IRENE SANTE AND REYNALDO G.R. No.
G.R. No. 173915 claim for exemplary damages should be excluded in computing the total
SANTE,
Petitioners, Present:
PUNO, C.J., Chairperson,
- versus - CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
HON. EDILBERTO T. CLARAVALL, in his VILLARAMA, JR., JJ.
capacity as Presiding Judge of Branch 60,
Regional Trial Court of Baguio City, and Promulgated:
VITA N. KALASHIAN,
Respondents. February 22, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
Before this Court is a petition for certiorari[1] under Rule 65 of the 1997 Rules of
Civil Procedure, as amended, filed by petitioners Irene and Reynaldo Sante
assailing the Decision[2] dated January 31, 2006 and the Resolution[3] dated
June 23, 2006 of the Seventeenth Division of the Court of Appeals in CA-G.R.
SP No. 87563. The assailed decision affirmed the orders of the Regional Trial
Court (RTC) of Baguio City, Branch 60, denying their motion to dismiss the
complaint for damages filed by respondent Vita Kalashian against them.
The facts, culled from the records, are as follows:
On April 5, 2004, respondent filed before the RTC of Baguio City a complaint
for damages[4] against petitioners. In her complaint, docketed as Civil Case
No. 5794-R, respondent alleged that while she was inside the Police Station
of Natividad, Pangasinan, and in the presence of other persons and police
officers, petitioner Irene Sante uttered words, which when translated in
English are as follows, How many rounds of sex did you have last night with
your boss, Bert? You fuckin bitch! Bert refers to Albert Gacusan, respondents
friend and one (1) of her hired personal security guards detained at the said
station and who is a suspect in the killing of petitioners close
relative. Petitioners also allegedly went around Natividad, Pangasinan telling
people that she is protecting and cuddling the suspects in the aforesaid
killing. Thus, respondent prayed that petitioners be held liable to pay moral
damages in the amount of P300,000.00; P50,000.00 as exemplary
damages; P50,000.00 attorneys fees; P20,000.00 litigation expenses; and
costs of suit.
Petitioners filed a Motion to Dismiss[5] on the ground that it was the Municipal
Trial Court in Cities (MTCC) and not the RTC of Baguio, that had jurisdiction
over the case. They argued that the amount of the claim for moral damages
was not more than the jurisdictional amount of P300,000.00, because the
claim.
On June 24, 2004,[6] the trial court denied the motion to dismiss citing our
ruling in Movers-Baseco Integrated Port Services, Inc. v. Cyborg Leasing
Corporation.[7] The trial court held that the total claim of respondent
amounted to P420,000.00 which was above the jurisdictional amount for
MTCCs outside Metro Manila. The trial court also later issued Orders on July
7, 2004[8] and July 19, 2004,[9] respectively reiterating its denial of the motion
to dismiss and denying petitioners motion for reconsideration.
Aggrieved, petitioners filed on August 2, 2004, a Petition for Certiorari and
Prohibition,[10] docketed as CA-G.R. SP No. 85465, before the Court of
Appeals. Meanwhile, on July 14, 2004, respondent and her husband filed an
Amended Complaint[11] increasing the claim for moral damages
from P300,000.00 to P1,000,000.00. Petitioners filed a Motion to Dismiss
with Answer Ad Cautelam and Counterclaim, but the trial court denied their
motion in an Order[12] dated September 17, 2004.
Hence, petitioners again filed a Petition for Certiorari and Prohibition [13] before
the Court of Appeals, docketed as CA-G.R. SP No. 87563, claiming that the
trial court committed grave abuse of discretion in allowing the amendment of
the complaint to increase the amount of moral damages from P300,000.00
to P1,000,000.00. The case was raffled to the Seventeenth Division of the
Court of Appeals.
On January 23, 2006, the Court of Appeals, Seventh Division, promulgated a
decision in CA-G.R. SP No. 85465, as follows:
WHEREFORE, finding grave abuse of discretion on the part of [the] Regional
Trial Court of Baguio, Branch 60, in rendering the assailed Orders dated
June 24, 2004 and July [19], 2004 in Civil Case No. 5794-R the instant
petition for certiorari is GRANTED. The assailed Orders are
hereby ANNULLED and SET ASIDE. Civil Case No. 5794-R for damages is
ordered DISMISSED for lack of jurisdiction.
SO ORDERED.[14]
The Court of Appeals held that the case clearly falls under the jurisdiction of the
MTCC as the allegations show that plaintiff was seeking to recover moral
damages in the amount of P300,000.00, which amount was well within the
jurisdictional amount of the MTCC. The Court of Appeals added that the totality
of claim rule used for determining which court had jurisdiction could not be
applied to the instant case because plaintiffs claim for exemplary damages was
not a separate and distinct cause of action from her claim of moral damages, but
merely incidental to it. Thus, the prayer for exemplary damages should be
excluded in computing the total amount of the claim.
On January 31, 2006, the Court of Appeals, this time in CA-G.R. SP No.
87563, rendered a decision affirming the September 17, 2004 Order of the
RTC denying petitioners Motion to Dismiss Ad Cautelam. In the said
1
decision, the appellate court held that the total or aggregate amount
demanded in the complaint constitutes the basis of jurisdiction. The Court of
Appeals did not find merit in petitioners posture that the claims for exemplary
damages and attorneys fees are merely incidental to the main cause and
should not be included in the computation of the total claim.
The Court of Appeals additionally ruled that respondent can amend her
complaint by increasing the amount of moral damages from P300,000.00
to P1,000,000.00, on the ground that the trial court has jurisdiction over the
original complaint and respondent is entitled to amend her complaint as a
matter of right under the Rules.
Unable to accept the decision, petitioners are now before us raising the
following issues:
I.
WHETHER OR NOT THERE WAS GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION ON THE PART
OF THE (FORMER) SEVENTEENTH DIVISION OF THE HONORABLE
COURT OF APPEALS WHEN IT RESOLVED THAT THE REGIONAL TRIAL
COURT OF BAGUIO CITY BRANCH 60 HAS JURISDICTION OVER THE
SUBJECT MATTER OF THE CASE FOR DAMAGES AMOUNTING
TO P300,000.00;
II.
WHETHER OR NOT THERE WAS GRAVE ABUSE OF DISCRETION ON
THE PART OF THE HONORABLE RESPONDENT JUDGE OF THE
REGIONAL TRIAL COURT OF BAGUIO BRANCH 60 FOR ALLOWING THE
COMPLAINANT TO AMEND THE COMPLAINT (INCREASING THE
AMOUNT OF DAMAGES TO 1,000,000.00 TO CONFER JURISDICTION
OVER THE SUBJECT MATTER OF THE CASE DESPITE THE PENDENCY
OF A PETITION FOR CERTIORARI FILED AT THE COURT OF APPEALS,
SEVENTH DIVISION, DOCKETED AS CA G.R. NO. 85465.[15]
In essence, the basic issues for our resolution are:
1) Did the RTC acquire jurisdiction over the case? and
2) Did the RTC commit grave abuse of discretion in allowing the
amendment of the complaint?
Petitioners insist that the complaint falls under the exclusive jurisdiction of the
MTCC. They maintain that the claim for moral damages, in the amount
of P300,000.00 in the original complaint, is the main action. The exemplary
damages being discretionary should not be included in the computation of
the jurisdictional amount. And having no jurisdiction over the subject matter
of the case, the RTC acted with grave abuse of discretion when it allowed the
amendment of the complaint to increase the claim for moral damages in
order to confer jurisdiction.
In her Comment,[16] respondent averred that the nature of her complaint is for
recovery of damages. As such, the totality of the claim for damages,
including the exemplary damages as well as the other damages alleged and
prayed in the complaint, such as attorneys fees and litigation expenses,
should be included in determining jurisdiction. The total claim
being P420,000.00, the RTC has jurisdiction over the complaint.
We deny the petition, which although denominated as a petition for certiorari,
we treat as a petition for review on certiorari under Rule 45 in view of the
issues raised.
Section 19(8) of Batas Pambansa Blg. 129,[17] as amended by Republic Act
No. 7691,[18] states:
SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise
exclusive original jurisdiction:
xxxx
(8) In all other cases in which the demand, exclusive of interest, damages of
whatever kind, attorneys fees, litigation expenses, and costs or the value of
the property in controversy exceeds One hundred thousand pesos
(P100,000.00) or, in such other cases in Metro Manila, where the demand,
exclusive of the abovementioned items exceeds Two hundred thousand
pesos (P200,000.00).
Section 5 of Rep. Act No. 7691 further provides:
SEC. 5. After five (5) years from the effectivity of this Act, the jurisdictional
amounts mentioned in Sec. 19(3), (4), and (8); and Sec. 33(1) of Batas
Pambansa Blg. 129 as amended by this Act, shall be adjusted to Two
hundred thousand pesos (P200,000.00). Five (5) years thereafter, such
jurisdictional amounts shall be adjusted further to Three hundred thousand
pesos (P300,000.00): Provided, however, That in the case of Metro Manila,
the abovementioned jurisdictional amounts shall be adjusted after five (5)
years from the effectivity of this Act to Four hundred thousand pesos
(P400,000.00).
Relatedly, Supreme Court Circular No. 21-99 was issued declaring that the
first adjustment in jurisdictional amount of first level courts outside of Metro
Manila from P100,000.00 to P200,000.00 took effect on March 20, 1999.
Meanwhile, the second adjustment from P200,000.00 to P300,000.00
became effective on February 22, 2004 in accordance with OCA Circular No.
65-2004 issued by the Office of the Court Administrator on May 13, 2004.
Based on the foregoing, there is no question that at the time of the filing of
the complaint on April 5, 2004, the MTCCs jurisdictional amount has been
adjusted to P300,000.00.
But where damages is the main cause of action, should the amount of moral
damages prayed for in the complaint be the sole basis for determining which
court has jurisdiction or should the total amount of all the damages claimed
regardless of kind and nature, such as exemplary damages, nominal
damages, and attorneys fees, etc., be used?
In this regard, Administrative Circular No. 09-94[19] is instructive:
xxxx
2
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. (Emphasis ours.)
In the instant case, the complaint filed in Civil Case No. 5794-R is for the
recovery of damages for the alleged malicious acts of petitioners. The complaint
principally sought an award of moral and exemplary damages, as well as
attorneys fees and litigation expenses, for the alleged shame and injury suffered
by respondent by reason of petitioners utterance while they were at a police
station in Pangasinan. It is settled that jurisdiction is conferred by law based on
the facts alleged in the complaint since the latter comprises a concise statement
of the ultimate facts constituting the plaintiffs causes of action.[20] It is clear, based
on the allegations of the complaint, that respondents main action is for
damages. Hence, the other forms of damages being claimed by
respondent, e.g., exemplary damages, attorneys fees and litigation expenses,
are not merely incidental to or consequences of the main action but constitute
the primary relief prayed for in the complaint.
In Mendoza v. Soriano,[21] it was held that 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. In the said case, the respondents claim of P929,000.06 in
damages and P25,000 attorneys fees plus P500 per court appearance was
held to represent the monetary equivalent for compensation of the alleged
injury. The Court therein held that the total amount of monetary claims
including the claims for damages was the basis to determine the jurisdictional
amount.
Also, in Iniego v. Purganan,[22] the Court has held:
The amount of damages claimed is within the jurisdiction of the RTC, since it
is the claim for all kinds of damages that is the basis of determining the
jurisdiction of courts, whether the claims for damages arise from the same or
from different causes of action.
xxxx
Considering that the total amount of damages claimed was P420,000.00, the
Court of Appeals was correct in ruling that the RTC had jurisdiction over the
case.
Lastly, we find no error, much less grave abuse of discretion, on the part of
the Court of Appeals in affirming the RTCs order allowing the amendment of
the original complaint from P300,000.00 to P1,000,000.00 despite the
pendency of a petition for certiorari filed before the Court of Appeals. While it
is a basic jurisprudential principle that an amendment cannot be allowed
when the court has no jurisdiction over the original complaint and the
purpose of the amendment is to confer jurisdiction on the court, [23] here, the
RTC clearly had jurisdiction over the original complaint and amendment of
the complaint was then still a matter of right.[24]
WHEREFORE, the petition is DENIED, for lack of merit. The Decision and
Resolution of the Court of Appeals dated January 31, 2006 and June 23,
2006, respectively, are AFFIRMED. The Regional Trial Court of Baguio City,
Branch 60 is DIRECTED to continue with the trial proceedings in Civil Case
No. 5794-R with deliberate dispatch.
No costs.
SO ORDERED.
In Irene Sante and Reynaldo Sante vs. Hon. Edilberto
Claraval, the Supreme Court clarified that jurisdiction is conferred by
law based on the facts alleged in the complaint since the latter comprises
a concise statement of the ultimate facts constituting the plaintiffs causes
of action (Nocum v. Tan, G.R. No. 145022, September 23, 2005, 470
SCRA 639, 644-645). Since it is clear, based on the allegations of the
complaint therein that respondents main action is for damages, the other
forms of damages being claimed by respondent, e.g., exemplary damages,
attorneys fees and litigation expenses, are not merely incidental to or
consequences of the main action but constitute the primary relief prayed
for in the complaint.
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 (Administrative Circular No. 09-94).
3
G.R. No. 164594, April 22, 2015 KASUNDUAN

MICHAEL SEBASTIAN, Petitioner, v. ANNABEL LAGMAY NG, Nagkasundo ang dalawang panig na pagkayari ng labing apat na
REPRESENTED BY HER ATTORNEY-IN-FACT, ANGELITA buwan (14 months) Simula ngayong July 9, 1997 hanggang
LAGMAY, Respondent. September 1998 ay kailangan ng maibigay ni Mr. Sebastian ang pera
ni Ms. Anabelle Lagmay.
DECISION
At napagkasunduan ay dalawang hulog ang halagang P250,000.00
BRION, J.: na pera ni Ms.Lagmay at Simula ng pagbibigay ni Mr. Sebastian ay sa
buwan ng September 1998.
We resolve the petition for review on certiorari,1 filed by petitioner
Michael Sebastian (Michael), assailing the March 31, 2004 At upang may katunayan ang lahat ng napag usapan ay lumagda sa
Decision,2 and the July 15, 2004 Resolution3 of the Court of Appeals ibaba nito at sa harap ng mga saksi ngayong ika-9 ng Hulyo, 1997
(CA) in CA-G.R. SP No. 65450.
Mrs. Angelita Lagmay - (Lagda)
The CA decision reversed and set aside the decision of the Regional Mr. Michael Sebastian - (Lagda)
Trial Court (RTC) of Palayan City, Branch 40, in SP. Proc. Case No.
0096-P. Saksi: Kagawad Rolando Mendizabal - (Lagda)
Hepe Quirino Sapon - (Lagda)
Factual Background Benjamin Sebastian - (Lagda)
Jun Roxas - (Lagda)
Sometime in 1997, Angelita Lagmay (Angelita), acting as
representative and attorney-in-fact of her daughter Annabel Lagmay Angelita alleged that the kasunduan was not repudiated within a
Ng (Annabel), filed a complaint before the Barangay Justice of period of ten (10) days from the settlement, in accordance with
Siclong, Laur, Nueva Ecija. She sought to collect from Michael the the Katarungang Pambarangay Law embodied in the Local
sum of P350,000.00 that Annabel sent to Michael. She claimed that Government Code of 1991 [Republic Act (R.A.) No. 7160], and
Annabel and Michael were once sweethearts, and that they agreed to Section 14 of its Implementing Rules. When Michael failed to honor
jointly invest their financial resources to buy a truck. She alleged that the kasunduan, Angelita brought the matter back to the Barangay, but
while Annabel was working in Hongkong, Annabel sent Michael the the BarangayCaptain failed to enforce the kasunduan, and instead,
amount of P350,000.00 to purchase the truck. However, after Annabel issued a Certification to File Action.
and Michael's relationship has ended, Michael allegedly refused to
return the money to Annabel, prompting the latter to bring the matter After about one and a half years from the date of the execution of
before the Barangay Justice. the kasunduan or on January 15, 1999, Angelita filed with the
Municipal Circuit Trial Court (MCTC) of Laur and Gabaldon, Nueva
On July 9, 1997, the parties entered into an amicable settlement, Ecija, a Motion for Execution of the kasunduan.
evidenced by a document denominated as "kasunduan''4 wherein
Michael agreed to pay Annabel the amount of P250,000.00 on specific Michael moved for the dismissal of the Motion for Execution, citing as
dates. The kasunduan was signed by Angelita (on behalf of Annabel), a ground Angelita's alleged violation of Section 15, Rule 13 of the
Michael, and the members of the pangkat ng tagapagkasundo. 1997 Rules of Civil Procedure.
The kasunduan reads:
4
On January 17, 2000, the MCTC rendered a decision5 in favor of
Annabel, the dispositive portion of which reads, as follows:
WHEREFORE, the plaintiff through counsel has satisfactorily proven
by preponderance of evidence based on Exhibits "A," "B," "C," "D,"
and "F," that defendant has obligation to the plaintiff in the amount
ofP250,000.00.
IN VIEW OF THE FOREGOING, the Motion for Execution filed by the
plaintiff is hereby granted based on Sec. 2, Rule 7 of the
Implementing Rules and Regulations of Republic Act No. 7160, and
therefore, defendant is hereby ordered within 15 days upon receipt of
this decision to pay the plaintiff the amount of P250,000.00 as
evidenced by the Kasunduan (Exhibit "C") with legal interests from
July 9, 1997 until said obligation is fully paid, and to pay attorney's
fees for the plaintiffs counsel in the amount of P15,000.00 and to pay
the cost of the suit.
SO ORDERED.
Michael filed an appeal with the RTC arguing that the MCTC
committed grave abuse of discretion in prematurely deciding the case.
Michael also pointed out that a hearing was necessary for the
petitioner to establish the genuineness and due execution of
the kasunduan.
The Regional Trial Court's Ruling
In its November 13, 2000 Decision,6 the RTC, Branch 40 of Palayan
City upheld the MCTC decision, finding Michael liable to pay Annabel
the sum of P250,000.00. It held that Michael failed to assail the
validity of the kasunduan, or to adduce any evidence to dispute
Annabel's claims or the applicability of the Implementing Rules and
Regulations of R.A. No. 7160. The dispositive portion of the decision
reads:
WHEREFORE, the assailed Decision and Order of the lower court is
hereby MODIFIED in that the appellant is ordered to pay the appellee
the amount of Two hundred Fifty Thousand pesos (P250,000.00) plus
twelve percent interest(12%) per annum from September, 1998 up to
the time it is actually paid and fifty Thousand Pesos(P50,000.00)
representing attorney's fees.
Michael filed a Motion for Reconsideration arguing that: (i) an
amicable settlement or arbitration award can be enforced by
the Lupon within six (6) months from date of settlement or after the
lapse of six (6) months, by ordinary civil action in the appropriate City
or Municipal Trial Court and not by a mere Motion for execution; and
(ii) the MCTC does not have jurisdiction over the case since the
amount of P250,000.00 (as the subject matter of the kasunduan) is in
excess of MCTC's jurisdictional amount of P200,000.00.7
In its March 13, 2001 Order, the RTC granted Michael's Motion for
Reconsideration, and ruled that there is merit in the jurisdictional issue
he raised. It dismissed Angelita's Motion for Execution, and set aside
the MCTC Decision. The dispositive portion of the said Order reads:
WHEREFORE, the Motion for Reconsideration is GRANTED. The
Decision of the Court dated November 13, 2000 is hereby SET
ASIDE. The Decision of the Municipal Trial Court of Laur, Nueva Ecija
dated January 17, 2000 is likewise SET ASIDE and the Motion for
Execution of Kasunduan is DISMISSED, the said court having had no
jurisdiction to hear and decide the matter.8
Angelita moved for the reconsideration of the March 13, 2001 Order,
but the motion was subsequently denied. Aggrieved, she filed a
Petition for Review9 with the CA.
The Court of Appeal's Ruling
On August 2, 2001, the CA initially dismissed the petition for review on
a mere technical ground of failure to attach the Affidavit of Service.
Angelita moved for reconsideration, attaching in her motion the
Affidavit of Service. The CA granted the motion.
On March 31, 2004, the CA rendered its decision granting the petition,
and reversing the RTC's decision. The CA declared that the
"appropriate local trial court" stated in Section 2, Rule VII of the
Implementing Rules of R.A. No. 7160 refers to the municipal trial
courts. Thus, contrary to Michael's contention, the MCTC has
5
jurisdiction to enforce any settlement or arbitration award, regardless beyond the MCTC's jurisdiction to hear and to resolve. Accordingly,
of the amount involved. the proceedings in the Barangay are all nullity.

The CA also ruled that Michael's failure to repudiate the kasunduan in
accordance with the procedure prescribed under the Implementing
Rules of R.A. No. 7160, rendered the kasunduan final. Hence,
Michael can no longer assail the kasunduan on the ground of forgery.
Michael moved to reconsider this decision, but the CA denied his
motion in its resolution dated July 15, 2004. Hence, this petition.
The Petition
The Issues
The issues to be resolved in the present petition are:
1. Whether or not the MCTC has the authority and jurisdiction to
execute the kasunduan regardless of the amount involved;
2. Whether or not the kasunduan could be given the force and
effect of a final judgment; and

In the present petition for review on certiorari, Michael alleges that 3. Whether or not the kasunduan can be enforced.
the kasunduan cannot be given the force and effect of a final
judgment because it did not conform to the provisions of
the Katarungang Pambarangay law embodied in Book III, Title One, The Court's Ruling
Chapter 7 of R.A. No. 7160. He points out the following irregularities
in the kasunduan's, execution, and claims that the agreement forged
between him and Angelita was fictitious and simulated: We deny the petition.
(1) there was no record of the complaint in the Barangay;
A perusal of the body of the motion for
(2) there was no notice of mediation sent to him;
execution shows that it is actually in the
(3) there was no constitution of the Pangkat Ng Tagapagasundo;
nature of an action for execution; hence,
(4) the parties were never called upon to choose the three (3)
it was a proper remedy;
members from among the Lupon members;
(5) he had no participation in the execution of the kasunduan;
We note at the outset that Michael raised - in his brief before the C A -
(6) his signature in the kasunduan was forged;
the issue of wrong remedy. He alleged that Angelita's recourse should
(7) he did not personally appear before the Barangay;
have been to file a civil action, not a mere motion for execution, in a
(8) there was no attestation clause;
regular court. However, the CA failed to address this issue and only
(9) the kasunduan was neither reported nor filed before the
ruled on the issues of the kasunduan's irregularities and the MCTC's
MCTC; and
jurisdiction.
(10) Annabel, the real party in interest, did not personally appear
before the Barangay as required by the law.
A simple reading of Section 417 of the Local Government Code
readily discloses the two-tiered mode of enforcement of an amicable
Michael additionally claims that the kasunduan is merely in the nature
settlement. The provision reads:
of a private document. He also reiterates that since the amount of
P250,000.00 - the subject matter of the kasunduan - is in excess of Section 417. Execution. - The amicable settlement or arbitration
MCTC's jurisdictional amount of P200,000.00, the kasunduan is award may be enforced by execution by the lupon within six (6)
months from the date of the settlement. After the lapse of such time,
6
the settlement may be enforced by action in the appropriate city or with allegations of the ultimate facts constituting the cause of action;
municipal court. [Emphasis ours.] the names and residences of the plaintiff and the defendant; it
contains the prayer for the MCTC to order the execution of
Under this provision, an amicable settlement or arbitration award that the kasunduan; and there was also a verification and certification
is not repudiated within a period often (10) days from the settlement against forum shopping.
may be enforced by: first, execution by the Lupon within six (6)
months from the date of the settlement; or second, by an action in the Furthermore, attached to the motion are: 1) the authenticated special
appropriate city or municipal trial court if more than six (6) months power of attorney of Annabel, authorizing Angelita to file the present
from the date of settlement has already elapsed. action on her behalf; and 2) the copy of the kasunduan whose
contents were quoted in the body of the motion for execution.
Under the first mode of enforcement, the execution of an amicable
settlement could be done on mere motion of the party entitled thereto It is well-settled that what are controlling in determining the nature of
before the Punong Barangay.10 The proceedings in this case are the pleading are the allegations in the body and not the caption. 14
summary in nature and are governed by the Local Government Code
and the Katarungang PambarangayImplementing Rules and Thus, the motion for execution that Angelita filed was intended to
Regulations. be an initiatory pleading or an original action that is compliant
with the requirement under Section 3, Rule 6 of the Rules of
The second mode of enforcement, on the other hand, is judicial in Court that the complaint should allege the plaintiffs cause of
nature and could only be resorted to through the institution of an action and the names and residences of the plaintiff and the
action in a regular form before the proper City/Municipal Trial defendant.
Court.11The proceedings shall be governed by the provisions of the
Rules of Court. Angelita's motion could therefore be treated as an original
action, and not merely as a motion/special proceeding. For this
Indisputably, Angelita chose to enforce the kasunduan under the reason, Annabel has filed the proper remedy prescribed under
second mode and filed a motion for execution, which was docketed as Section 417 of the Local Government Code.
Special Proceedings No. 45-99. The question for our resolution
is: Whether the MCTC, through Angelita's motion for execution, is However, Angelita should pay the proper docket fees corresponding to
expressly authorized to enforce the kasunduan under Section 417 of the filing of an action for execution. The docket fees shall be
the Local Government Code? computed by the Clerk of Court of the MCTC, with due consideration,
of course, of what Angelita had already paid when her motion for
The Court rules in the affirmative. execution was docketed as a special proceeding.

It is undisputed that what Angelita filed before the MCTC was The kasunduan has the force and effect of a final judgment.
captioned "motion for execution," rather than a petition/complaint for
execution. Under Section 416 of the Local Government Code, the amicable
settlement and arbitration award shall have the force and effect of a
A perusal of the motion for execution, however, shows that it contains final judgment of a court upon the expiration often (10) days from the
the material requirements of an initiatory action. date of its execution, unless the settlement or award has been
repudiated or a petition to nullify the award has been filed before the
First, the motion is sufficient in form 12 and substance.13 It is complete proper city or municipal court.
7
 that words must be given their literal meaning and applied without
Moreover, Section 14, Rule VI of the Katarungang attempted interpretation where the words of a statute are clear,' plain
Pambarangay Implementing Rules states that the party's failure to and free from ambiguity.15
repudiate the settlement within the period often (10) days shall be
deemed a waiver of the right to challenge the settlement on the WHEREFORE, premises considered, we hereby DENY the
ground that his/her consent was vitiated by fraud, violence or petitioner's petition for review on certiorari, and AFFIRM the March
intimidation. 31, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 65450.

In the present case, the records reveal that Michael never repudiated Angelita Lagmay is ORDERED to pay the proper docket fees to be
the kasunduan within the period prescribed by the law. Hence, the CA computed by the Clerk of Court of the Municipal Circuit Trial Court of
correctly ruled that the kasunduan has the force and effect of a final Laur and Gabaldon, Nueva Ecija, with due consideration of what she
judgment that is ripe for execution. had paid when her motion for execution was docketed as a special
proceeding.
Furthermore, the irregularities in the kasunduan's execution, and the
claim of forgery are deemed waived since Michael never raised these SO ORDERED.
defenses in accordance with the procedure prescribed under the
Local Government Code. Thus, we see no reason to discuss these
issues in the present case.

The MCTC has the authority and jurisdiction

to enforce the kasunduan regardless of the amount involved.

The Court also finds that the CA correctly upheld the MCTC's
jurisdiction to enforce any settlement or arbitration .award issued by
the Lupon.

We again draw attention to the provision of Section 417 of the Local

Government Code that after the lapse of the six (6) month period from
the date of the settlement, the agreement may be enforced by action
in the appropriate city or municipal court.

The law, as written, unequivocally speaks of the "appropriate city or

municipal court" as the forum for the execution of the settlement or
arbitration award issued by the Lupon. Notably, in expressly
conferring authority over these courts, Section 417 made no
distinction with respect to the amount involved or the nature of the
issue involved. Thus, there can be no question that the law's
intendment was to grant jurisdiction over the enforcement of
settlement/arbitration awards to the city or municipal
courts regardless of the amount. A basic principle of interpretation is
8
G.R. No. 176492 October 20, 2014
MARIETTA N. BARRIDO, Petitioner,
vs.
LEONARDO V. NONATO, Respondent.
PERALTA, J.:
For the Court's resolution is a Petition for Review filed by petitioner Marietta
N. Barrido questioning the Decision 1 of the Court of Appeals (CA), dated
November 16, 2006, and its Resolution2 dated January 24, 2007 in CA-G.R.
SP No. 00235. The CA affirmed the Decision3 of the Regional Trial Court
(RTC) ofBacolod City, Branch 53, dated July 21, 2004, in Civil Case No. 03-
12123, which ordered the partition of the subject property.The facts, as culled
from the records, are as follows: In the course of the marriage of respondent
Leonardo V. Nonato and petitioner Marietta N. Barrido,they were able to
acquire a property situated in Eroreco, Bacolod City, consisting ofa house
and lot, covered by Transfer Certificate of Title (TCT) No. T-140361. On
March 15, 1996, their marriage was declared void on the ground of
psychological incapacity. Since there was no more reason to maintain their
co-ownership over the property, Nonato asked Barrido for partition, but the
latter refused. Thus, on January 29, 2003, Nonato filed a Complaint for
partition before the Municipal Trial Court in Cities (MTCC) of Bacolod City,
Branch 3.
Barrido claimed, by way of affirmative defense, that the subject property had
already been sold to their children, Joseph Raymund and Joseph Leo. She
likewise moved for the dismissal of the complaint because the MTCC lacked
jurisdiction, the partition case being an action incapable of pecuniary
estimation.
The Bacolod MTCC rendered a Decision dated September 17, 2003,
applying Article 129 of the Family Code. It ruled in this wise:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered,
ordering the conjugal property of the former Spouses Leonardo and Marietta
Nonato, a house and lot covered by TCT No. T-140361 located at Eroreco,
Bacolod City, which was their conjugal dwelling, adjudicated to the defendant
Marietta Nonato, the spouse with whom the majority of the common children
choose to remain.
Furthermore, defendants counterclaim is hereby granted, ordering plaintiff to
pay defendant P10,000.00 as moral damages for the mental anguish and
unnecessary inconvenience brought about by this suit; and an
additional P10,000.00 as exemplary damages to deter others from following
suit; and attorneys fees of P2,000.00 and litigation expenses
of P575.00.Nonato appealed the MTCC Decision before the RTC. On July
21, 2004, the Bacolod RTC reversed the ruling of the MTCC. It found that
even though the MTCC aptly applied Article 129 of the Family Code, it
nevertheless made a reversible error in adjudicating the subject property to
Barrido. Its dispositive portion reads:
WHEREFORE, premises considered, the decision dated September 17,
2003 is hereby REVERSED and SET ASIDE and a new judgment is hereby
rendered ordering the parties:
(1) to equitably partition the house and lot covered by TCT No. T-
140361;
(2) to reimburse Joseph Raymund and Joseph Leo Nonato of the
amount advanced by them in payment of the debts and obligation of
TCT No. T-140361 with Philippine National Bank;
(3) to deliver the presumptive legitimes of Joseph Raymund and
Joseph Leo Nonato pursuant to Article 51 of the Family Code.
SO ORDERED.5
Upon appeal, the CA affirmed the RTC Decision on November 16, 2006. It
held that since the propertys assessed value was only P8,080.00, it clearly
fell within the MTCCs jurisdiction. Also, although the RTC erred in relying on
Article 129 of the FamilyCode, instead of Article 147, the dispositive portion
of its decision still correctly ordered the equitable partition of the property.
Barrido filed a Motion for Reconsideration, which was, however, denied for
lack of merit.
Hence, Barrido brought the case to the Court via a Petition for Review. She
assigned the following errors in the CA Decision:
I.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
MTCC HAD JURISDICTION TO TRY THE PRESENT CASE.
II.
9
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
LOT COVERED BY TCT NO. T-140361 IS CONJUGAL AFTER BEING
SOLD TO THE CHILDREN, JOSEPH LEO NONATO AND JOSEPH
RAYMUND NONATO.
III.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
ARTICLE 129 OF THE FAMILY CODE HAS NO APPLICATION IN THE
PRESENT CASE, ON THE ASSUMPTION
THAT THE TRIAL COURT HAD JURISDICTION OVER THE CASE.6
The petition lacks merit.
Contrary to Barridos contention, the MTCC has jurisdiction to take
cognizance of real actions or those affecting title to real property, or for the
recovery of possession, or for the partition or condemnation of, or foreclosure
of a mortgage on real property. 7 Section 33 of Batas Pambansa Bilang
1298 provides:
Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts
and Municipal Circuit Trial Courts in civil cases. Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit
Trial Courts shall exercise:
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, or
possession of, real property, or any interest therein where the assessed
value of the propertyor 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. (as amended by R.A. No. 7691) 9
Here, the subject propertys assessed value was merely P8,080.00, an
amount which certainly does not exceed the required limit of P20,000.00 for
civil actions outside Metro Manila tofall within the jurisdiction of the MTCC.
Therefore, the lower court correctly took cognizance of the instant case.
The records reveal that Nonatoand Barridos marriage had been declared
void for psychological incapacity under Article 36 10 of the Family Code.
During their marriage, however, the conjugal partnership regime governed
their property relations. Although Article 12911 provides for the
procedure in case of dissolution of the conjugal partnership regime, Article
147 specifically covers the effects of void marriages on the spouses property
relations. Article 147 reads:
Art. 147. When a man and a woman who are capacitated to marry each
other, live exclusively with each other as husband and wife without the
benefit of marriage or under a void marriage, their wages and salaries shall
be owned by them in equal shares and the property acquired by both of them
through their work or industry shall be governed by the rules on co-
ownership.
In the absence of proof to the contrary, properties acquired while they lived
together shall be presumed tohave been obtained by their joint efforts, work
or industry, and shall beowned by them in equal shares. For purposes of this
Article, a party who did not participate in the acquisition by the other party of
any property shall be deemed to have contributed jointly in the acquisition
thereof if the former's efforts consisted in the care and maintenance of the
family and of the household.
Neither party can encumber or dispose by acts inter vivos of his or her share
in the property acquired during cohabitation and owned in common, without
the consent of the other, until after the termination of their cohabitation.
When only one of the parties to a void marriage is in good faith, the share of
the party in bad faith in the co-ownership shall be forfeited in favor of their
common children. In case of default of or waiver by any or all of the common
children or their descendants, each vacant share shall belong to the
respective surviving descendants. In the absence of descendants, such
share shall belong to the innocent party.1wphi1 In all cases, the forfeiture
shall take place upon termination of the cohabitation.This particular kind of
co-ownership applies when a man and a woman, suffering no illegal
impedimentto marry each other, exclusively live together as husband and
wife under a void marriage or without the benefit of marriage. 12 It is clear,
therefore, that for Article 147 to operate, the man and the woman: (1) must
be capacitated to marry each other; (2) live exclusively with each other as
husband and wife; and (3) their union is without the benefit of marriage or
their marriage is void. Here, all these elements are present. 13 The term
"capacitated" inthe first paragraph of the provision pertains to the legal
10
capacity of a party to contract marriage.14 Any impediment to marry has not
been shown to have existed on the part of either Nonato or Barrido. They
lived exclusively with each other as husband and wife. However, their
marriage was found to be void under Article 36 of the Family Code on the
ground of psychological incapacity. 15 Under this property regime, property
acquired by both spouses through their work and industry shall be governed
by the rules on equal coownership. Any property acquired during the union is
prima faciepresumed to have been obtained through their joint efforts. A party
who did not participate in the acquisition of the property shall be considered
as having contributed to the same jointly if said party's efforts consisted in the
care and maintenance of the family household. 16 Efforts in the care and
maintenance of the family and household are regarded as contributions to
the acquisition of common property by one who has no salary or income or
work or industry.17
In the analogous case of Valdez,18 it was likewise averred that the trial court
failed to apply the correct law that should govern the disposition of a family
dwelling in a situation where a marriage is declared void ab initiobecause of
psychological incapacity on the part of either or both parties in the contract of
marriage.The Court held that the court a quodid not commit a reversible error
in utilizing Article 147 of the Family Code and in ruling that the former
spouses own the family home and all their common property in equal shares,
as well as in concluding that, in the liquidation and partition of the property
that they owned in common, the provisions on coownership under the Civil
Code should aptly prevail.19 The rules which are set up to govern the
liquidation of either the absolute community or the conjugal partnership of
gains, the property regimes recognized for valid and voidable marriages, are
irrelevant to the liquidation of the co-ownership that exists between common-
law spousesor spouses of void marriages.20
Here, the former spouses both agree that they acquired the subject property
during the subsistence of their marriage. Thus, it shall be presumed to have
been obtained by their joint efforts, work or industry, and shall be jointly
owned by them in equal shares. Barrido, however, claims that the ownership
over the property in question is already vested on their children, by virtue of a
Deed of Sale. But aside from the title to the property still being registered in
the names of the former spouses, said document of safe does not bear a
notarization of a notary public. It must be noted that without the notarial seal,
a document remains to be private and cannot be converted into a public
document,21 making it inadmissible in evidence unless properly
authenticated.22 Unfortunately, Barrido failed to prove its due execution and
authenticity. In fact, she merely annexed said Deed of Sale to her position
paper. Therefore, the subject property remains to be owned in common by
Nonato and Barrido, which should be divided in accordance with the rules on
co-ownership.WHEREFORE, premises considered, the petition is DENIED.
The Decision of the Court of Appeals, dated November 16, 2006, as well as
its Resolution dated January 24, 2007 in CA-G.R. SP No. 00235, are hereby
AFFIRMED.
acts: Leonardo and Marrietas marriage was dissolved by reason of psychologyical
incapacity in 1996, hence Leonardo filed a complaint for partition over their property consisting
of a house and lot, since according to him, there was no more reason to maintain their co-
ownership. In her defense, Marrieta claimed that the property had been sold to their children
Joseph Raymond and Joseph Leo. She also moved for dismissal of the action for lack of
jurisdiction on the part of the MTCC Bacolod City, the action for partition being an action
incapable of pecuniary estimation. Per decision of the MTCC, it ruled in favour of Marrietta
and adjudicated the land to her, being the spouse with whom the majority of the common
children choose to remain. It also awarded moral damages in favour of Marrieta. Leonardo
appealed the ruling to the RTC, which reversed the MTCC ruling and ordered the partition of
the property, hence Marrieta appealed the RTC decision to the Court of Appeals by petition for
review. The appellate court denied Mariettas appeal, ruling that since the assessed value
of the property is only P8,080.00, it clearly fell within the MTCC jurisdiction. Though the RTC
applied Art. 129 instead of Art. 147 thereof, it still correctly ordered the partition of the property.
Marrieta elevated her case to the Supreme Court. Held: The Supreme Court: Contrary to
Barridos contention, the MTCC has jurisdiction to take cognizance of real actions or those
affecting title to real property, or for the recovery of possession, or for the partition or
condemnation of, or foreclosure of a mortgage on real property. Section 33 of Batas
Pambansa Bilang 129 provides: Section 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: x x x x (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, attorneys fees, litigation expenses and costs:
Provided, That value of such property shall be determined by the assessed value of the
adjacent lots. (as amended by R.A. No. 7691) Here, the subject propertys assessed
value was merely P8,080.00, an amount which certainly does not exceed the required limit of
P20,000.00 for civil actions outside Metro Manila to fall within the jurisdiction of the MTCC.
Therefore, the lower court correctly took cognizance of the instant case.
11
[G.R. No. 138896. June 20, 2000]
BARANGAY SAN ROQUE, TALISAY, CEBU, petitioner, vs. Heirs of
FRANCISCO PASTOR, namely: EUGENIO SYLIANCO, TEODORO
SYLIANCO, ISABEL SYLIANCO, EUGENIA S. ONG, LAWRENCE
SYLIANCO, LAWSON SYLIANCO, LAWINA S. NOTARIO, LEONARDO
SYLIANCO JR. and LAWFORD SYLIANCO, respondents.
DECISION
PANGANIBAN, J.:
An expropriation suit is incapable of pecuniary estimation. Accordingly, it falls
within the jurisdiction of the regional trial courts, regardless of the value of the
subject property.
The Case
Before us is a Petition for Review on Certiorari assailing the March 29, 1999
Order[1] of the Regional Trial Court (RTC) of Cebu City (Branch 58) in Civil
Case No. CEB-21978, in which it dismissed a Complaint for eminent domain.
It ruled as follows:
"Premises considered, the motion to dismiss is hereby granted on the ground
that this Court has no jurisdiction over the case. Accordingly, the Orders
dated February 19, 1999 and February 26, 1999, as well as the Writ of
Possession issued by virtue of the latter Order are hereby recalled for being
without force and effect."[2]
Petitioner also challenges the May 14, 1999 Order of the RTC denying
reconsideration.
The Facts
Petitioner filed before the Municipal Trial Court (MTC) of Talisay, Cebu
(Branch 1)[3] a Complaint to expropriate a property of the respondents. In an
Order dated April 8, 1997, the MTC dismissed the Complaint on the ground
of lack of jurisdiction. It reasoned that "[e]minent domain is an exercise of the
power to take private property for public use after payment of just
compensation. In an action for eminent domain, therefore, the principal
cause of action is the exercise of such power or right. The fact that the action
also involves real property is merely incidental. An action for eminent domain
is therefore within the exclusive original jurisdiction of the Regional Trial
Court and not with this Court."[4]
Assailed RTC Ruling
The RTC also dismissed the Complaint when filed before it, holding that an
action for eminent domain affected title to real property; hence, the value of
the property to be expropriated would determine whether the case should be
filed before the MTC or the RTC. Concluding that the action should have
been filed before the MTC since the value of the subject property was less
than P20,000, the RTC ratiocinated in this wise:
"The instant action is for eminent domain. It appears from the current Tax
Declaration of the land involved that its assessed value is only One
Thousand Seven Hundred Forty Pesos (P1,740.00). Pursuant to Section 3,
paragraph (3), of Republic Act No. 7691, all civil actions involving title to, or
possession of, real property with an assessed value of less than P20,000.00
are within the exclusive original jurisdiction of the Municipal Trial Courts. In
the case at bar, it is within the exclusive original jurisdiction of the Municipal
Trial Court of Talisay, Cebu, where the property involved is located.
"The instant action for eminent domain or condemnation of real property is a
real action affecting title to or possession of real property, hence, it is the
assessed value of the property involved which determines the jurisdiction of
the court. That the right of eminent domain or condemnation of real property
is included in a real action affecting title to or possession of real property, is
pronounced by retired Justice Jose Y. Feria, thus, Real actions are those
affecting title to or possession of real property. These include partition or
condemnation of, or foreclosures of mortgage on, real property. x x x" [5]
Aggrieved, petitioner appealed directly to this Court, raising a pure question
of law.[6] In a Resolution dated July 28, 1999, the Court denied the Petition for
Review "for being posted out of time on July 2, 1999, the due date being
June 2, 1999, as the motion for extension of time to file petition was denied in
the resolution of July 14, 1999." [7] In a subsequent Resolution dated October
6, 1999, the Court reinstated the Petition.[8]
Respondents, on the other hand, contend that the Complaint for Eminent
Domain affects the title to or possession of real property. Thus, they argue
that the case should have been brought before the MTC, pursuant to BP 129
as amended by Section 3 (3) of RA 7691. This law provides that MTCs shall
have exclusive original jurisdiction over all civil actions that involve title to or
possession of real property, the assessed value of which does not exceed
twenty thousand pesos or, in civil actions in Metro Manila, fifty thousand
pesos exclusive of interest, damages of whatever kind, attorneys fees,
litigation expenses and costs.
We agree with the petitioner that an expropriation suit is incapable of
pecuniary estimation. The test to determine whether it is so was laid down by
the Court in this wise:
"A review of the jurisprudence of this Court indicates that in determining
whether an action is one the subject matter of which is not capable of
pecuniary estimation, this Court has adopted the criterion of first ascertaining
the nature of the principal action or remedy sought. If it is primarily for the
recovery of a sum of money, the claim is considered capable of pecuniary
estimation, and whether jurisdiction is in the municipal courts or in the courts
of first instance would depend on the amount of the claim. However, where
the basic issue is something other than the right to recover a sum of money,
or 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
12
the contract (specific performance) and in actions for support, or for
annulment of a judgment or to foreclose a mortgage, this Court has
considered such actions as cases where the subject of the litigation may not
be estimated in terms of money, and are cognizable exclusively by courts of
first instance. The rationale of the rule is plainly that the second class cases,
besides the determination of damages, demand an inquiry into other factors
which the law has deemed to be more within the competence of courts of first
instance, which were the lowest courts of record at the time that the first
organic laws of the Judiciary were enacted allocating jurisdiction (Act 136 of
the Philippine Commission of June 11, 1901)."10
In the present case, an expropriation suit does not involve the recovery of a
sum of money. Rather, it deals with the exercise by the government of its
authority and right to take private property for public use. 11 In National Power
Corporation v. Jocson,12 the Court ruled that expropriation proceedings have
two phases:
"The first is concerned with the determination of the authority of the plaintiff to
exercise the power of eminent domain and the propriety of its exercise in the
context of the facts involved in the suit. It ends with an order, if not of
dismissal of the action, of condemnation declaring that the plaintiff has a
lawful right to take the property sought to be condemned, for the public use
or purpose described in the complaint, upon the payment of just
compensation to be determined as of the date of the filing of the complaint.
An order of dismissal, if this be ordained, would be a final one, of course,
since it finally disposes of the action and leaves nothing more to be done by
the Court on the merits. So, too, would an order of condemnation be a final
one, for thereafter as the Rules expressly state, in the proceedings before
the Trial Court, no objection to the exercise of the right of condemnation (or
the propriety thereof) shall be filed or heard.
"The second phase of the eminent domain action is concerned with the
determination by the court of the just compensation for the property sought to
be taken. This is done by the Court with the assistance of not more than
three (3) commissioners. The order fixing the just compensation on the basis
of the evidence before, and findings of, the commissioners would be final,
too. It would finally dispose of the second stage of the suit, and leave nothing
more to be done by the Court regarding the issue. x x x"
It should be stressed that the primary consideration in an expropriation suit is
whether the government or any of its instrumentalities has complied with the
requisites for the taking of private property. Hence, the courts determine the
authority of the government entity, the necessity of the expropriation, and the
observance of due process.13 In the main, the subject of an expropriation suit
is the governments exercise of eminent domain, a matter that is incapable of
pecuniary estimation.
True, the value of the property to be expropriated is estimated in monetary
terms, for the court is duty-bound to determine the just compensation for it.
This, however, is merely incidental to the expropriation suit. Indeed, that
amount is determined only after the court is satisfied with the propriety of the
expropriation.
Verily, the Court held in Republic of the Philippines v. Zurbano that
"condemnation proceedings are within the jurisdiction of Courts of First
Instance,"14the forerunners of the regional trial courts. The said case was
decided during the effectivity of the Judiciary Act of 1948 which, like BP 129
in respect to RTCs, provided that courts of first instance had original
jurisdiction over "all civil actions in which the subject of the litigation is not
capable of pecuniary estimation."15 The 1997 amendments to the Rules of
Court were not intended to change these jurisprudential precedents.
We are not persuaded by respondents argument that the present action
involves the title to or possession of a parcel of land. They cite the
observation of retired Justice Jose Y. Feria, an eminent authority in remedial
law, that condemnation or expropriation proceedings are examples of real
actions that affect the title to or possession of a parcel of land. 16
Their reliance is misplaced. Justice Feria sought merely to distinguish
between real and personal actions. His discussion on this point pertained to
the nature of actions, not to the jurisdiction of courts. In fact, in his pre-bar
lectures, he emphasizes that jurisdiction over eminent domain cases is still
within the RTCs under the 1997 Rules.
To emphasize, the question in the present suit is whether the government
may expropriate private property under the given set of circumstances. The
government does not dispute respondents title to or possession of the same.
Indeed, it is not a question of who has a better title or right, for the
government does not even claim that it has a title to the property. It merely
asserts its inherent sovereign power to "appropriate and control individual
property for the public benefit, as the public necessity, convenience or
welfare may demand."17
WHEREFORE, the Petition is hereby GRANTED and the assailed
Orders SET ASIDE. The Regional Trial Court is directed to HEAR the case.
No costs.
SO ORDERED.
13
Brgy. San Roque, Talisay, Cebu vs Heirs of Franco Pastor Trial Court, no objection to the exercise of the right of condemnation
(or the propriety thereof) shall be filed or heard.
334 SCRA 127 Political Law Municipal Corporation Eminent
Domain Expropriation BP 129 The second phase of the eminent domain action is concerned with the
determination by the court of the just compensation for the property
In 1997, Brgy. San Roque of Talisay, Cebu filed for an expropriation sought to be taken. This is done by the Court with the assistance of
suit before the MTC of Talisay against the heirs of Franco Pastor. The not more than three (3) commissioners. The order fixing the just
MTC denied the suit because apparently under BP 129, MTCs do not compensation on the basis of the evidence before, and findings of, the
have jurisdiction over expropriation cases as it is the RTCs that are commissioners would be final, too. It would finally dispose of the
lodged with the power to try such cases. So Brgy. San Roque filed it second stage of the suit, and leave nothing more to be done by the
before RTC Talisay but then Judge Jose Soberano, Jr. denied the suit Court regarding the issue. . . .
as he ruled that the action for eminent domain affected title to real
property; hence, the value of the property to be expropriated would It should be stressed that the primary consideration in an
determine whether the case should be filed before the MTC or the expropriation suit is whether the government or any of its
RTC. The judge also concluded that the action should have been filed instrumentalities has complied with the requisites for the taking of
before the MTC since the value of the subject property was less than private property. Hence, the courts determine the authority of the
P20,000. government entity, the necessity of the expropriation, and the
observance of due process. In the main, the subject of an
ISSUE: Whether or not the RTC should take cognizance of the expropriation suit is the governments exercise of eminent domain, a
expropriation case. matter that is incapable of pecuniary estimation.
HELD: Yes. Under Section 19 (1) of BP 129, which provides that
RTCs shall exercise exclusive original jurisdiction over all civil actions
in which the subject of the litigation is incapable of pecuniary
estimation; . . . . . The present action involves the exercise of the right
to eminent domain, and that such right is incapable of pecuniary
estimation.
What are the two phases of expropriation cases?
The first is concerned with the determination of the authority of the
plaintiff to exercise the power of eminent domain and the propriety of
its exercise in the context of the facts involved in the suit. It ends with
an order, if not of dismissal of the action, of condemnation declaring
that the plaintiff has a lawful right to take the property sought to be
condemned, for the public use or purpose described in the complaint,
upon the payment of just compensation to be determined as of the
date of the filing of the complaint. An order of dismissal, if this be
ordained, would be a final one, of course, since it finally disposes of
the action and leaves nothing more to be done by the Court on the
merits. So, too, would an order of condemnation be a final one, for
thereafter as the Rules expressly state, in the proceedings before the

14
G.R. No. 202664, November 20, 2015
MANUEL LUIS C. GONZALES AND FRANCIS MARTIN D.
GONZALES, Petitioners, v. GJH LAND, INC. (FORMERLY KNOWN AS S.J.
LAND, INC.), CHANG HWAN JANG A.K.A. STEVE JANG, SANG RAK
KIM, MARIECHU N. YAP, AND ATTY. ROBERTO P. MALLARI
II, Respondent.
DECISION
PERLAS-BERNABE, J.:
This is a direct recourse to the Court, via a petition for review
on certiorari,1 from the Orders dated April 17, 2012 2 and July 9, 20123 of the
Regional Trial Court (RTC) of Muntinlupa City, Branch 276 (Branch 276)
dismissing Civil Case No. 11-077 for lack of jurisdiction.
The Facts
On August 4, 2011, petitioners Manuel Luis C. Gonzales 4 and Francis Martin
D. Gonzales (petitioners) filed a Complaint5 for "Injunction with prayer for
Issuance of Status Quo Order, Three (3) and Twenty (20)-Day Temporary
Restraining Orders, and Writ of Preliminary Injunction with Damages" against
respondents GJH Land, Inc. (formerly known as S.J. Land, Inc.), Chang
Hwan Jang, Sang Rak Kim, Mariechu N. Yap, and Atty. Roberto P. Mallari
II6 (respondents) before the RTC of Muntinlupa City seeking to enjoin the
sale of S.J. Land, Inc.'s shares which they purportedly bought from S.J.
Global, Inc. on February 1, 2010. Essentially, petitioners alleged that the
subscriptions for the said shares were already paid by them in full in the
books of S.J. Land, Inc.,7 but were nonetheless offered for sale on July 29,
2011 to the corporation's stockholders,8 hence, their plea for injunction.
The case was docketed as Civil Case No. 11-077 and raffled to Branch 276,
which is not a Special Commercial Court. On August 9, 2011, said branch
issued a temporary restraining order,9 and later, in an Order10 dated August
24, 2011, granted the application for a writ of preliminary injunction.
After filing their respective answers11 to the complaint, respondents filed a
motion to dismiss12 on the ground of lack of jurisdiction over the subject
matter, pointing out that the case involves an intra-corporate dispute and
should, thus, be heard by the designated Special Commercial Court of
Muntinlupa City.13
The RTC Ruling
In an Order14 dated April 17, 2012, Branch 276 granted the motion to dismiss
filed by respondents. It found that the case involves an intra-corporate
dispute that is within the original and exclusive jurisdiction of the RTCs
designated as Special Commercial Courts. It pointed out that the RTC of
Muntinlupa City, Branch 256 (Branch 256) was specifically designated by the
Court as the Special Commercial Court, hence, Branch 276 had no
jurisdiction over the case and cannot lawfully exercise jurisdiction on the
matter, including the issuance of a Writ of Preliminary
Injunction.15 Accordingly, it dismissed the case.
Dissatisfied, petitioners filed a motion for reconsideration, 16 arguing that they
filed the case with the Office of the Clerk of Court of the RTC of Muntinlupa
City which assigned the same to Branch 276 by raffle.17 As the raffle was
beyond their control, they should not be made to suffer the consequences of
the wrong assignment of the case, especially after paying the filing fees in
the amount of P235,825.00 that would be for naught if the dismissal is
upheld.18 They further maintained that the RTC has jurisdiction over intra-
corporate disputes under Republic Act No. (RA) 8799, 19 but since the Court
selected specific branches to hear and decide such suits, the case must, at
most, be transferred or raffled off to the proper branch. 20
In an Order21 dated July 9, 2012, Branch 276 denied the motion for
reconsideration, holding that it has no authority or power to order the transfer
of the case to the proper Special Commercial Court, citing Calleja v.
Panday22 (Calleja); hence, the present petition.
The Issue Before the Court
The essential issue for the Court's resolution is whether or not Branch 276 of
the RTC of Muntinlupa City erred in dismissing the case for lack of
jurisdiction over the subject matter.
The Court's Ruling
The petition is meritorious.
At the outset, the Court finds Branch 276 to have correctly categorized Civil
Case No. 11-077 as a commercial case, more particularly, an intra-corporate
dispute,23 considering that it relates to petitioners' averred rights over the
shares of stock offered for sale to other stockholders, having paid the same
in full. Applying the relationship test and the nature of the controversy
15
test, the suit between the parties is clearly rooted in the existence of an intra- Code. The Commission shall retain jurisdiction over pending suspension of
corporate relationship and pertains to the enforcement of their correlative payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
rights and obligations under the Corporation Code and the internal and intra- (Emphasis supplied)cralawlawlibrary
corporate regulatory rules of the corporation,24 hence, intra-corporate, which
should be heard by the designated Special Commercial Court as provided The legal attribution of Regional Trial Courts as courts of general
under A.M. No. 03-03-03-SC25 dated June 17, 2003 in relation to Item 5.2, jurisdiction stems from Section 19 (6), Chapter II of Batas Pambansa Bilang
Section 5 of RA 8799. (BP) 129,30 known as "The Judiciary Reorganization Act of
1980":chanRoblesvirtualLawlibrary
The present controversy lies, however, in the procedure to be followed when
a commercial case - such as the instant intra-corporate dispute -has Section 19. Jurisdiction in civil cases.- Regional Trial Courts shall exercise
been properly filed in the official station of the designated Special exclusive original jurisdiction:chanRoblesvirtualLawlibrary
Commercial Court but is, however, later wrongly assigned by raffle to a
regular branch of that station. x x x x

As a basic premise, let it be emphasized that a court's acquisition of (6) In all cases not within the exclusive jurisdiction of any court, tribunal,
jurisdiction over a particular case's subject matter is different from incidents person or body exercising jurisdiction or any court, tribunal, person or body
pertaining to the exercise of its jurisdiction. Jurisdiction over the subject exercising judicial or quasi-judicial functions; x x x x
matter of a case is conferred by law, whereas a court's exercise of cralawlawlibrary
jurisdiction, unless provided by the law itself, is governed by the Rules of
Court or by the orders issued from time to time by the Court. 26 In Lozada v. As enunciated in Durisol Philippines, Inc. v. CA:31chanroblesvirtuallawlibrary
Bracewell,27 it was recently held that the matter of whether the RTC
resolves an issue in the exercise of its general jurisdiction or of its The regional trial court, formerly the court of first instance, is a court of
limited jurisdiction as a special court is only a matter of procedure and general jurisdiction. All cases, the jurisdiction over which is not specifically
has nothing to do with the question of jurisdiction. provided for by law to be within the jurisdiction of any other court, fall under
the jurisdiction of the regional trial court.32ChanRoblesVirtualawlibrary
Pertinent to this case is RA 8799 which took effect on August 8, 2000. By cralawlawlibrary
virtue of said law, jurisdiction over cases enumerated in Section 5 28 of
Presidential Decree No. 902-A29 was transferred from the Securities and To clarify, the word "or" in Item 5.2, Section 5 of RA 8799 was intentionally
Exchange Commission (SEC) to the RTCs, being courts of general used by the legislature to particularize the fact that the phrase "the Courts of
jurisdiction. Item 5.2, Section 5 of RA 8799 general jurisdiction" is equivalent to the phrase "the appropriate Regional
provides:chanRoblesvirtualLawlibrary Trial Court." In other words, the jurisdiction of the SEC over the cases
enumerated under Section 5 of PD 902-A was transferred to the courts of
SEC. 5. Powers and Functionsof the Commission. - x x x general jurisdiction, that is to say (or, otherwise known as), the proper
Regional Trial Courts. This interpretation is supported by San Miguel Corp. v.
x x x x Municipal Council,33 wherein the Court held that:chanRoblesvirtualLawlibrary

5.2 The Commission's jurisdiction over all cases enumerated under
Section 5 of Presidential Decree No. 902-A is hereby transferred to the
Courts of general jurisdiction or the appropriate Regional Trial
Court: Provided, that the Supreme Court in the exercise of its authority
may designate the Regional Trial Court branches that shall exercise
jurisdiction over the cases. The Commission shall retain jurisdiction over
pending cases involving intra-corporate disputes submitted for final resolution
which should be resolved within one (1) year from the enactment of this
[T]he word "or" may be used as the equivalent of "that is to say" and gives
that which precedes it the same significance as that which follows it. It is not
always disjunctive and is sometimes interpretative or expository of the
preceding word.34cralawlawlibrary
Further, as may be gleaned from the following excerpt of the Congressional
deliberations:chanRoblesvirtualLawlibrary
16
Senator [Raul S.] Roco: x x x.
x x x x
x x x. The first major departure is as regards the Securities and Exchange
Commission. The Securities and Exchange Commission has been
authorized under this proposal to reorganize itself. As an administrative
agency, we strengthened it and at the same time we take away the quasi-
judicial functions. The quasi-judicial functions are now given back to the
courts of general jurisdiction - the Regional Trial Court, except for two
categories of cases.
In the case of corporate disputes, only those that are now submitted for final
determination of the SEC will remain with the SEC. So, all those cases, both
memos of the plaintiff and the defendant, that have been submitted for
resolution will continue. At the same time, cases involving rehabilitation,
bankruptcy, suspension of payments and receiverships that were filed before
June 30, 2000 will continue with the SEC. in other words, we are avoiding the
possibility, upon approval of this bill, of people filing cases with the SEC, in
manner of speaking, to select their court. 35
x x x x (Emphasis supplied)cralawlawlibrary
Therefore, one must be disabused of the notion that the transfer of
jurisdiction was made only in favor of particular RTC branches, and not the
RTCs in general.
Consistent with the foregoing, history depicts that when the transfer of SEC
cases to the RTCs was first implemented, they were transmitted to the
Executive Judges of the RTCs for raffle between or among its different
branches, unless a specific branch has been designated as a Special
Commercial Court, in which instance, the cases were transmitted to
said branch.36 It was only on November 21, 2000 that the Court designated
certain RTC branches to try and decide said SEC cases 37 without, however,
providing for the transfer of the cases already distributed to or filed with the
regular branches thereof. Thus, on January 23, 2001, the Court issued SC
Administrative Circular No. 08-2001 38 directing the transfer of said cases to
the designated courts (commercial SEC courts). Later, or on June 17, 2003,
the Court issued A.M. No. 03-03-03-SC consolidating the commercial SEC
courts and the intellectual property courts39 in one RTC branch in a
particular locality, i.e., the Special Commercial Court, to streamline the
court structure and to promote expediency.40 Accordingly, the RTC
branch so designated was mandated to try and decide SEC cases, as well as
those involving violations of intellectual property rights, which were,
thereupon, required to be filed in the Office of the Clerk of Court in
the official station of the designated Special Commercial Courts, to
wit:chanRoblesvirtualLawlibrary
1. The Regional Courts previously designated as SEC Courts through the:
(a) Resolutions of this Court dated 21 November 2000, 4 July 2001, 12
November 2002, and 9 July 2002 all issued in A.M. No. 00-11-03-SC; (b)
Resolution dated 27 August 2001 in A.M. No. 01-5-298-RTC; and (c)
Resolution dated 8 July 2002 in A.M. No. 01-12-656-RTC are hereby
DESIGNATED and shall be CALLED as Special Commercial Courts to try
and decide cases involving violations of Intellectual Property Rights which fall
within their jurisdiction and those cases formerly cognizable by the Securities
and Exchange Commission:chanRoblesvirtualLawlibrary
x x x x
4. The Special Commercial Courts shall have jurisdiction over cases arising
within their respective territorial jurisdiction with respect to the National
Capital Judicial Region and within the respective provinces with respect to
the First to Twelfth Judicial Regions. Thus, cases shall be filed in the Office of
the Clerk of Court in the official station of the designated Special Commercial
Court;41
x x x x (Underscoring supplied)cralawlawlibrary
It is important to mention that the Court's designation of Special Commercial
Courts was made in line with its constitutional authority to supervise the
administration of all courts as provided under Section 6, Article VIII of the
1987 Constitution:chanRoblesvirtualLawlibrary
Section 6. The Supreme Court shall have administrative supervision over all
courts and the personnel thereof.cralawlawlibrary
The objective behind the designation of such specialized courts is to
promote expediency and efficiency in the exercise of the RTCs'
jurisdiction over the cases enumerated under Section 5 of PD 902-A. Such
designation has nothing to do with the statutory conferment of jurisdiction to
all RTCs under RA 8799 since in the first place, the Court cannot enlarge,
diminish, or dictate when jurisdiction shall be removed, given that the power
to define, prescribe, and apportion jurisdiction is, as a general rule, a
matter of legislative prerogative.42 Section 2, Article VIII of the 1987
Constitution provides:chanRoblesvirtualLawlibrary
17
Section 2. The Congress shall have the power to define, prescribe, and deprived of these shares without legal and factual basis.
apportion the jurisdiction of the various courts but may not deprive the
Supreme Court of its jurisdiction over cases enumerated in Section 5 hereof. 20. Furthermore, if they are deprived of these shares through the scheduled
sale, both MLCG and FMDG would suffer grave and irreparable damage
x x x x incapable of pecuniary estimation.
cralawlawlibrary
21. For this reason, plaintiffs now come to the Honorable Court for injunctive
Here, petitioners filed a commercial case, i.e., an intra-corporate dispute, relief so that after trial on the merits, a permanent injunction should be issued
with the Office of the Clerk of Court in the RTC of Muntinlupa City, which is against the defendants preventing them from selling the shares of the
the official station of the designated Special Commercial Court, in plaintiffs, there being no basis for such sale.46cralawlawlibrary
accordance with A.M. No. 03-03-03-SC. It is, therefore, from the time of
such filing that the RTC of Muntinlupa City acquired jurisdiction over According to jurisprudence, "it is not the caption but the allegations in the
the subject matter or the nature of the action.43 Unfortunately, the complaint or other initiatory pleading which give meaning to the pleading and
commercial case was wrongly raffled to a regular branch, e.g., Branch on the basis of which such pleading may be legally
276, instead of being assigned44to the sole Special Commercial Court in characterized."47 However, so as to avert any future confusion, the Court
the RTC of Muntinlupa City, which is Branch 256. This error may have requires henceforth, that all initiatory pleadings state the action's nature both
been caused by a reliance on the complaint's caption, i.e., "Civil Case for in its caption and the body, which parameters are defined in the dispositive
Injunction with prayer for Status Quo Order, TRO and Damages," 45 which, portion of this Decision.
however, contradicts and more importantly, cannot prevail over its actual
allegations that clearly make out an intra-corporate Going back to the case at bar, the Court nonetheless deems that the
dispute:chanRoblesvirtualLawlibrary erroneous raffling to a regular branch instead of to a Special Commercial
Court is only a matter of procedure - that is, an incident related to the
16. To the surprise of MLCG and FMDG, however, in two identical letters exercise of jurisdiction - and, thus, should not negate the jurisdiction which
both dated 13 May 2011, under the letterhead of GJH Land, Inc., Yap, now the RTC of Muntinlupa City had already acquired. In such a scenario, the
acting as its President, Jang and Kim demanded payment of supposed proper course of action was not for the commercial case to be dismissed;
unpaid subscriptions of MLCG and FMDG amounting to P10,899,854.30 and instead, Branch 276 should have first referred the case to the Executive
P2,625,249.41, respectively. Judge for re-docketing as a commercial case; thereafter, the Executive
16.1 Copies of the letters dated 13 May 2011 are attached hereto and made Judge should then assign said case to the only designated Special
integral parts hereof as Annexes "J" and "K", repectively. Commercial Court in the station, i.e., Branch 256.
17. On 29 July 2011, MLCG and FMDG received an Offer Letter addressed
to stockholders of GJH Land, Inc. from Yap informing all stockholders that Note that the procedure would be different where the RTC acquiring
GJH Land, Inc. is now offering for sale the unpaid shares of stock of MLCG jurisdiction over the case has multiple special commercial court
and FMDG. The same letter states that the offers to purchase these shares branches; in such a scenario, the Executive Judge, after re-docketing the
will be opened on 10 August 2011 with payments to be arranged by deposit same as a commercial case, should proceed to order its re-raffling among
to the depository bank of GJH Land, Inc. the said special branches.
17.1 A copy of the undated Offer Letter is attached hereto and made and
made an integral part hereof as Annex "L". Meanwhile, if the RTC acquiring jurisdiction has no branch designated as a
18. The letter of GJH Land, Inc. through Yap, is totally without legal and Special Commercial Court, then it should refer the case to the nearest RTC
factual basis because as evidenced by the Deeds of Assignment signed and with a designated Special Commercial Court branch within the judicial
certified by Yap herself, all the S.J. Land, Inc. shares acquired by MLCG and region.48 Upon referral, the RTC to which the case was referred to should re-
FMDG have been fully paid in the books of S.J. Land, Inc. docket the case as a commercial case, and then: (a) if the said RTC has only
one branch designated as a Special Commercial Court, assign the case to
19. With the impending sale of the alleged unpaid subscriptions on 10 August the sole special branch; or (b) if the said RTC has multiple branches
2011, there is now a clear danger that MLCG and FMDG would be designated as Special Commercial Courts, raffle off the case among those
18
special branches.
In all the above-mentioned scenarios, any difference regarding the applicable
docket fees should be duly accounted for. On the other hand, all docket fees
already paid shall be duly credited, and any excess, refunded.
At this juncture, the Court finds it fitting to clarify that the RTC mistakenly
relied on the Calleja case to support its ruling. In Calleja, an intra-corporate
dispute49 among officers of a private corporation with principal address at
Goa, Camarines Sur, was filed with the RTC of San Jose, Camarines Sur,
Branch 58 instead of the RTC of Naga City, which is the official station of the
designated Special Commercial Court for Camarines Sur. Consequently, the
Court set aside the RTC of San Jose, Camarines Sur's order to transfer the
case to the RTC of Naga City and dismissed the complaint considering that it
was filed before a court which, having no internal branch designated as a
Special Commercial Court, had no jurisdiction over those kinds of
actions, i.e., intra-corporate disputes. Calleja involved two different
RTCs, i.e., the RTC of San Jose, Camarines Sur and the RTC of Naga City,
whereas the instant case only involves one RTC, i.e., the RTC of
Muntinlupa City, albeit involving two different branches of the same
court, i.e., Branches 256 and 276. Hence, owing to the variance in the facts
attending, it was then improper for the RTC to rely on the Calleja ruling.
Besides, the Court observes that the fine line that distinguishes subject
matter jurisdiction and exercise of jurisdiction had been clearly blurred
in Calleja. Harkening back to the statute that had conferred subject matter
jurisdiction, two things are apparently clear: (a) that the SEC's subject
matter jurisdiction over intra-corporate cases under Section 5 of
Presidential Decree No. 902-A was transferred to the Courts of general
jurisdiction, i.e., the appropriate Regional Trial Courts; and (b) the designated
branches of the Regional Trial Court, as per the rules promulgated by the
Supreme Court, shall exercise jurisdiction over such cases. Item 5.2,
Section 5 of RA 8799 provides:chanRoblesvirtualLawlibrary
SEC. 5. Powers and Functions of the Commission. - x x x Commercial Court does not shed the RTC's general jurisdiction over ordinary
x x x x
5.2 The Commission's jurisdiction over all cases enumerated under
Section 5 of Presidential Decree No. 902-A is hereby transferred to the
Courts of general jurisdiction or the appropriate Regional Trial
Court: Provided, that the Supreme Court in the exercise of its authority
may designate the Regional Trial Court branches that shall exercise
jurisdiction over the cases, x x x.cralawlawlibrary
In contrast, the appropriate jurisprudential reference to this case would
be Tan v. Bausch & Lomb, Inc., 50 which involves a criminal complaint for
violation of intellectual property rights filed before the RTC of Cebu City but
was raffled to a regular branch thereof (Branch 21), and not to a Special
Commercial Court. As it turned out, the regular branch subsequently denied
the private complainant's motion to transfer the case to the designated
special court of the same RTC, on the ground of lack of jurisdiction. The CA
reversed the regular branch and, consequently, ordered the transfer of the
case to the designated special court at that time (Branch 9). The Court,
affirming the CA, declared that the RTC had acquired jurisdiction over the
subject matter. In view, however, of the designation of another court as the
Special Commercial Court in the interim (Branch 11 of the same Cebu City
RTC), the Court accordingly ordered the transfer of the case and the
transmittal of the records to said Special Commercial Court
instead.51Similarly, the transfer of the present intra-corporate dispute
from Branch 276 to Branch 256 of the same RTC of Muntinlupa City,
subject to the parameters above-discussed is proper and will further
the purposes stated in A.M. No. 03-03-03-SC of attaining a speedy and
efficient administration of justice.
For further guidance, the Court finds it apt to point out that the same
principles apply to the inverse situation of ordinary civil cases filed
before the proper RTCs but wrongly raffled to its branches designated
as Special Commercial Courts. In such a scenario, the ordinary civil case
should then be referred to the Executive Judge for re-docketing as an
ordinary civil case; thereafter, the Executive Judge should then order
the raffling of the case to all branches of the same RTC, subject to
limitations under existing internal rules, and the payment of the correct
docket fees in case of any difference. Unlike the limited
assignment/raffling of a commercial case only to branches designated as
Special Commercial Courts in the scenarios stated above, the re-raffling of
an ordinary civil case in this instance to all courts is permissible due to the
fact that a particular branch which has been designated as a Special
civil cases under the imprimatur of statutory law, i.e., Batas Pambansa Bilang
(BP) 129.52 To restate, the designation of Special Commercial Courts was
merely intended as a procedural tool to expedite the resolution of commercial
cases in line with the court's exercise of jurisdiction. This designation was
not made by statute but only by an internal Supreme Court rule under its
authority to promulgate rules governing matters of procedure and its
constitutional mandate to supervise the administration of all courts and the
personnel thereof.53 Certainly, an internal rule promulgated by the Court
cannot go beyond the commanding statute. But as a more fundamental
19
reason, the designation of Special Commercial Courts is, to stress, merely an Special Commercial Courts, raffle off the case among those special
incident related to the court's exercise of jurisdiction, which, as first branches.
discussed, is distinct from the concept of jurisdiction over the subject matter. 2. If an ordinary civil case filed before the proper RTC is wrongly raffled to its
The RTC's general jurisdiction over ordinary civil cases is therefore not branch designated as a Special Commercial Court, then the case shall be
abdicated by an internal rule streamlining court procedure. referred to the Executive Judge for re-docketing as an ordinary civil case.
Thereafter, it shall be raffled off to all courts of the same RTC (including its
In fine, Branch 276's dismissal of Civil Case No. 11-077 is set aside and the designated special branches which, by statute, are equally capable of
transfer of said case to Branch 256, the designated Special Commercial exercising general jurisdiction same as regular branches), as provided for
Court of the same RTC of Muntinlupa City, under the parameters above- under existing rules.
explained, is hereby ordered.
3. All transfer/raffle of cases is subject to the payment of the appropriate
WHEREFORE, the petition is GRANTED. The Orders dated April 17, 2012 docket fees in case of any difference. On the other hand, all docket fees
and July 9, 2012 of the Regional Trial Court (RTC) of Muntinlupa City, Branch already paid shall be duly credited, and any excess, refunded.
276 in Civil Case No. 11-077 are hereby REVERSED and SET ASIDE. Civil
Case No. 11-077 is REFERRED to the Executive Judge of the RTC of 4. Finally, to avert any future confusion, the Court requires that all initiatory
Muntinlupa City for re-docketing as a commercial case. Thereafter, the pleadings state the action's nature both in its caption and body. Otherwise,
Executive Judge shall ASSIGNsaid case to Branch 256, the sole designated the initiatory pleading may, upon motion or by order of the court motu proprio,
Special Commercial Court in the RTC of Muntinlupa City, which be dismissed without prejudice to its re-filing after due rectification. This last
is ORDERED to resolve the case with reasonable dispatch. In this regard, procedural rule is prospective in application.
the Clerk of Court of said RTC shall DETERMINE the appropriate amount of
docket fees and, in so doing, ORDER the payment of any difference or, on 5. All existing rules inconsistent with the foregoing are deemed
the other hand, refund any excess. superseded.cralawlawlibrary

Furthermore, the Court hereby RESOLVES that henceforth, the following SO ORDERED.
guidelines shall be observed:
1. If a commercial case filed before the proper RTC is wrongly raffled to its
regular branch, the proper courses of action are as follows:
1.1 If the RTC has only one branch designated as a Special Commercial
Court, then the case shall be referred to the Executive Judge for re-docketing
as a commercial case, and thereafter, assigned to the sole special branch;

1.2 If the RTC has multiple branches designated as Special Commercial

Courts, then the case shall be referred to the Executive Judge for re-
docketing as a commercial case, and thereafter, raffled off among those
special branches; and

1.3 If the RTC has no internal branch designated as a Special Commercial

Court, then the case shall be referred to the nearest RTC with a designated
Special Commercial Court branch within the judicial region. Upon referral, the
RTC to which the case was referred to should re- docket the case as a
commercial case, and then: (a) if the said RTC has only one branch
designated as a Special Commercial Court, assign the case to the sole
special branch; or (b) if the said RTC has multiple branches designated as

20
G.R. No. L-29155 November 5, 1928
JOSEFINA RUBIO DE LARENA, plaintiff-appellant,
vs.
HERMENEGILDO VILLANUEVA, defendant-appellee.
Abad Santos, Camus and Delgado and Jose Montano for appellant.
Del Rosario and Del Rosario for appellee.
OSTRAND, J.:
The case at bar is a sequel to case G. R. No. 21706, Josefina Rubio de
Larena vs. Hermenegildo Villanueva, decided on March 26, 1924. 1 In that
case we affirmed a decision of the Court of First Instance ordering the
rescission of a lease of the Tacgajan Sugar Plantation and the payment by
the defendant-lessee of the unpaid balance of the rent for the agricultural
year 1920-1922 in the sum of P5,949.28 with interest from August 26, 1922,
an for P8,000 in rent for the agricultural year 1921-1923. The decision also
provided that the possession of the leased land be delivered to the plaintiff.
Shortly after the record was returned to the court below, a writ of execution
was issued, but before levy was made the parties came to an agreement,
under which the money judgment was to be satisfied by the payment of
P10,500 in cash and the transfer to the plaintiff of a dwelling house situated
in the municipality of Bais. The agreement was carried out in accordance
with its terms, and on September 30, 1924, the following document was
executed by the plaintiff:
Habiendo llegado a un convenio entre la que subscribe, ejecutante,
en la causa civil No. 67 decidida por la Corte Suprema, y el
ejecutado, Don Hermenegildo Villanueva, por la presente declaro
haber recibido del Sheriff Provincial de Negros Oriental, y mi entera
satisfaccion la suma de diez mil quinientos pesos (P10,500), mas
una casa residencial con su solar, situada en la plaza del Municipio
de Bais, Provincia de Negros Oriental, cuyas descripciones
aparecen an un ocumento aparte, por el importnte de la ejecusacion
expidida por el Jusgado de Negros Oriental al 14 de mayo de 1924,
en vitud de una decision de la Corte Suprema. Con este queda
definitivamente cumplimentada esta ejecucion.
Y para que asi conste, firmo la presente en el Municipio de Bais,
Provincia de Negros Oriental, I. F., ante el Sheriff Provincial de esta
Provincia de Negros Oriental y el Notario Publico Don Francisco
Romero, que ratifica este compromiso.
(Fda.) JOSEFINA RUBIO, Vda. DE LARENA
Firmado en presencia de:
(Fdos.) BRAULIO RUBIO
FRANCISCO PINERO
(ACKNOWLEDGMENT)
In the meantime, the defendant had harvested the sugarcane crop produced
in the agricultural year 1922-1924, and after having satisfied the aforesaid
money judgment, he also continued in possession of the plantation long
enough to appropriate to himself the following ratoon cane crop.
The present action was brought on April 13, 1925, but the last amended
complaint, setting forth three causes of action, was not filed until June 17,
1927. As her first cause of action the plaintiff, after a preliminary statement of
the origin of the controversy, alleges that while case G. R. No. 21706 was on
appeal to the Supreme Court, the defendant knew positively that the
aforesaid lease was declared rescinded by the Court of First Instance on
September 8, 1923, and that he, the defendant, also knew that he thereafter
was not entitled to the possession of the aforesaid hacienda; that he,
nevertheless, in bad faith continued in such possession during the
agricultural year 1922-1924 and appropriated to himself the cane harvest for
that year, which after deducting the share of the sugar central, produced
1,679.02 piculs for his own benefit, which sugar was sold by him for the sum
of P13 a picul; that the plaintiff has demanded payment to her of the total
value of said 1,679.02 piculs, amounting to P21,827.26, but that the
defendant refuses to pay. The plaintiff, therefore, asks judgment for the sum
of P21,827.26 upon the first cause of action.
For the second cause of action the plaintiff alleges that under the contract of
lease of the Tacgajan Hacienda, one of the obligations assumed by the
defendant was that he would use the care of a good father of the family in
conserving the tools, agricultural implements, draft animals, and other effects
enumerated in an inventory made at the time the defendant entered in
21
possession under the lease; that he was further obligated to return said
property to the plaintiff, but that he return said property to the plaintiff, but that
he returned only a part that he returned only a part thereof and failed to
returned only a part thereof and failed to return 4 carabaos, 4 vacunos, 1
corn mill, 4 wagons, 106 steel rails, 14 plows, 1 table, 1 scale, an 1
telephone, the total value of the property enumerated being P3,596 for which
amount, plus P500 in damages, the plaintiff asks judgment under her second
cause of action.
As a third cause of action the plaintiff alleges that the harvest of sugar cane
illegally made by the defendant in 1924 left ratoon sugar cane in the fields of
the hacienda, which sugar can was the property of the plaintiff, and that
during the year 1925, the defendant illegally harvested said ratoon cane
together with some recently planted cane, which harvested after deducting
the share of the sugar central, produced 1,613.25 piculs of sugar, which the
defendant sold for his own benefit at the price of P13 per picul, the total
amount received by him being P20,962.25 for which the plaintiff demands
judgment. lawphi1.net
In his answer to the first and third causes of action, the defendants alleges
that according to the pleadings in case G. R. No. 21706, the two causes of
action were included in that case and, therefore, must be considered res
adjudicata. In regard to the second cause of action the defendant pleads the
general issue and sets up as a special defense that assuming that the
property referred to in said cause of action was missing, it loss was due to its
total extinction by ordinary use, for which the defendant could not be held
responsible. For all three causes of action, the defendant sets up as a
special defense the document executed by the plaintiff on September 30,
1924, acknowledging the satisfaction of the judgment in case G. R. No.
21706.
Upon trial the Court of First Instance sustained the defendant's special
defense and absolved him from the complaint with the cost against the
plaintiff, whereupon the latter appealed to this court.
We do not think that the court below erred in absolving the defendant from
liability upon the second cause of action. It is not without significance that in
her original complaint the plaintiff claimed only 5 plows, 6 carts, 3 carabaos
an 4 vacunos, the total value of which was alleged to be P1,360; in the first
amended complaint filed over two years later, the same claim was made, but
in the last amended complaint a number of other articles were included, thus
increasing the claim to P3,596. The court below found that the weight of the
evidence showed that the missing draft animals died from rinderpest and that
the other personal property was turned over to the provincial sheriff for
delivery to the plaintiff before the writ of execution was returned to the court.
If so, the action would lie against the sheriff rather than against the
defendant.
As to the first cause of action the defendant argues that it was included in the
prayer of an amended complaint filed in case G. R. No. 21706 and that,
although no express determination thereof was made in the decision of the
case, it must, nevertheless, be regarded as res judicata. That such is not the
case is very clear. The Code of Civil Procedure says:
That only is deemed to have been so adjudged in a former judgment
which appears upon its face to have been so adjudged, or which was
actually and necessarily included therein or necessary thereto. (Sec.
307, Code of Civil Proc.)
But the defendant maintains that the plaintiff having had an opportunity to
ventilate the matter in the former case, she cannot now enforce the same
cause of action in the present case. Properly speaking, this argument does
not involve the doctrine of res judicata but rests on the well-known an, in
American law, firmly established principle that a party will not be permitted to
split up a single cause of action an make it the basis for several suits. But
that is not this case. The rule is well established that when a lease provides
for the payment of the rent in separate installments, each installment is an
independent cause of action, though it has been held and is good law, that in
an action upon such a lease for the recovery of rent, the installments due at
the time the action brought must be included in the complaint an that failure
to o so will constitute a bar to a subsequent action for the payment of that
rent. The aforesaid action, G. R. No. 21706, was brought on August 23,
1922, the plaintiff demanding payment of then sue rent in addition to the
rescission of the lease. On July 27, 1923, the plaintiff filed a motion for an
amendment to paragraph 6 of the complaint adding to that paragraph the
following sentence:
Que tambien ha vencido ya el tercer ano el arrendamiento de la
finca en cuestion y que tampoco ha pagado el demandao el canon
correspondiente a icho ano.
The plaintiff also amended the prayer of the complaint by asking judgment for
rent for years subsequent to 1922. The motion was granted, and the case
came up for trial on July 30, 1923, and on September 8, 1923, the trial court
rendered its decision giving judgment for rent up to and including the rent for
the agricultural year ending in 1923. The lease did not provide for payment of
22
rent in advance or at any definite time, an it appears plainly from the record
that the rent for an agricultural year was not considered due until the end of
the corresponding year. It follows that the rent for the agricultural year 1922-
1924 ha not become sue time of the trial of the case and that consequently
the trial court could not render judgment therefore. The action referred to is,
therefore, no bar to the first cause of action in the present litigation.
is not entitled to any part of the net proceeds of the crop. The evidence
shows that the net ratoon crop of the year 1924-1925 was 1,613.25 piculs of
sugar, and according to the defendant's own statement, the market value of
the sugar was in the neighborhood of P11 per picul an the costs of
production about P4.50. The net result is that under the third cause of action,
the defendant must pay to the plaintiff the sum of P10,486.13 with interest.

The defendant places much weigh upon the document of September 30, For the reason stated, the judgment of the court below is affirmed in regard
1924, hereinbefore quoted. The document speaks for itself, and it will be to the second cause of action. It is reversed as to the first and third causes of
readily seen that it is merely a receipt for the satisfaction of the money action, and it is hereby ordered that the plaintiff have and recover from the
judgment in the case G. R. No. L-21706 and has nothing to with the present defendant the sum of P18,486.13 with interest at the rate of 6 per cent per
case. annum from April 13, 1925, the date of the filing of the complaint. No costs
will be allowed. So ordered.
The only question in regard to the first cause of action relates to the amount
of the damages. The plaintiff contends that the defendant was a possessor in
bad faith, and therefore, must pay the value of the fruits of the land in
accordance with article 455 of the Civil Code. Under the circumstances of the
case, we cannot so hold. The defendant held possession under the contract
of lease until said contract was rescinded. The contract contained no special
provision for the procedure in effecting the rescission, and it follows that it
could only be accompanied by a final judgment of the court. The judgment in
case G. R. No. L-210706 did not become final until March 27, 192, when our
decision on appeal was rendered. As that must have been close to the end of
the harvest and milling of the sugar crop for the period to which the first
cause of action refers, we do not think that the defendant should be required
to pay more than the amount of the stipulated rent for the period, i. e., the
sum of P8,000 with interest rent for that period, i. e., the sum of P8,000 with
interest. (Lerma vs. De la Cruz, 7 Phil., 581.)

The action for terminating the lease was brought under article 1124 of the
Civil Code, an it may, perhaps, he said that properly speaking, the subject
matter of the action was a resolution of the contract an not a rescission. That
may be true, but it is a distinction without a difference; in their case a judicial
declaration would be necessary for the cancellation of the contract in the
absence of a special agreement.

Very little need be said in regard to the third cause of action. It relates to a
period subsequent to the complete termination of the lease by final judicial
order. The defendant had then no right whatever to the possession of the
land or to the fruits thereof, and in removing the fruits, he acted in bad faith.
This being the case, he must pay for the fruits received by him, less the
necessary expenses of production. (Arts. 455 and 453 of the Civil Code.) As
his bad faith commence long before the fruits in question were produced, he

23
G.R. No. L-32958 November 8, 1930 lying adjacent to its plant at the price of P5 per square meter, the proof of
which is evidenced by Exhibit C. That pursuant to Exhibit C, defendant sold
BLOSSOM AND COMPANY, INC., plaintiff-appellant, and conveyed the land to the plaintiff which in turn executed a mortgage
vs. thereon to the defendant for P17,140.20, to secure the payment of the
MANILA GAS CORPORATION, defendant-appellee. balance of the purchase price.

Harvey and O'Brien for appellant. It is then alleged:

Ross, Lawrence and Selph and John B. Miller for appellee.
VIII. That about the last part of July, 1920 the defendant herein, the
STATEMENT Manila Gas Corporation willfully, and deliberately breached its said
contract, Exhibit C, with the plaintiff by ceasing to deliver any coal
and water gas tar to it thereunder solely because of the increased
In its complaint filed March 3, 1927, the plaintiff alleges that on September
price of its tar products and its desire to secure better prices therefor
10, 1918, it entered into a contract with the defendant in which the plaintiff
than plaintiff was obliged to pay to it, notwithstanding the frequent
promised and undertook to purchase and receive from the defendant and the
and urgent demands made by the plaintiff upon it to comply with its
defendant agreed to sell and deliver to the plaintiff, for a period of four years,
aforesaid contract by continuing to deliver the coal and water gas tar
three tons of water gas tar per month from September to January 1, 1919
to the plaintiff thereunder, but the said defendant flatly refused to
and twenty tons per month after January 1, 1919, for the remaining period of
make any deliveries under said contract, and finally on November
the contract; one-half ton of coal gas tar a month from September to January
23, 1923, the plaintiff was forced to commence action against the
1, 1919, and six tons per month after January 1, 1919, for the remainder of
defendant herein in the Court of First Instance of Manila, being case
the contract, delivery to be made at the plant of the defendant in the City of
No. 25352, of that court entitled 'Blossom & Co., plaintiff,vs. Manila
Manila, without containers and at the price of P65 per ton for each kind of
Gas Corporation, defendant,' to recover the damages which it had up
gas tar, it being agreed that this price should prevail only so long as the raw
to that time suffered by reason of such flagrant violation of said
materials coal and crude oil used by the defendant in the manufacture
contract on the part of the defendant herein, and to obtain the
of gas should cost the defendant the same price as that prevailing at the time
specific performance of the said contract and after due trial of that
of the contract, and that in the event of an increase or decrease in the cost of
action, judgment was entered therein in favor of the plaintiff herein
raw material there would be a corresponding increase or decrease in the
and against the said defendant, the Manila Gas Corporation, for the
price of the tar. That on January 31, 1919, this contract was amended so that
sum of P26,119.08, as the damages suffered by this plaintiff by the
it should continue to remain in force for a period of ten years from January 1,
defendant's breach of said contract from July, 1920, up to and
1919, and it was agreed that the plaintiff should not be obliged to take the
including September, 1923, with legal interest thereon from
qualities of the tars required during the year 1919, but that it might purchase
November 23, 1923, and for the costs but the court refused to order
tars in such quantities as it could use to advantage at the stipulated price.
the said defendant to resume the delivery of the coal and water gas
That after the year 1919 the plaintiff would take at least the quantities
tar to the plaintiff under said contract, but left the plaintiff with its
specified in the contract of September 10, 1918, to be taken from and after
remedy for damages against said defendant for the subsequent
January 1, 1919, and that at its option it would have the right to take any
breaches of said contract, which said decision, as shown by the copy
quantity of water gas tar in excess of the minimum quantity specified in that
attached hereto as Exhibit G, and made a part hereof, was affirmed
contract and up to the total amount of output of that tar of defendant's plant
by our Supreme Court on March 3, 1926;
and also to take any quantity of coal gas tar in excess of the minimum
quantity specified in that contract and up to 50 per cent of defendant's entire
output of coal gas tar, and that by giving the defendant ninety days' notice, it IX. That after the defendant had willfully and deliberately violated its
would have the right at its option to take the entire output of defendant's coal said contract as herein-before alleged, and the plaintiff suffered great
gas tar, except such as it might need for its own use in and about its plant. damage by reason thereof, the plaintiff claimed the right to off- set its
That in consideration of this modification of the contract of September 10, damages against the balance due from it to said defendant on
1918, plaintiff agreed to purchase from the defendant of certain piece of land account of the purchase of said land from the defendant, and

24
 immediately thereupon and notwithstanding said defendant was
justly indebted to the plaintiff at that time as shown by the judgment
of the Court Exhibit G, in more that four times the amount due to it
from the plaintiff, the said defendant caused to be presented against
the plaintiff a foreclosure action, known as the Manila Gas
Corporation versus Blossom & Company, No. 24267, of the Court of
First Instance of Manila, and obtained judgment therein ordering that
Blossom & Company pay the last installment and interest due on
said land or else the land and improvements placed thereon by the
plaintiff would be sold as provided by law in such cases to satisfy the
same, and the said defendant proceeded with the sale of said
property under said judgment and did everything in its power to sell
the same for the sole purpose of crushing and destroying the
plaintiff's business and thus rendering it impossible for the plaintiff
herein to continue with its said contract in the event that said
defendant might in the future consider it more profitable to resume
performance of the same, but fortunately the plaintiff was able to
redeem its property as well as to comply with its contract and
continued demanding that the defendant performed its said contract
and deliver to it the coal and water gas tar required thereby.
That the defendant made no deliveries under its contract, Exhibit C, from
July, 1920 to March 26, 1926, or until after the Supreme Court affirmed the
judgment of the lower court for damages in the sum of P26, 119.08. 1
It is then alleged that:
. . . On March 26, 1926 the said defendant offered to resume delivery
to the plaintiff from that date of the minimum monthly quantities of
tars stated in its contract ,and the plaintiff believing that the said
defendant was at least going to try to act in good faith in the further
performance of its said contract, commenced to accept deliveries of
said tars from it, and at once ascertained that the said defendant was
deliberately charging it prices much higher than the contract price,
and while the plaintiff accepted deliveries of the minimum quantities
of tars stated in said contract up to and including January, 1927,
(although it had demanded deliveries of larger quantities thereunder,
as hereinafter alleged) and paid the increased prices demanded by
the defendant, in the belief that it was its duty to minimize the
damages as much as possible which the defendant would be
required to pay to it by reason of its violation of said contract, it has
in all cases done so under protest and with the express reservation
of the right to demand from the said defendant an adjustment of the
prices charged in violation of its contract, and the right to the
payment of the losses which it had and would suffer by reason of its
refusal to make additional deliveries under said contract, and it also
has continuously demanded that the said defendant furnish to it
statements supported by its invoices showing the cost prices if its
raw materials coal and crude oil upon which the contract price
of the tars in question is fixed, which is the only way the plaintiff has
to calculate the true price of said tars, but said defendant has and
still refuses to furnish such information, and will continue to refuse to
do so, unless ordered to furnish such information to the plaintiff by
the court, and the plaintiff believes from the information which it now
has and so alleges that the said defendant has overcharged it on the
deliveries of said tars mentioned in the sum of at least P10,000, all in
violation of the rights of the plaintiff under its said contract with the
defendant.
That on January 31, 1926 and pursuant to Exhibit C. plaintiff notified the
defendant in writing that commencing with the month of August, 1926 it
desired to take delivery of 50 per cent of defendant's coal tar production for
that month and that on November 1, 1926, it desired to take the entire output
of defendant's coal gas tar, but that the defendant refused and still refuses to
make such deliveries unless plaintiff would take all of its water gas tar
production with the desired quantity of coal gas tar which refusal was a plain
violation of the contract. That on January 29, 1927, and in accord with Exhibit
C, plaintiff notified the defendant in writing that within ninety days after the
initial delivery to it of its total coal gas tar production or in February, 1927, it
would require 50 per cent of its total water gas tar production and that in April
1927, it would require the total output of the defendant of both coal and water
gas tars, and that it refused to make either of such deliveries.
It is then alleged:
XIV. That as shown by the foregoing allegations of this complaint, it
is apparent that notwithstanding the plaintiff in this case has at all
times faithfully performed all the terms and conditions of said
contract, Exhibit C, on its part of be performed, and has at all times
and is now ready, able and willing to accept and pay for the
deliveries of said coal and water gas tars required by said contract
and the notices given pursuant thereto, the said defendant, the
Manila Gas Corporation, does not intend to comply with its said
contract, Exhibit C, and deliver to the plaintiff at the times and under
the terms and conditions stated therein the quantities of coal and
water gas tars required by said contract, and the several notices
25
 given pursuant thereto, and that it is useless for the plaintiff to insist
further upon its performance of the said contract, and for that reason
he only feasible course for the plaintiff to pursue is to ask the court
for the rescission of said contract and for the full damages which the
plaintiff has suffered from September, 1923, and will suffer for the
remainder of said contract by reason of the defendant's failure and
refusal to perform the same, and the plaintiff has so notified the said
defendant.
That since September, 1923, by reason of the bad faith of the defendant, the
plaintiff has been damaged in the sum of P300,000, for which it prays a
corresponding judgment, and that the contract, Exhibit C, be rescinded and
declared void and without force and effect.
After the filing and overruling of its demurrer, the defendant filed an answer in
the nature of a general and specific denial and on April 10, 1928, and upon
stipulation of the parties, the court appointed W. W. Larkin referee, "to take
the evidence and, upon completion of the trial, to report his findings of law
and fact to the court."
July 18, 1928, the defendant filed an amended answer in which it alleged as
an affirmative defense, first, that the complaint does not state facts sufficient
to constitute cause of action the reason that a prior adjudication has been
had of all the issues involved in this action, and, second, "that on or about the
16th day of June, 1925, in an action brought in the Court of First Instance of
the City on Manila, Philippine Islands, before the Honorable Geo. R. Harvey,
Judge, by Blossom & Company, plaintiff, vs. Manila Gas Corporation,
defendant, being civil case No. 25353, of said court, for the same cause of
action as that set fourth in the complaint herein, said plaintiff recovered
judgment upon the merits thereof, against said defendant decreeing a breach
of the contract sued upon herein, and awarding damages therefor in the sum
of P26,119.08 with legal interest from November 23, 1923, and costs of suit,
which judgment was upon appeal affirmed by the Supreme Court of the
Philippine Islands, in case G. R. No. 24777 of said court, on the 3d day of
March, 1926 and reported in volume 48 Philippines Reports at page 848,"
and it prays that plaintiff's complaint be dismissed with costs.
After the evidence was taken the referee made an exhaustive report of sixty-
pages in which he found that the plaintiff was entitled to P56,901.53
damages, with legal interest from the date of the filing on the complaint, to
which both parties filed numerous exceptions
In its decision the court says:
Incidental references have been made to the referee's report. It was
admirably prepared. Leaving aside the question of damages and the
facts upon which the referee assessed them, the facts are not in
dispute at least not in serious dispute. They appear in the
documentary evidence and this decision is based upon documents
introduced into evidence by plaintiff. If I could have agreed with the
referee in respect to the question of law, I should have approved his
report in toto. If defendant is liable for the damages accruing from
November 23, 1923, the date the first complaint was filed, to April
1st, 1926, the date of resumption of relations; and if defendant, after
such resumption of relations, again violated the contract, the
damages assessed by the referee, are, to my way of thinking, as fair
as could be estimated. He went to tremendous pains in figuring out
the details upon which he based his decision. Unfortunately, I cannot
agree with his legal conclusions and the report is set aside except
wherein specifically approved.
It is unnecessary to resolve specifically the many exceptions made
by both partied to the referee's report. It would take much time to do
so. Much time has already been spent in preparing this decision.
Since both parties have informed me that in case of adverse
judgment ,and appeal would be taken, I desire to conclude the case
so that delay will be avoided.
Let judgment be entered awarding damages to plaintiff in the sum of
P2,219.60, with costs.
From which plaintiff only appealed and assigns twenty-four different errors, of
which the following are material to this opinion:
I. The trial court erred in holding that this suit in so far as the
damages from November, 1923, to March 31, 1926, are concerned ,
is res adjudicata.
II. The trial court erred in holding that the defendant repudiated the
contract in question as a whole, and that the plaintiff when it brought
its first suit to collect damages had already elected and consented to
the dissolution of the contract, and its choice once made, being final,
it was estopped to claim that the contract was alive when that suit
was brought.
xxx xxx xxx
26
VII. The trial court erred in refusing to sustain plaintiff's third since this was the efficient cause of the failure of defendant to deliver
exception to the legal interpretation placed on the contract in this or plaintiff to accept tars, the blame is attribute to plaintiff, and it
case by the referee with reference to quantity of tars and his cannot recover for a rescission.
conclusion with respect to the terms thereof that:
xxx xxx xxx
"1. Plaintiff must take and defendant must deliver either the minimum
or maximum quantity of water gas tar and not any quantity from the XXIII. The trial court erred in refusing to sustain plaintiff's
minimum to the maximum and/or seventeenth exception to the finding and conclusion of the referee
that the plaintiff is entitled to recover from the defendant only the
"2. Plaintiff must take either the minimum and any quantity up to fifty following sums:
per cent of entire output of coal gas tar.
Water gas tar (Exhibit Ref. 21) P38,134.60
"3. With ninety days' notice by plaintiff to defendant the former must
take and the latter must deliver total output of both tars, except such Coal gas tar (Exhibit Ref. 22) 16,547.33
as might be needed by defendant for use in and about its plants Overcharges on deliveries
and not any quantity from the minimum up to total output of both 2,219.60
(Exhibit Ref. 23)
tars." (See page 47, Referee's report.)

And in holding that the option contained in said contract, taking into
consideration the purposes of both parties in entering into the
contract, was a claimed by defendant: all the water gas tar and 50
per cent of the coal gas tar upon immediate notice and all tars upon
ninety day's notice.
VIII. The trial court erred in refusing to sustain plaintiff's fourth
exception to the finding and conclusion of the referee that from the
correspondence between the parties it was apparent that plaintiff did
not make a right use of its option, and that the letter of June 25,
1926, and the subsequent demands, with exception of the letter of
July 31, 1926, were not made in pursuance to the terms of the
contract, and that defendant had no liability in refusing to comply
therewith, and in allowing plaintiff damages only for the failure of the
defendant to deliver quantities shown in Exhibits Ref. 21 and 22.
(See pages 51, 52, Referee's report.)
IX. The trial court erred in finding and holding that the demands of
plaintiff for additional tars under its contract with the defendant were
extravagant and not made in good faith, and that when it wrote to
defendant that it desired maximum quantities of coal gas tars and
only minimum of water gas tars, but with the reservation of going
back to minimum quantities of both at any time it chose, it
announced its intention f breaching the contract, and defendant was
under no obligation to deliver maximum quantities of either tars, and
or a total of 56,901.53
with interest, and in not awarding to the plaintiff as damages in this
case the sum of P319,253.40, with legal interest thereon from the
date of filing the complaint in this case, in the manner and form
computed but it, and in awarding damages to the plaintiff for the sum
of only P2,219.60. with costs.
xxx xxx xxx
JOHNS, J.:
In this action plaintiff seeks to recover damages from the defendant which it
claims to have sustained after September, 1923, arising from, and growing
out of, its original contract of September 10, 1918, as modified on January 1,
1919, to continue for a period of ten years from that date.
In paragraph VIII of its complaint, plaintiff alleges that about the last part of
July, 1920, the defendant "willfully and deliberately breached its said
contract," and that it "flatly refused to make any deliveries under said
contract, and finally on November 23, 1923," it was forced to commence
action in the Court of First Instance against the defendant known as case No.
27
25352, to recover the damages which it had then sustained by reason of
such flagrant violation of said contract on the part of the defendant, in which
judgment was rendered in favor of the plaintiff and against the defendant for
P26,1119.08, as damages suffered by this plaintiff by the defendant's breach
of said contract from July 1920, up to and including September, 1923, with
legal interest thereon from November 23, 1923, and for the costs," in which
the court refused to order the defendant to resume the delivery of the coal
and water gas tar to the plaintiff, in accord with said contract, but left it with
its remedy for damages against the defendant for any subsequent breaches
of the contract. A copy of that judgment, which was later affirmed by this
court, is attached to, marked Exhibit G, and made a part of, the complaint in
this action.
In their respective briefs, opposing counsel have much to say about the
purpose and intent of the judgment, and it is vigorously asserted that it was
never intended that it should be or become a bar to another action by the
plaintiff to recover any damages it may have sustained after September,
1923, during the remainder of the ten-year period of that contract. Be that as
it may, it must be conceded that the question as to what would be the legal
force and effect of that judgment in that case was never presented to, or
decided by, the lower court or this court. In the very nature of things, neither
court in that case would have the power to pass upon or decided the legal
force and effect of its own judgment, for the simple reason that it would be
premature and outside of the issues of any pleading, and could not be raised
or presented until after the judgment became final and then only by an
appropriate plea, as in this case.
Plaintiff specifically alleges that the defendant willfully and deliverately
breached the contract and "flatly refused to make any deliveries under said
contract," by reason of. which it was forced to and commenced its former
action in which it was awarded P26,119.08 damages against the defendant
by reason of its breach of the contract from July, 1920, to September, 1923.
In the final analysis, plaintiff in this action seeks to recover damages growing
out of, and arising from, other and different breaches of that same contract
after November, 1923, for the remainder of the ten-year period, and the
question is thus squarely presented as to whether the rendition of the former
judgment is a bar to the right of the plaintiff to recover damages from and
after September, 1923, arising from, and growing out of, breaches of the
original contract of September 10, 1918, as modified on January 1, 1919.
That is to say, whether the plaintiff, in a former action, having recovered
judgment for the damages which it sustained by reason of a breach of its
contract by the defendant up to September, 1923, can now in this action
recover damages it may have sustained after September, 1923, arising from,
and growing out of, a breach of the same contract, upon and for which it
recovered its judgment in the former action.
In the former action in which the judgment was rendered, it is alleged in the
compliant:
"7. That about the last part of July or the first part of August, 1920,
the Manila Gas Corporation, the defendant herein, without any cause
ceased delivering coal and water gas tar to the plaintiff herein; and
that from that time up to the present date, the plaintiff corporation,
Blossom & Company, has frequently and urgently demanded of the
defendant, the Manila Gas Corporation, that it comply with its
aforesaid contract Exhibit A by continuing to deliver coal and water
gas tar to this plaintiff but that the said defendant has refused and
still refuses, to deliver to the plaintiff any coal and water gas tar
whatsoever under the said contract Exhibit A, since the said month of
July 1920.
"9. That owing to the bad faith of the said Manila Gas Corporation,
defendant herein, in not living up to its said contract Exhibit A, made
with this plaintiff, and refusing now to carry out the terms of the
same, be delivering to this plaintiff the coal and water gas tar
mentioned in the said Exhibit A, has caused to this plaintiff great and
irreparable damages amounting to the sum total of one hundred
twenty- four thousand eight hundred forty eight pesos and seventy
centavos (P124,848,70);and that the said defendant corporation has
refused, and still refuses, to pay to this plaintiff the whole or any part
of the aforesaid sum.
"10. That the said contract Exhibit A, was to be in force until January
1, 1929, that is to say ten (10) years counted from January 1, 1929;
and that unless the defendant again commence to furnish and supply
this plaintiff with coal and water gas tar, as provided for in the said
contract Exhibit A, the damages already suffered by this plaintiff will
continually increase and become larger and larger in the course of
years preceding the termination of the said contract on January 1,
1929."
In that action plaintiff prays for judgment against the defendant:
28
 "(a) That upon trial of this this cause judgment be rendered in favor
of the plaintiff and against the defendant for the sum of
P124,8484.70), with legal interest thereon from November 23, 1923;
"(b) That the court specifically order the defendant to resume the
delivery of the coal and water gas tar to the plaintiff under the terms
of the said contract Exhibit A of this complaint."
In the final analysis, plaintiff must stand or fall on its own pleadings, and
tested by that rule it must be admitted that the plaintiff's original cause of
action, in which it recovered judgment for damages, was founded on the ten-
year contract, and that the damages which it then recovered were recovered
for a breach of that contract.
Both actions are founded on one and the same contract. By the terms of the
original contract of September 10, 1018, the defendant was to sell and the
plaintiff was to purchase three tons of water gas tar per month form
September to January 1, 1919, and twenty tons of water gas tar per month
after January 1, 1919, one-half ton of coal gas tar per month from September
to January 1, 1919, and six tons of coal gas tar per month after January 1,
1919. That from and after January 1, 1919, plaintiff would take at least the
quantities specified in the contract of September 10, 1918, and that at its
option, it would have the right to take the total output of water gas tar of
defendant's plant and 50 per cent of the gross output of its coal gas tar, and
upon giving ninety days' notice, it would have the right to the entire output of
coal gas tar, except such as the defendant might need for its own use. That
is to say, the contract provided for the delivery to the plaintiff from month to
month of the specified amounts of the different tars as ordered and
requested by the plaintiff. In other words, under plaintiff's own theory, the
defendant was to make deliveries from month to month of the tars during the
period of ten years, and it is alleged in both complaints that the defendant
broke its contract, and in bad faith refused to make any more deliveries.
In 34 Corpus Juris, p. 839, it is said:
As a general rule a contract to do several things at several times in
its nature, so as to authorize successive actions; and a judgment
recovered for a single breach of a continuing contract or covenant is
no bar to a suit for a subsequent breach thereof. But where the
covenant or contract is entire, and the breach total, there can be only
one action, and plaintiff must therein recover all his damages.
In the case of Rhoelm vs, Horst, 178 U. U., 1; 44 Law. ed., 953, that court
said:
An unqualified and positive refusal to perform a contract, though the
performance thereof is not yet due, may, if the renunciation goes to
the whole contract, be treated as a complete breach which will entitle
the injured party to bring his action at once.
15 Ruling Case Law, 966, 967, sec. 441 says:
Similarly if there is a breach by the vendor of a contract for the sale
of goods to be delivered and paid for in installments, and the vendee
maintains an action therefor and recovers damages, he cannot
maintain a subsequent action to recover for the failure to deliver later
installments.
In Pakas vs. Hollingshead, 184 N. Y., 211; 77 N. E., 40; 3 L. R. A. (N. S.),
1024, the syllabus says:
Upon refusal, by the seller, after partial performance, longer to
comply with his contract to sell and deliver a quantity of articles in
installments the buyer cannot keep the contract in force and maintain
actions for breaches as they occur but must recover all his damages
in one suit.
And on page 1044 of its opinion, the court say:
The learned counsel for the plaintiff contends that the former
judgment did not constitute a bar to the present action but that the
plaintiff had the right to elect to waive or disregard the breach, keep
the contract in force, and maintain successive actions for time to time
as the installments of goods were to be delivered, however
numerous these actions might be. It is said that this contention is
supported in reason and justice, and has the sanction of authority at
least in other jurisdictions. We do not think that the contention can be
maintained. There is not as it seems to us any judicial authority in
this state that gives it any substantial support. On the contrary, we
think that the cases, so far as we have been able to examine them,
are all the other way, and are to the effect that, inasmuch as there
was a total breach of the contract by the defendant's refusal to
deliver, the plaintiff cannot split up his demand and maintain
successive actions, but must either recover all his damages in the
first suit or wait until the contract matured or the time for the delivery
29
 of all the goods had arrived. In other words, there can be but one
action for damages for a total breach of an entire contract to deliver
goods, and the fact that they were to be delivered in installment from
time to time does not change the general rule.
The case of L. Bucki & Son Lumber Co. vs. Atlantic Lumber Co. (109
Federal, 411), of the United States Circuit Court of Appeals for the Fifth
Circuit, is very similar.
The syllabus says:
1. CONTRACTS CONSTRUCTION ENTIRE CONTRACT. A
contract was made for the sale of a large quantity of logs to be
delivered in monthly installments during a period of eight years,
payments to be made also in installments at times having relation tot
he deliveries. It contained stipulations as to such payments, and
guaranties as to the average size of the logs to be delivered in each
installment. Held, that it was an entire contract, and not a number of
separate and independent agreements for the sale of the quantity to
be delivered and paid for each month, although there might be
breaches of the minor stipulations and warranties with reference
thereto which would warrant suits without a termination of the
contract.
2. JUDGMENTS MATTERS CONCLUDED ACTION FOR
BREACH OF INDIVISIBLE CONTRACT. The seller declared the
contract terminated for alleged breaches by the purchaser, and
brought suit for general and special damages the latter covering
payments due for installments of logs delivered. By way of set-off
and recoupment against this demand, the purchaser pleaded
breaches of the warranty as to the size of the logs delivered during
the months for which payment had not been made. Held, that the
judgment in such action was conclusive as to all claims or demands
or either party against the other growing out of the entire contract,
and was a bar to a subsequent suit brought by the purchaser to
recover for other breaches of the same warranty in relation to
deliveries made in previous months.
On page 415 of the opinion, the court says:
When the contract was ended, the claims of each party for alleged
breaches and damages therefor constituted an indivisible demand;
and when the same, or any part of the same, was pleaded, litigation
had, and final judgment rendered, such suit and judgment constitute
a bar to subsequent demands which were or might have been
litigated (Baird vs. U. S., 96 U. S., 430; 24 L. ed., 703.)
In Watts vs. Weston (238 Federal, 149), Circuit Court of Appeals, Second
Circuit, the syllabus says:
1. JUDGMENTS 593 JUDGMENT AS BAR MATTERS
CONCLUDED. Where a continuing contract was terminated by
the absolute refusal of the party whose action was necessary to
further perform, a claim for damages on account of the breach
constituted as indivisible demand, and when the same or any part of
the same was pleaded, litigated, and final judgment rendered, such
suit and judgment constitute a bar to subsequent demands which
were or might have been litigated therein.
And on page 150 of the opinion, the court says:
It is enough to show the lack of merit in the present contention to
point out as an inexorable rule of law that, when Kneval's contract
was discharged by his total repudiation thereof, Watt's claims for
breaches and damages therefor constituted an indivisible demand,
and when the same, or any part of the same, was pleaded, litigation
had and final judgment rendered, such suit and judgment constitute
a bar to subsequent demands which were or might have been
litigated." (Bucki, etc., Co. vs. Atlantic, etc., Co., 109 Fed. at page
415; 48 C. C. A., 459; Cf. Landon vs. Bulkley, 95 Fed., 344; 337 C.
C. A., 96.)
The rule is usually applied in cases of alleged or supposed
successive breaches, and consequently severable demands for
damages; but if the contract has been discharged by breach, if suit
for damages is all that is left, the rule is applicable, and every
demand arising form that contract and possessed by any given
plaintiff must be presented (at least as against any given defendant)
in one action; what the plaintiff does not advance he foregoes by
conclusive presumption.
Inn Abbott vs. 76 Land and Water Co. (118 Pac., 425; 161 Cal., 42), at page
428, the court said:
In Fish vs. Folley, 6 Hill (N. Y.), 54, it was held, in accord with the rule
we have discussed, that, where the defendant had covenanted that
30
 plaintiff should have a continual supply of water for his mill from a
dam, and subsequently totally failed to perform for nine years, and
plaintiff brought an action for the breach and recovered damages
sustained by him to that time, the judgment was a bar to a second
action arising from subsequent failure to perform, on the theory that,
although he covenant was a continuing one in one sense, it was an
entire contract, and a total breach put an end to it, and gave plaintiff
the right to sue for an equivalent in damages.
In such a case it is no warrant for a second action that the party may
not be able to actually prove in the first action all the items of the
demand, or that all the damage may not then have been actually
suffered. He is bound to prove in the first action not only such
damages as has been actually suffered, but also such prospective
damage by reason of the breach as he may be legally entitled to, for
the judgment he recovers in such action will be a conclusive
adjudication as to the total damage on account of the breach.
It will thus be seen that, where there is a complete and total breach of a
continuous contract for a term of years, the recovery of a judgment for
damages by reason of the breach is a bar to another action on the same
contract for and on account of the continuous breach.
In the final analysis is, there is no real dispute about any material fact, and
the important and decisive question is the legal construction of the pleadings
in the former case and in this case, and of the contract between the plaintiff
and the defendant of January 1, 1920.
The complaint on the former case specifically alleges that the defendant "has
refused and still refuses, to deliver to the plaintiff any coal and water gas tar
whatsoever under the said contract Exhibit A, since the said month of July,
1920." " That owing to the bad faith of the said Manila Gas Corporation,
defendant herein, in not living up to its said contract Exhibit A, made with this
plaintiff, and refusing now to carry out the terms of the same." That is a
specific allegation not only a breach of the contract since the month of July,
1920, but of the faith of the defendant in its continuous refusal to make
deliveries of any coal and water gas tar. That amended complaint was filed
on July 11, 1924, or four years after the alleged bad faith in breaking the
contract.
Having recovered damages against it, covering a period of four years, upon
the theory that the defendant broke the contract, and in bad faith refused to
make deliveries of either of the tars, how can the plaintiff now claim and
assert that the contract is still in fierce and effect? In the instant case the
plaintiff alleges and relies upon the ten year contract on January 11, 1920,
which in bad faith was broken by the defendant. If the contract was then
broken, how can it be enforced in this action?
It is admitted that the defendant never made any deliveries of any tar from
July, 1920, to April, 1936. Also that it made nine deliveries to plaintiff of the
minimum quantities of coal and water gas tar from April 7, 1926, to January
5, 1927.
Plaintiff contends that such deliveries were made under and in continuation
of the old contract.
March 26, 1926, after the decision of this court affirming the judgment in the
original action, plaintiff wrote the defendant:
. . . It is our desire to take deliveries of at least the minimum
quantities set forth therein and shall appreciate to have you advise
us how soon you will be in a position to make deliveries; . . .
. . . In view of the fact that you have only effected settlement up to
November 23, 1923, please inform us what adjustment you are
willing to make for the period of time that has since elapsed without
your complying with the contract.
In response to which on March 31, 1926, the defendant wrote this letter to
the plaintiff:
In reply to your letter of March 26th, 1926, in regard to tar, we beg to
advise you that we are prepared to furnish the minimum quantities of
coal and water gas tars as per your letter, viz: twenty tons of water
gas tar and six tons of coal gas tar. The price figured on present
costs of raw materials is P39.01 ) Thirty-nine and 01/100 Pesos) per
ton of water gas and P33.59 (Thirty-three and 59/100 Pesos) per ton
of coal tar.
We shall expect you to take delivery and pay for the above amount of
tars at our factory on or before April 7th prox.
Thereafter we shall be ready to furnish equal amounts on the first of
each month. Kindly make your arrangements accordingly.
31
On January 29, 1927, the plaintiff wrote the defendant that:
On July 31st last, we made demand upon you, under the terms of
our tar contract for 50 per cent of your total coal tar production for
that month and also served notice on you that beginning 90 days
from August 1st we would require you total output of coal tar
monthly; this in addition to the 20 tons of water gas tar provided for in
the contract to be taken monthly.
xxx xxx xxx
We are here again on your for your total output of coal tar
immediately and the regular minimum monthly quantity of water gas
tar. In this connection we desire to advise you that within 90 days of
your initial delivery to us of your total coal tar output we will require
50 per cent of your total water gas tar output, and, further, that two
months thereafter we will require your total output of both tars.
February 2, 1927, the defendant wrote the plaintiff:
Replying to your letter of Jan. 29, we would sat that we have already
returned to you the check enclosed there with. As we have
repeatedly informed you we disagree with you as to the construction
of your contract and insist that you take the whole output of both tars
if you wish to secure the whole of the coal tar.
With regard to your threat of further suits we presume that you will
act as advised. If you make it necessary we shall do the
same.lawphil.net
The record tends to show that tars which the defendant delivered after April
7, 1926, were not delivered under the old contract of January 1, 1920, and
that at all times since July 1920, the defendant has consistently refused to
make any deliveries of any tars under that contract.
The referee found as a fact that plaintiff was entitled to P2,219.60 for and on
account of overcharges which the defendant made for the deliveries of fifty-
four tons of coal gas tar, and one hundred eighty tons of water gas tar after
April, 1926, and upon that point the lower says:
The fourth charge that plaintiff makes is meritorious. The price was to
be fixed on the basis of raw materials. The charge for deliveries
during 1926 were too high. In this I agree with entirely with the
referee and adopt his findings of fact and calculations.
(See Referee's report, p. 83) The referee awarded for overcharge
during the period aforesaid, the sum of P2,219.60. The defendant
was trying to discharge plaintiff from buying tars and made the price
of raw material appear as high as possible.
That finding is sustained upon the theory that the defendant broke its
contract which it made with the plaintiff for the sale and delivery of the tars on
and after April, 1926.
After careful study of the many important questions presented on this appeal
in the exhaustive brief of the appellant, we are clearly of the opinion that, as
found by the lower court, the plea of res judicata must be sustained. The
judgment of the lower court is affirmed.
It is so ordered, with costs against the appellant.

From an analysis of these letters it clearly appears that the plaintiff then
sought to reply upon and enforce the contract of January 1, 1920, and that
defendant denied plaintiff's construction of the contract, and insisted "that you
take the whole output of both tars if you wish to secure the whole of the coal
tar."

February 28, 1927, the plaintiff wrote the defendant:

In view of your numerous violations of and repeated refusal and

failure to comply with the terms and provisions of our contract dated
January 30-31, 1919, for the delivery to us of water and coal gas
tars, etc., we will commence action," which it did.

32
[G.R. No. 161135. April 8, 2005]
SWAGMAN HOTELS AND TRAVEL, INC., petitioner, vs. HON. COURT OF
APPEALS, and NEAL B. CHRISTIAN, respondents.
DECISION
DAVIDE, JR., C.J.:
May a complaint that lacks a cause of action at the time it was filed be cured
by the accrual of a cause of action during the pendency of the case? This is
the basic issue raised in this petition for the Courts consideration.
Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc.,
through Atty. Leonor L. Infante and Rodney David Hegerty, its president and
vice-president, respectively, obtained from private respondent Neal B.
Christian loans evidenced by three promissory notes dated 7 August 1996,
14 March 1997, and 14 July 1997. Each of the promissory notes is in the
amount of US$50,000 payable after three years from its date with an interest
of 15% per annum payable every three months. [1] In a letter dated 16
December 1998, Christian informed the petitioner corporation that he was
terminating the loans and demanded from the latter payment in the total
amount of US$150,000 plus unpaid interests in the total amount of
US$13,500.[2]
On 2 February 1999, private respondent Christian filed with the Regional
Trial Court of Baguio City, Branch 59, a complaint for a sum of money and
damages against the petitioner corporation, Hegerty, and Atty. Infante. The
complaint alleged as follows: On 7 August 1996, 14 March 1997, and 14 July
1997, the petitioner, as well as its president and vice-president obtained
loans from him in the total amount of US$150,000 payable after three years,
with an interest of 15% per annum payable quarterly or every three months.
For a while, they paid an interest of 15% per annum every three months in
accordance with the three promissory notes. However, starting January 1998
until December 1998, they paid him only an interest of 6% per annum,
instead of 15% per annum, in violation of the terms of the three promissory
notes. Thus, Christian prayed that the trial court order them to pay him jointly
and solidarily the amount of US$150,000 representing the total amount of the
loans; US$13,500 representing unpaid interests from January 1998 until
December 1998; P100,000 for moral damages; P50,000 for attorneys fees;
and the cost of the suit.[3]
The petitioner corporation, together with its president and vice-president, filed
an Answer raising as defenses lack of cause of action and novation of the
principal obligations. According to them, Christian had no cause of action
because the three promissory notes were not yet due and demandable. In
December 1997, since the petitioner corporation was experiencing huge
losses due to the Asian financial crisis, Christian agreed (a) to waive the
interest of 15% per annum, and (b) accept payments of the principal loans in
installment basis, the amount and period of which would depend on the state
of business of the petitioner corporation. Thus, the petitioner paid Christian
capital repayment in the amount of US$750 per month from January 1998
until the time the complaint was filed in February 1999. The petitioner and its
co-defendants then prayed that the complaint be dismissed and that
Christian be ordered to pay P1 million as moral damages; P500,000 as
exemplary damages; and P100,000 as attorneys fees.[4]
In due course and after hearing, the trial court rendered a decision [5] on 5
May 2000 declaring the first two promissory notes dated 7 August 1996 and
14 March 1997 as already due and demandable and that the interest on the
loans had been reduced by the parties from 15% to 6% per annum. It then
ordered the petitioner corporation to pay Christian the amount of $100,000
representing the principal obligation covered by the promissory notes dated 7
August 1996 and 14 March 1997, plus interest of 6% per month thereon until
fully paid, with all interest payments already paid by the defendant to the
plaintiff to be deducted therefrom.
The trial court ratiocinated in this wise:
(1) There was no novation of defendants obligation to the plaintiff. Under
Article 1292 of the Civil Code, there is an implied novation only if the old and
the new obligation be on every point incompatible with one another.
The test of incompatibility between the two obligations or contracts,
according to an imminent author, is whether they can stand together, each
one having an independent existence. If they cannot, they are incompatible,
and the subsequent obligation novates the first (Tolentino, Civil Code of the
Philippines, Vol. IV, 1991 ed., p. 384). Otherwise, the old obligation will
continue to subsist subject to the modifications agreed upon by the parties.
Thus, it has been written that accidental modifications in an existing
obligation do not extinguish it by novation. Mere modifications of the debt
agreed upon between the parties do not constitute novation. When the
changes refer to secondary agreement and not to the object or principal
conditions of the contract, there is no novation; such changes will produce
modifications of incidental facts, but will not extinguish the original obligation.
Thus, the acceptance of partial payments or a partial remission does not
involve novation (id., p. 387). Neither does the reduction of the amount of an
obligation amount to a novation because it only means a partial remission or
condonation of the same debt.
In the instant case, the Court is of the view that the parties merely intended
to change the rate of interest from 15% per annum to 6% per annum when
the defendant started paying $750 per month which payments were all
accepted by the plaintiff from January 1998 onward. The payment of the
principal obligation, however, remains unaffected which means that the
defendant should still pay the plaintiff $50,000 on August 9, 1999, March 14,
2000 and July 14, 2000.
(2) When the instant case was filed on February 2, 1999, none of the
promissory notes was due and demandable. As of this date however, the first
33
and the second promissory notes have already matured. Hence, payment is
already due.
Under Section 5 of Rule 10 of the 1997 Rules of Civil Procedure, a complaint
which states no cause of action may be cured by evidence presented without
objection. Thus, even if the plaintiff had no cause of action at the time he filed
the instant complaint, as defendants obligation are not yet due and
demandable then, he may nevertheless recover on the first two promissory
notes in view of the introduction of evidence showing that the obligations
covered by the two promissory notes are now due and demandable.
(3) Individual defendants Rodney Hegerty and Atty. Leonor L. Infante can not
be held personally liable for the obligations contracted by the defendant
corporation it being clear that they merely acted in representation of the
defendant corporation in their capacity as General Manager and President,
respectively, when they signed the promissory notes as evidenced by Board
Resolution No. 1(94) passed by the Board of Directors of the defendant
corporation (Exhibit 4).[6]
In its decision[7] of 5 September 2003, the Court of Appeals denied petitioners
appeal and affirmed in toto the decision of the trial court, holding as follows:
In the case at bench, there is no incompatibility because the changes
referred to by appellant Swagman consist only in the manner of payment. . . .
Appellant Swagmans interpretation that the three (3) promissory notes have
been novated by reason of appellee Christians acceptance of the monthly
payments of US$750.00 as capital repayments continuously even after the
filing of the instant case is a little bit strained considering the stiff
requirements of the law on novation that the intention to novate must appear
by express agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken. Under the circumstances, the more reasonable
interpretation of the act of the appellee Christian in receiving the monthly
payments of US$750.00 is that appellee Christian merely allowed appellant
Swagman to pay whatever amount the latter is capable of. This interpretation
is supported by the letter of demand dated December 16, 1998 wherein
appellee Christian demanded from appellant Swagman to return the principal
loan in the amount of US$150,000 plus unpaid interest in the amount of
US$13,500.00
...
Appellant Swagman, likewise, contends that, at the time of the filing of the
complaint, appellee Christian ha[d] no cause of action because none of the
promissory notes was due and demandable.
Again, We are not persuaded.
...
In the case at bench, while it is true that appellant Swagman raised in its
Answer the issue of prematurity in the filing of the complaint, appellant
Swagman nonetheless failed to object to appellee Christians presentation of
evidence to the effect that the promissory notes have become due and
demandable.
The afore-quoted rule allows a complaint which states no cause of action to
be cured either by evidence presented without objection or, in the event of an
objection sustained by the court, by an amendment of the complaint with
leave of court (Herrera, Remedial Law, Vol. VII, 1997 ed., p. 108). [8]
Its motion for reconsideration having been denied by the Court of Appeals in
its Resolution of 4 December 2003,[9] the petitioner came to this Court raising
the following issues:
I. WHERE THE DECISION OF THE TRIAL COURT DROPPING TWO
DEFENDANTS HAS BECOME FINAL AND EXECUTORY, MAY THE
RESPONDENT COURT OF APPEALS STILL STUBBORNLY CONSIDER
THEM AS APPELLANTS WHEN THEY DID NOT APPEAL?
II. WHERE THERE IS NO CAUSE OF ACTION, IS THE DECISION OF THE
LOWER COURT VALID?
III. MAY THE RESPONDENT COURT OF APPEALS VALIDLY AFFIRM A
DECISION OF THE LOWER COURT WHICH IS INVALID DUE TO LACK OF
CAUSE OF ACTION?
IV. WHERE THERE IS A VALID NOVATION, MAY THE ORIGINAL TERMS
OF CONTRACT WHICH HAS BEEN NOVATED STILL PREVAIL?[10]
The petitioner harps on the absence of a cause of action at the time the
private respondents complaint was filed with the trial court. In connection with
this, the petitioner raises the issue of novation by arguing that its obligations
under the three promissory notes were novated by the renegotiation that
happened in December 1997 wherein the private respondent agreed to
waive the interest in each of the three promissory notes and to accept
US$750 per month as installment payment for the principal loans in the total
amount of US$150,000. Lastly, the petitioner questions the act of the Court of
Appeals in considering Hegerty and Infante as appellants when they no
longer appealed because the trial court had already absolved them of the
liability of the petitioner corporation.
On the other hand, the private respondent asserts that this petition is a mere
ploy to continue delaying the payment of a just obligation. Anent the fact that
Hegerty and Atty. Infante were considered by the Court of Appeals as
appellants, the private respondent finds it immaterial because they are not
affected by the assailed decision anyway.
Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil
Procedure, is the act or omission by which a party violates the right of
another. Its essential elements are as follows:
1. A right in favor of the plaintiff by whatever means and under whatever law
it arises or is created;
2. An obligation on the part of the named defendant to respect or not to
violate such right; and
34
3. Act or omission on the part of such defendant in violation of the right of the
plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of damages
or other appropriate relief.[11]
It is, thus, only upon the occurrence of the last element that a cause of action
arises, giving the plaintiff the right to maintain an action in court for recovery
of damages or other appropriate relief.
It is undisputed that the three promissory notes were for the amount of
P50,000 each and uniformly provided for (1) a term of three years; (2) an
interest of 15 % per annum, payable quarterly; and (3) the repayment of the
principal loans after three years from their respective dates. However, both
the Court of Appeals and the trial court found that a renegotiation of the three
promissory notes indeed happened in December 1997 between the private
respondent and the petitioner resulting in the reduction not waiver of the
interest from 15% to 6% per annum, which from then on was payable
monthly, instead of quarterly. The term of the principal loans remained
unchanged in that they were still due three years from the respective dates of
the promissory notes. Thus, at the time the complaint was filed with the trial
court on 2 February 1999, none of the three promissory notes was due yet;
although, two of the promissory notes with the due dates of 7 August 1999
and 14 March 2000 matured during the pendency of the case with the trial
court. Both courts also found that the petitioner had been religiously paying
the private respondent US$750 per month from January 1998 and even
during the pendency of the case before the trial court and that the private
respondent had accepted all these monthly payments.
With these findings of facts, it has become glaringly obvious that when the
complaint for a sum of money and damages was filed with the trial court on 2
February 1999, no cause of action has as yet existed because the petitioner
had not committed any act in violation of the terms of the three promissory
notes as modified by the renegotiation in December 1997. Without a cause of
action, the private respondent had no right to maintain an action in court, and
the trial court should have therefore dismissed his complaint.
Despite its finding that the petitioner corporation did not violate the modified
terms of the three promissory notes and that the payment of the principal
loans were not yet due when the complaint was filed, the trial court did not
dismiss the complaint, citing Section 5, Rule 10 of the 1997 Rules of Civil
Procedure, which reads:
Section 5. Amendment to conform to or authorize presentation of evidence.
When issues not raised by the pleadings are tried with the express or implied
consent of the parties, they shall be treated in all respects as if they had
been raised in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these
issues may be made upon motion of any party at any time, even after
judgment; but failure to amend does not affect the result of the trial of these
issues. If evidence is objected to at the trial on the ground that it is not within
the issues made by the pleadings, the court may allow the pleadings to be
amended and shall do so with liberality if the presentation of the merits of the
action and the ends of substantial justice will be subserved thereby. The
court may grant a continuance to enable the amendment to be made.
According to the trial court, and sustained by the Court of Appeals, this
Section allows a complaint that does not state a cause of action to be cured
by evidence presented without objection during the trial. Thus, it ruled that
even if the private respondent had no cause of action when he filed the
complaint for a sum of money and damages because none of the three
promissory notes was due yet, he could nevertheless recover on the first two
promissory notes dated 7 August 1996 and 14 March 1997, which became
due during the pendency of the case in view of the introduction of evidence
of their maturity during the trial.
Such interpretation of Section 5, Rule 10 of the 1997 Rules of Civil
Procedure is erroneous.
Amendments of pleadings are allowed under Rule 10 of the 1997 Rules of
Civil Procedure in order that the actual merits of a case may be determined
in the most expeditious and inexpensive manner without regard to
technicalities, and that all other matters included in the case may be
determined in a single proceeding, thereby avoiding multiplicity of suits.
[12]
Section 5 thereof applies to situations wherein evidence not within the
issues raised in the pleadings is presented by the parties during the trial, and
to conform to such evidence the pleadings are subsequently amended on
motion of a party. Thus, a complaint which fails to state a cause of action
may be cured by evidence presented during the trial.
However, the curing effect under Section 5 is applicable only if a cause of
action in fact exists at the time the complaint is filed, but the complaint is
defective for failure to allege the essential facts. For example, if a complaint
failed to allege the fulfillment of a condition precedent upon which the cause
of action depends, evidence showing that such condition had already been
fulfilled when the complaint was filed may be presented during the trial, and
the complaint may accordingly be amended thereafter. [13] Thus, in Roces v.
Jalandoni,[14] this Court upheld the trial court in taking cognizance of an
otherwise defective complaint which was later cured by the testimony of the
plaintiff during the trial. In that case, there was in fact a cause of action and
the only problem was the insufficiency of the allegations in the complaint.
This ruling was reiterated in Pascua v. Court of Appeals.[15]
It thus follows that a complaint whose cause of action has not yet accrued
cannot be cured or remedied by an amended or supplemental pleading
alleging the existence or accrual of a cause of action while the case is
pending.[16] Such an action is prematurely brought and is, therefore, a
groundless suit, which should be dismissed by the court upon proper motion
seasonably filed by the defendant. The underlying reason for this rule is that
35
a person should not be summoned before the public tribunals to answer for
complaints which are immature. As this Court eloquently said in Surigao
Mine Exploration Co., Inc. v. Harris:[17]
It is a rule of law to which there is, perhaps, no exception, either at law or in
equity, that to recover at all there must be some cause of action at the
commencement of the suit. As observed by counsel for appellees, there are
reasons of public policy why there should be no needless haste in bringing
up litigation, and why people who are in no default and against whom there is
yet no cause of action should not be summoned before the public tribunals to
answer complaints which are groundless. We say groundless because if the
action is immature, it should not be entertained, and an action prematurely
brought is a groundless suit.
It is true that an amended complaint and the answer thereto take the place of
the originals which are thereby regarded as abandoned (Reynes vs. Compaa
General de Tabacos [1912], 21 Phil. 416; Ruyman and Farris vs. Director of
Lands [1916], 34 Phil., 428) and that the complaint and answer having been
superseded by the amended complaint and answer thereto, and the answer
to the original complaint not having been presented in evidence as an exhibit,
the trial court was not authorized to take it into account. (Bastida vs. Menzi &
Co. [1933], 58 Phil., 188.) But in none of these cases or in any other case
have we held that if a right of action did not exist when the original complaint
was filed, one could be created by filing an amended complaint. In some
jurisdictions in the United States what was termed an imperfect cause of
action could be perfected by suitable amendment (Brown vs. Galena Mining
& Smelting Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26 Ga. App., 221)
and this is virtually permitted in Banzon and Rosauro vs. Sellner ([1933], 58
Phil., 453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935], 62 Phil., 683); and
recently in Ramos vs. Gibbon (38 Off. Gaz., 241). That, however, which is no
cause of action whatsoever cannot by amendment or supplemental
pleading be converted into a cause of action: Nihil de re accrescit ei qui nihil
in re quando jus accresceret habet.
We are therefore of the opinion, and so hold, that unless the plaintiff has a
valid and subsisting cause of action at the time his action is commenced, the
defect cannot be cured or remedied by the acquisition or accrual of one while
the action is pending, and a supplemental complaint or an amendment
setting up such after-accrued cause of action is not permissible. (Emphasis
ours).
Hence, contrary to the holding of the trial court and the Court of Appeals, the
defect of lack of cause of action at the commencement of this suit cannot be
cured by the accrual of a cause of action during the pendency of this case
arising from the alleged maturity of two of the promissory notes on 7 August
1999 and 14 March 2000.
Anent the issue of novation, this Court observes that the petitioner
corporation argues the existence of novation based on its own version of
what transpired during the renegotiation of the three promissory notes in
December 1997. By using its own version of facts, the petitioner is, in a way,
questioning the findings of facts of the trial court and the Court of Appeals.
As a rule, the findings of fact of the trial court and the Court of Appeals are
final and conclusive and cannot be reviewed on appeal to the Supreme
Court[18] as long as they are borne out by the record or are based on
substantial evidence.[19] The Supreme Court is not a trier of facts, its
jurisdiction being limited to reviewing only errors of law that may have been
committed by the lower courts. Among the exceptions is when the finding of
fact of the trial court or the Court of Appeals is not supported by the evidence
on record or is based on a misapprehension of facts. Such exception obtains
in the present case.[20]
This Court finds to be contrary to the evidence on record the finding of both
the trial court and the Court of Appeals that the renegotiation in December
1997 resulted in the reduction of the interest from 15% to 6% per annum and
that the monthly payments of US$750 made by the petitioner were for the
reduced interests.
It is worthy to note that the cash voucher dated January 1998 [21] states that
the payment of US$750 represents INVESTMENT PAYMENT. All the
succeeding cash vouchers describe the payments from February 1998 to
September 1999 as CAPITAL REPAYMENT. [22] All these cash vouchers
served as receipts evidencing private respondents acknowledgment of the
payments made by the petitioner: two of which were signed by the private
respondent himself and all the others were signed by his representatives.
The private respondent even identified and confirmed the existence of these
receipts during the hearing. [23] Significantly, cognizant of these receipts, the
private respondent applied these payments to the three consolidated
principal loans in the summary of payments he submitted to the court. [24]
Under Article 1253 of the Civil Code, if the debt produces interest, payment
of the principal shall not be deemed to have been made until the interest has
been covered. In this case, the private respondent would not have signed the
receipts describing the payments made by the petitioner as capital
repayment if the obligation to pay the interest was still subsisting. The
receipts, as well as private respondents summary of payments, lend
credence to petitioners claim that the payments were for the principal loans
and that the interests on the three consolidated loans were waived by the
private respondent during the undisputed renegotiation of the loans on
account of the business reverses suffered by the petitioner at the time.
There was therefore a novation of the terms of the three promissory notes in
that the interest was waived and the principal was payable in monthly
installments of US$750. Alterations of the terms and conditions of the
obligation would generally result only in modificatory novation unless such
terms and conditions are considered to be the essence of the obligation
itself.[25] The resulting novation in this case was, therefore, of the modificatory
36
type, not the extinctive type, since the obligation to pay a sum of money
remains in force.
Thus, since the petitioner did not renege on its obligation to pay the monthly
installments conformably with their new agreement and even continued
paying during the pendency of the case, the private respondent had no
cause of action to file the complaint. It is only upon petitioners default in the
payment of the monthly amortizations that a cause of action would arise and
give the private respondent a right to maintain an action against the
petitioner.
Lastly, the petitioner contends that the Court of Appeals obstinately included
its President Infante and Vice-President Hegerty as appellants even if they
did not appeal the trial courts decision since they were found to be not
personally liable for the obligation of the petitioner. Indeed, the Court of
Appeals erred in referring to them as defendants-appellants; nevertheless,
that error is no cause for alarm because its ruling was clear that the petitioner
corporation was the one solely liable for its obligation. In fact, the Court of
Appeals affirmed in toto the decision of the trial court, which means that it
also upheld the latters ruling that Hegerty and Infante were not personally
liable for the pecuniary obligations of the petitioner to the private respondent.
In sum, based on our disquisition on the lack of cause of action when the
complaint for sum of money and damages was filed by the private
respondent, the petition in the case at bar is impressed with merit.
WHEREFORE, the petition is hereby GRANTED. The Decision of 5
September 2003 of the Court of Appeals in CA-G.R. CV No. 68109, which
affirmed the Decision of 5 May 2000 of the Regional Trial Court of Baguio,
Branch 59, granting in part private respondents complaint for sum of money
and damages, and its Resolution of 4 December 2003, which denied
petitioners motion for reconsideration are hereby REVERSED and SET
ASIDE. The complaint docketed as Civil Case No. 4282-R is hereby
DISMISSED for lack of cause of action.
No costs.
SO ORDERED.
Facts: Sometime in 1996 and 1997, Swagman through Atty. Infante and Hegerty, its
president and vice-president, respectively, obtained from Christian loans evidenced
by three promissory notes dated 7 August 1996, 14 March 1997, and 14 July 1997.
Each of the promissory notes is in the amount of US$50,000 payable after three
years from its date with an interest of 15% per annum payable every three months. In
a letter dated 16 December 1998, Christian informed the petitioner corporation that he
was terminating the loans and demanded from the latter payment of said loans.
On 2 February 1999, Christian filed with the RTC a complaint for a sum of money and
damages against the petitioner corporation, Hegerty, and Atty. Infante.
The petitioner corporation, together with its president and vice-president, filed an
Answer raising as defenses lack of cause of action. According to them, Christian had
no cause of action because the three promissory notes were not yet due and
demandable.
The trial court ruled that under Section 5 of Rule 10 of the 1997 Rules of Civil
Procedure, a complaint which states no cause of action may be cured by evidence
presented without objection. Thus, even if the plaintiff had no cause of action at the
time he filed the instant complaint, as defendants obligation are not yet due and
demandable then, he may nevertheless recover on the first two promissory notes in
view of the introduction of evidence showing that the obligations covered by the two
promissory notes are now due and demandable. When the instant case was filed on
February 2, 1999, none of the promissory notes was due and demandable, but , the
first and the second promissory notes have already matured during the course of the
proceeding. Hence, payment is already due.
This finding was affirmed in toto by the CA.
Issue: Whether or not a complaint that lacks a cause of action at the time it was filed
be cured by the accrual of a cause of action during the pendency of the case.
Held: No. Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil
Procedure, is the act or omission by which a party violates the right of another. Its
essential elements are as follows:
1. A right in favor of the plaintiff by whatever means and under whatever law it arises
or is created;
2. An obligation on the part of the named defendant to respect or not to violate such
right; and
3. Act or omission on the part of such defendant in violation of the right of the plaintiff
or constituting a breach of the obligation of the defendant to the plaintiff for which the
latter may maintain an action for recovery of damages or other appropriate relief.
It is, thus, only upon the occurrence of the last element that a cause of action arises,
giving the plaintiff the right to maintain an action in court for recovery of damages or
other appropriate relief.
Such interpretation by the trial court and CA of Section 5, Rule 10 of the 1997 Rules
of Civil Procedure is erroneous. The curing effect under Section 5 is applicable only if
a cause of action in fact exists at the time the complaint is filed, but the complaint
is defective for failure to allege the essential facts.Amendments of pleadings are
allowed under Rule 10 of the 1997 Rules of Civil Procedure in order that the actual
merits of a case may be determined in the most expeditious and inexpensive manner
without regard to technicalities, and that all other matters included in the case may be
determined in a single proceeding, thereby avoiding multiplicity of suits.
37
 EN BANC NACHURA,
EDUARDO R. ERMITA, in his capacity as LEONARDO-DE CASTRO,
SYLVIA BANDA, CONSORICIA O. G.R. No. 166620 Executive Secretary, THE DIRECTOR BRION,
ON, RADITO V. PADRIGANO, JEAN R. GENERAL OF THE PHILIPPINE PERALTA,
ESA, LEAH P. DELA CRUZ, ANDY V. INFORMATION AGENCY and THE NATIONAL BERSAMIN,
ASAQUIT, SENEN B. CORDOBA, TREASURER, DEL CASTILLO,
RT BRILLANTES, GLORIA BISDA, Respondents. ABAD,*
TA V. CONCEPCION, TERESITA G. VILLARAMA, JR.,
AJAL, ROSANNA T. MALIWANAG, PEREZ, and
ARD ODERON, CECILIA ESTERNON, MENDOZA, JJ.
DICTO CABRAL, MA. VICTORIA E.
CO, CESAR ANDRA, FELICISIMO
CIO, ELSA R. CALMA, FILOMENA A.
NG, JEAN PAUL MELEGRITO, CLARO
SANTIAGO, JR., EDUARDO FRIAS,
ALDO O. ANDAL, NEPHTALIE IMPERIO,
BALAGTAS, VICTOR R. ORTIZ,
CISCO P. REYES, JR., ELISEO M.
GOT, JR., JOSE C. MONSALVE, JR.,
RO ADSUARA, F.C. LADRERO, JR., Promulgated:
ON PADUA, MARCELA C. SAYAO,
ELITO MALAKAS, GLORIA RAMENTO,
ANA SUPLEO, MANUEL MENDRIQUE, E.
AN, CARMELA BOBIS, DANILO April 20, 2010
AS, ROY-LEO C. PABLO, ALLAN x--------------------------------------------------x
ANUEVA, VICENTE R. VELASCO, JR.,
DA ERENO, FLORIZA M. CATIIS, RANIEL DECISION
SCO, E. JALIJALI, MARIO C. CARAAN,
ORES M. AVIADO, MICHAEL P.
ANA, GUILLERMO G. SORIANO, ALICE LEONARDO-DE CASTRO, J.:
OJO, ARTHUR G. NARNE, LETICIA
ANO, FEDERICO RAMOS, JR.,
RSON CAAMPUED, RODELIO L. The present controversy arose from a Petition for Certiorari and prohibition
EZ, ANTONIO D. GARCIA, JR., ANTONIO challenging the constitutionality of Executive Order No. 378 dated October
O, A. SANCHEZ, SOL E. TAMAYO, 25, 2004, issued by President Gloria Macapagal Arroyo (President
PHINE A.M. COCJIN, DAMIAN QUINTO, Arroyo). Petitioners characterize their action as a class suit filed on their own
EDLYN MARIANO, M.A. MALANUM, Present: behalf and on behalf of all their co-employees at the National Printing Office
EDO S. ESTRELLA, and JESUS MEL (NPO).
,
ners, PUNO, C.J., The NPO was formed on July 25, 1987, during the term of former President
CARPIO, Corazon C. Aquino (President Aquino), by virtue of Executive Order No.
CORONA, 285[1] which provided, among others, the creation of the NPO from the
us - CARPIO MORALES, merger of the Government Printing Office and the relevant printing units of
VELASCO, JR.,
38
the Philippine Information Agency (PIA). Section 6 of Executive Order No.
285 reads:
SECTION 6. Creation of the National Printing Office. There is hereby
created a National Printing Office out of the merger of the Government
Printing Office and the relevant printing units of the Philippine Information
Agency. The Office shall have exclusive printing jurisdiction over the
following:
a. Printing, binding and distribution of all standard and accountable forms of
national, provincial, city and municipal governments, including government
corporations;
b. Printing of officials ballots;
c. Printing of public documents such as the Official Gazette,
General Appropriations Act, Philippine Reports, and development information
materials of the Philippine Information Agency.
The Office may also accept other government printing jobs,
including government publications, aside from those enumerated above, but
not in an exclusive basis.
The details of the organization, powers, functions, authorities, and related
management aspects of the Office shall be provided in the implementing
details which shall be prepared and promulgated in accordance with Section
II of this Executive Order.
The Office shall be attached to the Philippine Information Agency.
On October 25, 2004, President Arroyo issued the herein assailed Executive
Order No. 378, amending Section 6 of Executive Order No. 285 by, inter alia,
removing the exclusive jurisdiction of the NPO over the printing services
requirements of government agencies and instrumentalities. The pertinent
portions of Executive Order No. 378, in turn, provide:
SECTION 1. The NPO shall continue to provide printing services to
government agencies and instrumentalities as mandated by
law.However, it shall no longer enjoy exclusive jurisdiction over the
printing services requirements of the government over standard and
accountable forms. It shall have to compete with the private sector,
except in the printing of election paraphernalia which could be shared
with the Bangko Sentral ng Pilipinas, upon the discretion of the Commission
on Elections consistent with the provisions of the Election Code of 1987.
SECTION 2. Government agencies/instrumentalities may source printing
services outside NPO provided that:
2.1 The printing services to be provided by the private sector is superior in
quality and at a lower cost than what is offered by the NPO; and
2.2 The private printing provider is flexible in terms of meeting the target
completion time of the government agency.
SECTION 3. In the exercise of its functions, the amount to be
appropriated for the programs, projects and activities of the NPO in the
General Appropriations Act (GAA) shall be limited to its income without
additional financial support from the government. (Emphases and
underscoring supplied.)
Pursuant to Executive Order No. 378, government agencies and
instrumentalities are allowed to source their printing services from the private
sector through competitive bidding, subject to the condition that the services
offered by the private supplier be of superior quality and lower in cost
compared to what was offered by the NPO. Executive Order No.
378 also limited NPOs appropriation in the General Appropriations Act to its
income.
Perceiving Executive Order No. 378 as a threat to their security of tenure as
employees of the NPO, petitioners now challenge its constitutionality,
contending that: (1) it is beyond the executive powers of President Arroyo to
amend or repeal Executive Order No. 285issued by former President Aquino
when the latter still exercised legislative powers; and (2) Executive Order No.
378 violates petitioners security of tenure, because it paves the way for the
gradual abolition of the NPO.
We dismiss the petition.
Before proceeding to resolve the substantive issues, the Court must first
delve into a procedural matter. Since petitioners instituted this case as a
class suit, the Court, thus, must first determine if the petition indeed qualifies
as one. In Board of Optometry v. Colet,[2] we held that [c]ourts must exercise
utmost caution before allowing a class suit, which is the exception to the
requirement of joinder of all indispensable parties. For while no difficulty may
arise if the decision secured is favorable to the plaintiffs, a quandary would
39
result if the decision were otherwise as those who were deemed impleaded
by their self-appointed representatives would certainly claim denial of due
process.
Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
Sec. 12. Class suit. When the subject matter of the controversy is one of
common or general interest to many persons so numerous that it is
impracticable to join all as parties, a number of them which the court finds to
be sufficiently numerous and representative as to fully protect the interests of
all concerned may sue or defend for the benefit of all. Any party in interest
shall have the right to intervene to protect his individual interest.
From the foregoing definition, the requisites of a class suit are: 1) the subject
matter of controversy is one of common or general interest to many persons;
2) the parties affected are so numerous that it is impracticable to bring them
all to court; and 3) the parties bringing the class suit are sufficiently
numerous or representative of the class and can fully protect the interests of
all concerned.
In Mathay v. The Consolidated Bank and Trust Company,[3] the Court held
that:
An action does not become a class suit merely because it is designated as
such in the pleadings. Whether the suit is or is not a class suit depends upon
the attending facts, and the complaint, or other pleading initiating the
class action should allege the existence of the necessary facts, to wit, the
existence of a subject matter of common interest, and the existence of a
class and the number of persons in the alleged class, in order that the
court might be enabled to determine whether the members of the class
are so numerous as to make it impracticable to bring them all before
the court, to contrast the number appearing on the record with the
number in the class and to determine whether claimants on record
adequately represent the class and the subject matter of general or
common interest. (Emphases ours.)
Here, the petition failed to state the number of NPO employees who would
be affected by the assailed Executive Order and who were allegedly
represented by petitioners. It was the Solicitor General, as counsel for
respondents, who pointed out that there were about 549 employees in the
NPO.[4] The 67 petitioners undeniably comprised a small fraction of the NPO
employees whom they claimed to represent.Subsequently, 32 of the original
petitioners executed an Affidavit of Desistance, while one signed a letter
denying ever signing the petition, [5] ostensibly reducing the number of
petitioners to 34. We note that counsel for the petitioners challenged the
validity of the desistance or withdrawal of some of the petitioners and
insinuated that such desistance was due to pressure from people close to the
seat of power.[6] Still, even if we were to disregard the affidavit of desistance
filed by some of the petitioners, it is highly doubtful that a sufficient,
representative number of NPO employees have instituted this purported
class suit. A perusal of the petition itself would show that of the 67 petitioners
who signed the Verification/Certification of Non-Forum Shopping, only 20
petitioners were in fact mentioned in the jurat as having duly subscribed the
petition before the notary public. In other words, only 20 petitioners
effectively instituted the present case.
Indeed, in MVRS Publications, Inc. v. Islamic Dawah Council of the
Philippines, Inc.,[7] we observed that an element of a class suit or
representative suit is the adequacy of representation. In determining the
question of fair and adequate representation of members of a class, the court
must consider (a) whether the interest of the named party is coextensive with
the interest of the other members of the class; (b) the proportion of those
made a party, as it so bears, to the total membership of the class; and (c) any
other factor bearing on the ability of the named party to speak for the rest of
the class.
Previously, we held in Ibaes v. Roman Catholic Church[8] that where the
interests of the plaintiffs and the other members of the class they seek to
represent are diametrically opposed, the class suit will not prosper.
It is worth mentioning that a Manifestation of Desistance, [9] to which the
previously mentioned Affidavit of Desistance [10] was attached, was filed by the
President of the National Printing Office Workers Association
(NAPOWA). The said manifestation expressed NAPOWAs opposition to the
filing of the instant petition in any court. Even if we take into account the
contention of petitioners counsel that the NAPOWA President had no legal
standing to file such manifestation, the said pleading is a clear indication that
there is a divergence of opinions and views among the members of the class
sought to be represented, and not all are in favor of filing the present
suit. There is here an apparent conflict between petitioners interests and
those of the persons whom they claim to represent. Since it cannot be said
that petitioners sufficiently represent the interests of the entire class, the
instant case cannot be properly treated as a class suit.
As to the merits of the case, the petition raises two main grounds to assail
the constitutionality of Executive Order No. 378:
40
First, it is contended that President Arroyo cannot amend or repeal
Executive Order No. 285 by the mere issuance of another executive order
(Executive Order No. 378). Petitioners maintain that former President
Aquinos Executive Order No. 285 is a legislative enactment, as the same
was issued while President Aquino still had legislative powers under the
Freedom Constitution;[11] thus, only Congress through legislation can validly
amend Executive Order No. 285.
Second, petitioners maintain that the issuance of Executive Order No. 378
would lead to the eventual abolition of the NPO and would violate the
security of tenure of NPO employees.
Anent the first ground raised in the petition, we find the same patently without
merit.
It is a well-settled principle in jurisprudence that the President has the power
to reorganize the offices and agencies in the executive department in line
with the Presidents constitutionally granted power of control over executive
offices and by virtue of previous delegation of the legislative power to
reorganize executive offices under existing statutes.
In Buklod ng Kawaning EIIB v. Zamora,[12] the Court pointed out that
Executive Order No. 292 or the Administrative Code of 1987 gives the
President continuing authority to reorganize and redefine the functions of the
Office of the President. Section 31, Chapter 10, Title III, Book III of the said
Code, is explicit:
Sec. 31. Continuing Authority of the President to Reorganize his Office. The
President, subject to the policy in the Executive Office and in order to
achieve simplicity, economy and efficiency, shall have continuing
authority to reorganize the administrative structure of the Office of the
President. For this purpose, he may take any of the following actions:
(1) Restructure the internal organization of the Office of the President
Proper, including the immediate Offices, the President Special
Assistants/Advisers System and the Common Staff Support System, by
abolishing, consolidating or merging units thereof or transferring
functions from one unit to another;
(2) Transfer any function under the Office of the President to any other
Department or Agency as well as transfer functions to the Office of the
President from other Departments and Agencies; and
(3) Transfer any agency under the Office of the President to any other
department or agency as well as transfer agencies to the Office of the
President from other Departments or agencies. (Emphases ours.)
Interpreting the foregoing provision, we held in Buklod ng Kawaning EIIB,
thus:
But of course, the list of legal basis authorizing the President to reorganize
any department or agency in the executive branch does not have to end
here. We must not lose sight of the very source of the power that which
constitutes an express grant of power. Under Section 31, Book III of
Executive Order No. 292 (otherwise known as the Administrative Code of
1987), the President, subject to the policy in the Executive Office and in order
to achieve simplicity, economy and efficiency, shall have the continuing
authority to reorganize the administrative structure of the Office of the
President. For this purpose, he may transfer the functions of other
Departments or Agencies to the Office of the President. In Canonizado v.
Aguirre [323 SCRA 312 (2000)], we ruled that reorganization involves
the reduction of personnel, consolidation of offices, or abolition thereof
by reason of economy or redundancy of functions. It takes place when
there is an alteration of the existing structure of government offices or
units therein, including the lines of control, authority and responsibility
between them. The EIIB is a bureau attached to the Department of Finance.
It falls under the Office of the President. Hence, it is subject to the Presidents
continuing authority to reorganize.[13] (Emphasis ours.)
It is undisputed that the NPO, as an agency that is part of the Office of the
Press Secretary (which in various times has been an agency directly
attached to the Office of the Press Secretary or as an agency under the
Philippine Information Agency), is part of the Office of the President. [14]
Pertinent to the case at bar, Section 31 of the Administrative Code of 1987
quoted above authorizes the President (a) to restructure the internal
organization of the Office of the President Proper, including the immediate
Offices, the President Special Assistants/Advisers System and the Common
Staff Support System, by abolishing, consolidating or merging units thereof
or transferring functions from one unit to another, and (b) to transfer functions
or offices from the Office of the President to any other Department or Agency
in the Executive Branch, and vice versa.
Concomitant to such power to abolish, merge or consolidate offices in the
Office of the President Proper and to transfer functions/offices not only
41
among the offices in the Office of President Proper but also the rest of the
Office of the President and the Executive Branch, the President implicitly has
the power to effect less radical or less substantive changes to the functional
and internal structure of the Office of the President, including the modification
of functions of such executive agencies as the exigencies of the service may
require.
In the case at bar, there was neither an abolition of the NPO nor a removal of
any of its functions to be transferred to another agency.Under the assailed
Executive Order No. 378, the NPO remains the main printing arm of the
government for all kinds of government forms and publications but in the
interest of greater economy and encouraging efficiency and profitability, it
must now compete with the private sector for certain government printing
jobs, with the exception of election paraphernalia which remains the
exclusive responsibility of the NPO, together with the Bangko Sentral ng
Pilipinas, as the Commission on Elections may determine. At most, there
was a mere alteration of the main function of the NPO by limiting the
exclusivity of its printing responsibility to election forms.[15]
There is a view that the reorganization actions that the President may take
with respect to agencies in the Office of the President are strictly limited to
transfer of functions and offices as seemingly provided in Section 31 of the
Administrative Code of 1987.
However, Section 20, Chapter 7, Title I, Book III of the same Code
significantly provides:
Sec. 20. Residual Powers. Unless Congress provides otherwise, the
President shall exercise such other powers and functions vested in the
President which are provided for under the laws and which are not
specifically enumerated above, or which are not delegated by the President
in accordance with law. (Emphasis ours.)
Pursuant to Section 20, the power of the President to reorganize the
Executive Branch under Section 31 includes such powers and functions that
may be provided for under other laws. To be sure, an inclusive and broad
interpretation of the Presidents power to reorganize executive offices has
been consistently supported by specific provisions in general
appropriations laws.
In the oft-cited Larin v. Executive Secretary,[16] the Court likewise adverted to
certain provisions of Republic Act No. 7645, the general appropriations law
for 1993, as among the statutory bases for the Presidents power to
reorganize executive agencies, to wit:
Section 48 of R.A. 7645 provides that:
Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the
Executive Branch. The heads of departments, bureaus and offices and
agencies are hereby directed to identify their respective activities which are
no longer essential in the delivery of public services and which may be
scaled down, phased out or abolished, subject to civil [service] rules and
regulations. x x x. Actual scaling down, phasing out or abolition of the
activities shall be effected pursuant to Circulars or Orders issued for the
purpose by the Office of the President.
Said provision clearly mentions the acts of "scaling down, phasing out
and abolition" of offices only and does not cover the creation of offices
or transfer of functions. Nevertheless, the act of creating and
decentralizing is included in the subsequent provision of Section 62,
which provides that:
Sec. 62. Unauthorized organizational changes. Unless otherwise created by
law or directed by the President of the Philippines, no organizational unit or
changes in key positions in any department or agency shall be authorized in
their respective organization structures and be funded from appropriations by
this Act.
The foregoing provision evidently shows that the President is
authorized to effect organizational changes including the creation of
offices in the department or agency concerned.
The contention of petitioner that the two provisions are riders deserves scant
consideration. Well settled is the rule that every law has in its favor the
presumption of constitutionality. Unless and until a specific provision of the
law is declared invalid and unconstitutional, the same is valid and binding for
all intents and purposes.[17] (Emphases ours)
Buklod ng Kawaning EIIB v. Zamora,[18] where the Court upheld as valid then
President Joseph Estradas Executive Order No. 191 deactivating the
Economic Intelligence and Investigation Bureau (EIIB) of the Department of
Finance, hewed closely to the reasoning in Larin. The Court, among others,
also traced from the General Appropriations Act [19] the Presidents authority to
effect organizational changes in the department or agency under the
executive structure, thus:
We adhere to the precedent or ruling in Larin that this provision recognizes
the authority of the President to effect organizational changes in the
department or agency under the executive structure. Such a ruling further
finds support in Section 78 of Republic Act No. 8760. Under this law, the
42
heads of departments, bureaus, offices and agencies and other entities in the
Executive Branch are directed (a) to conduct a comprehensive review of their
respective mandates, missions, objectives, functions, programs, projects,
activities and systems and procedures; (b) identify activities which are no
longer essential in the delivery of public services and which may be scaled
down, phased-out or abolished; and (c) adopt measures that will result in
the streamlined organization and improved overall performance of their
respective agencies. Section 78 ends up with the mandate that the actual
streamlining and productivity improvement in agency organization and
operation shall be effected pursuant to Circulars or Orders issued for the
purpose by the Office of the President. x x x.[20] (Emphasis ours)
Notably, in the present case, the 2003 General Appropriations Act, which was
reenacted in 2004 (the year of the issuance of Executive Order No. 378),
likewise gave the President the authority to effect a wide variety of
organizational changes in any department or agency in the Executive
Branch. Sections 77 and 78 of said Act provides:
Section 77. Organized Changes. Unless otherwise provided by law or
directed by the President of the Philippines, no changes in key positions
or organizational units in any department or agency shall be authorized in
their respective organizational structures and funded from appropriations
provided by this Act.
Section 78. Institutional Strengthening and Productivity Improvement in
Agency Organization and Operations and Implementation of
Organization/Reorganization Mandated by Law. The Government shall
adopt institutional strengthening and productivity
improvementmeasures to improve service delivery and enhance productivity
in the government, as directed by the President of the Philippines. The
heads of departments, bureaus, offices, agencies, and other entities of the
Executive Branch shall accordingly conduct a comprehensive review of
their respective mandates, missions, objectives, functions, programs,
projects, activities and systems and procedures; identify areas where
improvements are necessary; and implement corresponding structural,
functional and operational adjustments that will result in streamlined
organization and operations and improved performance and
productivity: PROVIDED, That actual streamlining and productivity
improvements in agency organization and operations, as authorized by the
President of the Philippines for the purpose, including the utilization of
savings generated from such activities, shall be in accordance with the rules
and regulations to be issued by the DBM, upon consultation with the
Presidential Committee on Effective Governance: PROVIDED, FURTHER,
That in the implementation of organizations/reorganizations, or specific
changes in agency structure, functions and operations as a result of
institutional strengthening or as mandated by law, the appropriation,
including the functions, projects, purposes and activities of agencies
concerned may be realigned as may be necessary: PROVIDED,
FINALLY, That any unexpended balances or savings in appropriations may
be made available for payment of retirement gratuities and separation
benefits to affected personnel, as authorized under existing laws. (Emphases
and underscoring ours.)
Implicitly, the aforequoted provisions in the appropriations law recognize the
power of the President to reorganize even executive offices already funded
by the said appropriations act, including the power to implement structural,
functional, and operational adjustments in the executive bureaucracy and,
in so doing, modify or realign appropriations of funds as may be necessary
under such reorganization. Thus, insofar as petitioners protest the limitation
of the NPOs appropriations to its own income under Executive Order No.
378, the same is statutorily authorized by the above provisions.
In the 2003 case of Bagaoisan v. National Tobacco Administration,[21] we
upheld the streamlining of the National Tobacco Administration through a
reduction of its personnel and deemed the same as included in the power of
the President to reorganize executive offices granted under the laws,
notwithstanding that such streamlining neither involved an abolition nor a
transfer of functions of an office.To quote the relevant portion of that decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D.
Zamora, in his capacity as the Executive Secretary, et al., this Court has had
occasion to also delve on the Presidents power to reorganize the Office of
the President under Section 31(2) and (3) of Executive Order No. 292 and
the power to reorganize the Office of the President Proper. x x x
xxxx
The first sentence of the law is an express grant to the President of
a continuing authority to reorganize the administrative structure of the Office
of the President. The succeeding numbered paragraphs are not in the
nature of provisos that unduly limit the aim and scope of the grant to
the President of the power to reorganize but are to be viewed in
consonance therewith. Section 31(1) of Executive Order No. 292
specifically refers to the Presidents power to restructure the internal
organization of the Office of the President Proper, by abolishing,
consolidating or merging units hereof or transferring functions from one unit
to another, while Section 31(2) and (3) concern executive offices outside the
Office of the President Proper allowing the President to transfer any function
under the Office of the President to any other Department or Agency
43
and vice-versa, and the transfer of any agency under the Office of the
President to any other department or agency and vice-versa.
In the present instance, involving neither an abolition nor transfer of
offices, the assailed action is a mere reorganization under the general
provisions of the law consisting mainly of streamlining the NTA in the
interest of simplicity, economy and efficiency. It is an act well within
the authority of the President motivated and carried out, according to the
findings of the appellate court, in good faith, a factual assessment that this
Court could only but accept.[22] (Emphases and underscoring supplied.)
In the more recent case of Tondo Medical Center Employees Association v.
Court of Appeals,[23] which involved a structural and functional
reorganization of the Department of Health under an executive order,
we reiterated the principle that the power of the President to reorganize
agencies under the executive department by executive or administrative
order is constitutionally and statutorily recognized. We held in that case:
This Court has already ruled in a number of cases that the President
may, by executive or administrative order, direct the reorganization of
government entities under the Executive Department. This is also
sanctioned under the Constitution, as well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states: [T]he
president shall have control of all executive departments, bureaus and
offices. Section 31, Book III, Chapter 10 of Executive Order No. 292, also
known as the Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize his Office -
The President, subject to the policy in the Executive Office and in order to
achieve simplicity, economy and efficiency, shall have continuing authority to
reorganize the administrative structure of the Office of the President. For this
purpose, he may take any of the following actions:
xxxx
In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the rationale
behind the Presidents continuing authority under the Administrative Code to
reorganize the administrative structure of the Office of the President. The
law grants the President the power to reorganize the Office of the
President in recognition of the recurring need of every President to
reorganize his or her office to achieve simplicity, economy and
efficiency. To remain effective and efficient, it must be capable of being
shaped and reshaped by the President in the manner the Chief Executive
deems fit to carry out presidential directives and policies.
The Administrative Code provides that the Office of the President consists
of the Office of the President Proper and the agencies under it. The
agencies under the Office of the President are identified in Section 23,
Chapter 8, Title II of the Administrative Code:
Sec. 23. The Agencies under the Office of the President.The
agencies under the Office of the President refer to those offices placed under
the chairmanship of the President, those under the supervision and
control of the President, those under the administrative supervision of the
Office of the President, those attached to it for policy and program
coordination, and those that are not placed by law or order creating them
under any specific department.
xxxx
The power of the President to reorganize the executive department
is likewise recognized in general appropriations laws. x x x.
xxxx
Clearly, Executive Order No. 102 is well within the constitutional power of
the President to issue. The President did not usurp any legislative
prerogative in issuing Executive Order No. 102. It is an exercise of the
Presidents constitutional power of control over the executive
department, supported by the provisions of the Administrative Code,
recognized by other statutes, and consistently affirmed by this Court.
[24]
(Emphases supplied.)
Subsequently, we ruled in Anak Mindanao Party-List Group v. Executive
Secretary[25] that:
The Constitutions express grant of the power of control in the President
justifies an executive action to carry out reorganization measures under a
broad authority of law.
In enacting a statute, the legislature is presumed to have deliberated
with full knowledge of all existing laws and jurisprudence on the subject. It is
thus reasonable to conclude that in passing a statute which places an
agency under the Office of the President, it was in accordance with existing
laws and jurisprudence on the Presidents power to reorganize.
44

In establishing an executive department, bureau or office, the legislature
necessarily ordains an executive agencys position in the scheme of
administrative structure. Such determination is primary, but subject to the
Presidents continuing authority to reorganize the administrative structure.As
far as bureaus, agencies or offices in the executive department are
concerned, the power of control may justify the President to deactivate the
functions of a particular office. Or a law may expressly grant the President
the broad authority to carry out reorganization measures. The Administrative
Code of 1987 is one such law.[26]
The issuance of Executive Order No. 378 by President Arroyo is an exercise
of a delegated legislative power granted by the aforementioned Section 31,
Chapter 10, Title III, Book III of the Administrative Code of 1987, which
provides for the continuing authority of the President to reorganize the Office
of the President, in order to achieve simplicity, economy and efficiency. This
is a matter already well-entrenched in jurisprudence. The reorganization of
such an office through executive or administrative order is also recognized in
the Administrative Code of 1987. Sections 2 and 3, Chapter 2, Title I, Book III
of the said Code provide:
Sec. 2. Executive Orders. - Acts of the President providing for rules of a
general or permanent character in implementation or execution of
constitutional or statutory powers shall be promulgated
in executive orders.
Sec. 3. Administrative Orders. - Acts of the President which relate to
particular aspects of governmental operations in pursuance of his duties
as administrative head shall be promulgated in administrative orders.
(Emphases supplied.)
To reiterate, we find nothing objectionable in the provision in Executive Order
No. 378 limiting the appropriation of the NPO to its own income. Beginning
with Larin and in subsequent cases, the Court has noted certain provisions in
the general appropriations laws as likewise reflecting the power of the
President to reorganize executive offices or agencies even to the extent of
modifying and realigning appropriations for that purpose.
Petitioners contention that the issuance of Executive Order No. 378 is an
invalid exercise of legislative power on the part of the President has no legal
leg to stand on.
In all, Executive Order No. 378, which purports to institute necessary reforms
in government in order to improve and upgrade efficiency in the delivery of
public services by redefining the functions of the NPO and limiting its funding
to its own income and to transform it into a self-reliant agency able to
compete with the private sector, is well within the prerogative of President
Arroyo under her continuing delegated legislative power to reorganize her
own office. As pointed out in the separate concurring opinion of our learned
colleague, Associate Justice Antonio T. Carpio, the objective behind
Executive Order No. 378 is wholly consistent with the state policy contained
in Republic Act No. 9184 or the Government Procurement Reform Act to
encourage competitiveness by extending equal opportunity to private
contracting parties who are eligible and qualified.[27]
To be very clear, this delegated legislative power to reorganize pertains only
to the Office of the President and the departments, offices and agencies of
the executive branch and does not include the Judiciary, the Legislature or
the constitutionally-created or mandated bodies.Moreover, it must be
stressed that the exercise by the President of the power to reorganize the
executive department must be in accordance with the Constitution, relevant
laws and prevailing jurisprudence.
In this regard, we are mindful of the previous pronouncement of this Court
in Dario v. Mison[28] that:
Reorganizations in this jurisdiction have been regarded as valid
provided they are pursued in good faith. As a general rule, a
reorganization is carried out in good faith if it is for the purpose of economy
or to make bureaucracy more efficient. In that event, no dismissal (in case of
a dismissal) or separation actually occurs because the position itself ceases
to exist. And in that case, security of tenure would not be a Chinese wall. Be
that as it may, if the abolition, which is nothing else but a separation or
removal, is done for political reasons or purposely to defeat security of
tenure, or otherwise not in good faith, no valid abolition takes place and
whatever abolition is done, is void ab initio. There is an invalid abolition as
where there is merely a change of nomenclature of positions, or where
claims of economy are belied by the existence of ample funds. (Emphasis
ours.)
Stated alternatively, the presidential power to reorganize agencies and
offices in the executive branch of government is subject to the condition that
such reorganization is carried out in good faith.
If the reorganization is done in good faith, the abolition of positions, which
results in loss of security of tenure of affected government employees, would
45
be valid. In Buklod ng Kawaning EIIB v. Zamora,[29] we even observed that
there was no such thing as an absolute right to hold office. Except those who
hold constitutional offices, which provide for special immunity as regards
salary and tenure, no one can be said to have any vested right to an office or
salary.[30]

This brings us to the second ground raised in the petition that Executive
Order No. 378, in allowing government agencies to secure their printing
requirements from the private sector and in limiting the budget of the NPO to
its income, will purportedly lead to the gradual abolition of the NPO and the
loss of security of tenure of its present employees. In other words, petitioners
avow that the reorganization of the NPO under Executive Order No. 378 is
tainted with bad faith. The basic evidentiary rule is that he who asserts a
fact or the affirmative of an issue has the burden of proving it. [31]

A careful review of the records will show that petitioners utterly failed to
substantiate their claim. They failed to allege, much less prove, sufficient
facts to show that the limitation of the NPOs budget to its own income would
indeed lead to the abolition of the position, or removal from office, of any
employee. Neither did petitioners present any shred of proof of their
assertion that the changes in the functions of the NPO were for political
considerations that had nothing to do with improving the efficiency of, or
encouraging operational economy in, the said agency.

In sum, the Court finds that the petition failed to show any constitutional
infirmity or grave abuse of discretion amounting to lack or excess of
jurisdiction in President Arroyos issuance of Executive Order No. 378.

WHEREFORE, the petition is hereby DISMISSED and the prayer for a

Temporary Restraining Order and/or a Writ of Preliminary Injunction is
hereby DENIED. No costs.

SO ORDERED.

46
 ROGER V. NAVARRO, G.R. No. 153788 The first complaint stated:
Petitioner,
1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN
Present: O. GO, a resident of Cagayan de Oro City and doing business under the
CARPIO, J., Chairperson, trade name KARGO ENTERPRISES, an entity duly registered and existing
- versus - LEONARDO-DE CASTRO, under and by virtue of the laws of the Republic of the Philippines, which has
BRION, its business address at Bulua, Cagayan de Oro City; that defendant ROGER
DEL CASTILLO, and NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street,
ABAD, JJ. Nazareth, Cagayan de Oro City, where he may be served with summons and
other processes of the Honorable Court; that defendant JOHN DOE
HON. JOSE L. ESCOBIDO, Presiding Judge, whose real name and address are at present unknown to plaintiff is hereby
RTC Branch 37, Cagayan de Oro City, and Promulgated: joined as party defendant as he may be the person in whose possession and
KAREN T. GO, doing business under the custody the personal property subject matter of this suit may be found if the
name KARGO ENTERPRISES, November 27, 2009 same is not in the possession of defendant ROGER NAVARRO;
Respondents.
2. That KARGO ENTERPRISES is in the business of, among others, buying
and selling motor vehicles, including hauling trucks and other heavy
equipment;

3. That for the cause of action against defendant ROGER NAVARRO, it is

x ---------------------------------------------------------------------------------------- x
DECISION
BRION, J.:
This is a petition for review on certiorari[1] that seeks to set aside the Court of
Appeals (CA) Decision[2] dated October 16, 2001 and Resolution[3] dated May
29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26,
2000[4] and March 7, 2001[5] orders of the Regional Trial Court (RTC),
Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarros
(Navarro) motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints,
docketed as Civil Case Nos. 98-599 (first complaint)[6] and 98-598 (second
complaint),[7] before the RTC for replevin and/or sum of money with damages
against Navarro. In these complaints, Karen Go prayed that the RTC issue
writs of replevin for the seizure of two (2) motor vehicles in Navarros
possession.
hereby stated that on August 8, 1997, the said defendant leased [from]
plaintiff a certain motor vehicle which is more particularly described as
follows
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO
PURCHASE entered into by and between KARGO ENTERPRISES,
then represented by its Manager, the aforementioned GLENN O. GO, and
defendant ROGER NAVARRO xxx; that in accordance with the provisions of
the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant
ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in
the amount of SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE
& 33/100 PESOS (P66,333.33) which were supposedly in payment of the
agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK
OF COMMUNICATIONS CAGAYAN DE ORO BRANCH CHECKS NOS.
017112 and 017113, respectively dated January 8, 1998 and February 8,
1998, were presented for payment and/or credit, the same
were dishonored and/or returned by the drawee bank for the common
reason that the current deposit account against which the said checks were
issued did not have sufficient funds to cover the amounts thereof; that the
47
total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-
TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS
(P132,666.66) therefore represents the principal liability of defendant
ROGER NAVARRO unto plaintiff on the basis of the provisions of the above
LEASE AGREEMENT WITH RIGHT TO PURCHASE; that demands, written
and oral, were made of defendant ROGER NAVARRO to pay the amount of
ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX &
66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also
provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but
said demands were, and still are, in vain to the great damage and injury of
herein plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the subject of any tax
assessment and/or fine pursuant to law, or seized under an execution or an
attachment as against herein plaintiff;
xxx
8. That plaintiff hereby respectfully applies for an order of the Honorable
Court for the immediate delivery of the above-described motor vehicle from
defendants unto plaintiff pending the final determination of this case on the
merits and, for that purpose, there is attached hereto an affidavit duly
executed and bond double the value of the personal property subject matter
hereof to answer for damages and costs which defendants may suffer in the
event that the order for replevin prayed for may be found out to having not
been properly issued.
The second complaint contained essentially the same allegations as the first
complaint, except that the Lease Agreement with Option to Purchase
involved is dated October 1, 1997 and the motor vehicle leased is described
as follows:
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-dated
checks, each for the amount of P100,000.00, to Karen Go in payment of the
agreed rentals; however, the third check was dishonored when presented for
payment.[8]
On October 12, 1998[9] and October 14, 1998,[10] the RTC issued writs of
replevin for both cases; as a result, the Sheriff seized the two vehicles and
delivered them to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense that the
two complaints stated no cause of action, since Karen Go was not a party
to the Lease Agreements with Option to Purchase (collectively, the lease
agreements) the actionable documents on which the complaints were based.
On Navarros motion, both cases were duly consolidated on December 13,
1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground that the
complaints did not state a cause of action.
In response to the motion for reconsideration Karen Go filed dated May 26,
2000,[11] the RTC issued another order dated July 26, 2000 setting aside the
order of dismissal. Acting on the presumption that Glenn Gos leasing
business is a conjugal property, the RTC held that Karen Go had sufficient
interest in his leasing business to file the action against Navarro. However,
the RTC held that Karen Go should have included her husband, Glenn Go, in
the complaint based on Section 4, Rule 3 of the Rules of Court (Rules).
[12]
Thus, the lower court ordered Karen Go to file a motion for the inclusion of
Glenn Go as co-plaintiff.
When the RTC denied Navarros motion for reconsideration on March 7,
2001, Navarro filed a petition for certiorari with the CA, essentially contending
that the RTC committed grave abuse of discretion when it reconsidered the
dismissal of the case and directed Karen Go to amend her complaints by
including her husband Glenn Go as co-plaintiff. According to Navarro, a
complaint which failed to state a cause of action could not be converted into
one with a cause of action by mere amendment or supplemental pleading.
On October 16, 2001, the CA denied Navarros petition and affirmed the
RTCs order.[13] The CA also denied Navarros motion for reconsideration in its
resolution of May 29, 2002,[14] leading to the filing of the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in the name of Kargo
Enterprises, since it did not have the requisite juridical personality to sue, the
actual parties to the agreement are himself and Glenn Go. Since it was
Karen Go who filed the complaints and not Glenn Go, she was not a real
party-in-interest and the complaints failed to state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment of the
complaint to include Glenn Go as a co-plaintiff, instead of dismissing the
complaint outright because a complaint which does not state a cause of
action cannot be converted into one with a cause of action by a mere
48
amendment or a supplemental pleading. In effect, the lower court created a
cause of action for Karen Go when there was none at the time she filed the
complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff
drastically changed the theory of the complaints, to his great prejudice.
Navarro claims that the lower court gravely abused its discretion when it
assumed that the leased vehicles are part of the conjugal property of Glenn
and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises,
the vehicles subject of the complaint are her paraphernal properties and the
RTC gravely erred when it ordered the inclusion of Glenn Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the case in the
same order that required Karen Go to amend her complaints, claiming that
by issuing this order, the trial court violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action against him, Navarro
maintains that the complaints were premature because no prior demand was
made on him to comply with the provisions of the lease agreements before
the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were issued based
on flawed complaints, the vehicles were illegally seized from his possession
and should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to state
that she has no real interest in the subject of the complaint, even if the lease
agreements were signed only by her husband, Glenn Go; she is the owner of
Kargo Enterprises and Glenn Go signed the lease agreements merely as the
manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarros
insistence that Kargo Enterprises is Karen Gos paraphernal property is
without basis. Based on the law and jurisprudence on the matter, all property
acquired during the marriage is presumed to be conjugal property. Finally,
Karen Go insists that her complaints sufficiently established a cause of action
against Navarro. Thus, when the RTC ordered her to include her husband as
co-plaintiff, this was merely to comply with the rule that spouses should sue
jointly, and was not meant to cure the complaints lack of cause of action.
THE COURTS RULING
We find the petition devoid of merit.
Karen Go is the real party-in-interest
The 1997 Rules of Civil Procedure requires that every action must be
prosecuted or defended in the name of the real party-in-interest, i.e., the
party who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.[15]
Interestingly, although Navarro admits that Karen Go is the registered owner
of the business name Kargo Enterprises, he still insists that Karen Go is not
a real party-in-interest in the case. According to Navarro, while the lease
contracts were in Kargo Enterprises name, this was merely a trade name
without a juridical personality, so the actual parties to the lease agreements
were Navarro and Glenn Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave abuse of
discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this
in effect created a cause of action for the complaints when in truth, there was
none.
We do not find Navarros arguments persuasive.
The central factor in appreciating the issues presented in this case is the
business name Kargo Enterprises. The name appears in the title of the
Complaint where the plaintiff was identified as KAREN T. GO doing business
under the name KARGO ENTERPRISES, and this identification was
repeated in the first paragraph of the Complaint. Paragraph 2 defined the
business KARGO ENTERPRISES undertakes.Paragraph 3 continued with
the allegation that the defendant leased from plaintiff a certain motor vehicle
that was thereafter described.Significantly, the Complaint specifies and
attaches as its integral part the Lease Agreement that underlies the
transaction between the plaintiff and the defendant. Again, the name KARGO
ENTERPRISES entered the picture as this Lease Agreement provides:
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx, herein
referred to as the LESSOR-SELLER; representing KARGO ENTERPRISES
as its Manager,
xxx
thus, expressly pointing to KARGO ENTERPRISES as the principal that
Glenn O. Go represented. In other words, by the express terms of this Lease
Agreement, Glenn Go did sign the agreement only as the manager of Kargo
Enterprises and the latter is clearly the real party to the lease agreements.
49
As Navarro correctly points out, Kargo Enterprises is a sole proprietorship,
which is neither a natural person, nor a juridical person, as defined by Article
44 of the Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or
purpose, created by law; their personality begins as soon as they have been
constituted according to law;
(3) Corporations, partnerships and associations for private interest or
purpose to which the law grants a juridical personality, separate and distinct
from that of each shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules, [16] Kargo Enterprises cannot
be a party to a civil action. This legal reality leads to the question: who then is
the proper party to file an action based on a contract in the name of Kargo
Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza,[17] where we
said:
Finally, there is no law authorizing sole proprietorships like petitioner to bring
suit in court. 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 the proprietor or owner thereof to secure licenses and permits,
register the business name, and pay taxes to the national government. It
does not vest juridical or legal personality upon the sole proprietorship nor
empower it to file or defend an action in court.
Thus, the complaint in the court below should have been filed in the name
of the owner of Juasing Hardware. The allegation in the body of the
complaint would show that the suit is brought by such person as
proprietor or owner of the business conducted under the name and
style Juasing Hardware. The descriptive words doing business as Juasing
Hardware may be added to the title of the case, as is customarily done. [18]
[Emphasis supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of the
Rules, which states:
SEC. 2. Parties in interest. A real party in interest is the party who stands to
be benefited or injured by the judgment in the suit, or the party entitled to
the avails of the suit. Unless otherwise authorized by law or these Rules,
every action must be prosecuted or defended in the name of the real party in
interest.
As the registered owner of Kargo Enterprises, Karen Go is the party who will
directly benefit from or be injured by a judgment in this case. Thus, contrary
to Navarros contention, Karen Go is the real party-in-interest, and it is legally
incorrect to say that her Complaint does not state a cause of action because
her name did not appear in the Lease Agreement that her husband signed in
behalf of Kargo Enterprises.Whether Glenn Go can legally sign the Lease
Agreement in his capacity as a manager of Kargo Enterprises, a sole
proprietorship, is a question we do not decide, as this is a matter for the trial
court to consider in a trial on the merits.
Glenn Gos Role in the Case
We find it significant that the business name Kargo Enterprises is in the
name of Karen T. Go,[19] who described herself in the Complaints to be a
Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de
Oro City, and doing business under the trade name KARGO ENTERPRISES.
[20]
That Glenn Go and Karen Go are married to each other is a fact never
brought in issue in the case. Thus, the business name KARGO
ENTERPRISES is registered in the name of a married woman, a fact
material to the side issue of whether Kargo Enterprises and its properties are
paraphernal or conjugal properties. To restate the parties positions, Navarro
alleges that Kargo Enterprises is Karen Gos paraphernal property,
emphasizing the fact that the business is registered solely in Karen Gos
name. On the other hand, Karen Go contends that while the business is
registered in her name, it is in fact part of their conjugal property.
The registration of the trade name in the name of one person a woman does
not necessarily lead to the conclusion that the trade name as a property is
hers alone, particularly when the woman is married. By law, all property
acquired during the marriage, whether the acquisition appears to have been
made, contracted or registered in the name of one or both spouses, is
presumed to be conjugal unless the contrary is proved.[21] Our examination of
the records of the case does not show any proof that Kargo Enterprises and
the properties or contracts in its name are conjugal. If at all, only the bare
allegation of Navarro to this effect exists in the records of the case. As we
emphasized in Castro v. Miat:[22]
50
Petitioners also overlook Article 160 of the New Civil Code. It provides that all
property of the marriage is presumed to be conjugal partnership, unless it be
prove[n] that it pertains exclusively to the husband or to the wife. This
article does not require proof that the property was acquired with funds
of the partnership. The presumption applies even when the manner in
which the property was acquired does not appear.[23] [Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the issue of whether
Kargo Enterprises as a sole proprietorship is conjugal or paraphernal
property, we hold that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal property,
provides:
Art. 124. The administration and enjoyment of the conjugal partnership
property shall belong to both spouses jointly. In case of disagreement,
the husbands decision shall prevail, subject to recourse to the court by the
wife for proper remedy, which must be availed of within five years from the
date of the contract implementing such decision.
xxx
This provision, by its terms, allows either Karen or Glenn Go to speak and
act with authority in managing their conjugal property, i.e.,Kargo
Enterprises. No need exists, therefore, for one to obtain the consent of the
other before performing an act of administration or any act that does not
dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed
by the rules on the contract of partnership in all that is not in conflict with
what is expressly determined in this Chapter or by the spouses in their
marriage settlements. In other words, the property relations of the husband
and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of
Gains of the Family Code and, suppletorily, by the spouses marriage
settlement and by the rules on partnership under the Civil Code. In the
absence of any evidence of a marriage settlement between the spouses Go,
we look at the Civil Code provision on partnership for guidance.
A rule on partnership applicable to the spouses circumstances is Article 1811
of the Civil Code, which states:
Art. 1811. A partner is a co-owner with the other partners of specific
partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any agreement
between the partners, has an equal right with his partners to possess
specific partnership property for partnership purposes; xxx
Under this provision, Glenn and Karen Go are effectively co-owners of Kargo
Enterprises and the properties registered under this name; hence, both have
an equal right to seek possession of these properties. Applying Article 484 of
the Civil Code, which states that in default of contracts, or special provisions,
co-ownership shall be governed by the provisions of this Title, we find further
support in Article 487 of the Civil Code that allows any of the co-owners to
bring an action in ejectment with respect to the co-owned property.
While ejectment is normally associated with actions involving real property,
we find that this rule can be applied to the circumstances of the present case,
following our ruling in Carandang v. Heirs of De Guzman.[24] In this case, one
spouse filed an action for the recovery of credit, a personal property
considered conjugal property, without including the other spouse in the
action. In resolving the issue of whether the other spouse was required to be
included as a co-plaintiff in the action for the recovery of the credit, we said:
Milagros de Guzman, being presumed to be a co-owner of the credits
allegedly extended to the spouses Carandang, seems to be either an
indispensable or a necessary party. If she is an indispensable party,
dismissal would be proper. If she is merely a necessary party, dismissal is
not warranted, whether or not there was an order for her inclusion in the
complaint pursuant to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the
contract of partnership in all that is not in conflict with what is expressly
determined in this Chapter or by the spouses in their marriage settlements.
This provision is practically the same as the Civil Code provision it
superseded:
Art. 147. The conjugal partnership shall be governed by the rules on the
contract of partnership in all that is not in conflict with what is expressly
determined in this Chapter.
51
In this connection, Article 1811 of the Civil Code provides that [a] partner is a
co-owner with the other partners of specific partnership property. Taken with
the presumption of the conjugal nature of the funds used to finance the four
checks used to pay for petitioners stock subscriptions, and with the
presumption that the credits themselves are part of conjugal funds, Article
1811 makes Quirino and Milagros de Guzman co-owners of the alleged
credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may
separately bring an action for the recovery thereof. In the fairly recent cases
of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-
ownership, co-owners may bring actions for the recovery of co-owned
property without the necessity of joining all the other co-owners as co-
plaintiffs because the suit is presumed to have been filed for the benefit
of his co-owners. In the latter case and in that of De Guia v. Court of
Appeals, we also held that Article 487 of the Civil Code, which provides
that any of the co-owners may bring an action for ejectment, covers all
kinds of action for the recovery of possession.
In sum, in suits to recover properties, all co-owners are real parties in
interest. However, pursuant to Article 487 of the Civil Code and relevant
jurisprudence, any one of them may bring an action, any kind of action, for
the recovery of co-owned properties. Therefore, only one of the co-
owners, namely the co-owner who filed the suit for the recovery of the
co-owned property, is an indispensable party thereto. The other co-
owners are not indispensable parties. They are not even necessary parties,
for a complete relief can be accorded in the suit even without their
participation, since the suit is presumed to have been filed for the benefit of
all co-owners.[25] [Emphasis supplied.]
Under this ruling, either of the spouses Go may bring an action against
Navarro to recover possession of the Kargo Enterprises-leased vehicles
which they co-own. This conclusion is consistent with Article 124 of the
Family Code, supporting as it does the position that either spouse may act on
behalf of the conjugal partnership, so long as they do not dispose of or
encumber the property in question without the other spouses consent.
On this basis, we hold that since Glenn Go is not strictly an indispensable
party in the action to recover possession of the leased vehicles, he only
needs to be impleaded as a pro-forma party to the suit, based on Section 4,
Rule 4 of the Rules, which states:
Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly,
except as provided by law.
Non-joinder of indispensable parties not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action, we
have held in a number of cases [26] that the misjoinder or non-joinder of
indispensable parties in a complaint is not a ground for dismissal of action.
As we stated in Macababbad v. Masirag:[27]
Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor
nonjoinder of parties is a ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-
joinder of parties is ground for dismissal of an action. Parties may be
dropped or added by order of the court on motion of any party or on its own
initiative at any stage of the action and on such terms as are just. Any claim
against a misjoined party may be severed and proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when a party is
left out is to implead the indispensable party at any stage of the action. The
court, either motu proprio or upon the motion of a party, may order the
inclusion of the indispensable party or give the plaintiff opportunity to amend
his complaint in order to include indispensable parties. If the plaintiff to whom
the order to include the indispensable party is directed refuses to comply with
the order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court's own motion.Only upon unjustified failure or
refusal to obey the order to include or to amend is the action dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to
join her husband as a party plaintiff is fully in order.
Demand not required prior
to filing of replevin action
In arguing that prior demand is required before an action for a writ of replevin
is filed, Navarro apparently likens a replevin action to an unlawful detainer.
For a writ of replevin to issue, all that the applicant must do is to file an
affidavit and bond, pursuant to Section 2, Rule 60 of the Rules, which states:
Sec. 2. Affidavit and bond.
52
The applicant must show by his own affidavit or that of some other person
who personally knows the facts:
(a) That the applicant is the owner of the property claimed, particularly
describing it, or is entitled to the possession thereof;
(b) That the property is wrongfully detained by the adverse party,
alleging the cause of detention thereof according to the best of his
knowledge, information, and belief;
(c) That the property has not been distrained or taken for a tax
assessment or a fine pursuant to law, or seized under a writ of execution or
preliminary attachment, or otherwise placed under custodia legis, or if so
seized, that it is exempt from such seizure or custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party in double
the value of the property as stated in the affidavit aforementioned, for the
return of the property to the adverse party if such return be adjudged, and for
the payment to the adverse party of such sum as he may recover from the
applicant in the action.
We see nothing in these provisions which requires the applicant to make a
prior demand on the possessor of the property before he can file an action
for a writ of replevin. Thus, prior demand is not a condition precedent to an
action for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that a prior
demand is necessary, as he has already admitted in his Answers that he had
received the letters that Karen Go sent him, demanding that he either pay his
unpaid obligations or return the leased motor vehicles. Navarros position that
a demand is necessary and has not been made is therefore totally
unmeritorious.
WHEREFORE, premises considered, we DENY the petition for review for
lack of merit. Costs against petitioner Roger V. Navarro.
SO ORDERED.
ROGER V. NAVARRO vs. HON. JOSE
L. ESCOBIDO
Posted on March 28, 2013 by winnieclaire
FACTS: Respondent Karen T. Go filed two complaints before the RTC for
replevin and/or sum of money with damages against Navarro. In these
complaints, Karen Go prayed that the RTC issue writs of replevin for the
seizure of two (2) motor vehicles in Navarros possession. In his Answers,
Navarro alleged as a special affirmative defense that the two complaints
stated no cause of action, since Karen Go was not a party to the Lease
Agreements with Option to Purchase (collectively, the lease agreements)
the actionable documents on which the complaints were based. RTC
dismissed the case but set aside the dismissal on the presumption that Glenn
Gos (husband) leasing business is a conjugal property and thus ordered
Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff as per
Rule 4, Section 3 of the Rules of Court. Navarro filed a petition for certiorari
with the CA. According to Navarro, a complaint which failed to state a cause
of action could not be converted into one with a cause of action by mere
amendment or supplemental pleading. CA denied petition.
ISSUE: Whether or not Karen Go is a real party in interest.
HELD: YES. Karen Go is the registered owner of the business name Kargo
Enterprises, as the registered owner of Kargo Enterprises, Karen Go is the
party who will directly benefit from or be injured by a judgment in this case.
Thus, contrary to Navarros contention, Karen Go is the real party-in-interest,
and it is legally incorrect to say that her Complaint does not state a cause of
action because her name did not appear in the Lease Agreement that her
husband signed in behalf of Kargo Enterprises.
Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the
properties registered under this name; hence, both have an equal right to
seek possession of these properties. Therefore, only one of the co-owners,
namely the co-owner who filed the suit for the recovery of the co-owned
property, is an indispensable party thereto. The other co-owners are not
indispensable parties. They are not even necessary parties, for a complete
relief can be accorded in the suit even without their participation, since the
suit is presumed to have been filed for the benefit of all co-owners.
We hold that since Glenn Go is not strictly an indispensable party in the
action to recover possession of the leased vehicles, he only needs to be
impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the
Rules, which states:
Section 4.Spouses as parties. Husband and wife shall sue or be sued
jointly, except as provided by law.
Even assuming that Glenn Go is an indispensable party to the action,
53
misjoinder or non-joinder of indispensable parties in a complaint is not a The Taronas alleged in their complaint that, unknown to them, in 1981, the
ground for dismissal of action as per Rule 3, Section 11 of the Rules of Court. Assessors Office of Morong in Bataan cancelled Tax Declaration 463 in the
name of their father, Juanito Tarona (Juanito), covering 6,186 square meters
of land in Morong, Bataan. The cancellation was said to be based on an
unsigned though notarized affidavit that Juanito allegedly executed in favor of
petitioner Tallorin and two others, namely, Margarita Pastelero Vda. de
Valdez and Dolores Valdez, who were not impleaded in the action. In place of
the cancelled one, the Assessors Office issued Tax Declaration 6164 in the
names of the latter three persons. The old man Taronas affidavit had been
missing and no copy could be found among the records of the Assessors
Office.[2]
ANICIA VALDEZ-TALLORIN, G.R. No. 177429
Petitioner, The Taronas further alleged that, without their fathers affidavit on file, it
Present: followed that his tax declaration had been illegally cancelled and a new one
Carpio, J., Chairperson, illegally issued in favor of Tallorin and the others with her. The unexplained
- versus - Leonardo-De Castro, disappearance of the affidavit from official files, the Taronas concluded,
Brion, covered-up the falsification or forgery that caused the substitution. [3] The
Del Castillo, and Taronas asked the RTC to annul Tax Declaration 6164, reinstate Tax
Abad, JJ. Declaration 463, and issue a new one in the name of Juanitos heirs.
HEIRS OF JUANITO TARONA,
Represented by CARLOS TARONA, On March 6, 1998 the Taronas filed a motion to declare petitioner Tallorin in
ROGELIO TARONA and Promulgated: default for failing to answer their complaint within the allowed time. [4] But,
LOURDES TARONA, before the RTC could act on the motion, Tallorin filed a belated answer,
Respondents. November 24, 2009 alleging among others that she held a copy of the supposedly missing
affidavit of Juanito who was merely an agricultural tenant of the land covered
x ---------------------------------------------------------------------------------------- x by Tax Declaration 463. He surrendered and waived in that affidavit his
occupation and tenancy rights to Tallorin and the others in consideration
DECISION of P29,240.00. Tallorin also put up the affirmative defenses of non-
compliance with the requirement of conciliation proceedings and prescription.
ABAD, J.:
On March 12, 1998 the RTC set Tallorins affirmative defenses for
hearing[5] but the Taronas sought reconsideration, pointing out that the trial
This case is about a courts annulment of a tax declaration in the names of court should have instead declared Tallorin in default based on their earlier
three persons, two of whom had not been impleaded in the case, for the motion.[6] On June 2, 1998 the RTC denied the Taronas motion for
reason that the document was illegally issued to them. reconsideration[7] for the reasons that it received Tallorins answer before it
could issue a default order and that the Taronas failed to show proof that
The Facts and the Case Tallorin was notified of the motion three days before the scheduled
hearing. Although the presiding judge inhibited himself from the case on
On February 9, 1998 respondents Carlos, Rogelio, and Lourdes Tarona (the motion of the Taronas, the new judge to whom the case was re-raffled stood
Taronas) filed an action before the Regional Trial Court (RTC) of by his predecessors previous orders.
Balanga, Bataan,[1] against petitioner Anicia Valdez-Tallorin (Tallorin) for the
cancellation of her and two other womens tax declaration over a parcel of By a special civil action for certiorari before the Court of Appeals (CA),
[8]
land. however, the Taronas succeeded in getting the latter court to annul the
RTCs March 12 and June 2, 1998 orders. [9] The CA ruled that the RTC
54
gravely abused its discretion in admitting Tallorins late answer in the absence
of a motion to admit it. Even if petitioner Tallorin had already filed her late
answer, said the CA, the RTC should have heard the Taronas motion to
declare Tallorin in default.
Upon remand of the case, the RTC heard the Taronas motion to declare
Tallorin in default,[10] granted the same, and directed the Taronas to present
evidence ex parte.[11]
On January 30, 2002 the RTC rendered judgment, a) annulling the tax
declaration in the names of Tallorin, Margarita Pastelero Vda. de Valdez, and
Dolores Valdez; b) reinstating the tax declaration in the name of Juanito; and
c) ordering the issuance in its place of a new tax declaration in the names of
Juanitos heirs. The trial court also ruled that Juanitos affidavit authorizing the
transfer of the tax declaration had no binding force since he did not sign it.
Tallorin appealed the above decision to the CA, [12] pointing out 1) that the
land covered by the tax declaration in question was titled in her name and in
those of her two co-owners; 2) that Juanitos affidavit only dealt with the
surrender of his tenancy rights and did not serve as basis for canceling Tax
Declaration 463 in his name; 3) that, although Juanito did not sign the
affidavit, he thumbmarked and acknowledged the same before a notary
public; and 4) that the trial court erred in not dismissing the complaint for
failure to implead Margarita Pastelero Vda. de Valdez and Dolores Valdez
who were indispensable parties in the action to annul Juanitos affidavit and
the tax declaration in their favor.[13]
On May 22, 2006 the CA rendered judgment, affirming the trial courts
decision.[14] The CA rejected all of Tallorins arguments. Since she did not
assign as error the order declaring her in default and since she took no part
at the trial, the CA pointed out that her claims were in effect mere
conjectures, not based on evidence of record. [15] Notably, the CA did not
address the issue Tallorin raised regarding the Taronas failure to implead
Margarita Pastelero Vda. de Valdez and Dolores Valdez as indispensable
party-defendants, their interest in the cancelled tax declarations having been
affected by the RTC judgment.
Questions Presented
The petition presents the following questions for resolution by this Court:
1. Whether or not the CA erred in failing to dismiss the Taronas complaint for
not impleading Margarita Pastelero Vda. de Valdez and Dolores Valdez in
whose names, like their co-owner Tallorin, the annulled tax declaration had
been issued;
2. Whether or not the CA erred in not ruling that the Taronas complaint was
barred by prescription; and
3. Whether or not the CA erred in affirming the RTCs finding that Juanitos
affidavit had no legal effect because it was unsigned; when at the hearing of
the motion to declare Tallorin in default, it was shown that the affidavit bore
Juanitos thumbmark.
The Courts Rulings
The first question, whether or not the CA erred in failing to dismiss the
Taronas complaint for not impleading Margarita Pastelero Vda. de Valdez
and Dolores Valdez in whose names, like their co-owner Tallorin, the
annulled tax declaration had been issued, is a telling question.
The rules mandate the joinder of indispensable parties. Thus:
Sec. 7. Compulsory joinder of indispensable parties. Parties in interest
without whom no final determination can be had of an action shall be joined
either as plaintiffs and defendants.[16]
Indispensable parties are those with such an interest in the controversy that
a final decree would necessarily affect their rights, so that the courts cannot
proceed without their presence. [17] Joining indispensable parties into an
action is mandatory, being a requirement of due process. Without their
presence, the judgment of the court cannot attain real finality.
Judgments do not bind strangers to the suit. The absence of an
indispensable party renders all subsequent actions of the court null and
void. Indeed, it would have no authority to act, not only as to the absent
party, but as to those present as well. And where does the responsibility for
impleading all indispensable parties lie? It lies in the plaintiff.[18]
Here, the Taronas sought the annulment of the tax declaration in the names
of defendant Tallorin and two others, namely, Margarita Pastelero Vda. de
Valdez and Dolores Valdez and, in its place, the reinstatement of the
previous declaration in their father Juanitos name. Further, the Taronas
sought to strike down as void the affidavit in which Juanito renounced his
tenancy right in favor of the same three persons. It is inevitable that any
decision granting what the Taronas wanted would necessarily affect the rights
of such persons to the property covered by the tax declaration.
55
The Court cannot discount the importance of tax declarations to the persons
in whose names they are issued. Their cancellation adversely affects the
rights and interests of such persons over the properties that the documents
cover. The reason is simple: a tax declaration is a primary evidence, if not the
source, of the right to claim title of ownership over real property, a right
enforceable against another person.The Court held in Uriarte v.
People[19] that, although not conclusive, a tax declaration is a telling evidence
of the declarants possession which could ripen into ownership.
WHEREFORE, the Court GRANTS the petition and SETS ASIDE the
decision of the Regional Trial Court of Balanga, Bataan in Civil Case 6739
dated January 30, 2002 and the decision of the Court of Appeals in CA-G.R.
CV 74762 dated May 22, 2006. The Court REMANDS the case to the
Regional Trial Court of Balanga, Bataan which is DIRECTED to have
Margarita Pastelero Vda. de Valdez and Dolores Valdez impleaded by the
plaintiffs as party-defendants and, afterwards, to hear the case in the manner
prescribed by the rules.

In Director of Lands v. Court of Appeals,[20] the Court said that no one in his SO ORDERED.
right mind would pay taxes for a property that he did not have in his
possession. This honest sense of obligation proves that the holder claims
title over the property against the State and other persons, putting them on
notice that he would eventually seek the issuance of a certificate of title in his
name. Further, the tax declaration expresses his intent to contribute needed
revenues to the Government, a circumstance that strengthens his bona
fide claim to ownership.[21]

Here, the RTC and the CA annulled Tax Declaration 6164 that belonged not
only to defendant Tallorin but also to Margarita Pastelero Vda. de Valdez and
Dolores Valdez, which two persons had no opportunity to be heard as they
were never impleaded. The RTC and the CA had no authority to annul that
tax declaration without seeing to it that all three persons were impleaded in
the case.

But the Taronas action cannot be dismissed outright. As the Court held
in Plasabas v. Court of Appeals,[22] the non-joinder of indispensable parties is
not a ground for dismissal. Section 11, Rule 3 of the 1997 Rules of Civil
Procedure prohibits the dismissal of a suit on the ground of non-joinder or
misjoinder of parties and allows the amendment of the complaint at any
stage of the proceedings, through motion or on order of the court on its own
initiative. Only if plaintiff refuses to implead an indispensable party, despite
the order of the court, may it dismiss the action.

There is a need, therefore, to remand the case to the RTC with an order to
implead Margarita Pastelero Vda. de Valdez and Dolores Valdez as
defendants so they may, if they so desire, be heard.

In view of the Courts resolution of the first question, it would serve no

purpose to consider the other questions that the petition presents. The
resolution of those questions seems to depend on the complete evidence in
the case. This will not yet happen until all the indispensable party-defendants
are impleaded and heard on their evidence.

56

G.R. No. 196894 March 3, 2014
JESUS G. CRISOLOGO and NANETTE B. CRISOLOGO, Petitioners,
vs.
JEWM AGRO-INDUSTRIAL CORPORATION, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
challenging the May 6, 2011 Decision1of the Court of Appeals (CA), in CA-
G.R. SP No. 03896-MIN, which affirmed the September 27, 2010, 2 October
7, 20103 and November 9, 20104 Orders of the Regional Trial Court, Davao
City, Branch 14 (RTC-Br. 14), in Civil Case No. 33,551-2010, an action for
Cancellation of Lien. It is entitled "JEWM Agro-Industrial Corporation v. The
Registry of Deeds for the City of Davao. Sheriff Robert Medialdea. John &
Jane Does. and all persons acting under their directions.
This controversy stemmed from various cases of collection for sum of money
filed against So Keng Kok, the owner of various properties including two (2)
parcels of land covered by TCT Nos. 292597 and 292600 (subject
properties), which were attached by various creditors including the petitioners
in this case. As a result, the levies were annotated on the back of the said
titles.
Petitioners Jesus G. Crisologo and Nannette B. Crisologo (Spouses
Crisologo) were the plaintiffs in two (2) collection cases before RTC, Branch
15, Davao City (RTC-Br. 15), docketed as Civil Case Nos. 26,810-98 and
26,811-98, against Robert Limso, So Keng Koc, et al. Respondent JEWM
Agro-Industrial Corporation (JEWM) was the successor-in-interest of one Sy
Sen Ben, the plaintiff in another collection case before RTC, Branch 8, Davao
City (RTC-Br. 8), docketed as Civil Case No. 26,513-98, against the same
defendants.
On October 19, 1998, RTC-Br. 8 rendered its decision based on a
compromise agreement, dated October 15, 1998, between the parties
wherein the defendants in said case were directed to transfer the subject
properties in favor of Sy Sen Ben. The latter subsequently sold the subject
properties to one Nilda Lam who, in turn, sold the same to JEWM on June 1,
2000. Thereafter, TCT Nos. 325675 and 325676 were eventually issued in
the name of JEWM, both of which still bearing the same annotations as well
as the notice of lis pendens in connection with the other pending cases filed
against So Keng Kok.
A year thereafter, Spouses Crisologo prevailed in the separate collection
case filed before RTC-Br. 15 against Robert Lim So and So Keng Koc
(defendants). Thus, on July 1, 1999, the said defendants were ordered to
solidarily pay the Spouses Crisologo. When this decision attained finality,
they moved for execution. On June 15, 2010, a writ was eventually issued.
Acting on the same, the Branch Sheriff issued a notice of sale scheduling an
auction on August 26, 2010. The notice of sale included, among others, the
subject properties covered by TCT Nos. 325675 and 325676, now, in the
name of JEWM.
In the same proceedings, JEWM immediately filed its Affidavit of Third Party
Claim and the Urgent Motion Ad Cautelam. It prayed for the exclusion of the
subject properties from the notice of sale. In an order, dated August 26, 2010,
however, the motion was denied. In turn, the Spouses Crisologo posted a
bond in order to proceed with the execution.
To protect its interest, JEWM filed a separate action for cancellation of lien
with prayer for the issuance of a preliminary injunction before RTC-Br. 14,
docketed as Civil Case No. 33,551-2010. It prayed for the issuance of a writ
of preliminary injunction to prevent the public sale of the subject properties
covered in the writ of execution issued pursuant to the ruling of RTC-Br. 15;
the cancellation of all the annotations on the back of the pertinent TCTs; and
the issuance of a permanent injunction order after trial on the merits. "The
Register of Deeds of Davao City, Sheriff Robert Medialdea, John and Jane
Does and all persons acting under their direction" were impleaded as
defendants.
At the scheduled hearing before RTC-Br. 14 on September 22, 2010,
Spouses Crisologos counsel appeared and filed in open court their Very
Urgent Manifestation questioning the authority of the said court to restrain the
execution proceedings in RTC-Br. 15. JEWM opposed it on the ground that
Spouses Crisologo were not parties in the case.
On September 24, 2010, Spouses Crisologo filed an Omnibus Motion
praying for the denial of the application for writ or preliminary injuction filed by
JEWM and asking for their recognition as parties. No motion to intervene
was, however, filed as the Spouses Crisologo believed that it was
57
unnecessary since they were already the John and Jane Does named in the
complaint.
In the Order, dated September 27, 2010, RTC-Br. 14 denied Spouses
Crisologos Omnibus Motion and granted JEWMs application for a writ of
preliminary injunction.
On October 1, 2010, Spouses Crisologo filed a Very Urgent Omnibus Motion
before RTC-Br. 14 praying for reconsideration and the setting aside of its
September 27, 2010 Order. This was denied in the RTC Br.-14s October 7,
2010 Order for lack of legal standing in court considering that their counsel
failed to make the written formal notice of appearance. The copy of this order
was received by Spouses Crisologo on October 22, 2010. It must be noted,
however, that on October 27, 2010, they received another order, likewise
dated October 7, 2010, giving JEWM time to comment on their Very Urgent
Omnibus Motion filed on October 1, 2010. In its Order, dated November 9,
2010, however, RTC-Br. 14 again denied the Very Urgent Motion previously
filed by Spouses Crisologo.
On November 12, 2010, JEWM moved to declare the "defendants" in default
which was granted in an order given in open court on November 19, 2010.
Spouses Crisologo then filed their Very Urgent Manifestation, dated
November 30, 2010, arguing that they could not be deemed as defaulting
parties because they were not referred to in the pertinent motion and order of
default.
On November 19, 2010, Spouses Crisologo filed with the CA a petition for
certiorari5 under Rule 65 of the Rules of Court assailing the RTC-Br. 14
orders, dated September 27, 2010, October 7, 2010 and November 9, 2010,
all of which denied their motion to be recognized as parties. They also
prayed for the issuance of a Temporary Restraining Order (TRO) and/or a
Writ of Preliminary Injunction.
In its Resolution, dated January 6, 2011, the CA denied the application for a
TRO, but directed Spouses Crisologo to amend their petition. On January 19,
2011, the Spouses Crisologo filed their Amended Petition 6 with prayers for
the issuance of a TRO and/or writ of preliminary injunction, the annulment of
the aforementioned orders of RTC Br. 14, and the issuance of an order
dissolving the writ of preliminary injunction issued in favor of JEWM.
Pending disposition of the Amended Petition by the CA, JEWM filed a motion
on December 6, 2010 before RTC-Br. 14 asking for the resolution of the case
on the merits.
On January 10, 2011, RTC-Br. 14 ruled in favor of JEWM, with the dispositive
portion of its Decision7 stating as follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in
favor of the plaintiff as follows:
1. the preliminary writ of injunction issued on October 5, 2010 is hereby
made permanent;
2. directing herein defendant Registry of Deeds of Davao City where the
subject lands are located, to cancel all existing liens and encumbrances on
TCT No. T-325675 and T-325676 registered in the name of the plaintiff, and
pay the
3. cost of suit.
SO ORDERED.8
Spouses Crisologo then filed their Omnibus Motion Ex Abudanti ad
Cautelam, asking RTC- Br. 14 to reconsider the above decision. Because no
motion for intervention was filed prior to the rendition of the judgment, a
certificate, dated March 17, 2011, was issued declaring the January 10, 2011
decision final and executory.
On May 6, 2011, the CA eventually denied the Amended Petition filed by
Spouses Crisologo for lack of merit. It ruled that the writ of preliminary
injunction subject of the petition was already fait accompli and, as such, the
issue of grave abuse of discretion attributed to RTC-Br. 14 in granting the
relief had become moot and academic. It further held that the failure of
Spouses Crisologo to file their motion to intervene under Rule 19 rendered
Rule 65 inapplicable as a vehicle to ventilate their supposed right in the
case.9
Hence, this petition.
ISSUES
I. The Court of Appeals erred in holding that the action for Cancellation of
Annotations may proceed even without notice to and impleading the party/ies
who caused the annotations, in clear contravention of the rule on joinder of
parties and basic due process.
II. The Court of Appeals erred in applying a very constrictive interpretation of
the rules in holding that a motion to intervene is the only way an otherwise
real party in interest could participate.
III. The Court of Appeals erred in denying our application for the issuance of
a temporary restraining order and/or a writ of preliminary injunction.
IV. The Court of Appeals erred in holding that the issues raised by petitioners
before it [had] been mooted by the January 10, 2011 decision of RTC Branch
14.10
Spouses Crisologo submit as error the CA affirmation of the RTC- Br. 14
ruling that the action for cancellation may proceed without them being
impleaded. They allege deprivation of their right to due process when they
were not impleaded in the case before RTC-Br. 14 despite the claim that they
stand, as indispensable parties, to be benefited or injured by the judgment in
the action for the cancellation of annotations covering the subject properties.
They cite Gonzales v. Judge Bersamin,11 among others, as authority. In that
case, the Court ruled that pursuant to Section 108 of Presidential Decree
(P.D.) No. 1529, notice must be given to all parties in interest before the court
may hear and determine the petition for the cancellation of annotations on
the certificates of title.
58
The Spouses Crisologo also question the statement of the CA that their
failure to file the motion to intervene under Rule 19 before RTC-Br. 14 barred
their participation in the cancellation proceedings. They put emphasis on the
courts duty to, at the very least, suspend the proceedings before it and have
such indispensable parties impleaded.
As to the ruling on the denial of their application for the issuance of a TRO or
writ of preliminary injunction, Spouses Crisologo claim that their adverse
interest, evinced by the annotations at the back of the certificates of title,
warranted the issuance of a TRO or writ of preliminary injunction against
JEWMs attempt to cancel the said annotations in violation of their
fundamental right to due process.
Lastly, Spouses Crisologo cast doubt on the CA ruling that the issues
presented in their petition were mooted by the RTC-Br. 14 Decision, dated
January 10, 2011. Having been rendered without impleading indispensable
parties, the said decision was void and could not have mooted their petition.
In their Comment,12 JEWM asserts that Spouses Crisologos failure to file a
motion to intervene, pleadings-in-intervention, appeal or annulment of
judgment, which were plain, speedy and adequate remedies then available to
them, rendered recourse to Rule 65 as improper; that Spouses Crisologo
lacked the legal standing to file a Rule 65 petition since they were not
impleaded in the proceedings before RTC-Br. 14; and that Spouses
Crisologo were not indispensable parties since their rights over the properties
had been rendered ineffective by the final and executory October 19, 1998
Decision of RTC-Br. 8 which disposed unconditionally and absolutely the
subject properties in favor of its predecessor-in-interest.
JEWM further argues that, on the assumption that Section 108 of P.D. No.
1529 applies, no notice to Spouses Crisologo was required because they
were not real parties-in-interest in the case before RTC-Br. 14, or even if they
were, their non-participation in the proceedings was because of their failure
to properly intervene pursuant to Rule 19; and, lastly, that the case before
RTC-Br. 14 became final and executory because Spouses Crisologos did not
perfect an appeal therefrom, thus, rendering the issues in the CA petition
moot and academic.
In their Reply,13 Spouses Crisologo restate the applicability of Section 108 of
P.D. No. 1529 to the effect that any cancellation of annotation of certificates
of title must be carried out by giving notice to all parties-in-interest. This they
forward despite their recognition of the mootness of their assertion over the
subject properties, to wit:
Again, we respect JAICs position that "the claims of subsequent attaching
creditors (including petitioners) have been rendered moot and academic,
and hence the entries in favor of said creditors have no more legal basis and
therefore must be cancelled." But we likewise at least ask a modicum of
respect by at least being notified and heard.14
The Ruling of the Court
The crux of this controversy is whether the CA correctly ruled that RTC-Br. 14
acted without grave abuse of discretion in failing to recognize Spouses
Crisologo as indispensable parties in the case for cancellation of lien.
In this respect, the Court agrees with Spouses Crisologo.
In an action for the cancellation of memorandum annotated at the back of a
certificate of title, the persons considered as indispensable include those
whose liens appear as annotations pursuant to Section 108 of P.D. No.
1529,15 to wit:
Section 108. Amendment and alteration of certificates. -No erasure, alteration
or amendment shall be made upon the registration book after the entry of a
certificate of title or of a memorandum thereon and the attestation of the
same by the Register of Deeds, except by order of the proper Court of First
Instance. A registered owner or other person having an interest in registered
property, or, in proper cases, the Register of Deeds with the approval of the
Commissioner of Land Registration, may apply by petition to the court upon
the ground that the registered interests of any description, whether vested,
contingent, expectant inchoate appearing on the certificate, have terminated
and ceased; or that new interest not appearing upon the certificates have
arisen or been created; or that an omission or error was made in entering a
certificate or memorandum thereon, or on any duplicate certificate; x x x or
upon any other reasonable ground; and the court may hear and determine
the petition after notice to all parties in interest, and may order the entry or
cancellation of a new certificate, the entry or cancellation of a memorandum
upon a certificate, or grant any other relief upon such terms and conditions,
requiring security or bond if necessary, as it may consider proper.
In Southwestern University v. Laurente,16 the Court held that the cancellation
of the annotation of an encumbrance cannot be ordered without giving notice
to the parties annotated in the certificate of title itself. It would, thus, be an
error for a judge to contend that no notice is required to be given to all the
persons whose liens were annotated at the back of a certificate of title.
Here, undisputed is the fact that Spouses Crisologos liens were indeed
annotated at the back of TCT Nos. 325675 and 325676. Thus, as persons
with their liens annotated, they stand to be benefited or injured by any order
relative to the cancellation of annotations in the pertinent TCTs. In other
words, they are as indispensable as JEWM itself in the final disposition of the
case for cancellation, being one of the many lien holders.
As indispensable parties, Spouses Crisologo should have been joined as
defendants in the case pursuant to Section 7, Rule 3 of the Rules of Court, to
wit:
SEC. 7. Compulsory joinder of indispensable parties. Parties in interest
without whom no final determination can be had of an action shall be joined
either as plaintiffs or defendants.17
The reason behind this compulsory joinder of indispensable parties is the
complete determination of all possible issues, not only between the parties
59
themselves but also as regards other persons who may be affected by the
judgment.18
In this case, RTC-Br. 14, despite repeated pleas by Spouses Crisologo to be
recognized as indispensable parties, failed to implement the mandatory
import of the aforecited rule.
In fact, in Sps. Crisologo v. Judge George E. Omelio, 19 a related
administrative case, the Court found the trial judge guilty of gross ignorance
of the law when it disregarded the claims of Spouses Crisologo to participate.
In part, the Court stated:
This is not the first time Judge Omelio has rendered a decision affecting third
parties interests, without even notifying the indispensable parties. In the first
disputed case, JEWM Agro-Industrial Corporation v. Register of Deeds,
Sheriff Medialdea, John & Jane Does and all persons acting under their
directions, Judge Omelio failed to cause the service of proper summons
upon the John and Jane Does impleaded in the complaint. Even when Sps.
Crisologo voluntarily appeared in court to be recognized as the John and
Jane Does, Judge Omelio refused to acknowledge their appearance and
ordered the striking out of Sps. Crisologos' pleadings. For this reason, the
Investigating Justice recommended admonishing Judge Omelio for failing to
recognize the Sps.Crisologo as indispensable parties in that case.
xxx xxx xxx
Clearly, the cancellation of the annotation of the sale without notifying the
buyers, Sps. Crisologo, is a violation of the latters right to due process.
Since this is the second time that Judge Omelio has issued an order which
fails to notify or summon the indispensable parties, we find Judge Omelio
guilty of gross ignorance of the law, with a warning that repetition of the same
or similar act will merit a stiffer penalty in the future.
xxx
WHEREFORE, We find Judge George E. Omelio GUILTY of four counts
of the serious charge of gross ignorance of the law for the following acts: (a)
refusing to recognize Spouses Jesus G. Crisologo and Nannette B. Crisologo
as indispensable parties; in violation of the latter's right to due process.
Accordingly, we impose upon Judge George E. Omelio the penalty of fine of
Forty Thousand Pesos (P40,000.00), with a warning that repetition of the
same or similar acts will be dealt with more severely.
SO ORDERED.20
The trial court should have exercised prudence in denying Spouses
Crisologos pleas to be recognized as indispensable parties. In the words of
the Court, "Judge Omelio should be penalized for failing to recognize Sps.
Crisologo as indispensable parties and for requiring them to file a motion to
intervene, considering that a simple perusal of the certificates of title would
show Sps. Crisologos adverse rights because their liens are annotated at
the back of the titles."21
This manifest disregard of the basic rules and procedures constitutes a grave
abuse of discretion.
In State Prosecutors II Comilang and Lagman v. Judge Medel Belen, 22 the
Court held as inexcusable abuse of authority the trial judges "obstinate
disregard of basic and established rule of law or procedure." Such level of
ignorance is not a mere error of judgment. It amounts to "evasion of a
positive duty or to a virtual refusal to perform a duty enjoined by law, or to act
at all in contemplation of law,"23 or in essence, grave abuse of discretion
amounting to lack of jurisdiction.
Needless to say, judges are expected to exhibit more than just a cursory
acquaintance with statutes and procedural laws. They must know the laws
and apply them properly in good faith as judicial competence requires no
less.24
Despite the clear existence of grave abuse of discretion on the part of RTC-
Br. 14, JEWM asserts technical grounds on why the CA did not err in
dismissing the petition via Rule 65. It states that:
a) The Crisologos could have used other available remedies such as
intervention under Rule 19, an appeal of the judgment, or even an annulment
of judgment, which are, by all means, plain, speedy and adequate remedies
in the ordinary course of law;
b) The Crisologos lack legal standing to file the Rule 65 petition since they
were not impleaded in the Branch 14 case.
The rule is that a petition for certiorari under Rule 65 is proper only if there is
no appeal, or any plain speedy, and adequate remedy in the ordinary course
of law.
In this case, no adequate recourse, at that time, was available to Spouses
Crisologo, except resorting to Rule 65.
Although Intervention under Rule 19 could have been availed of, failing to
use this remedy should not prejudice Spouses Crisologo. It is the duty of
RTC-Br. 14, following the rule on joinder of indispensable parties, to simply
recognize them, with or without any motion to intervene. Through a cursory
reading of the titles, the Court would have noticed the adverse rights of
Spouses Crisologo over the cancellation of any annotations in the subject
TCTs.
Neither will appeal prove adequate as a remedy since only the original
parties to an action can appeal. 25 Here, Spouses Crisologo were never
impleaded. Hence, they could not have utilized appeal as they never
possessed the required legal standing in the first place.
And even if the Court assumes the existence of the legal standing to appeal,
it must be remembered that the questioned orders were interlocutory in
character and, as such, Spouses Crisologo would have to wait, for the review
by appeal, until the rendition of the judgment on the merits, which at that time
may not be coming as speedy as practicable. While waiting, Spouses
Crisologo would have to endure the denial of their right, as indispensable
60
parties, to participate in a proceeding in which their indispensability was due process to the persons whose interests are indispensible to the final
obvious. Indeed, appeal cannot constitute an adequate, speedy and plain disposition of the case. It will only result in a protracted litigation as Spouses
remedy. Crisologo will be forced to rely on a petition for the annulment of judgment
The same is also true if recourse to Annulment of Judgment under Rule 47 is before the CA (as the last remaining remedy), which may again reach this
made since this remedy presupposes a final judgment already rendered by a Court.1wphi1 To prevent multiplicity of suits and to expedite the swift
trial court. administration of justice, the CA should have applied liberality by striking
At any rate, the remedy against an interlocutory order, not subject of an down the assailed orders despite the lack of legal standing on the part of
appeal, is an appropriate special civil action under Rule 65, provided that the Spouses Crisologo to file the Rule 65 petition before it. Besides, this lacking
interlocutory order is rendered without or in excess of jurisdiction or with requirement, of which Spouses Crisologo were not even at fault, is precisely
grave abuse of discretion. Only then is certiorari under Rule 65 allowed to be the reason why this controversy arose.
resorted to.26 All told, the CA erred in dismissing the amended petition filed before it and in
This takes particular relevance in this case where, as previously discussed, not finding grave abuse of discretion on the part of RTC-Br. 14.
RTC-Br. 14 acted with grave abuse of discretion in not recognizing Spouses WHEREFORE, the petition is GRANTED. The May 6, 2011 Decision of the
Crisologo as indispensable parties to the pertinent action. Court of Appeals is NULLIFIED and SET ASIDE. The September 27, 2010,
Based on the above, recourse to the CA via Rule 65 would have already October 7, 2010 and November 9, 2010 Orders of the Regional Trial Court,
been proper, except for one last issue, that is, Spouses Crisologos legal Branch 14, Davao City, are likewise NULLIFIED and SET ASIDE. Civil Case
standing to file the same. JEWM cites DBP v. COA27 where the Court held: No. 33,551-2010 is hereby REMANDED to the trial court for further
The petition for certiorari under Rule 65, however, is not available to any proceedings. The respondent is ordered to implead all parties whose
person who feels injured by the decision of a tribunal, board or officer annotations appear at the back of Transfer Certificate of Title Nos. 325675
exercising judicial or quasi judicial functions. The person aggrieved under and 325676.
Section 1 of Rule 65 who can avail of the special civil action of certiorari SO ORDERED.
pertains only to one who was a party in the proceedings before the court a
quo, or in this case before the COA. To hold otherwise would open the courts
to numerous and endless litigations.
Under normal circumstances, JEWM would be correct in their averment that
the lack of legal standing on the part of Spouses Crisologo in the case before
RTC-Br. 14 prevents the latters recourse via Rule 65.
This case, however, is an exception. In many instances, the Court has ruled
that technical rules of procedures should be used to promote, not frustrate
the cause of justice. Rules of procedure are tools designed not to thwart but
to facilitate the attainment of justice; thus, their strict and rigid application
may, for good and deserving reasons, have to give way to, and be
subordinated by, the need to aptly dispense substantial justice in the normal
cause.28
Be it noted that the effect of their non-participation as indispensable parties is
to preclude the judgment, orders and the proceedings from attaining finality.
Time and again, the Court has ruled that the absence of an indispensable
party renders all subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even to those present.
Consequently, the proceedings before RTC-Br. 14 were null and void
including the assailed orders, which may be "ignored wherever and
whenever it exhibits its head."29
To turn a blind eye to the said nullity and, in turn, rule as improper the
recourse to Rule 65 by the lack of legal standing is to prolong the denial of
61
 Petitioner was a police officer with the rank of Police Senior Superintendent.
On July 30, 2001, pursuant to the provisions of Section 39 of Republic Act
6975, otherwise known as the "Department of the Interior and Local
Government Act of 1990," the Chief of Directorial Staff of the Philippine
National Police (PNP) issued General Order No. 1168, enumerating the
names of commissioned officers who were subject to compulsory retirement
on various dates in the month of January 2002 by virtue of their attainment of
the compulsory retirement age of 56. Among the names included in the said
Order was that of petitioner, who was supposed to retire on January 11,
2002, as the files of the PNP Records Management Division indicate that he
was born on January 11, 1946.

On September 3, 2001, petitioner filed an application for late registration of

his birth with the Municipal Civil Registrar's Office of Mulondo, Lanao del Sur.
In the said application, petitioner swore under oath that he was born on
January 11, 1956. The application was, subsequently, approved.

On October 15, 2001, petitioner filed with the RTC of Marawi City, Branch 8,
a Petition for Correction of Entry in the Public Service Records Regarding the
G.R. No. 186610 July 29, 2013 Birth Date. Pertinent portions of his allegations are as follows:

POLICE SENIOR SUPERINTENDENT DIMAPINTO xxxx

MACAWADIB, Petitioner,
vs. 1. That herein petitioner is 45 years old, married, Filipino citizen,
THE PHILIPPINE NATIONAL POLICE DIRECTORATE FOR PERSONNEL PNP (Police Superintendent) by occupation and resident of Camp
AND RECORDS MANAGEMENT,Respondent. Bagong Amai, Pakpak, Marawi City. x x x;

DECISION 2. That on January 11, 1956, herein petitioner was born in Mulondo,
Lanao del Sur, x x x, copy of his live birth certificate is attached and
PERALTA, J.: marked as Annex "A", for ready reference;

Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to nullify and set aside the Decision 1 and
Resolution2 of the Court of Appeals (CA), dated December 17, 2008 and
February 25, 2009, respectively, in CA-G.R. SP No. 02120-MIN. The assailed
CA judgment nullified the December 4, 2001 Decision 3 of the Regional Trial
Court (RTC) of Marawi City, Branch 8, in Spl. Proc. No. 782-01, while the
questioned CA Resolution denied petitioner's Motion for Reconsideration.
The factual and procedural antecedents of the case are as follows:
3. That when petitioner herein joined with (sic) the government
service, particularly the local police force and later on the Integrated
National Police, he honestly entered his birth date as January 11,
1946, while in his (sic) Government Service Insurance System
(GSIS, in short) and National Police Commission, he erroneously
entered his birth date as January 11, 1946, which entry are honestly
based on estimation, as Muslim (sic) in the south do not register their
marriages and births before;
4. That herein petitioner has correctly entered his true and correct
birth date, January 11, 1956, in his Service Record at the National
Headquarters, Philippine National Police, Directorate for Personnel
62
 and Records Management, Camp Crame, Quezon City, copy of
which is attached and marked as Annex "B", x x x;
5. That herein petitioner is submitting Joint Affidavit of two (2)
disinterested person (sic) x x x;
6. That this petition is not intended to defraud anybody but to
establish the true and correct birth date of herein petitioner.
x x x x4
The petition was docketed as Spl. Proc. No. 782-01.
On December 4, 2001, the RTC rendered its Decision, disposing as follows:
WHEREFORE, judgment is hereby rendered in favor of petitioner
DIMAPINTO BABAI MACAWADIB, to wit:
1. Ordering the Chief, Records Management, PNP NHQ, Camp
Crame, Quezon City, to make a correction upon the birth date of
herein petitioner to January 11, 1956;
2. Ordering the Director, Personnel and Records Management
Service, NAPOLCOM, Makati City, to make correction upon the birth
date of herein petitioner from January 11, 1946 to January 11, 1956;
and
3. Ordering the Chief, Records of the Civil Service Commission,
Manila and all other offices concern (sic), to make the necessary
correction in the Public Records of herein petitioner to January 11,
1956.
SO ORDERED.5
Subsequently, the RTC issued an Entry of Final Judgment 6 indicating therein
that its December 4, 2001 Decision in Spl. Proc. No. 782-01 has become
final and executory on March 13, 2002.
On January 8, 2008, herein respondent filed a Petition for Annulment of
Judgment with Prayer for the Issuance of a Temporary Restraining Order
and/or Writ of Preliminary Injunction with the CA, seeking to nullify the above-
mentioned Decision of the RTC on the ground that the trial court failed to
acquire jurisdiction over the PNP, "an unimpleaded indispensable party." 7
On December 17, 2008, the CA promulgated its assailed Decision with the
following dispositive portion:
WHEREFORE, finding the instant petition impressed with merit, the same is
hereby GRANTED. The assailed Decision dated December 4, 2001 of the
respondent court in Spl. Proc. No. 782-01 is NULLIFIED and SET ASIDE.
Also, so as to prevent further damage upon the PNP, let a permanent
injunction issue in the meantime, barring the private respondent Dimapinto
Babai Macawadib from continuing and prolonging his tenure with the PNP
beyond the mandatory retirement age of fifty-six (56) years.
SO ORDERED.8
Petitioner filed a Motion for Reconsideration, 9 but the CA denied it in its
Resolution10 dated February 25, 2009.
Hence, the instant petition with the following Assignment of Errors:
1. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT PNP-DPRM IS AN INDISPENSABLE PARTY IN SPECIAL
PROCEEDING NO. 782-01 AND THAT THE RTC HAVE (sic) NOT
ACQUIRED JURISDICTION OVER THE PERSON OF THE
PNPDPRM.
2. THE HONORABLE COURT OF APPEALS ERRED IN NOT
DISMISSING CA-G.R. SP NO. 02120-MIN DESPITE THE FACT
THAT THE ASSAILED RTC DECISION DATED DECEMBER 4, 2001
IN SPECIAL PROCEEDING NO. 782-01 HAS LONG BECOME
FINAL AND EXECUTORY AND WAS IN FACT FULLY AND
COMPLETELY EXECUTED AFTER THE PNP-DPRM CORRECTED
THE DATE OF BIRTH OF THE PETITIONER FROM JANUARY 11,
1946 TO JANUARY 11, 1956.
3. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT PNP-DPRM IS NOT ESTOPPED FROM ASSAILING THE
VALIDITY OF THE RTC DECISION IN SPECIAL PROCEEDING NO.
782-01.
63
 4. THE HONORABLE COURT OF APPEALS ERRED IN NOT
DISMISSING CA-G.R. SP NO. 02120-MIN FOR BEING
INSUFFICIENT IN FORM AND SUBSTANCE.11
In his first assigned error, petitioner contends that respondent is not an
indispensable party.1wphi1 The Court is not persuaded. On the contrary,
the Court agrees with the ruling of the CA that it is the integrity and
correctness of the public records in the custody of the PNP, National Police
Commission (NAPOLCOM) and Civil Service Commission (CSC) which are
involved and which would be affected by any decision rendered in the
petition for correction filed by herein petitioner. The aforementioned
government agencies are, thus, required to be made parties to the
proceeding. They are indispensable parties, without whom no final
determination of the case can be had. An indispensable party is defined as
one who has such an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that
interest.12 In the fairly recent case of Go v. Distinction Properties
Development and Construction, Inc.,13 the Court had the occasion to reiterate
the principle that:
Under Section 7, Rule 3 of the Rules of Court, "parties in interest without
whom no final determination can be had of an action shall be joined as
plaintiffs or defendants." If there is a failure to implead an indispensable
party, any judgment rendered would have no effectiveness.
It is "precisely when an indispensable party is not before the court (that) an
action should be dismissed. The absence of an indispensable party renders
all subsequent actions of the court null and void for want of authority to act,
not only as to the absent parties but even to those present." The purpose of
the rules on joinder of indispensable parties is a complete determination of all
issues not only between the parties themselves, but also as regards other
persons who may be affected by the judgment. A decision valid on its face
cannot attain real finality where there is want of indispensable parties. 14
Citing previous authorities, the Court also held in the Go case that:
The general rule with reference to the making of parties in a civil action
requires the joinder of all indispensable parties under any and all conditions,
their presence being a sine qua non of the exercise of judicial power.
(Borlasa v. Polistico, 47 Phil. 345, 348) For this reason, our Supreme Court
has held that when it appears of record that there are other persons
interested in the subject matter of the litigation, who are not made parties to
the action, it is the duty of the court to suspend the trial until such parties are
made either plaintiffs or defendants. (Pobre, et al. v. Blanco, 17 Phil. 156). x x
x Where the petition failed to join as party defendant the person interested in
sustaining the proceeding in the court, the same should be dismissed. x x x
When an indispensable party is not before the court, the action should be
dismissed.15
The burden of procuring the presence of all indispensable parties is on the
plaintiff.16
In the instant case, there is a necessity to implead the PNP, NAPOLCOM
and CSC because they stand to be adversely affected by petitioner's petition
which involves substantial and controversial alterations in petitioner's service
records. Moreover, as correctly pointed out by the
Office of the Solicitor General (OSG), if petitioner's service is extended by ten
years, the government, through the PNP, shall be burdened by the additional
salary and benefits that would have to be given to petitioner during such
extension. Thus, aside from the OSG, all other agencies which may be
affected by the change should be notified or represented as the truth is best
ascertained under an adversary system of justice.
As the above-mentioned agencies were not impleaded in this case much less
given notice of the proceedings, the decision of the trial court granting
petitioner's prayer for the correction of entries in his service records, is void.
As mentioned above, the absence of an indispensable party renders all
subsequent actions of the court null and void for want of authority to act, not
only as to the absent parties but even as to those present. 17
On the question of whether or not respondent is estopped from assailing the
decision of the RTC for failure of the OSG, as government representative, to
participate in the proceedings before the trial court or to file an opposition to
petitioner's petition for correction of entries in his service records, this Court
rules that such an apparent oversight has no bearing on the validity of the
appeal which the petitioner filed before the CA. Neither can the State, as
represented by the government, be considered in estoppel due to the
petitioner's seeming acquiescence to the judgment of the RTC when it
initially made corrections to some of petitioner's records with the PNP. This
Court has reiterated time and again that the absence of opposition from
government agencies is of no controlling significance, because the State
cannot be estopped by the omission, mistake or error of its officials or
agents.18 Nor is the Republic barred from assailing the decision granting the
petition for correction of entries if, on the basis of the law and the evidence
on record, such petition has no merit.19
64
As to the second and last assigned errors, suffice it to say that considering
that the assailed decision of the RTC is null and void, the same could not
have attained finality. Settled is the rule that a void judgment cannot attain
finality and its execution has no basis in law.20
At this juncture, it may not be amiss to point out that, like the CA, this Court
cannot help but entertain serious doubts on the veracity of petitioner's claim
that he was indeed born in 1956. The late registration of petitioner's
certificate of live birth on September 3, 2001 was made forty-five (45) years
after his supposed birth and a mere 34 days after the PNP's issuance of its
Order for his compulsory retirement. He had all the time to make such
registration but why did he do it only when he was about to retire?
The Court, likewise, agrees with the observation of the OSG that, if petitioner
was indeed born in 1956, he would have been merely 14 years old in 1970
when he was appointed as Chief of Police of Mulondo, Lanao del Sur. This
would not have been legally tenable, considering that Section 9 of RA 4864,
otherwise known as the Police Act of 1966, provides, among others, that a
person shall not be appointed to a local police agency if he is less than
twenty-three years of age. Moreover, realistically speaking, it would be
difficult to believe that a 14-year old minor would serve as a police officer,
much less a chief of police.
records, the CSC imposes the submission of additional evidence that would
prove the veracity of the entries in a belatedly registered birth certificate.
Thus, the CSC, in its Memorandum Circular No. 31, dated November 20,
2001, demands that, aside from the said birth certificate, the person
requesting the correction or change of information must submit other
authenticated supporting documents, such as baptismal certificate, affidavits
of two disinterested witnesses, and "other employment, personal or school
records which would support the entry reflected in the delayed registered
birth certificate and which entry is requested to be reflected in the records of
the Commission as the true and correct entry." In the instant case, petitioner
was only able to submit affidavits of two witnesses, who were not really
proven to be disinterested and whose testimonies were not even tested in
the crucible of cross-examination. On the contrary, the other pieces of
documentary evidence on record, such as his marriage certificate, and his
school and service records, contradict his claims and show that he was, in
fact, born in 1946.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision
dated December 17, 2008 and the Resolution dated February 25, 2009 of the
Court of Appeals, in CA-G.R. SP No. 02120-MIN, are hereby AFFIRMED.
SO ORDERED.

The Court also gives credence to the pronouncement made by the CA which
took judicial notice that in the several hearings of the petition before the
appellate court where the petitioner was present, the CA observed that "in
the several hearings of this petition before Us where the private respondent
was present, he does not really appear to be 52 years old but his old age of
62."21

It can be argued that petitioner's belatedly registered certificate of live birth,

as a public document, enjoys the presumption of validity. However, petitioner
merely relied on such presumption without presenting any other convincing
or credible evidence to prove that he was really born in 1956. On the
contrary, the specific facts attendant in the case at bar, as well as the totality
of the evidence presented during the hearing of the case in the court a quo,
sufficiently negate the presumption of regularity accorded to petitioner's
belatedly registered birth certificate.

In this regard, it is also apropos to mention that, in cases of correction or

change of information based on belatedly registered birth certificates, the
CSC no longer requires a court order to warrant such correction or change of
information in its records. However, in an apparent move to safeguard its
65
 Certificate of Live Birth.5Impleaded as respondent is the Local Civil Registrar
of Gingoog City. She alleged that she was born on February 8, 1952 and is
the illegitimate daughter of Sy Ton and Sotera Lugsanay 6 Her Certificate of
Live Birth7 shows that her full name is Anita Sy when in fact she is allegedly
known to her family and friends as Norma S. Lugsanay. She further claimed
that her school records, Professional Regulation Commission (PRC) Board of
Medicine Certificate,8 and passport9 bear the name Norma S. Lugsanay.
She also alleged that she is an illegitimate child considering that her parents
were never married, so she had to follow the surname of her mother. 10 She
also contended that she is a Filipino citizen and not Chinese, and all her
siblings bear the surname Lugsanay and are all Filipinos. 11cralaw virtualaw
library

Respondent allegedly filed earlier a petition for correction of entries with the
Office of the Local Civil Registrar of Gingoog City to effect the corrections on
her name and citizenship which was supposedly granted. 12 However, the
National Statistics Office (NSO) records did not bear such changes. Hence,
the petition before the RTC.

G.R. No. 198010, August 12, 2013 On May 13, 2004, the RTC issued an Order 13 finding the petition to be
sufficient in form and substance and setting the case for hearing, with the
directive that the said Order be published in a newspaper of general
REPUBLIC OF THE PHILIPPINES, Petitioner, v. DR. NORMA S.
circulation in the City of Gingoog and the Province of Misamis Oriental at
LUGSANAY UY, Respondent.
least once a week for three (3) consecutive weeks at the expense of
respondent, and that the order and petition be furnished the Office of the
DECISION
Solicitor General (OSG) and the City Prosecutors Office for their information
and guidance.14 Pursuant to the RTC Order, respondent complied with the
PERALTA, J.: publication requirement.

On June 28, 2004, the RTC issued an Order in favor of respondent, the
dispositive portion of which reads:
Assailed in this petition for review on certiorari under Rule 45 of the Rules of WHEREFORE, premises considered, the instant petition is hereby
Court are the Court of Appeals (CA)1 Decision2 dated February 18, 2011 and GRANTED. THE CITY CIVIL REGISTRAR OF GINGOOG CITY, or any
Resolution3 dated July 27, 2011 in CA-G.R. CV No. 00238-MIN. The assailed person acting in his behalf is directed and ordered to effect the correction or
decision dismissed the appeal filed by petitioner Republic of the Philippines change of the entries in the Certificate of Live Birth of petitioners name and
and, consequently, affirmed in toto the June 28, 2004 Order4 of the Regional citizenship so that the entries would be:cralawlibrary
Trial Court (RTC), Branch 27, Gingoog City in Special Proceedings No. 230-
2004 granting the Petition for Correction of Entry of Certificate of Live Birth a) As to petitioners
:
filed by respondent Dr. Norma S. Lugsanay Uy; while the assailed resolution name
denied petitioner's motion for reconsideration. First Name : NORMA
Middle Name : SY
The facts of the case are as follows:cralawlibrary Last Name : LUGSANAY

On March 8, 2004, respondent filed a Petition for Correction of Entry in her

66
b) As to petitioners
: FILIPINO
nationality/citizenship
SO ORDERED.15cralaw virtualaw library
The RTC concluded that respondents petition would neither prejudice the
government nor any third party. It also held that the names Norma Sy
Lugsanay and Anita Sy refer to one and the same person, especially since same, and cause reasonable notice thereof to be given to the persons
the Local Civil Registrar of Gingoog City has effected the correction.
Considering that respondent has continuously used and has been known
since childhood as Norma Sy Lugsanay and as a Filipino citizen, the RTC
granted the petition to avoid confusion.16cralaw virtualaw library
On February 18, 2011, the CA affirmed in toto the RTC Order. The CA held
that respondents failure to implead other indispensable parties was cured
upon the publication of the Order setting the case for hearing in a newspaper
of general circulation for three (3) consecutive weeks and by serving a copy
of the notice to the Local Civil Registrar, the OSG and the City Prosecutors
Office.17 As to whether the petition is a collateral attack on respondents
filiation, the CA ruled in favor of respondent, considering that her parents
were not legally married and that her siblings birth certificates uniformly state
that their surname is Lugsanay and their citizenship is Filipino. 18 Petitioners
motion for reconsideration was denied in a Resolution dated July 27, 2011.
Hence, the present petition on the sole ground that the petition is dismissible
for failure to implead indispensable parties.
Cancellation or correction of entries in the civil registry is governed by Rule
108 of the Rules of Court, to wit:
SEC. 1. Who may file petition. Any person interested in any act, event,
order or decree concerning the civil status of persons which has been
recorded in the civil register, may file a verified petition for the cancellation or
correction of any entry relating thereto, with the Regional Trial Court of the
province where the corresponding civil registry is located.
SEC. 2. Entries subject to cancellation or correction. Upon good and valid
grounds, the following entries in the civil register may be cancelled or
corrected: (a) births; (b) marriages; (c) deaths; (d) legal separations; (e)
judgments of annulments of marriage; (f) judgments declaring marriages void
from the beginning; (g) legitimations; (h) adoptions; (i) acknowledgments of
natural children; (j) naturalization; (k) election, loss or recovery of citizenship;
(l) civil interdiction; (m) judicial determination of filiation; (n) voluntary
emancipation of a minor; and (o) changes of name.
SEC. 3. Parties. When cancellation or correction of an entry in the
civil register is sought, the civil registrar and all persons who have or
claim any interest which would be affected thereby shall be made
parties to the proceeding.
SEC. 4. Notice and Publication. Upon the filing of the petition, the
court shall, by an order, fix the time and place for the hearing of the
named in the petition. The court shall also cause the order to be
published once a week for three (3) consecutive weeks in a newspaper
of general circulation in the province.
SEC. 5. Opposition. The civil registrar and any person having or
claiming any interest under the entry whose cancellation or correction
is sought may, within fifteen (15) days from notice of the petition, or
from the last date of publication of such notice, file his opposition
thereto.
SEC. 6. Expediting proceedings. The court in which the proceeding is
brought may make orders expediting the proceedings, and may also grant
preliminary injunction for the preservation of the rights of the parties pending
such proceedings.
SEC. 7. Order. After hearing, the court may either dismiss the petition or
issue an order granting the cancellation or correction prayed for. In either
case, a certified copy of the judgment shall be served upon the civil registrar
concerned who shall annotate the same in his record. 19cralaw virtualaw
library
In this case, respondent sought the correction of entries in her birth
certificate, particularly those pertaining to her first name, surname and
citizenship. She sought the correction allegedly to reflect the name which she
has been known for since childhood, including her legal documents such as
passport and school and professional records. She likewise relied on the
birth certificates of her full blood siblings who bear the surname Lugsanay
instead of Sy and citizenship of Filipino instead of Chinese. The
changes, however, are obviously not mere clerical as they touch on
respondents filiation and citizenship. In changing her surname from Sy
(which is the surname of her father) to Lugsanay (which is the surname of
her mother), she, in effect, changes her status from legitimate to illegitimate;
and in changing her citizenship from Chinese to Filipino, the same affects her
rights and obligations in this country. Clearly, the changes are substantial.
It has been settled in a number of cases starting with Republic v.
Valencia20 that even substantial errors in a civil registry may be corrected and
the true facts established provided the parties aggrieved by the error avail
67
themselves of the appropriate adversary proceeding. 21 The pronouncement
of the Court in that case is illuminating:
It is undoubtedly true that if the subject matter of a petition is not for the
correction of clerical errors of a harmless and innocuous nature, but one
involving nationality or citizenship, which is indisputably substantial as well as
controverted, affirmative relief cannot be granted in a proceeding summary in
nature. However, it is also true that a right in law may be enforced and a
wrong may be remedied as long as the appropriate remedy is used. This
Court adheres to the principle that even substantial errors in a civil registry
may be corrected and the true facts established provided the parties
aggrieved by the error avail themselves of the appropriate adversary
proceeding. x x x earnest effort to comply with the provisions of Rule 108. Thus, the publication
What is meant by appropriate adversary proceeding? Blacks Law indispensable
Dictionary defines adversary proceeding as follows:
One having opposing parties; contested, as distinguished from an ex parte
application, one of which the party seeking relief has given legal warning to
the other party, and afforded the latter an opportunity to contest it. Excludes
an adoption proceeding.22cralaw virtualaw library
In sustaining the RTC decision, the CA relied on the Courts conclusion
in Republic v. Kho,23Alba v. Court of Appeals,24 and Barco v. Court of
Appeals,25 that the failure to implead indispensable parties was cured by the
publication of the notice of hearing pursuant to the provisions of Rule 108 of
the Rules of Court. In Republic v. Kho,26 petitioner therein appealed the RTC
decision granting the petition for correction of entries despite respondents
failure to implead the minors mother as an indispensable party. The Court,
however, did not strictly apply the provisions of Rule 108, because it opined
that it was highly improbable that the mother was unaware of the
proceedings to correct the entries in her childrens birth certificates especially
since the notices, orders and decision of the trial court were all sent to the
residence she shared with them. 27cralaw virtualaw library
In Alba v. Court of Appeals,28 the Court found nothing wrong with the trial
courts decision granting the petition for correction of entries filed by
respondent although the proceedings was not actually known by petitioner. In
that case, petitioners mother and guardian was impleaded in the petition for
correction of entries, and notices were sent to her address appearing in the
subject birth certificate. However, the notice was returned unserved, because
apparently she no longer lived there. Thus, when she allegedly learned of the
granting of the petition, she sought the annulment of judgment which the
Court denied. Considering that the petition for correction of entries is a
proceeding in rem, the Court held that acquisition of jurisdiction over the
person of the petitioner is, therefore, not required and the absence of
personal service was cured by the trial courts compliance with Rule 108
which requires notice by publication.29cralaw virtualaw library
In Barco v. Court of Appeals,30 the Court addressed the question of whether
the court acquired jurisdiction over petitioner and all other indispensable
parties to the petition for correction of entries despite the failure to implead
them in said case. While recognizing that petitioner was indeed an
indispensable party, the failure to implead her was cured by compliance with
Section 4 of Rule 108 which requires notice by publication. In so ruling, the
Court pointed out that the petitioner in a petition for correction cannot be
presumed to be aware of all the parties whose interests may be affected by
the granting of a petition. It emphasized that the petitioner therein exerted
of the notice of hearing was considered to have cured the failure to implead
parties.
In this case, it was only the Local Civil Registrar of Gingoog City who was
impleaded as respondent in the petition below. This, notwithstanding, the
RTC granted her petition and allowed the correction sought by respondent,
which decision was affirmed in toto by the CA.
We do not agree with the RTC and the CA.
This is not the first time that the Court is confronted with the issue involved in
this case. Aside from Kho, Alba and Barco, the Court has addressed the
same in Republic v. Coseteng-Magpayo,31Ceruila v. Delantar,32 and Labayo-
Rowe v. Republic.33cralaw virtualaw library
In Republic v. Coseteng-Magpayo,34 claiming that his parents were never
legally married, respondent therein filed a petition to change his name from
Julian Edward Emerson Coseteng Magpayo, the name appearing in his
birth certificate to Julian Edward Emerson Marquez Lim Coseteng. The
notice setting the petition for hearing was published and there being no
opposition thereto, the trial court issued an order of general default and
eventually granted respondents petition deleting the entry on the date and
place of marriage of parties; correcting his surname from Magpayo to
Coseteng; deleting the entry Coseteng for middle name; and deleting the
entry Fulvio Miranda Magpayo, Jr. in the space for his father. The Republic
of the Philippines, through the OSG, assailed the RTC decision on the
grounds that the corrections made on respondents birth certificate had the
effect of changing the civil status from legitimate to illegitimate and must only
be effected through an appropriate adversary proceeding. The Court nullified
the RTC decision for respondents failure to comply strictly with the
procedure laid down in Rule 108 of the Rules of Court. Aside from the wrong
remedy availed of by respondent as he filed a petition for Change of Name
68
under Rule 103 of the Rules of Court, assuming that he filed a petition under
Rule 108 which is the appropriate remedy, the petition still failed because of
improper venue and failure to implead the Civil Registrar of Makati City and
all affected parties as respondents in the case.
In Ceruila v. Delantar,35 the Ceruilas filed a petition for the cancellation and
annulment of the birth certificate of respondent on the ground that the same
was made as an instrument of the crime of simulation of birth and, therefore,
invalid and spurious, and it falsified all material entries therein. The RTC
issued an order setting the case for hearing with a directive that the same be
published and that any person who is interested in the petition may interpose
his comment or opposition on or before the scheduled hearing. Summons
was likewise sent to the Civil Register of Manila. After which, the trial court
granted the petition and nullified respondents birth certificate. Few months
after, respondent filed a petition for the annulment of judgment claiming that
she and her guardian were not notified of the petition and the trial courts
decision, hence, the latter was issued without jurisdiction and in violation of
her right to due process. The Court annulled the trial courts decision for
failure to comply with the requirements of Rule 108, especially the non-
impleading of respondent herself whose birth certificate was nullified.
In Labayo-Rowe v. Republic,36 petitioner filed a petition for the correction of
entries in the birth certificates of her children, specifically to change her name
from Beatriz V. Labayu/Beatriz Labayo to Emperatriz Labayo, her civil status
from married to single, and the date and place of marriage from 1953-
Bulan to No marriage. The Court modified the trial courts decision by
nullifying the portion thereof which directs the change of petitioners civil
status as well as the filiation of her child, because it was the OSG only that
was made respondent and the proceedings taken was summary in nature
which is short of what is required in cases where substantial alterations are
sought.
Respondents birth certificate shows that her full name is Anita Sy, that she is
a Chinese citizen and a legitimate child of Sy Ton and Sotera Lugsanay. In
filing the petition, however, she seeks the correction of her first name and
surname, her status from legitimate to illegitimate and her citizenship from
Chinese to Filipino. Thus, respondent should have impleaded and notified
not only the Local Civil Registrar but also her parents and siblings as the
persons who have interest and are affected by the changes or corrections
respondent wanted to make.
The fact that the notice of hearing was published in a newspaper of general
circulation and notice thereof was served upon the State will not change the
nature of the proceedings taken.37 A reading of Sections 4 and 5, Rule 108 of
the Rules of Court shows that the Rules mandate two sets of notices to
different potential oppositors: one given to the persons named in the petition
and another given to other persons who are not named in the petition but
nonetheless may be considered interested or affected parties. 38Summons
must, therefore, be served not for the purpose of vesting the courts with
jurisdiction but to comply with the requirements of fair play and due process
to afford the person concerned the opportunity to protect his interest if he so
chooses.39cralaw virtualaw library
While there may be cases where the Court held that the failure to implead
and notify the affected or interested parties may be cured by the publication
of the notice of hearing, earnest efforts were made by petitioners in bringing
to court all possible interested parties. 40 Such failure was likewise excused
where the interested parties themselves initiated the corrections
proceedings;41 when there is no actual or presumptive awareness of the
existence of the interested parties;42 or when a party is inadvertently left
out.43cralaw virtualaw library
It is clear from the foregoing discussion that when a petition for cancellation
or correction of an entry in the civil register involves substantial and
controversial alterations, including those on citizenship, legitimacy of
paternity or filiation, or legitimacy of marriage, a strict compliance with the
requirements of Rule 108 ofthe Rules of Court is mandated. 44 If the entries in
the civil register could be corrected or changed through mere summary
proceedings and not through appropriate action wherein all parties who may
be affected by the entries are notified or represented, the door to fraud or
other mischief would be set open, the consequence of which might be
detrimental and far reaching. 45cralaw virtualaw library
WHEREFORE, premises considered, the petition is hereby GRANTED. The
Court of Appeals Decision dated February 18, 2011 and Resolution dated
July 27, 20011 in CA-G.R. CV No. 00238-MIN, are SET ASIDE.
Consequently, the June 28, 2004 Order of the Regional Trial Court, Branch
27, Gingoog City, in Spl. Proc. No. 230-2004 granting the Petition for
Correction of Entry of Certificate of Live Birth filed by respondent Dr. Norma
S. Lugsanay Uy, is NULLIFIED.
SO ORDERED.
69

EN BANC
G.R. No. 180771, April 21, 2015
RESIDENT MARINE MAMMALS OF THE PROTECTED SEASCAPE TANON STRAIT,
E.G., TOOTHED WHALES, DOLPHINS, PORPOISES, AND OTHER CETACEAN
SPECIES, JOINED IN AND REPRESENTED HEREIN BY HUMAN BEINGS GLORIA
ESTENZO RAMOS AND ROSE-LIZA EISMA-OSORIO, IN THEIR CAPACITY AS
LEGAL GUARDIANS OF THE LESSER LIFE-FORMS AND AS RESPONSIBLE
STEWARDS OF GOD'S CREATIONS, Petitioners, v. SECRETARY ANGELO REYES,
IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF ENERGY (DOE),
SECRETARY JOSE L. ATIENZA, IN HIS CAPACITY AS SECRETARY OF THE
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR),
LEONARDO R. SIBBALUCA, DENR REGIONAL DIRECTOR-REGION VII AND IN
HIS CAPACITY AS CHAIRPERSON OF THE TANON STRAIT PROTECTED
SEASCAPE MANAGEMENT BOARD, BUREAU OF FISHERIES AND AQUATIC
RESOURCES (BFAR), DIRECTOR MALCOLM I. SARMIENTO, JR., BFAR
REGIONAL DIRECTOR FOR REGION VII ANDRES M. BOJOS, JAPAN PETROLEUM
EXPLORATION CO., LTD. (JAPEX), AS REPRESENTED BY ITS PHILIPPINE
AGENT, SUPPLY OILFIELD SERVICES, INC., Respondents.
G.R. No.
CENTRAL VISAYAS FISHERFOLK DEVELOPMENT CENTER (FIDEC), CERILO D.
ENGARCIAL, RAMON YANONG, FRANCISCO LABID, IN THEIR PERSONAL
CAPACITY AND AS REPRESENTATIVES OF THE SUBSISTENCE FISHERFOLKS
OF THE MUNICIPALITIES OF ALOGUINSAN AND PINAMUNGAJAN, CEBU, AND
THEIR FAMILIES, AND THE PRESENT AND FUTURE GENERATIONS OF
FILIPINOS WHOSE RIGHTS ARE SIMILARLY
AFFECTED, Petitioners, v. SECRETARY ANGELO REYES, IN HIS CAPACITY AS
SECRETARY OF THE DEPARTMENT OF ENERGY (DOE), JOSE L. ATIENZA, IN
HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES (DENR), LEONARDO R. SIBBALUCA, IN HIS CAPACITY
AS DENR REGIONAL DIRECTOR-REGION VII AND AS CHAIRPERSON OF THE
TAON STRAIT PROTECTED SEASCAPE MANAGEMENT BOARD, ALAN
ARRANGUEZ, IN HIS CAPACITY AS DIRECTOR ENVIRONMENTAL MANAGEMENT
BUREAU-REGION VII, DOE REGIONAL DIRECTOR FOR REGION VIII 1 ANTONIO
LABIOS, JAPAN PETROLEUM EXPLORATION CO., LTD. (JAPEX), AS
REPRESENTED BY ITS PHILIPPINE AGENT, SUPPLY OILFIELD SERVICES,
INC., Respondent.
DECISION
LEONARDO-DE CASTRO, J. :
Before Us are two consolidated Petitions filed under Rule 65 of the 1997 Rules of Court,
concerning Service Contract No. 46 (SC-46), which allowed the exploration, development,
and exploitation of petroleum resources within Taon Strait, a narrow passage of water
situated between the islands of Negros and Cebu. 2
The Petition docketed as G.R. No. 180771 is an original Petition for Certiorari, Mandamus,
and Injunction, which seeks to enjoin respondents from implementing SC-46 and to have it
nullified for willful and gross violation of the 1987 Constitution and certain international and
municipal laws.3
Likewise, the Petition docketed as G.R. No. 181527 is an original Petition for Certiorari,
Prohibition, and Mandamus, which seeks to nullify the Environmental Compliance Certificate
(ECC) issued by the Environmental Management Bureau (EMB) of the Department of
Environment and Natural Resources (DENR), Region VII in connection with SC-46; to prohibit
respondents from implementing SC-46; and to compel public respondents to provide
petitioners access to the pertinent documents involving the Taon Strait Oil Exploration
Project.4
ANTECEDENT FACTS AND PROCEEDINGS
181527
Petitioners in G.R. No. 180771, collectively referred to as the "Resident Marine Mammals" in
70
the petition, are the toothed whales, dolphins, porpoises, and other cetacean species, which
inhabit the waters in and around the Taon Strait. They are joined by Gloria Estenzo Ramos
(Ramos) and Rose-Liza Eisma-Osorio (Eisma-Osorio) as their legal guardians and as friends
(to be collectively known as "the Stewards") who allegedly empathize with, and seek the
protection of, the aforementioned marine species. Also impleaded as an unwilling co-petitioner
is former President Gloria Macapagal-Arroyo, for her express declaration and undertaking in
the ASEAN Charter to protect the Taon Strait, among others. 5
Petitioners in G.R. No. 181527 are the Central Visayas Fisherfolk Development Center
(FIDEC), a non-stock, non-profit, non-governmental organization, established for the welfare
of the marginal fisherfolk in Region VII; and Cerilo D. Engarcial (Engarcial), Ramon Yanong
(Yanong) and Francisco Labid (Labid), in their personal capacities and as representatives of
the subsistence fisherfolk of the municipalities of Aloguinsan and Pinamungajan, Cebu.
Named as respondents in both petitions are the late Angelo T. Reyes, as then Secretary of the
Department of Energy (DOE); Jose L. Atienza, as then Secretary of the DENR; Leonardo R.
Sibbaluca, as then DENR-Regional Director for Region VII and Chairman of the Taon Strait
Protected Seascape Management Board; Japan Petroleum Exploration Co., Ltd. (JAPEX), a
company organized and existing under the laws of Japan with a Philippine branch office; and
Supply Oilfield Services, Inc. (SOS), as the alleged Philippine agent of JAPEX.
In G.R. No. 181527, the following were impleaded as additional public respondents: Alan C.
Arranguez (Arranguez) and Antonio Labios (Labios), in their capacities as then Director of the
EMB, Region VII and then Regional Director of the DOE, Region VII, respectively. 6
On June 13, 2002, the Government of the Philippines, acting through the DOE, entered into a
Geophysical Survey and Exploration Contract-102 (GSEC-102) with JAPEX. This contract
involved geological and geophysical studies of the Taon Strait. The studies included surface
geology, sample analysis, and reprocessing of seismic and magnetic data. JAPEX, assisted
by DOE, also conducted geophysical and satellite surveys, as well as oil and gas sampling in
Taon Strait.7
On December 21, 2004, DOE and JAPEX formally converted GSEC-102 into SC-46 for the
exploration, development, and production of petroleum resources in a block covering
approximately 2,850 square kilometers offshore the Taon Strait. 8
From May 9 to 18, 2005, JAPEX conducted seismic surveys in and around the Taon Strait. A
multi-channel sub-bottom profiling covering approximately 751 kilometers was also done to
determine the area's underwater composition.9
JAPEX committed to drill one exploration well during the second sub-phase of the project.
Since the well was to be drilled in the marine waters of Aloguinsan and Pinamungajan, where
the Taon Strait was declared a protected seascape in 1988, 10 JAPEX agreed to comply with
the Environmental Impact Assessment requirements pursuant to Presidential Decree No.
1586, entitled "Establishing An Environmental Impact Statement System, Including Other
Environmental Management Related Measures And For Other Purposes." 11
On January 31, 2007, the Protected Area Management Board 12 of the Taon Strait (PAMB-
Taon Strait) issued Resolution No. 2007-001, 13 wherein it adopted the Initial Environmental
Examination (IEE) commissioned by JAPEX, and favorably recommended the approval of
JAPEX's application for an ECC.
On March 6, 2007, the EMB of DENR Region VII granted an ECC to the DOE and JAPEX for
the offshore oil and gas exploration project in Taon Strait. 14 Months later, on November 16,
2007, JAPEX began to drill an exploratory well, with a depth of 3,150 meters, near
Pinamungajan town in the western Cebu Province. 15 This drilling lasted until February 8,
2008.16
It was in view of the foregoing state of affairs that petitioners applied to this Court for redress,
via two separate original petitions both dated December 17, 2007, wherein they commonly
seek that respondents be enjoined from implementing SC-46 for, among others, violation of
the 1987 Constitution.
On March 31, 2008, SOS filed a Motion to Strike 17 its name as a respondent on the ground
that it is not the Philippine agent of JAPEX. In support of its motion, it submitted the branch
office application of JAPEX,18 wherein the latter's resident agent was clearly identified. SOS
claimed that it had acted as a mere logistics contractor for JAPEX in its oil and gas exploration
activities in the Philippines.
Petitioners Resident Marine Mammals and Stewards opposed SOS's motion on the ground
that it was premature, it was pro-forma, and it was patently dilatory. They claimed that SOS
admitted that "it is in law a ( sic) privy to JAPEX" since it did the drilling and other exploration
activities in Taon Strait under the instructions of its principal, JAPEX. They argued that it
would be premature to drop SOS as a party as JAPEX had not yet been joined in the case;
and that it was "convenient" for SOS to ask the Court to simply drop its name from the parties
when what it should have done was to either notify or ask JAPEX to join it in its motion to
enable proper substitution. At this juncture, petitioners Resident Marine Mammals and
Stewards also asked the Court to implead JAPEX Philippines as a corespondent or as a
substitute for its parent company, JAPEX.19
On April 8, 2008, the Court resolved to consolidate G.R. No. 180771 and G.R. No. 181527.
On May 26, 2008, the FIDEC manifested20 that they were adopting in toto the Opposition to
Strike with Motion to Implead filed by petitioners Resident Marine Mammals and Stewards in
G.R. No. 180771.
On June 19, 2008, public respondents filed their Manifestation 21 that they were not objecting
to SOS's Motion to Strike as it was not JAPEX's resident agent. JAPEX during all this time, did
71
not file any comment at all. requested to be clarified as to whether or not it should deem the February 7, 2012 Resolution
as this Court's Order of its inclusion in the case, as it has not been impleaded. It also alleged
Thus, on February 7, 2012, this Court, in an effort to ensure that all the parties were given that JAPEX PH had already stopped exploration activities in the Taon Strait way back in
ample chance and opportunity to answer the issues herein, issued a Resolution directing the 2008, rendering this case moot.
Court's process servicing unit to again serve the parties with a copy of the September 23,
2008 Resolution of the Court, which gave due course to the petitions in G.R. Nos. 180771 and On March 22, 2012, JAPEX PH, also by special appearance, filed a Motion for Extension of
181527, and which required the parties to submit their respective memoranda. The February Time25 to file its Memorandum. It stated that since it received the February 7, 2012 Resolution
7, 2012 Resolution22 reads as follows:chanroblesvirtuallawlibrary on February 23, 2012, it had until March 22, 2012 to file its Memorandum. JAPEX PH then
G.R. No. 180771 (Resident Marine Mammals of the Protected Seascape Taon Strait, e.g., asked for an additional thirty days, supposedly to give this Court some time to consider its
Toothed Whales, Dolphins, Porpoises and Other Cetacean Species, et al. vs. Hon. Angelo Motion for Clarification.
Reyes, in his capacity as Secretary of the Department of Energy, et al.) and G.R. No.
181527 (Central Visayas Fisherfolk Development Center, et al. vs. Hon. Angelo Reyes, et al.). On April 24, 2012, this Court issued a Resolution 26 granting JAPEX PH's Motion to Admit its
- The Court Resolved to direct the Process Servicing Unit to RE-SEND the resolution dated Motion for Clarification. This Court, addressing JAPEX PH's Motion for Clarification,
September 23, 2008 to the following parties and counsel, together with this held:chanroblesvirtuallawlibrary
resolution:chanroblesvirtuallawlibrary With regard to its Motion for Clarification (By Special Appearance) dated March 19, 2012, this
Atty. Aristeo O. th Court considers JAPEX Philippines. Ltd. as a real party-in-interest in these cases. Under
20 Floor Pearlbank Centre
Cario Section 2, Rule 3 of the 1997 Rules of Court, a real party-in-interest is the party who stands to
Counsel for be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.
Respondent 146 Valero Street Contrary to JAPEX Philippines, Ltd.'s allegation that it is a completely distinct corporation,
Supply which should not be confused with JAPEX Company, Ltd., JAPEX Philippines, Ltd. is a mere
Oilfield Services, branch office, established by JAPEX Company, Ltd. for the purpose of carrying out the latter's
Salcedo Village, Makati City
Inc. business transactions here in the Philippines. Thus, JAPEX Philippines, Ltd., has no separate
personality from its mother foreign corporation, the party impleaded in this case.
JAPEX
20th Floor Pearlbank Centre
Philippines Ltd. Moreover, Section 128 of the Corporation Code provides for the responsibilities and duties of
146 Valero Street a resident agent of a foreign corporation:chanroblesvirtuallawlibrary
Salcedo Village, Makati City SECTION 128. Resident agent; service of process. The Securities and Exchange
Commission shall require as a condition precedent to the issuance of the license to transact
JAPEX business in the Philippines by any foreign corporation that such corporation file with the
19th Floor Pearlbank Centre
Philippines Ltd. Securities and Exchange Commission a written power of attorney designating some person
c/o Atty. Maria who must be a resident of the Philippines, on whom any summons and other legal processes
146 Valero Street
Farah Z.G. may be served in all actions or other legal proceedings against such corporation, and
Nicolas-SuchiancoSalcedo Village, Makati City consenting that service upon such resident agent shall be admitted and held as valid as if
served upon the duly authorized officers of the foreign corporation at its home office. Any such
Atty. Maria foreign corporation shall likewise execute and file with the Securities and Exchange
Suite 2404 Discovery Centre
Farah Z.G. Commission an agreement or stipulation, executed by the proper authorities of said
Nicolas- corporation, in form and substance as follows:
25 ADB Avenue
Suchianco
Resident Agent of "The (name of foreign corporation) does hereby stipulate and agree, in consideration of its
Ortigas Center, Pasig City
JAPEX being granted by the Securities and Exchange Commission a license to transact business in
Philippines Ltd. the Philippines, that if at any time said corporation shall cease to transact business in the
This Resolution was personally served to the above parties, at the above addresses on Philippines, or shall be without any resident agent in the Philippines on whom any summons
February 23, 2012. On March 20, 2012, JAPEX Philippines, Ltd. (JAPEX PH), by way of or other legal processes may be served, then in any action or proceeding arising out of any
special appearance, filed a Motion to Admit 23 its Motion for Clarification,24 wherein JAPEX PH business or transaction which occurred in the Philippines, service of any summons or other
72
legal process may be made upon the Securities and Exchange Commission and that such also impute the incidences of "fish kill" 32 observed by some of the local fisherfolk to the
service shall have the same force and effect as if made upon the duly-authorized officers of seismic survey. And they further allege that the ECC obtained by private respondent JAPEX is
the corporation at its home office." invalid because public consultations and discussions with the affected stakeholders, a pre-
requisite to the issuance of the ECC, were not held prior to the ECC's issuance.
Whenever such service of summons or other process shall be made upon the Securities and
Exchange Commission, the Commission shall, within ten (10) days thereafter, transmit by mail In its separate petition, petitioner FIDEC confirms petitioners Resident Marine Mammals and
a copy of such summons or other legal process to the corporation at its home or principal Stewards' allegations of reduced fish catch and lack of public consultations or discussions
office. The sending of such copy by the Commission shall be a necessary part of and shall with the fisherfolk and other stakeholders prior to the issuance of the ECC. Moreover, it
complete such service. All expenses incurred by the Commission for such service shall be alleges that during the seismic surveys and drilling, it was barred from entering and fishing
paid in advance by the party at whose instance the service is made. within a 7-kilometer radius from the point where the oilrig was located, an area greater than
the 1.5-kilometer radius "exclusion zone" stated in the IEE. 33 It also agrees in the allegation
In case of a change of address of the resident agent, it shall be his or its duty to immediately that public respondents DENR and EMB abused their discretion when they issued an ECC to
notify in writing the Securities and Exchange Commission of the new address. public respondent DOE and private respondent JAPEX without ensuring the strict compliance
It is clear from the foregoing provision that the function of a resident agent is to receive with the procedural and substantive requirements under the Environmental Impact
summons or legal processes that may be served in all actions or other legal proceedings Assessment system, the Fisheries Code, and their implementing rules and regulations. 34 It
against the foreign corporation. These cases have been prosecuted in the name of JAPEX further claims that despite several requests for copies of all the documents pertaining to the
Company, Ltd., and JAPEX Philippines Ltd., as its branch office and resident agent, had been project in Taflon Strait, only copies of the PAMB-Taon Strait Resolution and the ECC were
receiving the various resolutions from this Court, as evidenced by Registry Return Cards given to the fisherfolk.35
signed by its representatives.
And in the interest of justice, this Court resolved to grant JAPEX PH's motion for extension of Public Respondents' Counter-Allegations
time to file its memorandum, and was given until April 21, 2012, as prayed for, within which to
comply with the submission.27 Public respondents, through the Solicitor General, contend that petitioners Resident Marine
Mammals and Stewards have no legal standing to file the present petition; that SC-46 does
Without filing its Memorandum, JAPEX PH, on May 14, 2012, filed a motion, asking this Court not violate the 1987 Constitution and the various laws cited in the petitions; that the ECC was
for an additional thirty days to file its Memorandum, to be counted from May 8, 2012. It issued in accordance with existing laws and regulations; that public respondents may not be
justified its request by claiming that this Court's April 24, 2012 Resolution was issued past its compelled by mandamus to furnish petitioners copies of all documents relating to SC-46; and
requested deadline for filing, which was on April 21, 2012. 28 that all the petitioners failed to show that they are entitled to injunctive relief. They further
contend that the issues raised in these petitions have been rendered moot and academic by
On June 19, 2012, this Court denied JAPEX PH's second request for additional time to file its the fact that SC-46 had been mutually terminated by the parties thereto effective June 21,
Memorandum and dispensed with such filing. 2008.36

Since petitioners had already filed their respective memoranda, 29 and public respondents had ISSUES
earlier filed a Manifestation30 that they were adopting their Comment dated March 31, 2008 as
their memorandum, this Court submitted the case for decision.chanRoblesvirtualLawlibrary The following are the issues posited by petitioners Resident Marine Mammals and Stewards
in G.R. No. 180771:chanroblesvirtuallawlibrary
Petitioners' Allegations
I. WHETHER OR NOT PETITIONERS HAVE LOCUS STANDI TO FILE THE
Protesting the adverse ecological impact of JAPEX's oil exploration activities in the Taon INSTANT PETITION;
Strait, petitioners Resident Marine Mammals and Stewards aver that a study made after the
seismic survey showed that the fish catch was reduced drastically by 50 to 70 percent. They
II. WHETHER OR NOT SERVICE CONTRACT NO. 46 IS VIOLAT[IVE] OF THE 1987
claim that before the seismic survey, the average harvest per day would be from 15 to 20
PHILIPPINE CONSTITUTION AND STATUTES;
kilos; but after the activity, the fisherfolk could only catch an average of 1 to 2 kilos a day. They
attribute this "reduced fish catch" to the destruction of the " payao" also known as the "fish
aggregating device" or "artificial reef." 31Petitioners Resident Marine Mammals and Stewards
73
 III. WHETHER OR NOT THE ON-GOING EXPLORATION AND PROPOSED II. Main Issue: Legality of Sendee Contract No. 46.
EXPLOITATION FOR OIL AND NATURAL GAS AT, AROUND, AND UNDERNEATH
THE MARINE WATERS OF THE TANON STRAIT PROTECTED SEASCAPE IS DISCUSSION
INCONSISTENT WITH THE PHILIPPINE COMMITMENTS TO INTERNATIONAL
ENVIRONMENTAL LAWS AND INSTRUMENTS; AND At the outset, this Court makes clear that the '"moot and academic principle' is not a magical
formula that can automatically dissuade the courts in resolving a case." Courts have decided
IV. WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE cases otherwise moot and academic under the following exceptions:
CERTIFICATE (ECC) IN ENVIRONMENTALLY CRITICAL AREAS AND HABITATS
OF MARINE WILDLIFE AND ENDANGERED SPECIES IS LEGAL AND PROPER. 37 1) There is a grave violation of the Constitution;

Meanwhile, in G.R. No. 181527, petitioner FIDEC presented the following issues for our 2) The exceptional character of the situation and the paramount public interest is involved;
consideration:chanroblesvirtuallawlibrary
3) The constitutional issue raised requires formulation of controlling principles to guide the
bench, the bar, and the public; and
I. WHETHER OR NOT SERVICE CONTRACT NO. 46 EXECUTED BETWEEN
RESPONDENTS DOE AND JAPEX SHOULD BE NULLIFIED AND SET ASIDE
4) The case is capable of repetition yet evading review. 39
FOR BEING IN DIRECT VIOLATION OF SPECIFIC PROVISIONS OF THE 1987
PHILIPPINE CONSTITUTION AND APPLICABLE LAWS;
In this case, despite the termination of SC-46, this Court deems it necessary to resolve these
consolidated petitions as almost all of the foregoing exceptions are present in this case. Both
II. WHETHER OR NOT THE OFF-SHORE OIL EXPLORATION CONTEMPLATED petitioners allege that SC-46 is violative of the Constitution, the environmental and livelihood
UNDER SERVICE CONTRACT NO. 46 IS LEGALLY PERMISSIBLE WITHOUT A issues raised undoubtedly affect the public's interest, and the respondents' contested actions
LAW BEING DULY PASSED EXPRESSLY FOR THE PURPOSE; are capable of repetition.chanRoblesvirtualLawlibrary

III. WHETHER OR NOT THE OIL EXPLORATION BEING CONDUCTED WITHIN THE Procedural Issues
TANON STRAIT PROTECTED SEASCAPE VIOLATES THE RIGHTS AND LEGAL
PROTECTION GRANTED TO PETITIONERS UNDER THE CONSTITUTION AND Locus Standi of Petitioners Resident Marine Mammals and Stewards
APPLICABLE LAWS.
The Resident Marine Mammals, through the Stewards, "claim" that they have the legal
IV. WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE standing to file this action since they stand to be benefited or injured by the judgment in this
CERTIFICATE (ECC) FOR SUCH AN ENVIRONMENTALLY CRITICAL PROJECT suit.40 Citing Oposa v. Factoran, Jr.,41 they also assert their right to sue for the faithful
INSIDE AN ENVIRONMENTALLY CRITICAL AREA SUCH AS THE TANON STRAIT performance of international and municipal environmental laws created in their favor and for
PROTECTED SEASCAPE CONFORMED TO LAW AND EXISTING RULES AND their benefit. In this regard, they propound that they have the right to demand that they be
REGULATIONS ON THE MATTER. accorded the benefits granted to them in multilateral international instruments that the
Philippine Government had signed, under the concept of stipulation pour autrui.42
V. WHETHER OR NOT THE RESPONDENTS MAY BE COMPELLED BY
MANDAMUS TO FURNISH PETITIONERS WITH COPIES OF THE DOCUMENTS For their part, the Stewards contend that there should be no question of their right to represent
PERTAINING TO THE TANON STRAIT OIL EXPLORATION PROJECT.38 the Resident Marine Mammals as they have stakes in the case as forerunners of a campaign
to build awareness among the affected residents of Taon Strait and as stewards of the
environment since the primary steward, the Government, had failed in its duty to protect the
In these consolidated petitions, this Court has determined that the various issues raised by the
environment pursuant to the public trust doctrine. 43
petitioners may be condensed into two primary issues:
Petitioners Resident Marine Mammals and Stewards also aver that this Court may lower the
I. Procedural Issue: Locus Standi of the Resident Marine Mammals and Stewards, benchmark in locus standi as an exercise of epistolary jurisdiction. 44
petitioners in G.R. No. 180771; and

74
In opposition, public respondents argue that the Resident Marine Mammals have no standing
because Section 1, Rule 3 of the Rules of Court requires parties to an action to be either
natural or juridical persons, viz.:chanroblesvirtuallawlibrary
Section 1. Who may be parties; plaintiff and defendant . - Only natural or juridical persons, or
entities authorized by law may be parties in a civil action. The term "plaintiff may refer to the
claiming party, the counter-claimant, the cross-claimant, or the third (fourth, etc.)-party plaintiff.
The term "defendant" may refer to the original defending party, the defendant in a
counterclaim, the cross-defendant, or the third (fourth, etc.)-party defendant.
The public respondents also contest the applicability of Oposa, pointing out that the petitioners
therein were all natural persons, albeit some of them were still unborn. 45
As regards the Stewards, the public respondents likewise challenge their claim of legal
standing on the ground that they are representing animals, which cannot be parties to an
action. Moreover, the public respondents argue that the Stewards are not the real parties-in-
interest for their failure to show how they stand to be benefited or injured by the decision in
this case.46
Invoking the alter ego principle in political law, the public respondents claim that absent any
proof that former President Arroyo had disapproved of their acts in entering into and
implementing SC-46, such acts remain to be her own. 47
The public respondents contend that since petitioners Resident Marine Mammals and
Stewards' petition was not brought in the name of a real party-in-interest, it should be
dismissed for failure to state a cause of action. 48
The issue of whether or not animals or even inanimate objects should be given legal standing
in actions before courts of law is not new in the field of animal rights and environmental law.
Petitioners Resident Marine Mammals and Stewards cited the 1972 United States case Sierra
Club v. Rogers C.B. Morton,49wherein Justice William O. Douglas, dissenting to the
conventional thought on legal standing, opined:chanroblesvirtuallawlibrary
The critical question of "standing" would be simplified and also put neatly in focus if we
fashioned a federal rule that allowed environmental issues to be litigated before federal
agencies or federal courts in the name of the inanimate object about to be despoiled, defaced,
or invaded by roads and bulldozers and where injury is the subject of public outrage, x x x.
Inanimate objects are sometimes parties in litigation. A ship has a legal personality, a fiction
found useful for maritime purposes. The corporation sole - a creature of ecclesiastical law - is
an acceptable adversary and large fortunes ride on its cases. The ordinary corporation is a
"person" for purposes of the adjudicatory processes, whether it represents proprietary,
spiritual, aesthetic, or charitable causes.
So it should be as respects valleys, alpine meadows, rivers, lakes, estuaries, beaches, ridges,
groves of trees, swampland, or even air that feels the destructive pressures of modern
technology and modem life. The river, for example, is the living symbol of all the life it sustains
or nourishesfish, aquatic insects, water ouzels, otter, fisher, deer, elk, bear, and all other
animals, including man, who are dependent on it or who enjoy it for its sight, its sound, or its
life. The river as plaintiff speaks for the ecological unit of life that is part of it. Those people
who have a meaningful relation to that body of waterwhether it be a fisherman, a canoeist, a
zoologist, or a loggermust be able to speak for the values which the river represents and
which are threatened with destruction.50 (Citations omitted.)
The primary reason animal rights advocates and environmentalists seek to give animals and
inanimate objects standing is due to the need to comply with the strict requirements in
bringing a suit to court. Our own 1997 Rules of Court demand that parties to a suit be either
natural or juridical persons, or entities authorized by law. It further necessitates the action to
be brought in the name of the real party-in-interest, even if filed by a
representative, viz.:chanroblesvirtuallawlibrary
Rule 3
Parties to Civil Actions
Section 1. Who may be parties; plaintiff and defendant . - Only natural or juridical persons, or
entities authorized by law may be parties in a civil action. The term "plaintiff may refer to the
claiming party, the counter-claimant, the cross-claimant, or the third (fourth, etc.)-party plaintiff.
The term "defendant" may refer to the original defending party, the defendant in a
counterclaim, the cross-defendant, or the third (fourth, etc.)-party defendant.
Sec. 2. Parties in interest. - A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be prosecuted or defended in
the name of the real party in interest.
Sec. 3. Representatives as parties. - Where the action is allowed to be prosecuted or
defended by a representative or someone acting in a fiduciary capacity, the beneficiary shall
be included in the title of the case and shall be deemed to be the real party in interest. A
representative may be a trustee of an express trust, a guardian, an executor or administrator,
or a party authorized by law or these Rules. An agent acting in his own name and for the
benefit of an undisclosed principal may sue or be sued without joining the principal except
when the contract involves things belonging to the principal.
It had been suggested by animal rights advocates and environmentalists that not only natural
and juridical persons should be given legal standing because of the difficulty for persons, who
cannot show that they by themselves are real parties-in-interests, to bring actions in
representation of these animals or inanimate objects. For this reason, many environmental
cases have been dismissed for failure of the petitioner to show that he/she would be directly
injured or affected by the outcome of the case. However, in our jurisdiction, locus standi in
environmental cases has been given a more liberalized approach. While developments in
Philippine legal theory and jurisprudence have not progressed as far as Justice Douglas's
paradigm of legal standing for inanimate objects, the current trend moves towards
simplification of procedures and facilitating court access in environmental cases.
75
Recently, the Court passed the landmark Rules of Procedure for Environmental
Cases,51 which allow for a "citizen suit," and permit any Filipino citizen to file an action before
our courts for violations of our environmental laws:chanroblesvirtuallawlibrary
SEC. 5. Citizen suit. - Any Filipino citizen in representation of others, including minors
or generations yet unborn, may file an action to enforce rights or obligations under
environmental laws. Upon the filing of a citizen suit, the court shall issue an order which
shall contain a brief description of the cause of action and the reliefs prayed for, requiring all
interested parties to manifest their interest to intervene in the case within fifteen (15) days
from notice thereof. The plaintiff may publish the order once in a newspaper of a general
circulation in the Philippines or furnish all affected barangays copies of said order.
Citizen suits filed under R.A. No. 8749 and R.A. No. 9003 shall be governed by their
respective provisions.52 (Emphasis ours.)
Explaining the rationale for this rule, the Court, in the Annotations to the Rules of Procedure
for Environmental Cases, commented:chanroblesvirtuallawlibrary
Citizen suit. To further encourage the protection of the environment, the Rules enable litigants
enforcing environmental rights to file their cases as citizen suits. This provision liberalizes
standing for all cases filed enforcing environmental laws and collapses the traditional rule on
personal and direct interest, on the principle that humans are stewards of nature . The
terminology of the text reflects the doctrine first enunciated in Oposa v. Factoran, insofar as it
refers to minors and generations yet unborn.53 (Emphasis supplied, citation omitted.)
Although this petition was filed in 2007, years before the effectivity of the Rules of Procedure
for Environmental Cases, it has been consistently held that rules of procedure "may be
retroactively applied to actions pending and undetermined at the time of their passage and will
not violate any right of a person who may feel that he is adversely affected, inasmuch as there
is no vested rights in rules of procedure."54
Elucidating on this doctrine, the Court, in Systems Factors Corporation v. National Labor
Relations Commission55 held that:chanroblesvirtuallawlibrary
Remedial statutes or statutes relating to remedies or modes of procedure, which do not create
new or take away vested rights, but only operate in furtherance of the remedy or confirmation
of rights already existing, do not come within the legal conception of a retroactive law, or the
general rule against retroactive operation of statutes. Statutes regulating the procedure of the
courts will be construed as applicable to actions pending and undetermined at the time of their
passage. Procedural laws are retroactive in that sense and to that extent, x x x.
Moreover, even before the Rules of Procedure for Environmental Cases became effective, this
Court had already taken a permissive position on the issue of locus standi in environmental
cases. In Oposa, we allowed the suit to be brought in the name of generations yet unborn
"based on the concept of intergenerational responsibility insofar as the right to a balanced and
healthful ecology is concerned."56Furthermore, we said that the right to a balanced and
healthful ecology, a right that does not even need to be stated in our Constitution as it is
assumed to exist from the inception of humankind, carries with it the correlative duty to refrain
from impairing the environment.57
In light of the foregoing, the need to give the Resident Marine Mammals legal standing has
been eliminated by our Rules, which allow any Filipino citizen, as a steward of nature, to bring
a suit to enforce our environmental laws. It is worth noting here that the Stewards are joined
as real parties in the Petition and not just in representation of the named cetacean species.
The Stewards, Ramos and Eisma-Osorio, having shown in their petition that there may be
possible violations of laws concerning the habitat of the Resident Marine Mammals, are
therefore declared to possess the legal standing to file this
petition.chanRoblesvirtualLawlibrary
Impleading Former President Gloria Macapagal-Arroyo as an Unwilling Co-Petitioner
Petitioners Stewards in G.R. No. 180771 impleaded as an unwilling co-petitioner former
President Gloria Macapagal-Arroyo for the following reasons, which we
quote:chanroblesvirtuallawlibrary
Her Excellency Gloria Macapagal-Arroyo, also of legal age, Filipino and resident of
Malacaang Palace, Manila Philippines. Steward Gloria Macapagal-Arroyo happens to be the
incumbent President of the Philippine Islands. She is personally impleaded in this suit as an
unwilling co-petitioner by reason of her express declaration and undertaking under the
recently signed ASEAN Charter to protect Your Petitioners' habitat, among others. She is
meantime dominated as an unwilling co-petitioner due to lack of material time in seeking her
signature and imprimatur hereof and due to possible legal complications that may hereafter
arise by reason of her official relations with public respondents under the alter ego principle in
political law.58cralawlawlibrary
This is incorrect.
Section 10, Rule 3 of the Rules of Court provides:chanroblesvirtuallawlibrary
Sec. 10. Unwilling co-plaintiff. - If the consent of any party who should be joined as plaintiff
can not be obtained, he may be made a defendant and the reason therefor shall be stated in
the complaint.
Under the foregoing rule, when the consent of a party who should be joined as a plaintiff
cannot be obtained, he or she may be made a party defendant to the case. This will put the
unwilling party under the jurisdiction of the Court, which can properly implead him or her
through its processes. The unwilling party's name cannot be simply included in a petition,
without his or her knowledge and consent, as such would be a denial of due process.
Moreover, the reason cited by the petitioners Stewards for including former President
Macapagal-Arroyo in their petition, is not sufficient to implead her as an unwilling co-petitioner.
Impleading the former President as an unwilling co-petitioner, for an act she made in the
performance of the functions of her office, is contrary to the public policy against embroiling
the President in suits, "to assure the exercise of Presidential duties and functions free from
any hindrance or distraction, considering that being the Chief Executive of the Government is
a job that, aside from requiring all of the office holder's time, also demands undivided
attention."59
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Therefore, former President Macapagal-Arroyo cannot be impleaded as one of the petitioners Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
in this suit. Thus, her name is stricken off the title of this case.chanRoblesvirtualLawlibrary mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna,
and other natural resources are owned by the State. With the exception of agricultural lands,
Main Issue: all other natural resources shall not be alienated. The exploration, development, and utilization
Legality of Service Contract No. 46 of natural resources shall be under the full control and supervision of the State. The State may
directly undertake such activities, or it may enter into co-production, joint venture, or
Service Contract No. 46 vis-a-vis production-sharing agreements with Filipino citizens, or corporations or associations at least
Section 2, Article XII of the sixty per centum of whose capital is owned by such citizens. Such agreements may be for a
1987 Constitution period not exceeding twenty-five years, renewable for not more than twenty-five years, and
under such terms and conditions as may be provided by law. In cases of water rights for
Petitioners maintain that SC-46 transgresses the Jura Regalia Provision or paragraph 1, irrigation, water supply, fisheries, or industrial uses other than the development of water
Section 2, Article XII of the 1987 Constitution because JAPEX is 100% Japanese- power, beneficial use may be the measure and limit of the grant.
owned.60 Furthermore, the FIDEC asserts that SC-46 cannot be considered as a technical and
financial assistance agreement validly executed under paragraph 4 of the same The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and
provision.61 The petitioners claim that La Bugal-B'laan Tribal Association, Inc. v. Ramos62 laid exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.
down the guidelines for a valid service contract, one of which is that there must exist a general
law for oil exploration before a service contract may be entered into by the Government. The The Congress may, by law, allow small-scale utilization of natural resources by Filipino
petitioners posit that the service contract in La Bugal is presumed to have complied with the citizens, as well as cooperative fish farming, with priority to subsistence fishermen and
requisites of (a) legislative enactment of a general law after the effectivity of the 1987 fishworkers in rivers, lakes, bays, and lagoons.
Constitution (such as Republic Act No. 7942, or the Philippine Mining Law of 1995, governing
mining contracts) and (b) presidential notification. The petitioners thus allege that the ruling The President may enter into agreements with foreign-owned corporations involving
in La Bugal, which involved mining contracts under Republic Act No. 7942, does not apply in either technical or financial assistance for large-scale exploration, development, and
this case.63 The petitioners also argue that Presidential Decree No. 87 or the Oil Exploration utilization of minerals, petroleum, and other mineral oils according to the general
and Development Act of 1972 cannot legally justify SC-46 as it is deemed to have been terms and conditions provided by law, based on real contributions to the economic
repealed by the 1987 Constitution and subsequent laws, which enunciate new policies growth and general welfare of the country. In such agreements, the State shall promote
concerning the environment.64 In addition, petitioners in G.R. No. 180771 claim that the development and use of local scientific and technical resources.
paragraphs 2 and 3 of Section 2, Article XII of the 1987 Constitution mandate the exclusive
use and enjoyment by the Filipinos of our natural resources, 65 and paragraph 4 does not The President shall notify the Congress of every contract entered into in accordance
speak of service contracts but of FTAAs or Financial Technical Assistance Agreements. 66 with this provision, within thirty days from its execution. (Emphases ours.)
This Court has previously settled the issue of whether service contracts are still allowed under
The public respondents again controvert the petitioners' claims and asseverate that SC-46 the 1987 Constitution. In La Bugal, we held that the deletion of the words "service contracts"
does not violate Section 2, Article XII of the 1987 Constitution. They hold that SC-46 does not in the 1987 Constitution did not amount to a ban on them per se. In fact, in that decision, we
fall under the coverage of paragraph 1 but instead, under paragraph 4 of Section 2, Article XII quoted in length, portions of the deliberations of the members of the Constitutional
of the 1987 Constitution on FTAAs. They also insist that paragraphs 2 and 3, which refer to Commission (ConCom) to show that in deliberating on paragraph 4, Section 2, Article XII, they
the grant of exclusive fishing right to Filipinos, are not applicable to SC-46 as the contract were actually referring to service contracts as understood in the 1973 Constitution, albeit with
does not grant exclusive fishing rights to JAPEX nor does it otherwise impinge on the FIDEC's safety measures to eliminate or minimize the abuses prevalent during the martial law regime,
right to preferential use of communal marine and fishing resources. 67 to wit:chanroblesvirtuallawlibrary
Summation of the ConCom Deliberations
Ruling of the Court
On the legality of Service Contract No. 46 At this point, we sum up the matters established, based on a careful reading of the ConCom
vis-a-vis Section 2, Article XII of the 1987 Constitution deliberations, as follows:

The petitioners insist that SC-46 is null and void for having violated Section 2, Article XII of the In their deliberations on what was to become paragraph 4, the framers used the term service
1987 Constitution, which reads as follows:chanroblesvirtuallawlibrary contracts in referring to agreements x x x involving either technical or financial assistance .
77

They spoke of service contracts as the concept was understood in the 1973 Constitution.
It was obvious from their discussions that they were not about to ban or eradicate service
contracts.
XII. The following are the safeguards this Court enumerated in La
Bugal:chanroblesvirtuallawlibrary
Such service contracts may be entered into only with respect to minerals, petroleum and other
mineral oils. The grant thereof is subject to several safeguards, among which are these
requirements:

Instead, they were plainly crafting provisions to put in place safeguards that would eliminate (1) The service contract shall be crafted in accordance with a general law that will set
or minimize the abuses prevalent during the marital law regime . In brief, they were going to standard or uniform terms, conditions and requirements, presumably to attain a certain
permit service contracts with foreign corporations as contractors, but with safety measures to uniformity in provisions and avoid the possible insertion of terms disadvantageous to the
prevent abuses, as an exception to the general norm established in the first paragraph of country.
Section 2 of Article XII. This provision reserves or limits to Filipino citizens and corporations at
least 60 percent of which is owned by such citizens the exploration, development and (2) The President shall be the signatory for the government because, supposedly before an
utilization of natural resources. agreement is presented to the President for signature, it will have been vetted several times
over at different levels to ensure that it conforms to law and can withstand public scrutiny.
This provision was prompted by the perceived insufficiency of Filipino capital and the felt need
for foreign investments in the EDU of minerals and petroleum resources. (3) Within thirty days of the executed agreement, the President shall report it to Congress to
give that branch of government an opportunity to look over the agreement and interpose
The framers for the most part debated about the sort of safeguards that would be considered timely objections, if any.69cralawlawlibrary
adequate and reasonable. But some of them, having more "radical" leanings, wanted to ban Adhering to the aforementioned guidelines, this Court finds that SC-46 is indeed null and void
service contracts altogether; for them, the provision would permit aliens to exploit and benefit for noncompliance with the requirements of the 1987 Constitution.
from the nation's natural resources, which they felt should be reserved only for Filipinos.
1. The General Law on Oil Exploration
In the explanation of their votes, the individual commissioners were heard by the entire body.
They sounded off their individual opinions, openly enunciated their philosophies, and The disposition, exploration, development, exploitation, and utilization of indigenous petroleum
supported or attacked the provisions with fervor. Everyone's viewpoint was heard. in the Philippines are governed by Presidential Decree No. 87 or the Oil Exploration and
Development Act of 1972. This was enacted by then President Ferdinand Marcos to promote
In the final voting, the Article on the National Economy and Patrimony including paragraph the discovery and production of indigenous petroleum through the utilization of government
4 allowing service contracts with foreign corporations as an exception to the general norm in and/or local or foreign private resources to yield the maximum benefit to the Filipino people
paragraph 1 of Section 2 of the same article was resoundingly approved by a vote of 32 to and the revenues to the Philippine Government. 70
7, with 2 abstentions.
Contrary to the petitioners' argument, Presidential Decree No. 87, although enacted in 1972,
Agreements Involving Technical Or Financial Assistance Are Service Contracts with before the adoption of the 1987 Constitution, remains to be a valid law unless otherwise
Safeguards repealed, to wit:chanroblesvirtuallawlibrary
ARTICLE XVIII - TRANSITORY PROVISIONS
From the foregoing, we are impelled to conclude that the phrase agreements involving either
technical or financial assistance, referred to in paragraph 4, are in fact service contracts. But Section 3. All existing laws, decrees, executive orders, proclamations, letters of instructions,
unlike those of the 1973 variety, the new ones are between foreign corporations acting as and other executive issuances not inconsistent with this Constitution shall remain operative
contractors on the one hand; and on the other, the government as principal or "owner" of the until amended, repealed, or revoked.
works. In the new service contracts, the foreign contractors provide capital, technology and If there were any intention to repeal Presidential Decree No. 87, it would have been done
technical know-how, and managerial expertise in the creation and operation of large-scale expressly by Congress. For instance, Republic Act No. 7160, more popularly known as the
mining/extractive enterprises; and the government, through its agencies (DENR, MGB), Local Government Code of 1991, expressly repealed a number of laws, including a specific
actively exercises control and supervision over the entire operation. 68cralawlawlibrary provision in Presidential Decree No. 87, viz.:chanroblesvirtuallawlibrary
In summarizing the matters discussed in the ConCom, we established that paragraph 4, SECTION 534. Repealing Clause. (a) Batas Pambansa Blg. 337, otherwise known as the
with the safeguards in place, is the exception to paragraph 1, Section 2 of Article "Local Government Code," Executive Order No. 112 (1987), and Executive Order No. 319
78
(1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions,
memoranda and issuances related to or concerning the barangay are hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund;
Section 3, a (3) and b (2) of Republic Act No. 5447 regarding the Special Education Fund;
Presidential Decree No. 144 as amended by Presidential Decree Nos. 559 and 1741;
Presidential Decree No. 231 as amended; Presidential Decree No. 436 as amended by
Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464, 477, 526, 632, 752,
and 1136 are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded
projects.
(e) The following provisions are hereby repealed or amended insofar as they are inconsistent
with the provisions of this Code: Sections 2, 16 and 29 of Presidential Decree No.
704; Section 12 of Presidential Decree No. 87 , as amended; Sections 52, 53, 66, 67, 68,
69, 70, 71, 72, 73, and 74 of Presidential Decree No. 463, as amended; and Section 16 of
Presidential Decree No. 972, as amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations
and administrative regulations, or part or parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified accordingly. (Emphasis supplied.)
This Court could not simply assume that while Presidential Decree No. 87 had not yet been
expressly repealed, it had been impliedly repealed. As we held in Villarea v. The Commission
on Audit,71 "[i]mplied repeals are not lightly presumed." It is a settled rule that when laws are in
conflict with one another, every effort must be exerted to reconcile them. In Republic of the
Philippines v. Marcopper Mining Corporation,72 we said:chanroblesvirtuallawlibrary
The two laws must be absolutely incompatible, and a clear finding thereof must surface,
before the inference of implied repeal may be drawn. The rule is expressed in the
maxim, interpretare et concordare leqibus est optimus interpretendi, i.e. , every statute must be
so interpreted and brought into accord with other laws as to form a uniform system of
jurisprudence. The fundament is that the legislature should be presumed to have known the
existing laws on the subject and not have enacted conflicting statutes. Hence, all doubts must
be resolved against any implied repeal, and all efforts should be exerted in order to harmonize
and give effect to all laws on the subject. (Citation omitted.)
Moreover, in cases where the statute seems to be in conflict with the Constitution, but a
construction that it is in harmony with the Constitution is also possible, that construction
should be preferred.73 This Court, in Pangandaman v. Commission on Elections 74 expounding
on this point, pronounced:chanroblesvirtuallawlibrary
It is a basic precept in statutory construction that a statute should be interpreted in harmony
with the Constitution and that the spirit, rather than the letter of the law determines its
construction; for that reason, a statute must be read according to its spirit and intent, x x x.
(Citation omitted.)
Consequently, we find no merit in petitioners' contention that SC-46 is prohibited on the
ground that there is no general law prescribing the standard or uniform terms, conditions, and
requirements for service contracts involving oil exploration and extraction.
But note must be made at this point that while Presidential Decree No. 87 may serve as the
general law upon which a service contract for petroleum exploration and extraction may be
authorized, as will be discussed below, the exploitation and utilization of this energy resource
in the present case may be allowed only through a law passed by Congress, since the Taon
Strait is a NIPAS75 area.
2. President was not the signatory to SC-46 and the same was not submitted to
Congress
While the Court finds that Presidential Decree No. 87 is sufficient to satisfy the requirement of
a general law, the absence of the two other conditions, that the President be a signatory to
SC-46, and that Congress be notified of such contract, renders it null and void.
As SC-46 was executed in 2004, its terms should have conformed not only to the provisions of
Presidential Decree No. 87, but also to those of the 1987 Constitution. The Civil Code
provides:chanroblesvirtuallawlibrary
ARTICLE 1306. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy. (Italics ours.)
In Heirs of San Miguel v. Court of Appeals,76 this Court held that:chanroblesvirtuallawlibrary
It is basic that the law is deemed written into every contract. Although a contract is the law
between the parties, the provisions of positive law which regulate contracts are deemed
written therein and shall limit and govern the relations between the parties, x x x. (Citations
omitted.)
Paragraph 4, Section 2, Article XII of the 1987 Constitution requires that the President himself
enter into any service contract for the exploration of petroleum. SC-46 appeared to have been
entered into and signed only by the DOE through its then Secretary, Vicente S. Perez, Jr.,
contrary to the said constitutional requirement. Moreover, public respondents have neither
shown nor alleged that Congress was subsequently notified of the execution of such contract.
Public respondents' implied argument that based on the "alter ego principle," their acts are
also that of then President Macapagal-Arroyo's, cannot apply in this case. In Joson v.
Torres,77 we explained the concept of the alter ego principle or the doctrine of qualified political
agency and its limit in this wise:chanroblesvirtuallawlibrary
Under this doctrine, which recognizes the establishment of a single executive, all executive
and administrative organizations are adjuncts of the Executive Department, the heads of the
various executive departments are assistants and agents of the Chief Executive, and, except
in cases where the Chief Executive is required by the Constitution or law to act in
79
person or the exigencies of the situation demand that he act personally , the
multifarious executive and administrative functions of the Chief Executive are performed by
and through the executive departments, and the acts of the Secretaries of such departments,
performed and promulgated in the regular course of business, are, unless disapproved or
reprobated by the Chief Executive presumptively the acts of the Chief Executive. (Emphasis
ours, citation omitted.)
While the requirements in executing service contracts in paragraph 4, Section 2 of Article XII
of the 1987 Constitution seem like mere formalities, they, in reality, take on a much bigger
role. As we have explained in La Bugal, they are the safeguards put in place by the framers of
the Constitution to "eliminate or minimize the abuses prevalent during the martial law
regime."78 Thus, they are not just mere formalities, which will only render a contract
unenforceable but not void, if not complied with. They are requirements placed, not just in an
ordinary statute, but in the fundamental law, the non-observance of which will nullify the
contract. Elucidating on the concept of a "constitution," this Court, in Manila Prince Hotel v.
Government Service Insurance System,79 held:chanroblesvirtuallawlibrary
A constitution is a system of fundamental laws for the governance and administration of a
nation. It is supreme, imperious, absolute and unalterable except by the authority from which it
emanates. It has been defined as the fundamental and paramount law of the nation . It
prescribes the permanent framework of a system of government, assigns to the different
departments their respective powers and duties, and establishes certain fixed principles on
which government is founded. The fundamental conception in other words is that it is a
supreme law to which all other laws must conform and in accordance with which all private
rights must be determined and all public authority administered. Under the doctrine of
constitutional supremacy, if a law or contract violates any norm of the constitution
that law or contract whether promulgated by the legislative or by the executive
branch or entered into by private persons for private purposes is null and void and
without any force and effect. Thus, since the Constitution is the fundamental, paramount
and supreme law of the nation, it is deemed written in every statute and contract . (Emphasis
ours.)
As this Court has held in La Bugal, our Constitution requires that the President himself be the
signatory of service agreements with foreign-owned corporations involving the exploration,
development, and utilization of our minerals, petroleum, and other mineral oils. This power
cannot be taken lightly.
In this case, the public respondents have failed to show that the President had any
participation in SC-46. Their argument that their acts are actually the acts of then President
Macapagal-Arroyo, absent proof of her disapproval, must fail as the requirement that the
President herself enter into these kinds of contracts is embodied not just in any ordinary
statute, but in the Constitution itself. These service contracts involving the exploitation,
development, and utilization of our natural resources are of paramount interest to the present
and future generations. Hence, safeguards were put in place to insure that the guidelines set
by law are meticulously observed and likewise to eradicate the corruption that may easily
penetrate departments and agencies by ensuring that the President has authorized or
approved of these service contracts herself.
Even under the provisions of Presidential Decree No. 87, it is required that the Petroleum
Board, now the DOE, obtain the President's approval for the execution of any contract under
said statute, as shown in the following provision:chanroblesvirtuallawlibrary
SECTION 5. Execution of contract authorized in this Act. - Every contract herein authorized
shall, subject to the approval of the President, be executed by the Petroleum Board created in
this Act, after due public notice pre-qualification and public bidding or concluded through
negotiations. In case bids are requested or if requested no bid is submitted or the bids
submitted are rejected by the Petroleum Board for being disadvantageous to the Government,
the contract may be concluded through negotiation.
In opening contract areas and in selecting the best offer for petroleum operations, any of the
following alternative procedures may be resorted to by the Petroleum Board, subject to prior
approval of the President [.]
Even if we were inclined to relax the requirement in La Bugal to harmonize the 1987
Constitution with the aforementioned provision of Presidential Decree No. 87, it must be
shown that the government agency or subordinate official has been authorized by the
President to enter into such service contract for the government. Otherwise, it should be at
least shown that the President subsequently approved of such contract explicitly. None of
these circumstances is evident in the case at bar.chanRoblesvirtualLawlibrary
Service Contract No. 46 vis-a-vis Other Laws
Petitioners in G.R. No. 180771 claim that SC-46 violates Section 27 of Republic Act. No. 9147
or the Wildlife Resources Conservation and Protection Act, which bans all marine exploration
and exploitation of oil and gas deposits. They also aver that Section 14 of Republic Act No.
7586 or the National Integrated Protected Areas System Act of 1992 (NIPAS Act), which
allows the exploration of protected areas for the purpose of information-gathering, has been
repealed by Section 27 of Republic Act No. 9147. The said petitioners further claim that SC-46
is anathema to Republic Act No. 8550 or the Philippine Fisheries Code of 1998, which
protects the rights of the fisherfolk in the preferential use of municipal waters, with the
exception being limited only to research and survey activities. 80
The FIDEC, for its part, argues that to avail of the exceptions under Section 14 of the NIPAS
Act, the gathering of information must be in accordance with a DENR-approved program, and
the exploitation and utilization of energy resources must be pursuant to a general law passed
by Congress expressly for that purpose. Since there is neither a DENR-approved program nor
a general law passed by Congress, the seismic surveys and oil drilling operations were all
done illegally.81 The FIDEC likewise contends that SC-46 infringes on its right to the
preferential use of the communal fishing waters as it is denied free access within the
prohibited zone, in violation not only of the Fisheries Code but also of the 1987 Constitutional
provisions on subsistence fisherfolk and social justice. 82 Furthermore, the FIDEC believes that
the provisions in Presidential Decree No. 87, which allow offshore drilling even in municipal
waters, should be deemed to have been rendered inoperative by the provisions of Republic
80
Act No. 8550 and Republic Act No. 7160, which reiterate the social justice provisions of the however, was subsequently abolished in 2002 by then President Gloria Macapagal-Arroyo, via
Constitution.83 Executive Order No. 72.88

The public respondents invoke the rules on statutory construction and argue that Section 14 of
the NIPAS Act is a more particular provision and cannot be deemed to have been repealed by
the more general prohibition in Section 27 of Republic Act No. 9147. They aver that Section
14, under which SC-46 falls, should instead be regarded as an exemption to Section 27. 84
Addressing the claim of petitioners in G.R. No. 180771 that there was a violation of Section 27
of Republic Act No. 9147, the public respondents assert that what the section prohibits is the
exploration of minerals, which as defined in the Philippine Mining Act of 1995, exclude energy
materials such as coal, petroleum, natural gas, radioactive materials and geothermal energy.
Thus, since SC-46 involves oil and gas exploration, Section 27 does not apply. 85
The public respondents defend the validity of SC-46 and insist that it does not grant exclusive
fishing rights to JAPEX; hence, it does not violate the rule on preferential use of municipal
waters. Moreover, they allege that JAPEX has not banned fishing in the project area, contrary
to the FIDEC's claim. The public respondents also contest the attribution of the declining fish
catch to the seismic surveys and aver that the allegation is unfounded. They claim that
according to the Bureau of Fisheries and Aquatic Resources' fish catch data, the reduced fish
catch started in the 1970s due to destructive fishing practices. 86
True to the constitutional policy that 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,"89 Congress enacted the NIPAS Act to secure the perpetual existence of all native
plants and animals through the establishment of a comprehensive system of integrated
protected areas. These areas possess common ecological values that were incorporated into
a holistic plan representative of our natural heritage. The system encompasses outstandingly
remarkable areas and biologically important public lands that are habitats of rare and
endangered species of plants and animals, biogeographic zones and related ecosystems,
whether terrestrial, wetland, or marine.90 It classifies and administers all the designated
protected areas to maintain essential ecological processes and life-support systems, to
preserve genetic diversity, to ensure sustainable use of resources found therein, and to
maintain their natural conditions to the greatest extent possible. 91 The following categories of
protected areas were established under the NIPAS Act:chanroblesvirtuallawlibrary
a. Strict nature reserve;
b. Natural park;

Ruling of the Court c. Natural monument;

On the legality of Service Contract No. 46 vis-a-vis Other Laws
d. Wildlife sanctuary;
Although we have already established above that SC-46 is null and void for being violative of
the 1987 Constitution, it is our duty to still rule on the legality of SC-46 vis-a-vis other pertinent e. Protected landscapes and seascapes;
laws, to serve as a guide for the Government when executing service contracts involving not
only the Taon Strait, but also other similar areas. While the petitioners allege that SC-46 is in f. Resource reserve;
violation of several laws, including international ones, their arguments focus primarily on the
protected status of the Taon Strait, thus this Court will concentrate on those laws that pertain
g. Natural biotic areas; and
particularly to the Taon Strait as a protected seascape.

The Taon Strait is a narrow passage of water bounded by the islands of Cebu in the East and h. Other categories established by law, conventions or international agreements which
Negros in the West. It harbors a rich biodiversity of marine life, including endangered species the Philippine Government is a signatory.92
of dolphins and whales. For this reason, former President Fidel V. Ramos declared the Taon
Strait as a protected seascape in 1998 by virtue of Proclamation No. 1234 - Declaring the Under Section 4 of the NIPAS Act, a protected area refers to portions of land and water, set
Taon Strait situated in the Provinces of Cebu, Negros Occidental and Negros Oriental as a aside due to their unique physical and biological significance, managed to enhance biological
Protected Area pursuant to the NIP AS Act and shall be known as Taon Strait Protected diversity and protected against human exploitation.
Seascape. During former President Joseph E. Estrada's time, he also constituted the Taon
Strait Commission via Executive Order No. 76 to ensure the optimum and sustained use of The Taon Strait, pursuant to Proclamation No. 1234, was set aside and declared a protected
the resources in that area without threatening its marine life. He followed this with Executive area under the category of Protected Seascape. The NIPAS Act defines a Protected
Order No. 177,87 wherein he included the mayor of Negros Occidental Municipality/City as a Seascape to be an area of national significance characterized by the harmonious interaction
member of the Taon Strait Commission, to represent the LGUs concerned. This Commission, of man and land while providing opportunities for public enjoyment through recreation and

81
tourism within the normal lifestyle and economic activity of this areas; 93 thus a management
plan for each area must be designed to protect and enhance the permanent preservation of its 3) Measures are undertaken to ensure that the exploration is being done with the least
natural conditions.94 Consistent with this endeavor is the requirement that an Environmental damage to surrounding areas.104
Impact Assessment (EIA) be made prior to undertaking any activity outside the scope of the
management plan. Unless an ECC under the EIA system is obtained, no activity inconsistent We do not agree with the arguments raised by the public respondents.
with the goals of the NIPAS Act shall be implemented. 95
Sections 12 and 14 of the NIPAS Act read:chanroblesvirtuallawlibrary
The Environmental Impact Statement System (EISS) was established in 1978 under SECTION 12. Environmental Impact Assessment. - Proposals for activities which are outside
Presidential Decree No. 1586. It prohibits any person, partnership or corporation from the scope of the management plan for protected areas shall be subject to an environmental
undertaking or operating any declared environmentally critical project or areas without first impact assessment as required by law before they are adopted, and the results thereof shall
securing an ECC issued by the President or his duly authorized representative. 96 Pursuant to be taken into consideration in the decision-making process.
the EISS, which called for the proper management of environmentally critical
areas,97 Proclamation No. 214698 was enacted, identifying the areas and types of projects to No actual implementation of such activities shall be allowed without the required
be considered as environmentally critical and within the scope of the EISS, while DENR Environmental Compliance Certificate (ECC) under the Philippine Environmental Impact
Administrative Order No. 2003-30 provided for its Implementing Rules and Regulations (IRR). Assessment (EIA) system. In instances where such activities are allowed to be undertaken,
the proponent shall plan and carry them out in such manner as will minimize any adverse
DENR Administrative Order No. 2003-30 defines an environmentally critical area as "an area effects and take preventive and remedial action when appropriate. The proponent shall be
delineated as environmentally sensitive such that significant environmental impacts are liable for any damage due to lack of caution or indiscretion.
expected if certain types of proposed projects or programs are located, developed, or
implemented in it";99 thus, before a project, which is "any activity, regardless of scale or SECTION 14. Survey for Energy Resources. - Consistent with the policies declared in
magnitude, which may have significant impact on the environment," 100 is undertaken in it, such Section 2 hereof, protected areas, except strict nature reserves and natural parks, may be
project must undergo an EIA to evaluate and predict the likely impacts of all its stages on the subjected to exploration only for the purpose of gathering information on energy resources
environment.101 An EIA is described in detail as follows:chanroblesvirtuallawlibrary and only if such activity is carried out with the least damage to surrounding areas. Surveys
h. Environmental Impact Assessment (EIA) - process that involves evaluating and predicting shall be conducted only in accordance with a program approved by the DENR, and the result
the likely impacts of a project (including cumulative impacts) on the environment during of such surveys shall be made available to the public and submitted to the President for
construction, commissioning, operation and abandonment. It also includes designing recommendation to Congress. Any exploitation and utilization of energy resources found
appropriate preventive, mitigating and enhancement measures addressing these within NIPAS areas shall be allowed only through a law passed by Congress.
consequences to protect the environment and the community's welfare. The process is It is true that the restrictions found under the NIPAS Act are not without exceptions.
undertaken by, among others, the project proponent and/or EIA Consultant, EMB, a However, while an exploration done for the purpose of surveying for energy
Review Committee, affected communities and other stakeholders. 102 resources is allowed under Section 14 of the NIPAS Act, this does not mean that it is
Under Proclamation No. 2146, the Taon Strait is an environmentally critical area, exempt from the requirement to undergo an EIA under Section 12 . In Sotto v.
having been declared as a protected area in 1998; therefore, any activity outside the Sotto,105 this Court explained why a statute should be construed as a
scope of its management plan may only be implemented pursuant to an ECC whole:chanroblesvirtuallawlibrary
secured after undergoing an EIA to determine the effects of such activity on its A statute is passed as a whole and not in parts or sections and is animated by one general
ecological system. purpose and intent. Consequently each part or section should be construed in connection with
every other part or section and so as to produce a harmonious whole. It is not proper to
The public respondents argue that they had complied with the procedures in obtaining an confine the attention to the one section to be construed. It is always an unsafe way of
ECC103 and that SC-46 falls under the exceptions in Section 14 of the NIPAS Act, due to the construing a statute or contract to divide it by a process of etymological dissection, into
following reasons: separate words, and then apply to each, thus separated from its context, some particular
definition given by lexicographers, and then reconstruct the instrument upon the basis of these
1) The Taon Strait is not a strict nature reserve or natural park; definitions. An instrument must always be construed as a whole, and the particular meaning to
be attached to any word or phrase is usually to be ascertained from the context, the nature of
2) Exploration is only for the purpose of gathering information on possible energy resources; the subject treated of and the purpose or intention of the parties who executed the contract, or
and of the body which enacted or framed the statute or constitution, x x x.
82
Surveying for energy resources under Section 14 is not an exemption from
complying with the EIA requirement in Section 12; instead, Section 14 provides
for additional requisites before any exploration for energy resources may be done in
protected areas.
The rationale for such additional requirements are incorporated in Section 2 of the NIPAS Act,
to wit:chanroblesvirtuallawlibrary
SECTION 2. Declaration of Policy - Cognizant of the profound impact of man's activities on all
components of the natural environment particularly the effect of increasing population,
resource exploitation and industrial advancement amd recognizing the critical importance of
protecting and maintaining the natural biological and physical diversities of the environment
notably on areas with biologically unique features to sustain human life and development, as
well as plant and animal life, it is hereby declared the policy of the State to secure for the
Filipino people of present and future generations the perpetual existence of all native plants
and animals through the establishment of a comprehensive system of integrated protected
areas within the classification of national park as provided for in the Constitution.
It is hereby recognized that these areas, although distinct in features, possess common
ecological values that may be incorporated into a holistic plan representative of our natural
heritage; that effective administration of this area is possible only through cooperation among
national government, local government and concerned private organizations; that the use and
enjoyment of these protected areas must be consistent with the principles of biological
diversity and sustainable development.
To this end, there is hereby established a National Integrated Protected Areas System
(NIPAS), which shall encompass outstandingly remarkable areas and biologically important
public lands that are habitats of rare and endangered species of plants and animals,
biogeographic zones and related ecosystems, whether terrestrial, wetland or marine, all of
which shall be designated as "protected areas."
The public respondents themselves admitted that JAPEX only started to secure an ECC prior
to the second sub-phase of SC-46, which required the drilling of an oil exploration well. This
means that when the seismic surveys were done in the Taon Strait, no such environmental
impact evaluation was done. Unless seismic surveys are part of the management plan of the
Taon Strait, such surveys were dona in violation of Section 12 of the NIPAS Act and Section
4 of Presidential Decree No. 1586, which provides:chanroblesvirtuallawlibrary
Section 4. Presidential Proclamation of Environmentally Critical Areas and Projects . - The
President of the Philippines may, on his own initiative or upon recommendation of the National
Environmental Protection Council, by proclamation declare certain projects, undertakings or
areas in the country as environmentally critical. No person, partnership or corporation shall
undertake or operate any such declared environmentally critical project or area without first
securing an Environmental Compliance Certificate issued by the President or his duly
authorized representative. For the proper management of said critical project or area, the
President may by his proclamation reorganize such government offices, agencies, institutions,
corporations or instrumentalities including the re-alignment of government personnel, and their
specific functions and responsibilities.
For the same purpose as above, the Ministry of Human Settlements shall: (a) prepare the
proper land or water use pattern for said critical project(s) or area(s); (b) establish ambient
environmental quality standards; (c) develop a program of environmental enhancement or
protective measures against calamitous factors such as earthquakes, floods, water erosion
and others, and (d) perform such other functions as may be directed by the President from
time to time.
The respondents' subsequent compliance with the EISS for the second sub-phase of SC-46
cannot and will not cure this violation. The following penalties are provided for under
Presidential Decree No. 1586 and the NIPAS Act.
Section 9 of Presidential Decree No. 1586 provides for the penalty involving violations of the
ECC requirement:chanroblesvirtuallawlibrary
Section 9. Penalty for Violation. - Any person, corporation or partnership found violating
Section 4 of this Decree, or the terms and conditions in the issuance of the Environmental
Compliance Certificate, or of the standards, rules and regulations issued by the National
Environmental Protection Council pursuant to this Decree shall be punished by
the suspension or cancellation of his/its certificates and/or a fine in an amount not to
exceed Fifty Thousand Pesos (P50,000.00) for every violation thereof, at the
discretion of the National Environmental Protection Council. (Emphasis supplied.)
Violations of the NIPAS Act entails the following fines and/or imprisonment under Section
21:chanroblesvirtuallawlibrary
SECTION 21. Penalties. - Whoever violates this Act or any rules and regulations issued by the
Department pursuant to this Act or whoever is found guilty by a competent court of justice of
any of the offenses in the preceding section shall be fined in the amount of not less than
Five thousand pesos (P5,000) nor more than Five hundred thousand pesos
(P500,000), exclusive of the value of the thing damaged or imprisonment for not less
than one (1) year but not more than six (6) years, or both, as determined by the
court: Provided, that, if the area requires rehabilitation or restoration as determined by
the court, the offender shall be required to restore or compensate for the restoration
to the damages: Provided, further, that court shall order the eviction of the offender from
the land and the forfeiture in favor of the Government of all minerals, timber or any
species collected or removed including all equipment, devices and firearms used in
connection therewith, and any construction or improvement made thereon by the
offender. If the offender is an association or corporation, the president or manager shall be
directly responsible for the act of his employees and laborers: Provided, finally, that the
DENR may impose administrative fines and penalties consistent with this Act .
(Emphases supplied.)
Moreover, SC-46 was not executed for the mere purpose of gathering information on the
possible energy resources in the Taon Strait as it also provides for the parties' rights and
obligations relating to extraction and petroleum production should oil in commercial quantities
be found to exist in the area. While Presidential Decree No. 87 may serve as the
general law upon which a service contract for petroleum exploration and extraction
83
may be authorized, the exploitation and utilization of this energy resource in the DECISION
present case may be allowed only through a law passed by Congress, since the
Taon Strait is a NIPAS area. 106Since there is no such law specifically allowing oil REYES, J.:
exploration and/or extraction in the Taon Strait, no energy resource exploitation
and utilization may be done in said protected seascape. Before this Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court. Petitioner Crisanta Alcaraz Miguel (Miguel) seeks the
In view of the foregoing premises and conclusions, it is no longer necessary to discuss the reversal and setting aside of the September 17, 2009 Decision [1] and
other issues raised in these consolidated petitions.cralawred February 11, 2010 Resolution [2] of the Court of Appeals (CA) in CA-G.R. SP
No. 100544, entitled Jerry D. Montanez v. Crisanta Alcaraz Miguel.
WHEREFORE, the Petitions in G.R. Nos. 180771 and 181527 are GRANTED, Service
Contract No. 46 is hereby declared NULL AND VOID for violating the 1987 Constitution, Antecedent Facts
Republic Act No. 7586, and Presidential Decree No. 1586.
On February 1, 2001, respondent Jerry Montanez (Montanez) secured a loan
SO ORDERED.chanroblesvirtuallawlibrary of One Hundred Forty-Three Thousand Eight Hundred Sixty-Four Pesos
(P143,864.00), payable in one (1) year, or until February 1, 2002, from the
petitioner. The respondent gave as collateral therefor his house and lot
located at Block 39 Lot 39 Phase 3, Palmera Spring,
Bagumbong, Caloocan City.

Due to the respondents failure to pay the loan, the petitioner filed a complaint
against the respondent before the Lupong Tagapamayapa of Barangay San
Jose, Rodriguez, Rizal. The parties entered into a Kasunduang Pag-
aayos wherein the respondent agreed to pay his loan in installments in the
amount of Two Thousand Pesos (P2,000.00) per month, and in the event the
house and lot given as collateral is sold, the respondent would settle the
balance of the loan in full. However, the respondent still failed to pay, and on
December 13, 2004, the Lupong Tagapamayapa issued a certification to file
CRISANTA ALCARAZ MIGUEL, G.R. No. 191336 action in court in favor of the petitioner.
Petitioner,
Present: On April 7, 2005, the petitioner filed before the Metropolitan Trial Court
(MeTC) of Makati City, Branch 66, a complaint for Collection of Sum of
CARPIO, J., Money. In his Answer with Counterclaim,[3] the respondent raised the defense
- versus - Chairperson, of improper venue considering that the petitioner was a resident of
PEREZ, Bagumbong, Caloocan City while he lived in San Mateo, Rizal.
SERENO,
REYES, and After trial, on August 16, 2006, the MeTC rendered a Decision, [4] which
PERLAS-BERNABE, disposes as follows:

JERRY D. MONTANEZ, Promulgated: WHEREFORE, premises considered[,] judgment is hereby rendered ordering
Respondent. defendant Jerry D. Montanez to pay plaintiff the following:
January 25, 2012
1. The amount of [Php147,893.00] representing the obligation with legal rate
x------------------------------------------------------------------------------------x of interest from February 1, 2002 which was the date of the loan maturity
until the account is fully paid;
84

2. The amount of Php10,000.00 as and by way of attorneys fees; and the
costs.
SO ORDERED. [5]
On appeal to the Regional Trial Court (RTC) of Makati City, Branch 146, the
respondent raised the same issues cited in his Answer. In its March 14, 2007
Decision,[6] the RTC affirmed the MeTC Decision, disposing as follows:
WHEREFORE, finding no cogent reason to disturb the findings of the court a
quo, the appeal is hereby DISMISSED, and the DECISION appealed from is
hereby AFFIRMED in its entirety for being in accordance with law and
evidence.
SO ORDERED.[7]
Dissatisfied, the respondent appealed to the CA raising two issues, namely,
(1) whether or not venue was improperly laid, and (2) whether or not
the Kasunduang Pag-aayos effectively novated the loan agreement. On
September 17, 2009, the CA rendered the assailed Decision, disposing as
follows:
WHEREFORE, premises considered, the petition is hereby GRANTED. The
appealed Decision dated March 14, 2007 of the Regional Trial Court (RTC)
of Makati City, Branch 146, is REVERSED and SET ASIDE. A new judgment
is entered dismissing respondents complaint for collection of sum of money,
without prejudice to her right to file the necessary action to enforce
the Kasunduang Pag-aayos.
SO ORDERED.[8]
Anent the issue of whether or not there is novation of the loan
contract, the CA ruled in the negative. It ratiocinated as follows:
Judging from the terms of the Kasunduang Pag-aayos, it is clear that no
novation of the old obligation has taken place. Contrary to petitioners
assertion, there was no reduction of the term or period originally stipulated.
The original period in the first agreement is one (1) year to be counted from
February 1, 2001, or until January 31, 2002. When the complaint was filed
before the barangay on February 2003, the period of the original agreement
had long expired without compliance on the part of petitioner. Hence, there
was nothing to reduce or extend. There was only a change in the terms of
payment which is not incompatible with the old agreement. In other words,
the Kasunduang Pag-aayos merely supplemented the old agreement.[9]
The CA went on saying that since the parties entered into a Kasunduang
Pag-aayos before the Lupon ng Barangay, such settlement has the force and
effect of a court judgment, which may be enforced by execution within six (6)
months from the date of settlement by the Lupon ng Barangay, or by court
action after the lapse of such time. [10] Considering that more than six (6)
months had elapsed from the date of settlement, the CA ruled that the
remedy of the petitioner was to file an action for the execution of
the Kasunduang Pag-aayos in court and not for collection of sum of money.
[11]
Consequently, the CA deemed it unnecessary to resolve the issue on
venue.[12]
The petitioner now comes to this Court.
Issues
(1) Whether or not a complaint for sum of money is the proper remedy for the
petitioner, notwithstanding the Kasunduang Pag-aayos;[13] and
(2) Whether or not the CA should have decided the case on the merits
rather than remand the case for the enforcement of the Kasunduang Pag-
aayos.[14]
Our Ruling
Because the respondent failed to comply with the terms of the Kasunduang
Pag-aayos, said agreement is deemed rescinded pursuant to Article 2041 of
the New Civil Code and the petitioner can insist on his original demand.
Perforce, the complaint for collection of sum of money is the proper remedy.
The petitioner contends that the CA erred in ruling that she should have
followed the procedure for enforcement of the amicable settlement as
provided in the Revised Katarungang Pambarangay Law, instead of filing a
collection case. The petitioner points out that the cause of action did not arise
from the Kasunduang Pag-aayos but on the respondents breach of the
original loan agreement.[15]
85
This Court agrees with the petitioner.
It is true that an amicable settlement reached at the barangay conciliation
proceedings, like the Kasunduang Pag-aayos in this case, is binding
between the contracting parties and, upon its perfection, is immediately
executory insofar as it is not contrary to law, good morals, good
customs, public order and public policy. [16] This is in accord with the broad
precept of Article 2037 of the Civil Code, viz:
A compromise has upon the parties the effect and authority of res judicata;
but there shall be no execution except in compliance with a judicial
compromise.
Being a by-product of mutual concessions and good faith of the parties, an
amicable settlement has the force and effect of res judicataeven if not
judicially approved.[17] It transcends being a mere contract binding only upon
the parties thereto, and is akin to a judgment that is subject to execution in
accordance with the Rules.[18] Thus, under Section 417 of the Local
Government Code,[19] such amicable settlement or arbitration award may be
enforced by execution by the Barangay Lupon within six (6) months from the
date of settlement, or by filing an action to enforce such settlement in the
appropriate city or municipal court, if beyond the six-month period.
Under the first remedy, the proceedings are covered by the Local
Government Code and the Katarungang Pambarangay Implementing Rules
and Regulations. The Punong Barangay is called upon during the hearing to
determine solely the fact of non-compliance of the terms of the settlement
and to give the defaulting party another chance at voluntarily complying with
his obligation under the settlement. Under the second remedy, the
proceedings are governed by the Rules of Court, as amended. The cause of
action is the amicable settlement itself, which, by operation of law, has the
force and effect of a final judgment.[20]
It must be emphasized, however, that enforcement by execution of the
amicable settlement, either under the first or the second remedy, is only
applicable if the contracting parties have not repudiated such settlement
within ten (10) days from the date thereof in accordance with Section 416 of
the Local Government Code. If the amicable settlement is repudiated by one
party, either expressly or impliedly, the other party has two options, namely,
to enforce the compromise in accordance with the Local Government Code
or Rules of Court as the case may be, or to consider it rescinded and insist
upon his original demand. This is in accord with Article 2041 of the Civil
Code, which qualifies the broad application of Article 2037, viz:
If one of the parties fails or refuses to abide by the compromise, the other
party may either enforce the compromise or regard it as rescinded and insist
upon his original demand.
In the case of Leonor v. Sycip,[21] the Supreme Court (SC) had the occasion
to explain this provision of law. It ruled that Article 2041 does not require an
action for rescission, and the aggrieved party, by the breach of compromise
agreement, may just consider it already rescinded, to wit:
It is worthy of notice, in this connection, that, unlike Article 2039 of the same
Code, which speaks of "a cause of annulment or rescission of the
compromise" and provides that "the compromise may be annulled or
rescinded" for the cause therein specified, thus suggesting an action for
annulment or rescission, said Article 2041 confers upon the party concerned,
not a "cause" for rescission, or the right to "demand" the rescission of a
compromise, but the authority, not only to "regard it as
rescinded", but, also, to "insist upon his original demand". The language of
this Article 2041, particularly when contrasted with that of Article 2039,
denotes that no action for rescission is required in said Article 2041, and that
the party aggrieved by the breach of a compromise agreement may, if he
chooses, bring the suit contemplated or involved in his original demand, as if
there had never been any compromise agreement, without bringing an action
for rescission thereof. He need not seek a judicial declaration of rescission,
for he may "regard" the compromise agreement already "rescinded".
[22]
(emphasis supplied)
As so well stated in the case of Chavez v. Court of Appeals,[23] a party's non-
compliance with the amicable settlement paved the way for the application of
Article 2041 under which the other party may either enforce the compromise,
following the procedure laid out in the Revised Katarungang Pambarangay
Law, or consider it as rescinded and insist upon his original demand. To
quote:
In the case at bar, the Revised Katarungang Pambarangay Law provides for
a two-tiered mode of enforcement of an amicable settlement, to wit: (a) by
execution by the Punong Barangay which is quasi-judicial and summary in
nature on mere motion of the party entitled thereto; and (b) an action in
regular form, which remedy is judicial. However, the mode of enforcement
does not rule out the right of rescission under Art. 2041 of the Civil Code. The
availability of the right of rescission is apparent from the wording of Sec. 417
itself which provides that the amicable settlement "may" be enforced by
86
execution by the lupon within six (6) months from its date or by action in the
appropriate city or municipal court, if beyond that period. The use of the word
"may" clearly makes the procedure provided in the Revised Katarungang
Pambarangay Law directory or merely optional in nature.
Thus, although the "Kasunduan" executed by petitioner and respondent
before the Office of the Barangay Captain had the force and effect of a final
judgment of a court, petitioner's non-compliance paved the way for the
application of Art. 2041 under which respondent may either enforce the
compromise, following the procedure laid out in the Revised Katarungang
Pambarangay Law, or regard it as rescinded and insist upon his original
demand. Respondent chose the latter option when he instituted Civil Case
No. 5139-V-97 for recovery of unrealized profits and reimbursement of
advance rentals, moral and exemplary damages, and attorney's fees.
Respondent was not limited to claiming P150,000.00 because although he
agreed to the amount in the "Kasunduan," it is axiomatic that a compromise
settlement is not an admission of liability but merely a recognition that there
is a dispute and an impending litigation which the parties hope to prevent by
making reciprocal concessions, adjusting their respective positions in the
hope of gaining balanced by the danger of losing. Under the "Kasunduan,"
respondent was only required to execute a waiver of all possible claims
arising from the lease contract if petitioner fully complies with his obligations
thereunder. It is undisputed that herein petitioner did not. [24] (emphasis
supplied and citations omitted)
In the instant case, the respondent did not comply with the terms and
conditions of the Kasunduang Pag-aayos. Such non-compliance may be
construed as repudiation because it denotes that the respondent did not
intend to be bound by the terms thereof, thereby negating the very purpose
for which it was executed. Perforce, the petitioner has the option either to
enforce the Kasunduang Pag-aayos, or to regard it as rescinded and insist
upon his original demand, in accordance with the provision of Article 2041 of
the Civil Code. Having instituted an action for collection of sum of money, the
petitioner obviously chose to rescind the Kasunduang Pag-aayos. As such, it
is error on the part of the CA to rule that enforcement by execution of said
agreement is the appropriate remedy under the circumstances.
Considering that the Kasunduang Pag-aayos is deemed rescinded by the
non-compliance of the respondent of the terms thereof, remanding the case
to the trial court for the enforcement of said agreement is clearly
unwarranted.
The petitioner avers that the CA erred in remanding the case to the
trial court for the enforcement of the Kasunduang Pag-aayos as it prolonged
the process, thereby putting off the case in an indefinite pendency. [25] Thus,
the petitioner insists that she should be allowed to ventilate her rights before
this Court and not to repeat the same proceedings just to comply with the
enforcement of the Kasunduang Pag-aayos, in order to finally enforce her
right to payment.[26]
The CA took off on the wrong premise that enforcement of the Kasunduang
Pag-aayos is the proper remedy, and therefore erred in its conclusion that
the case should be remanded to the trial court. The fact that the petitioner
opted to rescind the Kasunduang Pag-aayos means that she is insisting
upon the undertaking of the respondent under the original loan contract.
Thus, the CA should have decided the case on the merits, as an appeal
before it, and not prolong the determination of the issues by remanding it to
the trial court. Pertinently, evidence abounds that the respondent has failed
to comply with his loan obligation. In fact, the Kasunduang Pag-aayos is the
well nigh incontrovertible proof of the respondents indebtedness with the
petitioner as it was executed precisely to give the respondent a second
chance to make good on his undertaking. And since the respondent still
reneged in paying his indebtedness, justice demands that he must be held
answerable therefor.
WHEREFORE, the petition is GRANTED. The assailed decision of the Court
of Appeals is SET ASIDE and the Decision of the Regional Trial Court,
Branch 146, Makati City, dated March 14, 2007 is REINSTATED.
SO ORDERED.
87
 At around three oclock to four oclock in the afternoon of June 12, 2001,
while the petitioner and his daughter Erlinda Sabay (Erlinda) were busy
laying wood and water pipes in the yard of Godofredo Lopez (Godofredo),
the latter confronted the petitioner about his (the petitioners) alleged
intrusion into Godofredos property. A verbal altercation ensued between
them.

In the course of the verbal exchange, Erlinda hit Godofredo on the head with
a hard object. The petitioner joined in by throwing a stone at Godofredos
face, breaking the latters eyeglasses. Godofredo claimed that as a result,
he felt dizzy.5 The petitioner and Erlinda then shouted at Godofredo and
threatened to kill him.

Immediately thereafter, Jervie Lopez (Jervie) came and pacified the three.
But in the course his efforts, he was hit in the hand with a bolo. 6 The
neighbors intervened not long after and pacified the parties.

The Medico Legal Certificates7 dated June 12, 2001 showed that Godofredo
suffered a contusion on the left parietal area of his head and an abrasion in
his left cheek, while Jervie sustained a wound in his right palm.

On June 13, 2001, Godofredo and Jervie filed a complaint against the
G.R. No. 192150, October 01, 2014 petitioner before the barangay.8 The parties agreed to settle the complaint
based on the recommendation of the building inspector and reflected their
agreement in their Kasunduang Pag-aayos9 (Kasunduan) dated June 20,
FEDERICO SABAY, Petitioner, v. PEOPLE OF THE
2001. The Kasunduan, however, was not implemented because the building
PHILIPPINES, Respondent.
inspector failed to make the promised recommendation to resolve the
boundary dispute between the parties.10 Thus, the Office of
DECISION the Barangay Captain issued a Certificate to File an Action.

BRION, J.: The petitioner was accordingly charged before the MTC with the crime of
Physical Injuries under two (2) Informations 11 that
We review in this petition for review on certiorari1 the decision2 dated October read:chanRoblesvirtualLawlibrary
23, 2009 and the resolution 3 dated March 22, 2010 of the Court of Appeals
(CA) in CA- G.R. CR No. 31532. Criminal Case No. 209934

The CA affirmed the April 28, 2008 decision 4 of the Regional Trial Court
(RTC) of Caloocan City, Branch 126, finding petitioner Federico Sabay guilty
beyond reasonable doubt for two (2) counts of Slight Physical Injuries. The
RTC decision in turn affirmed the Metropolitan Trial Courts (MTC) judgment.
The Antecedent Facts
That on or about the 12th day of June 2001, in Caloocan City, Metro Manila
and within the jurisdiction of this Honorable Court, the above-named
accused, without justifiable cause, did then and there willfully, unlawfully and
feloniously hit with a bolo one JERVIE LOPEZ, thereby inflicting upon the
latter physical injuries which required and will require medical attendance for
not more than seven (7) days or incapacitated or will incapacitate said victim
88
from performing his habitual work for the same period of time.
CONTRARY TO LAW.
Criminal Case No. 209935
That on or about the 12th day of June 2001, in Caloocan City, Metro Manila
and within the jurisdiction of this Honorable Court, the above-named
accused, without justifiable cause, did then and there willfully, unlawfully and
feloniously hit with a bolo one GODOFREDO LOPEZ, thereby inflicting upon
the latter physical injuries which required and will require medical attendance
for not more than seven (7) days or incapacitated or will incapacitate said
victim from performing his habitual work for the same period of time.
CONTRARY TO LAW.
The petitioner, together with his daughter Erlinda, was also charged with
Light Threats12 for allegedly uttering threatening words against the private
complainant, Godofredo.
When arraigned, both accused pleaded not guilty to all the charges. Trial on
the merits thereafter ensued.
At the trial, the prosecution presented the following eyewitnesses: Rodolfo
Lata, Sr. y Dolping (Rodolfo) and Dina Perez y Alapaap (Dina) (who both
testified on the details of the crime); Godofredo; Jervie; and Dr. Melissa
Palugod (Godofredos attending physician). The defense, on the other hand,
presented the petitioner, Wilfredo Verdad and Caridad Sabay.
The petitioner denied the charge and claimed that he had simply acted in
self-defense. He narrated that on the date of the incident while he was
putting a monument on his lot, Godofredo suddenly hit him with an iron bar in
his right hand, causing him injuries. Jesus Lopez (Jessie), Godofredos son,
went out of their house and with a .38 caliber gun, fired the gun at him. To
defend himself, he got a stone and threw it at Godofredo.
The MTCs and the RTCs Rulings
In its decision, MTC believed the prosecution's version of the incident and
found the petitioner guilty beyond reasonable doubt of two (2) counts of slight
physical injuries. The MTC, however, dismissed the light threats charged, as
this offense is deemed absorbed in the crime of slight physical injuries.
Further, it absolved Erlinda for the crime of light threats as there was no
allegation that she uttered threatening words against Godofredo.
The MTC rejected the petitioners claim of self-defense for lack of clear,
convincing and satisfactory supporting evidence. The MTC held that the
petitioner failed to prove that there had been unlawful aggression by
Godofredo; he did not even present the medical certificate of his injury as
evidence. The dispositive part of its decision
reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, accused Federico Sabay y Bactol is
found guilty beyond reasonable doubt for two (2) counts of Slight Physical
Injuries and is meted a penalty of imprisonment of Eleven (11) Days for each
count as there is neither mitigating nor aggravating circumstance.
SO ORDERED.
In due course, the petitioner appealed his judgment to the RTC, which fully
affirmed the MTCs decision.
The petitioner sought recourse with the CA, arguing in this appeal that: (1)
the MTC has no jurisdiction over the case in view of the prosecutions failure
to offer the Certification to File an Action in evidence; and (2) the trial court
erred in not sustaining his claim of self-defense.
The CAs Ruling
The CA rejected the petitioners arguments and affirmed the RTCs decision.
The CA held that even if there had been no formal offer of exhibit pursuant to
Section 34, Rule 132 of the Rules on Evidence, the Certification to File an
Action could still be admitted against the adverse party if, first, it has been
duly identified by testimony duly recorded and, second, it has been
incorporated into the records of the case. Noting that the Certification to File
an Action was identified by the complainants and is attached to the records of
the case, the CA ruled that an exception to Section 34, Rule 132 of the Rules
on Evidence could be recognized.
The CA also dismissed the petitioners plea of self-defense. The CA ruled
that self-defense is essentially a factual matter that is best addressed by the
trial court; in the absence of any showing that both the MTC and the RTC
overlooked weighty and substantial facts or circumstances that could alter
their conclusion, the appellate court saw no reason to disturb their factual
ruling.
On March 22, 2010, the CA denied the petitioners motion for
reconsideration; hence, the present petition.
89
The Issues case was conditioned on the recommendation of the building inspector; with
no recommendation, no resolution of the conflict likewise took place.
On the basis of the same arguments raised before the CA, the petitioner
questions: (1) the jurisdiction of the MTC over the criminal cases in view of Furthermore, the Barangay Captain, as a public official, is presumed to act
the alleged inadmissibility of the Certification to File Action; and (2) the lower regularly in the performance of official duty.13 In the absence of contrary
courts finding of guilt, its appreciation of the evidence and its rejection of the evidence, this presumption prevails; his issuance of the disputed Certification
claim of self-defense. to File an Action was regular and pursuant to law. 14 Thus,
the Barangay Captain properly issued the Certification to File an Action.
The Courts Ruling
Even granting that an irregularity had intervened in the Barangay Captains
We find no reversible error committed by the CA and affirm the petitioners issuance of the Certification to File and Action, we note that this irregularity is
conviction for two counts of slight physical injuries. not a jurisdictional flaw that warrants the dismissal of the criminal cases
before the MTC. As we held in Diu v. Court of Appeals:15cralawred
On the first issue, the petitioner contends that the lower courts erred in
disregarding the existence of the Kasunduan executed by the parties before Also, the conciliation procedure under Presidential Decree No. 1508 is not a
the Lupon. This existing settlement between the parties rendered the jurisdictional requirement and non-compliance therewith cannot affect the
Certification to File an Action without factual and legal basis, and is hence jurisdiction which the lower courts had already acquired over the subject
null and void. The petitioner also contends that the CA erred in not holding matter and private respondents as defendants therein.
that the MTC has no jurisdiction over the criminal cases in view of the non-
compliance (i.e., issuance of the Certification to File an Action despite the Similarly, in Garces v. Court of Appeals, 16 we stated
existence of an agreement) with conciliation procedures under Presidential that:chanRoblesvirtualLawlibrary
Decree No. 1508.
In fine, we have held in the past that prior recourse to the conciliation
We see no merit in these contentions. procedure required under P.D. 1508 is not a jurisdictional requirement, non-
compliance with which would deprive a court of its jurisdiction either over the
The Office of the Barangay Captain Cannot subject matter or over the person of the defendant.
be Precluded From Issuing a Certification to
File an Action Where No Actual Settlement Thus, the MTC has jurisdiction to try and hear the petitioners case; the
Was Reached; the Certification to File an Action claimed irregularity in conciliation procedure, particularly in the issuance of
Issued by The Office of The Barangay is Valid. the Certification to File an Action, did not deprive the court of its jurisdiction.
If at all, the irregularity merely affected the parties cause of
The present case was indisputably referred to the Barangay Lupon for action.17cralawred
conciliation prior to the institution of the criminal cases before the MTC. The
parties in fact admitted that a meeting before the Lupontranspired between The petitioner next contends that even if there was a valid Certification to File
them, resulting in a Kasunduan. an Action, the lower courts still erred in admitting the Certificate into evidence
as the prosecution did not formally offer it as required by the Rules on
Although they initially agreed to settle their case, the Kasunduan that Evidence. He emphasizes that in Fideldia v. Sps. Mulato,18 the Court held
embodied their agreement was never implemented; no actual settlement that a formal offer is necessary because judges are required to base their
materialized as the building inspector failed to make his promised findings solely upon evidence offered by the parties. In the absence of a
recommendation to settle the dispute. The Barangay Captain was thus formal offer, the Certification is not admissible pursuant to Section 412 of
compelled to issue a Certification to File an Action, indicating that the Republic Act No. 7160, and cannot be considered by the court.
disputing parties did not reach any settlement.
We do not find this argument sufficiently persuasive.
The CA correctly observed and considered the situation: the settlement of the
90
The Certification to File an Action is Admissible. conclusions of the RTC, especially when affirmed by the CA as in this case,
are entitled to great weight and respect and are deemed final and conclusive
Section 34 of Rule 132 of our Rules on Evidence provides that the court on this Court when supported by the evidence on record. 26cralawred
cannot consider any evidence that has not been formally offered. 19 Formal
offer means that the offering party shall inform the court of the purpose of In the absence of any indication that the trial and the appellate courts
introducing its exhibits into evidence, to assist the court in ruling on their overlooked facts or circumstances that would result in a different ruling in this
admissibility in case the adverse party objects. 20 Without a formal offer of case, we will not disturb their factual findings. 27cralawred
evidence, courts cannot take notice of this evidence even if this has been
previously marked and identified. We thus uphold the rulings of the RTC and the CA which found the elements
of the crime of slight physical injuries fully established during the trial. The
This rule, however, admits of an exception. The Court, in the appropriate RTC and the CA correctly rejected the petitioners claim of self-defense
cases, has relaxed the formal-offer rule and allowed evidence not formally because he did not substantiate it with clear and convincing proof.
offered to be admitted.
Self-defense as a justifying circumstance under Article 11 of the Revised
The cases of People v. Napat-a,21People v. Mate,22 and The Heirs of Romana Penal Code, as amended, implies the admission by the accused that he
Saves, et al. v. The Heirs of Escolastico Saves, et al.,23 to cite a few, committed the acts that would have been criminal in character had it not
enumerated the requirements so that evidence, not previously offered, can been for the presence of circumstances whose legal consequences negate
be admitted, namely: first, the evidence must have been duly identified by the commission of a crime.28 The plea of self-defense in order to exculpate
testimony duly recorded and, second, the evidence must have been the accused must be duly proven. The most basic rule is that no self-
incorporated in the records of the case. defense can be recognized until unlawful aggression is
established.29cralawred
In the present case, we find that the requisites for the relaxation of the
formal-offer rule are present. As the lower courts correctly observed, Since the accused alleges self-defense, he carries the burden of evidence to
Godofredo identified the Certification to File an Action during his cross- prove that he satisfied the elements required by law; 30 he who alleges must
examination, to wit: 24cralawred prove. By admitting the commission of the act charged and pleading
avoidance based on the law, he must rely on the strength of his own
Q: And Im referring to you this Certification from the Office of the Brgy. evidence to prove that the facts that the legal avoidance requires are
docketed as 181-01, is this the one you are referring to? present; the weakness of the prosecutions evidence is immaterial after he
A: This is with respect to the hitting of my head. admitted the commission of the act charged.31cralawred
Atty. At this juncture, your Honor, we would like to request that this
Bihag: particular certification referring to the case 181-01 entitled Mr. In this case, the petitioner admitted the acts attributed to him, and only
Godofredo Lopez, Mr. Jervie Lopez versus Mr. Federico Sabay pleads that he acted in self-defense. His case essentially rests on the
and Mrs. Erlinda Castro, be marked as Exh. 1 for the defense. existence of unlawful aggression that Godofredo hit him with an iron bar on
[TSN, Godofredo Lopez, page 119; emphasis ours.] his right hand.

Although the Certification was not formally offered in evidence, it was marked As the RTC and the CA pointed out, the petitioner failed to substantiate his
as Exhibit 1 and attached to the records of the case. 25 Significantly, the claimed self-defense because he did not even present any medical certificate
petitioner never objected to Godofredos testimony, particularly with the as supporting evidence, notwithstanding his claim that he consulted a doctor.
identification and marking of the Certification. In these lights, the Court sees Nor did he ever present the doctor he allegedly consulted.
no reason why the Certification should not be admitted.
His contention, too, that he was attacked by Godofredo and was shot with a .
The Claim of Self-Defense 38 caliber gun by Jessie was refuted by the prosecution eyewitnesses
Rodolfo and Dina who both testified that it was the petitioner who had
On the claim of self-defense, we recognize that the factual findings and attacked Godofredo.
91
 Petitioners asseverated that while they worked under the direct control of
The prosecution eyewitnesses testimonies were supported by the medico supervisors assigned by TACOR and DFI, these companies used different
legal certificates showing that Godofredo sustained a contusion on the left schemes to make it appear that petitioners were hired through independent
parietal area of his head and an abrasion on his left cheek. These medico contractors, including individuals, unregistered associations, and
legal findings are consistent with Godofredos claim that the petitioner hit him cooperatives; that the successive changes in the names of their employers
and inflicted physical injuries. notwithstanding, they continued to perform the same work under the direct
control of TACOR and DFI supervisors; and that under the last scheme
In sum, we are fully satisfied that the petitioner is guilty beyond reasonable adopted by these companies, the nominal individual contractors were
doubt of two (2) counts of slight physical injuries, as the lower courts found. required to, as they did, join a cooperative and thus became members of
His claim of self-defense fails for lack of supporting evidence; he failed to respondent Bobongon Banana Growers Multi-purpose Cooperative (the
present any evidence of unlawful aggression and cannot thus be said to have Cooperative).2
hit Godofredo as a measure to defend himself. Continued petitioners: Sometime in 2000, above-named respondents began
utilizing harassment tactics to ease them out of their jobs. Without first
WHEREFORE, premises considered, we DENY the appeal and AFFIRM the seeking the approval of the Department of Labor and Employment (DOLE),
decision dated October 23, 2009 and the resolution dated March 22, 2010 of they changed their compensation package from being based on a daily rate
the Court of Appeals in CA- G.R. CR No. 31532. to a pakyawan rate that depended on the combined productivity of the
"gangs" they had been grouped into. Soon thereafter, they stopped paying
SO ORDERED. their salaries, prompting them to stop working.3
One after another, three separate complaints for illegal dismissal were filed
by petitioners, individually and collectively, with the National Labor Relations
Commission (NLRC) against said respondents including respondent Dole
Asia Philippines as it then supposedly owned TACOR, 4 for unpaid salaries,
overtime pay, 13th month pay, service incentive leave pay, damages, and
G.R. No. 164205 September 3, 2009 attorneys fees.5
OLDARICO S. TRAVEO, ROVEL A. GENELSA, RUEL U. VILLARMENTE, DFI answered for itself and TACOR, which it claimed had been merged with it
ALFREDO A. PANILAGAO, CARMEN P. DANILA, ELIZABETH B. and ceased to exist as a corporation. Denying that it had engaged the
MACALINO, RAMIL P. ALBITO, REYNALDO A. LADRILLO, LUCAS G. services of petitioners,6 DFI alleged that during the corporate lifetime of
TAMAYO, DIOSDADO A. AMORIN, RODINO C. VASQUEZ, GLORIA A. TACOR, it had an arrangement with several landowners in Santo Tomas,
FELICANO, NOLE E. FERMILAN, JOSELITO B. RENDON, CRISTETA D. Davao Del Norte whereby TACOR was to extend financial and technical
CAA, EVELYN D. ARCENAL and JEORGE M. NONO, Petitioners, assistance to them for the development of their lands into a banana
vs. plantation on the condition that the bananas produced therein would be sold
BOBONGON BANANA GROWERS MULTI-PURPOSE COOPERATIVE, exclusively to TACOR; that the landowners worked on their own farms and
TIMOG AGRICULTURAL CORPORATION, DIAMOND FARMS, INC., and hired laborers to assist them; that the landowners themselves decided to
DOLE ASIA PHILIPPINES, Respondents. form a cooperative in order to better attain their business objectives; and that
D E C I S I O N CARPIO MORALES, J.: it was not in a position to state whether petitioners were working on the
By the account of petitioner Oldarico Traveo and his 16 co-petitioners, in banana plantation of the landowners who had contracted with TACOR. 7a1f
1992, respondent Timog Agricultural Corporation (TACOR) and respondent The Cooperative failed to file a position paper despite due notice, prompting
Diamond Farms, Inc. (DFI) hired them to work at a banana plantation at the Labor Arbiter to consider it to have waived its right to adduce evidence in
Bobongon, Santo Tomas, Davao Del Norte which covered lands previously its defense.
planted with rice and corn but whose owners had agreed to convert into a Nothing was heard from respondent Dole Asia Philippines.
banana plantation upon being convinced that TACOR and DFI could provide By consolidated Decision dated October 30, 2002, 8 the Labor Arbiter, found
the needed capital, expertise, and equipment. Petitioners helped prepare the respondent Cooperative guilty of illegal dismissal. It dropped the complaints
lands for the planting of banana suckers and eventually carried out the against DFI, TACOR and Dole Asia Philippines. Thus it disposed:
planting as well.1 WHEREFORE, judgment is hereby rendered:
92
1. Declaring respondent Bobongon Banana Growers Multi-
purpose Cooperative guilty of illegal dismissal;
2. Ordering respondent Bobongon Banana Growers Multi-purpose
Cooperative to pay complainants full backwages from the time of their illegal
dismissal up to this promulgation, to be determined during the execution
stage;
3. Ordering respondent Bobongon Banana Growers Multi-purpose
Cooperative to reinstate complainants to their former positions without loss of
seniority rights and if not possible, to pay them separation pay equivalent to
1/2 month pay for every year of service;
4. Ordering respondent Bobongon Banana Grower Cooperative [sic] to pay
10% of the total award as Attorneys fees;
5. All other respondents are hereby dropped as party-respondents for lack of
merit. (Underscoring supplied)
In finding for petitioners, the Labor Arbiter relied heavily on the following
Orders submitted by DFI which were issued in an earlier case filed with the
DOLE, viz: (1) Order dated July 11, 1995 of the Director of DOLE Regional
Office No. XI declaring the Cooperative as the employer of the 341 workers
in the farms of its several members; (2) Order dated December 17, 1997
of the DOLE Secretary affirming the Order dated July 11, 1995 of the Director
of DOLE Regional Office No. XI; and (3) Order dated June 23, 1998 of the
DOLE Secretary denying the Cooperatives Motion for Reconsideration.
On partial appeal to the NLRC, petitioners questioned the Labor Arbiters
denial of their money claims and the dropping of their complaints against
TACOR, DFI, and Dole Asia Philippines.
By Resolution dated July 30, 2003, 9 the NLRC sustained the Labor Arbiters
ruling that the employer of petitioners is the Cooperative, there being no
showing that the earlier mentioned Orders of the DOLE Secretary had been
set aside by a court of competent jurisdiction. It partially granted petitioners
appeal, however, by ordering the Cooperative to pay them their unpaid
wages, wage differentials, service incentive leave pay, and 13th month pay. It
thus remanded the case to the Labor Arbiter for computation of those
awards. Their Motion for Reconsideration having been denied by Resolution
of September 30, 2003,10 petitioners appealed to the Court of Appeals via
certiorari.11 By Resolution dated February 20, 2004, 12 the appellate court
dismissed petitioners petition for certiorari on the ground that the
accompanying verification and certification against forum shopping was
defective, it having been signed by only 19 of the 22 therein named
petitioners. Their Motion for Reconsideration having been denied by
Resolution of May 13, 2004,13 petitioners lodged the present Petition for
Review on Certiorari.
Petitioners posit that the appellate court erred in dismissing their petition on a
mere technicality as it should have, at most, dismissed the petition only with
respect to the non-signing petitioners. Dwelling on the merits of the case,
petitioners posit that the Labor Arbiter and the NLRC disregarded evidence
on record showing that while the Cooperative was their employer on paper,
the other respondents exercised control and supervision over them; that the
Cooperative was a labor-only contractor; and that the Orders of the DOLE
Secretary relied upon by the Labor Arbiter and the NLRC are not applicable
to them as the same pertained to a certification election case involving
different parties and issues.14DFI, commenting for itself and TACOR,
maintains that, among other things, it was not the employer of petitioners;
and that it cannot comment on their money claims because no evidence was
submitted in support thereof.15 It appears that respondent Cooperative had
been dissolved.16 As respondent Dole Asia Philippines failed to file a
comment, the Court, by Resolution of November 29, 2006, 17required it to (1)
show cause why it should not be held in contempt for its failure to heed the
Courts directive, and (2) file the required comment, within 10 days from
notice. Dole Philippines, Inc. (DPI) promptly filed an Urgent
Manifestation18 stating that, among other things, while its division located in
Davao City received the Courts Resolution directing Dole Asia Philippines to
file a comment on the present petition, DPI did not file a comment as the
directive was addressed to "Dole Asia Philippines", an entity which is not
registered at the Securities and Exchange Commission.
Commenting on DPIs Urgent Manifestation, petitioners contend that DPI
cannot be allowed to take advantage of their lack of knowledge as to its
exact corporate name, DPI having raised the matter for the first time before
this Court notwithstanding its receipt of all pleadings and court processes
from the inception of this case.19
Upon review of the records, the Court finds that DPI never ever participated
in the proceedings despite due notice. Its posturing, therefore, that the court
processes it received were addressed to "Dole Asia Philippines," a non-
existent entity, does not lie. That DPI is the intended respondent, there is no
doubt.
Respecting the appellate courts dismissal of petitioners appeal due to the
failure of some of them to sign the therein accompanying verification and
certification against forum-shopping, the Courts guidelines for the bench and
bar in Altres v. Empleo,20 which were culled "from jurisprudential
pronouncements," are instructive:
For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements already reflected above respecting non-
compliance with the requirements on, or submission of defective, verification
and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement
on or submission of defective verification, and non-compliance with the
requirement on or submission of defective certification against forum
shopping.
93
2) As to verification, non-compliance therewith or a defect therein does not
necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending
circumstances are such that strict compliance with the Rule may be
dispensed with in order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has
ample knowledge to swear to the truth of the allegations in the complaint or
petition signs the verification, and when matters alleged in the petition have
been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a
defect therein, unlike in verification, is generally not curable by its
subsequent submission or correction thereof, unless there is a need to relax
the Rule on the ground of "substantial compliance" or presence of "special
circumstances or compelling reasons."
5) The certification against forum shopping must be signed by all the plaintiffs
or petitioners in a case; otherwise, those who did not sign will be dropped as
parties to the case. Under reasonable or justifiable circumstances, however,
as when all the plaintiffs or petitioners share a common interest and invoke a
common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the
party-pleader, not by his counsel. If, however, for reasonable or justifiable
reasons, the party-pleader is unable to sign, he must execute a Special
Power of Attorney designating his counsel of record to sign on his behalf.
(Emphasis and underscoring supplied)
The foregoing restated pronouncements were lost in the challenged
Resolutions of the appellate court. Petitioners contention that the appellate
court should have dismissed the petition only as to the non-signing
petitioners or merely dropped them as parties to the case is thus in order.
Instead of remanding the case to the appellate court, however, the Court
deems it more practical to decide the substantive issue raised in this petition
so as not to further delay the disposition of this case. 21 And it thus resolves to
deviate as well from the general rule that factual questions are not
entertained in petitions for review on certiorari of the appellate courts
decisions in order to write finis to this protracted litigation.
The sole issue is whether DFI (with which TACOR had been merged) and
DPI should be held solidarily liable with the Cooperative for petitioners illegal
dismissal and money claims.
The Labor Code and its Implementing Rules empower the Labor Arbiter to be
the trier of facts in labor cases. 22Much reliance is thus placed on the Arbiters
findings of fact, having had the opportunity to discuss with the parties and
their witnesses the factual matters of the case during the conciliation
phase.23 Just the same, a review of the records of the present case does not
warrant a conclusion different from the Arbiters, as affirmed by the NLRC,
that the Cooperative is the employer of petitioners.
To be sure, the matter of whether the Cooperative is an independent
contractor or a labor-only contractor may not be used to predicate a ruling in
this case. Job contracting or subcontracting refers to an arrangement
whereby a principal agrees to farm out with a contractor or subcontractor the
performance of a specific job, work or service within a definite or
predetermined period, regardless of whether such job, work or service is to
be performed or completed within or outside the premises of the
principal.24 The present case does not involve such an arrangement.
DFI did not farm out to the Cooperative the performance of a specific job,
work, or service. Instead, it entered into a Banana Production and Purchase
Agreement25 (Contract) with the Cooperative, under which the Cooperative
would handle and fund the production of bananas and operation of the
plantation covering lands owned by its members in consideration of DFIs
commitment to provide financial and technical assistance as needed,
including the supply of information and equipment in growing, packing, and
shipping bananas. The Cooperative would hire its own workers and pay their
wages and benefits, and sell exclusively to DFI all export quality bananas
produced that meet the specifications agreed upon.
To the Court, the Contract between the Cooperative and DFI, far from being
a job contracting arrangement, is in essence a business partnership that
partakes of the nature of a joint venture. 26 The rules on job contracting are,
therefore, inapposite. The Court may not alter the intention of the contracting
parties as gleaned from their stipulations without violating the autonomy of
contracts principle under Article 1306 of the Civil Code which gives the
contracting parties the utmost liberality and freedom to establish such
stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good custom, public order or
public policy.
Petitioners claim of employment relationship with the Cooperatives herein
co-respondents must be assessed on the basis of four standards, viz: (a) the
manner of their selection and engagement; (b) the mode of payment of their
wages; (c) the presence or absence of the power of dismissal; and (d) the
presence or absence of control over their conduct. Most determinative
among these factors is the so-called "control test." 27
There is nothing in the records which indicates the presence of any of the
foregoing elements of an employer-employee relationship.
The absence of the first requisite, which refers to selection and engagement,
is shown by DFIs total lack of knowledge on who actually were engaged by
the Cooperative to work in the banana plantation. This is borne out by the
Contract between the Cooperative and DFI, under which the Cooperative
was to hire its own workers. As TACOR had been merged with DFI, and DPI
is merely alleged to have previously owned TACOR, this applies to them as
94
well. Petitioners failed to prove the contrary. No employment contract
whatsoever was submitted to substantiate how petitioners were hired and by
whom.
On the second requisite, which refers to the payment of wages, it was
likewise the Cooperative that paid the same. As reflected earlier, under the
Contract, the Cooperative was to handle and fund the production of bananas
and operation of the plantation.28 The Cooperative was also to be responsible
for the proper conduct, safety, benefits, and general welfare of its members
and workers in the plantation.29
As to the third requisite, which refers to the power of dismissal, and the fourth
requisite, which refers to the power of control, both were retained by the
Cooperative. Again, the Contract stipulated that the Cooperative was to be
responsible for the proper conduct and general welfare of its members and
workers in the plantation.
The crucial element of control refers to the authority of the employer to
control the employee not only with regard to the result of the work to be
done, but also to the means and methods by which the work is to be
accomplished.30While it suffices that the power of control exists, albeit not
actually exercised, there must be some evidence of such power. In the
present case, petitioners did not present any.
There being no employer-employee relationship between petitioners and the
Cooperatives co-respondents, the latter are not solidarily liable with the
Cooperative for petitioners illegal dismissal and money claims.
While the Court commiserates with petitioners on their loss of employment,
especially now that the Cooperative is no longer a going concern, it cannot
simply, by default, hold the Cooperatives co-respondents liable for their
claims without any factual and legal justification therefor. The social justice
policy of labor laws and the Constitution is not meant to be oppressive of
capital.
En passant, petitioners are not precluded from pursuing any available
remedies against the former members of the defunct Cooperative as their
individual circumstances may warrant. WHEREFORE, the petition is
DISMISSED. SO ORDERED.
OLDARICO S. TRAVEO vs.BOBONGON BANANA GROWERS MULTI-PURPOSE
COOPERATIVE FACTS: Petitioner Oldarico Traveo and his 16 co-petitioners worked at a
banana plantation at Bobongan Santo Tomas, Davao del Norte. Sometime in 2000, they
filed three separate complaints for illegal dismissal, individually and collectively, with the
NLRC against said respondents including respondent Dole Asia Philippines as it then
supposedly owned TACOR, for unpaid salaries, overtime pay, 13th month pay, service
incentive leave pay, damages, and attorneys fees. DFI answered for itself and TACOR
denied that they hired petitioners; That it had an arrangement with several landowners for
them to extend financial and technical assistance to them for the development of their
lands into a banana plantation on the condition that the bananas produced therein would
be sold exclusively to TACOR and it was the landowners who worked on their own farms
and hired laborers to assist them and that the landowners themselves decided to form a
cooperative in order to better attain their business objectives; The Cooperative failed to file
a position paper despite due notice, prompting the Labor Arbiter to consider it to have
waived its right to adduce evidence in its defense.Nothing was heard from respondent Dole
Asia Philippines. LABOR ARBITER: Cooperative is guilty of illegal dismissal based on
several Orders by the DOLE in an earlier case declaring the Cooperative as the employer
of the 341 workers in the farms of its several members. It dropped the complaints against
DFI, TACOR and Dole Asia Philippines. NLRC: sustained the Labor Arbiters ruling that
the employer of petitioners is the Cooperative. It partially granted petitioners appeal,
however, by ordering the Cooperative to pay them their unpaid wages, wage differentials,
service incentive leave pay, and 13th month pay. It thus remanded the case to the Labor
Arbiter for computation of those awards. CA: dismissed petitioners petition for certiorari
on the ground that the accompanying verification and certification against forum shopping
was defective, it having been signed by only 19 of the 22 therein named petitioners.
ISSUES: (1) WON the petition should be dismissed because of the non-signing of the
petitioners; = No. HELD: For the guidance of the bench and bar, the Court restates in
capsule form the jurisprudential pronouncements already reflected in Altres v Empleo
above respecting non-compliance with the requirements on, or submission of defective,
verification and certification against forum shopping: 1) A distinction must be made
between non-compliance with the requirement on or submission of defective verification,
and non-compliance with the requirement on or submission of defective certification
against forum shopping. 2) As to verification, non-compliance therewith or a defect therein
does not necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending circumstances are such
that strict compliance with the Rule may be dispensed with in order that the ends of justice
may be served thereby. 3) Verification is deemed substantially complied with when one
who has ample knowledge to swear to the truth of the allegations in the complaint or
petition signs the verification, and when matters alleged in the petition have been made in
good faith or are true and correct. 4) As to certification against forum shopping, non-
compliance therewith or a defect therein, unlike in verification, is generally not curable by
its subsequent submission or correction thereof, unless there is a need to relax the Rule on
the ground of "substantial compliance" or presence of "special circumstances or
compelling reasons." 5) The certification against forum shopping must be signed by all the
plaintiffs or petitioners in a case; otherwise, those who did not sign will be dropped as
parties to the case. Under reasonable or justifiable circumstances, however, as when all
the plaintiffs or petitioners share a common interest and invoke a common cause of action
or defense, the signature of only one of them in the certification against forum shopping
substantially complies with the Rule. 6) Finally, the certification against forum shopping
must be executed by the party-pleader, not by his counsel. If, however, for reasonable or
justifiable reasons, the party-pleader is unable to sign, he must execute a Special Power of
Attorney designating his counsel of record to sign on his behalf. (Emphasis and
underscoring supplied) The foregoing restated pronouncements were lost in the
challenged Resolutions of the appellate court. Petitioners contention that the appellate
court should have dismissed the petition only as to the nonsigning petitioners or merely
dropped them as parties to the case is thus in order. Instead of remanding the case to the
appellate court, however, the Court deems it more practical to decide the substantive issue
raised in this petition so as not to further delay the disposition of this case. ISSUE: (2) won
DFI and DPI should be held solidarily liable with Cooperative for petitioners illegal
dismissal and money claims. HELD: No they are not solidarily liable. Petition is dismissed.
There is no ER-EE relationship between petitioners and Cooperatives co-respondents.
DFI did not farm out to the Cooperative the performance of a specific job, work, or service.
Instead, it entered into a Banana Production and Purchase Agreement (Contract) with the
Cooperative, under which the Cooperative would handle and fund the production of
95
bananas and operation of the plantation covering lands owned by its members in
consideration of DFIs commitment to provide financial and technical assistance as
needed, including the supply of information and equipment in growing, packing, and
shipping bananas. The Cooperative would hire its own workers and pay their wages and
benefits, and sell exclusively to DFI all export quality bananas produced that meet the
specifications agreed upon. To the Court, the Contract between the Cooperative and DFI,
far from being a job contracting arrangement, is in essence a business partnership that
partakes of the nature of a joint venture. The rules on job contracting are, therefore,
inapposite. Further, petitioners claim of employment relationship with the Cooperatives
herein co-respondents must be assessed on the basis of four standards, viz: (a) the
manner of their selection and engagement (No employment contract was; (b) the mode of
payment of their wages; (c) the presence or absence of the power of dismissal; and (d) the
presence or absence of control over their conduct. Most determinative among these
factors is the so-called "control test." There is nothing in the records which indicates the
presence of any of the foregoing elements of an employeremployee relationship. While the
Court commiserates with petitioners on their loss of employment, especially now that the
Cooperative is no longer a going concern since it has been dissolved, it cannot simply, by
default, hold the Cooperatives co-respondents liable for their claims without any factual
and legal justification therefor. The social justice policy of labor laws and the Constitution is
not meant to be oppressive of capital. En passant, petitioners are not precluded from
pursuing any available remedies against the former members of the defunct Cooperative
as their individual circumstances may warrant.

96
G.R. No. 158401 January 28, 2008
PHILIPPINE PORTS AUTHORITY, petitioner,
vs.
WILLIAM GOTHONG & ABOITIZ (WG&A), INC., respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
This resolves the Petition for Review on Certiorari filed by the Philippine Ports Authority
(petitioner) seeking the reversal of the Decision 1 of the Court of Appeals (CA) promulgated
on October 24, 2002 and its Resolution dated May 15, 2003.
The antecedent facts are accurately narrated by the CA as follows:
Petitioner William Gothong & Aboitiz, Inc. (WG&A for brevity), is a duly organized
domestic corporation engaged in the shipping industry. Respondent Philippine
Ports Authority (PPA for brevity), upon the other hand, is a government-owned
and controlled company created and existing by virtue of the provisions of P.D.
No. 87 and mandated under its charter to operate and administer the country's
sea port and port facilities.
After the expiration of the lease contract of Veterans Shipping Corporation over
the Marine Slip Way in the North Harbor on December 31, 2000, petitioner
WG&A requested respondent PPA for it to be allowed to lease and operate the
said facility. Thereafter, then President Estrada issued a memorandum dated
December 18, 2000 addressed to the Secretary of the Department of
Transportation and Communication (DOTC) and the General Manager of PPA,
stating to the effect that in its meeting held on December 13, 2000, the Economic
Coordinating Council (ECC) has approved the request of petitioner WG&A to
lease the Marine Slip Way from January 1 to June 30, 2001 or until such time
that respondent PPA turns over its operations to the winning bidder for the North
Harbor Modernization Project.
Pursuant to the said Memorandum, a Contract of Lease was prepared by
respondent PPA containing the following terms:
1. The lease of the area shall take effect on January 1 to June 30, 2001
or until such time that PPA turns over its operation to the winning bidder
for the North Harbor modernization;
2. You shall pay a monthly rental rate of P12.15 per square meter or an
aggregate monthly rental amount of P886,950.00;
3. All structures/improvements introduced in the leased premises shall
be turned over to PPA;
4. Water, electricity, telephone and other utility expenses shall be for the
account of William, Gothong & Aboitiz, Inc.;
5. Real Estate tax/insurance and other government dues and charges
shall be borne by WG&A.
The said contract was eventually conformed to and signed by the petitioner
company, through its President/Chief Executive Officer Endika Aboitiz, Jr.
Thereafter, in accordance with the stipulations made in the lease agreement, PPA
surrendered possession of the Marine Slip Way in favor of the petitioner.
However, believing that the said lease already expired on June 30, 2001,
respondent PPA subsequently sent a letter to petitioner WG&A dated November
12, 2001 directing the latter to vacate the contested premises not later than
November 30, 2001 and to turnover the improvements made therein pursuant to
the terms and conditions agreed upon in the contract.
In response, petitioner WG&A wrote PPA on November 27, 2001 urging the latter
to reconsider its decision to eject the former. Said request was denied by the PPA
via a letter dated November 29, 2001.
On November 28, 2001, petitioner WG&A commenced an Injunction suit before
the Regional Trial Court of Manila. Petitioner claims that the PPA unjustly, illegally
and prematurely terminated the lease contract. It likewise prayed for the issuance
of a temporary restraining order to arrest the evacuation. In its complaint,
petitioner also sought recovery of damages for breach of contract and attorney's
fees.
On December 11, 2001, petitioner WG&A amended its complaint for the first time.
The complaint was still denominated as one for Injunction with prayer for TRO. In
the said amended pleading, the petitioner incorporated statements to the effect
that PPA is already estopped from denying that the correct period of lease is
"until such time that the North Harbor Modernization Project has been bidded out
to and operations turned over to the winning bidder. It likewise included, as its
third cause of action, the additional relief in its prayer, that should the petitioner
be forced to vacate the said facility, it should be deemed as entitled to be
refunded of the value of the improvements it introduced in the leased property.
Following the first amendment in the petitioner's complaint, respondent PPA
submitted its answer on January 23, 2002. Meanwhile, the TRO sought by the
former was denied by the trial court by way of an order dated January 16, 2002.
Petitioner later moved for the reconsideration of the said Order on February 11,
2002. Shortly thereafter, petitioner filed a Motion to Admit Attached Second
97
 Amended Complaint. This time, however, the complaint was already captioned as
one for Injunction with Prayer for Temporary Restraining Order and/or Writ of
Preliminary Injunction and damages and/or for Reformation of Contract. Also, it
included as its fourth cause of action and additional relief in its prayer, the
reformation of the contract as it failed to express or embody the true intent of the
contracting parties.
SECTION 3. Amendments by leave of court. Except as provided in the next
preceding section, substantial amendments may be made only upon leave of
court. But such leave may be refused if it appears to the court that the
motion was made with intent to delay. Orders of the court upon the matters
provided in this section shall be made upon motion filed in court, and after notice
to the adverse party, and an opportunity to be heard.

The admission of the second amended complaint met strong opposition from the
respondent PPA. It postulated that the reformation sought for by the petitioner
constituted substantial amendment, which if granted, will substantially alter the
latter's cause of action and theory of the case.
On March 22, 2002, the respondent judge issued an Order denying the
Admission of the Second Amended Complaint. Petitioner filed a motion for
reconsideration of the aforesaid order but the same was again denied in an order
dated April 26, 2002.2
Herein respondent WG&A then filed a petition for certiorari with the CA seeking the
nullification of the aforementioned RTC orders.
In its Decision dated October 24, 2002, the CA granted respondent's petition, thereby
setting aside the RTC orders and directing the RTC to admit respondent's second
amended complaint pursuant to Section 3, Rule 10 of the 1997 Rules of Civil Procedure.
Petitioner moved for reconsideration but the same was denied per Resolution dated May
15, 2003.
Hence, the present petition where the only issue raised is whether the CA erred in ruling
that the RTC committed grave abuse of discretion when it denied the admission of the
second amended complaint.
The Court finds the petition without merit.
The Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil
Procedure in Valenzuela v. Court of Appeals,3 thus:
Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended
the former rule in such manner that the phrase "or that the cause of action or
defense is substantially altered" was stricken-off and not retained in the new
rules. The clear import of such amendment in Section 3, Rule 10 is that
under the new rules, "the amendment may (now) substantially alter the
cause of action or defense." This should only be true, however, when despite a
substantial change or alteration in the cause of action or defense, the
amendments sought to be made shall serve the higher interests of substantial
justice, and prevent delay and equally promote the laudable objective of the rules
which is to secure a "just, speedy and inexpensive disposition of every action and
proceeding."4
The application of the old Rules by the RTC almost five years after its amendment by the
1997 Rules of Civil Procedure patently constitutes grave abuse of discretion.
WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of
Appeals promulgated on October 24, 2002 and its Resolution dated May 15, 2003 are
hereby AFFIRMED in toto.
SO ORDERED.

The CA did not err in finding that the RTC committed grave abuse of discretion in issuing
the Order dated March 22, 2002 denying the admission of respondent's second amended
complaint.

The RTC applied the old Section 3, Rule 10 of the Rules of Court:

Section 3. Amendments by leave of court. after the case is set for hearing,
substantial amendments may be made only upon leave of court. But such leave
may be refused if it appears to the court that the motion was made with intent to
delay the action or that the cause of action or defense is substantially altered.
Orders of the court upon the matters provided in this section shall be made upon
motion filed in court, and after notice to the adverse party, and an opportunity to
be heard.

instead of the provisions of the 1997 Rules of Civil Procedure, amending Section 3, Rule
10, to wit:
98