EN BANC

[G.R. No. L-19613. April 30, 1966.]

ALFONSO G. LOPEZ, Plaintiff-Appellant, v. FILIPINAS COMPANIA DE

SEGUROS, Defendant-Appellee.

Antonio M. Mendoza for plaintiff and Appellant.

Josue H. Gustilo & Associates for defendant and appellee.

SYLLABUS

1. ACTIONS; OPERATIVE FACT WHICH CONVERTS A CLAIM INTO AN ACTION OR

SUIT. — The terms "action" and "suit" are synonymous, and the determinative or
operative fact which converts a claim into an "action" or "suit" is the filing of the
same with a "court of justice." Filed elsewhere, as with some other body or office
not a court of justice, the claim may not properly be categorized under either term.

2. ID.; ID.; COMPLAINT FILED WITH OFFICE OF INSURANCE COMMISSIONER NOT

AN ACTION OR SUIT. — An "action or suit" is essentially "for the enforcement or
protection of a right, or the prevention or redress of a wrong." (Rule 2, Sec. 1,
Rules of Court.) There is nothing in the Insurance Law, Act No. 2427, as amended,
or in any of its allied legislations, which empowers the Insurance Commissioner to
adjudicate on disputes relating to an insurance company’s liability to an insured
under a policy issued by the former to the latter. The validity of an insured’s claim
under a specific policy, its amount, and all such other matters as might involve the
interpretation and construction of the insurance policy, are issues which only a
regular court of justice may resolve and settle. Consequently, a complaint filed by
the insured with the Office of the Insurance Commissioner is not an "action or suit."

DECISION

REGALA, J.:

This is an appeal by the plaintiff-appellant, Alfonso G. Lopez, from an order of the

Court of First Instance of Manila, dated January 25, 1962, dismissing his complaint
against the defendant-appellee, Filipinas Compania de Seguros.

Prior to April 22, 1959, the plaintiff applied with the defendant company for the
insurance of his property consisting of a Biederman truck tractor and a Winter Weils
trailer from loss or damage in the amount of P26,000.00 and P10,000.00
respectively. In connection with the above application, the defendant company
inquired of the plaintiff the following:jgc:chanrobles.com.ph

"5. Has any company in respect of the insurance of any car or vehicle
1
(a) declined, canceled or refused to renew your insurance?

(b) increased your premium on renewal?

To both questions the plaintiff answered: "none," though the truth was at that time,
the American International Underwriters of the Philippines (AIU) had already
declined a similar application for insurance by the plaintiff in respect of the above-
described vehicles.

On April 22, 1959, the defendant appellee issued to the plaintiff-appellant two
Commercial Vehicle Comprehensive Policies covering the above properties. On
August 30, 1959, while the said policies were in force, the aforementioned vehicles
figured in an accident at Bagabag, Nueva Vizcaya, resulting in the total loss of the
tractor and partial damage to the trailer. Accordingly, the plaintiff gave notice of the
same to the defendant company and made demand upon the latter for the payment
to him of P27,962.00, the total amount of damages resulting from the accident.

On April 28, 1960, the defendant-appellant rejected the above claim by reason of,
among others, the claimant’s alleged "concealment of a material fact," namely: that
the insured property previously had been declined insurance by another company.

In view of the rejection of his claim by the defendant company, the plaintiff-
appellant filed on May 27, 1960 with the Office of the Insurance Commissioner a
complaint against the said company. On June 7, 1960, the Assistant Insurance
Commissioner requested the defendant company to give its side of the above
complaint and, thereafter, or on August 1, 1960, the said official "transmitted to the
plaintiff, thru his counsel, the `self-explanatory letters’ dated June 12, 1960 of the
American International Underwriters of the Philippines, Inc., and June 21, 1960 of
the defendant, which the said office had received from said parties in connection
with plaintiff’s complaint, with the suggestion that in view of the reluctant attitude
of plaintiff towards the company’s proposal for the matter to be settled thru
arbitration, and considering the informative facts disclosed’ in the letter of AIUPI,
plaintiff should pursue his case to the Court which has proper competence to
resolve said matter."cralaw virtua1aw library

On August 16, 1961, the plaintiff-appellant informed by letter the Office of the
Insurance Commissioner that he was willing to submit his claim to arbitration and,
in the premises, suggested that the Assistant Insurance Commissioner be
designated as the sole arbitrator of the same. On September 1, 1960, the
Insurance Commissioner informed the plaintiff-appellant of his willingness to act as
the single arbitrator, provided that both parties to the dispute manifest in writing
their conformity thereto and to abide by the arbitrator’s award. The defendant-
appellee, on the other hand, informed the Insurance Commissioner on September
22, 1960 that it could not consent to the above proposal since the claim of the
plaintiff cannot be resolved by arbitration, as recourse to arbitration referred to in
the policy contract, envisioned only differences or disputes, `with respect to the
amount of the company’s liability,’ and not to cases where the company does not
2
admit its liability to the insured." With this rejection, the plaintiff-appellant filed his
complaint with the Court of First Instance of Manila on September 19, 1961.

Against the above complaint, the defendant-appellee filed on September 29, 1961 a
motion to dismiss on the ground of prescription. The latter argued that the
plaintiff’s claim had already prescribed since it was not filed within twelve months
from its rejection by the insurance company as stipulated under paragraph 9 of the
General Conditions of Commercial Vehicle Comprehensive Policy Nos. 5598 and
5599, to wit:jgc:chanrobles.com.ph

"If a claim be made and rejected and an action or suit be not commenced within
twelve months after such rejection or (in case of arbitration taking place as
provided herein) within twelve months after the arbitrator, arbitrators, or umpire
shall have made their award then the claim shall for all purposes be deemed to
have been abandoned and shall not thereafter be recovered hereunder."cralaw
virtua1aw library

On January 25, 1962, the court a quo sustained the above motion and dismissed
the complaint. Thus, the instant appeal.

The principal issue raised in this appeal is simple: Was the complaint filed by the
plaintiff-appellant with the Office of the Insurance Commissioner on May 27, 1960 a
commencement of an "action or suit" within the meaning and intent of general
condition quoted above? If it was, then the plaintiff’s complaint has not yet
prescribed since the complaint filed with the said office was made on May 27, 1960
or just about a month after his claim was rejected by the defendant- appellee on
April 28, 1960. On the other hand, if the abovequoted condition refers alone to an
"action or suit" filed with a court of justice, as the Order appealed from urges and
as the herein appellee maintains, then, indeed, must the finding of prescription in
this incident be upheld. For, while the plaintiff’s claim was rejected on April 28,
1960 by the insurance company, the "action or suit" thereon with a court of justice
was filed some 17 months later, September 19, 1961.

We find for the appellee.

In 1 Moran 86 (1963 ed.), the following jurisprudence is

expressed:jgc:chanrobles.com.ph

"Action is the act by which one sues another in "a court of justice" for the
enforcement or protection of a right, or the prevention or redress of a wrong.
Special proceeding is the act by which one seeks to establish the status or right of a
party, or a particular fact. Hence, an action is distinguished from special proceeding
in that the former is a formal demand of a right by one against another, while the
latter is but a petition for a declaration of a status, right or fact." (Italics supplied).

The above distinction was laid down in connection with the definition of "action" in
Rule 2, Section 1 of the Rules of Court that:chanrob1es virtual 1aw library

3
Section 1. Action defined. — Action means an ordinary suit in a Court of Justice by
which one party prosecutes another for the enforcement or protection of a right, or
the prevention or redress of a wrong." (Italics supplied).

Also, in 1 Am. Jur. 407, as cited in Francisco, Civil Procedure, p. 91, a suit is
defined as:jgc:chanrobles.com.ph

"Suit is the prosecution or pursuit of some claim or demand in a court of justice, or

any proceeding in a court of justice in which a plaintiff pursues his remedy to
recover a right or claim." (Italics supplied)

Upon the authorities, therefore, it is settled that the terms "action" and "suit" are
synonymous. Moreover, it is clear that the determinative or operative fact which
converts a claim into an "action or suit" is the filing of the same with a "court of
justice." Filed elsewhere, as with some other body or office not a court of justice,
the claim may not properly be categorized under either term.

Apart from the foregoing, however, there is yet one other reason why the
appellant’s recourse to the Office of the Insurance Commissioner could not have
been an "action or suit" which could have halted the running of the prescriptive
period stipulated in the insurance policies involved. An "action or suit" is essentially
"for the enforcement or protection of a right, or the prevention or redress of a
wrong." (Rule 2, Sec. 1, Rules of Court). There is nothing in the Insurance Law, Act
No. 2427, as amended, nor in any of its allied legislations, which empowers the
Insurance Commissioner to adjudicate on disputes relating to an insurance
company’s liability to an insured under a policy issued by the former to the latter.
The validity of an insured’s claim under a specific policy, its amount, and all such
other matters as might involve the interpretation and construction of the insurance
policy, are issues which only a regular court of justice may resolve and settle.
Consequently, the complaint filed by the appellant herein with the Office of the
Insurance Commission could not have been an "action or suit."cralaw virtua1aw
library

The other assignments of error in the appellant’s brief spring from or are
consequences of the latter’s view that the claim be filed with the Office of the
Insurance Commissioner was an "action or suit" within the contemplation of
paragraph 9 of the general condition earlier quoted. With our ruling above,
therefore, the necessity to pass on them becomes inconsequential.

Wherefore, the order appealed from is hereby affirmed, with costs.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Makalintal,

Bengzon, J.P. and Zaldivar, JJ., concur.

Barrera, J., concurs in the result.

4
 [G.R. No. 128646. March 14, 2003]

CRISELDA F. JOSE, petitioner, vs. HON. COURT OF APPEALS and DANILO OMEGA,
respondents.

DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition erroneously entitled as a Petition for Review on Certiorari which should
be a petition for certiorari under Rule 65 of the Rules of Court.
The factual background of the case is as follows:
On November 14, 1994, the Regional Trial Court of Cebu City (Branch 22) rendered a
decision in Civil Case No. CEO-15709, entitled Danilo Omega, Plaintiff, versus, Criselda F. Jose,
Defendant., the dispositive portion of which reads as follows:
WHEREFORE, based on the evidence thus presented, this Court finds for the
plaintiff. Judgment is hereby rendered declaring the March 3, 1981 marriage between
plaintiff Danilo Omega and Criselda F. Jose, null and void ab initio. Custody over the
three children Joselyn, Danilo, Jr. and Jordan, all surnamed Omega shall be entrusted
to plaintiff Danilo Omega.
Furnish the Local Civil Registrar of Manila with a copy of this judgment. No costs.
SO ORDERED.1
The ground for declaring the marriage null and void is psychological incapacity on the part of
defendant Criselda under Article 36 of the Family Code of the Philippines. During the trial, the
counsel on record of defendant Criselda was Atty. Margarito D. Yap of the Cebu City District
Office of the Public Attorneys Office (PAO). However, defendant Criselda filed a Notice of Appeal,
dated December 7, 1994, on her own, without the assistance of Atty. Yap.2
The Judicial Records Division (JRD) of the Court of Appeals sent a notice to pay docket fee,
dated August 3, 1995 to Atty. Yap which was received by him.3 On October 24, 1995, the appellate
court, through the Former Sixteenth Division,4 promulgated a Resolution which reads as follows:
For failure of the defendant-appellant to pay the docketing fee in this case within the
reglementary period which expired on August 25, 1995, despite receipt by his counsel
on August 10, 1995 of this Courts notice dated August 3, 1995, this appeal is hereby

5
 DISMISSED pursuant to Section 1(d), Rule 50 of the Rules of Court.
SO ORDERED.5
On May 9, 1996, the Division Clerk of Court issued the Entry of Judgment certifying that the
above-quoted Resolution had become final and executory as of December 1, 1995.6 It is indicated
at the bottom of said Entry of Judgment that Atty. Yap and the Special and Appealed Cases
Division of the PAO were sent copies of the Entry of Judgment.
On May 13, 1996, the appellate court received a letter of even date from defendant-appellant
Criselda addressed to the Clerk of Court of the Court of Appeals inquiring about the status of her
appeal and claiming that she has not received any notice from the appellate court.7
The appellate court noted the explanation of the clerk in the Civil Cases Section of the Judicial
Records Division (JRD) of said court that Atty. Yap was sent the notice to pay docket fee because
Criselda had sent a copy of her Notice of Appeal to Atty. Yap and that per the records of the case,
Atty. Yap was earlier sent a copy of the formal offer of exhibits and duly received in his behalf, he
filed the comments and objections to the exhibits for the plaintiff; he appeared at the hearings
conducted by the trial court.8
On October 28, 1996, Criselda through counsel filed a Motion for Leave of Court to File
Omnibus Motions/Motion to Reinstate Appeal.9 On December 16, 1996, the Court of Appeals
issued the following Resolution:
Considering that the Resolution dismissing this appeal has become final on
December 1, 1995 and an Entry of Judgment has in fact been made on May 9, 1996, the
Motion for Leave of Court to File Omnibus Motions/Motion to Reinstate Appeal and the
Omnibus Motions/Motion to Reinstate Appeal are hereby denied.
SO ORDERED.10
Criseldas motion for reconsideration was denied by the Court of Appeals.
Hence, the present petition on the following ground:
The public respondent Honorable Court of Appeals committed grave error in denying

6
 the petitioners Motion for Leave of Court to file Omnibus Motions/Motion to Reinstate
Appeal and the Omnibus Motions/Motion to Reinstate Appeal which if not corrected,
would deprive petitioner of her constitutional right to due process and injustice would be
done to her.11
on which basis, petitioner Criselda raises the following issues:
I.
WHETHER OR NOT THE PETITIONER WHO APPEALED HER CASE BY HERSELF
WITHOUT COUNSEL WAS VALIDLY SERVED WITH NOTICE TO PAY THE
DOCKETING FEE AND NOTICE OF THE RESOLUTION DISMISSING HER APPEAL
FOR FAILURE TO PAY THE DOCKETING FEE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DENYING
THE PETITIONERS MOTION FOR LEAVE OF COURT TO FILE OMNIBUS
MOTIONS/MOTION TO REINSTATE APPEAL AND THE OMNIBUS
MOTIONS/MOTION TO REINSTATE APPEAL.12
After private respondent filed his Comment, parties filed their respective Memoranda in
compliance with the Resolution of the Court dated December 14, 1998.
We find the petition devoid of merit.
Based on the records, it appears that the PAO, through Atty. Victor C. Laborte and Atty. Yap,
represented petitioner during the trial of the case. Although petitioner herself personally filed the
Notice of Appeal, the fact remains that Atty. Yap or the PAO has not filed any formal notice of
withdrawal of appearance in the trial court. Therefore, insofar as the appellate court is concerned,
Atty. Yap is the counsel of record. As such, the appellate court did not commit any grave abuse
of discretion in denying petitioners motion for leave of court to file omnibus motions or motion to
reinstate appeal.
Section 22, Rule 138 of the Rules of Court, provides:
Section 22. Attorney who appears in lower court presumed to represent client on
appeal. An attorney who appears de parte in a case before a lower court shall be
presumed to continue representing his client on appeal, unless he files a formal petition
withdrawing his appearance in the appellate court.
Payment of the docket and other legal fees within the prescribed period is both mandatory
and jurisdictional, and failure of the appellant to conform with the rules on appeal renders the
judgment final and executory.13
Indeed, the Court, in some instances, had allowed liberal construction of the Rules of Court
with respect to the rules on the manner and periods for perfecting appeals on equitable

7
consideration.14 In Buenaflor vs. Court of Appeals, the Court has enunciated the following:
The established rule is that the payment in full of the docket fees within the
prescribed period is mandatory. Nevertheless, this rule must be qualified, to wit: First,
the failure to pay appellate court docket fee within the reglementary period allows only
discretionary dismissal, not automatic dismissal, of the appeal; Second, such power
should be used in the exercise of the Courts sound discretion in accordance with the
tenets of justice and fair play and with great deal of circumspection considering all
attendant circumstances.
Admittedly, this Court has allowed the filing of an appeal in some cases where a
stringent application of the rules would have denied it, only when to do so would serve
the demands of justice and in the exercise of the Courts equity jurisdiction. This is based
on the rule of liberality in the interpretation of the Rules to achieve substantial justice. It
may be recalled that the general rule is that the Rules of Court are rules of procedure
and whenever called for they should be so construed as to give effect rather than defeat
their essence.
Section 6, Rule 1 of the 1997 Rules of Civil Procedure provides:
SEC. 6. Construction These Rules shall be liberally construed in order to
promote their objective of securing a just, speedy and inexpensive disposition
of every action and proceeding.
Rules of procedures are intended to promote, not to defeat, substantial justice and,
therefore, they should not be applied in a very rigid and technical sense. The exception
is that, while the Rules are liberally construed, the provisions with respect to the rules on
the manner and periods for perfecting appeals are strictly applied. As an exception to
the exception, these rules have sometimes been relaxed on equitable considerations.
Also, in some cases the Supreme Court has given due course to an appeal perfected
out of time where a stringent application of the rules would have denied it, but only when
to do so would serve the demands of substantial justice, and in the exercise of equity
jurisdiction of the Supreme Court.
The underlying consideration in this petition is that the act of dismissing the notice
of appeal, if done in excess of the trial courts jurisdiction, amounts to an undue denial of
the petitioners right to appeal. The importance and real purpose of the remedy of appeal
has been emphasized in Castro v. Court of Appeals where this Court ruled that an appeal
is an essential part of our judicial system and trial courts are advised to proceed with
caution so as not to deprive a party of the right to appeal and instructed that every party-
litigant should be afforded the amplest opportunity for the proper and just disposition of
his cause, freed from the constraints of technicalities.15
However, the Court finds no cogent reason to be liberal in the present case for the following
reasons:
Petitioners counsel, Atty. Margarito Yap of the PAO was properly sent by the appellate court
a notice to pay the docket fees. Atty. Yap or the PAO did not file any formal withdrawal of
appearance and therefore, for all intents and purposes, the appellate court correctly sent the
notice to Atty. Yap. It is settled that clients are bound by the mistakes, negligence and omission

8
of their counsel.16
Moreover, under Section 21, Rule 138 of the Rules of Court, an attorney is presumed to be
properly authorized to represent any cause in which he appears. Under Section 22 of the same
Rule, an attorney who appears de parte in a case before a lower court shall be presumed to
continue representing his client on appeal, unless he files a formal petition withdrawing his
appearance in the appellate court.
Petitioner failed to pursue her appeal for almost two years. She herself filed the notice of
appeal on December 4, 1994 but thought of inquiring from the Court of Appeals about her appeal
only on May 13, 1996 (or after the lapse of one year and five months) as to the status of her
appeal.
Petitioner failed to show that her appeal is extremely meritorious that to deprive her of an
appeal would unduly affect her substantial rights.
In other words, petitioner failed to show any compelling reason to warrant the issuance of the
writ of certiorari. The Court of Appeals committed no grave abuse of discretion in denying
petitioners Motion for Leave of Court to File Omnibus Motions/Motion to Reinstate Appeal. Its
Resolution dated October 24, 1995 dismissing petitioners appeal had become final and executory
as of December 1, 1995.
WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.

[G.R. No. 112597. April 2, 1996]

VIRGINIA A. LEONOR, petitioner, vs. COURT OF APPEALS, HON. ROLINDO D. BELDIA,

JR., as Presiding Judge of the Regional Trial Court of San Carlos City, Branch 57,
and MAURICIO D. LEONOR, JR., respondents.
SYLLABUS
1. REMEDIAL LAW; SPECIAL PROCEEDINGS; CANCELLATION OR CORRECTION OF
ENTRIES IN THE CIVIL REGISTRY (RULE 108); COVERS ONLY TYPOGRAPHICAL OR
CLERICAL ERRORS. - The only errors that can be cancelled or corrected under Rule 108
of the Rules of Court are typographical or clerical errors, not material or substantial ones like
the validity or nullity of a marriage. A clerical error is one which is visible to the eyes or obvious
to the understanding; error made by a clerk or a transcriber; a mistake in copying or writing
(Black vs. Republic, L-10869, Nov. 28, 1958); or some harmless and innocuous change such
as a correction of name that is clearly misspelled or of a mis-statement of the occupation of
the parent. Where the effect of a correction in a civil registry will change the civil status of
petitioner and her children from legitimate to illegitimate, the same cannot be granted except
only in an adversarial proceeding.
2. ID.; ID.; ID.; RULE, NOT APPLICABLE IN CHANGE OF STATUS. - The summary procedure
under Rule 108, and for that matter under Art. 412 of the Civil Code, cannot be used by
Mauricio to change his and Virginias civil status from married to single and of their three
children from legitimate to illegitimate. Neither does the trial court, under said Rule, have any

9
 jurisdiction to declare their marriage null and void and as a result thereof, to order the local
civil registrar to cancel the marriage entry in the civil registry. Further, the respondent trial
judge gravely and seriously abused his discretion in unceremoniously expanding his very
limited jurisdiction under such rule to hear evidence on such a controversial matter as nullity
of a marriage under the Civil Code and/or Family Code, a process that is proper only in
ordinary adversarial proceedings under the Rules.
3. ID.; JUDGMENT; EFFECT OF VOID JUDGMENT. - A void judgment for want of jurisdiction
is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All
acts performed pursuant to it and all claims emanating from it have no legal effect. Hence, it
can never become final and any writ of execution based on it is void; x x x it may be said to
be a lawless thing which can be treated as an outlaw and slain at sight, or ignored wherever
and whenever it exhibits its head. Banco Espaol-Filipino vs. Palanca, 37 Phil. 921, 949
(1918).
4. ID.; PROACTIVE ROLE OF SUPREME COURT. - The Supreme Court is not just a toothless
promoter of procedural niceties which are understood and appreciated only by lawyers and
jurists. It cannot shrink from its quintessential role as the fountain of speedy, adequate and
substantial justice. If the Court, as the head and guardian of the judicial branch, must
continuously merit the force of public trust and confidence - which ultimately is the real source
of its sovereign power, possessing neither the purse nor the sword - and if it must decisively
discharge its sacred duty as the last sanctuary of the oppressed and the weak, it must, in
appropriate cases like the one before us, pro-actively provide weary litigants with immediate
legal and equitable relief, free from the delays and legalistic contortions that oftentimes result
from applying purely formal and procedural approaches to judicial dispensations. Pursuant
to the foregoing principle and considering the peculiar circumstances of the present case
which are patent on the basis of the admitted facts, as well as the undisputed copies of the
pleadings presented by the parties, and especially the verified copy of the trial courts decision
which loudly speaks for itself, the Court therefore resolved to make an exception to the normal
procedures and to delve deeper into the substantive issue of the validity/nullity of the trial
courts proceedings and judgment. Happily, both parties had expressed a desire to have this
case resolved soonest. Upon the other hand, remanding the case back to the trial court for
the perfection of the appeal and requiring the parties to re-litigate in the Court of Appeals with
the use of probably the same documents and arguments ventilated in the kilometric pleadings
filed here would just unnecessarily clog the courts dockets; besides, in all likelihood the
parties would eventually come before this Court anyway.
APPEARANCES OF COUNSEL
Edgar Mendoza for petitioner.
Reynaldo C. Depasucat for private respondent.

DECISION
PANGANIBAN, J.:

Is a judgment voiding a marriage and rendered by the regional trial court under Rule 108 of
the Rules of Court valid and proper? May its validity be challenged by the wife in a petition for
certiorari against the husband who abandoned her and who is now living abroad with a foreign
woman?
These are the two main issues that were posed before this Court in this petition for review

10
seeking a partial reversal of the Decision1 of the Court of Appeals2 promulgated September 30,
1993 in CA-G.R. SP No. 30606 and its Resolution3 promulgated November 11, 1993, which
denied petitioners motion for partial reconsideration of the Decision.

The Facts

Petitioner Virginia A. Leonor was married to private respondent Mauricio D. Leonor, Jr., in
San Carlos City on March 13, 1960. Out of the union, three children, Mauricio III, Ned and Don,
were born. The spouses were separated for a substantial part of their married life for, while
Mauricio resided in Switzerland studying and working, Virginia stayed in the Philippines working
as a nurse in Laguna. Mauricio became unfaithful and lived with a certain Lynda Pond abroad.
This induced petitioner to institute a civil action in Geneva, Switzerland for separation and
alimony. Private respondent counter-sued for divorce.
On February 14, 1991, the lower Cantonal Civil Court of Switzerland pronounced the divorce
of the spouses Leonor but reserved the liquidation of the matrimonial partnership. The said Swiss
Court denied alimony to petitioner. In a letter to the lower Cantonal Civil Court dated March 1,
1991, Mauricio, for the first time, raised the issue of the alleged non-existence of the marriage
between him and Virginia. Meanwhile, Virginia learned that the solemnizing officer in the
Philippines, Justice of the Peace Mabini Katalbas, failed to send a copy of their marriage contract
to the Civil Registrar of San Carlos City for registration. Hence, on July 11, 1991, Virginia applied
for the late registration of her marriage. The Civil Registrar, finding said application in order,
granted the same.
On appeal to the higher Cantonal Civil Court, Mauricio asked for the cancellation of his
marriage in the Philippines. On January 17, 1992, the higher Cantonal Civil Court granted
petitioner alimony, prompting Mauricio to elevate the matter on appeal to the Federal Court of
Switzerland, In its decision dated July 9, 1992, the Federal Court affirmed the decision of the
higher Cantonal Civil Court.4
On May 22, 1992, Mauricio, represented by his brother Teodoro Leonor, filed a petition for
the cancellation of the late registration of marriage in the civil registry of San Carlos City with the
Regional Trial Court, Branch 59, San Carlos City (Special Proceeding No. RTC- 144). Given as
grounds for the cancellation were the tardiness of the registration and the nullity of his marriage
with Virginia due to the non-observance of the legal requirements for a valid marriage. Mauricios
petition was filed pursuant to Rule 108 of the Rules of Court.

11
 After several hearings and on December 14, 1992, the trial court rendered judgment 5
declaring said marriage null and void for being sham and fictitious. The dispositive portion of said
decision reads:
AND IN THE LIGHT OF THE FOREGOING, this Court finds and orders that the
registration of the marriage contract between Mauricio Leonor, Jr. and Virginia Amor
dated March 13, 1960 must be canceled in (sic) the Books of the Local Civil Registry of
San Carlos City for being a null and void marriage not in accordance with a (sic) New
Civil Code under Articles 52, 53 and 55 now presently amended by the Family Code of
the Philippines, Executive Order No. 209 as amended by Executive Order No. 227,
without pronouncement as to cost.
Virginia received notice of the decision on January 4, 1993, and on January 15, 1993, she
filed her notice of appeal.
On February 24, 1993, the trial court, on motion of Mauricios counsel, issued an order 6
dismissing Virginias appeal on the ground that she had failed to file a record on appeal within
thirty days and had thus failed to perfect her appeal. It was the erroneous holding of the trial court
that in special proceedings, a record on appeal was an indispensable requisite under Rule 19,
Section 6 of the Interim Rules and Guidelines in relation to Rule 109 of the Rules of Court. Such
failure, according to respondent Judge, caused the decision to become executory.
On April 1, 1993, Virginia filed a petition for certiorari, prohibition and mandamus with the
Court of Appeals (CA-G.R. SP NO. 30606) and sought the nullification of both the decision dated
December 14, 1992 and the order dated February 24, 1993 of the trial court for having been
issued in excess ofjurisdiction and/or with grave abuse of discretion.
The Court of Appeals dismissed the petition insofar as it sought the reversal of the decision
of the trial court, saying that the remedy for said purpose was an appeal, not a special civil action.
The appellate court, however, granted the petition insofar as it sought the nullification of the
Order dated February 24, 1993 dismissing the appeal. Said the appellate court:
Even so, this petition is an appropriate remedy against the dismissal of the
petitioners appeal, which dismissal we sense to be erroneous and issued in excess of
jurisdiction.
xxx xxx xxx
WHEREFORE, judgment is hereby rendered setting aside the questioned order of
respondent judge dated February 24, 1993, with instructions to the latter to give due
course to petitioners appeal in the subject special proceeding. Costs against private
respondents.
Dissatisfied with the above Decision, petitioner filed a motion for partial reconsideration
asking the Court of Appeals to annul the decision of the trial court. The Court of Appeals denied
the motion, stating that the central issue in the special civil action was only the validity of the trial
courts order denying petitioners right to appeal and that said issue was resolved in petitioners
favor. Further, it said that the correctness or validity of the trial courts decision should properly be
resolved in the appeal.

12
 Hence, the present recourse.

Issues Raised by the Parties

The petition assailed the respondent Courts Decision and Order mentioned in the second
paragraph of this Decision for alleged -
1. Procedural Errors x x x in not finding x x x (a) that the lower court gravely abused
its discretion in recognizing the action as one for declaration of nullity of marriage instead
of a special proceeding for cancellation of (an) entry in the civil registry and (b) in not
finding that the lower court had no jurisdiction (over) the issue of nullity; and
2. Substantive errors x x x in not finding x x x (a) that the lower court gravely erred
in declaring the marriage null and void x x x and (b) x x x in disregarding the presumptions
in favor of the rights of children and to the administration of the conjugal property x x x
and the validity of marriage x x x.
In her Memorandum, petitioner elucidated and spiritedly argued the above grounds.
In fine, the foregoing issues could be restated as follows:
1. Did the respondent Court err in holding that petitioner should have appealed
from the trial courts decision instead of filing a petition for certiorari?
2. Did the respondent Court err in refusing to decide upon the merits of the case,
that is, to declare whether or not the judgment of the trial court is null and void? Should
the Supreme Court now resolve the merits of the case, i.e., decide the issue of nullity of
the assailed decision of the trial court?

The Courts Ruling

Since these issues are intimately intertwined, we shall discuss them together.
At the outset, it must be stressed that the Court of Appeals acted within its authority in simply
ordering the trial court to give due course to petitioners appeal without going into the merits of the
case.
In Municipality of Binan, Laguna vs. Court of Appeals,7 we held:
Respondent Court of Appeals has no jurisdiction in a certiorari proceeding involving
an incident in a case to rule on the merits of the main case itself which was not on appeal
before it. x x x.
In other words, the Court of Appeals has already done its duty by declaring that the lower
court gravely abused its discretion or acted without jurisdiction in refusing to give due course to
petitioners appeal. Hence, it ordered said court to allow the appeal. Once appeal is perfected, the
merits of the case, i.e. the validity/nullity of the trial courts decision, would then be resolved by
said Court.
Understandably, the Court of Appeals has limited itself to ruling upon the procedural question

13
lodged before it. It cannot be seriously faulted - as petitioner vehemently did - for opting to
navigate within the narrow banks of the placid waters of certiorari. For in doing so, it was strictly
following established legal doctrines and precedents.
Upon the other hand, the Supreme Court is not just a toothless promoter of procedural
niceties which are understood and appreciated only by lawyers and jurists. It cannot shrink from
its quintessential role as the fountain of speedy, adequate and substantial justice. If the Court, as
the head and guardian of the judicial branch, must continuously merit the force of public trust and
confidence - which ultimately is the real source of its sovereign power, possessing neither the
purse nor the sword - and if it must decisively discharge its sacred duty as the last sanctuary of
the oppressed and the weak, it must, in appropriate cases like the one before us, pro-actively
provide weary litigants with immediate legal and equitable relief, free from the delays and legalistic
contortions that oftentimes result from applying purely formal and procedural approaches to
judicial dispensations.
Pursuant to the foregoing principle and considering the peculiar circumstances of the present
case which are patent on the basis of the admitted facts, as well as the undisputed copies of the
pleadings presented by the parties, and especially the verified copy of the trial courts decision
which loudly speaks for itself, the Court therefore resolved to make an exception to the normal
procedures and to delve deeper into the substantive issue of the validity/nullity of the trial courts
proceedings and judgment. Happily, both parties had expressed a desire to have this case
resolved soonest. Upon the other hand, remanding the case back to the trial court for the
perfection of the appeal and requiring the parties to re-litigate in the Court of Appeals with the use
of probably the same documents and arguments ventilated in the kilometric pleadings filed here
would just unnecessarily clog the courts dockets; besides, in all likelihood the parties would
eventually come before this Court anyway.
Also, it must be observed that Virginia actually filed a proper Notice of Appeal which the trial
court disallowed. Hence, she had no choice but to bring her petition for certiorari in the respondent
Court. To constrain her to go back to said Court, this time by ordinary appeal, would be tantamount
to punishing her and delaying her cause for faults not attributable to her, but rather to the manifest
error of the respondent trial judge.
So, too, as will be shown shortly, the trial courts decision is really a nullity for utter want of
jurisdiction. Hence, it could be challenged at any time.
It is not disputed that the original petition8 in the trial court was for cancellation of entry in the
civil registry of the late registration of the marriage between Leonor and Mauricio, in consonance
with Section 3, Rule 108 of the Rules of Court. Ground alleged for the nullity and cancellation of
the marriage was non-observance of the legal requirements for a valid marriage.
Later, on August 22, 1992, an amended petition9 was filed adding essentially the following
allegations; (a) that there was no marriage contract, (b) that the marriage was a sham x x x to
cover-up the (alleged) shame of Virginia Amor who was then pregnant, (c) that Virginia allegedly
assured Mauricio that they need not live together x x x and Mauricio need not give any support,
(d) that the couple always had trouble (and) quarrel, and (e) that Mauricio had been transferring
residence to avoid Virginia until he went abroad for good. The answer10 of the Civil Registrar and

14
the opposition11 of Virginia, among others, disputed the propriety of the collateral attack against
the marriage, under said Rule.
The decision12 of the trial court is, painfully, a sophomoric and pathetic portrayal of Virginia
as allegedly an unbecoming x x x unmarried woman (who) wormed her to a (sic) heart of the
matriarch of the Leonor Family x x x to summon the son Mauricio to come to her rescue and as a
scheming nurse who lured a struggling young teacher x x x to this unwelcomed (sic) love affair.
These matters, needless to say, border on the incredible, as they were brought up some thirty
(30) years after the marriage was celebrated in 1960 and only after Virginia discovered her
husbands infidelity. The said decisions crude attempt at literary sophistication is matched only by
its jarring syntax and grammatical incongruencies.13 Insofar as this Court can figure out from the
convoluted language of the decision, the trial court (a) declared the marriage null and void and
(b) ordered the local civil registrar of San Carlos City to cancel its entry in the local civil registry,
the sum total of which, coincidentally (and most conveniently), would enable Mauricio to show to
the Swiss courts that he was never married and thus, to convince said courts to reverse their
order granting alimony to his abandoned wife. Such blatant abuse and misuse of court
proceedings cannot be countenanced by this Court.
The ultimate legal question therefore is this: In disposing of a special proceeding under Rule
108, did the trial court have jurisdiction to declare the marriage null and void and to order the
cancellation of its entry in the local civil registry?
To contribute to the cause of clarity, Rule 108 of the Rules of Court is reproduced hereunder.
Rule 108
CANCELLATION OR CORRECTION OF ENTRIES
IN THE CIVIL REGISTRY
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 court of First Instance 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.

15
 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 filling of the petition, the court shall, by
an order, fix the time and place for the hearing of the same, and cause reasonable notice
thereof to be given to the persons 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.
On its face, the Rule would appear to authorize the cancellation of any entry regarding
marriages in the civil registry for any reason by the mere filing of a verified petition for the purpose.
However, it is not as simple as it looks. Doctrinally, the only errors that can be cancelled or
corrected under this Rule are typographical or clerical errors, not material or substantial ones like
the validity or nullity of a marriage.14 A clerical error is one which is visible to the eyes or obvious
to the understanding; error made by a clerk or a transcriber; a mistake in copying or writing (Black
vs. Republic, L-10869, Nov. 28, 1958); or some harmless and innocuous change such as a
correction of name that is clearly misspelled or of a mis-statement of the occupation of the parent
(Ansalada vs. Republic, No. L-10226, Feb. 14, 1958).15
Where the effect of a correction in a civil registry will change the civil status of petitioner and
her children from legitimate to illegitimate, the same cannot be granted except only in an
adversarial proceeding.16 In Vda. de Castro vs. Republic,17 this Court held:
x x x It has been the consistent ruling of this Court since the Ty Kong Tin vs.
Republic, 94 Phil. 321, that substantial alterations, such as those affecting the status and
citizenship of a person in the Civil Registry Records, cannot be ordered by the court
unless first threshed out in an appropriate action wherein all parties who may be affected

16
 by the entries are notified or represented (see Rule 108 of the Revised Rules of Court),
and that the summary proceedings under Article 412 of the Civil Code only justify an
order to correct innocuous or clerical errors, such as misspellings and the like, errors that
are visible to the eyes or obvious to the understanding. (Baybayan vs. Republic of the
Philippines, 16 SCRA 403)
Clearly and unequivocally, the summary procedure under Rule 108, and for that matter under
Art. 412 of the Civil Code, cannot be used by Mauricio to change his and Virginias civil status
from married to single and of their three children from legitimate to illegitimate. Neither does the
trial court, under said Rule, have any jurisdiction to declare their marriage null and void and as a
result thereof, to order the local civil registrar to cancel the marriage entry in the civil registry.
Further, the respondent trial judge gravely and seriously abused his discretion in unceremoniously
expanding his very limited jurisdiction under such rule to hear evidence on such a controversial
matter as nullity of a marriage under the Civil Code and/or Family Code, a process that is proper
only in ordinary adversarial proceedings under the Rules.
A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any
right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating
from it have no legal effect. Hence, it can never become final and any writ of execution based on
it is void; x x x it may be said to be a lawless thing which can be treated as an outlaw and slain at
sight, or ignored wherever and whenever it exhibits its head.18
WHEREFORE, the petition is GRANTED. Judgment is hereby rendered DECLARING NULL and VOID the
decision of the respondent judge dated February 14,1992 in Special Proceedings No. RTC-144 and MODIFYING
accordingly the Decision dated September 30, 1993 of the respondent Court of Appeals in CA-G.R. No. SP-30606. Let
a copy of this Decision be spread in the records of respondent Judge in the Office of the Court
Administrator. Costs against private respondent Mauricio D. Leonor, Jr. SO ORDERED.
[G.R. No. 146559. August 13, 2004]
PRUDENTIAL GUARANTEE AND ASSURANCE INC., petitioner, vs. HON.
COURT OF APPEALS, Special Former Eight Division, HON. LOLITA BESANA,
and MARIANO ONG, respondents.
RESOLUTION
CARPIO MORALES, J.:
The petition for review on certiorari at bar seeks to set aside and annul the Court of
Appeals June 13, 2000 Resolution[1] in CA-G.R. SP No. 59022 dismissing the petition
of Prudential Guarantee and Assurance, Inc. (petitioner), a motion for reconsideration[2]
of which was, by Resolution[3] of November 14, 2000, denied.
On January 16, 1990, ARMCO Industrial Corporation, (ARMCO) filed a complaint for
specific performance and damages with prayer for the issuance of a writ of attachment
against Mariano Ong and several other defendants before the Regional Trial Court of
Iloilo City, docketed as Civil Case No. 18978. Branch 32 of the court to which the case
was raffled issued a writ of attachment upon the filing by ARMCO of a bond in the
amount of P1,200,056.00.
In the Plaintiffs Bond for Levying of Attachment No. WV-B-90/0006,[4] ARMCO,
represented by its president Edward C. Ong, as principal, and petitioner, represented
by its vice-president Ramon E. Kilayko, as surety, jointly and severally bound

17
themselves in the above-stated amount to pay all the costs which may be adjudged to
the defendant . . . and all damages which he may sustain by reason of the attachment
...
During the pendency of the case, ARMCO failed to pay the premiums on the bond as
they fell due, prompting petitioner to file an Urgent Ex-Parte Motion for Cancellation of
Bond and Release of Surety[5] before the trial court. Acting on said motion, the trial
court, by Order[6] of September 10, 1997, holding that the agreement was that the
surety bond was to answer for the whole period of the case so that there will be no
liability on the part of the plaintiff but that ARMCO did not pay premiums on the bond,
directed ARMCO to put up another bond within fifteen (15) days otherwise the writ of
attachment would be dissolved.[7]
By a subsequent Order[8] of September 16, 1997, the trial court directed ARMCO to pay
the premiums on the bond or put up a new bond to protect the rights of the defendants.
ARMCO, however, failed to either pay the premiums on the bond or put up a new bond,
prompting the trial court to direct, by Order[9] of May 21, 1999, the release and delivery
to the defendant Mariano Ong within fifteen (15) days all the attached properties
enumerated in the Depository Receipt dated April 24, 1990.
The trial court went on to declare as follows:
The Prudential Guarantee and Assurance Inc. shall be released of its obligations as
surety company immediately after compliance by the plaintiff of the herein order and let
this case be submitted for decision after such compliance.[10] (Underscoring supplied)
Without resolving the incidental issue on the motion for release of Surety and the
cancellation of the surety bond,[11] the trial court rendered on June 21, 1999 a decision
on the main case.
Petitioner thereupon filed a second Urgent Ex-Parte Motion to Release Surety[12] which
was, by Order[13] of January 17, 2000, denied, the trial court holding as follows:
In view of the fact that this Surety is the one who undertook the liability of the plaintiff
while the case is pending, this Court in the interest of justice DENIE[S] the Motion to
Release Surety for non-payment. It is the duty of the Surety to institute proper action
against the creditor/plaintiff ARMCO also known as ARMAGRI but the liability
undertaken by them remains.[14]
Petitioners Motion for Reconsideration[15] of the trial courts January 17, 2000 Order
having been denied for lack of merit by Order[16] of February 22, 2000, petitioner
assailed said orders by certiorari[17] before the Court of Appeals (CA), docketed as CA-
G.R. SP No. 59022.
By Resolution[18] of June 13, 2000, the CA, finding that the petition was filed three (3)
days late, dismissed it pursuant to Section 1(A), Rule 50[19] of the Rules of Court.
Petitioner herein claims that this petition has been filed within the reglementary period
since the last day of filing happens to be May 13, 2000 which is a Saturday, and the
same was mailed on May 15, 2000, Monday, the next working day.
However, a careful consideration of the said reglementary period would readily reveal
that this petition was filed three (3) days late. It is admitted in the petition that the court

18
a quos order denying petitioners motion for reconsideration was received by them on
March 13, 2000. Hence, petitioner has sixty (60) days from that date to file this petition.
Since March has 31 days, then necessarily the last day for the filing is May 12, 2000, a
Friday, which is the 60th day from March 13, 2000, and not May 13, 2000 as erroneously
claimed by petitioner.[20] (Underscoring supplied)
Petitioner filed a Motion for Reconsideration[21] which the CA denied by Resolution[22]
of November 14, 2000 in this wise:
Sec. 4, Rule 65 of the 1997 Rules of Civil Procedure already specifically provides the
period within which to file a petition for Certiorari. Unlike in the old rule where mere
reasonable time was required. By reason of such new provision under the Rules, failure
to file the petition within the reglementary period required by law will make the assailed
Order final and executory.
Petitioner invokes higher interest of justice in seeking reconsideration of this Courts
Resolution. This, We cannot do in as much as the rule is very specific on the matter of
filing of petitions under Rule 65. Petitioner must be reminded that justice must not only
be served for the latter but also for the respondents.[23]
Hence, the petition for review at bar, petitioner contending that the above resolutions of
the CA are not in accord with law and applicable jurisprudence.
Banking on a liberal interpretation of the Rules of Court, petitioner asserts that mere
technicalities should be set aside in the interest of substantial justice in view of its
highly meritorious case.
The Rules of Court and prevailing jurisprudence are not on petitioners side.
Under Section 4 of Rule 65[24] of the 1997 Revised Rules of Court, certiorari should be
instituted within a period of sixty (60) days from notice of the judgment, order or
resolution sought to be assailed.
The 60-day period is deemed reasonable and sufficient time for a party to mull over and
to prepare a petition asserting grave abuse of discretion by a lower court. The period
was specifically set to avoid any unreasonable delay that would violate the constitutional
rights of parties to a speedy disposition of their case. For these reasons, the 60-day-
period ought to be considered inextendible.[25] (Underscoring supplied)
Rules of procedure prescribing the time within which certain acts must be done, or
certain proceedings taken, are absolutely indispensable to the prevention of needless
delays and the orderly and speedy discharge of judicial business. Strict compliance
therewith is thus mandatory and imperative.[26]
Rules of procedure may, however, be relaxed for the most persuasive of reasons.
x x x A party who seeks to avail of the extraordinary remedy of certiorari must observe the
rules laid down by law, and non-observance of the said rules may not be brushed aside as
mere technicality.
It is true that a litigation is not a game of technicalities and that the rules of procedure
should not be strictly enforced at the cost of substantial justice. However, it does not mean
that the Rules of Court may be ignored at will and at random to the prejudice of the orderly
presentation and assessment of the issues and their just resolution. It must be emphasized
that procedural rules should not be belittled or dismissed simply because their non-
19
observance may have resulted in prejudice to a partys substantial rights. Like all rules, they
are required to be followed except only for the most persuasive of reasons.[27] (Emphasis
and underscoring supplied)
Concomitant to a liberal application of such rules should be an effort on the part of the party
invoking liberality to at least proffer a reason for its failure to comply therewith.[28]
Petitioner has proffered none such, however. The general rule must thus stand. For utter
disregard of the rules cannot justly be rationalized by merely harking on the policy of liberal
construction.[29]
WHEREFORE, the assailed Resolutions of the Court of Appeals dated June 13, 2000 and November 14,
2000 are hereby AFFIRMED. The instant petition is hereby DENIED. SO ORDERED.

G.R. No. 183965 September 18, 2009

JOANIE SURPOSA UY, Petitioner,

vs.
JOSE NGO CHUA, Respondent.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review under Rule 45 of the Rules of Court assailing the Resolution dated
25 June 2008 of the Regional Trial Court (RTC) of Cebu City, Branch 24, which granted the
demurrer to evidence of respondent Jose Ngo Chua, resulting in the dismissal of Special
Proceeding No. 12562-CEB.

Petitioner Joanie Surposa Uy filed on 27 October 2003 before the RTC a Petition1 for the issuance
of a decree of illegitimate filiation against respondent. The Complaint was docketed as Special
Proceeding No. 12562-CEB, assigned to RTC-Branch 24.

Petitioner alleged in her Complaint that respondent, who was then married, had an illicit
relationship with Irene Surposa (Irene). Respondent and Irene had two children, namely,
petitioner and her brother, Allan. Respondent attended to Irene when the latter was giving birth to
petitioner on 27 April 1959, and instructed that petitioner’s birth certificate be filled out with the
following names: "ALFREDO F. SURPOSA" as father and "IRENE DUCAY" as mother. Actually,
Alfredo F. Surposa was the name of Irene’s father, and Ducay was the maiden surname of Irene’s
mother. Respondent financially supported petitioner and Allan. Respondent had consistently and
regularly given petitioner allowances before she got married. He also provided her with
employment. When petitioner was still in high school, respondent required her to work at the Cebu
Liberty Lumber, a firm owned by his family. She was later on able to work at the Gaisano-
Borromeo Branch through respondent’s efforts. Petitioner and Allan were introduced to each other
and became known in the Chinese community as respondent’s illegitimate children. During
petitioner’s wedding, respondent sent his brother Catalino Chua (Catalino) as his representative,
and it was the latter who acted as father of the bride. Respondent’s relatives even attended the
baptism of petitioner’s daughter.2

In his Answer3 to the Complaint, filed on 9 December 2003, respondent denied that he had an
illicit relationship with Irene, and that petitioner was his daughter. 4 Hearings then ensued during
which petitioner testified that respondent was the only father she knew; that he took care of all
her needs until she finished her college education; and that he came to visit her on special family
occasions. She also presented documentary evidence to prove her claim of illegitimate filiation.
Subsequently, on 27 March 2008, respondent filed a Demurrer to Evidence5 on the ground that
20
the Decision dated 21 February 2000 of RTC-Branch 9 in Special Proceeding No. 8830-CEB had
already been barred by res judicata in Special Proceeding No. 12562-CEB before RTC-Branch
24.

It turned out that prior to instituting Special Proceeding No. 12562-CEB on 27 October 2003,
petitioner had already filed a similar Petition for the issuance of a decree of illegitimate affiliation
against respondent. It was docketed as Special Proceeding No. 8830-CEB, assigned to RTC-
Branch 9. Petitioner and respondent eventually entered into a Compromise Agreement in Special
Proceeding No. 8830-CEB, which was approved by RTC-Branch 9 in a Decision6 dated 21
February 2000. The full contents of said Decision reads:

Under consideration is a Compromise Agreement filed by the parties on February 18, 2000,
praying that judgment be rendered in accordance therewith, the terms and conditions of which
follows:

"1. Petitioner JOANIE SURPOSA UY declares, admits and acknowledges that there is no
blood relationship or filiation between petitioner and her brother Allan on one hand and
[herein respondent] JOSE NGO CHUA on the other. This declaration, admission or
acknowledgement is concurred with petitioner’s brother Allan, who although not a party to
the case, hereby affixes his signature to this pleading and also abides by the declaration
herein.

2. As a gesture of goodwill and by way of settling petitioner and her brother’s (Allan) civil,
monetary and similar claims but without admitting any liability, [respondent] JOSE NGO
CHUA hereby binds himself to pay the petitioner the sum of TWO MILLION PESOS
(P2,000,000.00) and another TWO MILLION PESOS (P2,000,000.00) to her brother,
ALLAN SURPOSA. Petitioner and her brother hereby acknowledge to have received in
full the said compromise amount.

3. Petitioner and her brother (Allan) hereby declare that they have absolutely no more
claims, causes of action or demands against [respondent] JOSE NGO CHUA, his heirs,
successors and assigns and/or against the estate of Catalino Chua, his heirs, successors
and assigns and/or against all corporations, companies or business enterprises including
Cebu Liberty Lumber and Joe Lino Realty Investment and Development Corporation
where defendant JOSE NGO CHUA or CATALINO NGO CHUA may have interest or
participation.

4. [Respondent] JOSE NGO CHUA hereby waives all counterclaim or counter-demand

with respect to the subject matter of the present petition.

5. Pursuant to the foregoing, petitioner hereby asks for a judgment for the permanent
dismissal with prejudice of the captioned petition. [Respondent] also asks for a judgment
permanently dismissing with prejudice his counterclaim."

Finding the said compromise agreement to be in order, the Court hereby approves the same.
Judgment is rendered in accordance with the provisions of the compromise agreement. The
parties are enjoined to comply with their respective undertakings embodied in the agreement.7

With no appeal having been filed therefrom, the 21 February 2000 Decision of RTC-Branch 9 in
Special Proceeding 8830-CEB was declared final and executory.

21
Petitioner filed on 15 April 2008 her Opposition8 to respondent’s Demurrer to Evidence in Special
Proceeding No. 12562-CEB. Thereafter, RTC-Branch 24 issued its now assailed Resolution dated
25 June 2008 in Special Proceeding No. 12562-CEB, granting respondent’s Demurrer.

RTC-Branch 24 summarized the arguments of respondent and petitioner in the Demurrer and
Opposition, respectively, as follows:

This is to resolve the issues put across in the Demurrer to the Evidence submitted to this Court;
the Opposition thereto; the Comment on the Opposition and the Rejoinder to the Comment.

xxxx

1. The instant case is barred by the principle of res judicata because there was a judgment
entered based on the Compromise Agreement approved by this multiple-sala Court,
branch 09, on the same issues and between the same parties.

2. That such decision of Branch 09, having attained finality, is beyond review, reversal or
alteration by another Regional Trial Court and not even the Supreme Court, no matter how
erroneous.

3. Judicial Admissions or admission in petitioner’s pleadings to the effect that there is no

blood relationship between petitioner and respondent, which is a declaration against
interest, are conclusive on her and she should not be permitted to falsify.

4. That the Certificate of Live Birth showing that petitioner’s father is Alfredo Surposa is a
public document which is the evidence of the facts therein stated, unless corrected by
judicial order.

5. After receiving the benefits and concessions pursuant to their compromise agreement,
she is estopped from refuting on the effects thereof to the prejudice of the [herein
respondent].

The summary of the Opposition is in this wise:

1. That the illegitimate filiation of petitioner to respondent is established by the open, and
continuous possession of the status of an illegitimate child.

2. The Demurrer to the evidence cannot set up the affirmative grounds for a Motion to
Dismiss.

3. The question on the civil status, future support and future legitime can not be subject to
compromise.

4. The decision in the first case does not bar the filing of another action asking for the
same relief against the same defendant.9

Taking into consideration the aforementioned positions of the parties, RTC-Branch 24 held that:

Looking at the issues from the viewpoint of a judge, this Court believes that its hands are tied.
Unless the Court of Appeals strikes down the Compromise Judgment rendered by Branch 09 of
the Regional Trial Court of Cebu City, this Court will not attempt to vacate, much more annul, that
Judgment issued by a co-equal court, which had long become final and executory, and in fact
executed.
22
This court upholds the Policy of Judicial Stability since to do otherwise would result in patent
abuse of judicial discretion amounting to lack of jurisdiction. The defense of lack of jurisdiction
cannot be waived. At any rate, such is brought forth in the Affirmative Defenses of the Answer.

This Court, saddled with many cases, suffers the brunt of allowing herein case involving same
parties to re-litigate on the same issues already closed.10

In the end, RTC-Branch 24 decreed:

WHEREFORE, in view of the foregoing, the Demurrer to the Evidence is hereby given due course,
as the herein case is hereby ordered DISMISSED.11

RTC-Branch 24 denied petitioner’s Motion for Reconsideration12 in a Resolution13 dated 29 July

2008.

Petitioner then filed the instant Petition raising the following issues for resolution of this Court:

Whether or not the principle of res judicata is applicable to judgments predicated upon a
compromise agreement on cases enumerated in Article 2035 of the Civil Code of the Philippines;

II

Whether or not the compromise agreement entered into by the parties herein before the Regional
Trial Court, Branch 09 of Cebu City effectively bars the filing of the present case.14

At the outset, the Court notes that from the RTC Resolution granting respondent’s Demurrer to
Evidence, petitioner went directly to this Court for relief. This is only proper, given that petitioner
is raising pure questions of law in her instant Petition.a1f

Section 1, Rule 45 of the Rules of Court provides:

SECTION 1. Filing of petition with Supreme Court. – A party desiring to appeal by certiorari from
a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional
Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified
petition for review on certiorari. The petition shall raise only questions of law which must be
distinctly set forth.

Clearly, a party may directly appeal to this Court from a decision or final order or resolution of the
trial court on pure questions of law. A question of law lies, on one hand, when the doubt or
difference arises as to what the law is on a certain set of facts; a question of fact exists, on the
other hand, when the doubt or difference arises as to the truth or falsehood of the alleged facts.
Here, the facts are not disputed; the controversy merely relates to the correct application of the
law or jurisprudence to the undisputed facts.15

The central issue in this case is whether the Compromise Agreement entered into between
petitioner and respondent, duly approved by RTC-Branch 9 in its Decision dated 21 February
2000 in Special Proceeding No. 8830-CEB, constitutes res judicata in Special Proceeding No.
12562-CEB still pending before RTC-Branch 24.1avvphi1

The doctrine of res judicata is a rule that pervades every well- regulated system of jurisprudence
and is founded upon two grounds embodied in various maxims of the common law, namely: (1)
23
public policy and necessity, which makes it in the interest of the State that there should be an end
to litigation, interest reipublicae ut sit finis litium, and (2) the hardship of the individual that he
should be vexed twice for the same cause, nemo debet bis vexari pro eadem causa.16

For res judicata, to serve as an absolute bar to a subsequent action, the following requisites must
concur: (1) there must be a final judgment or order; (2) the court rendering it must have jurisdiction
over the subject matter and the parties; (3) it must be a judgment or order on the merits; and (4)
there must be, between the two cases, identity of parties, subject matter, and causes of action.17

It is undeniable that Special Proceeding No. 8830-CEB, previously before RTC-Branch 9, and
Special Proceeding No. 12562-CEB, presently before RTC-Branch 24, were both actions for the
issuance of a decree of illegitimate filiation filed by petitioner against respondent. Hence, there is
apparent identity of parties, subject matter, and causes of action between the two cases.
However, the question arises as to whether the other elements of res judicata exist in this case.

The court rules in the negative.

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a

litigation or put an end to one already commenced.18 In Estate of the late Jesus S. Yujuico v.
Republic,19 the Court pronounced that a judicial compromise has the effect of res judicata. A
judgment based on a compromise agreement is a judgment on the merits.

It must be emphasized, though, that like any other contract, a compromise agreement must
comply with the requisites in Article 1318 of the Civil Code, to wit: (a) consent of the contracting
parties; (b) object certain that is the subject matter of the contract; and (c) cause of the obligation
that is established. And, like any other contract, the terms and conditions of a compromise
agreement must not be contrary to law, morals, good customs, public policy and public order. Any
compromise agreement that is contrary to law or public policy is null and void, and vests no rights
in and holds no obligation for any party. It produces no legal effect at all.20

In connection with the foregoing, the Court calls attention to Article 2035 of the Civil Code, which
states:

ART. 2035. No compromise upon the following questions shall be valid:

(1) The civil status of persons;

(2) The validity of a marriage or a legal separation;

(3) Any ground for legal separation;

(4) Future support;

(5) The jurisdiction of courts;

(6) Future legitime. (Emphases ours.)

The Compromise Agreement between petitioner and respondent, executed on 18 February 2000
and approved by RTC-Branch 9 in its Decision dated 21 February 2000 in Special Proceeding
No. 8830-CEB, obviously intended to settle the question of petitioner’s status and filiation, i.e.,
whether she is an illegitimate child of respondent. In exchange for petitioner and her brother Allan
acknowledging that they are not the children of respondent, respondent would pay petitioner and
Allan P2,000,000.00 each. Although unmentioned, it was a necessary consequence of said
24
Compromise Agreement that petitioner also waived away her rights to future support and future
legitime as an illegitimate child of respondent. Evidently, the Compromise Agreement dated 18
February 2000 between petitioner and respondent is covered by the prohibition under Article 2035
of the Civil Code.

Advincula v. Advincula21 has a factual background closely similar to the one at bar. Manuela
Advincula (Manuela) filed, before the Court of First Instance (CFI) of Iloilo, Civil Case No. 3553
for acknowledgment and support, against Manuel Advincula (Manuel). On motion of both parties,
said case was dismissed. Not very long after, Manuela again instituted, before the same court,
Civil Case No. 5659 for acknowledgment and support, against Manuel. This Court declared that
although Civil Case No. 3553 ended in a compromise, it did not bar the subsequent filing by
Manuela of Civil Case No. 5659, asking for the same relief from Manuel. Civil Case No. 3553 was
an action for acknowledgement, affecting a person’s civil status, which cannot be the subject of
compromise.

It is settled, then, in law and jurisprudence, that the status and filiation of a child cannot be
compromised. Public policy demands that there be no compromise on the status and filiation of a
child.22 Paternity and filiation or the lack of the same, is a relationship that must be judicially
established, and it is for the Court to declare its existence or absence. It cannot be left to the will
or agreement of the parties.23

Being contrary to law and public policy, the Compromise Agreement dated 18 February 2000
between petitioner and respondent is void ab initio and vests no rights and creates no obligations.
It produces no legal effect at all. The void agreement cannot be rendered operative even by the
parties' alleged performance (partial or full) of their respective prestations.24

Neither can it be said that RTC-Branch 9, by approving the Compromise Agreement, in its
Decision dated 21 February 2000 in Special Proceeding No. 8830-CEB, already made said
contract valid and legal. Obviously, it would already be beyond the jurisdiction of RTC-Branch 9
to legalize what is illegal. RTC-Branch 9 had no authority to approve and give effect to a
Compromise Agreement that was contrary to law and public policy, even if said contract was
executed and submitted for approval by both parties. RTC-Branch 9 would not be competent,
under any circumstances, to grant the approval of the said Compromise Agreement. No court can
allow itself to be used as a tool to circumvent the explicit prohibition under Article 2035 of the Civil
Code. The following quote in Francisco v. Zandueta25 is relevant herein:

It is a universal rule of law that parties cannot, by consent, give a court, as such, jurisdiction in a
matter which is excluded by the laws of the land. In such a case the question is not whether a
competent court has obtained jurisdiction of a party triable before it, but whether the court itself is
competent under any circumstances to adjudicate a claim against the defendant. And where there
is want of jurisdiction of the subject-matter, a judgment is void as to all persons, and consent of
parties can never impart to it the vitality which a valid judgment derives from the sovereign state,
the court being constituted, by express provision of law, as its agent to pronounce its decrees in
controversies between its people. (7 R. C. L., 1039.)

A judgment void for want of jurisdiction is no judgment at all. It cannot be the source of any right
or the creator of any obligation. All acts performed pursuant to it and all claims emanating from it
have no legal effect. Hence, it can never become final, and any writ of execution based on it is
void. It may be said to be a lawless thing that can be treated as an outlaw and slain on sight, or
ignored wherever and whenever it exhibits its head.26

In sum, Special Proceeding No. 12562-CEB before RTC-Branch 24 is not barred by res judicata,
since RTC-Branch 9 had no jurisdiction to approve, in its Decision dated 21 February 2000 in
Special Proceeding No. 8830-CEB, petitioner and respondent’s Compromise Agreement, which
25
was contrary to law and public policy; and, consequently, the Decision dated 21 February 2000
in Special Proceeding No. 8830-CEB, being null and void for having been rendered by RTC-
Branch 9 without jurisdiction, could not have attained finality or been considered a judgment on
the merits.

Nevertheless, the Court must clarify that even though the Compromise Agreement between
petitioner and respondent is void for being contrary to law and public policy, the admission
petitioner made therein may still be appreciated against her in Special Proceeding No. 12562-
CEB. RTC-Branch 24 is only reminded that while petitioner’s admission may have evidentiary
value, it does not, by itself, conclusively establish the lack of filiation.27

Proceeding from its foregoing findings, the Court is remanding this case to the RTC-Branch 24
for the continuation of hearing on Special Proceedings No. 12562-CEB, more particularly, for
respondent’s presentation of evidence.

Although respondent’s pleading was captioned a Demurrer to Evidence, it was more appropriately
a Motion to Dismiss on the ground of res judicata.

Demurrer to Evidence is governed by Rule 33 of the Rules of Court, Section 1 of which is

reproduced in full below:

SECTION 1. Demurrer to evidence. – After the plaintiff has completed the presentation of his
evidence, the defendant may move for dismissal on the ground that upon the facts and the law
the plaintiff has shown no right to relief. If his motion is denied, he shall have the right to present
evidence. If the motion is granted but on appeal the order of dismissal is reversed he shall be
deemed to have waived the right to present evidence.

Demurrer to evidence authorizes a judgment on the merits of the case without the defendant
having to submit evidence on his part, as he would ordinarily have to do, if plaintiff's evidence
shows that he is not entitled to the relief sought. Demurrer, therefore, is an aid or instrument for
the expeditious termination of an action, similar to a motion to dismiss, which the court or tribunal
may either grant or deny.28

The Court has recently established some guidelines on when a demurrer to evidence should be
granted, thus:

A demurrer to evidence may be issued when, upon the facts and the law, the plaintiff has shown
no right to relief. Where the plaintiff's evidence together with such inferences and conclusions as
may reasonably be drawn therefrom does not warrant recovery against the defendant, a demurrer
to evidence should be sustained. A demurrer to evidence is likewise sustainable when, admitting
every proven fact favorable to the plaintiff and indulging in his favor all conclusions fairly and
reasonably inferable therefrom, the plaintiff has failed to make out one or more of the material
elements of his case, or when there is no evidence to support an allegation necessary to his claim.
It should be sustained where the plaintiff's evidence is prima facie insufficient for a recovery.29

The essential question to be resolved in a demurrer to evidence is whether petitioner has been
able to show that she is entitled to her claim, and it is incumbent upon RTC-Branch 24 to make
such a determination. A perusal of the Resolution dated 25 June 2008 of RTC-Branch 24 in
Special Proceeding No. 12562-CEB shows that it is barren of any discussion on this matter. It did
not take into consideration any of the evidence presented by petitioner. RTC-Branch 24 dismissed
Special Proceedings No. 12562-CEB on the sole basis of res judicata, given the Decision dated
21 February 2000 of RTC-Branch 9 in Special Proceeding No. 8830-CEB, approving the
Compromise Agreement between petitioner and respondent. Hence, the Resolution dated 25

26
June 2008 of RTC-Branch 24 should be deemed as having dismissed Special Proceeding No.
12562-CEB on the ground of res judicata rather than an adjudication on the merits of respondent’s
demurrer to evidence. Necessarily, the last line of Section 1, Rule 33 of the Rules of Court should
not apply herein and respondent should still be allowed to present evidence before RTC-Branch
24 in Special Proceedings No. 12562-CEB.

It must be kept in mind that substantial justice must prevail. When there is a strong showing that
grave miscarriage of justice would result from the strict application of the Rules, this Court will not
hesitate to relax the same in the interest of substantial justice. The Rules of Court were conceived
and promulgated to set forth guidelines in the dispensation of justice but not to bind and chain the
hand that dispenses it, for otherwise, courts will be mere slaves to or robots of technical rules,
shorn of judicial discretion. That is precisely why courts in rendering real justice have always
been, as they in fact ought to be, conscientiously guided by the norm that when on the balance,
technicalities take backseat against substantive rights, and not the other way around.30

WhereforE, premises considered, the Resolution dated 25 June 2008 of the Regional Trial Court
of Cebu City, Branch 24, in Special Proceeding No. 12562-CEB is REVERSED and set aside.
This case is ordered REMANDED to the said trial court for further proceedings in accordance with
the ruling of the Court herein. No costs.

SO ORDERED.

27
G.R. No. 174975 January 20, 2009

LUISA KHO MONTAÑER, ALEJANDRO MONTAÑER, JR., LILLIBETH MONTAÑER-

BARRIOS, AND RHODORA ELEANOR MONTAÑER-DALUPAN, Petitioners,
vs.
SHARI'A DISTRICT COURT, FOURTH SHARI'A JUDICIAL DISTRICT, MARAWI CITY, LILING
DISANGCOPAN, AND ALMAHLEEN LILING S. MONTAÑER, Respondents.

DECISION

PUNO, C.J.:

This Petition for Certiorari and Prohibition seeks to set aside the Orders of the Shari’a District
Court, Fourth Shari’a Judicial District, Marawi City, dated August 22, 20061 and September 21,
2006.2

On August 17, 1956, petitioner Luisa Kho Montañer, a Roman Catholic, married Alejandro
Montañer, Sr. at the Immaculate Conception Parish in Cubao, Quezon City.3 Petitioners Alejandro
Montañer, Jr., Lillibeth Montañer-Barrios, and Rhodora Eleanor Montañer-Dalupan are their
children.4 On May 26, 1995, Alejandro Montañer, Sr. died.5

On August 19, 2005, private respondents Liling Disangcopan and her daughter, Almahleen Liling
S. Montañer, both Muslims, filed a "Complaint" for the judicial partition of properties before the
Shari’a District Court.6 The said complaint was entitled "Almahleen Liling S. Montañer and Liling
M. Disangcopan v. the Estates and Properties of Late Alejandro Montañer, Sr., Luisa Kho
Montañer, Lillibeth K. Montañer, Alejandro Kho Montañer, Jr., and Rhodora Eleanor K. Montañer,"
and docketed as "Special Civil Action No. 7-05."7 In the said complaint, private respondents made
the following allegations: (1) in May 1995, Alejandro Montañer, Sr. died; (2) the late Alejandro
Montañer, Sr. is a Muslim; (3) petitioners are the first family of the decedent; (4) Liling
Disangcopan is the widow of the decedent; (5) Almahleen Liling S. Montañer is the daughter of
the decedent; and (6) the estimated value of and a list of the properties comprising the estate of
the decedent.8 Private respondents prayed for the Shari’a District Court to order, among others,
the following: (1) the partition of the estate of the decedent; and (2) the appointment of an
administrator for the estate of the decedent.9

Petitioners filed an Answer with a Motion to Dismiss mainly on the following grounds: (1) the
Shari’a District Court has no jurisdiction over the estate of the late Alejandro Montañer, Sr.,
because he was a Roman Catholic; (2) private respondents failed to pay the correct amount of
docket fees; and (3) private respondents’ complaint is barred by prescription, as it seeks to
establish filiation between Almahleen Liling S. Montañer and the decedent, pursuant to Article
175 of the Family Code.10

28
On November 22, 2005, the Shari’a District Court dismissed the private respondents’ complaint.
The district court held that Alejandro Montañer, Sr. was not a Muslim, and its jurisdiction extends
only to the settlement and distribution of the estate of deceased Muslims.11

On December 12, 2005, private respondents filed a Motion for Reconsideration.12 On December
28, 2005, petitioners filed an Opposition to the Motion for Reconsideration, alleging that the
motion for reconsideration lacked a notice of hearing.13 On January 17, 2006, the Shari’a District
Court denied petitioners’ opposition.14 Despite finding that the said motion for reconsideration
"lacked notice of hearing," the district court held that such defect was cured as petitioners "were
notified of the existence of the pleading," and it took cognizance of the said motion.15 The Shari’a
District Court also reset the hearing for the motion for reconsideration.16

In its first assailed order dated August 22, 2006, the Shari’a District Court reconsidered its order
of dismissal dated November 22, 2005.17 The district court allowed private respondents to adduce
further evidence.18 In its second assailed order dated September 21, 2006, the Shari’a District
Court ordered the continuation of trial, trial on the merits, adducement of further evidence, and
pre-trial conference.19

Seeking recourse before this Court, petitioners raise the following issues:

I.

RESPONDENT SHARI’A DISTRICT COURT – MARAWI CITY LACKS JURISDICTION OVER

PETITIONERS WHO ARE ROMAN CATHOLICS AND NON-MUSLIMS.

II.

RESPONDENT SHARI’A DISTRICT COURT – MARAWI CITY DID NOT ACQUIRE

JURISDICTION OVER "THE ESTATES AND PROPERTIES OF THE LATE ALEJANDRO
MONTAÑER, SR." WHICH IS NOT A NATURAL OR JURIDICAL PERSON WITH CAPACITY TO
BE SUED.

III.

RESPONDENT SHARI’A DISTRICT COURT DID NOT ACQUIRE JURISDICTION OVER THE
COMPLAINT OF PRIVATE RESPONDENTS AGAINST PETITIONERS DUE TO NON-
PAYMENT OF THE FILING AND DOCKETING FEES.

IV.

RESPONDENT SHARI’A DISTRICT COURT—MARAWI CITY COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT DENIED THE
OPPOSITION OF PETITIONERS AND THEN GRANTED THE MOTION FOR
RECONSIDERATION OF RESPONDENTS LILING DISANGCOPAN, ET AL. WHICH WAS
FATALLY DEFECTIVE FOR LACK OF A "NOTICE OF HEARING."

V.

RESPONDENT SHARI’A DISTRICT COURT—MARAWI CITY COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT SET SPL. CIVIL ACTION
7-05 FOR TRIAL EVEN IF THE COMPLAINT PLAINLY REVEALS THAT RESPONDENT
ALMAHLEEN LILING S. MONTAÑER SEEKS RECOGNITION FROM ALEJANDRO

29
MONTAÑER, SR. WHICH CAUSE OF ACTION PRESCRIBED UPON THE DEATH OF
ALEJANDRO MONTAÑER, SR. ON MAY 26, 1995.

In their Comment to the Petition for Certiorari, private respondents stress that the Shari’a District
Court must be given the opportunity to hear and decide the question of whether the decedent is
a Muslim in order to determine whether it has jurisdiction.20

Jurisdiction: Settlement of the Estate of Deceased Muslims

Petitioners’ first argument, regarding the Shari’a District Court’s jurisdiction, is dependent on a
question of fact, whether the late Alejandro Montañer, Sr. is a Muslim. Inherent in this argument
is the premise that there has already been a determination resolving such a question of fact. It
bears emphasis, however, that the assailed orders did not determine whether the decedent is a
Muslim. The assailed orders did, however, set a hearing for the purpose of resolving this issue.

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

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

xxxx

(b) All cases involving disposition, distribution and settlement of the estate of deceased Muslims,
probate of wills, issuance of letters of administration or appointment of administrators or executors
regardless of the nature or the aggregate value of the property.

The determination of the nature of an action or proceeding is controlled by the averments and
character of the relief sought in the complaint or petition.21 The designation given by parties to
their own pleadings does not necessarily bind the courts to treat it according to the said
designation. Rather than rely on "a falsa descriptio or defective caption," courts are "guided by
the substantive averments of the pleadings."22

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

We cannot agree with the contention of the petitioners that the district court does not have
jurisdiction over the case because of an allegation in their answer with a motion to dismiss that
Montañer, Sr. is not a Muslim. Jurisdiction of a court over the nature of the action and its subject
matter does not depend upon the defenses set forth in an answer25 or a motion to dismiss.26
Otherwise, jurisdiction would depend almost entirely on the defendant27 or result in having "a case
either thrown out of court or its proceedings unduly delayed by simple stratagem. 28 Indeed, the

30
"defense of lack of jurisdiction which is dependent on a question of fact does not render the court
to lose or be deprived of its jurisdiction."29

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

Special Proceedings

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

Petitioners’ argument, that the prohibition against a decedent or his estate from being a party
defendant in a civil action33 applies to a special proceeding such as the settlement of the estate
of the deceased, is misplaced. Unlike a civil action which has definite adverse parties, a special
proceeding has no definite adverse party. The definitions of a civil action and a special
proceeding, respectively, in the Rules illustrate this difference. A civil action, in which "a party
sues another for the enforcement or protection of a right, or the prevention or redress of a wrong" 34
necessarily has definite adverse parties, who are either the plaintiff or defendant.35 On the other
hand, a special proceeding, "by which a party seeks to establish a status, right, or a particular
fact,"36 has one definite party, who petitions or applies for a declaration of a status, right, or
particular fact, but no definite adverse party. In the case at bar, it bears emphasis that the estate
of the decedent is not being sued for any cause of action. As a special proceeding, the purpose
of the settlement of the estate of the decedent is to determine all the assets of the estate, 37 pay
its liabilities,38 and to distribute the residual to those entitled to the same.39

Docket Fees

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

31
Filing the appropriate initiatory pleading and the payment of the prescribed docket fees vest a trial
court with jurisdiction over the subject matter.40 If the party filing the case paid less than the correct
amount for the docket fees because that was the amount assessed by the clerk of court, the
responsibility of making a deficiency assessment lies with the same clerk of court. 41 In such a
case, the lower court concerned will not automatically lose jurisdiction, because of a party’s
reliance on the clerk of court’s insufficient assessment of the docket fees.42 As "every citizen has
the right to assume and trust that a public officer charged by law with certain duties knows his
duties and performs them in accordance with law," the party filing the case cannot be penalized
with the clerk of court’s insufficient assessment.43 However, the party concerned will be required
to pay the deficiency.44

In the case at bar, petitioners did not present the clerk of court’s assessment of the docket fees.
Moreover, the records do not include this assessment. There can be no determination of whether
private respondents correctly paid the docket fees without the clerk of court’s assessment.

Exception to Notice of Hearing

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

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

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

Prescription and Filiation

32
Petitioners’ fifth argument is premature. Again, the Shari’a District Court has not yet determined
whether it has jurisdiction to settle the estate of the decedent. In the event that a special
proceeding for the settlement of the estate of a decedent is pending, questions regarding heirship,
including prescription in relation to recognition and filiation, should be raised and settled in the
said proceeding.54 The court, in its capacity as a probate court, has jurisdiction to declare who are
the heirs of the decedent.55 In the case at bar, the determination of the heirs of the decedent
depends on an affirmative answer to the question of whether the Shari’a District Court has
jurisdiction over the estate of the decedent.

IN VIEW WHEREOF, the petition is DENIED. The Orders of the Shari’a District Court, dated
August 22, 2006 and September 21, 2006 respectively, are AFFIRMED. Cost against petitioners.

SO ORDERED.

G.R. No. 169942 January 24, 2011

BARANGAY DASMARIÑAS thru BARANGAY CAPTAIN MA. ENCARNACION R. LEGASPI,

Petitioner,
vs.
CREATIVE PLAY CORNER SCHOOL, DR. AMADO J. PIAMONTE, REGINA PIAMONTE
TAMBUNTING, CELINE CONCEPCION LEBRON and CECILE CUNA COLINA, Respondents.

DECISION

DEL CASTILLO, J.:

"Utter disregard of [the rules of procedure] cannot justly be rationalized by harking on the policy
of liberal construction."1

This Petition for Review on Certiorari assails the Resolution2 dated July 21, 2005 of the Court of
Appeals (CA) in CA-G.R. SP No. 89723 denying petitioner’s Second Motion for Extension of Time
to File Petition for Review and consequently dismissing the Petition for Review for having been
filed beyond the period allowed by the Rules of Court. Likewise assailed is the Resolution3 dated
September 29, 2005 denying the Motion for Reconsideration thereto.

Factual Antecedents

On June 28, 2004, petitioner Barangay Dasmariñas thru Ma. Encarnacion R. Legaspi (Legaspi)
filed a Complaint-Affidavit4 before the Office of the Prosecutor of Makati docketed as I.S. No. 04-
F-10389, charging respondent Creative Play Corner School (CPC) and its alleged owners,
respondents Dr. Amado J. Piamonte (Piamonte), Regina Piamonte Tambunting (Tambunting),
Celine Concepcion Lebron (Lebron) and Cecille Cuna Colina (Colina) with Falsification and Use
of Falsified Documents. Petitioner alleged that respondents falsified and used the Barangay
Clearance and Official Receipt purportedly issued in the name of CPC by the Office of the
Barangay Captain of Dasmariñas Village, Makati City of which Lepaspi was Barangay Captain.

In their Counter-Affidavit,5 Lebron and Colina denied having falsified the subject documents. They
averred that petitioner's assertion that they were owners of CPC is a mere allegation without
proof. They also pointed out that the complaint neither shows any operative act committed by any
of the respondents in perpetrating the crime charged nor identified who among them actually
committed it. They thus insisted that no probable cause exists to warrant their indictment for the
offense charged. For their part, Tambunting and Piamonte in their respective Counter-Affidavits6
affirmed the arguments made by Lebron and Colina. In addition, Tambunting alleged that the
33
subject documents were not received by any relevant office while Piamonte claimed that he had
no participation whatsoever in the operation of CPC. Both of them averred that petitioner was not
able to discharge its burden of presenting sufficient evidence to support the belief that they
committed the crime charged.

Ruling of the Prosecutor

In a Resolution7 dated September 29, 2004, Assistant City Prosecutor Carolina Esguerra-Ochoa
(Prosecutor Ochoa) recommended the dismissal of the case because of failure to establish
probable cause. Prosecutor Ochoa noted the absence of any finding from pertinent police
laboratory tests and/or law enforcement agency confirming that the subject documents were
indeed falsified, forged or tampered or if so, that respondents were the ones who falsified, forged
or tampered the same. Prosecutor Ochoa concluded that petitioner failed to show any cause
which would engender the belief that respondents are probably guilty of the offense charged.

City Prosecutor Feliciano Aspi approved the Resolution and released the same on November 4,
2004.

Petitioner thus brought the case before the Department of Justice (DOJ) through a Petition for
Review.

Ruling of the Department of Justice

Petitioner refuted the prosecutor’s finding of lack of probable cause. It claimed that since it was
Legaspi's signature which was forged, she was in the best position to attest to the fact of
falsification and therefore her affidavit speaks volumes. Petitioner likewise argued that the
documents attached to the complaint, i.e. sample format of Barangay Clearances legitimately
issued by the Office of the Barangay Captain showing Legaspi's signature and Certifications
regarding the allegation of tampered official receipt, were sufficient to support a finding of probable
cause. After all, a finding of probable cause does not mean conviction; it simply manifests that
there is sufficient evidence to procure a conviction. It is enough that it is believed that the act
complained of constitutes the offense charged. Thus, petitioner sought for the reversal and setting
aside of the Resolution of the Prosecution Office and prayed for the issuance of an order directing
it to cause the filing of the corresponding criminal information against respondents.

Respondents, on the other hand, basically reiterated the allegations in their respective counter-
affidavits and maintained that Prosecutor Ochoa did not err in holding that no probable cause
exists against them.

The DOJ, though, after finding that no error which would justify the reversal of the assailed
resolution was committed by Prosecutor Ochoa and that the petition was filed late, dismissed the
Petition for Review through a Resolution8 dated February 21, 2005. Petitioner filed a Motion for
Reconsideration9 thereto but same was also denied in a Resolution10 dated April 25, 2005.

Still unsatisfied, petitioner challenged this dismissal through a Petition for Review before the CA.

Ruling of the Court of Appeals

But before petitioner was able to file its petition, it first sought for an extension of time11 of 15 days
from May 13, 200512 or until May 28, 2005 within which to file the same due to counsel’s heavy
workload. The CA granted the extension in a Resolution13 dated May 23, 2005. Subsequently,
petitioner asked for another extension14 of five days from May 28, 2005 until June 2, 2005 for the
same reason given in its first motion for extension. However, petitioner filed the petition by mail
34
only on June 7, 2005.15 Because of these, the CA issued the following assailed Resolution of July
21, 2005:

In a Resolution dated May 23, 2005, this Court granted petitioner an additional period of fifteen
(15) days from May 13, 2005 or until May 28, 2005 within which to file its petition for review.
However, instead of filing its petition on May 28, 2005, petitioner filed [the] Second Motion for
Extension of Time to File Petition for Review requesting for an additional period of five days from
May 28, 2005 or until June 2, 2005 within which to file its petition for review.

Section 4, Rule 43 of the Rules of Court provides that we may grant an additional period of fifteen
(15) days only within which to file the petition for review and no further extension shall be granted
except for the most compelling reason. We do not find petitioner’s reason to be compelling to
grant another extension. In this second motion, petitioner gave the same reason it gave us in its
first motion for extension of time to file petition for review, i.e. pressures of other equally important
pleadings. The original period of fifteen days and the extension of fifteen days granted are not
unreasonable as they add up to thirty days within which petitioner can prepare, perfect and file its
petition.

In addition, records of the case show that petitioner filed its petition for review on June 7, 2005 or
five days late from the extension sought from us.

WHEREFORE, premises considered, we hereby DENY the ‘Second Motion for Extension of Time
to File Petition for Review’ and DISMISS the Petition for Review for having been filed beyond the
period allowed by the Revised Rules of Civil Procedure.

SO ORDERED.16

Petitioner filed a Motion for Reconsideration17 explaining therein that aside from the first and
second motions for extension, it also filed a Final Motion for Additional Time to File Petition for
Review18 asking for another five days from June 2, 2005 or until June 7, 2005 within which to file
the petition. This new request for extension was allegedly on account of a sudden death in the
family of the handling lawyer, Atty. Maria Katrina Bote-Veguillas (Atty. Bote-Veguillas). Thus,
petitioner argued that when the petition was filed on June 7, 2005, it was still within the period of
extension prayed for in said final motion for extension. At any rate, petitioner prayed that the CA
set aside rules of technicalities as it claimed that the slight delay in the filing of the petition did not
after all result to the prejudice of respondents. More importantly, it believed that the merits of the
case justify the relaxation of technical rules.

After respondents filed their Comment,19 the CA issued its September 29, 2005 Resolution20
denying the Motion for Reconsideration. The CA ratiocinated that while Section 4, Rule 43 of the
Rules of Court allows it a great leeway in the exercise of discretion in granting an additional period
of 15 days for filing a petition for review, said Rules, however, limit such discretion in the grant of
a second extension only to the most compelling reasons presented by the movant. And,
considering that the reason given by petitioner for the extension sought in its first and second
motions for extension, i.e. pressure and large volume of work of counsel, is, as held by
jurisprudence, not an excuse for filing a petition out of time, the CA was constrained to deny the
second motion for extension and consequently, dismiss the petition for review.

With respect to the final motion for extension, the CA gave three reasons for it to disregard the
same: First, a third extension is not authorized by the Rules of Court. Second, the reason given
for the extension sought was the sudden death of a relative of the handling lawyer Atty. Bote-
Veguillas. However, no details as to the degree of relationship between Atty. Bote-Veguillas and
the deceased was given for the court to determine whether such reason is indeed compelling.

35
Third, the reason given is not sufficiently persuasive because petitioner’s counsel of record is
Dela Vega Matta Bote-Veguillas and Associates Law Offices and not Atty. Bote-Veguillas alone.
This means that any member of the law firm could have prepared, perfected and filed the petition
for the law firm other than Atty. Bote-Veguillas if the latter has indeed gone through a personal
tragedy. The CA thus saw no reason to grant petitioner's Motion for Reconsideration.

This notwithstanding, petitioner still firmly believes that the case should have been resolved on
the merits and hence, it is now before this Court via this Petition for Review on Certiorari.

Issues

Petitioner advances the following grounds:

The Honorable Court of Appeals gravely erred in dismissing the Petition For Review on a mere
technicality, without considering the substantive grounds on which the Petition For Review was
based.

The Honorable Court of Appeals gravely erred in not considering that respondents’ rights had not
been prejudiced in any way by the short delay of ten days on account of the requests for extension
of time to file Petition for Review.

The Honorable Court of Appeals gravely erred when it dismissed the Petition for Review despite
the clear and categorical existence of probable cause that would justify the filing of criminal cases
against the respondents.21

Petitioner’s Arguments

Petitioner harps on the policy of liberal construction embodied in Section 6, Rule 1 of the Rules
of Court which provides that the rules shall be liberally construed in order to promote their object
and to assist the parties in obtaining just, speedy and inexpensive determination of every action.
It cites several jurisprudence22 where this Court set aside technical rules to give way to the merits
of the case. Petitioner notes that the CA in dismissing the petition merely focused on the technical
infirmity and did not even bother to take a look at its substance. Petitioner believes that if only the
CA examined the records of the case, it would find that the substantial merits of the case are
enough to override technical deficiencies. It likewise argues that Cosmo Entertainment
Management, Inc. v. La Ville Commercial Corporation23 relied upon by respondents does not
apply because although the Court dismissed the appeal in said case for having been filed beyond
the reglementary period and did not find "pressure of work on equally important cases" as
compelling reason to grant an extension of time to file the same, still the merits of the case were
nevertheless examined and considered.

Moreover, petitioner avers that even if the petition was filed 10 days beyond the extended period,
respondents have not been prejudiced in any way by such delay as they were free and not
detained. Petitioner also posits that since it received the CA’s resolution denying its Second
Motion for Extension on July 27, 2005 or after it has filed the Petition for Review and paid the
corresponding docket fees, such belated filing of the petition has already become moot and the
more equitable action of the CA should have been to admit the petition.

Lastly, petitioner believes that there is probable cause for the charge of falsification and use of
falsified documents against respondents and that it was able to discharge its burden of
establishing the same.1avvphi1

Respondents’ Arguments
36
Respondents find no error on the part of the CA in denying petitioner’s Second Motion for
Extension and in dismissing the petition. They cited Cosmo Entertainment Management, Inc. v.
La Ville Commercial Corporation24 wherein this Court held that "pressure of work on equally
important cases" is not a compelling reason to merit an extension of time. Besides, even assuming
that petitioner’s Second Motion for Extension was granted, respondents point out that the petition
was nevertheless filed beyond the period requested. With respect to petitioner's Final Motion for
Extension, the CA has already adequately explained the reasons why it cannot consider the
same.

Moreover, respondents call this Court’s attention to petitioner’s repeated transgression of

technical rules: first, before the DOJ where it belatedly filed thereat its petition for review and
again, before the CA. To respondents, petitioner's utter disregard of the rules should not be
countenanced and hence the Court must not excuse it from complying therewith.

Respondents also put forward the principle that the determination of probable cause is an
executive function and that as a matter of sound judicial policy, courts should refrain from
interfering in the conduct of investigation. It is precisely because of this principle that the DOJ has
a wide latitude of discretion in the determination of what constitutes sufficient evidence to
establish probable cause. This means that petitioner can assail the decision of the prosecuting
arm of the government only if the same is tainted with grave abuse of discretion. In this case,
however, it is clear that there is no grave abuse of discretion. As petitioner was not able to point
out any operative act committed by any of the respondents in perpetrating the crime charged or
when and who among them perpetrated it, the CA, therefore, was correct in dismissing the
petition. Finally, respondents argue that the issues raised are factual and hence cannot be passed
upon by this Court in this Petition for Review on Certiorari. In sum, respondents pray that the
present petition be dismissed and the assailed CA resolutions affirmed.

Our Ruling

We deny the petition.

Section 4, Rule 43 of the Rules of Court provides:

Section 4. Period of appeal. The appeal shall be taken within fifteen (15) days from notice of the
award, judgment, final order or resolution, or from the date of its last publication, if publication is
required by law for its effectivity, or of the denial of petitioner’s motion for new trial or
reconsideration duly filed in accordance with the governing law of the court or agency a quo. Only
one (1) motion for reconsideration shall be allowed. Upon proper motion and the payment of
the full amount of the docket fee before the expiration of the reglementary period, the Court
of Appeals may grant an additional period of fifteen (15) days only within which to file the
petition for review. No further extension shall be granted except for the most compelling
reason and in no case to exceed fifteen (15) days. (Emphasis supplied.)

From the above, it is clear that the CA, after it has already allowed petitioner an extension of 15
days within which to file a petition for review, may only grant a further extension when presented
with the most compelling reason but same is limited only to a period of 15 days. Thus, when the
CA denied petitioner’s Second Motion for Extension of five days, it was merely following the
abovementioned provision of the rules after it found the reason for the second extension as not
compelling. And, considering that the CA has already sufficiently explained how it was able to
arrive at the conclusion that there is no compelling reason for such second extension, we deem
it unnecessary to repeat the same especially since we are in total agreement with the ratiocination
of the CA.

37
As to petitioner’s invocation of liberal application of the rules, we cannot heed the same. "It is true
that litigation is not a game of technicalities and that the rules of procedure should not be strictly
followed in the interest of substantial justice. However, it does not mean that the Rules of Court
may be ignored at will. It bears emphasizing that procedural rules should not be belittled or
dismissed simply because their non-observance may have resulted in prejudice to a party’s
substantial rights. Like all rules, they are required to be followed except only for the most
persuasive of reasons."25

While petitioner cites several jurisprudence wherein this Court set aside procedural rules, an
imperative existed in those cases that warranted a liberal application of the rules. We have
examined the records of this case, however, and we are convinced that the present case is not
attended by such an imperative that justifies relaxation of the rules. Moreover, as pointed out by
respondents, petitioner had not only once transgressed procedural rules. This Court has
previously held that "[t]echnical rules may be relaxed only for the furtherance of justice and to
benefit the deserving."26 Petitioner’s low regard of procedural rules only shows that it is
undeserving of their relaxation.

Also, we cannot subscribe to petitioner’s argument that considering that no prejudice was caused
to respondents by the belated filing of the petition as the latter were free and not detained hence,
the CA should have just disregarded such belated filing. Likewise, the filing of the petition and
payment of the corresponding docket fees prior to petitioner’s receipt of the CA’s resolution
denying its Second Motion for Extension does not, contrary to petitioner’s position, render such
belated filing moot. If such would be the case, the delay in the delivery of court resolutions caused
by the limitations of postal service would serve as a convenient cover up for a pleading or a
motion’s belated filing. This would be contrary to the aim of procedural rules which is to secure
an effective and expeditious administration of justice.

Besides, even if the CA ignores the petition’s belated filing, the same would have been dismissed
for being an improper remedy. It has been held that "[t]he remedy of a party desiring to elevate to
the appellate court an adverse resolution of the Secretary of Justice is a petition for certiorari
under Rule 65. A Rule 43 petition for review is a wrong mode of appeal."27

With the foregoing, it is clear that the present petition is unworthy of this Court’s attention and
should be denied.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed Resolutions dated
July 21, 2005 and September 29, 2005 of the Court of Appeals in CA-G.R. SP No. 89723 are
AFFIRMED.

SO ORDERED.

38
G.R. No. 79899 April 24, 1989

D. ANNIE TAN, petitioner,

vs.
COURT OF APPEALS, CHINA BANKING CORPORATION, GEORGE LAUREL TAN,
TEODORA TAN ONG, ROSA TAN, ROSITA TAN, and MAURO UMALI TAN, respondents.

Tabaquero, Albano & Evangelista for petitioner.

Del Rosario, Lim, Telan De Vera & Vigilia for respondent China Banking Corporation. Estela B.
Perlas for respondents Tan.

GUTIERREZ, JR., J.:

Tan Tiong Tick, married to Tan Ong Hun, was the registered owner of a 178 square meter parcel
of land and its improvements located at Lot No. 5, Block No. 2021 of the Cadastral Survey of
Manila, Carvajal Street, Binondo, Manila.

Mr. and Mrs. Tan had six children - respondents George Laurel Tan, Teodora Tan Ong, Rosa
Tan, Rosita Tan, Mauro Umali Tan, and the petitioner, D. Annie Tan.

On February 6, 1963, in order to secure payment of various obligations with respondent China
Banking Corporation or China Bank for short, Mr. and Mrs. Tan Tiong Tick mortgaged the disputed
property to the bank. Tan Tiong Tick died on December 22, 1969 without having paid his
obligations.

On June 27, 1972, China Bank foreclosed the mortgage and purchased the property at public
auction as the highest bidder for the sum of P186,100.00.

On August 31, 1972, the widow and children of Tan Tiong Tick filed a complaint against China
Bank with the Court of First Instance of Manila praying for the nullity of the real estate mortgage
executed by the spouses Tan and the foreclosure sale conducted by the Sheriff. They also asked
that the redemption period be suspended.

The one year period for redemption expired on July 6, 1973 without the Tan heirs having exercised
the right to redeem the property. The widow Tan Ong Hun having died, only the children were left
to redeem the lot and building. China Bank consolidated its ownership over the land and

39
improvements and a new title, Transfer Certificate Title No. 112924 was issued in the name of
the bank on August 16, 1973.

About two weeks earlier, however, the heirs of Tan and China Bank agreed to amicably settle the
action for nullity of mortgage before the Court of First Instance of Manila. The parties filed a joint
motion to dismiss.

The verbal agreement regarding the disposition of the property was confirmed in a letter of China
Bank signed by four of the children and one daughter-in-law on August 3, 1973. The heirs were
given the right to repurchase the property for P180,000.00 provided it was done on or before
August 31,1974. The agreement reads in part:

xxx xxx xxx

It is understood, that should you fail to pay us in full the aforesaid sum of
P180,000.00 on or before August 31, 1974, your right to repurchase the
property shall terminate and we shall be free to dispose of the property to
any other party. (p. 81, Folder of Exhibits; Exhibit 2, CBC)

There are allegations that some of the heirs tried to buy the property in the ensuing one year
period but for one reason or another, were unable to do so.

Finally, on August 30, 1974, or one day before the end of the period to buy back, petitioner D.
Annie Tan went to the office of Mr. Dee K. Chiong of China Bank and tendered her China Bank
Manager's Check for P180,000.00 as payment. Upon the insistence of the bank official, the deed
of sale returning the property to the heirs was executed in favor, not of D. Annie Tan who alone
paid for the property but of all the six heirs of Tan Tiong Tick who would, therefore, share and
share alike.

This led to the filing of the action by D. Annie Tan against her brothers and sisters and the China
Banking Corporation, now respondents in this petition. The petitioner prayed the trial court to
order the respondents-(1) to reconvey the disputed property to her and (2) to pay actual damages
in the amount of P300,000.00, moral damages in the amount of P100,000.00, exemplary
damages in the amount of P50,000.00, and attorney's fees in the amount of P10,000.00.

On September 1, 1980, the Court of First Instance of Manila rendered a decision, the dispositive
portion of which reads:

ACCORDINGLY, judgment is hereby rendered as follows:

(1) Dismissing the complaint as well as defendants' counter-claim;

(2) Ordering each of the defendants, namely George Laurel Tan, Teodora
Tan Ong, Rosa Tan and Rosita Tan to reimburse the plaintiff the sum of
P30,000.00 plus 12% interest from August 20, 1974 until the whole amount
is fully paid;

(3) Ordering the defendant Mauro Umali Tan who had been ordered in
default to execute the deed of sale of his rights and interests over the
property covered in Transfer Certificate of Title No. 64806 in favor of the
plaintiff in accordance with his instrument of waiver dated June 25, 1974,
and

40
 (4) Without pronouncement as to costs. (Annex B, Rollo, pp. 43-44)

On October 17, 1986, the Court of Appeals affirmed the decision of the trial court. On September
7, 1987, a motion for reconsideration was denied. Hence this petition.

The petitioner gives the following grounds why her petition should be given due course:

1. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN

AFFIRMING THE DECISION OF THE TRIAL COURT ORDERING
REIMBURSEMENT TO THE PETITIONER INSPITE OF THE FACT THAT
THE LEGAL BASIS FOR THE REIMBURSEMENT, WHICH WAS NOT
CLEARLY EXPLAINED IN THE DECISION, MAY HAVE BEEN THE
ALLEGED EXISTENCE OF (1) A CO-OWNERSHIP AMONG THE HEIRS,
AND (2) CREDITOR-DEBTOR RELATIONSHIP BETWEEN THE HEIRS
AND THE BANK, WHICH HAVE NOT BEEN FULLY ESTABLISHED BY
EVIDENCE.

2. ASSUMING, WITHOUT ADMITTING, THE EXISTENCE AMONG THE

HEIRS OF A CO-OWNERSHIP AND/OR A CREDITOR/ DEBTOR
RELATIONSHIP BETWEEN THE RESPONDENT BANK AND THE
HEIRS, RESPONDENT COURT GRAVELY ERRED IN NOT HOLDING
THAT THE CO-HEIRS OF PETITIONER, THE PRIVATE RESPONDENTS
HEREIN, HAVE IMPLIEDLY WAIVED THEIR RIGHT TO BUY BACK THE
PROPERTY BY THEIR FAILURE TO RAISE THE MONEY FOR THEIR
RESPECTIVE SHARES UP TO THE LAST DAY GIVEN THEM BY THE
RESPONDENT BANK ON AUGUST 31, 1974, THUS WHEN PETITIONER
BOUGHT THE PROPERTY BY HER EXCLUSIVE FUNDS, IT BENEFITED
HER ALONE AND NOT HER CO-HEIRS.

3. RESPONDENT COURT OF APPEALS, GRAVELY ERRED IN NOT

HOLDING THAT THE LETTER-AGREEMENT DATED AUGUST 3, 1973,
FOR WHICH THE RIGHTS OF THE PETITIONER AND HER CO-HEIRS
TO BUY BACK THE FORECLOSED PROPERTY AROSE, IS ACTUALLY
NOT A RIGHT TO REPURCHASE BUT IS AN OPTION TO BUY BACK
THE PROPERTY WHICH MAY BE EXERCISED BY THE HEIRS SINGLY
OR COLLECTIVELY. (Rollo, pp. 21-22)

The decision of the trial court, affirmed by the Court of Appeals, is based on the principle that the
heirs of Mr. and Mrs. Tan Tiong Tick being co- owners of the foreclosed property, a repurchase
or reconveyance effected by only one of those heirs redounds to the co-ownership. This explains
why the courts below ordered four of the heirs - George Laurel Tan, Teodora Tan Ong, Rosa Tan
and Rosita Tan - to reimburse D. Annie Tan the sum of P30,000.00 each plus 12% interests while
the share of the fifth heir who was in default and who had waived his interest would go to the
petititioner.

The petitioner contends that there was no co-ownership and no creditor/debtor relationship
between her and the other children.

The petitioner states:

This controversy addresses itself to the question of whether or not the co-
ownership among the heirs over a parcel of land formerly belonging to their
parents had been dissolved by the foreclosure and consolidation of title by

41
 a bank after the redemption period of one (1) year had expired, such that
a unilateral obligation given by the bank to the heirs to buy back the
foreclosed property out of liberality is actually an option to buy given to the
heirs as group of persons singly or collectively, and not strictly a right of
repurchase to be exercised by the heirs as co-owners. If it is admitted that
the co-ownership of the heirs over the foreclosed property of their parents
had been dissolved by the consolidation of the title in the mortgagee's
name, which in this case is respondent Bank and that there exists no
creditor-debtor relationship between respondent Bank and the heirs, then
the bank may not impose an obligation to the heirs that they should
purchase back the property only as former co-owners or as solidary
debtors, but as groups of persons, singly or collectively. The bank would
then be imposing an onerous condition upon the heirs of going back to the
dissolved co- ownership which the law frowns upon. To settle this case
once and for all, herein petitioner anchors her claim on the theory that when
the respondent Bank foreclosed the property and consolidated its title on
August 16, 1973 and T.C.T. No. 112924 was issued in its name, the co-
ownership of the heirs of the deceased parents of petitioner and private
respondents over the property in question have been dissolved. In this
wise, the decision of the respondent court premised on the existence of a
co-ownership or in a creditor-debtor relationship, and ordering the
reimbursement to petitioner of the money for the purchase of the property
in question which allegedly redounded to the benefits of her co-heirs as co-
owners or solidary debtors has no leg to stand on. It is this erroneous
decision of respondent court based on a misapprehension of facts and
contrary to settled jurisprudence that petitioner comes to this Honorable
Court, for relief. (Sese v. Intermediate Appellate Court, G.R. No. 66186,
July 31, 1987; Moran, Jr. v. Court of Appeals, 133 SCRA 88; Manero v.
Court of Appeals, 102 SCRA 817; Carolina Industries v. CMS Brokerage,
97 SCRA 734; Sacay v. Sandiganbayan, 142 SCRA 593) (Rollo, pp. 7-9)

The first question which arises is the correctness of the assumption that there was a co-ownership
among the children of Tan Tiong Tick and Tan Ong Hun when the petitioner purchased the
property.

Since the lot and its improvement were mortgaged by the deceased parents, there can be no
question that a co-ownership existed among the heirs during the period given by law to redeem
the foreclosed property. Redemption by one during this period would have inured to the benefit
of all (Adille v. Court of Appeals, G.R. No. 44546, 157 SCRA 455 [1988]; and De Guzman v. Court
of Appeals, G.R. No. 47378, 148 SCRA 75 [1987]).

The records show, however, that when the petitioner purchased the disputed property on August
30, 1974, any co-ownership among the brothers and sisters no longer existed. The period to
redeem had expired more than one year earlier, on July 6, 1973. The respondent China Bank
consolidated its ownership and a new title was issued in the bank's name. When the heirs allowed
the one year redemption period to expire without redeeming their parents' former property and
permitted the consolidation of ownership and the issuance of a new title, the co-ownership was
extinguished. The challenged ruling of the respondent court is, therefore, based on erroneous
premises.

Under Section 63-B of Presidential Decree No. 1529, the Property Registration Decree, in case
of non-redemption, the purchaser at the foreclosure sale, meaning the respondent Bank in this
case, is entitled to a new certificate of title in its name after filing the necessary papers with the
Register of Deeds (Spouses Teofisto and Eulalia Verceles v. Court of First Instance of Rizal, et
42
al., G.R. No. 62219, February 28, 1989). It becomes a ministerial duty to place the buyer in
possession of the property he now owns (Banco Filipino v. Intermediate Appellate Court, G.R.
No. 68878,142 SCRA 44 [1986]). Ownership, therefore, passed to China Bank and there was no
more co-ownership among the heirs.

The non-existence of a common inheritance of the Tan children at the time the disputed property
was purchased from China Bank is moreover supported by the evidence showing that there was
no more inheritance to divide. It had already been divided. Tan Tiong Tick left other properties in
addition to the property disputed in this petition. The eldest son, George Laurel Tan, inherited
practically all the properties consisting of several hectares of real estate in Novaliches, Metro
Manila; a furnished house in Greenhills, Mandaluyong; and a cigar factory (t.s.n., November 18,
1976, p. 24). The petitioner also claims that stock certificates went to another sister, Teodora Tan
Ong because she "forced" the other heirs to sign a deed of sale in her favor.

May the heirs be considered as debtors in common, substituting for their parents in liquidating the
latter's obligations?

The answer is again, No.

Upon the foreclosure of the mortgaged property and its purchase by China Bank as the highest
bidder, the proceeds of the auction sale were applied to the various debts of the Tan spouses.
The parents' debts were paid. The obligation having been extinguished, there was no more
common debt and no legal subrogation arising when one pays the debts properly accruing to
several others.

Respondent China Bank contends that the letter agreement dated August 3, 1973 called for the
reconveyance of the land and improvements to all the heirs "in equal undivided shares."

There is no such stipulation in the letter. There is reference to a verbal agreement to reconvey to
the "heirs of your late father" but no requirement that everybody must share in the purchase or
the offer would be withdrawn.

What is clear is that the bank's general manager, Mr. Dee K. Chiong tried to impose the above
requirement when the one year period to buy back was about to expire. Mr. Dee rejected the offer
of D. Annie Tan to buy the property for herself alone. He insisted that the money brought by the
petitioner would be considered a joint fund of all the heirs and ordered the same annotated on the
back of the check given as payment for the property.

This attitude of Mr. Dee K. Chiong is in sharp contrast to the bank's official stand embodied in a
letter to the Central Bank.

Asked to comment on a letter-complaint filed by D. Annie Tan with Malacañang and forwarded to
the Central Bank, the respondent bank through its Legal Officer wrote the Director, Department
of Commercial and Savings Bank, Central Bank an explanation, part of which states:

To our mind, the dispute is not between the Bank and the heirs or any one
of them, but among the heirs themselves, for as far as the Bank is
concerned, it makes no difference whether the property is reconveyed to
all the heirs or to any one of them alone as they may agree. As a matter of
fact the complainant has already filed a Petition under the Cadastral Case
now pending in the CFI, Manila, involving the property and all the heirs.
(Copy of the Petition is hereto attached as Annex "l0").

43
 At any rate, it is our honest conviction that the charges filed by the
complainant and the interpretation of Articles 1302 and 1303 of the New
Civil Code properly belong to the Courts where the complainant can always
have her right, if any, vindicated, and if only to resolve the issue, we shall
welcome any court action to clear the matter. (Folder of Exhibits, pp. 97-
98)

The petitioner questions the unusual interest shown by China Bank in the case when its stand
should be one of neutrality. She claims that there is an orchestrated alliance between the bank
and the other private respondents as shown by the fact that the bank seems to be more eager
and vigorous than the other heirs to win the case. (Rollo, p. 310).

As earlier stated, there is nothing in the August 3, 1973 letter-agreement which called for either a
purchase by all the heirs or no purchase at all. But could not Mr. Dee K. Chiong validly impose
such a requirement at the time the tender of money to buy the property was made?

Again, the answer is in the negative.

We agree with the petitioner that her agreeing to sign an annotation at the back of the check was
a case of vitiated consent. She states that her conformity was null and void because it was made
under duress. The records show that up to the last hour the petitioner was pleading with Mr. Dee
K. Chiong to buy the property for herself alone as the money she had raised was not in any way
owned by the other heirs. Since the period was expiring, the petitioner had no choice. It was a
case of either agreeing to the bank executive's requirement or losing the family property forever
to strangers.

Mr. Dee could not impose a new co-ownership upon the petitioner, her brothers and sisters. Co-
ownership is discouraged by law.

As held in the case of Basa v. Aguilar (G.R. No. L-30994, 117 SCRA 128, 130-131 [1982]):

Legal redemption is in the nature of a privilege created by law partly for

reasons of public policy and partly for the benefit and convenience of the
redemptioner, to afford him a way out of what might be a disagreeable or
inconvenient association into which he has thrust. (10 Manresa, 4th Ed.,
317.) It is intended to minimize co-ownership. The law grants a co-owner
the exercise of the said right of redemption when the shares of the other
owners are sold to "a third person." A third person, within the meaning of
this Article, is anyone who is not a co-owner. (Sentencia of February 7,
1944 as cited in Tolentino, Comments on the Civil Code, Vol. V, p. 160.)
(Emphasis supplied)

The records show that the annotation at the back of the P180,000.00 manager's check that the
funds were contributed by all the heirs was made by a China Bank representative and that D.
Annie Tan was told by Dee K Chiong that if she would not sign it, he would not accept the
manager's check and she would lose her right to buy the lot within the period offered by the bank.
The petitioner, at first, refused but being placed between the difficulty of agreeing to the condition
or losing the property, she decided to agree. (t.s.n., September 27, 1976, pp. 24-25; t.s.n.,
November 18, 1976, p. 36) The petitioner was also aware that a certain Mr. Ang who operated a
travel agency in the next door building was eager to buy the property at double the price stated
in the letter-agreement executed more than a year earlier. (Court of Appeals Rollo, Brief for
Plaintiff-Appellant, p. 77)

44
The petitioner further argues:

The insistence by respondent Bank that the said letter-agreement is a right

to re-purchase given to all the heirs of the late Tan Tiong Tick to be
exercised only collectively cannot legally stand considering the following
circumstances:

a) What will happen if one of the heirs of the late Tan Tiong Tick refuses or
fails to exercise his right to purchase for whatever reason? Cannot any of
the other heirs, but all, raise sufficient funds for the full amount of the
purchase price because the other heirs could not let him or her borrow
money to cover his or her share? Would such refusal then prejudice the
other heirs?

b) Cannot two or more heirs, but not all, who have sufficient funds exercise
the right of purchase?

c) Would all the heirs then who signed the letter-agreement as in the case
at bar lose their right to purchase the property because of the refusal of
one heir?

d) If only one of the heirs has sufficient funds to purchase the property and
the others do not have, and this particular heir does not want to lend her or
his money to the other heirs who have none, can the offer of the other heir
to exercise the option to buy in her or his own name alone be legally
refused?

e) Finally, can the buying back of the property by one heir alone be
disallowed considering that she is the one who has enough or sufficient
funds and that her action will prevent the property from going to third
persons, like respondent Bank, for failure to pay the purchase price on the
last day of the period given by respondent Bank?'

It is petitioner's submission that to follow the arguments of respondent Bank

that the letter-agreement can only be exercised collectively and not singly
would render the said agreement a useless piece of paper, and gravely
prejudicial to the property itself.

What is more, even the respondent bank's legal officer, Atty. Arsenio Sy
Santos, when asked to comment on the case of the petitioner, admitted
that indeed the letter-agreement of August 3,1973 is actually an option to
buy. Said legal officer gave the following observations and comments, to
wit:

xxxxxxxxx

Observations and comments -

It may be interesting to note that the provisions of Articles 1302 and 1303
which read as follows:

"Art. 1302. It is presumed that there is legal subrogation:

45
 (1) When a creditor pays another creditor who is preferred
even without the debtor's knowledge;

(2) When a third person, not interested in the obligation,

pays with the express or tacit approval of the debtor.

(3) When even without the knowledge of the debtor, a

person interested in the fulfillment of the obligation pays,
without prejudice to the effects of confusion as to the latter's
share.

Art. 1303. Subrogation transfers to the person subrogated

the credit with all the rights thereto appertaining, either
against the debtor or against third person, be they
guarantors or possessors of mortgages, subject to
stipulated in a conventional subrogations (sic)."

refer to cases where the creditor-debtor relationship exists among the

parties. (Rollo, pp. 243-246)

xxx xxx xxx

There was no creditor-debtor relationship existing among the heirs and Mr. Dee had no legal
authority to create one.

China Bank contends that when it told the petitioner that the property could not be reconveyed to
her alone, she was likewise informed that a similar offer from some of the other co-heirs had also
been politely turned down. (Exhibit 7, China Bank, Folder of Exhibits, p. 87)

The petitioner disputes this claim. She states that there was no such offer by her co-heirs because
she was the only one willing to buy back the lot and the only one with the means to do so at that
time. It was only on September 12, 1974 that the individual respondents offered to repurchase.
By that time, D. Annie Tan had already paid for the lot and was already insisting on a conveyance
of the property in her name alone.

The petitioner states:

There is, therefore, no doubt that the money used in buying back the
property belongs exclusively to the petitioner. Private respondents' in
action in not contributing the necessary money up to the last day of the buy
back period is fatal to their cause. To paraphrase one case decided by this
Honorable Court, courts cannot look with favor at parties who, by their
silence, delay and inaction, knowingly induce another to spend time, effort
and expense in protecting their interests over the property by paying the
buy back money only to spring from ambush and claim title or interest over
the property when the land and building value have become higher. (See
Lola v. Court of Appeals, G.R. No. 46575, November 13, 1986). Moreover,
the laws aid the vigilant, not those who slumber on their rights. (Miraflor v.
Court of Appeals, G.R. Nos. 40151-52, April 8, 1986).

Definetly, the effects of a waiver militates against the private respondents.

Having forfeited, abandoned and/or waived their rights, private
respondents are now estopped from taking an inconsistent position. They
46
 cannot now assert that they are still CO-owners of the property with the
petitioner. (Sec. 65, Rule 123, Rules of Court; Hernaez v. Hernaez, 32 Phil.
214) (See also Banco de Oro Savings & Mortgage Bank v. Equitable
Banking Corporation, G.R. No. 74917, January 20, 1988, citing Saura
Import and Export Co. v. Court of Appeals, 24 SCRA 974). All the elements
of a valid waiver (1) the existence of a right; (2) the knowledge of the
existence thereof; and (3) the intention to relinquish such right, either
expressly or impliedly are present. (Director of Lands v. Abiertas, 44 O.G.
928). ... (Rollo, pp. 238-239)

The claim of the respondents Tan in their memorandum that they gave their individual
contributions to the petitioner to raise the P180,000.00 is not worthy of credence. At the time of
the repurchase, the petitioner was already estranged from the respondents Tan and they would
not have given her any money without corresponding receipts or given her money under any
circumstance, for that matter. In fact, there is no reason why the petitioner should be the one to
collect the money of the heirs and bring it to China Bank. She was neither a son nor the eldest.
Neither did the others feel kindly towards her. The petitioner had called for a conference on July
23, 1974 at 619 Carvajal Street, Binondo, Manila to discuss compliance with the letter-agreement
considering the fast approaching deadline. Not one showed up. (Rollo, pp. 44-45) The money
was raised by D. Annie Tan through her connections with Jardine Davies because of her
construction business. The decision of the respondent court confirmed the factual findings of the
trial court. It declared that the respondents Tan became debtors of petitioner Tan and ordered
them to reimburse the P30,000.00 each which were advanced by the petitioner. There was no
pooling of resources up to August 30,1974 when at 4:00 in the afternoon, D. Annie Tan went to
Mr. Dee K. Chiong with the China Bank manager's check for P180,000.00.

The equities of this case also favor the grant of the petition. D. Annie Tan went to plenty of trouble
in her effort to buy back the property formerly owned by her parents. There is nothing in the
records to show that, beyond making some perfunctory allegations, the respondents Tan did
anything to save the property from falling into the hands of other persons. The petitioner states
that she has now spent substantial sums to pay for real estate taxes and to renovate, and improve
the premises. According to her she has "spent her little fortunes to preserve the patrimony left by
her parents." She alone deserves to be entitled to the property, in law and equity. (Rollo, p. 317)

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the Court of Appeals
is REVERSED and SET ASIDE. The respondent China Banking Corporation is ordered to execute
the deed of sale over the disputed property in favor of the petitioner alone.

SO ORDERED.

47
G.R. No. 153306 August 27, 2004

HEIRS OF THE LATE CRUZ BARREDO, petitioners,

vs.
SPS. VIRGILIO L. ASIS and MAUDE MASA ASIS, respondents.

DECISION

TINGA, J.:

This Petition for Review on Certiorari1 seeks to set aside the Resolutions of the Court of Appeals
dated November 29, 20012 and April 29, 2002,3 respectively dismissing petitioners’ appeal for
failure to file an appellants’ brief and denying their Motion for Reconsideration and/or Petition for
Relief from Judgment of the Resolution of November 29, 2001,4 for having been filed out of time
and for being an improper remedy.

We gather the following facts from the records before us:

On February 3, 1997, petitioners herein filed an action for Cancellation of Certificate of Title and
Damages5 against the respondents involving a seven (7)-hectare parcel of land located in Roxas
City. After trial on the merits, the Regional Trial Court (RTC) rendered a decision6 dated July 21,
2000 dismissing the complaint for lack of merit; ordering the Registry of Deeds of Roxas City to
cancel the annotation of lis pendens on Transfer Certificate of Title No. T-34929 covering the
subject property; and ordering the plaintiffs, petitioners herein, to pay the defendants the sum of
P200,000.00 as attorney’s fees and P50,000.00 as litigation expenses.

Upon petitioners’ filing of a Notice of Appeal through their counsel, Atty. Ray B. Fagutao (Atty.
Fagutao), the RTC forwarded the records of the case to the Court of Appeals. The appellate court
issued a Notice to File Brief dated February 7, 2001 giving the appellants, petitioners herein, a
period of 45 days within which to file their brief. However, petitioners failed to file their brief despite
Atty. Fagutao’s receipt of the Notice to File Brief on February 20, 2001. Hence, the appellate court
considered the appeal abandoned and accordingly dismissed the same in its questioned
Resolution dated November 29, 2001.7

Petitioners, through their new counsel, Atty. Diosdado B. Solidum, Jr., filed a Motion for
Reconsideration and/or Petition for Relief from Judgment of the Resolution of November 29,
20018 dated March 1, 2002, alleging that they received a copy of the Resolution dated November
29, 2001 on December 10, 2001; and that the dismissal of their appeal as a result of the mistake

48
or gross negligence of their former counsel effectively deprived them of their property without due
process of law.

The respondents filed a Comment/Opposition9 dated March 15, 2002 asserting that petitioners’
Motion for Reconsideration and/or Petition for Relief from Judgment of the Resolution of
November 29, 2001 was filed out of time. Having admitted receiving a copy of the questioned
Resolution dated November 29, 2001 on December 10, 2001, the respondents aver that
petitioners should have filed their motion within the 15-day period provided under Section 1, Rule
52 of the 1997 Rules of Civil Procedure (the Rules). Moreover, the remedy of petition for relief
from judgment is unavailable in the Court of Appeals, was unverified, unaccompanied by an
affidavit of merit and filed beyond the period provided under Section 3, Rule 38 of the Rules.

Agreeing with the respondents, the appellate court denied petitioners’ Motion for Reconsideration
and/or Petition for Relief from Judgment of the Resolution of November 29, 2001 in its second
assailed Resolution10 dated April 29, 2002.

In the instant petition, petitioners reiterate their argument that the dismissal of their appeal as a
result of the mistake or gross negligence of their counsel deprived them of their property without
due process of law. Petitioners insist that theirs is a situation that must be viewed as an exception
to the general rule that the negligence of counsel binds the client. They also question the trial
court’s award of attorney’s fees and litigation expenses which they claim are damages imposed
upon them for exercising their right to litigate.

The respondents filed a Comment11 dated September 6, 2002 reaffirming their position that
petitioners’ Motion for Reconsideration and/or Petition for Relief from Judgment of the Resolution
of November 29, 2001 was properly denied for the reasons set forth by the Court of Appeals.
Additionally, the respondents emphasize that petitioners were equally negligent in failing to follow-
up the status of their appeal. Besides, they did not even file the appropriate administrative charges
against their former counsel. The respondents likewise insist that petitioners were not deprived of
due process because a full trial was accorded them by the RTC. Moreover, petitioners’ inaction
on their appeal caused considerable damage to the respondents’ real estate business.

Petitioners filed a Motion for Leave to file Incorporated Reply to Respondents’ Comment Dated
September 6, 2002 on the Petition for Review on Certiorari12 dated September 30, 2002, arguing
that the questioned Resolutions dismissing their appeal and denying their Motion for
Reconsideration and/or Petition for Relief from Judgment of the Resolution of November 29, 2001
are void as they were deprived of due process. Since void resolutions do not attain finality, they
posit that their Motion for Reconsideration and/or Petition for Relief from Judgment of the
Resolution of November 29, 2001 was not filed out of time. They also aver that they were not
negligent as they contacted Atty. Fagutao to inquire about their case but were not informed that
the trial court had already ruled against them. In any case, petitioners insist that attorney’s fees
and litigation expenses should not have been awarded to the respondents.

The petition should be denied.

This Court has invariably ruled that the right to appeal is not a natural right nor a part of due
process; it is merely a statutory privilege, and may be exercised only in the manner and in
accordance with the provisions of the law. The party who seeks to avail of the same must comply
with the requirements of the Rules. Failing to do so, the right to appeal is lost.13

In the present case, petitioners failed to file the required brief within the period prescribed under
Section 7, Rule 44 of the Rules. Thus, the appellate court rightly considered their appeal
abandoned and consequently dismissed the same in its Resolution dated November 29, 2001.

49
Petitioners received a copy of this Resolution on December 10, 2001. They then had 15 days or
until December 25, 2001, or the next working day since December 25, 2001 was a legal holiday,
within which to file their motion for reconsideration.14 However, it was only on March 1, 2002,
more than two (2) months after the deadline, that they filed their Motion for Reconsideration and/or
Petition for Relief from Judgment of the Resolution of November 29, 2001. Even their petition for
relief (from the denial of their appeal) was filed beyond the period provided under Section 3, Rule
38 of the Rules.15 Hence, the appellate court again correctly denied their motion.

Petitioners blame the alleged negligence of their former counsel for their failure to file an
appellants’ brief on time. However, there is no rule more settled than that a client is bound by his
counsel’s conduct, negligence and mistake in handling the case.16 Besides, petitioners had an
opportunity to rectify their former counsel’s blunder by timely filing a motion for reconsideration of
the Resolution dismissing their appeal. As it is, their new counsel also belatedly filed their Motion
for Reconsideration and/or Petition for Relief from Judgment of the Resolution of November 29,
2001.

Parenthetically, petitioners explain that the Resolution dated November 29, 2001 was received
on December 10, 2001, not by their new counsel but by their former counsel, Atty. Fagutao. This
despite the unequivocal statement in their Motion for Reconsideration and/or Petition for Relief
from Judgment of the Resolution of November 29, 2001 that the questioned Resolution "was
received by the herein counsel (Atty. Solidum) on December 10, 2001."17 This explanation is but
a feeble attempt to justify the late filing of petitioners’ motion for reconsideration and does not
hold favor with the Court.

What is more, their petition for relief lacked the requisite affidavits showing the fraud, accident,
mistake or excusable negligence relied upon, and the facts constituting their good and substantial
cause of action.18

While it is true that rules of procedure are not cast in stone, it is equally true that strict compliance
with the Rules is indispensable for the prevention of needless delays and for the orderly and
expeditious dispatch of judicial business.19 Unfortunately for them, petitioners failed to show that
their counsels’ negligence was so gross and palpable as to call for the exercise of this Court’s
equity jurisdiction. Neither have they shown that the ends of justice will be better served by
relaxing procedural rules. It should be recalled that petitioners were accorded a full trial by the
RTC although its Decision was ultimately adverse to them. They cannot feign lack of due process.

In fine, the dismissal of petitioners’ appeal for failure to comply with the requirements of the Rules
is fatal to their cause and renders the Decision of the RTC final, executory and no longer subject
to review.

WHEREFORE, the petition is hereby DENIED for lack of merit. Costs against petitioners.

SO ORDERED.

50
G.R. No. 117209 February 9, 1996

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HON. JOSE R. HERNANDEZ, in his capacity as Presiding Judge, Regional Trial Court,
Branch 158, Pasig City and SPOUSES VAN MUNSON y NAVARRO and REGINA MUNSON
y ANDRADE, respondents.

DECISION

REGALADO, J.:

Indeed, what's in a name, as the Bard of Avon has written, since a rose by any other name would
smell as sweet?

This could well be the theme of the present appeal by certiorari which challenges, on pure
questions of law, the order of the Regional Trial Court, Branch 158, Pasig City, dated September
13, 1994 1 in JDRC Case No. 2964. Said court is faulted for having approved the petition for
adoption of Kevin Earl Bartolome Moran and simultaneously granted the prayer therein for the
change of the first name of said adoptee to Aaron Joseph, to complement the surname Munson
y Andrade which he acquired consequent to his adoption.

The facts are undisputed. On March 10, 1994, herein private respondent spouses, Van Munson
y Navarro and Regina Munson y Andrade, filed a p petition 2 to adopt the minor Kevin Earl
Bartolome Moran, duly alleging therein the jurisdictional facts required by Rule 99 of the Rules of
Court for adoption, their qualifications as and fitness to be adoptive parents, as well as the
circumstances under and by reason of which the adoption of the aforenamed minor was sought.
In the very same petition, private respondents prayed for the change of the first name or said
minor adoptee to Aaron Joseph, the same being the name with which he was baptized in keeping
with religious tradition and by which he has been called by his adoptive family, relatives and
friends since May 6, 1993 when he arrived at private respondents' residence. 3

At the hearing on April 18, 1994, petitioner opposed the inclusion of the relief for change of name
in the same petition for adoption. In its formal opposition dated May 3, 1995, 4 petitioner reiterated
its objection to the joinder of the petition for adoption and the petitions for change of name in a
single proceeding, arguing that these petition should be conducted and pursued as two separate
proceedings.

After considering the evidence and arguments of the contending parties, the trial court ruled in
favor of herein private respondents in this wise:

51
 WHEREFORE, minor child Kevin Earl Bartolome Moran is freed from all legal obligations
of obedience and maintenance with respect to his natural parents, and for all legal intents
and purposes shall be known as Aaron Joseph Munson y Andrade, the legally adopted
child of Van Munson and Regina Munson effective upon the filing of the petition on March
10, 1994. As soon as the decree of adoption becomes final and executory, it shall be
recorded in the Office of the Local Civil Registrar of Pasig, Metro Manila pursuant to
Section 8, Rule 99 and Section 6, Rule 103, respectively, of the Rules of Court, and shall
be annotated in the record of birth of the adopted child, which in this case is in Valenzuela,
Metro Manila, where the child was born. Likewise, send a copy of this Order to the National
Census and Statistics Office, Manila, for its appropriate action consisten(t) herewith. 5

At this juncture, it should be noted that no challenge has been raised by petitioner regarding the
fitness of herein private respondents to be adopting parents nor the validity of the decree of
adoption rendered in their favor. The records show that the latter have commendably established
their qualifications under the law to be adopters, 6 and have amply complied with the procedural
requirements for the petition for adoption, 7 with the findings of the trial court being recited thus:

To comply with the jurisdictional requirements, the Order of this Court dated March 16,
1994 setting this petition for hearing (Exh. "A") was published in the March 31, April 6 and
13, 1994 issues of the Manila Chronicle, a newspaper of general circulation (Exhs. "B" to
"E" and submarkings). . . .

xxx xxx xxx

Petitioners apart from being financially able, have no criminal nor derogatory record (Exhs.
"K" to "V"); and are physically fit to be the adoptive parents of the minor child Kevin (Exh.
"W"). Their qualification to become the adoptive parents of Kevin Earl finds support also
in the Social Case Study Report prepared by the DSWD through Social Worker Luz Angela
Sonido, the pertinent portion of which reads:

"Mr. and Mrs. Munson are very religious, responsible, mature and friendly
individuals. They are found physically healthy; mentally fit, spiritually and
financially capable to adopt Kevin Earl Moran aka Aaron Joseph.

"Mr. and Mrs. Munson have provided AJ with all his needs. They unselfishly share
their time, love and attention to him. They are ready and willing to continuously
provide him a happy and secure home life.

"Aaron Joseph, on the other hand, is growing normally under the care of the
Munsons. He had comfortably settled in his new environment. His stay with the
Munsons during the six months trial custody period has resulted to a close bond
with Mr. and Mrs. Munson and vice-versa.

"We highly recommend to the Honorable Court that the adoption of Kevin Earl
Moran aka Aaron Joseph by Mr. and Mrs. Van Munson be legalized." 8

It has been said all too often enough that the factual findings of the lower court, when sufficiently
buttressed by legal and evidential support, are accorded high respect and are binding and
conclusive upon this Court. 9 Accordingly, we fully uphold the propriety of that portion of the order
of the court below granting the petition, for adoption.

The only legal issues that need to be resolved may then be synthesized mainly as follows. (1)
whether or not the court a quo erred in granting the prayer for the change of the registered proper
52
or given name of the minor adoptee embodied in the petition for adoption; and (2) whether or not
there was lawful ground for the change of name.

I. It is the position of petitioner that respondent judge exceeded his jurisdiction when he
additionally granted the prayer for the change of the given or proper name of the adoptee in a
petition for adoption.

Petitioner argues that a petition for adoption and a petition for change of name are two special
proceedings which, in substance and purpose, are different from and are not related to each other,
being respectively governed by distinct sets of law and rules. In order to be entitled to both reliefs,
namely, a decree of adoption and an authority to change the giver or proper name of the adoptee,
the respective proceedings for each must be instituted separately, and the substantive and
procedural requirements therefor under Articles 183 to 193 of the Family Code in relation to Rule
99 of the Rules of Court for adoption, and Articles 364 to 380 of the Civil Code in relation to Rule
103 of the Rules of Court for change of name, must correspondingly be complied with. 10

A perusal of the records, according to petitioner, shows that only the laws and rules on adoption
have been observed, but not those for a petition for change of name. 11 Petitioner further contends
that what the law allows is the change of the surname of the adoptee, as a matter of right, to
conform with that of the adopter and as a natural consequence of the adoption thus granted. If
what is sought is the change of the registered given or proper name, and since this would involve
a substantial change of one's legal name, a petition for change of name under Rule 103 should
accordingly be instituted, with the substantive and adjective requisites therefor being conformably
satisfied. 12

Private respondents, on the contrary, admittedly filed the petition for adoption with a prayer for
change of name predicated upon Section 5, Rule 2 which allows permissive joinder of causes of
action in order to avoid multiplicity of suits and in line with the policy of discouraging protracted
and vexatious litigations. It is argued that there is no prohibition in the Rules against the joinder
of adoption and change of name being pleaded as two separate but related causes of action in a
single petition. Further, the conditions for permissive joinder of causes of action, i.e., jurisdiction
of the court, proper venue and joinder of parties, have been met. 13

Corollarily, petitioner insists on strict adherence to the rule regarding change of name in view of
the natural interest of the State in maintaining a system of identification of its citizens and in the
orderly administration of justice. 14 Private respondents argue otherwise and invoke a liberal
construction and application of the Rules, the welfare and interest of the adoptee being the
primordial concern that should be addressed in the instant proceeding. 15

On this score, the trial court adopted a liberal stance in holding that -

Furthermore, the change of name of the child from Kevin Earl Bartolome to Aaron Joseph
should not be treated strictly, it appearing that no rights have been prejudiced by said
change of name. The strict and meticulous observation of the requisites set forth by Rule
103 of the Rules of Court is indubitably for the purpose of preventing fraud, ensuring that
neither State nor any third person should be prejudiced by the grant of the petition for
change of name under said rule, to a petitioner of discernment.

The first name sought to be changed belongs to an infant barely over a year old. Kevin
Earl has not exercised full civil rights nor engaged in any contractual obligations. Neither
can he nor petitioners on his behalf, be deemed to have any immoral, criminal or illicit
purpose for seeking said cha(n)ge of name. It stands to reason that there is no way that
the state or any person may be so prejudiced by the action for change of Kevin Earl's first

53
 name. In fact, to obviate any possible doubts on the intent of petitioners, the prayer for
change of name was caused to be published together with the petition for adoption. 16

Art. 189 of the Family Code enumerates in no uncertain terms the legal effects of adoption:

(1) For civil purposes, the adopted shall be deemed to be a legitimate child of the adopters
and both shall acquire the reciprocal rights and obligations arising from the relationship of
parent and child, including the right of the adopted to use the surname of the adopters;

(2) The parental authority of the parents by nature over the adopted shall terminate and
be vested in the adopters, except that if the adopter is the spouse of the parent by nature
of the adopted, parental authority over the adopted shall be exercised jointly by both
spouses; and

(3) The adopted shall remain an intestate heir of his parents and other blood relatives.

Clearly, the law allows the adoptee, as a matter of right and obligation, to bear the surname of
the adopter, upon issuance of the decree of adoption. It is the change of the adoptee's surname
to follow that of the adopter which is the natural and necessary consequence of a grant of adoption
and must specifically be contained in the order of the court, in fact, even if not prayed for by
petitioner.

However, the given or proper name, also known as the first or Christian name, of the adoptee
must remain as it was originally registered in the civil register. The creation of an adoptive
relationship does not confer upon the adopter a license to change the adoptee's registered
Christian or first name. The automatic change thereof, premised solely upon the adoption thus
granted, is beyond the purview of a decree of adoption. Neither is it a mere incident in nor an
adjunct of an adoption proceeding, such that a prayer therefor furtively inserted in a petition for
adoption, as in this case, cannot properly be granted.

The name of the adoptee as recorded in the civil register should be used in the adoption
proceedings in order to vest the court with jurisdiction to hear and determine the same, 17 and
shall continue to be so used until the court orders otherwise. Changing the given or proper name
of a person as recorded in the civil register is a substantial change in one's official or legal name
and cannot be authorized without a judicial order. The purpose of the statutory procedure
authorizing a change of name is simply to have, wherever possible, a record of the change, and
in keeping with the object of the statute, a court to which the application is made should normally
make its decree recording such change. 18

The official name of a person whose birth is registered in the civil register is the name appearing
therein. If a change in one's name is desired, this can only be done by filing and strictly complying
with the substantive and procedural requirements for a special proceeding for change of name
under Rule 103 of the Rules of Court, wherein the sufficiency of the reasons or grounds therefor
can be threshed out and accordingly determined.

Under Rule 103, a petition for change of name shall be filed in the regional trial court of the
province where the person desiring to change his name resides. It shall be signed and verified by
the person desiring his name to be changed or by some other person in his behalf and shall state
that the petitioner has been a bona fide resident of the province where the petition is filed for at
least three years prior to such filing, the cause for which the change of name is sought, and the
name asked for. An order for the date and place of hearing shall be made and published, with the
Solicitor General or the proper provincial or city prosecutor appearing for the Government at such
hearing. It is only upon satisfactory proof of the veracity of the allegations in the petition and the

54
reasonableness of the causes for the change of name that the court may adjudge that the name
be changed as prayed for in the petition, and shall furnish a copy of said judgment to the civil
registrar of the municipality concerned who shall forthwith enter the same in the civil register.

A petition for change of name being a proceeding in rem, strict compliance with all the
requirements therefor is indispensable in order to vest the court with jurisdiction for its
adjudication. 19 It is an independent and discrete special proceeding, in and by itself, governed by
its own set of rules. A fortiori, it cannot be granted by means of any other proceeding. To consider
it as a mere incident or an offshoot of another special proceeding would be to denigrate its role
and significance as the appropriate remedy available under our remedial law system.

The Solicitor General correctly points out the glaring defects of the subject petition insofar as it
seeks the change of name of the adoptee, 20 all of which taken together cannot but lead to the
conclusion that there was no petition sufficient in form and substance for change of name as
would rightfully deserve an order therefor. It would be procedurally erroneous to employ a petition
for adoption to effect a change of name in the absence of the corresponding petition for the latter
relief at law.

Neither can the allowance of the subject petition, by any stretch of imagination and liberality, be
justified under the rule allowing permissive joinder of causes of action. Moreover, the reliance by
private respondents on the pronouncements in Briz vs. Brit, et al. 21 and Peyer vs. Martinez, et al.
22
is misplaced. A restatement of the rule and jurisprudence on joinder of causes of action would,
therefore, appear to be called for.

By a joinder of actions, or more properly, a joinder of causes of action, is meant the uniting of two
or more demands or rights of action in one action; the statement of more than one cause of action
in a declaration. 23 It is the union of two or more civil causes of action, each of which could be
made the basis of a separate suit, in the same complaint, declaration or petition. A plaintiff may
under certain circumstances join several distinct demands, controversies or rights of action in one
declaration, complaint or petition. 24

As can easily be inferred from the above definitions, a party is generally not required to join in one
suit several distinct causes of action. The joinder of separate causes of action, where allowable,
is permissive and not mandatory in the absence of a contrary statutory provision, even though
the causes of action arose from the same factual setting and might under applicable joinder rules
be joined. 25 Modern statutes and rules governing joinders are intended to avoid a multiplicity of
suits and to promote the efficient administration of justice wherever this may be done without
prejudice to the rights of the litigants. To achieve these ends, they are liberally construed. 26

While joinder of causes of action is largely left to the option of a party litigant, Section 5, Rule 2 of
our present Rules allows causes of action to be joined in one complaint conditioned upon the
following requisites: (a) it will not violate the rules on jurisdiction, venue and joinder of parties; and
(b) the causes of action arise out of the same contract, transaction or relation between the parties,
or are for demands for money or are of the same nature and character.

The objectives of the rule or provision are to avoid a multiplicity of suits where the same parties
and subject matter are to be dealt with by effecting in one action a complete determination of all
matters in controversy and litigation between the parties involving one subject matter, and to
expedite the disposition of litigation at minimum cost. The provision should be construed so as to
avoid such multiplicity, where possible, without prejudice to the rights of the litigants. Being of a
remedial nature, the provision should be liberally construed, to the end that related controversies
between the same parties may be adjudicated at one time; and it should be made effectual as far
as practicable, 27 with the end in view of promoting the efficient administration of justice. 28

55
The statutory intent behind the provisions on joinder of causes of action is to encourage joinder
of actions which could reasonably be said to involve kindred rights and wrongs, although the
courts have not succeeded in giving a standard definition of the terms used or in developing a
rule of universal application. The dominant idea is to permit joinder of causes of action, legal or
equitable, where there is some substantial unity between them. 29 While the rule allows a plaintiff
to join as many separate claims as he may have, there should nevertheless be some unity in the
problem presented and a common question of law and fact involved, subject always to the
restriction thereon regarding jurisdiction, venue and joinder of parties. Unlimited joinder is not
authorized. 30

Our rule on permissive joinder of causes of action, with the proviso subjecting it to the correlative
rules on jurisdiction, venue and joinder of parties 31 and requiring a conceptual unity in the
problems presented, effectively disallows unlimited joinder. 32

Turning now to the present petition, while it is true that there is no express prohibition against the
joinder of a petition for adoption and for change of name, we do not believe that there is any
relation between these two petitions, nor are they of the same nature or character, much less do
they present any common question of fact or law, which conjointly would warrant their joinder. In
short, these petitions do not rightly meet the underlying test of conceptual unity demanded to
sanction their joinder under our Rules.

As keenly observed and correctly pointed out by the Solicitor General -

A petition for adoption and a petition for change of name are two special proceedings
which, in substance and purpose, are different from each other. Each action is individually
governed by particular sets of laws and rules. These two proceedings involve disparate
issues. In a petition for adoption, the court is called upon to evaluate the proposed
adopter's fitness and qualifications to bring up and educate the adoptee properly (Prasnick
vs. Republic, 99 Phil. 665). On the other hand, in a petition for change of name, no family
relations are created or affected for what is looked into is the propriety and reasonableness
of the grounds supporting the proposed change of name (Yu vs. Republic, 17 SCRA 253).

xxx xxx xxx

. . . Hence, the individual merits of each issue must be separately assessed and
determined for neither action is dependent on the other. 33

The rule on permissive joinder of: causes of action is clear. Joinder may be allowed only
if the actions show a commonality of relationship and conform to the rules on jurisdiction,
venue and joinder of parties (Section 5, Rule 2, Rules of Court).

These conditions are wanting in the instant case. As already pointed out in our Petition
(pp. 9-10), an action for adoption and an action for change of name are, in nature and
purpose, not related to each other and do not arise out of the same relation between the
parties. While what is cogent in an adoption proceeding is the proposed adopter's fitness
and qualifications to adopt, a petition for change of first name may only prosper upon proof
of reasonable and compelling grounds supporting the change requested. Fitness to adopt
is not determinative of the sufficiency of reasons justifying a change of name. And
similarly, a change of first name cannot be justified in view of a finding that the proposed
adopter was found fit to adopt. There is just no way that the two actions can connect and
find a common ground, thus the joinder would be improper.

56
 In contending that adoption and change of name may be similarly sought in one petition,
private respondents rely upon Peyer vs. Martinez and Briz vs. Briz (p. 4, Comment)

We however submit that these citations are non sequitur. In both cases, the fact of intimacy
and relatedness of the issues is so pronounced. In Peyer, an application to pronounce the
husband an absentee is obviously intertwined with the action to transfer the management
of conjugal assets to the wife. In Briz, an action for declaration of heirship was deemed a
clear condition precedent to an action to recover the land subject of partition and
distribution proceeding. However, the commonality of relationship which stands out in both
cases does not characterize the present action for adoption and change of name. Thus
the rulings in Peyer and Briz find no place in the case at bar.

Besides, it is interesting to note that although a joinder of the two actions was, in Briz,
declared feasible, the Supreme Court did not indorse an automatic joinder and instead
remanded the matter for further proceedings, granting leave to amend the pleadings and
implead additional parties-defendants for a complete determination of the controversy
(Briz vs. Briz, 43 Phil. 763, 770). Such cautionary stance all the more emphasizes that
although joinders are generally accepted, they are not allowed where the conditions are
not satisfactorily met. 34

It furthermore cannot be said that the proposed joinder in this instance will make for a complete
determination of all matters pertaining to the coetaneous grant of adoption and change of name
of the adoptee in one petition. As already stated, the subject petition was grossly insufficient in
form and substance with respect to the prayer for change of name of the adoptee. The policy of
avoiding multiplicity of suits which underscores the rule on permissive joinder of causes of action
is addressed to suits that are intimately related and also present interwoven and dependent issues
which can be most expeditiously and comprehensively settled by having just one judicial
proceeding, but not to suits or actions whose subject matters or corresponding reliefs are
unrelated or diverse such that they are best taken up individually.

In Nabus vs. Court of Appeals, et al., 35 the Court clarified the rule on permissive joinder of causes
of action:

The rule is clearly permissive. It does not constitute an obligatory rule, as there is no
positive provision of law or any rule of jurisprudence which compels a party to join all his
causes of action and bring them at one and the same time. Under the present rules, the
provision is still that the plaintiff may, and not that he must, unite several causes of action
although they may be included in one of the classes specified. This, therefore, leaves it to
the plaintiff's option whether the causes of action shall be joined in the same action, and
no unfavorable inference may be drawn from his failure or refusal to do so. He may always
file another action based on the remaining cause or causes of action within the prescriptive
period therefor. (Emphasis supplied.)

The situation presented in this case does not warrant exception from the Rules under the policy
of liberal construction thereof in general, and for change of name in particular, as proposed by
private respondents and adopted by respondent judge. Liberal construction of the Rules may be
invoked in situations wherein there may be some excusable formal deficiency or error in a
pleading, provided that the same does not subvert the essence of the proceeding and connotes
at least a reasonable attempt at compliance with the Rules. Utter disregard of the Rules cannot
justly be rationalized by harking on the policy of liberal construction.

The Court is not impervious to the frustration that litigants and lawyers alike would at times
encounter in procedural bureaucracy but imperative justice requires correct observance of
indispensable technicalities precisely designed to ensure its proper dispensation. 36 It has long
57
been recognized that strict compliance with the Rules of Court is indispensable for the prevention
of needless delays and for the orderly and expeditious dispatch of judicial business. 37

Procedural rules are not to be disdained as mere technicalities that may be ignored at will to suit
the convenience of a party. Adjective law is important in ensuring the effective enforcement of
substantive rights through the orderly and speedy administration of justice. These rules are not
intended to hamper litigants or complicate litigation but, indeed to provide for a system under
which a suitor may be heard in the correct form and manner and at the prescribed time in a
peaceful confrontation before a judge whose authority they acknowledge. 38

It cannot be overemphasized that procedural rules have their own wholesome rationale in the
orderly administration of justice. Justice has to be administered according to the Rules in order to
obviate arbitrariness, caprice, or whimsicality. 39 We have been cautioned and reminded in Limpot
vs. CA, et al. that: 40

Rules of procedure are intended to ensure the orderly administration of justice and the
protection of substantive rights in judicial and extrajudicial proceedings. It is a mistake to
propose that substantive law and adjective law are contradictory to each other or, as has
often been suggested, that enforcement of procedural rules should never be permitted if
it will result in prejudice to the substantive rights of the litigants. This is not exactly true;
the concept is much misunderstood. As a matter of fact, the policy of the courts is to give
both kinds of law, as complementing each other, in the just and speedy resolution of the
dispute between the parties. Observance of both substantive rights is equally guaranteed
by due process, whatever the source of such rights, be it the Constitution itself or only a
statute or a rule of court.

xxx xxx xxx

. . . (T)hey are required to be followed except only when for the most persuasive of reasons
they may be relaxed to relieve a litigant of an injustice not commensurate with the degree
of his thoughtlessness in not complying with the procedure prescribed. . . . While it is true
that a litigation is not a game of technicalities, this does not mean that the Rules of Court
may be ignored at will and at random to the prejudice of the orderly presentation and
assessment of the issues and their just resolution. Justice eschews anarchy.

Only exceptionally in very extreme circumstances, when a rule deserts its proper office as an aid
to justice and becomes its great hindrance and chief enemy such that rigid application thereof
frustrates rather than promotes substantial justice, will technicalities deserve scant consideration
from the court. In such situations, the courts are empowered, even obligated, to suspend the
operation of the rules. 41

We do not perceive any injustice that can possibly be visited upon private respondents by
following the reglementary procedure for the change in the proper or given name that they seek
for their adopted child. We are hard put to descry the indispensability of a change of the first name
of the adoptee to his welfare and benefit. Nor is the said change of such urgency that would justify
an exemption from or a relaxation of the Rules. It is the State that stands to be prejudiced by a
wanton disregard of Rule 103 in this case, considering its natural interest in the methodical
administration of justice and in the efficacious maintenance of a system of identification of its
citizens.

The danger wrought by non-observance of the Rules is that the violation of or failure to comply
with the procedure prescribed by law prevents the proper determination of the questions raised
by the parties with respect to the merits of the case and makes it necessary to decide, in the first

58
place, such questions as relate to the form of the action. The rules and procedure laid down for
the trial court and the adjudication of cases are matters of public policy. 42 They are matters of
public order and interest which can in no wise be changed or regulated by agreements between
or stipulations by parties to an action for their singular convenience. 43

In Garcia vs. Republic, 44 we are reminded of the definiteness in the application of the Rules and
the importance of seeking relief under the appropriate proceeding:

. . . The procedure set by law should be delimited. One should not confuse or misapply
one procedure for another lest we create confusion in the application of the proper remedy.

Respondent judge's unmindful disregard of procedural tenets aimed at achieving stability of

procedure is to be deplored. He exceeded his prerogatives by granting the prayer for change of
name, his order being unsupported by both statutory and case law. The novel but unwarranted
manner in which he adjudicated this case may be characterized as a regrettable abdication of the
duty to uphold the teachings of remedial law and jurisprudence.

II. Petitioner avers that it was error for the lower court to grant the petition for change of name
without citing or proving any lawful ground. Indeed, the only justification advanced for the change
of name was the fact of the adoptee's baptism under the name Aaron Joseph and by which he
has been known since he came to live with private respondents. 45

Private respondents, through a rather stilted ratiocination, assert that upon the grant of adoption,
the subject minor adoptee ipso facto assumed a new identification and designation, that is, Aaron
Joseph which was the name given to him during the baptismal rites. Allowing the change of his
first name as prayed for in the petition, so they claim, merely confirms the designation by which
he is known and called in the community in which he lives. This largely echoes the opinion of the
lower court that naming the child Aaron Joseph was symbolic of naming him at birth, and that
they, as adoptive parents, have as much right as the natural parents to freely select the first name
of their adopted child. 46

The lower court was sympathetic to herein private respondents and ruled on this point in this
manner:

As adoptive parents, petitioner like other parents may freely select the first name given to
his/her child as it is only the surname to which the child is entitled that is fixed by law. . . .

xxx xxx xxx

The given name of the minor was Kevin Earl, a name given for no other purpose than for
identification purposes in a birth certificate by a woman who had all intentions of giving
him away. The naming of the minor as Aaron Joseph by petitioners upon the grant of their
petition for adoption is symbolic of naming the minor at birth. 47

We cannot fathom any legal or jurisprudential basis for this attenuated ruling of respondent judge
and must thus set it aside.

It is necessary to reiterate in this discussion that a person's name is a word or combination of

words by which he is known and identified, and distinguished from others, for the convenience of
the world at large in addressing him, or in speaking of or dealing with him. It is both of personal
as well as public interest that every person must have a name. The name of an individual has two
parts: the given or proper name and the surname or family name. The giver or proper name is
that which is given to the individual at birth or at baptism, to distinguish him from other individuals.
59
The surname or family name is that which identifies the family to which he belongs and is
continued from parent to child. The given name may be freely selected by the parents for the
child, but the surname to which the child is entitled is fixed by law. 48

By Article 408 of the Civil Code, a person's birth must be entered in the civil register. The official
name of a person is that given him in the civil register. That is his name in the eyes of the law. 49
And once the name of a person is officially entered in the civil register, Article 376 of the same
Code seals that identity with its precise mandate: no person can change his name or surname
without judicial authority. This statutory restriction is premised on the interest of the State in names
borne by individuals and entities for purposes of identification. 50

By reason thereof, the only way that the name of person can be changed legally is through a
petition for change of name under Rule 103 of the Rules of Court. 51 For purposes of an application
for change of name under Article 376 of the Civil Code and correlatively implemented by Rule
103, the only name that may be changed is the true or official name recorded in the civil register.
As earlier mentioned, a petition for change of name being a proceeding in rem, impressed as it is
with public interest, strict compliance with all the requisites therefor in order to vest the court with
jurisdiction is essential, and failure therein renders the proceedings a nullity. 52

It must likewise be stressed once again that a change of name is a privilege, not a matter of right,
addressed to the sound discretion of the court which has the duty to consider carefully the
consequences of a change of name and to deny the same unless weighty reasons are shown.
Before a person can be authorized to change his name, that is, his true or official name or that
which appears in his birth certificate or is entered in the civil register, he must show proper and
reasonable cause or any convincing reason which may justify such change. 53

Jurisprudence has recognized, inter alia, the following grounds as being sufficient to warrant a
change of name: (a) when the name is ridiculous, dishonorable or extremely difficult to write or
pronounce; (b) when the change results as a legal consequence of legitimation or adoption; (c)
when the change will avoid confusion; (d) when one has continuously used and been known since
childhood by a Filipino name and was unaware of alien parentage; (e) when the change is based
on a sincere desire to adopt a Filipino name to erase signs of former alienage, all in good faith
and without prejudice to anybody; and (f) when the surname causes embarrassment and there is
no showing that the desired change of name was for a fraudulent purpose or that the change of
name would prejudice public interest. 54

Contrarily, a petition for change of name grounded on the fact that one was baptized by another
name, under which he has been known and which he used, has been denied inasmuch as the
use of baptismal names is not sanctioned. 55 For, in truth, baptism is not a condition sine qua non
to a change of name. 56 Neither does the fact that the petitioner has been using a different name
and has become known by it constitute proper and reasonable cause to legally authorize a change
of name. 57 A name given to a person in the church records or elsewhere or by which be is known
in the community - when at variance with that entered in the civil register - is unofficial and cannot
be recognized as his real name. 58

The instant petition does not sufficiently persuade us to depart from such rulings of long accepted
wisdom and applicability. The only grounds offered to justify the change of name prayed for was
that the adopted child had been baptized as Aaron Joseph in keeping with the religious faith of
private respondents and that it was the name by which he had been called and known by his
family, relatives and friends from, the time he came to live with private respondents. 59 Apart from
suffusing their pleadings with sanctimonious entreaties for compassion, none of the justified
grounds for a change of name has been alleged or established by private respondents. The legal
bases chosen by them to bolster their cause have long been struck down as unavailing for their
present purposes. For, to allow the adoptee herein to use his baptismal name, instead of his name
60
registered in the civil register, would be to countenance or permit that which has always been
frowned upon. 60

The earlier quoted posturing of respondent judge, as expressed in his assailed order that -

(a)s adoptive parents, petitioners like other parents may freely select the first name given
to his/her child as it is only the surname to which the child is entitled that is fixed by law. .
..

The given name of the minor was Kevin Earl, a name given for no other purpose than for
identification purposes in a birth certificate by a woman who had all the intentions of giving
him away. The naming of the minor as Aaron Joseph by petitioners upon grant of their
petition for adoption is symbolic of naming the minor at birth.

and supposedly based on the authority of Republic vs. Court of Appeals and Maximo Wong,
supra, painfully misapplies the ruling therein enunciated.

The factual backdrop of said case is not at all analogous to that of the case at bar. In the Wong
case, therein petitioner Maximo Wong sought the change of his surname which he acquired by
virtue of the decree of adoption granted in favor of spouses Hoong Wong and Concepcion Ty
Wong. Upon reaching the age of majority, he filed a petition in court to change his surname from
Wong to Alcala, which was his surname prior to the adoption. He adduced proof that the use of
the surname Wong caused him embarrassment and isolation from friends and relatives in view of
a suggested Chinese ancestry when in reality he is a Muslim Filipino residing in a Muslim
community, thereby hampering his business and social life, and that his surviving adoptive mother
consented to the change of name sought. This Court granted the petition and regarded the change
of the surname as a mere incident in, rather than the object of, the adoption.

It should be noted that in said case the change of surname, not the given name, and the legal
consequences thereof in view of the adoption were at issue. That it was sought in a petition duly
and precisely filed for that purpose with ample proof of the lawful grounds therefor only serves to
reinforce the imperative necessity of seeking relief under and through the legally prescribed
procedures.

Here, the Solicitor General meritoriously explained that:

Respondent Judge failed to distinguish between a situation wherein a child is being named
for the first time by his natural parent, as against one wherein, a child is previously
conferred a first name by his natural parent, and such name is subsequently sought to be
disregarded and changed by the adoptive parents. In the first case, there is no dispute
that natural parents have the right to freely select and give the child's first name for every
person, including juridical persons, must have a name (Tolentino, A., Commentaries and
Jurisprudence on the Civil Code, Vo. I, 1987 edition, page 721). In the second case,
however, as in the case at bar, private respondents, in their capacities as adopters, cannot
claim a right to name the minor adoptee after such right to name the child had already
been exercised by the natural parent. Adopting parents have not been conferred such
right by law, hence, the right assertes by private respondents herein remains but illusory.
Renaming the adoptee cannot be claimed as a right. It is merely a privilege necessitating
judicial consent upon compelling grounds. 61

The liberality with which this Court treats matters leading up to adoption insofar as it carries out
the beneficent purposes of adoption and ensures to the adopted child the rights and privileges
arising therefrom, ever mindful that the paramount consideration is the overall benefit and interest

61
of the adopted child, 62 should be understood in its proper context. It should not be misconstrued
or misinterpreted to extend to inferences beyond the contemplation of law and jurisprudence.

The practically unrestricted freedom of the natural parent to select the proper or given name of
the child presupposes that no other name for it has theretofore been entered in the civil register.
Once such name is registered, regardless of the reasons for such choice and even if it be solely
for the purpose of identification, the same constitutes the official name. This effectively
authenticates the identity of the person and must remain unaltered save when, for the most
compelling reasons shown in an appropriate proceeding, its change may merit judicial approval.

While the right of a natural parent to name the child is recognized, guaranteed and protected
under the law, the so-called right of an adoptive parent to re-name an adopted child by virtue or
as a consequence of adoption, even for the most noble intentions and moving supplications, is
unheard of in law and consequently cannot be favorably considered. To repeat, the change of the
surname of the adoptee as a result of the adoption and to follow that of the adopter does not
lawfully extend to or include the proper or given name. Furthermore, factual realities and legal
consequences, rather than sentimentality and symbolisms, are what are of concern to the Court.

Finally, it is understood that this decision does not entirely foreclose and is without prejudice to,
private respondents' privilege to legally change the proper or given name of their adopted child,
provided that the same is exercised, this time, via a proper petition for change of name. Of course,
the grant thereof is conditioned on strict compliance with all jurisdictional requirements and
satisfactory proof of the compelling reasons advanced therefor.

WHEREFORE, on the foregoing premises, the assailed order of respondent judge is hereby
MODIFIED. The legally adopted child of private respondents shall henceforth be officially known
as Kevin Earl Munson y Andrade unless a change thereof is hereafter effected in accordance with
law. In all other respects, the order is AFFIRMED.

SO ORDERED.

62
G.R. No. L-110736 December 27, 1993

WALTER T. YOUNG, petitioner,

vs.
OFFICE OF THE OMBUDSMAN, ALBERTO P. ATAS, JUANITO B. ALMOSA, JR., AND
ROLANDO C. MALABONGA, MEMBERS, PANEL OF HEARING OFFICERS OF THE SEC,
respondents.

Ocampo, Quiroz, Mina & Associates for petitioners.

RESOLUTION

VITUG, J.:

Petitioner Walter Young, in his capacity as "counsel" for Allied Finance and Leasing Corporation
("ALFC"), filed the instant petition for certiorari praying for the reversal of the Resolution, dated 5
March 1993, and the Order, dated 1 June 1993, of the Ombudsman, which dismissed petitioner's
complaint against herein respondents, all members of the panel of hearing officers in the
Securities and Exchange Commission ("SEC"), and, ultimately, asking for an order from us to
direct the Ombudsman to charge said hearing officers with having violated paragraphs (e) and (i)
of Section 3, Republic Act 3019, and Article 204 of the Revised Penal Code.

This case is an offshoot of the SEC Case No. EB-187, entitled "In the Matter of Suspension of
Payments, Ruby Industrial Corporation ('RUBY'), Petitioner," pending with the SEC en banc.

In an Order, dated 10 August 1984, the SEC created a Management Committee, headed by a
representative of ALFC, along with, as members, representatives of the majority and minority
stockholders of RUBY. The committee was tasked to manage and preserve the latter's asset. On
29 May 1990, the majority stockholders of RUBY filed a verified "URGENT EX-PARTE PETITION
TO CREATE A NEW MANAGEMENT COMMITTEE AND APPROVE THE REVISED
REHABILITATION PLAN OF RUBY INDUSTRIAL CORPORATION." After an exchange of
pleadings, the SEC en banc referred the petition to herein respondent hearing officers. On 16
January 1991, the panel set the case for hearing and directed RUBY to furnish each and every
creditor listed in the petition with a copy of the order. One such copy was sent to the law firm of
"Ocampo, Quiroz, Mina and Associates," counsel for ALFC and its representative in the
management committee.

On 21 May 1991, RUBY manifested that it was submitting the petition to constitute a new
management committee for resolution on the basis of the pleadings. The minority stockholders of
RUBY, as well as ALFC, however, expressed their desire to present evidence. Respondent
63
hearing officers scheduled a hearing for the purpose. On 19 August 1991, the panel issued an
order, directing the management committee and ALFC to submit their respective comments and
petition papers on the rehabilitation plan prepared by the majority stockholders of RUBY.

The management committee moved for a reconsideration but the motion was denied.

On 18 September 1991, the hearing officers granted the petition to create a new management
committee and approved a revised rehabilitation plan.

An appeal to the SEC en banc was taken by ALFC, as well as the minority stockholders of RUBY
and the still standing management committee, on 22 October, 21 October and 23 October 1991,
respectively. During the pendency of the appeal, RUBY filed an urgent motion to implement the
order of 18 September 1991, which the herein respondent hearing officers granted on 12
December 1991. The order, however, was interdicted due to the issuance by the SEC en banc of
a writ of preliminary injunction.

On 13 July 1992, herein petitioner Walter Young filed a complaint with the Ombudsman against
respondent hearing officers for alleged corrupt practices under Section 3 [(e) and (i) of Republic
Act 3019] and for knowingly rendering an unjust judgment punishable under Article 204 of the
Revised Penal Code.

On 5 March 1993, the Office of the Ombudsman dismissed the petitioner's complaint. It also
denied the subsequent motion for reconsideration.

Hence, this recourse.

Initially, a fatal defect pointed out by the Solicitor General is the failure of the petitioner to move,
within the reglementary period, for the reconsideration of the Resolution of 5 March 1993 of the
public respondent dismissing the complaint. In the order, dated 1 June 1993, denying petitioner's
Motion for Reconsideration, the public respondent said:

Finally, as correctly pointed out by respondents in their Opposition, dated

May 11, 1993 (Vide: Record, page 239), the subject Motion for
Reconsideration should not be given due course by the Office anymore
under Section 27 of Republic Act 6770, otherwise known as "The
Ombudsman Act of 1989, and its implementing Administrative Order No.
09 issued by this Office on October 15, 1991, amending Section 7 (a), Rule
II of Administrative Order No. 07, which fixes "an INEXTENSIBLE period of
five (5) days from notice thereof" in that, while complainant admitted having
received his copy of the resolution in question on April 16, 1993, yet he filed
his instant Motion for Reconsideration with this Office only on April 29, 1993
or after the lapse of more than five (5) days, counted from April 16, 1993.

Ordinarily, the above infirmity warrant the original dismissal of the petition. Let us, nonetheless,
also delve into the propositions advanced in support of the petition.

The petitioner contends that the management committee has not been duly notified of the orders,
dated 19 August 1991 and 18 September 1991, and that, instead, said orders have been sent
erroneously to the law firm of "Ocampo, Quiroz, Mina and Associates," counsel for the
representative of ALFC and chairman of the management committee, and not to the law office of
"Quiroz and Young," being the counsel for the management committee itself. On this score, the
Office of the Ombudsman finds, thus:

64
 . . . (C)ontrary to the allegations of complaint (petitioner herein), the records
of this case clearly show that these hearings as well as in the other previous
hearings by the Commission en banc, it was the Law Firm of Ocampo,
Quiroz, Mina and Associates, represented invariably therein by either the
herein complainant or Atty. Raymundo Quiroz, who appeared not only for
ALFC, but also for the Chairman of the Management Committee (MC), Atty.
Raymundo Quiroz, and who were invariably furnished by respondents with
copies of the assailed orders. Hence, it is not true as claimed by
complainant that the MC was furnished by respondents with copies of their
Order dated September 18, 1991. The law is clear on this matter that notice
to the Law Firm appearing for a client is notice upon the client himself.

Clearly, we must accord due respect and weight to the above factual findings of the Office of the
Ombudsman. On such basis, the legal conclusion is inevitable, i.e., that the service of notice has
been properly effected.

The petitioner next avers that it is an error on the part of the public respondent in refusing to
consider the respondent hearing officers to have acted without jurisdiction, and to have thus
knowingly rendered an unjust judgment, when they issued the "implement order" of 12 December
1991. The order, however, along with the other orders of the hearing officers, are still pending
consideration by the SEC en banc. It would have unduly precipitate for the Ombudsman, as it
would be for us, to preempt the SEC en banc on such matter. Simply courtesy demands it. We
can understand the frustration that litigants, and lawyers alike, would at times encounter in
procedural bureaucracy but imperative justice require our proper observance of indispensable
technicalities precisely designed to ensure its proper dispensation. Surely, we cannot righteously
be asked top utterly disregard them.

Furthermore, absent a clear case of grave abuse of discretion, this Court will not interfere with
the discretion of the Ombudsman, who, depending on his own findings and considered elevation
of the case, either dismisses a complaint or proceeds with it. In Ocampo vs. Ombudsman (G.R.
No. 103446-47, 30 August 1993), this Court, speaking through Mr. Justice Teodoro Padilla, said:

. . . The rule is based not only upon respect for the investigatory and
prosecutory powers granted by the Constitution to the Office of the
Ombudsman but upon practicality as well. Otherwise, the functions of the
courts will be grievously hampered by inumerable petitions assailing the
dismissal of investigatory proceedings conducted by the Office of the
Ombudsman with regard to the complaints filed before it, in much the same
way that the courts would be extremely swamped if they could be
compelled to review the exercise of discretion on the part of the fiscals or
prosecuting attorneys each time they decide to file an information in court
or dismiss a complaint by a private complainant.

In this instance, given the attendant circumstances, we see no grave abuse of discretion on the
part of the Ombudsman in dismissing the complaint.

All told, we cannot grant the extraordinary relief prayed for.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

65
 G.R. No. 99357 January 27, 1992

MA. LOURDES VILLANUEVA, petitioner,

vs.
COURT OF APPEALS and BLUE CROSS INSURANCE, INC., respondents.

Aggabao, Fernandez, Arellano & Fule Law Offices for petitioner.

Samuel F. Baldado for private respondent.

REGALADO, J.:

This petition for review on certiorari seeks the nullification of the resolution of respondent Court
of Appeals dated May 8, 1991, reconsidering its preceding resolution of March 15, 1991, in CA-
G.R. SP No. 24120, entitled "Ma. Lourdes R. Villanueva vs. Blue Cross Insurance, Inc."

Petitioner's plaint in her present recourse narrates that on October 12, 1989, she filed a complaint
with the Insurance Commission alleging, inter alia, that, in consideration of the annual payment
of P7,535.00, private respondent executed a policy of sickness and accident insurance; that on
August 12, 1989, petitioner was admitted to a hospital where she was diagnosed and operated
on for cholecystitis; that petitioner paid the hospital and doctor's bills in the aggregate sum of
P48,934.05, the same being the actual hospital and professional fees charged to her; and that
private respondent wrongfully refused to pay petitioner the said amount which she is entitled to
recover under the policy.

Private respondent's answer raised the special and affirmative defenses that under the insurance
policy, definitions and exclusions were clearly specified and among the exclusions are conditions
which pre-existed before the effective date of the insurance of which the insured was aware or
should reasonably be aware; and that cholecystitis was a pre-existing condition, hence petitioner's
sickness is non-compensable.

On September 21, 1990, the Insurance Commission rendered its decision in I.C. Case No. 3277
in favor of petitioner ordering private respondent to pay the latter the amount of P48,934.05 with
legal interest from the date of the filing of the complaint until fully satisfied, plus P5,000.00
attorney's fees and costs. In the main, the Insurance Commission, after a review of the evidence
presented, concluded that petitioner's illness, contrary to private respondent's defenses, was not
a pre-existing disease and therefore, is fully compensable. 1

66
According to respondent court, a copy of said decision was received by private respondent on
September 27, 1990. On October 15, 1990, or more than the fifteen (15) days allowed by Section
2, Republic Act No. 5434, private respondent filed a motion for reconsideration which petitioner
opposed. On December 13, 1990, the Insurance Commission denied said motion for
reconsideration. 2 On December 17, 1990, private respondent filed a notice of appeal with the
Insurance Commission. 3

On March 15, 1991, the Third Division of respondent Court of Appeals dismissed the appeal on
the ground that it was filed out of time and that private respondent did not duly file a copy of its
notice of appeal with respondent Court as mandated by Republic Act No. 5434. 4

Respondent court noted that under the aforesaid Section 2 of Republic Act No. 5434, private
respondent had ten (10) days from its receipt on December 14, 1990 of the aforesaid order
denying its motion for reconsideration within which to appeal. While respondent court, in its
resolution of May 8, 1991, subsequently agreed that private respondent filed its notice of appeal
with the Insurance Commission within the said 10-day period, no such notice was filed with
respondent court as required by Section 3, Republic Act No. 5434.

Private respondent then moved for the reconsideration of the dismissal of its appeal. On May 8,
1991, the Special Third Division of respondent court resolved to reconsider its original resolution
and ordered the reinstatement of the appeal "in keeping with the ends of substantial justice." 5

Hence, the petition at bar with the following assignment of errors:

1. The respondent court committed an error in reinstating the appeal when it has
no jurisdiction to do so, no notice of appeal having been filed with it.

2. The manner of appeal from quasi-judicial bodies has been fixed with the
solemnity of a statute; the Court of Appeals erred in ignoring it. 6

We agree with petitioner that the Court of Appeals erred in reconsidering its previous resolution
dismissing herein private respondent's appeal in CA-G.R. SP No. 24120. The dismissal of said
appeal is proper and fully justified by private respondent's failure to file a notice of appeal with the
Court of Appeals as required by Republic Act No. 5434 for the perfection of its appeal from the
decision of the Insurance Commission.

The Court of Appeals has been vested with exclusive appellate jurisdiction over all final
judgments, decisions, resolutions, orders or awards of quasi-judicial agencies, instrumentalities,
boards or commissions, except those falling within the exclusive appellate jurisdiction of the
Supreme Court. During the period relevant to and involved in the appeal from the Insurance
Commission to respondent court in CA-G.R. SP No. 24120, subject of the present review, the
appeal to the Court of Appeals from said quasi-judicial body was governed by the provisions of
Republic Act No. 5434 insofar as the same are not inconsistent with the provisions of Batas
Pambansa Blg. 129. 7

As restated and clarified in the Lacsamana case, to perfect an appeal under Republic Act No.
5434, the following rules must be observed:

In an appeal from quasi-judicial bodies to the Court of Appeals under Republic Act
No. 5434 and Section 22(c) of the Interim Rules, the appeal shall be taken by filing
a notice of appeal with the Court of Appeals and with the quasi-judicial body within
fifteen days from notice of the ruling, award, order, decision or judgment; or in case
a motion for reconsideration is filed within said period, then within ten days from
67
 notice of the resolution denying the motion for reconsideration (Sections 2 and 3
of R.A. No. 5434). No extension of time to file such a notice of appeal is needed,
much less allowed. 8

It is, therefore, indubitable that to perfect an appeal, notice must be filed both with the Court of
Appeals and with the board, commission or agency that made or rendered the ruling, award,
order, decision or judgment appealed from. In the instant case, even assuming that a notice of
appeal was seasonably filed with the Insurance Commission, no such notice of appeal was filed
with the Court of Appeals. The said failure of petitioner to comply with the requirements of law for
the perfection of its appeal is fatal to its present remedial attempt. It renders the decision of the
Insurance Commission final and executory and the same can no longer be a subject of review. 9

This Court has invariably ruled that perfection of an appeal in the manner and within the period
laid down by law is not only mandatory but also jurisdictional. 10 The failure to perfect an appeal
as required by the rules has the effect of defeating the right of appeal of a party and precluding
the appellate court from acquiring jurisdiction over the case. 11

The right to appeal is not a natural right nor a part of due process; it is merely a statutory privilege,
and may be exercised only in the manner and in accordance with the provisions of the law. 12 The
party who seeks to avail of the same must comply with the requirements of the rules. Failing to
do so, the right to appeal is lost. 13

It is true that in some cases the filing of an appeal was allowed where a stringent application of
the rules would have denied it, but only when it would serve the demands of substantial justice
and in the exercise of the court's equity jurisdiction. 14 In the case at bar, however, the interests
of justice would not be served by a policy of liberality, nor has the private respondent advanced
any compelling reason to warrant the same. In fact, in its original resolution, 15 respondent court
itself expounded at length on the very same doctrines enjoining strict compliance with the rules
governing appeals which we have set out herein and, on such considerations, dismissed the
appeal therein.

Moreover, relaxation of the rules is not called for since the issues raised are mainly factual. The
decision of the Insurance Commission was based on its findings that the illness of private
respondent, cholecystitis, was not a pre-existing ailment and is, therefore, fully compensable. It
further specifically found that private respondent failed to prove petitioner's awareness of that pre-
existing condition which is excluded under the insurance policy. We find no reason to disturb the
said findings which are supported by the evidence on record and the conclusions of experts.

Settled is the rule that factual findings of administrative agencies are accorded not only respect
but finality, because of the special knowledge and expertise gained by these quasi-judicial
tribunals from handling specific matters falling under their jurisdiction. 16 Courts cannot take
cognizance of such factual issues. 17 In reviewing administrative decisions, the reviewing court
cannot re-examine the sufficiency of the evidence. The findings of fact must be respected, so long
as they are supported by substantial evidence. 18

It has long been recognized that strict compliance with the Rules of Court is indispensable for the
prevention of needless ENDING delays and for the orderly and expeditious dispatch of judicial
business. 19 For a party to seek exception for its failure to comply strictly with the statutory
requirements for perfecting its appeal, strong compelling reasons such as serving the ends of
justice and preventing a grave miscarriage thereof must be shown, in order to warrant the Court's
suspension of the rules. 20 Otherwise, the rules must strictly apply, as in this case.

68
WHEREFORE, the petition is granted. The challenged resolution of respondent court dated May
8, 1991 is hereby ANNULLED and SET ASIDE and its resolution of March 15, 1991 is
REINSTATED. The decision of the Insurance Commission in I.C. Case No. 3277, dated
September 21, 1990, is hereby declared FINAL and EXECUTORY.

SO ORDERED.

G.R. No. 92862 July 4, 1991

NICANOR T. SANTOS, petitioner,

vs.
COURT OF APPEALS and H.M. MONTENEGRO & ASSOCIATES, INC., respondents.

Del Rosario & Del Rosario for petitioner.

Cruz, Palabyab, Llorin & Associates for private respondent.

CRUZ, J.:p

The private respondent's counsel has acted quite in character up to the end and even unto this
Court. The respondent court should not have been so forbearing.

The private respondent lost in a suit for damages in the Regional Trial Court of Caloocan City. It
appealed to the respondent court and on May 17, 1989, was required to file its brief within 45
days from notice. The notice was received by its counsel on May 24, 1989.

The 45-day period expired on July 8, 1989. No brief had been filed by the appellant nor had it at
least moved for extension of time to do so.

On September 19, 1989, the Court of Appeals issued a resolution requiring the private respondent
to show cause why its appeal should not be considered abandoned or dismissed for its failure to
file the appellant's brief. This was ignored by the private respondent. 1

On October 4, 1989, the petitioner filed a motion for the dismissal of the private respondent's
appeal for failure to file the appellant's brief. No action having been taken thereon, it was reiterated
on December 12, 1989. There was no reaction from the private respondent to either of the two
motions,

On December 11, 1989, two hundred and one days from the start of the 45-day reglementary
period and after the expiration of the 10-day period to show cause, the respondent court dismissed
the private respondent's appeal pursuant to Section 1(f), Rule 50 of the Rules of Court. 2

69
It was only after more than a month, on January 17, 1990, that the private respondent roused
itself and filed a motion for reconsideration of the dismissal of its appeal and for the admission of
the appellant's brief. Its counsel alleged that an employee of another client had taken the records
of the case and had returned them only after Christmas of 1989. It also averred that it could not
file the appeal brief on time because of the aborted coup d'etat in December of that year and the
frequent power interruptions in the Makati area, where its office was located.

An opposition was filed by the petitioner, but the motion was granted by the respondent court on
February 21, 1990. 3 The resolution read in part:

The Court has no way to determine the veracity of the claim of defendant-
appellant's counsel that an employee of another client took the records of
the case from his office. The motion filed has no affidavit attached to the
same. However, the court could take judicial notice of the electrical power
interruption at Makati as well as the occurrence of the aborted coup.

PREMISES CONSIDERED, in the interest of substantial justice, the

resolution dated December 11, 1989 dismissing the appeal interposed by
defendant-appellant is hereby RECONSIDERED and the Brief filed is
ADMITTED and appellees are given the reglementary period of forty-five
(45) days within which to file appellee's brief.

The petitioner's own motion for reconsideration having been denied, it has come to this Court to
fault the reinstatement of the appeal with grave abuse of discretion.

We find at the outset, considering the ground invoked, that the petitioner should have filed a
special civil action for certiorari under Rule 65 of the Rules of Court rather than a petition for
review on certiorari under Rule 45. We shall disregard this procedural lapse, however, to correct
the obvious flaw in the challenged resolutions.

The conduct of the private respondent and its counsel reveals a careless disregard of the Rules
of Court and, indeed, even a contemptuous rejection of the authority of the respondent court.

Required to show cause why the appeal should not be dismissed for failure to file the appellant's
brief, 4 the private respondent and its counsel saw fit not to dignify the warning with a response.
Only after the respondent court had dismissed the appeal did it occur to them to move for
reconsideration, and for reasons too flimsy to be believed.

The respondent court itself noted that the motion for reconsideration carried no supporting
affidavits to prove the grounds alleged. There was no showing of how the coup d-etat and the
power interruptions prevented the private respondent's counsel from filing the appellant's brief on
time. Notably, the period for the filing of the brief began on May 24, 1989, long before the failed
November-December coup d'etat.

Other law offices similarly inconvenienced by the attempted coup d'etat and the power
interruptions have not been similarly remiss as the private respondent's counsel. Some of them
have pleaded for more time to meet 15-day or 30-day deadlines and have been accommodated.
But it is different in the case at bar, where the private respondent's counsel had delayed for more
than four months and had not even asked for an extension.

Given this inexcusable delay, the respondent court should not have been so tolerant. The
appellee, no less than the appellant, was entitled to speedy justice. Whether deliberate or not, the
non-filing of the appellant's brief on time had the effect of postponing action on the judgment the
70
petitioner had already won in the trial court. In reinstating the appeal, the respondent court allowed
itself to emasculate the policy of expeditious judicial action mandated by the Constitution itself.

It has to be noted that the irresponsibility of the private respondent's counsel did not stop at the
respondent court but has marred even the proceedings in this Court. In our resolution dated June
20, 1990, we required the private respondent to file a Comment on the petition within ten days
from notice. No such Comment was filed. The same counsel was required in the resolution dated
January 23, 1991, to show cause why it should not be disciplined for failure to submit its Comment,
and to comply with the Court resolution. It has completely ignored that warning as if this did not
deserve its attention.

We will not countenance such disrespect. All lawyers are expected to recognize the authority of
the Supreme Court and obey its lawful processes and orders. For the failure of the private
respondent to submit its Comment, we have dispensed with and resolved this petition on the basis
of the pleadings and other available documents. Moreover, for its intransigence and as a warning
to other lawyers who may be similarly disposed, the law office of Cruz, Palabyab, Llorin and
Associates is hereby fined in the amount of One Thousand Pesos, to be paid to the Cashier of
the Court within ten days from notice of this decision. Any further disrespect or disobedience of
this Court by the said law firm shall be dealt with more severely.

The record does not show if the private respondent condoned or contributed to its counsel's
negligence. If it did not and feels it has reason to complain, it may file administrative charges
against such counsel with the Integrated Bar of the Philippines.

Procedural rules are not to be disdained as mere technicalities that may be ignored at will to suit
the convenience of a party. Adjective law is important in insuring the effective enforcement of
substantive rights through the orderly and speedy administration of justice. These rules are not
intended to hamper litigants or complicate litigation but, indeed, to provide for a system under
which suitors may be heard in the correct form and manner and at the prescribed time in a
peaceful confrontation before a judge whose authority they acknowledge. The other alternative is
the settlement of their conflict through the barrel of a gun.

WHEREFORE, the petition is GRANTED and the resolution of the respondent court reinstating
the appeal in CA-G.R. CV No. 20225 is SET ASIDE, with costs against the private respondent.

SO ORDERED.

71
G.R. No. L-104437 December 17, 1993

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, THE HON. SANTIAGO RANADA, JR., JUDGE RTC
OF MAKATI METRO MANILA, BR. 137; CEFERINO PADUA; FERNANDO GAITE;
FEDERATION OF PARAÑAQUE HOMEOWNERS ASSOCIATION, AMELITO MUTUC,
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, TOLL REGULATORY BOARD; AND
THE REPUBLIC OF THE PHILIPPINES, respondents.

Ceferino Padua Law Office for private respondents.

Aquilino Q. Pimentel, Jr. & Associates Law Office for intervenor.

R E SO L U T I O N

VITUG, J.:

This Petition for review on Certiorari seeks to annul and set aside the decision of 25 November
1991 and Resolution of 2 March 1992 of the respondent Court of Appeals, upholding the writ of
execution issued by the Regional Trial Court of Makati in Civil Case No. 16699.

The antecedent events that led to the present petition might be culled, thus —

The Republic of the Philippines filed in 1987, with the Regional Trial Court a petition for quo
warranto, docketed as Civil Case No. 16699, seeking to exclude from the franchise of the
Philippine National Construction Corporation ("PNCC") certain segments of the Northern Luzon
Expressway and Southern Luzon Expressway. The court denied the Republic's prayer for a writ
of preliminary injunction. Its motion for reconsideration having likewise been denied, the Republic
filed with the Court of Appeals a petition, docketed as CA-G.R. SP No. 13235, for certiorari,
prohibition and injunction. On 04 August 1989, the appellate court issued a decision granting the
writ prayed for.

72
PNCC forthwith filed with this Court a petition for certiorari and prohibition, docketed as G.R. No.
89557, questioning the decision of the appellate court. Before final action entered into a
compromise agreement, expressing, after a recital of the mutual covenants of the parties, that —

Should PNCC fail to comply with any of its commitments under this
Compromise Agreement set forth in paragraph 2 (c) hereof, the Court of
Appeals Decision dated August 4, 1989 in CA-G.R. SP No. 13235, entitled
"Republic of the Philippines versus Hon. Jesus Guerrero," RTC Br. 148,
Makati, Metro Manila, and Philippine National Construction Corporation
(PNCC) formerly CDCP; Federation of Parañaque Homeowners
Associations and Ceferino P. Padua, Intervenors; Amelito Mutuc,
Intervenor; Fernando A. Gaite, Intervenor shall become immediately final
and executory. This sanction becomes without force and effect upon
PNCC's compliance with such commitments except its other commitments
under this Agreement and the maintenance of the questioned portions of
the expressways which PNCC shall continue pursuant to paragraph 2 (b)
hereof.

Finding the compromise agreement not to be contrary to law, morals, public order, good customs
or public policy, this Court, in its decision, dated 20 August 1990, gave its imprimatur thereto and
thus enjoined the parties to faithfully comply with the terms and conditions thereof.

Several months later, on the contention that PNCC had violated the compromise agreement, a
writ of execution was applied for with the Regional Trial Court ("RTC") in Civil Case No. 16699,
thus resuscitating the judicial controversy. The issue of whether the compromise agreement had
in truth been observed or branched by PNCC had well preoccupied the parties and the trial court,
until, finally, the latter issued the writ applied for in its Orders of 17 June 1991 and 19 August
1991.

A petition for certiorari was filed by PNCC with the Court of Appeals, this time docketed as CA-
G.R. 25859, questioning the jurisdiction of the RTC and its findings. The Court of Appeals, in its
decision of 25 November 1991, denied the petition and sustained the validity of the writ of
execution issued by the RTC.

Hence, the instant petition (G.R. No. 104437).

The petitioner, which we find to have been ably represented by the Office of the Government
Counsel, insists that the challenged writ of execution has been improperly issued. Such writ, the
petitioner maintains, can only be issued by the court which has rendered the judgment. The
petitioner, in main, relies on Section 8, Rule 39, of the Rules of Court providing that "the writ of
execution must issue in the name of the Republic of the Philippines from the court in which the
judgment or order is entered: . . ." The petitioner points out that the decision of this Court in G.R.
No. 89557, which has approved the compromise, is upon an original action, that has sought to
nullify the decision of the Court of Appeals in CA-G.R. No. 13235. Observe, however, that the
latter case, in turn, has been occasioned by RTC's denial of the Republic's prayer for a writ of
preliminary injunction in Civil Case No. 16699.

In any case, the rule invoked by the petitioner is not without exceptions. Even the petitioner itself
concedes that one such exception is when "the records of the case had been transferred to
another court," in which event the latter may issue the writ. In practice, in the case of the appellate
courts, this Court included, rarely would the court by itself execute its own decision, whether the
petition is brought up to it under Rule 45 or under Rule 65 of the Rules of Court. Almost invariably,
the appellate records, including the judgment, are forwarded to the court whose decision or order
has been questioned or put to issue. Thus, our decision and other records in G.R. No. 89557,
73
have been, upon entry of judgment, transmitted to the Court of Appeals, the latter's decision being
the subject of the petition in G.R. No. 89557. In the same vein, the Court of Appeals, in turn, has
returned the records to the RTC, the latter being the court, as we have earlier said, where the
judicial controversy on the subject matter involved in the case had, in the first place, originated.
This we can do, and in so doing, the Court is not thereby conferring jurisdiction on a court where
none theretofore has altogether existed.

But in the same way that it can allow the lower court to issue the writ of execution, it is also within
this Court's prerogative to itself consider the application for such a writ.

The Rules of Court, Section 8 of Rule 39 included, are rules of procedure, and, whenever called
for, they should be so construed as to give effect, rather than to defeat, their essence. The Rules
are designed to facilitate, rather than hinder, the expeditious settlement of controversies and, with
it, the prompt dispensation of justice.

While the matter of estoppel, given the above conclusion, no longer is an issue still required to be
resolved, we, nonetheless, deem it appropriate to express our agreement with the petitioner that,
under the circumstances which has put it to task, it has indeed, only been constrained, as it is
entitled, to make its own submission which, in our view fall short of seeking its own affirmative
relief that might have warranted estoppel to set in against it.

Instead of a peremptory resolution of the case solely predicted on the purely legal issues that
have been raised, the Court has thought it to be imperative, nonetheless, to have the parties
address with the greater paramount concern the "safety and convenience of an innumerable
number of commuters" than just the "legal niceties, occupying, so to speak, the forefront of the
scenario." Thus, in its deliberations on 25 August 1993, this Court has instead resolved to require
the parties to appear before it for hearing on 27 September 1993, with these words:

One overriding matter. The Government Corporate counsel has asked us

to consider the following point which we here reproduce; viz:

xxx xxx xxx

(c) Further, the continued implementation of the said Writ

greatly inconveniences the estimated 200,000 motorists
availing of the facilities on a daily basis inasmuch as the
absence of road maintenance and upkeep will cause road
deterioration of the road facilities. Petitioner, as operator
thereof, stands to also incur tremendous expenses just to
bring the condition of the facilities back to order, without
benefit of security or relief therefrom;

xxx xxx xxx

Seconding the petitioner's above apprehensions are the Toll Regulatory

Board and the Department of Public Workers and Highways, which have
both expounded, in their Joint Comment, their own position on the matter,
as follows:

That as a result of the parties squabbles, the contested

segments of the expressways have been left without prior
preparation to the care of the Government, which with all of
its budgetary limitations, cannot be expected to devote its
74
 full energy and resources thereto. The operation of a road
as a toll facility is a multi-faceted undertaking, which does
not merely connote a routinary maintenance of road
surfaces, shoulders, ditches, drainage structures but also
includes traffic services, traffic enforcement, motorist
assistance, fences, removal of debris, roadside cleaning,
security, grass cutting, and providing ambulances and
towing services. In fact, for a complete maintenance of the
expressways three more government agencies should be
directly involved, and they are: Traffic Engineering Center of
the Department of Transportation and Communication, for
traffic engineering facilities, lane markings, signs, other
traffic control devices; Philippine National Police, for
security traffic enforcement and motorist assistance; and
the Metro Manila Authority, for maintenance of cleanliness
of non-road side facilities, such as plants, lights and phones.
Thus, all these other agencies shall be needing additional
funding for such services. Besides, at present, the
questioned segments need major rehabilitation works and
not a mere routinary maintenance works.

We are not unmoved. It is enough that one reads daily newspaper reports
and hears broadcast accounts or, perhaps even better, simply negotiates
the entire length of each expressway — both the franchised and the so-
called disenfranchised portions — to appreciate why this Court cannot
close its eyes to the above concerns. This case undeniably is impressed
with public interest, affecting, as it does, no less than the safety and
convenience of an innumerable number of commuters. Yet, we are puzzled
by what seems to be a finical to legal niceties, occupying, so to speak, the
forefront of the scenario. With all due respect, should not the welfare of the
riding public be considered more paramount that the legal intricacies posed
in this case?

The Office of the Solicitor General, the Office of Government Corporate

Counsel, and, but not least, the Toll Regulatory Board, as well as the
Department of Public Works and Highways, all governmental entities
themselves, posit views. Lest it be misunderstood, our approval of the
compromise agreement in G.R. No. 89557 not withstanding, the real
parties thereto are certainly not precluded from re-examining their
respective positions, if truly desirable, and from accordingly reacting in
consonance therewith. A compromise agreement, although judicially
approved, is still basically an agreement, and it is precisely for this reason
that a court is not, as a general rule, free to impose on the parties a
judgment different from the terms and conditions thereof (Philippine Bank
of Communication vs. Echiverri, G.R. L-41795, 99 SCRA 508 [1980]). Like
any other contract, so long as the obligation remains outstanding, a
compromise agreement can be the subject of change or modification, freely
entered into, that would thereby have effects no different from those arising
from novation (Gatchalian vs. Arlegui, G.R. No. L-35615, 75 SCRA 234
[1977]; Dormitorio vs. Fernandez, G.R. No. L-25897, 72 SCRA 388 [1976]).
It is also hardly debatable that agreements may be affected by the
interposition of important public policy.

75
During the hearing held on 27 September 1993, the parties appeared; on even date, following the
oral submissions made, the Court issued the following resolution:

In today's hearing, petitioner Philippine National Construction Corporation

was represented by Asst. Government Corporate Counsel Ramiro
Madarang and State Corporate Attorney Jesus Clariza, both of the Office
of the Government Corporate Counsel. Asst. Solicitor General Mariano
Martinez appeared and argued for respondent Republic.
Attys. Ceferino Padua and Fernando Gaite appeared and argued as
intervenors.

After hearing the arguments of the parties, the court Resolved to require
them to SUBMIT simultaneous MEMORANDA, and to discuss therein the
points brought out during the hearing, within ten (10) days from today,
September 27, 1993.

Considering that public interest, including the interest of the public in safe,
secure and modern highways which must be continuously and effectively
maintained and policed, is or has become heavily engaged in this case;
and considering further that the principal parties, that is, petitioner PNCC
and respondent Republic of the Philippines (which owns 93% of the stock
of petitioner and therefore controls petitioner), have both announced during
the oral hearing their mutual intent to arrive at a practical and operable
agreement that would not only resolve the issues of this case but also take
adequate account of the paramount interest of the public, while consulting
with herein intervenors, the court also Resolved to REQUIRE said
petitioner and respondent to SUBMIT to this Court the agreement that they
shall have reached, within thirty (30) days from today, 27 September 1993.

Since then, other pleadings have been filed with this Court by the parties and other, including by
some concerned local officials, which are all hereby NOTED.

On 26 November 1993, a Joint Manifestation and Motion was filed with this Court. Its full text:

JOINT MANIFESTATION AND MOTION

Petitioner Philippine National Construction Corporation (PNCC) and respondent

Republic of the Philippines, Department of Public Works and Highways (DPWH) and
the Toll Regulatory Board (TRB), by their respective undersigned counsel, unto this
Honorable Tribunal respectfully jointly manifest:

1. That petitioner and the respondents aforementioned, all government agencies,

affirm that the instant case is impressed with public interest which require, no less,
an efficient, comfortable and safe passage along the expressways;

2. Cognizant of this pressing and paramount consideration, petitioner and public

respondents agree to set aside the legal differences which characterized their
previous conflicting stands and to adopt a common approach which will best serve
the interest of the public;

3. Petitioner and public respondents recognize that the disputed portions of the North
and South Luzon expressways have deteriorated badly and are in a sad state today.
There is, in fact, an urgent need not only to arrest the continuing deterioration, but
76
to restore and improve both the physical facilities and the requisite services within
the said portions of the expressways;

4. The required immediate restoration and improvement of the said disputed portions
of the expressways can be best undertaken, and petitioner and public respondents
agree, as follows:

4.1. The disputed segments of the expressways (Nichols to Alabang in the South
and Balintawak to Alabang in the North) shall be recognized as part of the franchise
of, or otherwise restored as toll facilities to be operated by, petitioner PNCC;

4.2. Should this Honorable Court agree with this arrangement, PNCC shall thence
be allowed to regain control of the disputed segments and to resume toll collection
thereon based on 1983-approved TRB rates within seven (7) calendar days from the
finality of this Honorable Court's judgment and after PNCC shall have been placed
in actual control of the disputed segments;

4.3. Within three (3) months from the finality of this Honorable Court's judgment and
from the time PNCC is placed in full control of the disputed segments, PNCC will
restore the following thereon, to wit:

a) Traffic management, to include traffic control, security and safety services;

b) Damaged pavements and shoulders;

c) Right-of-way fences;

d) Operation of toll booths; and

e) Tollways lights, call boxes in the North Luzon Expressway and, where
required by the TRB, call boxes in the South Luzon Expressway;

4.4. PNCC will prepare a program for major rehabilitation and initiate pre-
construction activities thereon within four (4) months from the finality of this
Honorable Court's judgment giving full control of the disputed segments back
to PNCC;

4.5. Thereafter, PNCC will pursue the pre-construction activities on the

disputed segments as determined by DPWH/TRB and, once the results of the
pre-construction activities are approved by DPWH and TRB, will embark on
extensive rehabilitation works and improvement of facilities thereon under the
supervision of the DPWH and TRB.

5. Premises considered, petitioner and public respondents respectfully entreat

and move this Honorable Court to approve the afore-delineated agreement
and to render judgment on the basis thereof.

Other and/or further relief or remedy just and equitable in the premises,
including the nullification of the writ of execution issued by the respondent
RTC Judge and the questioned decision/resolution of the Court of Appeals,
are likewise prayed for.

SO RESPECTFULLY MOVED AND PRAYED FOR.

77
 Manila, September 27, 1993.
PHILIPPINE NATIONAL REPUBLIC OF THE
CONSTRUCTION CORPORATION PHILIPPINES
represented by the
Solicitor General
Petitioner Respondent
By:

(Sgd.) (Sgd.)
RAMONCITO C. ABAD RAUL I. GOCO
President Solicitor General

We take note that the conformity to the compromise agreements has not been given by all the
parties who have intervened in this case; indeed, some of them have heretofore expressed strong
reservations on, if not outright opposition to, said agreement. Being merely nominal parties,
however, their consent to the agreement, although preferable, is not indispensable. Let it be said,
in any event, that the Court has taken due consideration of their respective positions and views
on the matter.

All given, we find the compromise agreement not to be contrary to law, moral, good customs,
public order and public policy, and therefore, the same is accepted as sufficient COMPLIANCE
by the parties thereto with our resolution of 27 September 1993.

One observation, nonetheless, on an item that may have been overlooked is that the Compromise
Agreement has not made explicit provisions on the appropriate measures that can be adopted
regarding the openings along the fence on South Superhighway leading to various subdivisions
in the vicinity. We take judicial notice of the great hazard to file and limb posed by such
approaches.

In closing, we express appreciation for the time and effort given by well meaning persons and
groups, notably Attorney Ceferino P. Padua and Attorney Fernando Gaite, on a matter so imbued
with public interest as in this instance.

WHEREFORE, the compromise agreement referred to above is hereby APPROVED, and the
parties are ENJOINED to faithfully comply with the covenants, terms and conditions therein
expressed. This resolution is immediately executory. No costs.

SO ORDERED.

78
G.R. No. L-46763 February 28, 1978

ANTONIO VASCO, petitioner,

vs.
COURT OF APPEALS, LEONOR INES LUCIANO, as Presiding Judge of the Juvenile &
Domestic Relations Court, Quezon City; NICANOR SALAYSAY, as Sheriff for the
Province of Rizal, and ANGELINA REYES Y BAJACAN, REYNALDO VASCO and LOLITA
VASCO, respondents.

Quasha, Asperilla, Ancheta, Valmonte, Peña & Marcoa for petitioner.

Alejandro S. Quizon for private respondents.

AQUINO, J.:

This case is about the trial court's jurisdiction to execute pending appeal a judgment for support.

The Juvenile and Domestic Relations Court of Quezon City in a decision dated October 5, 1976
found that Reynaldo Vasco and Lolita Vasco (born on April 8, 1952 and April 27, 1954,
respectively) are the illegitimate children of Antonio Vasco and Angelina Reyes. It ordered Antonio
to pay them the sum of P200 as monthly allowance for support, beginning October, 1976 plus
P500 as attorney's fees (Civil Case No. QE-00888, Reyes vs. Vasco).

Antonio Vasco appealed to the Court of Appeals from that decision. He perfected his appeal on
January 6, 1977. In its order dated April 21, 1977 the lower court approved Vasco's record on
appeal and ordered the elevation of the record to the Court of Appeals.

On June 22, 1977, or two months after the approval of the record on appeal, Reynaldo Vasco and
Lolita Vasco filed a motion for the execution of the said judgment pending appeal.

Antonio Vasco opposed that motion on the ground that the lower court had no jurisdiction to grant
execution. He invoked section 9, Rule 41 of the Rules of Court.

The lower court granted the motion in its order of July 13, 1972. Antonio Vasco assailed that order
of execution in his petition for certiorari in the Court of Appeals.

79
The Court of Appeals in its decision of August 10, 1977 upheld that order of execution pending
appeal in the "interest of substantial justice" and on the theory that the judiciary is an agency of
the State acting as parens patriae and that if the said order is erroneous, the error is only an error
of judgment and is not a grave abuse of discretion or an act in excess of jurisdiction.

On August 26, 1977 Antonio Vasco filed in this Court the instant petition for certiorari.

The petition is meritorious because the trial court had no jurisdiction (long after the perfection of
the appeal) to issue an order for execution pending appeal It had no jurisdiction because, after
the perfection of the appeal, "the trial court loses its jurisdiction over the case, except to issue
orders for the protection and preservation of the rights of the parties which do not involve any
matter litigated by the appeal to prove compromises offered by the parties prior to the transmittal
of the record on appeal to the appellate court, and to permit the prosecution of pauper's appeals"
(Sec. 9, Rule 41, Rules of Court.)

An order for execution pending appeal does not fall within the said exceptions because it is a
proceeding involving the very matter litigated by the appeal (Cabilao vs. Judge of the Court of
First Instance of Zamboanga, L-18454, August 29, 1966, 17 SCRA 992, 997).

Before the rendition of the judgment, the plaintiffs could have availed themselves in the lower
court of the provisional remedy of support pendente lite (Rule 61, Rules of Court). They did not
do so.

On the other hand, the general rule is that an appeal stays the execution of the judgment (Araneta
vs. Gatmaitan, 101 Phil. 328, 338; Caragao vs. Maceren and Sebellino 92 Phil. 121, 124).

In granting execution pending appeal, the lower court relied upon Garcia vs. Court of Appeals,
114 Phil. 619 and Hamoy vs. Batingolo, 116 Phil. 115. The facts of the two cases are different
from the situation in the instant case.

The Garcia case refers to support pendente lite which is immediately executory. The Hamoy case
refers to an execution pending appeal against a person who was not a party to the case and who
had a remedy in the trial court, which issued the writ of execution, even if the appeal of a party
had already been perfected. That is different from the incident in this case.

The instant case is governed by the rule that a trial court, in ordering (after the approval of the bill
of exceptions, now record on appeal) the execution of a judgment requiring the husband to pay
support to his wife, acted without jurisdiction and, therefore, the order of execution is illegal and
void (Marcelo vs. Estacio, 69 Phil. 145; Estacio vs. Provincial Warden of Rizal, 69 Phil. 150).

Contrary to the impression of the Court of Appeals, the trial court's error is not merely an error of
judgment. It is clear that the trial court acted without jurisdiction. Hence, certiorari lies to annul its
order of execution pending appeal.

The Court of Appeals in sustaining the trial court's order of execution cited the demands of
substantial justice and the role of the State as parens patriae protecting the interests of minors
(Cabanas vs. Pilapil, L-25843, July 25, 1974, 58 SCRA 94).

It is axiomatic that the courts should endeavor to do substantial justice in all cases and that as much
as possible technicalities should be eschewed. As has been said, a technicality should be an aid to
justice and not its great hindrance and chief enemy. And, as the saying goes, we should dispense
compassionate justice which is the hallmark of the New Society. "For Moses gave us only the Law

80
with its frigid demands and merciless justice, while Jesus Christ brought us loving forgiveness as well."
(Line 17, Chapter 1, Gospel of Saint John).

However, we should not forget that procedural rules have their own wholesome rationale in the orderly
administration of justice. Justice has to be administered according to the rules in order to obviate
arbitrariness, caprice or whimsicality.

As to the doctrine of parens patriae (father of his country), its relevancy to this case is doubtful
because the recipients of the support granted by the lower court are no longer honors. The
doctrine refers to the inherent power and authority of the state to provide protection of the person
and property of a person non sui juries. Under that doctrine, the state has the sovereign power of
guardianship over persons under disability. Thus, the state is considered the parens patriae of
minors. (67 C.J.S. 624; Government of the P. I. vs. Monte de Piedad, 35 Phil. 728, 747; 31 Words
and Phrases Judicially Defined, Per. Ed., pp. 99-100).

WHEREFORE, the decision of the Court of Appeals and the lower court's order and writ of
execution are reversed and set aside. No costs.

G.R. No. L-44642 February 20, 1989

AURIA LIMPOT, petitioner,

vs.
COURT OF APPEALS, PROV. SHERIFF, Southem Leyte, CONCHITA TAN DE LIM,
MARCELINA LIM GO, RUDELIA LIM GO, DULCITA LIM HORTIGUELA, and EDITO LIM,
respondents.

CRUZ, J.:

Rules of procedure are intended to ensure the orderly administration of justice and the protection
of substantive rights in judicial and extrajudicial proceedings. It is a mistake to purpose that
substantive law and adjective law are contradictory to each other or, as has often been suggested,
that enforcement of procedural rules should never be permitted if it will result in prejudice to the
substantive rights of the litigants. This is not exactly true; the concept is much misunderstood. As
a matter of fact, the policy of the courts is to give effect to both kinds of law, as complementing
each other, in the just and speedy resolution of the dispute between the parties. Observance of
both substantive rights is equally guaranteed by due process whatever the source of such rights,
be it the Constitution itself or only a statute or a rule of court.

In the case at bar, the petitioner claims that she has been deprived of her day in court because
of a strict adherence to procedural rules and as a consequence prevented from defending her
substantive rights. She asks that the decision of the Court of Appeals 1 sustaining the trial court
be reversed and that the case be remanded to the court a quo for a thorough examination of the
issues in contention between her and the plaintiffs, the private respondents herein.

Briefly stated, the facts involved in this petition are as follows:

On October 3, 1967, the private respondents filed a complaint for quieting of title and recovery of
possession against the petitioner in the Court of First Instance of Southern Leyte. 2 After the
plaintiffs had rested and following the presentation of one witness for the defendant, Atty. Braulio
G. Alfaro, the petitioner's counsel, sent on August 12, 1972 a telegraphic motion for the
postponement of the hearing set for August 22, 1972, alleging physical indisposition because of
injuries sustained by him due to a fall from a bus. 3 The petitioner was informed of the motion,
also by telegram, and asked to notify the adverse parties. 4 On the day of the scheduled hearing,

81
the motion was opposed by the private respondents for lack of notice and failure to indicate the
date of the resetting. 5 Judge Gibson Ara-ula denied the motion and said he would continue with
the hearing scheduled the following day. However, instead of proceeding with the trial on that
date, he required the petitioner, who was present without counsel, to submit proof within five days
that the plaintiffs had been notified of the motion for postponement. 6 No such proof was
submitted.

Accordingly, on September 2, 1972, the trial judge issued an order declaring the case submitted
for decision on the basis of the evidence so far presented by the parties. 7

The petitioner received a copy of this order on October 12, 1972. 8 Ten days later, Atty. "Alfaro
filed a motion for reconsideration on the ground of excusable negligence and/or honest mistake,
alleging that his chent had misunderstood his telegram asking her to notify the private respondent
herself as he did not have enough money for the additional telegrams. 9 This motion was denied
on January 19, 1973. 10 On January 31, 1973, Atty. Alfaro's motion to withdraw as petitioner's
counsel was granted 11 and Atty. Gilberts C. Alfafara filed his entry of appearance as replacement
on March 10, 1973, coupled with the request that the court inform him of the status of the case.
12
Decision on the merits was rendered on March 15,1973, and a copy thereof was received by
the petitioner on March 23, 1973. 13 On April 16, 1973, she filed a motion for new trial, which was
denied on May 14, 1973. 14 She was notified of the denial on May 25, 1973. 15 The petitioner filed
her notice of appeal and appeal bond on May 31, 1973, and the original record on appeal the
following day, June 1, 1973. 16 On June 12, the private respondents filed a motion to dismiss the
petitioner's appeal on the ground of tardiness, followed by an amended motion on July 5, 1973,
amplifying their original motion. 17 After hearing, the trial court dismissed the appeal and ordered
the issuance of a writ of execution. 18 On August 9, 1973, the petitioner elevated the case on
certiorari to the Court of Appeals, which denied the same on July 15, 1976. 19 A motion for
reconsideration was likewise denied on AugUst 30, 1976. 20 Notice of this denial was received on
September 13, 1976, by the petitioner, who came to this Court on November 9, 1976, for certiorari
under Rule 45 of the Rules of Court. 21 Her petition was denied for lack of merit on January 26,
1977 but, upon our reconsideration of the denial, given due course on May 6, 1977, with the
parties being required to file their respective memoranda. 22 Only the private respondents did so
despite the extension granted to but not availed of by the petitioner. The case was considered
submitted for decision without the memorandum. 23

We find no error in the decision of the Court of Appeals. The petitioner has only herself to blame
if judgment was rendered against her in the light of the circumstances above narrated. The Court
is not unfamiliar with the ploy resorted to by losing parties of complaining that their right to due
process has been violated where the rules of procedure they have not observed are applied
against them. Such ploys do not persuade.

The petitioner argues that in denying her motion for postponement and considering the case
submitted for decision, the trial court deprived her of ber chance to fully ventilate ber side in the
land conflict between her and the private respondents. The record does not support this
contention. On the contrary, it appears that she filed a motion for reconsideration in which she
argued that she had not understood her counsel's telegram that she take care of informing the
private respondents of the telegraphic motion for postponement. She was heard by the trial court.
If it nevertheless did not accept her explanation of honest mistake or excusable negligence, this
did not signify that she was denied due process as she claims. Later, after the decision on the
merits was rendered, her new counsel filed for her a motion for new trial, in which she again
argued for the setting aside of the decision so she could submit additional evidence to resist the
private respondents' claims. If the trial court was not convinced that she had a meritorious case,
this too did not mean that she was deprived of her day in court.

82
The Court notes that Atty. Alfaro had all of ten days after sending his telegrams to file a regular
motion for postponement, with copies furnished to the private respondents, conformably to the
Rules of Court. He did not do so. Worse, he simply assumed that his telegraphic motion would be
automatically granted and did not even bother to check with his client if she had notified the
adverse panes of the motion as he had requested. He also assumed they would have no
objection. Such assumptions are risky, let alone unjustified. The petitioner cannot contend that
she was denied due process just because her lawyer's assumptions proved to be wrong.

Atty. Alfafara complains that he was not informed of the status of the case as he had requested
of the trial court when he entered his appearance as the petitioner's new counsel. The argument,
as we understand it, is that the court should not have rendered its decision on the merits four days
later without first acting on his request. Counsel should have known better. His posture was
presumptuous. The trial court was not under any obligation to brief him on the progress of the
case, the records of which were available to him for his own examination. It was for him-or his
assistant if he had any-to examine such records for whatever he needed or wanted to know. It is
fortunate for him in fact that, instead of reproving him as it could have, the trial court chose merely
to ignore his impertinent request.

The motion for new trial filed by the petitioner was deficient in form because it did not comply with
Rule 37, section 2, of the Rules of Court. No afndavit of merit was attached, as required, to support
the claim of honest mistake or excusable negligence when she failed to notify the private
respondents of the telegraphic motion for postponement. As for the second ground, to wit, the
insufficiency of the evidence to justify the decision, the trial court took pains to refute the
petitioner's contentions, discussing her arguments one by one, and extensively. A careful reading
of its order of May 14, 1973, wfll show that the motion was not denied out of hand in violation of
her right to be heard, as the petitioner suggests.

This is the reason why we cannot agree with the private respondents' submission that the motion
for new trial was merely pro forma and so did not suspend the running of the period for appeal.

The question of the timeliness of the petitionees appeal was resolved on the basis of the factual
findings of both the trial court and the respondent court regarding the date the petitioner was
notified of the decision of March 15, 1973. The petitioner claims it was March 25, 1973, but the
correct date found was March 23, 1973, as established by the certification made by the
postmaster of Cebu City and the registry return card. 24 There is no reason not to accept this
determination. Conformably thereto, we also affirm the dismissal of the appeal on the following
justification made by the trial court:

From March 23, 1973, the date a copy of thedecision was received by the defendant to April
16, 1973, the date the motion for new trial was filed a period of twenty-four (24) days has
elapsed after excluding the first day. Then from May 25, 1973, the day the defendant
received a copy of the Order denying her motion for new trial to June 1, 1973, the day she
filed and submitted her Record on Appeal, a period of eight (8) days had elapsed. Adding
this eight (8) days to the twenty-four (24) days will give a total of thirty-two (32)days. So that
when defendant filed her Notice of Appeal and Appeal Bond on May 31, 1973 and the Record
on Appeal on June 1, 1973, it was already beyond the reglementary period of thirty (30) days
within which a party may be allowed to appeal. 25

The Court notes that the petitioner could have filed the notice of appeal and the appeal bond within
the reglementary period and then asked for an extension to submit the record on appeal if she needed
more time to prepare it. No such extention was sought. Among conscientious practitioners, verification
of the material dates, especially in connection with the reglementary periods, is a wise and
indispensable precaution. This precaution was not taken in this case. Atty Alfafara's chimed mistake
of misreading the date when the notice of the decision of March 15, 1973, was received-considering

83
what be calls the ambiguity in the writing of the disputed ciphers-is, if anything, but still another proof
of his inexcusable carelessness. It also does not advance the petitioner's cause that she first claimed
she had received the notice on May 25, 1973, and then, when confronted with evidence to the contrary,
averred that she had misread the figure "23" as "25."

The petitioner says she was also denied due process when the trial court resolved the motion to
dismiss the appeal and the supplemental motion flied later by the private respondents although she
had not yet been given an opportunity to file an opposition to the supplemental motion. She stresses
that she learned of the amended motion only at the hearing schedule, as she thought, only on the
original motion. We find no such denial. The supplemental motion was actually but an amplification of
the original motion and merely adduced additional evidence to support the contention that the appeal
had not been filed on time. The second motion was based on the same ground invoked in the first
motion. By any reasonable standard, rejection of this contention by the trial court and the respondent
court cannot be considered arbitrary.

And now, to rectify her tardiness, the petitioner would ask us to consider ber subsequent petition
for certiorari with the respondent court as a substitute for her lost appeal. Obviously, this should
not be permitted. As we have repeatedly held in innumerable cases:

... Where another such remedy like an appeal may be taken, certiorari does not lie. And, it is by
now abundantly clear that certiorari may not be utilized to offset the adverse effect of failure to
appeal.

Here, petitioner had the remedy of appeal from the judgment of respondent judge. In fact, he
did attempt to appeal. But his appeal was dismissed by this Court for failure to pay the docket
fee on time. He cannot revive his appeal. He bad lost it through his own fault. certiorari is no
substitute for appeal. 26

Where an appeal would have been an adequate remedy but it was lost through petitioner's
inexcusable negligence, certiorari is not in order.'Time and again, this Court dismissed petitions
for certiorari to annul decisions or final orders which could have, but were not, appealed. They
were dismissed because certiorari cannot take the place of an appeal. 27

Curiously, while insisting that her appeal was filed on time, the petitioner would also justify her
petition for certiorari with the respondent court as an exception to the above-discussed rule. The
simple justification she offers for her inconsistency is that the judgment rendered by the trial court
in Civil Case No. R-1564 was void ab initio for violation of due process and therefore correctible
by the present petition for certiorari.

If that be so, the Court can only wonder why she attempted to file her appeal in the first place
instead of coming directly to the respondent court in the petition for certiorari she claims is proper.
The act that she sought to file an ordinary appeal clearly shows that she herself believed that the
claimed errors of the trial court were appropriate for review only in that appeal and not by certiorari.
It is obvious that when she subsequently filed the petition for certiorari after her appeal had been
dismissed for tardiness, she was availing herself'of the second remedy only as a substitute for
her lost appeal. The petitioner forgets that the two remedies are mutually exclusive and not
alternative or successive.

Recapitulating, we find that the petitioner's counsel did not comply with the requirements of the
Rules of Court when he sent the telegraphic motion for postponement; that he did not rectify the
deficiency even if he had sufficient time to do so before the hearing sought to be postponed; that
it was therefore not improper for the trial court to consider the case submitted for decision on the
basis of the evidence presented so far by the parties; that the petitioner had and enjoyed the
chance to be heard through her motion for reconsideration and her subsequent motion for new
trial; that the alleged erors sought to be reviewed were reversible only in an ordinary appeal, that
84
this appeal was, however, not filed on time; and that the petition for certiorari with the respondent
court could not be resorted to by the petitioner as a substitute for her dismissed appeal. The
respondent court was therefore correct in denying the said petition.

We conclude as we began, by stressing that procedural rules are not to be belittled or dismissed
simply because their nonobservance may have resulted in prejudice to a party's substantive
rights, as in this case. Like all rules, they are required to be followed except only when for the
most persuasive of reasons they may be relaxed to relieve a litigant of an injustice not
commensurate with the degree of his thoughtlessness in not complying with the procedure
prescribed. Such reasons are not present here. We do not find that compelling justification for the
exception sought and so must sustain the respondent court. While it is true that a litigation is not
a game of technicalities, this does not mean that the Rules of Court may be ignored at will and at
random to the prejudice of the orderly presentation and assessment of the issues and their just
resolution. Justice eschews anarchy.

WHEREFORE, the petition is DENIED and the challenged decision of the respondent court is
AFFIRMED, with costs against the petitioner. This decision is immediately executory.

G.R. No. L-75041 November 13, 1989

ROSA N. EDRA, MERCY EDRA, WINMELYN EDRA, and JERICO EDRA, the last three being
minors are represented by their mother, petitioner, ROSA N. EDRA, petitioners,
vs.
HON. INTERMEDIATE APPELLATE COURT (FIRST SPECIAL CASES DIVISION),
MARCELINO T. SADUMIANO alias MARIO T. SADREMIANO and PEPITO N. ZAMBRANA,
respondents.

PARAS, J:

This is a petition for review on certiorari seeking to annul the decision of the Intermediate Appellate
Court (now Court of' Appeals) 1 in AC-G.R. SP No. 08330 entitled Marcelino T. Sadumiano alias
Mario T. Sadremiano and Pepito Zambrana v. Hon. Eficio B. Acosta, etc. et al. which set aside
the decision of the Court of First Instance of Rizal (now Regional Trial Court). Branch X 2 in Civil
Case No. 41513 entitled Roza N. Edra et al. v. Mario T. Sadremiano and Pepito M. Zambrana,
which ordered the defendants to pay the plaintiffs, jointly and severally actual expenses and
damages.

As culled from the records, the undisputed facts are as follows:

On June 3, 1981 the petitioners Rosa N. Edra and her minor children Mercy, Winmelyn and Jerico,
all surnamed Edra filed a complaint for damages before the Court of First Instance of Rizal against
the private respondents Mario T. Sadremiano (alias Marcelino T. Sadremiano) as operator of a
passenger jeepney and the driver thereof Pepito Zambrana. (Rollo, p. 15)

On July 22, 1981 a copy of the summons and a copy of the complaint were served upon the
private respondent Mario T. Sadremiano at No. 187-D Ist Kamuning Road, Quezon City and
Pepito M. Zambrana at No. 128 Kamuning Road, Quezon City thru the wife of one of them, Teofila
Sadremiano, a person of age, living therein, with sufficient discretion to receive such kind of
process (Sheriffs Return, p. 20, Ibid.).

For failure of the private respondents to file their, answers within the reglementary period, counsel
for the petitioners moved to declare them in default and allow presentation of their evidence ex
parte (p. 19, lbid.) which was granted by the trial court on February 4, 1982 (p. 21, Ibid.).
85
The following circumstances were duly established by the petitioners, viz:

On April 15,1981 at about 4:00 p.m., the plaintiffs, Rosa N. Edra together, with her husband,
Nardito Edra, Rosalia Edra, Ernesto Edra, Clarita Edra, Elpidio Edra, Wilfredo Inay with
their children, namely: Mercy, Winmelyn and Jerico all surnamed Edra hired from
defendants, Mario Sadremiano and Pepito Zambrana a 'Sarao Jeepney, with Plate No.
PUJ-O Phil. 80' owned by the former former them to be transported to Dingras, Ilocos Norte
at P 100.00 per head excluding the children on a round trip basis; that they left
Mandaluyong, Metro Manila the place where the agreement to transport plaintiffs and
companions took place and travelled north; that while travelling alone,, the National
Highway going north and upon reaching Barrio Payocpoc Bauang La Union which was
about 1:30 a.m. April 16, 1981, the driver, defendant Pepito N. Zambrana, disregard the
norms of conduct of a driver by not taking the precautionary measures, while driving at
night, did not exert extraordinary diligence in the vigilance for the safety of his passenger,
and as a consequence thereof, the jeepney he was driving rolled down the road and landed
upside down thereby injuring seriously the plaintiffs, Rosa N. Edra, Mercy Edra, Winmelyn
Edra and Jerico Edra with first and second degree burns (Exh. E); that by reason of the
injuries sustained by the plaintiffs, they were all hospitalized, deformed and in fact they are
still under treatment and have suffered and will continue to suffer damages by way of
medical expense of not less than P 30,000.00 (Exhs. A to D); that likewise by reason of the
negligence of the defendants, who under the law shall exercise due and extraordinary
diligence plaintiff shall suffer P 40.000.00 as moral damages; exemplary or corrective
damages as the plaintiffs were left and abandoned helpless and penniless in a far away
place by the defendants, in the amount of P 20,000.00; and by way of attorney's fees and
costs suit of P 9,000.00. (pp. 22-23, Ibid.)

February 17, 1982 the trial court rendered its decision the decretal portion of which reads:

WHEREFORE, judgement is hereby rendered in favor of the plaintiffs and against the defendants
ordering the latter to pay to the former, jointly and severally the sum for medical expenses and
other actual expenses for transportation in the amount of P 30,000.00; moral damages in the
amount of P 10,000.00; attorney's fees in the amount of P 5,000.00 plus cost suit. SO ORDERED.
(p. 23, Ibid.)

On March 2, 1982 private respondent Pepito M. Zambrana received a copy of the said decision
and on April 1, 1982, he filed a motion to lift order of default and set aside the
proceedings/decision claiming lack of jurisdiction of the trial court as he was never served with
summons; that the person of Teofila Sadremiano who appeared to have received the summons
is nonexistent and unknown in the given address nor known to the defendant and that assuming
that said person is existing, the aforesaid summons was never given to him. (pp. 24-25, Ibid.)

On September 2, 1982 counsel for the petitioners filed a motion for execution on the ground that
the decision has become final and executory and to set the motion of Zambrana for hearing (p.
26, Ibid.).

On September 27, 1982, Zambrana filed an opposition to plaintiffs motion for execution on the
ground of pre-maturity pending resolution of the motion to lift order of default and set aside
proceedings/decision and that said filing of motion injured to the benefit of all the defendants
(private respondent herein) (p. 281, Ibid.)

A reply to the opposition was filed by the petitioners asking for a denial of the private respondent
Zambrana's earlier motion and the grant of the motion for the execution inasmuch as six (61)
months had already elapsed from the time the private respondents were notified of the decision.
(p. 30, Ibid.)

86
Finding the motion to lift the order of default and set aside the decision to be without merit the
same was denied in the Order of December 22, 1982. (pp. 33, Ibid.)

A motion to reconsider the same was filed on January 18, 1983 ( p. 34, Ibid.) which was likewise
denied on January 28, 1983 as the decision sought to be annulled has become final and
executory. A writ of execution was ordered to be issued. (p. 33, Ibid.)

On February 19, 1983, Deputy Sheriff Norberto B. Doblada, Jr. proceeded to the residence of
private respondent Mario T. Sadremiano at No. 187-D Ist Kamuning, Quezon City and discovered
that the person residing therein was one Mario T. Sadumiano and (later found to be as Marcelino
T. Sadumiano) as per his Residence Certificate. He tried to enforce the writ of execution
levying/attaching the motor vehicles found inside the supposed garage of the said private
respondent at 120 Kamuning St., Quezon City but found out that the motor vehicles were
registered in the name of Marcelino T. Sadumiano as shown in the Registration Certificate. The
sheriff tried to locate the other private respondent Zambrana but to no avail as he was no longer
a resident at the given address (Sheriffs Return, p. 52, lbid). The sheriff did not know that private
respondent Marcelino T. Sadumiano and Mario T. Sadremiano refer to one and the same person.

On February 10, 1986, private respondent Marcelino T. Sadumiano alias Mario T. Sadremiano
filed a petition for certiorari with urgent injunction/restraining order with the Intermediate Appellate
Court praying for a nullification of the decision dated February 17, 1982 based on the same
premise set forth in Zambrano's earlier motion but this time to enjoin the Deputy Sheriff of Rizal
from levying/selling oil private respondent's property at public auction on February 11, 1986 (p.
40, Ibid.).

Petitioner was ordered to file their comment in the Resolution of February 12, 1986 and this order
was sent to 671 Nueve de Pebrero Mandaluyong, Metro Manila instead of 671-H Nueve de
Pebrero, Mandaluyong, M. M. as shown in the complaint dated June 3, 1981 (pp. 22, CA Rollo).
Consequently, petitioners failed to file the required comment and a decision was rendered on
April 16, 1986 by respondent Court of Appeals, the dispositive part of which reads:

WHEREFORE, in view of the foregoing the decision dated February 17, 1982 as
well as the subsequent notice of levy and sale on writ of execution dated February
5, 1986, is hereby set aside insofar as petitioner Mario Sadumiano is concerned.
No special pronouncement is rnade as to costs.
SO ORDERED. (p. 51. Rollo)

Petitioners likewise failed to receive a copy of respondent court's decision of April 16, 1986 but
discovered its issuance only upon follow-up of the case status re: writ of execution before the
sheriffs office, Pasig, Metro Manila Immediately thereafter, private respondent Rosa Edra filed a
manifestation to that effect and moved that she be given fifteen (15) days within which to file a
motion for reconsideration or to appeal to the Supreme Court (p. 31, CA Rollo) which was granted
in the Resolution of June 19, 1986. (p. 34, lbid.)

Hence the instant petition.

The petitioners advance the sole issue of whether or not the trial court acquired jurisdiction over
the person of private respondent Marcelino T. Sadumiano alias Mario T. Sadremiano.

The petition is impressed with merit.

87
It is axiomatic that where the conclusions of the appellate court on factual matters differ from
those of the trial court, a minute scrutiny thereof and resort to duly proven evidence becomes
necessary ( Pacmac Inc. v. Intermediate Appellate Court, 150 SCRA 55 [1987]).

Private respondents were duly served with summons at 187-D Ist Kamuning Road, Quezon City
thru Teofila Sadremiano, as appearing in the Sheriffs Return dated July 22, 1981. By service of
summons upon them, the trial court had acquired jurisdiction over their persons (Paramount
Insurance Corporation v. Luna, 148 SCRA 564 [1987]).

The deputy sheriff is a public officer and one of his official duties is to effect prompt and effective
service of summons issued by the court. Hence, in the absence of contrary evidence the
presumption is that he has regularly performed his official duty (Tolentino v. Galano, G.R. No. L-
49008, April 15,1988).

A copy of the decision dated February 17, 1982, was likewise sent by registered mall at the
aforestated address of private respondent Sadremiano but he failed to claim the same despite
three (3) notices given him (p. 17, CA Rollo). Against his claim that he never received any registry
notice of the decision are the notations: first notice 3/l/82; second notice 3/3/82 and last notice
3/12/82 on the envelope containing the decision of the trial court, but returned unclaimed.

Said decision was sent to the correct address of private respondent Sadremiano (alias Marcelino
Sadumiano) as the deputy sheriff was able to locate him thereat in an effort to enforce the decision
on February 19, 1983 (p. 52, Rollo).

Section 8, Rule 13 of the Rules of Court provides that if the addressee of a registered mail fails
to claim it from the Post Office within five days from the date of the first notice of the postmaster,
service becomes effective upon the expiration of that five-day period (Aportadera Sr. v. Court of
Appeals G.R. No. 41358, March 16, 1988).

In the case at bar, service of the decision is deemed completed five (5) days after March 1, 1982
the date when the first notice was given by the postmaster. Within thirty (30) days reckoned from
March 6, 1982, private respondent Sadumiano had a chance to appeal the trial court's decision
of February 17, 1982 but he chose not to do so.

On April 5, 1982, the judgment of the court a quo had become final and executory by operation
of law.

A judgment becomes final after the period of appeal has lapsed without one having been perfected
(Munez v. CA, 152 SCRA 197 [1987]). Judgments which had long become final and executory can no
longer be annulled or modified by the courts (United CMC Textile Workers Union v. Labor Arbiter, 149
SCRA 424 [1987]) and the appellate court is deprived of jurisdiction to alter the trial court's final
judgments (Carbonell v. CA, 147 SCRA 565 [1987]); Republic v. Reyes, 155 SCRA 313 [1987]). The
doctrine of finality of judgments is grounded on fundamental considerations of public policy and sound
practice that at the ask of occasional error the judgments of the courts must become final at some
definite date fixed by law. Reopening of a case which has become final and executory is disallowed
(Philippine Rabbit Bus Lines Inc. v. Arciaga, 148 SCRA 433 [1987]).

Evidently, when private respondent Sadumiano filed his petition before the respondent Intermediate
Appellate Court on February 10, 1986, the decision sought to be annulled for alleged lack of jurisdiction
had already attained finality and could not have been reopened by petitioners' non-compliance with its
resolution which admittedly they did not receive at all. certiorari is no substitute for appeal which had
been lost (Landicho v. Tensuan, 151 SCRA 410 [1987], Sarmiento v. Intermediate Appellate Court,
153 SCRA 104 [1987]; Acain v. Intermediate Appellate Court, 155 SCRA 100 [1987]; and Auria Limpot
v. Court of Appeals, G.R. No. L-44642, February 20, 1989).
88
Obviously the pleadings filed by counsel for private respondent Sadumiano were merely intended
to frustrate and defeat the execution of the judgment.

The judgment rendered is founded upon the evidence adduced by the petitioners. The fact that
the trial court in said case proceeded to hear evidence ex parte can only be attributed to private
respondents' fault and no other,

While it is true that a litigation is not a game of technicalities, this does not mean that the Rules
of Court may be ignored at will and at random to the prejudice of the orderly presentation and
assessment of the issues and their just resolution. Justice eschews anarchy. (Auria Limpot v.
Court of Appeals, supra).

PREMISES CONSIDERED, the (a) petition is GRANTED; (b) appealed decision of respondent
Court of Appeals is REVERSED and SET ASIDE; and (c) judgment of the trial court dated
February 17, 1982 is hereby REINSTATED.

G.R. No. 184915 June 30, 2009

NILO T. PATES, Petitioner,

vs.
COMMISSION ON ELECTIONS and EMELITA B. ALMIRANTE, Respondents.

RESOLUTION

BRION, J.:

Our Resolution of November 11, 2008 dismissed the petition in caption pursuant to Section 3, Rule 64
of the Rules of Court which provides:

SEC. 3. Time to file petition.—The petition shall be filed within thirty (30) days from notice of the
judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or
reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of
the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the
aggrieved party may file the petition within the remaining period, but which shall not be less than five
(5) days in any event, reckoned from notice of denial.

taking into account the following material antecedents:

a. February 1, 2008 – The COMELEC First Division issued its Resolution (assailed in the
petition);

b. February 4, 2008 – The counsel for petitioner Nilo T. Pates (petitioner) received a copy of
the February 1, 2008 Resolution;

c. February 8, 2008 – The petitioner filed his motion for reconsideration (MR) of the February
1, 2008 Resolution (4 days from receipt of the February 1, 2008 Resolution)

d. September 18, 2008 – The COMELEC en banc issued a Resolution denying the petitioner’s
MR (also assailed in the petition).

89
 e. September 22, 2008 – The petitioner received the COMELEC en banc Resolution of
September 18, 2008

Under this chronology, the last day for the filing of a petition for certiorari, i.e., 30 days from notice of
the final COMELEC Resolution, fell on a Saturday (October 18, 2008), as the petitioner only had the
remaining period of 26 days to file his petition, after using up 4 days in preparing and filing his Motion
for Reconsideration. Effectively, the last day for filing was October 20, 2008 – the following Monday or
the first working day after October 18, 2008. The petitioner filed his petition with us on October 22,
2008 or two days late; hence, our Resolution of dismissal of November 11, 2008.

The Motion for Reconsideration

The petitioner asks us in his "Urgent Motion for Reconsideration with Reiteration for the Issuance of a
Temporary Restraining Order" to reverse the dismissal of his petition, arguing that the petition was
seasonably filed under the fresh period rule enunciated by the Supreme Court in a number of cases
decided beginning the year 2005. The "fresh period" refers to the original period provided under the
Rules of Court counted from notice of the ruling on the motion for reconsideration by the tribunal below,
without deducting the period for the preparation and filing of the motion for reconsideration.

He claims that, historically, the fresh period rule was the prevailing rule in filing petitions for certiorari.
This Court, he continues, changed this rule when it promulgated the 1997 Rules of Civil Procedure
and Circular No. 39-98, which both provided for the filing of petitions within the remainder of the original
period, the "remainder" being the original period less the days used up in preparing and filing a motion
for reconsideration. He then points out that on September 1, 2000 or only three years after, this Court
promulgated A.M. No. 00-02-03-SC bringing back the fresh period rule. According to the petitioner,
the reason for the change, which we supposedly articulated in Narzoles v. National Labor Relations
Commission,1 was the tremendous confusion generated by Circular No. 39-98.

The fresh period rule, the petitioner further asserts, was subsequently applied by this Court in the
following cases:

(1) Neypes v. Court of Appeals2 which thenceforth applied the fresh

eriod rule to ordinary appeals of decisions of the Regional Trial Court to the Court of Appeals;

(2) Spouses de los Santos v. Vda. de Mangubat3 reiterating Neypes;

(3) Active Realty and Development Corporation v. Fernandez4 which, following Neypes,
applied the fresh period rule to ordinary appeals from the decisions of the Municipal Trial Court
to the Regional Trial Court; and

(4) Romero v. Court of Appeals5 which emphasized that A.M. No. 00-02-03-SC is a curative
statute that may be applied retroactively.

A reading of the ruling in these cases, the petitioner argues, shows that this Court has consistently
held that the order or resolution denying the motion for reconsideration or new trial is considered as
the final order finally disposing of the case, and the date of its receipt by a party is the correct reckoning
point for counting the period for appellate review.

The Respondent’s Comment

We asked the respondents to comment on the petitioner’s motion for reconsideration. The Office of
the Solicitor General (OSG), citing Section 5, Rule 65 of the Rules of Court and its related cases,
asked via a "Manifestation and Motion" that it be excused from filing a separate comment. We granted
the OSG’s manifestation and motion.
90
For her part, respondent Emelita B. Almirante (respondent Almirante) filed a comment stating that: (1)
we are absolutely correct in concluding that the petition was filed out of time; and (2) the petitioner’s
reliance on Section 4, Rule 65 of the Rules of Court (as amended by A.M. No. 00-02-03-SC) is totally
misplaced, as Rule 64, not Rule 65, is the vehicle for review of judgments and final orders or
resolutions of the COMELEC. Respondent Almirante points out that Rule 64 and Rule 65 are different;
Rule 65 provides for a 60-day period for filing petitions for certiorari, while Rule 64 provides for 30
days.

OUR RULING

We do not find the motion for reconsideration meritorious.

A. As a Matter of Law

Section 7, Article IX-A of the Constitution provides that unless otherwise provided by the Constitution
or by law, any decision, order, or ruling of each Commission may be brought to the Court on certiorari
by the aggrieved party within 30 days from receipt of a copy thereof. For this reason, the Rules of
Court provide for a separate rule (Rule 64) specifically applicable only to decisions of the COMELEC
and the Commission on Audit. This Rule expressly refers to the application of Rule 65 in the filing of a
petition for certiorari, subject to the exception clause – "except as hereinafter provided."6

Even a superficial reading of the motion for reconsideration shows that the petitioner has not
challenged our conclusion that his petition was filed outside the period required by Section 3, Rule 64;
he merely insists that the fresh period rule applicable to a petition for certiorari under Rule 65 should
likewise apply to petitions for certiorari of COMELEC rulings filed under Rule 64.

Rule 64, however, cannot simply be equated to Rule 65 even if it expressly refers to the latter rule.
They exist as separate rules for substantive reasons as discussed below. Procedurally, the most
patent difference between the two – i.e., the exception that Section 2, Rule 64 refers to – is Section 3
which provides for a special period for the filing of petitions for certiorari from decisions or rulings of
the COMELEC en banc. The period is 30 days from notice of the decision or ruling (instead of the 60
days that Rule 65 provides), with the intervening period used for the filing of any motion for
reconsideration deductible from the originally-granted 30 days (instead of the fresh period of 60 days
that Rule 65 provides).

Thus, as a matter of law, our ruling of November 11, 2008 to dismiss the petition for late filing cannot
but be correct. This ruling is not without its precedent; we have previously ordered a similar dismissal
in the earlier case of Domingo v. Commission on Elections.7 The Court, too, has countless times in
the past stressed that the Rules of Court must be followed. Thus, we had this to say in Fortich v.
Corona:8

Procedural rules, we must stress, should be treated with utmost respect and due regard since they
are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in the
resolution of rival claims and in the administration of justice. The requirement is in pursuance to the
bill of rights inscribed in the Constitution which guarantees that "all persons shall have a right to the
speedy disposition of their before all judicial, quasi-judicial and administrative bodies," the adjudicatory
bodies and the parties to a case are thus enjoined to abide strictly by the rules. While it is true that a
litigation is not a game of technicalities, it is equally true that every case must be prosecuted in
accordance with the prescribed procedure to ensure an orderly and speedy administration of justice.
There have been some instances wherein this Court allowed a relaxation in the application of the
rules, but this flexibility was "never intended to forge a bastion for erring litigants to violate the rules
with impunity." A liberal interpretation and application of the rules of procedure can be resorted to only
in proper cases and under justifiable causes and circumstances. (Emphasis supplied)

91
As emphasized above, exceptional circumstances or compelling reasons may have existed in the past
when we either suspended the operation of the Rules or exempted a particular case from their
application.9 But, these instances were the exceptions rather than the rule, and we invariably took this
course of action only upon a meritorious plea for the liberal construction of the Rules of Court based
on attendant exceptional circumstances. These uncommon exceptions allowed us to maintain the
stability of our rulings, while allowing for the unusual cases when the dictates of justice demand a
correspondingly different treatment.

Under this unique nature of the exceptions, a party asking for the suspension of the Rules of Court
comes to us with the heavy burden of proving that he deserves to be accorded exceptional treatment.
Every plea for a liberal construction of the Rules must at least be accompanied by an explanation of
why the party-litigant failed to comply with the rules and by a justification for the requested liberal
construction.10

Significantly, the petitioner presented no exceptional circumstance or any compelling reason to

warrant the non-application of Section 3, Rule 64 to his petition. He failed to explain why his filing was
late. Other than his appeal to history, uniformity, and convenience, he did not explain why we should
adopt and apply the fresh period rule to an election case.

To us, the petitioner’s omissions are fatal, as his motion does not provide us any reason specific to
his case why we should act as he advocates.

B. As a Matter of Policy

In harking back to the history of the fresh period rule, what the petitioner apparently wants – for reasons
of uniformity and convenience – is the simultaneous amendment of Section 3, Rule 64 and the
application of his proposed new rule to his case. To state the obvious, any amendment of this provision
is an exercise in the power of this Court to promulgate rules on practice and procedure as provided by
Section 5(5), Article VIII of the Constitution. Our rulemaking, as every lawyer should know, is different
from our adjudicatory function. Rulemaking is an act of legislation, directly assigned to us by the
Constitution, that requires the formulation of policies rather than the determination of the legal rights
and obligations of litigants before us. As a rule, rulemaking requires that we consult with our own
constituencies, not necessarily with the parties directly affected in their individual cases, in order to
ensure that the rule and the policy that it enunciates are the most reasonable that we can promulgate
under the circumstances, taking into account the interests of everyone – not the least of which are the
constitutional parameters and guidelines for our actions. We point these out as our adjudicatory
powers should not be confused with our rulemaking prerogative. lavv phil

We acknowledge that the avoidance of confusion through the use of uniform standards is not without
its merits. We are not unmindful, too, that no less than the Constitution requires that "motions for
reconsideration of [division] decisions shall be decided by the Commission en banc."11 Thus, the ruling
of the Commission en banc on reconsideration is effectively a new ruling rendered separately and
independently from that made by a division.

Counterbalanced against these reasons, however, are other considerations no less weighty, the most
significant of which is the importance the Constitution and this Court, in obedience to the Constitution,
accord to elections and the prompt determination of their results. Section 3, Article IX-C of the
lawphil

Constitution expressly requires that the COMELEC’s rules of procedure should expedite the
disposition of election cases. This Court labors under the same command, as our proceedings are in
fact the constitutional extension of cases that start with the COMELEC.

Based on these considerations, we do not find convenience and uniformity to be reasons sufficiently
compelling to modify the required period for the filing of petitions for certiorari under Rule 64. While

92
the petitioner is correct in his historical data about the Court’s treatment of the periods for the filing of
the different modes of review, he misses out on the reason why the period under Section 3, Rule 64
has been retained. The reason, as made clear above, is constitutionally-based and is no less than the
importance our Constitution accords to the prompt determination of election results. This reason far
outweighs convenience and uniformity. We significantly note that the present petition itself, through its
plea for the grant of a restraining order, recognizes the need for haste in deciding election cases.

C. Our Liberal Approach

Largely for the same reason and as discussed below, we are not inclined to suspend the rules to come
to the rescue of a litigant whose counsel has blundered by reading the wrong applicable provision.
The Rules of Court are with us for the prompt and orderly administration of justice; litigants cannot,
after resorting to a wrong remedy, simply cry for the liberal construction of these rules.12 Our ruling in
Lapid v. Laurea13 succinctly emphasized this point when we said:

Members of the bar are reminded that their first duty is to comply with the rules of procedure, rather
than seek exceptions as loopholes. Technical rules of procedure are not designed to frustrate the ends
of justice. These are provided to effect the prompt, proper and orderly disposition of cases and, thus,
effectively prevent the clogging of court dockets. Utter disregard of these rules cannot justly be
rationalized by harking on the policy of liberal construction. [Emphasis supplied.]

We add that even for this Court, liberality does not signify an unbridled exercise of discretion. It has
its limits; to serve its purpose and to preserve its true worth, it must be exercised only in the most
appropriate cases.14

WHEREFORE, premises considered, we DENY the motion for reconsideration for lack of merit. Our
Resolution of November 11, 2008 is hereby declared FINAL. Let entry of judgment be made in due
course.

SO ORDERED.

93
G.R. No. 139607 October 28, 2002

RAMON ISIDRO P. LAPID and GLADYS B. LAPID, in behalf of their minor child
CHRISTOPHER B. LAPID, petitioners,
vs
HON. EMMANUEL D. LAUREA, Presiding Judge of RTC, BR. 169, Malabon,
ST. THERESE OF THE CHILD JESUS, INC., and COURT OF APPEALS, ET. AL.,
respondents.

RESOLUTION

QUISUMBING, J.:

In this petition for review, petitioners assail the resolution1 dated June 1, 1999, of the Court of
Appeals in CA-G.R. SP No. 52970 dismissing their special civil action for certiorari, and also its
resolution dated August 4, 1999, denying their motion for reconsideration.

The factual antecedents of this petition are as follows:

Spouses Ramon Isidro P. Lapid and Gladys B. Lapid are the parents of seven-year-old
Christopher B. Lapid, who was a Grade 1 pupil of the respondent school, St. Therese of the Child
Jesus, a private educational institution providing preschool and elementary education at Malabon,
Metro Manila. Private respondents Esperanza N. Prim, Norilyn A. Cruz, Flordeliza C. Santos and
Macario B. Binondo are its directress, teacher-in-charge, guidance counselor and principal,
respectively.

On May 8, 1998, petitioners filed a complaint for damages against the private respondents before
the Regional Trial Court (RTC), Malabon, Metro Manila, Branch 169, docketed as Civil Case No.
2839 MN.2

94
In their complaint, the Lapid spouses averred that on November 5, 1997, Mrs. Lapid went to St.
Therese and looked for Ms. Norilyn A. Cruz, Christopher’s classroom teacher. The directress,
Mrs. Esperanza N. Prim, prohibited her from seeing Ms. Cruz so as not to disrupt ongoing classes.
Mrs. Prim advised Mrs. Lapid to return later that day. On her return, Mrs. Lapid was surprised to
see that a letter prepared by Mr. Binondo, the school principal, was already waiting for her,
apprising her of Christopher’s suspension for five days effective the following day or on November
6, 1997.

Petitioners averred that their son was summarily dismissed from school sans notice and hearing.
Petitioners denied any knowledge of the alleged letters of complaint filed by the parents whose
children were allegedly offended by Christopher. As a result of the strained relations between the
Lapids and the school management, Christopher was transferred to a different school immediately
thereafter.

Petitioners then filed a letter-complaint with Hon. Antonio Nachura, Undersecretary of the
Department of Education, Culture & Sports (DECS), assailing the respondent school’s refusal to
admit their son in his class. Petitioners also demanded an investigation of the circumstances
leading to their son’s suspension. This letter-complaint was later indorsed to the DECS Hearing
Officer of Valenzuela, Metro Manila. At the hearing, petitioners demanded a written retraction and
a public apology from the school officials, copy furnished the DECS. The school officials, however,
refused. This compelled petitioners to file the present case for damages.

According to petitioners, the school’s malicious imputation against their son tarnished their good
name and reputation. Petitioners said Mr. Lapid is a Bachelor of Laws graduate, a college
professor, and Branch Clerk of Court of the Metropolitan Trial Court, Branch 41, Quezon City;
while Mrs. Lapid is an account analyst at the Philippine Airlines Administrative Office in Makati,
and both of them belonging to good and reputable families. They prayed for moral damages in
the amount of One Million Pesos (P1,000,000), exemplary damages in the amount of P100,000,
and another P100,000 for actual and consequential damages.3

In their answer, respondent school officials stated that as early as June 1997, Ms. Cruz had been
sending them letters regarding Christopher’s mischief in school, as evidenced by the letters dated
June 20, 1997 and June 25, 1997. According to said respondents, Christopher had committed
serious infractions when he hurt not only his classmates but also his classroom teacher, Ms. Cruz,
and one school employee. They added that at one time, Christopher stabbed a classmate with a
pencil, and at another time, he hit a teacher with a backpack. These incidents were all recorded
by Ms. Cruz and reported to the Guidance Counselor, Mrs. Flordeliza C. Santos.

Private respondents added in their answer that on several occasions, the parents of students
offended by Christopher lodged complaints with the school against Christopher, urging the
administration to impose appropriate disciplinary action on him. After most of these incidents,
averred private respondents, Ms. Cruz had called up petitioners’ house to acquaint them with
these complaints. Said phone calls were received, often by Mrs. Gloria Manapat Bautista,
grandmother and guardian de facto of Christopher. Private respondents lamented, however, that
all their efforts to reach the Lapid spouses personally turned out to be futile.

On November 18, 1998,4 petitioners filed a motion to declare respondent school as in default,
which motion was denied by the trial court in an order dated February 9, 1999.5 Petitioners moved
for a reconsideration, but said motion was likewise denied on March 11, 1999.6

With the denial of their motion for reconsideration, petitioners filed a petition for certiorari with the
Court of Appeals, docketed as CA-G.R. SP No. 52970.

95
In a resolution June 1, 1999, the appellate court dismissed the petition for failure to indicate the
material date, particularly the date of filing of motion for reconsideration with the RTC, as required
by Supreme Court Circular No. 39-98, amending Section 3 of Rule 46 of the 1997 Rules of Civil
Procedure.7

In the appellate court’s view, this formal requirement is needed to ascertain whether the petition
was filed within the reglementary period as provided in Section 4, Rule 65 of the same rules, also
as amended by SC Circular No. 39-98.8

Unfazed, on June 15, 1999, the petitioners filed a motion for reconsideration of the CA resolution,
but still without indicating the date as to when their motion for reconsideration of the RTC order
was filed. Hence, in its second assailed resolution9 dated August 4, 1999, the appellate court
denied said motion for reconsideration.

Before us, petitioners now impute error to the Court of Appeals in issuing the June 1, 1999 and
August 4, 1999 resolutions, in this wise:

THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITION ON

GROUNDS OF PURE TECHNICALITY, FAILING TO APPRECIATE THE IMPORT OR MERIT
OF THE CASE WHICH POSES THE QUESTION OF WHETHER OR NOT A CORPORATION
CAN ACT WITHOUT THE EXPRESS CONCURRENCE OF ITS BOARD OF DIRECTORS.10

The basic issue posed before this Court is whether or not the Court of Appeals erred in dismissing
the petition for certiorari filed by petitioners on the ground of formal and procedural deficiency,
i.e., the petitioners’ failure to state a material date in their petition for certiorari.

Petitioners contend that it was error for the appellate court to dismiss the petition on grounds of
pure technicality. This, they say, undermines the oft-repeated doctrine by this Court that the rules
of procedure are used only to help secure, not override, substantial justice11 considering that the
principal appellant is their seven-year-old son.12 They boldly assert that technicalities should be
set aside in this case on meritorious grounds, which they have raised in the petition particularly
the issue as to whether or not a corporation can act without the express concurrence of its Board
of Directors.13

Private respondents, for their part, staunchly maintain that petitioners’ wanton disregard of the
Rules of Court warrant the outright dismissal of their petition. 14 In their memorandum, private
respondents stressed that petitioners had made false statements of material dates.[15] They add
that the present petition raises factual issues that the Court cannot pass upon at the first instance.

After a careful consideration of the submissions of the parties, particularly their respective
memoranda, we are constrained to agree with the ruling of the respondent appellate court which
dismissed the instant petition for certiorari. We find no reversible error in the assailed resolutions
of the Court of Appeals because in filing a special civil action for certiorari without indicating the
requisite material date thereon, petitioners violated basic tenets of remedial law, particularly Rule
65 of the Rules of Court.

There are three material dates that must be stated in a petition for certiorari brought under Rule
65. First, the date when notice of the judgment or final order or resolution was received; second,
the date when a motion for new trial or for reconsideration was filed; and third, the date when
notice of the denial thereof was received. 16 In the case before us, the petition filed with the CA
failed to indicate the second date, particularly the date of filing of their motion for reconsideration.17
As explicitly stated in the aforementioned Rule, failure to comply with any of the requirements
shall be sufficient ground for the dismissal of the petition.

96
The rationale for this strict provision of the Rules of Court is not difficult to appreciate. As stated
in Santos vs. Court of Appeals,18 the requirement is for purpose of determining the timeliness of
the petition, thus:

The requirement of setting forth the three (3) dates in a petition for certiorari under Rule 65 is for
the purpose of determining its timeliness. Such a petition is required to be filed not later than sixty
(60) days from notice of the judgment, order or Resolution sought to be assailed. Therefore, that
the petition for certiorari was filed forty-one (41) days from receipt of the denial of the motion for
reconsideration is hardly relevant. The Court of Appeals was not in any position to determine
when this period commenced to run and whether the motion for reconsideration itself was
filed on time since the material dates were not stated. x x x (Stress supplied.)

Moreover, as reiterated in Mabuhay vs. NLRC, 288 SCRA 1, 6: "As a rule, the perfection of an
appeal in the manner and within the period prescribed by law is jurisdictional and failure to perfect
an appeal as required by law renders the judgment final and executory."

We are not unmindful of exceptional cases where this Court has set aside procedural defects to
correct a patent injustice. However, concomitant to a liberal application of the rules of procedure
should be an effort on the part of the party invoking liberality to at least explain its failure to comply
with the rules.19 In the instant case, the petition was bereft of any persuasive explanation as to
why petitioners Ramon and Gladys Lapid failed to observe procedural rules properly. The record
shows that through their counsel they failed not only once but twice to indicate the material date
required by law. Counsel for petitioners had all the opportunity to comply with the rules, but
counsel remained obstinate in her non-observance thereof even when she sought reconsideration
of the ruling of the respondent court dismissing her clients’ petition.20 Such obstinacy is
inconsistent with her late plea for liberality in construing the rules on certiorari. Thus, any further
delay that would inadvertently result from the dismissal of the instant petition is one purely of
petitioners’ own making, considering that it is an elementary principle in law that negligence of
counsel binds the client.21

We find unsatisfactory the explanation of petitioners, through counsel, that they have not come
across said Circular No. 39-98 at the time of the filing of the petition in the CA. 22 On one hand,
law practitioners and all lawyers, for that matter, should be fully conversant with the requirements
for the institution of certiorari proceedings under Rule 65 of the Revised Rules of Court. On the
other hand, ignorantia legis non excusat.23 Ignorance in this regard encompasses not only
substantive but also procedural laws.

A final note. Members of the bar are reminded that their first duty is to comply with the rules of
procedure, rather than seek exceptions as loopholes. Technical rules of procedure are not
designed to frustrate the ends of justice. These are provided to effect the prompt, proper and
orderly disposition of cases and thus effectively prevent the clogging of court dockets. Utter
disregard of these rules cannot justly be rationalized by harking on the policy of liberal
construction.24

All told, no reversible error can be ascribed to the Court of Appeals for dismissing the petition for
certiorari and later denying the petitioners’ motion for reconsideration.

WHEREFORE, the instant petition is DENIED. The assailed resolutions of the Court of Appeals
dated June 1,1999 and August 4, 1999 in CA-G.R. SP No. 52970 are AFFIRMED. Cost against
petitioners.

SO ORDERED.

97
G.R. No. L-50997
SUMMIT GUARANTY AND INSURANCE COMPANY, INC., petitioner,
vs.
HON. JOSE C. DE GUZMAN, in his capacity as Presiding Judge of Branch III, CFI of Tarlac,
GERONIMA PULMANO and ARIEL PULMANO, respondents.

June 30, 1987

No. L-48679
SUMMIT GUARANTY AND INSURANCE COMPANY, INC., petitioner,
vs.
THE HONORABLE GREGORIA C. ARNALDO, in her capacity as Insurance Commissioner, and
JOSE G. LEDESMA, JR., respondents.

June 30, 1987

No. L-48758
SUMMIT GUARANTY AND INSURANCE COMPANY, INC., petitioner,
vs.
HONORABLE RAMON V. JABSON, in his capacity as Presiding Judge of Branch XXVI, Court
of First Instance of Rizal, Pasig, Metro Manila and AMELIA GENERAO, respondents.

GANCAYCO, J.:

These three consolidated cases arose from three separate complaints filed against Summit
Guaranty and Insurance Company, Inc., herein petitioner, for the payment of insurance on
insurance policies issued by the latter.

The facts are as follows:

G.R. No. L-48679

98
Private respondent Jose Ledesma was the owner of a tractor which was bumped by a
minibus insured with petitioner company for purposes of Third Party Liability. The incident
took place on March 10, 1977.

Immediately thereafter, private respondent made a notice of claim with petitioner company
for the damage and loss suffered by the tractor. Petitioner company then advised private
respondent to have the tractor repaired at GA Machineries which estimated the job at
Twenty-One Thousand Pesos (P21,000.00). 1 Later, petitioner company through its
officials, made an assurance of payment of the said amount. 2

When G.A. Machineries was finally through with the repair, private respondent made
several demands on petitioner company because of the repair shop's warning that failure
to pay would result in the auctioning of the tractor to cover the mechanic's lien. However,
private respondent only received additional assurances of payment.

On June 8, 1977, due to the failure of petitioner company to settle his claim, private
respondent submitted a letter-complaint to the Insurance Commission. 3 The latter, in turn,
wrote petitioner company to inquire about the status of the claim. 4

Again, in March, 1978, petitioner company promised to pay. 5

On April 26, 1978, for not having received any payment of its credit, private respondent filed a
formal complaint with the Insurance Commission 6 which petitioner company moved to dismiss
on the ground of prescription. The Commission, through an order of respondent Commissioner
Gregoria Arnaldo, deferred the resolution of the motion to dismiss causing petitioner company to
file a motion for reconsideration which was later denied. Hence, this petition for certiorari and
prohibition.

G.R. No. 50997

Private respondent Geronima Pulmano was the owner of a jeep insured with petitioner company
in the amount of Twenty Thousand Pesos (P120,000.00). On Sept. 5, 1977, while being driven
by private respondent Ariel Pulmano this jeep got involved in a vehicular accident which resulted
in the death of one of the victims.

Private respondent immediately filed a notice of accident and claim with the petitioner company
and diligently submitted all the required documents with it. 7 However, petitioner company did not
take any steps to process the claim.

Because of this, private respondents brought their claim to the Insurance Commission and the
latter wrote petitioner company three letters dated October 11, 13 and 21, 1977. 8 On December
22, 1977, the heirs of the victim themselves filed a letter-complaint with the Insurance Commission
9
a copy of which was sent to petitioner company by registered mail. 10 Still petitioner company
failed to settle the claim.

Since all the waiting for petitioner company to act proved to be futile, private respondents were
constrained to file a complaint with the Court of First Instance of Tarlac dated October 5, 1978.
Petitioner company moved to dismiss on the ground of prescription but respondent Judge Jose
C. de Guzman denied the motion. Hence, this petition for certiorari and prohibition.

G.R. No. L-48758

99
Private respondent Amelia Generao owned a passenger jeepney that was insured with petitioner
company under a Vehicle Comprehensive Policy. On June 23, 1976, while being driven by private
respondent Carlos Pagkalinawan, this jeepney struck the van of a certain Mr. Hahn.

Two days after the accident or on June 25, 1976, Generao notified petitioner company of the
vehicular accident and demanded from it payment of damages on both vehicles. 11 Thereafter,
Generao submitted to petitioner company all the necessary papers in support of the claim and
required of her by the latter.12 Following this, Generao and petitioner company had a dialogue at
the office of the insurance company to settle the claim. 13 Then, in the initial hearing of the criminal
case that arose out of the incident, accused Pagkalinawan was represented by a lawyer of
petitioner company. 14

Nonetheless, time passed without petitioner company taking any final action on Generao's claim.

On August 3, 1977, Mr. Hahn filed a complaint for damages against herein respondents Generao
and Pagkalinawan with the Court of First Instance of Rizal, Branch XXVI. Private respondents, on
the other hand, filed a third party complaint against petitioner company which in turn filed a motion
to dismiss on the ground of prescription. Respondent Judge Ramon V. Jabson, however, denied
the said motion. Subsequently, petitioner company filed a motion for reconsideration which again
was denied. Hence, this petition for certiorari and prohibition,

The only issue at bar is whether or not the causes of action of private respondents have already
prescribed.

According to the petitioner company, the complaints of private respondents, having been filed
beyond the one-year period provided in Section 384 of the Insurance Code, can no longer
prosper. Said law reads as follows:

SECTION 384. Any person having any claim upon the policy issued pursuant to this
chapter shall, without any unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the amount of his loss, and/or the nature,
extent and duration of the injuries sustained as certified by a duly licensed physician.
Notice of claim must be filed within six months from date of the accident, otherwise, the
claim shall be deemed waived Action or suit for recovery of damage due to loss or injury
must be brought, in proper cases, with the Commission or the Courts within one year from
date of accident, otherwise the claimant's right of action shall be prescribe. (Emphasis
supplied.)15

Petitioner company contends that the two periods prescribed in the aforementioned law-that is,
the six-month period for filing the notice of claim and the one-year period for bringing an action or
suit-are mandatory and must always concur. Petitioner company argues that under this law, even
if the notice of claim was timely filed with the insurance company within the six-month period, as
what happened in the three cases before Us, the action or suit that follows, if filed beyond the
one-year period should necessarily be dismissed on the ground of prescription.

We find no merit in the contention of petitioner company. There is absolutely nothing in the law
which mandates that the two periods must always concur. On the contrary, it is very clear that the
one-year period is only required "in proper cases." It appears that petitioner company disregarded
this very significant phrase when it made its own interpretation of the law. Had the lawmakers
intended it to be the way petitioner company assumes it to be, then the phrase "in proper cases"
would not have been inserted. At this point, it is but appropriate for Us to reiterate our ruling in
Aisporna vs. Court of Appeals, 16 to wit:

100
 Legislative intent must be ascertained from a consideration of the statute as a whole. The
particular words, clauses and phrases should not be studied as detached and isolated
expressions, but the whole and every part of the statute must be considered in fixing the
meaning of any of its parts and in order to produce a harmonious whole. A statute must
be so construed as to harmonize and give effect to all its provisions whenever possible.

It is very obvious that petitioner company is trying to use Section 384 of the Insurance Code as a
cloak to hide itself from its liabilities. The facts of these cases evidently reflect the deliberate efforts
of petitioner company to prevent the filing of a formal action against it. Bearing in mind that if it
succeeds in doing so until one year lapses from the date of the accident it could set up the defense
of prescription, petitioner company made private respondents believe that their claims would be
settled in order that the latter will not find it necessary to immediately bring suit. In violation of its
duties to adopt and implement reasonable standards for the prompt investigation of claims and to
effectuate prompt, fair and equitable settlement of claims, 17 and with manifest bad faith, petitioner
company devised means and ways of stalling the settlement proceedings. In G.R, No. L-50997,
no steps were taken to process the claim and no rejection of said claim was ever made even if
private respondent had already complied with all the requirements. In G.R. No. L-48758-petitioner
company even provided legal assistance to one of the private respondents in the criminal case
filed against him leading private respondents to believe that it was ready to pay. In the same case,
petitioner company admits that it took no final action or adjudication of the claim. 18 Worse still, in
G.R. No. L-48679, assurances of payment were constantly given and petitioner company even
said that a check was ready for release.

This Court has made the observation that some insurance companies have been inventing
excuses to avoid their just obligations 19 and it is only the State that can give the protection which
the insuring public needs from possible abuses of the insurers. 20

In view of the foregoing, We hold that these three cases do not fall within the meaning of "proper
cases" as contemplated in Section 384 of the Insurance Code. To hold otherwise would enable
petitioner company to evade its responsibility through a clever scheme it had contrived.

To strengthen its position, petitioner company cites the following principle laid down in the case
of Ang vs. Fulton Fire Insurance, 21 to wit:

The condition contained in an insurance policy that claims must be presented within one
year after rejection is not merely a procedural requirement but an important matter
essential to a prompt settlement of claims against insurance companies as it demands
that insurance suits be brought by the insured while the evidence as to the origin and
cause of destruction have not yet disappeared. It is in the nature of a condition precedent
to the liability of the insurer, or in other terms, a resolutory clause, the purpose of which is
to terminate all liabilities in case the action is not filed by the insured within the period
stipulated.

Suffice it to say that the aforementioned case has no application to the present cases as in that
case the claim of the plaintiffs was denied as early as April 18, 1956 and the action was brought
only on May 5, 1958 or almost 2 years after. As we have already noted earlier, in the cases at
bar, no denial of the claims was ever made and on the contrary, private respondents were made
to believe that they will be paid by petitioner company. The alleged delay, which is quite
insignificant compared to the length of time that the plaintiffs took in the Ang case in bringing suit,
was not caused by herein private respondents but by the petitioner company itself.

The one-year period should instead be counted from the date of rejection by the insurer as this is
the time when the cause of action accrues. Since in these cases there has yet been no accrual
of cause of action, We hold that prescription has not yet set in.
101
In Eagle Star Insurance Co., Ltd., et al. vs. Chia Yu, 22 this Court ruled:

The plaintiff's cause of action did not accrue until his claim was finally rejected by the
insurance company. This is because, before such final rejection, there was no real
necessity for bringing suit.

The philosophy of the above pronouncement was pointed out in the case of ACCFA vs. Alpha
Insurance and Surety Co., 23 viz:

Since a "cause of action" requires, as essential elements, not only a legal right of the
plaintiff and a correlative obligation of the defendant but also "an act or omission of the
defendant in violation of said legal right," the cause of action does not accrue until the
party obligated refuses, expressly or impliedly, to comply with its duty.

Finally, We are pleased to note that the now defunct Batasang Pambansa, after having
recognized that Section 384 of the Insurance Code, has created so many problems for the insured
24
amended the law to read as follows:

SEC. 384. Any person having any claim upon the policy issued pursuant to this chapter
shall, without any unnecessary delay, present to the insurance company concerned a
written notice of claim setting forth the nature, extent and duration of the injuries sustained
as certified by a duly licensed physician. Notice of claim must be filed within six months
from date of the accident otherwise, the claim shall be deemed waived. Action or suit for
recovery of damage due to loss or injury must be brought in proper cases, with the
Commissioner or the Courts within one year from denial of the claim, otherwise the
claimant's right of action shall prescribe. (Emphais supplied.) 25

WHEREFORE, the instant petitions are hereby dismissed for lack of merit. The temporary
restraining order dated July 18, 1979 issued in G.R. No. 50997 is hereby lifted. With costs against
petitioner company. Let the records of these cases be immediately remanded for prompt
determination of the claims. This decision is immediately executory. SO ORDERED.

102
G.R. No. L-45543 May 17, 1939

SURIGAO MINE EXPLORATION CO., INC., plaintiff-appellant,

vs.
C. HARRIS, SURIGAO-MAINIT MINING SYNDICATE, SURIGAO CONSOLIDATED MINING
CO., INC., OTTO WEBER, ET AL., defendants-appellees.

LAUREL, J.:

On October 24, 1935, the original complaint in this case was filed in the Court of First Instance of
Surigao in which the plaintiff, a domestic private corporation domiciled in Cebu, sought a judicial
pronouncement (a) adjudging the plaintiff to be the owner and possessor of the fourteen placer
mining claims mentioned in the complaint and located in the barrio of Tubod, municipality of
Mainit, Province of Surigao; (b) annulling the forty-three lode mining claims of the defendants, C.
Harris, Surigao-Mainit Mining Syndicate, Surigao Consolidated Mining Co., Inc., and Otto Weber,
and cancelling the registration of said lode claims in the records of the mining recorder of Surigao
and in all other official records; (c) prohibiting the defendants and their agents, employees and
laborers from interfering with plaintiff's ownership and possession of its placer claims; (d)
sentencing the defendants to pay jointly and severally to the plaintiff the sum of P47,000 by way
of damages; (e) assessing the costs of the action against the defendants; and (f) awarding the
plaintiff such other proper, just and equitable relief. The theory of the plaintiff, under the complaint,
is that it is the owner by purchase of the aforesaid placer claims and that the lode claims
complained of were staked and located by the defendants on plaintiff's placer claims after the
latter had been validly and duly staked and located by the plaintiff or its grantors and predecessors
in interest.

On November 23, 1935, the defendants C. Harris, Surigao-Mainit Mining Syndicate, Surigao
Consolidated Mining Co., Inc., and Otto Weber demurred to the complaint on the grounds (1) that
there was a misjoinder of parties in that Otto Weber had been included as defendant; (2) that the
complaint did not state facts sufficient to constitute a cause of action, because it merely alleged
that the plaintiff was the owner by purchase of the placer claims named therein; and (3) that the
103
complaint was ambiguous and unintelligible. On January 9, 1936 the Court of First Instance of
Surigao entered an order finding merit in the third ground of the demurrer and requiring the plaintiff
to amend its complaint so as to contain a detailed description of its placer claims.

On January 13, 1936 an amended complaint was filed to which another demurrer was interposed
on January 22, 1936. In the order of January 27, 1936 the Court of First Instance of Surigao
overruled the demurrer and required the defendants to file their answer within the reglementary
period. Pursuant to the order of the Court of First Instance of Surigao of June 5, 1936, the plaintiff
filed, on June 11, 1936, a third amended complaint in which, additional to C. Harris, Surigao-
Mainit Mining Syndicate, Surigao Consolidated Mining Co., Inc., and Otto Weber, the original
defendants, thirty-two other individual's were included as parties defendant. In this third amended
complaint the placer claims alleged to be owned by the plaintiff were reduced to eleven, and the
relief prayed for was about the same as that asked in the original complaint, although the amount
sought to be recovered as damages was increased to P49,000.

On August 3, 1936 the defendants, other than Surigao-Mainit Mining Syndicate, Surigao
Consolidated Mining Co., Inc., and Otto Weber, filed an answer, which was amended on
September 10, 1936, containing a general denial, setting up five special defenses and praying
that the location of the alleged placer claims described in paragraph 4 of the third amended
complaint and of any placer claim which might be shown in the trial to have been located by the
plaintiff or its predecessors in interest illegally and in fraud of the government, be declared null
and void and that the registration of said claims in the office of the mining recorder of Surigao be
ordered cancelled.

On August 24, 1936 the defendants Surigao-Mainit Mining Syndicate, Surigao Consolidated
Mining Co., Inc., and Otto Weber filed an answer containing a general denial, five special
defenses and a counterclaim in the sum of P40,000 and praying the Court of First Instance of
Surigao (a) to declare the nullity of the registration in the office of the mining recorder of Surigao
of the placer claims specified in paragraphs 3 and 4 of the third amended complaint and to order
the cancellation of said registration; (b) to declare the defendants the lawful owners and
possessors of the of the lode claims enumerated in paragraph 6 of the third amended complaint;
(c) to restrain the plaintiff and its agents, employees and laborers from interfering with the
ownership, possession and enjoyment of the defendants of their lode claims; and (d) to sentence
the plaintiff to pay to the defendants the sum of P40,000 as damages.

In the course of the adduction of plaintiff's evidence in the Court of First Instance of Surigao,
Exhibits O and O-1 to O-9 were presented. With the exception of Exhibit O-7, all of said exhibits
are deeds of sale in favor of the plaintiff covering, among others, the placer claims here in question
and bear dates posterior to October 24, 1935, the date of the filing of the original complaint. Exhibit
0-7 is a deed of sale executed by Pablo S. Atillo in favor of Maximo Borromeo on January 23,
1935. A perusal of this Exhibit O-7 in connection with Exhibit O-9 reveals the fact that the mining
claims conveyed by Maximo Borromeo to the plaintiff under said Exhibit O-9, dated December
21, 1935, were the same claims acquired by Maximo Borromeo under Exhibit O-7.

Whereupon, before the plaintiff could close its evidence, the defendants moved for the dismissal
of the complaint on the ground that, when the action was commenced, plaintiff's right of action
had not yet accrued, since, under its own Exhibits O and O-1 to O-9, the plaintiff did not become
the owner of the claims in dispute until after the original complaint was filed in the Court of First
Instance of Surigao on October 24, 1935.

The present appeal is from the order of the Court of First Instance of Surigao entered on
September 12, 1936 dismissing the complaint, with costs against the plaintiff, the latter alleging
that the trial court erred and abused its discretion in so ordering the dismissal of the complaint.

104
No pretense is here made by the plaintiff-appellant that it became the owner and possessor of
the claims in question by virtue of muniments of title other than Exhibits O and O-1 to O-9, and
this appeal will be disposed of on the assumption that the alleged rights of the appellant to said
claims had been conferred solely by said Exhibits O and O-1 to O-9. In other words, this case
must be decided on the premise that the deeds of sale in favor of the appellant were executed
after the filing of the original complaint. Exhibit O-7, executed on January 23, 1935, will not affect
the situation, for the reason that said exhibit evidences a deed of sale in favor of Maximo
Borromeo, who conveyed the claims acquired by him thereunder to the plaintiff by virtue of Exhibit
O-9, executed on December 21, 1935, or after the filing of the original complaint.

Subject to certain qualifications, and except as otherwise provided by law, an action commenced
before the cause of action has accrued is prematurely brought and should be dismissed, provided
an objection on this ground is properly and seasonably interposed. The fact that the cause of
action accrues after the action is commenced and while it is pending is of no moment. In the
present case, timely objection was made by counsel for the appellees upon discovery of the
immaturity of the action a a result of the presentation by plaintiff-appellant of certain exhibits
hereinabove mentioned. The date when a civil action is deemed commenced is determined by
section 389 of the Code of Civil Procedure. Without the need of commenting on this section in
relation to allied sections of the same Code, it is sufficient to observe that here summons was
issued by the Court of First Instance of Surigao on October 25, 1935 and was served on the
defendants C. Harris, Surigao-Mainit Mining Syndicate and Surigao Consolidated Mining Co.,
Inc., on October 28, 1935, and on the defendant Otto Weber on November 11, 1935. Under
section 389, which was taken from section 405 of the Code of Civil Procedure of California, the
action is deemed commenced upon the "filing of a complaint in the office of the clerk of the court
in which the action is to be instituted" (Sotelo vs. Dizon, G.R. No. 46492, promulgated April 26,
1939, and authorities therein cited). The original complaint was filed in the present case on
October 24, 1935. But although it be assumed that, under said section 389, the date or dates of
the issuance and service of the summons might affect the true date of the commencement of the
action, the points is of no legal consequence because whether the date of the filing of the original
complaint, or the date of the issuance of the summons, or the date of the service of said summons,
is considered as the time of the commencement of the suit, it is clear that any of said dates is
anterior to those of Exhibits O and O-1 to O-9.

Notwithstanding divergence of authorities and the apparent confusion that has arisen in the
country of origin of our procedural system, we believe that certain principles are well settled.
Primarily, the right to amend a pleading is not an absolute and unconditional right. It is to be
allowed in furtherance of justice under a sound judicial discretion. This judicial discretion, upon
the other hand, is of course not without any restriction. The cause of action must exist at the time
the action was begun, and the plaintiff will not be allowed by an amendment to introduce a cause
of action which had no existence when the action was commenced. As soon as an action is
brought and the complaint is filed, the proceedings thus initiated are not subject to the arbitrary
control of the parties or of the court, but must be dealt with in accordance with recognized rules
of pleading and practice. Amendments "must be such, and only such, as are necessary to
promote the completion of the action begun — all parties necessary for that purpose may come
or be brought into it, and so also, any and all such amendments may be made as to the cause of
action, as may be necessary to its completeness in all respects. But neither general principles of
practice, nor the statute providing for amendments, authorize amendments that reach beyond
these purposes. Especially, the court has no authority to allow such amendments as to parties,
or as to the cause of action, as make new, or substancially a new action, unless by the consent
of the parties. Indeed, this would not be to amend, in any proper sense, but to substitute a new
action by order, for and in place of a pending one, which the court cannot do. General principles
of procedure, and, as well, the statutory regulations upon the subject, contemplate and intend that
an action shall embrace but one litigation or matter, and only such parties, matters and things, as
are necessary, germane, and incident to it, except that several causes of action may be united in
105
the same action, as specially provided by statute. Any other rule or method would certainly be
subversive of orderly and intelligent procedure, and lead to intolerable confusion, as well as
injustice to litigants. (Grant vs. Burgwyn, 88 N.C., 95; Merrill vs. Merrill, 92 N.C., 657; McNair vs.
Commissioners, 93 N.C., 364; Ely vs. Early, 94 N.C., 1.)" (Clendenin vs. Turner [1887], 96 N.C.,
304, 306.)

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 as 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. Compañia 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 the 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 what we also permitted in Banzon
and Rosauro vs. Sellner ([1933], 58 Phil., 453); Asiatic Petroleum 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 (Cf. Compañia gral.
de Tabacos vs. Araza [1907], 7 Phil., 455; Santos vs. Marquez [1909], 13 Phil., 207; Barretto vs.
Lane [1915], 29 Phil., 487; National Bank vs. De la Viña [1924], 46 Phil., 63; Hodges vs. Locsin
[1933], 58 Phil., 607; Limpangco vs. Mercado [1908], 10 Phil., 508).

The order appealed from is affirmed, without prejudice, with costs against the appellant. So
ordered.

106
G.R. No. 183984 April 13, 2011

ARTURO SARTE FLORES, Petitioner,

vs.
SPOUSES ENRICO L. LINDO, JR. and EDNA C. LINDO, Respondents.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 30 May 2008 Decision2 and the 4 August
2008 Resolution3 of the Court of Appeals in CA-G.R. SP No. 94003.

The Antecedent Facts

The facts, as gleaned from the Court of Appeals’ Decision, are as follows:

On 31 October 1995, Edna Lindo (Edna) obtained a loan from Arturo Flores (petitioner) amounting
to P400,000 payable on 1 December 1995 with 3% compounded monthly interest and 3%
surcharge in case of late payment. To secure the loan, Edna executed a Deed of Real Estate
Mortgage4 (the Deed) covering a property in the name of Edna and her husband Enrico (Enrico)
Lindo, Jr. (collectively, respondents). Edna also signed a Promissory Note5 and the Deed for
herself and for Enrico as his attorney-in-fact.

Edna issued three checks as partial payments for the loan. All checks were dishonored for
insufficiency of funds, prompting petitioner to file a Complaint for Foreclosure of Mortgage with

107
Damages against respondents. The case was raffled to the Regional Trial Court of Manila, Branch
33 (RTC, Branch 33) and docketed as Civil Case No. 00-97942.

In its 30 September 2003 Decision,6 the RTC, Branch 33 ruled that petitioner was not entitled to
judicial foreclosure of the mortgage. The RTC, Branch 33 found that the Deed was executed by
Edna without the consent and authority of Enrico. The RTC, Branch 33 noted that the Deed was
executed on 31 October 1995 while the Special Power of Attorney (SPA) executed by Enrico was
only dated 4 November 1995.

The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the loan from
Edna as he could file a personal action against her. However, the RTC, Branch 33 ruled that it
had no jurisdiction over the personal action which should be filed in the place where the plaintiff
or the defendant resides in accordance with Section 2, Rule 4 of the Revised Rules on Civil
Procedure.

Petitioner filed a motion for reconsideration. In its Order7 dated 8 January 2004, the RTC, Branch
33 denied the motion for lack of merit.

On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages against
respondents. It was raffled to Branch 42 (RTC, Branch 42) of the Regional Trial Court of Manila,
and docketed as Civil Case No. 04-110858.

Respondents filed their Answer with Affirmative Defenses and Counterclaims where they admitted
the loan but stated that it only amounted to P340,000. Respondents further alleged that Enrico
was not a party to the loan because it was contracted by Edna without Enrico’s signature.
Respondents prayed for the dismissal of the case on the grounds of improper venue, res judicata
and forum-shopping, invoking the Decision of the RTC, Branch 33. On 7 March 2005, respondents
also filed a Motion to Dismiss on the grounds of res judicata and lack of cause of action.

The Decision of the Trial Court

On 22 July 2005, the RTC, Branch 42 issued an Order8 denying the motion to dismiss. The RTC,
Branch 42 ruled that res judicata will not apply to rights, claims or demands which, although
growing out of the same subject matter, constitute separate or distinct causes of action and were
not put in issue in the former action. Respondents filed a motion for reconsideration. In its Order9
dated 8 February 2006, the RTC, Branch 42 denied respondents’ motion. The RTC, Branch 42
ruled that the RTC, Branch 33 expressly stated that its decision did not mean that petitioner could
no longer recover the loan petitioner extended to Edna.

Respondents filed a Petition for Certiorari and Mandamus with Prayer for a Writ of Preliminary
Injunction and/or Temporary Restraining Order before the Court of Appeals.

The Decision of the Court of Appeals

In its 30 May 2008 Decision, the Court of Appeals set aside the 22 July 2005 and 8 February
2006 Orders of the RTC, Branch 42 for having been issued with grave abuse of discretion.

The Court of Appeals ruled that while the general rule is that a motion to dismiss is interlocutory
and not appealable, the rule admits of exceptions. The Court of Appeals ruled that the RTC,
Branch 42 acted with grave abuse of discretion in denying respondents’ motion to dismiss.

The Court of Appeals ruled that under Section 3, Rule 2 of the 1997 Rules of Civil Procedure, a
party may not institute more than one suit for a single cause of action. If two or more suits are
108
instituted on the basis of the same cause of action, the filing of one on a judgment upon the merits
in any one is available ground for the dismissal of the others. The Court of Appeals ruled that on
a nonpayment of a note secured by a mortgage, the creditor has a single cause of action against
the debtor, that is recovery of the credit with execution of the suit. Thus, the creditor may institute
two alternative remedies: either a personal action for the collection of debt or a real action to
foreclose the mortgage, but not both. The Court of Appeals ruled that petitioner had only one
cause of action against Edna for her failure to pay her obligation and he could not split the single
cause of action by filing separately a foreclosure proceeding and a collection case. By filing a
petition for foreclosure of the real estate mortgage, the Court of Appeals held that petitioner had
already waived his personal action to recover the amount covered by the promissory note.

Petitioner filed a motion for reconsideration. In its 4 August 2008 Resolution, the Court of Appeals
denied the motion.

Hence, the petition before this Court.

The Issue

The sole issue in this case is whether the Court of Appeals committed a reversible error in
dismissing the complaint for collection of sum of money on the ground of multiplicity of suits.

The Ruling of this Court

The petition has merit.

The rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor, that
is, to recover the debt.10 The mortgage-creditor has the option of either filing a personal action for
collection of sum of money or instituting a real action to foreclose on the mortgage security. 11 An
election of the first bars recourse to the second, otherwise there would be multiplicity of suits in
which the debtor would be tossed from one venue to another depending on the location of the
mortgaged properties and the residence of the parties.12

The two remedies are alternative and each remedy is complete by itself. 13 If the mortgagee opts
to foreclose the real estate mortgage, he waives the action for the collection of the debt, and vice
versa.14 The Court explained:

x x x in the absence of express statutory provisions, a mortgage creditor may institute against the
mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In
other words, he may pursue either of the two remedies, but not both. By such election, his cause
of action can by no means be impaired, for each of the two remedies is complete in itself. Thus,
an election to bring a personal action will leave open to him all the properties of the debtor for
attachment and execution, even including the mortgaged property itself. And, if he waives such
personal action and pursues his remedy against the mortgaged property, an unsatisfied judgment
thereon would still give him the right to sue for deficiency judgment, in which case, all the
properties of the defendant, other than the mortgaged property, are again open to him for the
satisfaction of the deficiency. In either case, his remedy is complete, his cause of action
undiminished, and any advantages attendant to the pursuit of one or the other remedy are purely
accidental and are all under his right of election. On the other hand, a rule that would authorize
the plaintiff to bring a personal action against the debtor and simultaneously or successively
another action against the mortgaged property, would result not only in multiplicity of suits so
offensive to justice (Soriano v. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio v.
San Agustin, 25 Phil. 404), but also in subjecting the defendant to the vexation of being sued in

109
the place of his residence or of the residence of the plaintiff, and then again in the place where
the property lies.15

The Court has ruled that if a creditor is allowed to file his separate complaints simultaneously or
successively, one to recover his credit and another to foreclose his mortgage, he will, in effect, be
authorized plural redress for a single breach of contract at so much costs to the court and with so
much vexation and oppressiveness to the debtor.16

In this case, however, there are circumstances that the Court takes into consideration.

Petitioner filed an action for foreclosure of mortgage. The RTC, Branch 33 ruled that petitioner
was not entitled to judicial foreclosure because the Deed of Real Estate Mortgage was executed
without Enrico’s consent. The RTC, Branch 33 stated:

All these circumstances certainly conspired against the plaintiff who has the burden of proving his
cause of action. On the other hand, said circumstances tend to support the claim of defendant
Edna Lindo that her husband did not consent to the mortgage of their conjugal property and that
the loan application was her personal decision.

Accordingly, since the Deed of Real Estate Mortgage was executed by defendant Edna Lindo
lacks the consent or authority of her husband Enrico Lindo, the Deed of Real Estate Mortgage is
void pursuant to Article 96 of the Family Code.

This does not mean, however, that the plaintiff cannot recover the P400,000 loan plus interest
which he extended to defendant Edna Lindo. He can institute a personal action against the
defendant for the amount due which should be filed in the place where the plaintiff resides, or
where the defendant or any of the principal defendants resides at the election of the plaintiff in
accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure. This Court has no
jurisdiction to try such personal action.17

Edna did not deny before the RTC, Branch 33 that she obtained the loan. She claimed, however,
that her husband did not give his consent and that he was not aware of the transaction.18 Hence,
the RTC, Branch 33 held that petitioner could still recover the amount due from Edna through a
personal action over which it had no jurisdiction.

Edna also filed an action for declaratory relief before the RTC, Branch 93 of San Pedro Laguna
(RTC, Branch 93), which ruled:

At issue in this case is the validity of the promissory note and the Real Estate Mortgage executed
by Edna Lindo without the consent of her husband.

The real estate mortgage executed by petition Edna Lindo over their conjugal property is
undoubtedly an act of strict dominion and must be consented to by her husband to be effective.
In the instant case, the real estate mortgage, absent the authority or consent of the husband, is
necessarily void. Indeed, the real estate mortgage is this case was executed on October 31, 1995
and the subsequent special power of attorney dated November 4, 1995 cannot be made to
retroact to October 31, 1995 to validate the mortgage previously made by petitioner.

The liability of Edna Lindo on the principal contract of the loan however subsists notwithstanding
the illegality of the mortgage. Indeed, where a mortgage is not valid, the principal obligation which
it guarantees is not thereby rendered null and void. That obligation matures and becomes
demandable in accordance with the stipulation pertaining to it. Under the foregoing
circumstances, what is lost is merely the right to foreclose the mortgage as a special remedy for
110
satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the
mortgage deed remains as evidence or proof of a personal obligation of the debtor and the amount
due to the creditor may be enforced in an ordinary action.

In view of the foregoing, judgment is hereby rendered declaring the deed of real estate mortgage
as void in the absence of the authority or consent of petitioner’s spouse therein. The liability of
petitioner on the principal contract of loan however subsists notwithstanding the illegality of the
real estate mortgage.19

The RTC, Branch 93 also ruled that Edna’s liability is not affected by the illegality of the real estate
mortgage.

Both the RTC, Branch 33 and the RTC, Branch 93 misapplied the rules.

Article 124 of the Family Code provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to
both spouses jointly. In case of disagreement, the husband’s 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 contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include disposition or encumbrance without authority of the
court or the written consent of the other spouse. In the absence of such authority or consent the
disposition or encumbrance shall be void. However, the transaction shall be construed as a
continuing offer on the part of the consenting spouse and the third person, and may be
perfected as a binding contract upon the acceptance by the other spouse or authorization
by the court before the offer is withdrawn by either or both offerors. (Emphasis supplied)

Article 124 of the Family Code of which applies to conjugal partnership property, is a reproduction
of Article 96 of the Family Code which applies to community property.

Both Article 96 and Article 127 of the Family Code provide that the powers do not include
disposition or encumbrance without the written consent of the other spouse. Any disposition or
encumbrance without the written consent shall be void. However, both provisions also state that
"the transaction shall be construed as a continuing offer on the part of the consenting spouse and
the third person, and may be perfected as a binding contract upon the acceptance by the
other spouse x x x before the offer is withdrawn by either or both offerors."

In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31
October 1995. The Special Power of Attorney was executed on 4 November 1995. The execution
of the SPA is the acceptance by the other spouse that perfected the continuing offer as a
binding contract between the parties, making the Deed of Real Estate Mortgage a valid
contract.

However, as the Court of Appeals noted, petitioner allowed the decisions of the RTC, Branch 33
and the RTC, Branch 93 to become final and executory without asking the courts for an alternative
relief. The Court of Appeals stated that petitioner merely relied on the declarations of these courts
that he could file a separate personal action and thus failed to observe the rules and settled
jurisprudence on multiplicity of suits, closing petitioner’s avenue for recovery of the loan.

Nevertheless, petitioner still has a remedy under the law.

111
In Chieng v. Santos,20 this Court ruled that a mortgage-creditor may institute against the
mortgage-debtor either a personal action for debt or a real action to foreclose the mortgage. The
Court ruled that the remedies are alternative and not cumulative and held that the filing of a
criminal action for violation of Batas Pambansa Blg. 22 was in effect a collection suit or a suit for
the recovery of the mortgage-debt.21 In that case, however, this Court pro hac vice, ruled that
respondents could still be held liable for the balance of the loan, applying the principle that no
person may unjustly enrich himself at the expense of another.22

The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides:

Art. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or legal
ground, shall return the same to him.

There is unjust enrichment "when a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against the fundamental principles of justice,
equity and good conscience."23 The principle of unjust enrichment requires two conditions: (1)
that a person is benefited without a valid basis or justification, and (2) that such benefit is derived
at the expense of another.241avvphi1

The main objective of the principle against unjust enrichment is to prevent one from enriching
himself at the expense of another without just cause or consideration.25 The principle is applicable
in this case considering that Edna admitted obtaining a loan from petitioners, and the same has
not been fully paid without just cause. The Deed was declared void erroneously at the instance
of Edna, first when she raised it as a defense before the RTC, Branch 33 and second, when she
filed an action for declaratory relief before the RTC, Branch 93. Petitioner could not be expected
to ask the RTC, Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he
should have done, because the RTC, Branch 33 already stated that it had no jurisdiction over any
personal action that petitioner might have against Edna.

Considering the circumstances of this case, the principle against unjust enrichment, being a
substantive law, should prevail over the procedural rule on multiplicity of suits. The Court of
Appeals, in the assailed decision, found that Edna admitted the loan, except that she claimed it
only amounted to P340,000. Edna should not be allowed to unjustly enrich herself because of the
erroneous decisions of the two trial courts when she questioned the validity of the Deed.
Moreover, Edna still has an opportunity to submit her defenses before the RTC, Branch 42 on her
claim as to the amount of her indebtedness.

WHEREFORE, the 30 May 2008 Decision and the 4 August 2008 Resolution of the Court of
Appeals in CA-G.R. SP No. 94003 are SET ASIDE. The Regional Trial Court of Manila, Branch
42 is directed to proceed with the trial of Civil Case No. 04-110858.

SO ORDERED.

112
G.R. No. 147593 July 31, 2006

GERONIMO Q. QUADRA, petitioner,

vs.
THE COURT OF APPEALS and the PHILIPPINE CHARITY SWEEPSTAKES OFFICE,
respondents.

DECISION

PUNO, J.:

This is a petition for review of the decision of the Court of Appeals in CA-G.R. SP No. 55634 dated
December 29, 2000 and its resolution dated March 26, 2001. The Court of Appeals reversed and
set aside the decision of the National Labor Relations Commission (NLRC) in NLRC NCR Case
No. 4312-ULP which affirmed the decision of the Labor Arbiter granting moral and exemplary
damages to petitioner Geronimo Q. Quadra in connection with his dismissal from the service.

Petitioner Geronimo Q. Quadra was the Chief Legal Officer of respondent Philippine Charity
Sweepstakes Office (PCSO) when he organized and actively participated in the activities of
Philippine Charity Sweepstakes Employees Association (CUGCO), an organization composed of
the rank and file employees of PCSO, and then later, the Association of Sweepstakes Staff
Personnel and Supervisors (CUGCO) (ASSPS [CUGCO]). In April 1964, he was administratively
charged before the Civil Service Commission with violation of Civil Service Law and Rules for
neglect of duty and misconduct and/or conduct prejudicial to the interest of the service. On July
14, 1965, the Civil Service Commission rendered a decision finding petitioner guilty of the charges
and recommending the penalty of dismissal. The following day, on July 15, 1965, the General
Manager of PCSO, Ignacio Santos Diaz, sent petitioner a letter of dismissal, in accordance with
the decision of the Civil Service Commission. Petitioner filed a motion for reconsideration of the

113
decision of the Civil Service Commission on August 10, 1965. At the same time, petitioner,
together with ASSPS (CUGCO), filed with the Court of Industrial Relations (CIR) a complaint for
unfair labor practice against respondent PCSO and its officers. The case was docketed as Case
No. 4312-ULP.

On November 19, 1966, the CIR issued its decision finding respondent PCSO guilty of unfair labor
practice for having committed discrimination against the union and for having dismissed petitioner
due to his union activities. It ordered the reinstatement of petitioner to his former position with full
backwages and with all the rights and privileges pertaining to said position.1

Respondent PCSO complied with the decision of the CIR. But while it reinstated petitioner to his
former position and paid his backwages, it also filed with the Supreme Court a petition for review
on certiorari entitled "Philippine Charity Sweepstakes Office, et al. v. The Association of
Sweepstakes Staff Personnel, et al." assailing the decision of the CIR in Case No. 4312-ULP.
The petition was docketed as G.R. No. L-27546.2

On March 16, 1967, during the pendency of the case in the Supreme Court, petitioner filed with
the CIR a "Petition for Damages." He prayed for moral and exemplary damages in connection
with Case No. 4312-ULP. He cited the decision of the Supreme Court in Rheem of the
Philippines, Inc., et al. v. Ferrer, et al.3 where it upheld the jurisdiction of the CIR over claims
for damages incidental to an employee's dismissal.

Respondent PCSO moved to dismiss the petition for damages on the following grounds: (1) the
CIR has no jurisdiction to award moral and exemplary damages; (2) the cause of action is barred
by prior judgment, it appearing that two complaints are brought for different parts of a single cause
of action; and (3) the petition states no valid cause of action.

Petitioner resigned from PCSO on August 18, 1967.

The petition for damages and the motion to dismiss, however, remained pending with the CIR
until it was abolished and the NLRC was created. On April 25, 1980, the Labor Arbiter rendered
a decision awarding moral and exemplary damages to petitioner in the amount of P1.6 million.
The dispositive portion of the decision stated:

WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered

awarding to complainant Geronimo Q. Quadra moral damages consisting of the following
sum: Three Hundred Fifty Thousand Pesos (P350,000.00) for besmirched reputation;
Three Hundred Fifty Thousand Pesos (P350,000.00) for social humiliation; One Hundred
Thousand Pesos (P100,000.00) for mental anguish; One Hundred Thousand Pesos
(P100,000.00) for serious anxiety; One Hundred Thousand Pesos (P100,000.00) for
wounded feelings; One Hundred Thousand Pesos (P100,000.00) for moral shock; and the
further sum of P500,000.00 as exemplary damages, on account of the arbitrary and
unlawful dismissal effected by respondents. Consequently, respondents are therefore
ordered to pay complainant Quadra the total sum of One Million Six Hundred Thousand
Pesos (P1,600,000.00) within ten (10) days after this Decision becomes final.

SO ORDERED.4

The NLRC affirmed the decision of the Labor Arbiter,5 prompting respondent PCSO to file a
petition for certiorari with the Court of Appeals.

The Court of Appeals reversed the decision of the NLRC. It held that there was no basis for the
grant of moral and exemplary damages to petitioner as his dismissal was not tainted with bad
114
faith. It was the Civil Service Commission that recommended petitioner's dismissal after
conducting an investigation. It also held that the petition claiming moral and exemplary damages
filed by petitioner after respondent PCSO had complied with the CIR decision of reinstatement
and backwages amounted to splitting of cause of action.6

Petitioner filed a motion for reconsideration of the decision of the Court of Appeals, but the same
was denied for lack for merit.7

Petitioner now seeks the Court to review the ruling of the Court of Appeals. He basically argues:

First: The ruling of the Court of Appeals that the PCSO did not act in bad faith when it
dismissed the petitioner is contrary to the already final and executory decision of the CIR
dated November 1[9], 1966 finding the PCSO guilty of bad faith and unfair labor practice
in dismissing the petitioner. The decision of the CIR was affirmed by the High Court in the
case of PCSO, et al. v. Geronimo Q. Quadra, et al., 115 SCRA 34. The Court of Appeals
has no jurisdiction to amend the final and executory decision of November 1[9], 1966 of
the CIR which was affirmed by the High Court. Once a decision has become final [and]
executory, it could no longer be amended or altered.

Second: The ruling of the Court of Appeals that the claims for moral and exemplary
damages of the petitioner is allegedly "tantamount to splitting of cause of action under
Sec. 4, Rule 2 of the 1997 Rules of Civil Procedure" is contrary to law. When petitioner
filed with the CIR his complaint for illegal dismissal and unfair labor practice, the prevailing
law and jurisprudence was that the CIR did not have jurisdiction to grant moral and
exemplary damages. Petitioner's claim for moral damages was filed with the CIR in the
same case by virtue of the ruling of the High Court in Rheem v. Ferrer, 19 SCRA 130
holding that the CIR has jurisdiction to award moral and exemplary damages arising out
of illegal dismissal and unfair labor practice.8

The petition is impressed with merit.

A dismissed employee is entitled to moral damages when the dismissal is attended by bad faith
or fraud or constitutes an act oppressive to labor, or is done in a manner contrary to good morals,
good customs or public policy. Exemplary damages may be awarded if the dismissal is effected
in a wanton, oppressive or malevolent manner.9 It appears from the facts that petitioner was
deliberately dismissed from the service by reason of his active involvement in the activities of the
union groups of both the rank and file and the supervisory employees of PCSO, which unions he
himself organized and headed. Respondent PCSO first charged petitioner before the Civil Service
Commission for alleged neglect of duty and conduct prejudicial to the service because of his union
activities. The Civil Service Commission recommended the dismissal of petitioner. Respondent
PCSO immediately served on petitioner a letter of dismissal even before the latter could move for
a reconsideration of the decision of the Civil Service Commission. Respondent PCSO may not
impute to the Civil Service Commission the responsibility for petitioner's illegal dismissal as it was
respondent PCSO that first filed the administrative charge against him. As found by the CIR,
petitioner's dismissal constituted unfair labor practice. It was done to interfere with, restrain or
coerce employees in the exercise of their right to self-organization. It stated:

Upon the entire evidence as a whole (sic), the [c]ourt feels and believes that complainant
Quadra was discriminatorily dismissed by reason of his militant union activities, not only
as President of PCSEA, but also as President of the ASSPS.10

115
In Nueva Ecija I Electric Cooperative, Inc. (NEECO I) Employees Association, et al. v. NLRC,
et al.,11 we found it proper to award moral and exemplary damages to illegally dismissed
employees as their dismissal was tainted with unfair labor practice. The Court said:

Unfair labor practices violate the constitutional rights of workers and employees to self-
organization, are inimical to the legitimate interests of both labor and management,
including their right to bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect; and disrupt industrial peace and hinder the
promotion of healthy and stable labor-management relations. As the conscience of the
government, it is the Court's sworn duty to ensure that none trifles with labor rights.

For this reason, we find it proper in this case to impose moral and exemplary damages on
private respondent. x x x

On the second issue, we agree with petitioner that the filing of a petition for damages before the
CIR did not constitute splitting of cause of action under the Revised Rules of Court. The Revised
Rules of Court prohibits parties from instituting more than one suit for a single cause of action.
Splitting a cause of action is the act of dividing a single cause of action, claim or demand into two
or more parts, and bringing suit for one of such parts only, intending to reserve the rest for another
separate action. The purpose of the rule is to avoid harassment and vexation to the defendant
and avoid multiplicity of suits.12

The prevailing rule at the time that the action for unfair labor practice and illegal dismissal was
filed and tried before the CIR was that said court had no jurisdiction over claims for damages.
Hence, petitioner, at that time, could not raise the issue of damages in the proceedings. However,
on January 27, 1967, the Supreme Court rendered its ruling in Rheem of the Philippines, Inc.,
et al. v. Ferrer, et al.13 upholding the jurisdiction of the CIR over claims for damages incidental
to an employee's illegal dismissal. Petitioner properly filed his claim for damages after the
declaration by the Court and before the ruling on their case became final. Such filing could not be
considered as splitting of cause of action.

IN VIEW WHEREOF, the assailed decision and resolution of the Court of Appeals are
REVERSED and SET ASIDE. The decision of the NLRC in NLRC NCR Case No. 4312-ULP is
REINSTATED. SO ORDERED.

116
G.R. No. L-25134 October 30, 1969

THE CITY OF BACOLOD, plaintiff-appellee,

vs.
SAN MIGUEL BREWERY, INC., defendant-appellant.

BARREDO, J.:

An appeal from the decision of the Court of First Instance of Negros Occidental in its Civil Case
No. 7355, ordering the San Miguel Brewery, Inc. to pay to the City of Bacolod the sum of
P36,519.10, representing surcharges on certain fees which, under existing ordinances of the City
of Bacolod, the San Miguel Brewery should have paid quarterly to the treasurer of the said city
for and/or during the period from July, 1959 to December, 1962, but which were paid only on April
23, 1963.

On February 17, 1949, the City Council of Bacolod passed Ordinance No. 66, series of 1949
imposing upon "any person, firm or corporation engaged in the manufacturer bottling of coca-
cola, pepsi cola, tru orange, lemonade, and other soft drinks within the jurisdiction of the City of
Bacolod, ... a fee of ONE TWENTY-FOURTH (1/24) of a centavo for every bottle thereof," plus "a
surcharge of 2% every month, but in no case to exceed 24% for one whole year," upon "such
local manufacturers or bottler above-mentioned who will be delinquent on any amount of fees
due" under the ordinance.

In 1959, this ordinance was amended by Ordinance No. 150, series of 1959, by increasing the
fee to "one-eighth (1/8) of a centavo for every bottle thereof." In other words, the fee was

117
increased from P0.01 to P0.03 per case of soft drinks. Appellant refused to pay the additional fee
and challenged the validity of the whole ordinance.

Under date of March 23, 1960, appellee sued appellant in Civil Case No. 5693 of the Court of
First Instance of Negros Occidental, with the corresponding Complaint alleging, inter alia:

3. — That the defendant, Manager of the San Miguel Brewery, Bacolod Coca Cola
Plant, Bacolod Branch since the approval of Ordinance No. 66, Series of 1949 as
amended by Ordinance No. 150, Series of 1959, which took effect on July 1, 1959,
only paid to the plaintiff herein the P0.01 bottling tax per case of soft drinks thereby
refusing to pay the P0.03 bottling tax per case of soft drinks which amounted to
P26,306.54 at P0.02 per case of soft drinks such as coca cola and tru orange
manufactured or bottled by said company as per statement submitted by the
Assistant City Treasurer of Bacolod City herewith attached as Annex "C" of this
complaint;

and praying

... that judgment be rendered for the plaintiff:

"(a) Ordering the defendant to pay the plaintiff the bottling taxes of P0.03
per case of soft drinks as provided for in Section 1, Ordinance No. 66,
Series of 1949, as amended by Ordinance No. 150, Series of 1959, as well
as the sum of P26,306.54 representing unpaid bottling taxes due with legal
rate of interest thereon from the date of the filing of this complaint until
complete payment thereof; ... costs, etc."'

In due time, appellant filed its answer. This was followed by a stipulation of facts between the
parties, whereupon, the court rendered judgment on November 12, 1960; with the following
dispositive portion:

WHEREFORE, San Miguel Brewery Inc. is ordered to pay to the plaintiff the sum
of P26,306.54 and the tax at the rate of three centavos per case levied in
Ordinance No. 66 and 150 from March, 1960, and thereafter. Costs against the
defendant.

Appellant appealed from the said decision to this Court where it pressed the question of the
invalidity of the abovementioned taxing ordinances. In that appeal (G.R. No. L-18290), however,
this Court affirmed the decision appealed from and upheld the constitutionality of the questioned
ordinances and the authority of the appellee to enact the same. For reasons not extant in the
record, it was already after this decision had become final when appellee moved for the
reconsideration thereof, praying that the same be amended so as to include the penalties and
surcharges provided for in the ordinances. Naturally, the said motion was denied, for the reason
that "the decision is already final and may not be amended." When execution was had before the
lower court, the appellee again sought the inclusion of the surcharges referred to; and once again
the move was frustrated by the Court of First Instance of Negros Occidental which denied the
motion, as follows:

Acting upon the motion dated October 24, 1963, filed by the Assistant City Fiscal,
Raymundo Rallos, counsel for the plaintiff, and the opposition thereto filed by
attorneys for the defendants dated November 9, 1963, as well as the reply to the
opposition of counsel for the defendants dated December 5, 1963, taking into
consideration that the decision of this Court as affirmed by the Supreme Court

118
 does not specifically mention the alleged surcharges claimed by the plaintiff-
appellee, the Court hereby resolves to deny, as it hereby denies, the aforesaid
motion, for not being meritorious.

Failing thus in its attempt to collect the surcharge provided for in the ordinances in question,
appellee filed a second action (Civil Case No. 7355) to collect the said surcharges. Under date of
July 10, 1964, it filed the corresponding complaint before the same Court of First Instance of
Negros Occidental alleging, inter alia, that:

6. That soon after the decision of the Honorable Supreme Court affirming the
decision of the Hon. Court, the defendant herein on April 23, 1963 paid to the City
of Bacolod, the amount of ONE HUNDRED FIFTY SIX THOUSAND NINE
HUNDRED TWENTY FOUR PESOS and TWENTY CENTAVOS (P156,924.20)
as taxes from July, 1959 to December, 1962 in compliance with the provision of
Section 1, Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150,
Series of 1959, which corresponds to the taxes due under said section in the
amount of P0.03 per case of soft soft drinks manufactured by the defendant, but
refused and still continued refusing to pay the surcharge as provided for under
Section 4 of Ordinance No. 66, Series of 1949, as amended by Ordinance No. 150,
Series of 1959, which reads as follows:

"SEC. 4 — A surcharge of 2% every month, but in no case to exceed 24%

for one whole year, shall be imposed on such local manufacturer or bottlers
above mentioned who will be delinquent on any amount of fees under the
ordinance."

which up to now amounted to THIRTY SIX THOUSAND FIVE HUNDRED

NINETEEN PESOS AND TEN CENTAVOS (P36,519.10), as shown by the
certified statement of the office of the City Treasurer of Bacolod City herewith
attached as Annex "E" and made an integral part of this complaint;

7. That the said interest and/or penalties to the said bottling taxes which defendant
refused to pay have long been overdue;

and again praying

... that judgment be rendered for the plaintiff:

(a) Ordering the defendant to pay the penalty and/or interest therein
Section 4 of Ordinance No. 66, Series of 1949, as amended by Ordinance
No. 150, Series of 1959 the total amount of THIRTY SIX THOUSAND FIVE
HUNDRED NINETEEN PESOS and TEN CENTAVOS (P36,519.10),
representing the surcharges from August, 1959 to December, 1962,
inclusive, and the 24% penalty computed as of June 30, 1964, from the
amount of P152,162.90, with legal rate of interest thereon from the date of
the filing of this complaint until complete payment thereof;" plus costs, etc.

On July 24, 1964, appellant filed a motion to dismiss the case on the grounds that: (1) the cause
of action is barred by a prior judgment, and (2) a party may not institute more than one suit for a
single cause of action. This motion was denied by the court a quo in its order dated August 22,
1964; so appellant filed its answer wherein it substantially reiterated, as affirmative defenses, the
above-mentioned grounds of its motion to dismiss. Thereafter, the parties submitted the case for

119
judgment on the pleadings, whereupon, the court rendered judgment on March 11, 1965 with the
following dispositive portion: .

IN VIEW THEREOF, judgment is hereby rendered ordering the defendant San

Miguel Brewery, Inc. to pay to the plaintiff the sum of P36,519.10 representing the
surcharges as provided in section 4 of Ordinance 66, series of 1949 of the City of
Bacolod. No costs.

Appellants moved for reconsideration but its motion was denied, hence, the instant appeal.

Appellant has only one assignment of error, to wit:

THE LOWER COURT ERRED IN FINDING THE APPELLANT LIABLE TO THE

APPELLEE FOR THE SUM OF P36,519.10 REPRESENTING SURCHARGES AS
PROVIDED IN TAX ORDINANCE NO. 66, SERIES OF 1949, AS AMENDED, OF
THE CITY OF BACOLOD.

Under this, it argues that the action of appellee cannot be maintained because (1) a party may
not institute more than one suit for a single cause of action; and (2) appellee's action for recovery
of the surcharges in question is barred by prior judgment.

We find appellant's position essentially correct. There is no question that appellee split up its
cause of action when it filed the first complaint on March 23, 1960, seeking the recovery of only
the bottling taxes or charges plus legal interest, without mentioning in any manner the surcharges.

The rule on the matter is clear. Sections 3 and 4 of Rule 2 of the Rules of Court of 1940 which
were still in force then provided:

SEC. 3. Splitting a cause of action, forbidden. — A single cause of action cannot

be split up into two or more parts so as to be made the subject of different
complaints. .

SEC. 4. Effect of splitting. — If separate complaints were brought for different parts
of a single cause of action, the filing of the first may be pleaded in abatement of
the others, and a judgment upon the merits in either is available as a bar in the
others.

Indeed, this rule against the splitting up of a cause of action is an old one. In fact, it preceded the
Rules of Court or any statutory provision. In Bachrach Motor Co., Inc. vs. Icarangal et al.,1 this
Court already explained its meaning, origin and purpose, thus:

But, even if we have no such section 708 of our Code of Civil Procedure, or section
59 of the Insolvency Law, we have still the rule against splitting a single cause of
action. This rule, though not contained in any statutory provision, has been applied
by this court in all appropriate cases. Thus, in Santos vs. Moir (36 Phil. 350, 359),
we said: "It is well recognized that a party cannot split a single cause of action into
parts and sue on each part separately. A complaint for the recovery of personal
property with damages for detention states a single cause of action which cannot
be divided into an action for possession and one for damages; and if suit is brought
for possession only a subsequent action cannot be maintained to recover the
damages resulting from the unlawful detention." In Rubio de Larena vs. Villanueva
(53 Phil. 923, 927), we reiterated the rule by stating that "... a party will not be
permitted to split up a single cause of action and make it the basis for several suits"
120
 and that when a lease provides for the payment of the rent in separate installments,
each installment constitutes an independent cause of action, but when, at the time
the complaint is filed, there are several installments due, all of them constitute a
single cause of action and should be included in a single complaint, and if some of
them are not so included, they are barred. The same doctrine is stated in Lavarro
vs. Labitoria (54 Phil. 788), wherein we said that "a party will not be permitted to
split up a single cause of action and make it a basis for several suits" and that a
claim for partition of real property as well as for improvements constitutes a single
cause of action, and a complaint for partition alone bars a subsequent complaint
for the improvements. And in Blossom & Co. vs. Manila Gas Corporation (55 Phil.
226-240), we held that "as a general rule a contract to do several things at several
times is divisible 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 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.

The rule against splitting a single cause of action is intended "to prevent repeated
litigation between the same parties in regard to the same subject of controversy;
to protect defendant from unnecessary vexation; and to avoid the costs and
expenses incident to numerous suits." (1 C.J. 1107) It comes from that old maxim
nemo debet bis vexare pro una et eadem causa (no man shall be twice vexed for
one and the same cause). (Ex parte Lange, 18 Wall 163, 168; 21 Law Ed. 872;
also U.S. vs. Throckmorton, 98 U.S. 61; 25 Law Ed. 93). And it developed, certainly
not as an original legal right of the defendant, but as an interposition of courts upon
principles of public policy to prevent inconvenience and hardship incident to
repeated and unnecessary litigations. (1 C. J. 1107).

In the light of these precedents, it cannot be denied that appellant's failure to pay the bottling
charges or taxes and the surcharges for delinquency in the payment thereof constitutes but one
single cause of action which under the above rule can be the subject of only one complaint, under
pain of either of them being barred if not included in the same complaint with the other. The error
of appellee springs from a misconception or a vague comprehension of the elements of a cause
of action. The classical definition of a cause of action is that it is "a delict or wrong by which the
rights of the plaintiff are violated by the defendant." Its elements may be generally stated to be (1)
a right existing in favor of the plaintiff; (2) a corresponding obligation on the part of the defendant
to respect such right; and (3) an act or omission of the plaintiff which constitutes a violation of the
plaintiff's right which defendant had the duty to respect. For purposes, however, of the rule against
splitting up of a cause of action, a clearer understanding can be achieved, if together with these
elements, the right to relief is considered.

In the last analysis, a cause of action is basically an act or an omission or several acts or
omissions. A single act or omission can be violative of various rights at the same time, as when
the act constitutes juridically a violation of several separate and distinct legal obligations. This
happens, for example, when a passenger of a common carrier, such as a taxi, is injured in a
collision thereof with another vehicle due to the negligence of the respective drivers of both
vehicles. In such a case, several rights of the passenger are violated, inter alia, (1) the right to be
safe from the negligent acts of either or both the drivers under the law on culpa-acquiliana or
quasi-delict; (2) the right to be safe from criminal negligence of the said drivers under the penal
laws; and (3) the right to be safely conducted to his destination under the contract of carriage and
the law covering the same, not counting anymore the provisions of Article 33 of the Civil Code.
The violation of each of these rights is a cause of action in itself. Hence, such a passenger has at
least three causes of action arising from the same act. On the other hand, it can happen also that
several acts or omissions may violate only one right, in which case, there would be only one cause
121
of action. Again the violation of a single right may give rise to more than one relief. In other words,
for a single cause of action or violation of a right, the plaintiff may be entitled to several reliefs. It
is the filing of separate complaints for these several reliefs that constitutes splitting up of the cause
of action. This is what is prohibited by the rule.

In the case at bar, when appellant failed and refused to pay the difference in bottling charges from
July 1, 1959, such act of appellant in violation of the right of appellee to be paid said charges in
full under the Ordinance, was one single cause of action, but under the Ordinance, appellee
became entitled, as a result of such non-payment, to two reliefs, namely: (1) the recovery of the
balance of the basic charges; and (2) the payment of the corresponding surcharges, the latter
being merely a consequence of the failure to pay the former. Stated differently, the obligation of
appellant to pay the surcharges arose from the violation by said appellant of the same right of
appellee from which the obligation to pay the basic charges also arose. Upon these facts, it is
obvious that appellee has filed separate complaints for each of two reliefs related to the same
single cause of action, thereby splitting up the said cause of action.

The trial court held that inasmuch as there was no demand in the complaint in the first case for
the payment of the surcharges, unlike in the case of Collector of Internal Revenue vs. Blas
Gutierrez, et al., G.R. No. L-13819. May 25, 1960, wherein there was such a demand, there is no
bar by prior judgment as to said surcharges, the same not having been "raised as an issue or
cause of action in Civil Case No. 5693." This holding is erroneous.

Section 4 of Rule 2, above-quoted, is unmistakably clear as to the effect of the splitting up of a

cause of action. It says, "if separate complaints are brought for different parts (reliefs) of a single
cause of action, the filing of the first (complaint) may be pleaded in abatement of the others, and
a judgment upon the merits in either is available as a bar in the others." In other words, whenever
a plaintiff has filed more than one complaint for the same violation of a right, the filing of the first
complaint on any of the reliefs born of the said violation constitutes a bar to any action on any of
the other possible reliefs arising from the same violation, whether the first action is still pending,
in which event, the defense to the subsequent complaint would be litis pendentia, or it has already
been finally terminated, in which case, the defense would be res adjudicata.2 Indeed, litis
pendentia and res adjudicata, on the one hand, and splitting up a cause of action on the other,
are not separate and distinct defenses, since either of the former is by law only the result or effect
of the latter, or, better said, the sanction for or behind it.

It thus results that the judgment of the lower court must be, as it is hereby, reversed and the
complaint of appellee is dismissed. No costs.

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G.R. No. L-22979 June 26, 1967

RHEEM OF THE PHILIPPINES, INC., ET AL., petitioners,

vs.
ZOILO R. FERRER, ET AL., respondents.

IN RE PROCEEDINGS AGAINST ALFONSO PONCE ENRILE, LEONARDO SIGUION REYNA,

MANUEL G. MONTECILLO, ENRIQUE M. BELO, OSCAR R. ONGSIAKO, and JOSE S.
ARMONIO, members of the Philippine Bar.

Ponce Enrile, Siguion Reyna, Montecillo and Belo for petitioners.

Jose T. Valmonte for respondents.

RESOLUTION

SANCHEZ, J.:

Contempt proceedings. The following from the motion to reconsider the decision herein, filed by
counsel for petitioners —

One pitfall into which this Honorable Court has repeatedly fallen whenever the
question as to whether or not a particular subject matter is within the jurisdiction of
the Court of Industrial Relations is the tendency of this Honorable Court to rely
upon its own pronouncement without due regard to the statutes which delineate
the jurisdiction of the industrial court. Quite often, it is overlooked that no court, not
even this Honorable Court, is empowered to expand or contract through its
123
 decision the scope of its jurisdictional authority as conferred by law. This error is
manifested by the decisions of this Honorable Court citing earlier rulings but
without making any reference to and analysis of the pertinent statute governing the
jurisdiction of the Court of Industrial Relations. This manifestation appears in this
Honorable Court's decision in the instant case. As a result, the errors committed
in earlier cases dealing with the jurisdiction of the industrial court are perpetuated
in subsequent cases involving the same issue . . . .

It may also be mentioned in passing that this Honorable Court contravened Rule
2, Section 5 of the Rules of Court when it applied the so-called "rule against
splitting of jurisdiction" in its Decision in the present case. As applied by this
Honorable Court, the rule means that when an employee files with the Court of
Industrial Relations numerous claims relative to his employment but only one [of]
which is cognizable by said court under the law, while the others pertain to other
tribunals, that court has authority to entertain all the claims to avoid multiplicity, of
suits. . . . .

drew from the Court an order directing counsel to show cause why they should not be dealt with
for contempt of court.

In respondent attorneys' verified return, they offered "their most sincere apologies for the
language used" and stated that "[i]t was not and it has never been their intention to be
disrespectful." They manifested that the language "was the result of overenthusiasm on the part
of Atty. [Jose S.] Armonio, who thought best to focus the attention of this Honorable Court to the
issue in the case, as not in any way meant to slight or offend this Honorable Court. They also said
that the unfortunate Motion for Reconsideration was prepared and filed by Atty. Armonio who had
been personally handling the case since its inception at the Court of Industrial Relations, and who
had, perhaps, become too emotionally involved in the case."

Respondent members of the law firm, namely, Attys. Alfonso Ponce Enrile, Leonardo Siguion
Reyna, Manuel G. Montecillo, Enrique M. Belo and Oscar R. Ongsiako assumed "full
responsibility" for what appears in the motion for reconsideration. They submitted, not as an
excuse, but as fact, that not one of the partners was able to pass upon the draft or final form of
the said motion, and that Atty. Armonio, an associate, prepared, signed and filed the motion
"without clearing it with any of the partners of the firm." The return winds up with an expression of
deep regret about the incident, coupled with an earnest pledge that it "shall never happen again."

Subsequent to the return, respondent attorneys appeared in court. Attys. Ponce Enrile and
Armonio were orally heard.1äwphï1.ñët

1. As we look back at the language (heretofore quoted) employed in the motion for
reconsideration, implications there are which inescapably arrest attention. It speaks of one pitfall
into which this Court has repeatedly fallen whenever the jurisdiction of the Court of Industrial
Relations comes into question. That pitfall is the tendency of this Court to rely on its own
pronouncements in disregard of the law on jurisdiction. It makes a sweeping charge that the
decisions of this Court blindly adhere to earlier rulings without as much as making "any reference
to and analysis of" the pertinent statute governing the jurisdiction of the industrial court. The plain
import of all these is that this Court is so patently inept that in determining the jurisdiction of the
industrial court, it has committed error and continuously repeated that error to the point of
perpetuation. It pictures this Court as one which refuses to hew to the line drawn by the law on
jurisdictional boundaries. Implicit in the quoted statements is that the pronouncements of this
Court on the jurisdiction of the industrial court are not entitled to respect. Those statements detract
much from the dignity of and respect due this Court. They bring into question the capability of the
members and — some former members — of this Court to render justice. The second paragraph
124
quoted yields a tone of sarcasm when counsel labelled as "so-called" the "rule against splitting of
jurisdiction."1

By now, a lawyer's duties to the Court have become common place. Really, there could hardly be
any valid excuse for lapses in the observance thereof. Section 20 (b), Rule 138 of the Rules of
Court, in categorical terms, spells out one such duty: "To observe and maintain the respect due
to the courts of justice and judicial officers." As explicit is the first canon of legal ethics which
pronounces that "[i]t is the duty of the lawyer to maintain towards the Courts a respectful attitude,
not for the sake of the temporary incumbent of the judicial office, but for the maintenance of its
supreme importance." That same canon, as a corollary, makes it peculiarly incumbent upon
lawyers to support the courts against "unjust criticism and clamor." And more. The attorney's oath
solemnly binds him to a conduct that should be "with all good fidelity . . . to the courts." Worth
remembering is that the duty of an attorney to the courts "can only be maintained by rendering no
service involving any disrespect to the judicial office which he is bound to uphold." 2

We concede that a lawyer may think highly of his intellectual endowment. That is his privilege.
And, he may suffer frustration at what he feels is others' lack of it. That is his misfortune. Some
such frame of mind, however, should not be allowed to harden into a belief that he may attack a
court's decision in words calculated to jettison the time-honored aphorism that courts are the
temples of right. He should give due allowance to the fact that judges are but men; and men are
encompassed by error, fettered by fallibility.

2. What we have before us is not without precedent. Time and again, this Court has admonished
and punished, in varying degrees, members of the Bar for statements, disrespectful or irreverent,
acrimonious or defamatory, of this Court or the lower courts. 3 Resort by an attorney — in a motion
for reconsideration — to words which may drag this Court down into disrepute, is frowned upon
as "neither justified nor in the least necessary, because in order to call the attention of the court
in a special way to the essential points relied upon in his argument and to emphasize the force
thereof, the many reasons stated in the motion" are "sufficient," and such words "superfluous." 4
It is in this context that we must say that just because Atty. Armonio "thought best to focus the
attention" of this Court "to the issue in the case" does not give him in bridled license in language.
To be sure, lawyers may come up with various methods, perhaps much more effective, in calling
the Court's attention to the issues involved. The language vehicle does not run short of
expressions, emphatic but respectful, convincing but not derogatory, illuminating but not
offensive.

To be proscribed then is the use of unnecessary language which jeopardizes high esteem in
courts, creates or promotes distrust in judicial administration, or which could have the effect of
"harboring and encouraging discontent which, in many cases, is the source of disorder, thus
undermining the foundation upon which rests that bulwark called judicial power to which those
who are aggrieved turn for protection and relief." 5 Stability of judicial institutions suggests that the
Bar stand firm on this precept.

The language here in question, respondents aver, "was the result of overenthusiasm." It is but to
repeat an old idea when we say that enthusiasm, or even excess of it, is not really bad. In fact,
the one or the other is no less a virtue, if channelled in the right direction. However, it must be
circumscribed within the bounds of propriety and with due regard for the proper place of courts in
our system of government. 6

We are not unmindful of counsel's statement that the language used "was not in any way meant
to slight or offend" this Court. Want of intention, we feel constrained to say, is no excuse for the
language employed. For, counsel cannot escape responsibility "by claiming that his words did not
mean what any reader must have understood them as meaning." 7 At best, it extenuates liability.

125
3. We now turn to the partners of the law firm. They explained that not one of them cleared the
motion in which the questionable portion appears. Their reason is that they were not in the office
at the time said motion was filed — which was the last day. They added that "it is the policy of the
firm known to all its members and associates that only the partners can sign court pleadings
except in rare cases where, for want of time or due to unexpected circumstances, an associate
has to sign the same." We understood Atty. Alfonso Ponce Enrile to have said in open court that
in his long years of practice, he knows that it serves no useful purpose to downgrade the dignity
of the Court. We may overlook the shortcomings of the members of the law firm; except that, as
we see it, partners are duty bound to provide for efficacious control of court pleadings and other
court papers that carry their names or the name of their law firm. Seemingly, such control was
absent here.

In the end, we admonish Atty. Jose S. Antonio, with the warning that repetition of this incident will
be dealt with accordingly. Let a copy of this resolution be attached to his record.

Attention of Attys. Alfonso Ponce Enrile, Leonardo Siguion Reyna, Manuel G. Montecillo, Enrique
M. Belo and Oscar R. Ongsiako is invited to the necessity of exercising adequete supervision and
control of the pleadings and other documents submitted by their law firm to the courts of justice
of this country.

So ordered.

G.R. No. 117209 February 9, 1996

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HON. JOSE R. HERNANDEZ, in his capacity as Presiding Judge, Regional Trial Court,
Branch 158, Pasig City and SPOUSES VAN MUNSON y NAVARRO and REGINA MUNSON
y ANDRADE, respondents.

DECISION

REGALADO, J.:

Indeed, what's in a name, as the Bard of Avon has written, since a rose by any other name would
smell as sweet?

This could well be the theme of the present appeal by certiorari which challenges, on pure
questions of law, the order of the Regional Trial Court, Branch 158, Pasig City, dated September
13, 1994 1 in JDRC Case No. 2964. Said court is faulted for having approved the petition for
adoption of Kevin Earl Bartolome Moran and simultaneously granted the prayer therein for the
change of the first name of said adoptee to Aaron Joseph, to complement the surname Munson
y Andrade which he acquired consequent to his adoption.

The facts are undisputed. On March 10, 1994, herein private respondent spouses, Van Munson
y Navarro and Regina Munson y Andrade, filed a p petition 2 to adopt the minor Kevin Earl
Bartolome Moran, duly alleging therein the jurisdictional facts required by Rule 99 of the Rules of
Court for adoption, their qualifications as and fitness to be adoptive parents, as well as the
circumstances under and by reason of which the adoption of the aforenamed minor was sought.
126
In the very same petition, private respondents prayed for the change of the first name or said
minor adoptee to Aaron Joseph, the same being the name with which he was baptized in keeping
with religious tradition and by which he has been called by his adoptive family, relatives and
friends since May 6, 1993 when he arrived at private respondents' residence. 3

At the hearing on April 18, 1994, petitioner opposed the inclusion of the relief for change of name
in the same petition for adoption. In its formal opposition dated May 3, 1995, 4 petitioner reiterated
its objection to the joinder of the petition for adoption and the petitions for change of name in a
single proceeding, arguing that these petition should be conducted and pursued as two separate
proceedings.

After considering the evidence and arguments of the contending parties, the trial court ruled in
favor of herein private respondents in this wise:

WHEREFORE, minor child Kevin Earl Bartolome Moran is freed from all legal obligations
of obedience and maintenance with respect to his natural parents, and for all legal intents
and purposes shall be known as Aaron Joseph Munson y Andrade, the legally adopted
child of Van Munson and Regina Munson effective upon the filing of the petition on March
10, 1994. As soon as the decree of adoption becomes final and executory, it shall be
recorded in the Office of the Local Civil Registrar of Pasig, Metro Manila pursuant to
Section 8, Rule 99 and Section 6, Rule 103, respectively, of the Rules of Court, and shall
be annotated in the record of birth of the adopted child, which in this case is in Valenzuela,
Metro Manila, where the child was born. Likewise, send a copy of this Order to the National
Census and Statistics Office, Manila, for its appropriate action consisten(t) herewith. 5

At this juncture, it should be noted that no challenge has been raised by petitioner regarding the
fitness of herein private respondents to be adopting parents nor the validity of the decree of
adoption rendered in their favor. The records show that the latter have commendably established
their qualifications under the law to be adopters, 6 and have amply complied with the procedural
requirements for the petition for adoption, 7 with the findings of the trial court being recited thus:

To comply with the jurisdictional requirements, the Order of this Court dated March 16,
1994 setting this petition for hearing (Exh. "A") was published in the March 31, April 6 and
13, 1994 issues of the Manila Chronicle, a newspaper of general circulation (Exhs. "B" to
"E" and submarkings). . . .

xxx xxx xxx

Petitioners apart from being financially able, have no criminal nor derogatory record (Exhs.
"K" to "V"); and are physically fit to be the adoptive parents of the minor child Kevin (Exh.
"W"). Their qualification to become the adoptive parents of Kevin Earl finds support also
in the Social Case Study Report prepared by the DSWD through Social Worker Luz Angela
Sonido, the pertinent portion of which reads:

"Mr. and Mrs. Munson are very religious, responsible, mature and friendly
individuals. They are found physically healthy; mentally fit, spiritually and
financially capable to adopt Kevin Earl Moran aka Aaron Joseph.

"Mr. and Mrs. Munson have provided AJ with all his needs. They unselfishly share
their time, love and attention to him. They are ready and willing to continuously
provide him a happy and secure home life.

127
 "Aaron Joseph, on the other hand, is growing normally under the care of the
Munsons. He had comfortably settled in his new environment. His stay with the
Munsons during the six months trial custody period has resulted to a close bond
with Mr. and Mrs. Munson and vice-versa.

"We highly recommend to the Honorable Court that the adoption of Kevin Earl
Moran aka Aaron Joseph by Mr. and Mrs. Van Munson be legalized." 8

It has been said all too often enough that the factual findings of the lower court, when sufficiently
buttressed by legal and evidential support, are accorded high respect and are binding and
conclusive upon this Court. 9 Accordingly, we fully uphold the propriety of that portion of the order
of the court below granting the petition, for adoption.

The only legal issues that need to be resolved may then be synthesized mainly as follows. (1)
whether or not the court a quo erred in granting the prayer for the change of the registered proper
or given name of the minor adoptee embodied in the petition for adoption; and (2) whether or not
there was lawful ground for the change of name.

I. It is the position of petitioner that respondent judge exceeded his jurisdiction when he
additionally granted the prayer for the change of the given or proper name of the adoptee in a
petition for adoption.

Petitioner argues that a petition for adoption and a petition for change of name are two special
proceedings which, in substance and purpose, are different from and are not related to each other,
being respectively governed by distinct sets of law and rules. In order to be entitled to both reliefs,
namely, a decree of adoption and an authority to change the giver or proper name of the adoptee,
the respective proceedings for each must be instituted separately, and the substantive and
procedural requirements therefor under Articles 183 to 193 of the Family Code in relation to Rule
99 of the Rules of Court for adoption, and Articles 364 to 380 of the Civil Code in relation to Rule
103 of the Rules of Court for change of name, must correspondingly be complied with. 10

A perusal of the records, according to petitioner, shows that only the laws and rules on adoption
have been observed, but not those for a petition for change of name. 11 Petitioner further contends
that what the law allows is the change of the surname of the adoptee, as a matter of right, to
conform with that of the adopter and as a natural consequence of the adoption thus granted. If
what is sought is the change of the registered given or proper name, and since this would involve
a substantial change of one's legal name, a petition for change of name under Rule 103 should
accordingly be instituted, with the substantive and adjective requisites therefor being conformably
satisfied. 12

Private respondents, on the contrary, admittedly filed the petition for adoption with a prayer for
change of name predicated upon Section 5, Rule 2 which allows permissive joinder of causes of
action in order to avoid multiplicity of suits and in line with the policy of discouraging protracted
and vexatious litigations. It is argued that there is no prohibition in the Rules against the joinder
of adoption and change of name being pleaded as two separate but related causes of action in a
single petition. Further, the conditions for permissive joinder of causes of action, i.e., jurisdiction
of the court, proper venue and joinder of parties, have been met. 13

Corollarily, petitioner insists on strict adherence to the rule regarding change of name in view of
the natural interest of the State in maintaining a system of identification of its citizens and in the
orderly administration of justice. 14 Private respondents argue otherwise and invoke a liberal
construction and application of the Rules, the welfare and interest of the adoptee being the
primordial concern that should be addressed in the instant proceeding. 15

128
On this score, the trial court adopted a liberal stance in holding that -

Furthermore, the change of name of the child from Kevin Earl Bartolome to Aaron Joseph
should not be treated strictly, it appearing that no rights have been prejudiced by said
change of name. The strict and meticulous observation of the requisites set forth by Rule
103 of the Rules of Court is indubitably for the purpose of preventing fraud, ensuring that
neither State nor any third person should be prejudiced by the grant of the petition for
change of name under said rule, to a petitioner of discernment.

The first name sought to be changed belongs to an infant barely over a year old. Kevin
Earl has not exercised full civil rights nor engaged in any contractual obligations. Neither
can he nor petitioners on his behalf, be deemed to have any immoral, criminal or illicit
purpose for seeking said cha(n)ge of name. It stands to reason that there is no way that
the state or any person may be so prejudiced by the action for change of Kevin Earl's first
name. In fact, to obviate any possible doubts on the intent of petitioners, the prayer for
change of name was caused to be published together with the petition for adoption. 16

Art. 189 of the Family Code enumerates in no uncertain terms the legal effects of adoption:

(1) For civil purposes, the adopted shall be deemed to be a legitimate child of the adopters
and both shall acquire the reciprocal rights and obligations arising from the relationship of
parent and child, including the right of the adopted to use the surname of the adopters;

(2) The parental authority of the parents by nature over the adopted shall terminate and
be vested in the adopters, except that if the adopter is the spouse of the parent by nature
of the adopted, parental authority over the adopted shall be exercised jointly by both
spouses; and

(3) The adopted shall remain an intestate heir of his parents and other blood relatives.

Clearly, the law allows the adoptee, as a matter of right and obligation, to bear the surname of
the adopter, upon issuance of the decree of adoption. It is the change of the adoptee's surname
to follow that of the adopter which is the natural and necessary consequence of a grant of adoption
and must specifically be contained in the order of the court, in fact, even if not prayed for by
petitioner.

However, the given or proper name, also known as the first or Christian name, of the adoptee
must remain as it was originally registered in the civil register. The creation of an adoptive
relationship does not confer upon the adopter a license to change the adoptee's registered
Christian or first name. The automatic change thereof, premised solely upon the adoption thus
granted, is beyond the purview of a decree of adoption. Neither is it a mere incident in nor an
adjunct of an adoption proceeding, such that a prayer therefor furtively inserted in a petition for
adoption, as in this case, cannot properly be granted.

The name of the adoptee as recorded in the civil register should be used in the adoption
proceedings in order to vest the court with jurisdiction to hear and determine the same, 17 and
shall continue to be so used until the court orders otherwise. Changing the given or proper name
of a person as recorded in the civil register is a substantial change in one's official or legal name
and cannot be authorized without a judicial order. The purpose of the statutory procedure
authorizing a change of name is simply to have, wherever possible, a record of the change, and
in keeping with the object of the statute, a court to which the application is made should normally
make its decree recording such change. 18

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The official name of a person whose birth is registered in the civil register is the name appearing
therein. If a change in one's name is desired, this can only be done by filing and strictly complying
with the substantive and procedural requirements for a special proceeding for change of name
under Rule 103 of the Rules of Court, wherein the sufficiency of the reasons or grounds therefor
can be threshed out and accordingly determined.

Under Rule 103, a petition for change of name shall be filed in the regional trial court of the
province where the person desiring to change his name resides. It shall be signed and verified by
the person desiring his name to be changed or by some other person in his behalf and shall state
that the petitioner has been a bona fide resident of the province where the petition is filed for at
least three years prior to such filing, the cause for which the change of name is sought, and the
name asked for. An order for the date and place of hearing shall be made and published, with the
Solicitor General or the proper provincial or city prosecutor appearing for the Government at such
hearing. It is only upon satisfactory proof of the veracity of the allegations in the petition and the
reasonableness of the causes for the change of name that the court may adjudge that the name
be changed as prayed for in the petition, and shall furnish a copy of said judgment to the civil
registrar of the municipality concerned who shall forthwith enter the same in the civil register.

A petition for change of name being a proceeding in rem, strict compliance with all the
requirements therefor is indispensable in order to vest the court with jurisdiction for its
adjudication. 19 It is an independent and discrete special proceeding, in and by itself, governed by
its own set of rules. A fortiori, it cannot be granted by means of any other proceeding. To consider
it as a mere incident or an offshoot of another special proceeding would be to denigrate its role
and significance as the appropriate remedy available under our remedial law system.

The Solicitor General correctly points out the glaring defects of the subject petition insofar as it
seeks the change of name of the adoptee, 20 all of which taken together cannot but lead to the
conclusion that there was no petition sufficient in form and substance for change of name as
would rightfully deserve an order therefor. It would be procedurally erroneous to employ a petition
for adoption to effect a change of name in the absence of the corresponding petition for the latter
relief at law.

Neither can the allowance of the subject petition, by any stretch of imagination and liberality, be
justified under the rule allowing permissive joinder of causes of action. Moreover, the reliance by
private respondents on the pronouncements in Briz vs. Brit, et al. 21 and Peyer vs. Martinez, et al.
22
is misplaced. A restatement of the rule and jurisprudence on joinder of causes of action would,
therefore, appear to be called for.

By a joinder of actions, or more properly, a joinder of causes of action, is meant the uniting of two
or more demands or rights of action in one action; the statement of more than one cause of action
in a declaration. 23 It is the union of two or more civil causes of action, each of which could be
made the basis of a separate suit, in the same complaint, declaration or petition. A plaintiff may
under certain circumstances join several distinct demands, controversies or rights of action in one
declaration, complaint or petition. 24

As can easily be inferred from the above definitions, a party is generally not required to join in one
suit several distinct causes of action. The joinder of separate causes of action, where allowable,
is permissive and not mandatory in the absence of a contrary statutory provision, even though
the causes of action arose from the same factual setting and might under applicable joinder rules
be joined. 25 Modern statutes and rules governing joinders are intended to avoid a multiplicity of
suits and to promote the efficient administration of justice wherever this may be done without
prejudice to the rights of the litigants. To achieve these ends, they are liberally construed. 26

130
While joinder of causes of action is largely left to the option of a party litigant, Section 5, Rule 2 of
our present Rules allows causes of action to be joined in one complaint conditioned upon the
following requisites: (a) it will not violate the rules on jurisdiction, venue and joinder of parties; and
(b) the causes of action arise out of the same contract, transaction or relation between the parties,
or are for demands for money or are of the same nature and character.

The objectives of the rule or provision are to avoid a multiplicity of suits where the same parties
and subject matter are to be dealt with by effecting in one action a complete determination of all
matters in controversy and litigation between the parties involving one subject matter, and to
expedite the disposition of litigation at minimum cost. The provision should be construed so as to
avoid such multiplicity, where possible, without prejudice to the rights of the litigants. Being of a
remedial nature, the provision should be liberally construed, to the end that related controversies
between the same parties may be adjudicated at one time; and it should be made effectual as far
as practicable, 27 with the end in view of promoting the efficient administration of justice. 28

The statutory intent behind the provisions on joinder of causes of action is to encourage joinder
of actions which could reasonably be said to involve kindred rights and wrongs, although the
courts have not succeeded in giving a standard definition of the terms used or in developing a
rule of universal application. The dominant idea is to permit joinder of causes of action, legal or
equitable, where there is some substantial unity between them. 29 While the rule allows a plaintiff
to join as many separate claims as he may have, there should nevertheless be some unity in the
problem presented and a common question of law and fact involved, subject always to the
restriction thereon regarding jurisdiction, venue and joinder of parties. Unlimited joinder is not
authorized. 30

Our rule on permissive joinder of causes of action, with the proviso subjecting it to the correlative
rules on jurisdiction, venue and joinder of parties 31 and requiring a conceptual unity in the
problems presented, effectively disallows unlimited joinder. 32

Turning now to the present petition, while it is true that there is no express prohibition against the
joinder of a petition for adoption and for change of name, we do not believe that there is any
relation between these two petitions, nor are they of the same nature or character, much less do
they present any common question of fact or law, which conjointly would warrant their joinder. In
short, these petitions do not rightly meet the underlying test of conceptual unity demanded to
sanction their joinder under our Rules.

As keenly observed and correctly pointed out by the Solicitor General -

A petition for adoption and a petition for change of name are two special proceedings
which, in substance and purpose, are different from each other. Each action is individually
governed by particular sets of laws and rules. These two proceedings involve disparate
issues. In a petition for adoption, the court is called upon to evaluate the proposed
adopter's fitness and qualifications to bring up and educate the adoptee properly (Prasnick
vs. Republic, 99 Phil. 665). On the other hand, in a petition for change of name, no family
relations are created or affected for what is looked into is the propriety and reasonableness
of the grounds supporting the proposed change of name (Yu vs. Republic, 17 SCRA 253).

xxx xxx xxx

. . . Hence, the individual merits of each issue must be separately assessed and
determined for neither action is dependent on the other. 33

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 The rule on permissive joinder of: causes of action is clear. Joinder may be allowed only
if the actions show a commonality of relationship and conform to the rules on jurisdiction,
venue and joinder of parties (Section 5, Rule 2, Rules of Court).

These conditions are wanting in the instant case. As already pointed out in our Petition
(pp. 9-10), an action for adoption and an action for change of name are, in nature and
purpose, not related to each other and do not arise out of the same relation between the
parties. While what is cogent in an adoption proceeding is the proposed adopter's fitness
and qualifications to adopt, a petition for change of first name may only prosper upon proof
of reasonable and compelling grounds supporting the change requested. Fitness to adopt
is not determinative of the sufficiency of reasons justifying a change of name. And
similarly, a change of first name cannot be justified in view of a finding that the proposed
adopter was found fit to adopt. There is just no way that the two actions can connect and
find a common ground, thus the joinder would be improper.

In contending that adoption and change of name may be similarly sought in one petition,
private respondents rely upon Peyer vs. Martinez and Briz vs. Briz (p. 4, Comment)

We however submit that these citations are non sequitur. In both cases, the fact of intimacy
and relatedness of the issues is so pronounced. In Peyer, an application to pronounce the
husband an absentee is obviously intertwined with the action to transfer the management
of conjugal assets to the wife. In Briz, an action for declaration of heirship was deemed a
clear condition precedent to an action to recover the land subject of partition and
distribution proceeding. However, the commonality of relationship which stands out in both
cases does not characterize the present action for adoption and change of name. Thus
the rulings in Peyer and Briz find no place in the case at bar.

Besides, it is interesting to note that although a joinder of the two actions was, in Briz,
declared feasible, the Supreme Court did not indorse an automatic joinder and instead
remanded the matter for further proceedings, granting leave to amend the pleadings and
implead additional parties-defendants for a complete determination of the controversy
(Briz vs. Briz, 43 Phil. 763, 770). Such cautionary stance all the more emphasizes that
although joinders are generally accepted, they are not allowed where the conditions are
not satisfactorily met. 34

It furthermore cannot be said that the proposed joinder in this instance will make for a complete
determination of all matters pertaining to the coetaneous grant of adoption and change of name
of the adoptee in one petition. As already stated, the subject petition was grossly insufficient in
form and substance with respect to the prayer for change of name of the adoptee. The policy of
avoiding multiplicity of suits which underscores the rule on permissive joinder of causes of action
is addressed to suits that are intimately related and also present interwoven and dependent issues
which can be most expeditiously and comprehensively settled by having just one judicial
proceeding, but not to suits or actions whose subject matters or corresponding reliefs are
unrelated or diverse such that they are best taken up individually.

In Nabus vs. Court of Appeals, et al., 35 the Court clarified the rule on permissive joinder of causes
of action:

The rule is clearly permissive. It does not constitute an obligatory rule, as there is no
positive provision of law or any rule of jurisprudence which compels a party to join all his
causes of action and bring them at one and the same time. Under the present rules, the
provision is still that the plaintiff may, and not that he must, unite several causes of action
although they may be included in one of the classes specified. This, therefore, leaves it to
the plaintiff's option whether the causes of action shall be joined in the same action, and
132
 no unfavorable inference may be drawn from his failure or refusal to do so. He may always
file another action based on the remaining cause or causes of action within the prescriptive
period therefor. (Emphasis supplied.)

The situation presented in this case does not warrant exception from the Rules under the policy
of liberal construction thereof in general, and for change of name in particular, as proposed by
private respondents and adopted by respondent judge. Liberal construction of the Rules may be
invoked in situations wherein there may be some excusable formal deficiency or error in a
pleading, provided that the same does not subvert the essence of the proceeding and connotes
at least a reasonable attempt at compliance with the Rules. Utter disregard of the Rules cannot
justly be rationalized by harking on the policy of liberal construction.

The Court is not impervious to the frustration that litigants and lawyers alike would at times
encounter in procedural bureaucracy but imperative justice requires correct observance of
indispensable technicalities precisely designed to ensure its proper dispensation. 36 It has long
been recognized that strict compliance with the Rules of Court is indispensable for the prevention
of needless delays and for the orderly and expeditious dispatch of judicial business. 37

Procedural rules are not to be disdained as mere technicalities that may be ignored at will to suit
the convenience of a party. Adjective law is important in ensuring the effective enforcement of
substantive rights through the orderly and speedy administration of justice. These rules are not
intended to hamper litigants or complicate litigation but, indeed to provide for a system under
which a suitor may be heard in the correct form and manner and at the prescribed time in a
peaceful confrontation before a judge whose authority they acknowledge. 38

It cannot be overemphasized that procedural rules have their own wholesome rationale in the
orderly administration of justice. Justice has to be administered according to the Rules in order to
obviate arbitrariness, caprice, or whimsicality. 39 We have been cautioned and reminded in Limpot
vs. CA, et al. that: 40

Rules of procedure are intended to ensure the orderly administration of justice and the
protection of substantive rights in judicial and extrajudicial proceedings. It is a mistake to
propose that substantive law and adjective law are contradictory to each other or, as has
often been suggested, that enforcement of procedural rules should never be permitted if
it will result in prejudice to the substantive rights of the litigants. This is not exactly true;
the concept is much misunderstood. As a matter of fact, the policy of the courts is to give
both kinds of law, as complementing each other, in the just and speedy resolution of the
dispute between the parties. Observance of both substantive rights is equally guaranteed
by due process, whatever the source of such rights, be it the Constitution itself or only a
statute or a rule of court.

xxx xxx xxx

. . . (T)hey are required to be followed except only when for the most persuasive of reasons
they may be relaxed to relieve a litigant of an injustice not commensurate with the degree
of his thoughtlessness in not complying with the procedure prescribed. . . . While it is true
that a litigation is not a game of technicalities, this does not mean that the Rules of Court
may be ignored at will and at random to the prejudice of the orderly presentation and
assessment of the issues and their just resolution. Justice eschews anarchy.

Only exceptionally in very extreme circumstances, when a rule deserts its proper office as an aid
to justice and becomes its great hindrance and chief enemy such that rigid application thereof
frustrates rather than promotes substantial justice, will technicalities deserve scant consideration

133
from the court. In such situations, the courts are empowered, even obligated, to suspend the
operation of the rules. 41

We do not perceive any injustice that can possibly be visited upon private respondents by
following the reglementary procedure for the change in the proper or given name that they seek
for their adopted child. We are hard put to descry the indispensability of a change of the first name
of the adoptee to his welfare and benefit. Nor is the said change of such urgency that would justify
an exemption from or a relaxation of the Rules. It is the State that stands to be prejudiced by a
wanton disregard of Rule 103 in this case, considering its natural interest in the methodical
administration of justice and in the efficacious maintenance of a system of identification of its
citizens.

The danger wrought by non-observance of the Rules is that the violation of or failure to comply
with the procedure prescribed by law prevents the proper determination of the questions raised
by the parties with respect to the merits of the case and makes it necessary to decide, in the first
place, such questions as relate to the form of the action. The rules and procedure laid down for
the trial court and the adjudication of cases are matters of public policy. 42 They are matters of
public order and interest which can in no wise be changed or regulated by agreements between
or stipulations by parties to an action for their singular convenience. 43

In Garcia vs. Republic, 44 we are reminded of the definiteness in the application of the Rules and
the importance of seeking relief under the appropriate proceeding:

. . . The procedure set by law should be delimited. One should not confuse or misapply
one procedure for another lest we create confusion in the application of the proper remedy.

Respondent judge's unmindful disregard of procedural tenets aimed at achieving stability of

procedure is to be deplored. He exceeded his prerogatives by granting the prayer for change of
name, his order being unsupported by both statutory and case law. The novel but unwarranted
manner in which he adjudicated this case may be characterized as a regrettable abdication of the
duty to uphold the teachings of remedial law and jurisprudence.

II. Petitioner avers that it was error for the lower court to grant the petition for change of name
without citing or proving any lawful ground. Indeed, the only justification advanced for the change
of name was the fact of the adoptee's baptism under the name Aaron Joseph and by which he
has been known since he came to live with private respondents. 45

Private respondents, through a rather stilted ratiocination, assert that upon the grant of adoption,
the subject minor adoptee ipso facto assumed a new identification and designation, that is, Aaron
Joseph which was the name given to him during the baptismal rites. Allowing the change of his
first name as prayed for in the petition, so they claim, merely confirms the designation by which
he is known and called in the community in which he lives. This largely echoes the opinion of the
lower court that naming the child Aaron Joseph was symbolic of naming him at birth, and that
they, as adoptive parents, have as much right as the natural parents to freely select the first name
of their adopted child. 46

The lower court was sympathetic to herein private respondents and ruled on this point in this
manner:

As adoptive parents, petitioner like other parents may freely select the first name given to
his/her child as it is only the surname to which the child is entitled that is fixed by law. . . .

xxx xxx xxx

134
 The given name of the minor was Kevin Earl, a name given for no other purpose than for
identification purposes in a birth certificate by a woman who had all intentions of giving
him away. The naming of the minor as Aaron Joseph by petitioners upon the grant of their
petition for adoption is symbolic of naming the minor at birth. 47

We cannot fathom any legal or jurisprudential basis for this attenuated ruling of respondent judge
and must thus set it aside.

It is necessary to reiterate in this discussion that a person's name is a word or combination of

words by which he is known and identified, and distinguished from others, for the convenience of
the world at large in addressing him, or in speaking of or dealing with him. It is both of personal
as well as public interest that every person must have a name. The name of an individual has two
parts: the given or proper name and the surname or family name. The giver or proper name is
that which is given to the individual at birth or at baptism, to distinguish him from other individuals.
The surname or family name is that which identifies the family to which he belongs and is
continued from parent to child. The given name may be freely selected by the parents for the
child, but the surname to which the child is entitled is fixed by law. 48

By Article 408 of the Civil Code, a person's birth must be entered in the civil register. The official
name of a person is that given him in the civil register. That is his name in the eyes of the law. 49
And once the name of a person is officially entered in the civil register, Article 376 of the same
Code seals that identity with its precise mandate: no person can change his name or surname
without judicial authority. This statutory restriction is premised on the interest of the State in names
borne by individuals and entities for purposes of identification. 50

By reason thereof, the only way that the name of person can be changed legally is through a
petition for change of name under Rule 103 of the Rules of Court. 51 For purposes of an application
for change of name under Article 376 of the Civil Code and correlatively implemented by Rule
103, the only name that may be changed is the true or official name recorded in the civil register.
As earlier mentioned, a petition for change of name being a proceeding in rem, impressed as it is
with public interest, strict compliance with all the requisites therefor in order to vest the court with
jurisdiction is essential, and failure therein renders the proceedings a nullity. 52

It must likewise be stressed once again that a change of name is a privilege, not a matter of right,
addressed to the sound discretion of the court which has the duty to consider carefully the
consequences of a change of name and to deny the same unless weighty reasons are shown.
Before a person can be authorized to change his name, that is, his true or official name or that
which appears in his birth certificate or is entered in the civil register, he must show proper and
reasonable cause or any convincing reason which may justify such change. 53

Jurisprudence has recognized, inter alia, the following grounds as being sufficient to warrant a
change of name: (a) when the name is ridiculous, dishonorable or extremely difficult to write or
pronounce; (b) when the change results as a legal consequence of legitimation or adoption; (c)
when the change will avoid confusion; (d) when one has continuously used and been known since
childhood by a Filipino name and was unaware of alien parentage; (e) when the change is based
on a sincere desire to adopt a Filipino name to erase signs of former alienage, all in good faith
and without prejudice to anybody; and (f) when the surname causes embarrassment and there is
no showing that the desired change of name was for a fraudulent purpose or that the change of
name would prejudice public interest. 54

Contrarily, a petition for change of name grounded on the fact that one was baptized by another
name, under which he has been known and which he used, has been denied inasmuch as the
use of baptismal names is not sanctioned. 55 For, in truth, baptism is not a condition sine qua non
to a change of name. 56 Neither does the fact that the petitioner has been using a different name
135
and has become known by it constitute proper and reasonable cause to legally authorize a change
of name. 57 A name given to a person in the church records or elsewhere or by which be is known
in the community - when at variance with that entered in the civil register - is unofficial and cannot
be recognized as his real name. 58

The instant petition does not sufficiently persuade us to depart from such rulings of long accepted
wisdom and applicability. The only grounds offered to justify the change of name prayed for was
that the adopted child had been baptized as Aaron Joseph in keeping with the religious faith of
private respondents and that it was the name by which he had been called and known by his
family, relatives and friends from, the time he came to live with private respondents. 59 Apart from
suffusing their pleadings with sanctimonious entreaties for compassion, none of the justified
grounds for a change of name has been alleged or established by private respondents. The legal
bases chosen by them to bolster their cause have long been struck down as unavailing for their
present purposes. For, to allow the adoptee herein to use his baptismal name, instead of his name
registered in the civil register, would be to countenance or permit that which has always been
frowned upon. 60

The earlier quoted posturing of respondent judge, as expressed in his assailed order that -

(a)s adoptive parents, petitioners like other parents may freely select the first name given
to his/her child as it is only the surname to which the child is entitled that is fixed by law. .
..

The given name of the minor was Kevin Earl, a name given for no other purpose than for
identification purposes in a birth certificate by a woman who had all the intentions of giving
him away. The naming of the minor as Aaron Joseph by petitioners upon grant of their
petition for adoption is symbolic of naming the minor at birth.

and supposedly based on the authority of Republic vs. Court of Appeals and Maximo Wong,
supra, painfully misapplies the ruling therein enunciated.

The factual backdrop of said case is not at all analogous to that of the case at bar. In the Wong
case, therein petitioner Maximo Wong sought the change of his surname which he acquired by
virtue of the decree of adoption granted in favor of spouses Hoong Wong and Concepcion Ty
Wong. Upon reaching the age of majority, he filed a petition in court to change his surname from
Wong to Alcala, which was his surname prior to the adoption. He adduced proof that the use of
the surname Wong caused him embarrassment and isolation from friends and relatives in view of
a suggested Chinese ancestry when in reality he is a Muslim Filipino residing in a Muslim
community, thereby hampering his business and social life, and that his surviving adoptive mother
consented to the change of name sought. This Court granted the petition and regarded the change
of the surname as a mere incident in, rather than the object of, the adoption.

It should be noted that in said case the change of surname, not the given name, and the legal
consequences thereof in view of the adoption were at issue. That it was sought in a petition duly
and precisely filed for that purpose with ample proof of the lawful grounds therefor only serves to
reinforce the imperative necessity of seeking relief under and through the legally prescribed
procedures.

Here, the Solicitor General meritoriously explained that:

Respondent Judge failed to distinguish between a situation wherein a child is being named
for the first time by his natural parent, as against one wherein, a child is previously
conferred a first name by his natural parent, and such name is subsequently sought to be

136
 disregarded and changed by the adoptive parents. In the first case, there is no dispute
that natural parents have the right to freely select and give the child's first name for every
person, including juridical persons, must have a name (Tolentino, A., Commentaries and
Jurisprudence on the Civil Code, Vo. I, 1987 edition, page 721). In the second case,
however, as in the case at bar, private respondents, in their capacities as adopters, cannot
claim a right to name the minor adoptee after such right to name the child had already
been exercised by the natural parent. Adopting parents have not been conferred such
right by law, hence, the right assertes by private respondents herein remains but illusory.
Renaming the adoptee cannot be claimed as a right. It is merely a privilege necessitating
judicial consent upon compelling grounds. 61

The liberality with which this Court treats matters leading up to adoption insofar as it carries out
the beneficent purposes of adoption and ensures to the adopted child the rights and privileges
arising therefrom, ever mindful that the paramount consideration is the overall benefit and interest
of the adopted child, 62 should be understood in its proper context. It should not be misconstrued
or misinterpreted to extend to inferences beyond the contemplation of law and jurisprudence.

The practically unrestricted freedom of the natural parent to select the proper or given name of
the child presupposes that no other name for it has theretofore been entered in the civil register.
Once such name is registered, regardless of the reasons for such choice and even if it be solely
for the purpose of identification, the same constitutes the official name. This effectively
authenticates the identity of the person and must remain unaltered save when, for the most
compelling reasons shown in an appropriate proceeding, its change may merit judicial approval.

While the right of a natural parent to name the child is recognized, guaranteed and protected
under the law, the so-called right of an adoptive parent to re-name an adopted child by virtue or
as a consequence of adoption, even for the most noble intentions and moving supplications, is
unheard of in law and consequently cannot be favorably considered. To repeat, the change of the
surname of the adoptee as a result of the adoption and to follow that of the adopter does not
lawfully extend to or include the proper or given name. Furthermore, factual realities and legal
consequences, rather than sentimentality and symbolisms, are what are of concern to the Court.

Finally, it is understood that this decision does not entirely foreclose and is without prejudice to,
private respondents' privilege to legally change the proper or given name of their adopted child,
provided that the same is exercised, this time, via a proper petition for change of name. Of course,
the grant thereof is conditioned on strict compliance with all jurisdictional requirements and
satisfactory proof of the compelling reasons advanced therefor.

WHEREFORE, on the foregoing premises, the assailed order of respondent judge is hereby
MODIFIED. The legally adopted child of private respondents shall henceforth be officially known
as Kevin Earl Munson y Andrade unless a change thereof is hereafter effected in accordance with
law. In all other respects, the order is AFFIRMED.

SO ORDERED.

137
G.R. No. 91670 February 7, 1991

ALBERT NABUS, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and MARIANO LIM, respondents.

REGALADO, J.:

This petition for review by certiorari seeks the reversal of the decision 1 of respondent Court of Appeals
in CA-G.R. CV No. 15846 which affirmed the order of the trial court dismissing herein petitioner's
complaint for rescission with damages on the ground of res judicata.

The records show that on June 22, 1970, herein petitioner Albert Nabus brought an action for
reconveyance of a parcel of land against herein private respondent Mariano Lim in the then Court of
First Instance of Baguio and Benguet, La Trinidad, Benguet, which was docketed as Civil Case No.
2159 (24), alleging inter alia:

2. That on June 23, 1965, plaintiff sold to defendant one (1) parcel of land, situated in the
Barrio of Ambiong, Municipality of La Trinidad, Province of Benguet, . . . as evidenced by a
deed of absolute sale, . . . ;

3. That the said property is a portion of a bigger parcel of land, with an area of 15 hectares, 05
ares and 17 centares, covered by and embraced in Original Certificate of Title No. P-136 (Free
Patent No. V48737) issued in the name of plaintiff, on July 5, 1956, . . . ;

4. That although the purchase price of the . . . property in the amount of P258,000.00 was
amortized . . ., title to the same was transferred to the defendant under TCT No. 2814, . . .,
and was later subdivided by said defendant into four (4) lots . . . ;
138
 5. That as of the date thereof, defendant has still an unpaid balance of P75,000.00;

6. That on June 8, 1970 (or 4 years, 11 months and 15 days from June 23, 1965); plaintiff
through counsel offered to repurchase the above-described parcel of land, pursuant to Sec.
119 of the Public Land Law (C.A. No. 141, as amended), as evidenced by a letter of the
undersigned counsel to defendant, . . .; and which was confirmed by the plaintiff in his letter to
defendant, dated June 12, 1970, . . . .

7. That notwithstanding the written offers . . . and subsequent verbal offers of plaintiff to
repurchase the above-described property according to law, the defendant refused and denied,
and still refuses and denies, the said offer;

8. That plaintiff is ready and willing to repurchase the said property and to pay defendant the
sum of P183,000.00, the difference between the stipulated purchase price of P258,000.00 and
the unpaid balance thereof in the amount of P75,000.00 referred to in paragraph 5 hereof. 2

xxx xxx xxx

On December 11, 1971, after Nabus had rested his case, Lim moved to dismiss the complaint in Civil
Case No. 2159(24) on the grounds of lack of cause of action, there being no tender of the repurchase
price of the parcel of land in question, and of prescription. This was denied by the trial court. Thereafter,
Lim filed a motion for reconsideration of the order denying his motion to dismiss, to which on February
3, 1972 Nabus filed an opposition on the ground that tender of the repurchase price of the parcel of
land in question was allegedly not a requirement under the Public Land Act, unlike the provisions of
the Civil Code, the repurchase of the said lot being a substantive right coupled with public interest.

On February 5, 1980, the trial court, upon motion of Lim, ordered Nabus to deposit the repurchase
pace of the said lot in the amount of P183,000.00. On November 13,1980, Lim filed a motion to dismiss
Civil Case No. 2159(24) for failure of Nabus to deposit in court the required amount. On December 1,
1980, Nabus, by counsel, filed a motion for extension of time within which to file an opposition to Lim's
motion to dismiss. On March 13, 1981, no opposition having been filed to the motion to dismiss
because of the death of Nabus' counsel, the trial court dismissed with prejudice Civil Case No.
2159(24) for his failure to deposit the required amount, evincing lack of interest to repurchase the
parcel of land in question. 3

On May 14, 1981, Nabus filed, through a new counsel, a motion for reconsideration of the order
dismissing Civil Case No. 2159(24). On January 26, 1982, the trial court denied Nabus' motion for
reconsideration. 4

No appeal was taken from said order of dismissal.

On March 15, 1982, Nabus filed Civil Case No. 4293 in the same Court of First Instance of Baguio
and Benguet for the annulment of the order of dismissal in Civil Case No. 2159(24), claiming that the
failure of Atty. Florendo, his former counsel, to file an opposition to Lim's motion to dismiss was due
to his serious illness; that the dismissal of his complaint therein, without Nabus being able to file an
opposition to Lim's motion to dismiss, deprived him of the opportunity to be heard amounting to denial
of due process; and that the denial of his motion for reconsideration constituted grave abuse of
discretion tantamount to lack of jurisdiction on the part of the trial court.

Civil Case No. 4293 was subsequently amended to allege grounds for rescission and damages as
additional causes of action. These second and third causes of action added in the amended compliant
aver that:

SECOND CAUSE OF ACTION

139
 xxx xxx xxx

21. That as appearing in the Deed of Absolute Sale Annex "A" of Civil Case No. 2159, . . .
defendant was to pay the purchase price of P258,000.00 in installment; however, defendant
failed to pay the total amount of P258,000.00 having paid only the sum of P183,000.00 and
leaving an unpaid balance of P75,000.00 which defendant failed and refused to pay in spite of
repeated demands;

22. That due to the foregoing, plaintiff is left with no other alternative but to seek for a rescission
(sic) of the contract of Sale aforesaid . . . ;

23. That plaintiff is ready and willing to return the sum of P183,000.00 he has received from
defendant minus of course such damages as the Court may adjudge against defendant;

24. That the said properties covered by said Deed of Absolute Sale have not been transferred
to third persons acting in good faith;

THIRD CAUSE OF ACTION

25. That due to the gross and evident bad faith of defendant in committing the foregoing acts
and in failing and refusing to comply with his obligations to the plaintiff, the latter has suffered
damages to wit: –– attorneys fee –– 15% of the total value of the lots subject matter of the
aforesaid Deed of Absolute Sale; expenses and losses incident to litigation –– P500,000.00;
moral and other damages –– one hundred thousand pesos (P100,000.00). 5

On August 8, 1986, Lim filed a motion to dismiss the complaint in Civil Case No. 4293 on the ground
that it was barred by prior judgment or res judicata and that the action had already prescribed. On
October 7, 1986, Nabus filed an opposition to the motion to dismiss. A reply to the opposition and a
supplement to his motion to dismiss was filed by Lim, to which Nabus filed a rejoinder. On July 22,
1987, the trial court dismissed the complaint in Civil Case No. 4293 on both grounds invoked in the
motion to dismiss. 6

On appeal to respondent court, Nabus claimed that the trial court erred in holding that all the causes
of action in the case are barred by res judicata and that the action for rescission and damages has
prescribed. The annulment of the dismissal order issued in Civil Case No. 2159(24) was no longer
pursued or raised on appeal.

As earlier stated, respondent court sustained the said order of dismissal on the ground of res judicata,
the relevant portion of its decision reading as follows:

It is within the power of the trial court to dismiss the appellant's complaint in Civil Case No.
2159(24) for failure to comply with its order to deposit the repurchase price of the parcel of
land in question. And such dismissal, rightly or wrongly, has the effect of an adjudication upon
the merits, it not having been provided otherwise (Section 3, Rule 17. Revised Rules of Court).
Dismissal on a technicality is no different in effect and consequences from a dismissal on the
merits under the cited provision of the Rules (General Offset Press, Inc. vs. Anatalio, 17 SCRA
688, 691). So too is the order of dismissal, with prejudice, res judicata upon finality under
Section 49, Rule 39, of the Revised Rules of Court, . . . .

Respondent court, however, found no necessity to rule on the matter of prescription.

Hence, the instant petition reiterating substantially the same issues raised on appeal with respondent
court, that is, whether or not (1) the complaint for rescission and damages is barred by the order of
dismissal of petitioner's action for reconveyance under the principle of res judicata; (2) petitioner's
action for rescission has prescribed; and (3) it is equitable to deny petitioner his day in court,
140
considering that admittedly private respondent has not paid the last three installments of the contract
of sale amounting to P75,000.00.

I. Res judicata is a rule of universal law pervading every well regulated system of jurisprudence, and
is put on two grounds, embodied in various maxims of the common law; the one, public policy and
necessity, which makes it the interest of the state that there should be an end to litigation — interest
reipublicae ut sit finis litium; the other, the hardship on the individual that he should be vexed twice for
the same cause — nemo debet bis vexari pro una et eadem causa. 7 The doctrine applies and treats
the final determination of the action as speaking the infallible truth as to the rights of the parties as to
the entire subject of the controversy, and such controversy and every part of it must stand irrevocably
closed by such determination. The sum and substance of the whole doctrine is that a matter once
judicially decided is finally decided. 8

The foundation principle upon which the doctrine of res judicata rests is that parties ought not to be
permitted to litigate the same issue more than once; that, when a right or fact has been judicially tried
and determined by a court of competent jurisdiction, or an opportunity for such trial has been given,
the judgment of the court, so long as it remains unreversed, should be conclusive upon the parties
and those in privity with them in law or estate. 9

Section 49, Rule 39 of the Rules of Court which embodies the principle of res judicata pertinent to this
case provides:

xxx xxx xxx

(b) In other cases the judgment or order is, with respect to the matter directly adjudged or as
to any other matter that could have been raised in relation thereto, conclusive between the
parties and their successors in interest by title subsequent to the commencement of the action
or special proceeding, litigating for the same thing and under the same title and in the same
capacity;

(c) In any other litigation between the same parties or their successors in interest, that only is
deemed to have been 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.

The principle of res judicata actually embraces two different concepts: (1) bar by former judgment and
(2) conclusiveness of judgment. There is "bar by former judgment" when, between the first case where
the judgment was rendered, and the second case where such judgment is invoked, there is identity of
parties, subject matter and cause of action. When the three identities are present, the judgment on the
merits rendered in the first constitutes an absolute bar to the subsequent action. It is final as to the
claim or demand in controversy, including the parties and those in privity with them, not only as to
every matter which was offered and received to sustain or defeat the claim or demand, but as to any
other admissible matter which might have been offered for that purpose. But where between the first
case wherein judgment is rendered and the second case wherein such judgment is invoked, there is
identity of parties, but there is no identity of cause of action, the judgment is conclusive in the second
case, only as to those matters actually and directly controverted and determined, and not as to matters
merely involved therein. This is what is termed conclusiveness of the judgment. 10

A. A case is said to be barred by a former judgment when the following requisites concur: (1) the
presence of a final former judgment; (2) the former judgment was rendered by a court having
jurisdiction over the subject matter and the parties; (3) the former judgment is a judgment on the merits;
and, (4) there is, between the first and the second actions, identity of parties, subject matter, and
causes of action. 11 There is no dispute as to the existence of and compliance with the first two elements
of res judicata in the case at bar. In issue are the alleged absence of a judgment on the merits in the
first case and the identity of causes of action in both cases.

141
1. Elemental is the rule that in order that a judgment may operate as a bar to a subsequent suit on the
same cause of action it must have been based on the merits of the case. And a judgment is on the
merits when it determines the rights and liabilities of the parties based on the disclosed facts,
irrespective of formal, technical, or dilatory objections. It is not necessary, however, that there should
have been a trial. If the judgment is general, and not based on any technical defect or objection, and
the parties had a full legal opportunity to be heard on their respective claims and contentions, it is on
the merits although there was no actual hearing or arguments on the facts of the case. 12 Such is one
of the situations contemplated in Section 3, Rule 17 of the Rules of Court, where a complaint is
dismissed for failure of the plaintiff to comply with a lawful order of the court which dismissal, as
correctly argued by private respondent, has the effect of an adjudication upon the merits.

In the present case, petitioner labors upon the erroneous conceptualization that the order of dismissal
issued in Civil Case No. 2159(24) was based merely on a preliminary matter, that is, failure to deposit
the repurchase price which allegedly is not the matter in controversy, hence it is not an adjudication
on the merits. While we do not discount the rule that a judgment dismissing a suit because of a purely
technical defect, irregularity, or informality is not strictly on the merits and is, therefore, no bar to
subsequent actions, 13 this is however, not applicable to the present case. Under the circumstances
obtaining herein, we have to consequently reject petitioner's ratiocination.

Firstly, it will be remembered that the order dismissing petitioner's complaint in Civil Case No. 2159(24)
is specified to be with prejudice. Our law reports are replete with jurisprudence declaring that a
dismissal with prejudice is an adjudication on the merits which finally disposes of the controversy and,
unless reversed, constitutes a bar to a future action. 14

Secondly, the aforesaid order of dismissal is not a dismissal on sheer technicality but actually goes
into the very substance of the relief sought therein by petitioner, that is, for the reconveyance of the
subject property which was denied in said case, and must thus be regarded as an adjudication on the
merits. It is the dismissal premised on such technical grounds as a mis-joinder, non-joinder, misnomer
or defect of parties; or that plaintiff has no sufficient title or authority to bring the suit, or want of legal
capacity to sue on his part; or formal defects in the pleadings; or a dismissal of the action for failure of
the complaint to state a cause of action which is not a bar to a new action on a good complaint wherein
the defects and omissions in the first complaint are corrected and supplied by the second complaint.
Also, a failure to allege a matter essential to the jurisdiction of the court is no bar to a second complaint
wherein such defect is cured or obviated by further and sufficient allegations. 15

The aforesaid instances are deemed to have no bearing on the merits of the case and will thus not
bar a subsequent suit on the same cause of action. The order of dismissal issued in Civil Case No.
2159(24) definitely does not fall within any of the above-mentioned exceptions and is considered in
our procedural rules as an adjudication on the merits. 16 It would not be amiss to state that a "dismissal
of an action with prejudice" by court order is to be considered no less than a "judgment." 17

It must be noted, however, that while the first order of dismissal is an adjudication on the merits, this
does not necessarily mean that it is a bar to the filing of petitioner's second complaint for rescission,
for, as hereinunder discussed, there is no identity of causes of action whereby the first action would
constitute res judicata to the second.

2. Petitioner next submits that there can be no identity of causes of action between the first and second
cases since the former involves the right of petitioner to redeem the subject property under Section
119 of the Public Land Act within five years from the date of sale, whereas the latter arose from the
failure of private respondent to pay the balance of the purchase price thereby authorizing the
rescission of the contract of sale pursuant to Article 1191 of the Civil Code. More importantly, it is
argued that the same evidence does not support and establish the causes of action in both cases.

On the other hand, private respondent theorizes that there is identity of causes of action between the
previous and subsequent cases in that: (1) the allegations contained and the facts which form the
bases of the two complaints are essentially and substantially the same; (2) the pivotal issue raised in
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both cases involves non-payment of the last three installments of the purchase price; (3) the crux of
the prayer of the two cases are exactly the same, that is, the reconveyance of the subject lot; (4) both
actions originated from the same deed of sale; and, (5) the documentary evidence presented, as well
as the testimony given by the petitioner, in Civil Case No. 2159(24) can also be used to sustain the
prosecution of Civil Case No. 4293.

We find for petitioner on this score.

In determining whether causes of action are identical so as to warrant application of the rule of res
judicata, the test most commonly stated is to ascertain whether the same evidence which is necessary
to sustain the second action would have been sufficient to authorize a recovery in the first, even if the
forms or nature of the two actions be different. If the same facts or evidence would sustain both, the
two actions are considered the same within the rule that the judgment in the former is a bar to the
subsequent action; otherwise it is not. It has been said that this method is the best and most accurate
test as to whether a former judgment is a bar in subsequent proceedings between the same parties,
and it has even been designated as infallible. 18

It will be observed that Civil Case No. 2159(24) is based on petitioner's light to repurchase the subject
property under Section 119 of the Public Land Act, while Civil Case No. 4293 involves the rescission
of the contract of sale by reason of the failure of private respondent to pay in full the value of the
property, pursuant to Article 1191 of the Civil Code. The former, in order to prosper, requires proof that
the land was granted under a free patent, that the land was sold within five years from the grant thereof,
and that the action for reconveyance was filed within five years from the execution of the deed of sale.
In the second case, proof of the unpaid installments is the only evidence necessary to sustain the
action for rescission. It is thus apparent that a different set of evidence is necessary to sustain and
establish the variant causes of action in the two cases.

In addition, causes of action which are distinct and independent, although arising out of the same
contract, transaction, or state of facts, may be sued on separately, recovery on one being no bar to
subsequent actions on others. 19 Also, the mere fact that the same relief is sought in the subsequent
action will not render the judgment in the prior action operative as res judicata, 20

such as where the two actions are brought on different statutes, 21 as in the case at bar.

Under the circumstances, therefore, the doctrine of res judicata will not apply. To repeat, for emphasis,
the cause of action asserted by petitioner in the former suit was anchored upon his right to repurchase
the subject lot. The cause of action sought to be enforced in the present action is predicated upon the
failure of private respondent to pay the last three installments of the purchase price. It is a cause of
action which is wholly independent of, and entirely separate and discrete from, the alleged cause of
action asserted by petitioner in the former suit. Since petitioner seeks relief in the instant case upon a
cause of action different from the one asserted by him in the former suit, the judgment in the former
suit is conclusive only as to such points or questions as were actually in issue or adjudicated therein.
And this brings us to the rule on conclusiveness of judgment.

B. Private respondent avers that granting arguendo that there is no identity of cause of action,
considering that the issue on the unpaid installments has been raised, considered, and passed upon
in Civil Case No. 2159(24), such issue can no longer be relitigated anew in Civil Case No. 4293,
invoking thereby the doctrine of conclusiveness of judgment.

The doctrine states that a fact or question which was in issue in a former suit, and was there judicially
passed on and determined by a court of competent jurisdiction, is conclusively settled by the judgment
therein, as far as concerns the parties to that action and persons in privity with them, and cannot be
again litigated in any future action between such parties or their privies, in the same court or any other
court of concurrent jurisdiction on either the same or a different cause of action, while the judgment
remains unreversed or unvacated by proper authority. 22 The only identities thus required for the

143
operation of the judgment as an estoppel, in contrast to the judgment as a bar, are identity of parties
and identity of issues. 23

It has been held that in order that a judgment in one action can be conclusive as to a particular matter
in another action between the same parties or their privies, it is essential that the issues be identical.
If a particular point or question is in issue in the second action, and the judgment will depend on the
determination of that particular point or question, a former judgment between the same parties will be
final and conclusive in the second if that same point or question was in issue and adjudicated in the
first suit; but the adjudication of an issue in the first case is not conclusive of an entirely different and
distinct issue arising in the second. In order that this rule may be applied, it must clearly and positively
appear, either from the record itself or by the aid of competent extrinsic evidence that the precise point
or question in issue in the second suit was involved and decided in the first. And in determining whether
a given question was an issue in the prior action, it is proper to look behind the judgment to ascertain
whether the evidence necessary to sustain a judgment in the second action would have authorized a
judgment for the same party in the first action. 24

Applying these rules to, the case at bar, it becomes crystal clear that the doctrine of res judicata will
still not apply even under the rule on conclusiveness of judgment. To begin with, the fact that there
was an unpaid balance equivalent to three installments was never put in issue in Civil Case No.
2159(24). The same was considered or assumed only for purposes of determining the amount of the
redemption price It was never directly admitted, controverted nor litigated therein, it being merely
incidental or peripheral to the main issue of whether petitioner could still exercise his right to
repurchase the subject lot by reason of the breach of the prohibition imposed by law. On the other
hand, the issue of non-payment of the installments is the primary and sole controversy presented in
the subsequent case for rescission. It is thus evident that the two cases involve two different issues.
Hence, it would be safe to conclude that neither a "bar by prior judgment" nor "conclusiveness of
judgment" would operate upon or adversely affect the second action for rescission.

C. Private respondent insists that petitioner should have included and alleged rescission of contract
as a second cause of action in Civil Case No. 2159(24) considering that at the time the first complaint
was filed, the breach of the contract of sale was already total, hence the ground for rescission was
available and in existence. This very argument, significantly, is in line with petitioner's own assertion
that, being based on different causes of action, the action for rescission under Article 1191 of the Civil
Code is distinct from the action for reconveyance under Section 119 of the Public Land Act.
Accordingly, said action for rescission could have been brought independently of the action for
reconveyance since Section 5, Rule 2 of the Rules of Court merely provides:

Sec. 5. Joinder of causes of action. –– Subject to rules regarding jurisdiction, venue and joinder
of parties, a party may in one pleading state, in the alternative or otherwise, as many causes
of action as he may have against an opposing party (a) if the said causes of action arise out
of the same contract, transaction or relation between the parties, or (b) if the causes of action
are for demands for money, or are of the same nature and character.

xxx xxx xxx

The rule is clearly permissive. It does not constitute an obligatory rule, as there is no positive provision
of law or any rule of jurisprudence which compels a party to join all his causes of action and bring them
at one and the same time. 25

Under the present rules, the provision is still that the plaintiff may, and not that he must, unite several
causes of action although they may be included in one of the classes specified. This, therefore, leaves
it to the plaintiffs option whether the causes of action shall be joined in the same action, and no
unfavorable inference may be drawn from his failure or refusal to do so. He may always file another
action based on the remaining cause or causes of action within the prescriptive period therefor.

144
II. We, however, find and so hold that in the controversy now before us the action for rescission has
prescribed and should consequently be dismissed on said ground. There can be no dispute that
actions based on written contracts prescribe after ten years from the time the right of the action
accrues. 26 It is elementary that the computation of the period of prescription of any cause of action,
which is the same as saying prescription of the action, should start from the date when the cause of
action accrues or from the day the right of the plaintiff is violated. This is as it should be.

A cause of action has three elements, namely: (1) a right in favor of the plaintiff by whatever means
and under whatever law it arises or is created: (2) an obligation on the part of the named defendant to
respect or not to violate such right; and, (3) an act or omission on the part of such defendant violative
of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff. It is
only when the last element occurs or takes place that it can be said in law that a cause of action has
arisen. Translated in terms of a hypothetical situation regarding a written contract, no cause of action
arises until there is a breach or violation thereof by either party. 27

Conversely, upon the occurrence of a breach, a cause of action exists and the concomitant right of
action may then be enforced.

In the present case, petitioner's position is that the last three installments which he claims were not
paid by private respondent, allegedly fell due on July 1, 1968, July 1, 1969, and July 1,1970,
respectively. 28 Indulging petitioner in his own submissions, therefore, the breach committed by private
respondent occurred, at the earliest, on July 1, 1968 or, at the latest, on July 1, 1970.

Now, even taking the non-payment of the last installment as the basis, an actionable breach of the
contract was already committed on said date, hence, as of that time there arose and existed a cause
of action for petitioner to file a case for rescission. This remedy could already have been availed of by
petitioner for, as earlier discussed, there has been no legal obstacle thereto. Since the ten-year period
had started to run on July 2, 1970, petitioner should have filed the action before July 2, 1980 when the
prescriptive period expired. Considering that the amended complaint in Civil Case No. 4293, invoking
petitioner's right to rescind the contract, was filed only on May 3, 1985, the action therefor has
obviously and ineluctably prescribed.

ACCORDINGLY, the instant petition for review on certiorari is hereby DENIED.

SO ORDERED.

145
G.R. No. L-10458 April 22, 1957

VICENTE MIJARES and SULPICIA GUANZON, petitioner,

vs.
HONORABLE EDMUNDO S. PICCIO, Judge of the Court of First Instance of Cebu and
PASTORA ALVAREZ GUANZON, respondents.

Luis G. Torres for petitioners.

Antonio Y. de Pio and Pedro T. Garcia for respondent Pastora A. Guanzon.

BAUTISTA ANGELO, J.:

This is a petition for prohibition and certiorari with preliminary injunction seeking to enjoin
respondent Judge from enforcing his order requiring petitioners to answer the complaint and
proceed with the trial in Civil Case No. R-3822 and asking at the same time that said order be set
aside and the case be dismissed as regards said petitioners.

On December 24, 1954, Pastora Alvarez Guanzon filed a complaint in the Court of First Instance
of Cebu against her husband Jose M. Guanzon containing two causes of action: one for the
annulment of a deed of sale in favor of Sulpicia Guanzon of certain real properties situated in the
province of Negros Occidental, and the annulment of a deed of donation inter-vivos in favor of
Joven Salvador Guanzon of another set of real properties situated in the province of Cebu; and
another for the separation of their conjugal properties which include both real and personal
acquired during marriage (Civil Case No. R-3823).

On October 19, 1955, plaintiff filed a motion to bring into the case Sulpicia Guanzon and her
husband Vicente Mijares as parties defendants alleging that their presence there in is
indispensable. This motion was granted and said defendants were duly summoned in accordance
with law.

146
On January 17, 1956, new defendants Sulpicia Guanzon and Vicente Mijares, of filing their
answer, filed a motion to dismiss based on three grounds to wit: (1) that venue is improperly laid,
(2) that their is a misjoinder of cause, of action and of and (3) that the court has no jurisdiction of
said defendants. After hearing the parties on this motion, the court denied the same on February
7, 1956, holding that the action is in personam as it does affect title to real property, that there is
no misjoinder of causes of action, and that it has jurisdiction over the persons of the movants.
The movants filed a motion for the reconsideration, and when this was denied, they interposed
the present petition for prohibition and certiorari seeking to set aside the two orders adverted to.

The present case involves the rule which the joinder of several causes of action, the pertinent
provision of which is embodied in Rule 2, section 5, which provides that "Subject to rules regarding
venue and joinder of parties, a party may in one complaint, counterclaim, cross-claim and third-
party claim state, in the alternative or otherwise, as many different causes of action as he may
have against an opposing party."

While this rule appears simple, however, difficulties may arise in its application, for it does not
state specifically the cases where several causes of action may be joined, each case apparently
depending upon the nature of the transactions involved. But one thing is clear: That the joining of
causes of action must be subject to the rules regarding venue and joinder of parties. If these rules
are violated, then a misjoinder of causes of action may arise.

Former Chief Justice Moran gives several illustrations of how this rule may be applied which are
interesting. On this point he makes the following comment:

This rule, which is expressly extended to counterclaims, cross-claims, and third-

party claims, is subject to the limitation regarding venue, whereby several causes
of action with no common venue cannot be joined. For instance, if A, a resident of
Manila, has against E, a resident of Baguio, two causes of action, one for money,
and another for title to real property located in Zamboanga, he cannot join them in
a single complaint, for the venue of the first action, which is either Manila or Baguio,
is different from the venue of the second, which is Zamboanga.

The rule is likewise subject to the limitation regarding joinder of parties. For
instance plaintiff A has a cause of action against B, another cause of action against
C, and another cause of action against D, the three causes of action cannot be
joined, because there would be a misjoinder of parties defendant, each of them
being interested in the cause of action alleged against him not in the other causes
of action pleaded against the others.1 A claim on a promissory note against three
defendants may not be joined with a claim on another promissory note against two
of the defendants, for again there is a misjoinder of parties, the third defendant in
the first cause of action not having an interest in the second cause of
action.2(Moran, Comments on the Rules of Court, Vol. 1, 1952 Ed., p. 24).

In the light of the instances cited by former Chief Justice Moran, it maybe stated that there is a
misjoinder of causes of action in the present case not only as regards venue but also as regards
the defendants. With regard to the first, it should be noted that the first cause of action stated in
the complaint refers to the annulment of a deed of sale real properties situated in the province of
Negros Occidental, and of a deed of donation inter vivos of another set of real properties situated
in the province of Cebu. They refer to two different transactions which properties situated in two
different provinces. The venue has therefore been improperly laid as regards the properties in
Negros Occidental. With regard to the second, it also appears that the deed sale which is sought
to be annulled was made in favor of Sulpicia Guanzon whereas the deed of donation was made
in favor of Joven Salvador Guanzon, and there is nothing from which it maybe inferred that the

147
two defendants have a common interest that maybe joined in one cause of action on the contrary
their interest is distinct and separate. They cannot therefore be joined in one cause of action.

In the light of the above considerations, it may be stated that the motion to dismiss filed by
petitioners in so far as the cause of action involving the annulment of the deed of sale covering
the properties in Negros Occidental is well taken and should have by the lower court.

Petition is granted. The orders of respondent Judge dated February 7, 1956, and March 5, 1956
are hereby set aside. The complaint in so far as the cause of action affecting petitioners is hereby
dismissed, leaving the complaint valid as regards the other defendants, with costs against
respondent Pastora Alvarez Guanzon.

G.R. No. L-3038 January 31, 1951

VISITACION A. GACULA, assisted by her husband FACUNDO GACULA, plaintiffs-appellants,

vs.
PILAR MARTINEZ, CRISTINA GUIRNALDA, EDEN GUIRNALDA, GENEROSA DE MANZANO and
LUZ DE GACUSAN, defendants-appellees.

Vicente Llanes and Alfonso Rosal for appellants.

No appearance for appellees.

MONTEMAYOR, J.:

In the Court of First Instance of Ilocos Sur, Visitacion A. Gacula assisted by her husband Facundo
Gacula, filed a civil action No. 616 against Pilar Martinez, Cristina Guirnalda, Eden Guirnalda,
Generosa de Manzano and Luz de Gacusan, to recover from them the sum of P920, alleged value of
four pieces of jewelry plus P1,250 as damages or a total of P2,200.

The complaint alleges that plaintiff Vicitacion was the owner of one ring valued at P200; another ring
worth P200; a "medallon de oro" valued at P170 and a pair of earings worth P350; that on March 9,
19, 20 and 31 and April 10, 1948, one Aquilina Saraos de Gabas received said jewelry to be sold on
commission with the obligation to return them to the owner or deliver their value, within ten days; that
Aquilina without authority of the owner delivered the first ring to Cristina and Eden, both surnamed
Guirnalda and the second ring to Pilar Martinez, the "medallon" to Generosa de Manzano and the
earings to Luz de Gacusan; that Aquilina Saraos was convicted of estafa in June, 1948 and was
sentenced to suffer ten months imprisonment, to indemnify Visitacion in the sum of P1,450.65 or suffer
subsidiary imprisonment in case of insolvency; that Aquilina failed to return the jewelry because they
remained in the possession of the respective defendants; that neither could Aquilina pay their value,
she being insolvent; and that the defendants refused to return the pieces of jewelry in their possession
to plaintiff Visitacion in spite of the several demands made upon them and despite the search warrant
issued by the court.
148
Cristina in her answer alleges that she is ignorant of the transaction between the plaintiff and Aquilina;
that she had nothing to do with the conviction of Aquilina for estafa, and that she knows nothing of the
ring said to have been delivered to her nor its demand for its return and that she never received said
ring from the plaintiff.

Generosa de Manzano in her answer claims that she never had any transaction with Aquilina Saraos
but that she possesses a "medallon" like that described in the complaint but that she had bought it not
from Aquilina but from one Mrs. Isabel Manzano de Maramba.

Defendants Pilar, Eden and Luz filed a motion to dismiss the claiming that the court has no jurisdiction
over the subject matter; that the cause of action is barred by the prior judgment and that the claim in
plaintiff's complaint has been released. They contend that the claim and interest in each piece of
jewelry is seperate and distinct and should be the subject of an action, that because of the value of
each piece of jewelry, such action falls within the jurisdiction of the justice of the peace court; that the
cause of action is barred by the criminal action of estafa against Aquilina on which she was duly
convicted, and that the sentenced to indemnify the plaintiff in the sum of P1,450.65 bars the present
claim of the plaintiff, said judgment having the effect of a release on the present claim of the plaintiff.

The trial court granted the motion and dismissed the case with costs, on the ground that the plaintiff
had distinct and seperate actions against each defendant, and since the amount of the claim against
each defendant ranges from P170 to P350, in accordance with the provisions of the section 88,
Republic Act 296, the plaintiff's case falls within the exclusive jurisdiction of the justice of the peace
court. The plaintiff appealed directly to this court because only questions of law are involved.

The contention of the defendants that the cause of action is barred by the prosecution of Aquilina for
estafa and that her conviction thereof and the sentence to indemnify the plaintiff in the sum of
P1,450.65 which includes the value of the jewelry, bars the claim of the plaintiffs, is untenable. Article
104 of the Revised Penal Code states that civil liability includes among other things, restitution, and
article 105 of the same code provides that the thing itself shall be restored, even though it be found in
the possession of a third person who has acquired it by lawful means, saving to the latter his action
against the person who may be liable to him. In other words, the owner of an article who has been
deprived thereof through the commission of crime may follow and recover it from any person in
possession thereof, except in certain specific cases. And the conviction of the person illegally depriving
the owner of the possession of an article and his being sentenced to either restore the article taken
away or pay the value thereof, is no bar to the recovery of the said article by the owner from anyone
holding it.

The case of Arenas vs. Raymundo, (19 Phil., 46), is directly in point. There, several pieces of jewelry
were delivered by the owner to an agent to be sold on commission, but the agent instead of selling the
jewelry or accounting for their value, pledged the same to a pawnshop. The agent as in the present
case was prosecuted for estafa, convicted, and sentenced to pay the value of the jewelry or suffer
subsidiary imprisonment in case of insolvency. And yet, this court held that the owner could recover
said jewelry from the pawnshop owner, citing in support of its holding the provisions of article 120 of
the old penal code, from which was copied article 105 of the Revised Penal Code, as well as the
doctrine laid down in the cases of Varela vs. Matute, and Valera vs. Finnick (9 Phil., 479 and 482),
respectively.

As regards jurisdiction, however, we agree to the contention of the defendants and the ruling of the
trial court that it had no jurisdiction. The claim against each defendant for the recovery, of the piece of
jewelry said to be in her possession, really constitutes a separate cause of action; so is the defense
of each defendant, separate and distinct from those of her co-defendants. The ruling in the case of
Brillo vs. Buklatan et al., (87 Phil., 519) is applicable. In said case, the first cause of action is that the
plaintiff as President of the Leyte United Workers, sought to recover from several defendants the
amounts of money which the latter in their capacities as chief foreman and foreman had been
collecting from several groups of laborers as their contributions to funds of the association of which

149
plaintiff was the president. In affirming the order of dismissal of the complaint this court said the
following:

Furthermore, the first cause of action is composed of separate claims against several
defendants of different amounts each of which is not more than P2,000 and falls under
the jurisdiction of the justice of the peace court under section 88 of Republic Act No.
296. The several claims do not seem to arise from the same transaction or series of
transactions and there seem to be no question of law or of fact common to all
defendants as may warrant their joinder under Rule 3, section 6. Therefore, if new
complaints are to be filed in the name of the real party in interest they should be filed
in the justice of the peace court.

In the present case, the several claims against the defendants do not seem to arise from the same
transaction or series of transactions. In fact complaint, the different pieces were received by the agent
from the owner on different dates. It is highly possible that assuming that said pieces of jewelry were
given by the agent to each of the several defendants, the transaction between the agent Aquilina and
each defendant was separate and distinct from that of the rest, and effected on a different occasion.
There is no pretense that there was any conspiracy between or among the different defendants to
obtain the pieces of jewelry from the agent and latter refuse to return or account for them. Furthermore,
the defense of each defendant as already stated, may be different from the rest. As may be seen from
their answers, while one defendant says that she possesses one of the pieces of jewelry involved in
the case, but insists that she had bought it from a person other than Aquilina, the other defendants
flatly deny having received any jewelry from the plaintiff's agent. It is not therefore permissable to
include these separate and distinct claims or causes of action and the several defendants in one single
complaint, and inasmuch as each claim does not exceed P2,000 the justice of the peace court has
jurisdiction, if and when new complaints are filed.

In view of the foregoing, the order appealed from is hereby affirmed, with costs. So ordered.

150
G.R. No. 149041 July 12, 2006

HEIRS OF ROLANDO N. ABADILLA, represented herein by SUSAN SAMONTE ABADILLA,

petitioners,
vs.
GREGORIO B. GALAROSA, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari assailing the Decision1 of the Court of Appeals (CA) in
CA-G.R. CV No. 60766 promulgated on May 28, 2001 as well as its Resolution 2 dated July 17, 2001
denying petitioners’ motion for reconsideration thereof. The CA reversed the Order3 of the Regional
Trial Court (RTC), Quezon City, Branch 84 dated February 16, 1998 which dismissed the Complaint
of herein respondent on the ground that it is barred by prior judgment.

The facts are as follows:

Respondent Gregorio B. Galarosa (Galarosa) filed on February 8, 1990, a Petition for Reconstitution
of Lost Title, Transfer Certificate of Title (TCT) No. 261465, docketed as LRC Case No. Q-3536(90)
before the RTC, Branch 105, presided by Judge Tomas V. Tadeo, Jr.. On September 25, 1990, Judge
Tadeo issued an Order directing the Register of Deeds of Quezon City to reconstitute the original of
TCT No. 261465, thus:

WHEREFORE, premises considered, the Register of Deeds of Quezon City or his duly
authorized representative is hereby ordered to reconstitute the original title that was burned,
destroyed or lost from the said owner’s duplicate copy of Transfer Certificate of Title No.
261465 to be presented by herein petitioner or counsel upon FINALITY of this ORDER. Let
copies of the same be furnished the Register of Deeds of Quezon City and the Land
Registration Authority.

151
 SO ORDERED.4

In issuing said Order, Judge Tadeo noted that: the concerned government agencies, namely, the
Office of the Solicitor General, the Land Registration Authority (LRA), the Register of Deeds of Quezon
City, the Director of Lands, and the City Prosecutor of Quezon City were duly served copies of
Galarosa’s Petition for Reconstitution; a representative from the Office of the City Prosecutor appeared
at the hearing and interposed no objection thereto; Galarosa caused the publication of the court order
setting the case for hearing in the Official Gazette dated June 25, 1990, July 2, 1990, and July 6, 1990;
said court order was also posted at the main entrance of the Quezon City Hall, the Bulletin Boards of
the Quezon City courts, the Sheriff’s Office and at the hall of the barangay where the property is
located; the Register of Deeds also issued a certificate that the original copy of TCT No. 261465 was
burned, destroyed, or lost when the Office of the Register of Deeds was gutted by fire on June 11,
1988; the owner’s duplicate copy of TCT No. 261465 was brought and presented before the court and
upon verification was found to be genuine and authentic. 5

When Galarosa presented the said court order together with his duplicate certificate of title to the
Register of Deeds of Quezon City, the latter, however, refused to comply prompting Galarosa to file
on June 25, 1991 an urgent motion with the RTC seeking to compel the Register of Deeds of Quezon
City to reconstitute his title.6

On September 16, 1993, RTC, Branch 105, this time through Judge Benedicto B. Ulep, issued an
Order denying the motion of Galarosa, explaining as follows:

While it is true that the Register of Deeds earlier issued a certification, this does not bar said
office from refusing to reconstitute because [of] the supervening event, that is, the discovery
of the spuriousness of the signature of then Register of Deeds Nestor Peña, has materially
changed the situation so that if reconstitution will be ordered by this Court of a non-existent
certificate of title, the same will be inequitable and unjust because the Court will be made an
instrument in impairing the integrity of the torrens system. Once reconstituted, the spurious
title may be conveyed to third persons who are innocent of the infirmities of the title and will
have no better right to ownership of the property. It is basic under R.A. No. 26 that for
reconstitution to be effected, the title must have been duly issued by the Register of Deeds
and destroyed while it was still in force. Since the title, therefore, was spurious because it was
not duly issued by the Register of Deeds (whose signature was simulated) and the judicial
form used in the Deeds of Ozamis City (not Quezon City), then there was no valid title on file
with the Register of Deeds of Quezon City which was in force at the time of the burning of
Quezon City Hall.

WHEREFORE, in the light of the foregoing, the urgent motion is denied.

SO ORDERED.7

In refusing to compel the Register of Deeds to effect the reconstitution, the trial court gave weight to
the (1) manifestation of the Register of Deeds of Quezon City, Samuel C. Cleofe, stating that it had to
deny reconstitution of the original of TCT No. 261465 based on the findings of the LRA Administrator
that said title, subject of the order for reconstitution, is of doubtful authenticity;8 (2) the National Bureau
of Investigation (NBI) report finding that the signature that appears on TCT No. 261465 and the
standard sample signatures of then Register of Deeds of Quezon City, Nestor Peña, were not written
by one and the same person;9 and the (3) Consulta of LRA Administrator Teodoro C. Bonifacio stating
that Serial Number 4055240 which appears on the face of the owner’s duplicate certificate of TCT No.
261465, was not assigned to the Registry of Deeds of Quezon City but was issued to the Registry of
Deeds of Ozamis City.10

Galarosa filed a Motion for Reconsideration which was denied by the trial court in its Order dated April
19, 1994.11

152
Three years later, or on June 4, 1997, Galarosa filed a Complaint for Recovery of Ownership,
Annulment of Title with Damages12 seeking the annulment of TCT No. 60405 which is in the name of
deceased Rolando N. Abadilla, docketed as Civil Case No. Q-97-31250 (hereafter CV No. Q-97-
31250) and assigned to RTC Branch 84 of Quezon City. Galarosa claims that TCT No. 60405 is
fraudulent, fake, and unauthorized under existing laws.13

The Heirs of Rolando N. Abadilla (Abadillas) filed an Answer on July 14, 1997, claiming that Galarosa’s
complaint states no cause of action and it is barred by prior judgment. The Abadillas cited the
September 16, 1993 Order of RTC, Branch 105, which denied Galarosa’s motion to compel the
Register of Deeds to reconstitute his title after finding that said title is spurious, as well as the April 19,
1994 Order denying Galarosa’s Motion for Reconsideration.14

On July 30, 1997, the Abadillas filed A Motion for Preliminary Hearing on Affirmative Defenses and to
Cancel the Notice of Lis Pendens.15

On February 16, 1998, RTC, Branch 84 of Quezon City issued an Order dismissing CV No. Q-97-
31250, as follows:

LRC Case No. Q-3536(90) of Branch 105 of this Court is conclusive of the rights of the parties
herein. The main issue was finally decided in the Orders of 16 September 1993 and 19 April
1994, both issued in LRC Case No, Q-3536(90). As a consequence, it can not be litigated
anew. The present action is thus barred by a prior judgment.

ACCORDINGLY, this case is dismissed. No costs.

SO ORDERED.16

Galarosa appealed to the CA claiming that the trial court erred in dismissing his complaint and in
refusing to rule that his title is genuine. He then prayed that the Order dated February 16, 1998 be
reversed and set aside and that a new order be issued annulling TCT No. 60405.17

On May 28, 2001, the CA issued the herein assailed Decision granting the appeal and setting aside
the order appealed from, thus:18

A simple perusal of the case shows that there is no identity of cause of action. The first action
is to reconstitute title, while the second one is for recovery of ownership, annulment of title with
damages. There are other issues in the second case which must be resolved by the court.
Hence, the first case cannot be considered as a bar to the resolution of the second case.

Even assuming however that the second case is barred by prior judgment, yet judging from
the facts presented by the present case, it is beyond doubt that serious injustice will be
committed if strict adherence to procedural rules were to be followed.

It is worthy to note that rules of procedure are but mere tools designed to facilitate the
attainment of justice, such that when rigid application of the rules would tend to frustrate rather
than promote substantial justice, this Court is empowered to suspend its operation.

The other errors raised by the plaintiff-appellant need not be resolved by this Court as the
same may be threshed out in the appropriate action that appellant may file in the proper court
to protect his interest. The appellant should have filed an action for cancellation of title. As held
by the Court in the case of Republic vs. Court of Appeals, a torrens title cannot be collaterally
attacked. The issue of validity of a torrens title, whether fraudulently issued or not, may be
posed only in an action brought to impugn or annul it. Unmistakable, and cannot be ignored,
is the germane provision of Section 48 of P.D. 1529, that a certificate of title can never be the

153
 subject of a collateral attack. It cannot be altered, modified, or cancelled except in a direct
proceeding instituted in accordance with law.

WHEREFORE, the appeal is hereby GRANTED and the order appealed from is accordingly
SET ASIDE.

SO ORDERED.19

The Abadillas filed a Motion for Reconsideration to no avail.20 Hence the present petition on the
following grounds:

A.

THE HONORABLE COURT OF APPEALS HAS DECIDED QUESTIONS OF SUBSTANCE IN

A WAY PROBABLY NOT IN ACCORD WITH LAW AND/OR WITH THE APPLICABLE
DECISIONS OF THE HONORABLE SUPREME COURT.

B.

THE HONORABLE COURT OF APPEALS HAS SO FAR DEPARTED FROM THE

ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION.

DISCUSSION

I.

THE RTC OF QUEZON CITY, BRANCH 84, CORRECTLY DISMISSED CIVIL CASE
NO. Q-97-31250 FOR BEING BARRED BY PRIOR JUDGMENT IN LRC CASE NO.
Q-3536 (90) IN LIGHT OF THE FOLLOWING-

a) The principle of res judicata applies notwithstanding respondent’s attempt to vary

his form of action in Civil Case No. Q-97-31250;

b) Respondent filed Civil Case No. Q-97-31250 for recovery of ownership, annulment
of title with damages to have his title validated in effect, in an indirect or subtle way of
challenging the final and executory judgment in the reconstitution proceeding
denominated as LRC Case No. Q-3536 wherein his title was declared as fake or
spurious;

c) It was pointless for respondent to bring an action for recovery of

ownership/annulment of title when he has not disproved the findings of the Register of
Deeds of Quezon City, the NBI and the LRA Administrator that his title is fake or
spurious;

d) Serious injustice will be caused not to respondent who holds a fake or spurious title,
but to petitioners who have a genuine and valid title.21

Petitioners argue that: the CA erred in ruling that res judicata does not apply in this case as substantial
identity of causes of action exists in the petition for reconstitution of title (LRC Case No. Q-3536[90])
and in the action for recovery of ownership/annulment of title with damages (CV No. Q-97-31250);
"genuineness of title" has to be alleged and established in both cases; respondent’s complaint for
recovery/annulment is a mere attempt to vary the form of action from the reconstitution case and
thereby avoid the effects of the final and executory judgment in the latter; res judicata or bar by prior
judgment forecloses not only matters squarely raised and litigated but all such matters which could
154
have been raised in the litigation but were not; proceedings in the reconstitution case are conclusive
on the rights of the parties, particularly as to whose title is genuine; respondent did not controvert the
manifestation of the Register of Deeds of Quezon City, the findings of the NBI, the Consulta of the
LRA Administrator, neither did he present evidence to the contrary; respondent also did not appeal
the Orders of Judge Ulep dated September 16, 1993 and April 19, 1994 which have become final and
executory; respondent deliberately suppressed facts which give rise to suspicion that he is a party to
a fraudulent scheme to validate/legitimize fake titles; respondent anchored his right of ownership on a
deed of absolute sale executed by one Wilfredo Gener, an alleged agent of the heirs of Don Mariano
San Pedro y Esteban; Don Mariano’s claim however was predicated upon a Spanish title, which is no
longer countenanced as indubitable evidence of land ownership.22

Petitioners then pray that the Decision of the CA dated May 28, 2001 and its Resolution dated July
17, 2001 be reversed and set aside, the appeal of Galarosa be dismissed for lack of merit, and the
Order dated February 16, 1998 of the RTC be affirmed.23

Respondent in his Comment contends that: he did not appeal the Orders dated September 16, 1993
and April 19, 1994 as said Orders were null and void having been rendered by Branch 105 long after
it had lost jurisdiction over the case; what respondent’s counsel did then was to file a separate civil
case for recovery of ownership, annulment of title with damages; the genuineness and authenticity of
respondent’s title is not an issue in this appeal; Act No. 496 as amended by Presidential Decree No.
1529, Sec. 48, provides that certificates of title are not subject to collateral attack and may not be
altered, modified, or cancelled except in a direct proceeding in accordance with law; the principal issue
in the present petition is whether the dismissal of the complaint in CV No. Q-97-31250 is meritorious,
or whether the Orders dated September 16, 1993 and April 19, 1994 could properly constitute a bar
to the filing of CV No. Q-97-31250; the issue of whose title is genuine has not been brought to the
appropriate courts; there can be no identity of causes of action between LRC Case No. Q-3536(90)
and CV No. Q-97-31250 as the first involves a court of limited jurisdiction while the latter involves a
court of general jurisdiction.24

Respondent filed a Supplement to Comment, adding that: there can be no res judicata as there is no
identity of causes of action between the first and the second case; even assuming that the
genuineness of title should be established in both actions, in the latter case, not only genuineness of
title must be looked into but recovery of ownership and damages as well; the two actions entail different
pieces of evidence; a reconstitution proceeding is an action in rem while an action to recover title or
possession of real property is not; respondent purchased the property from Wilfredo Gener in good
faith and for valuable consideration; for as long as respondent can prove that he was issued a title
which was destroyed, the trial court has no alternative but to grant the petition for reconstitution; the
NBI report is not conclusive and the Register of Deeds has not presented evidence to disprove the
existence of the title of respondent; in refusing to reconstitute the title of respondent, TCT No. 261465,
the Register of Deeds acted illegally and violated his ministerial duty; there is no suppression of facts
in this case as the same form part of the records which can easily be alleged by petitioners in their
answer.25

Petitioners filed a Consolidated Reply insisting that Rolando Abadilla’s acquisition of the property was
valid and his title, TCT No. 60405, is genuine and authentic while Galarosa’s acquisition of the same
is dubious and his title, TCT No. 261465, is spurious as borne out by the findings of the Register of
Deeds of Quezon City, LRA, NBI, and the RTC, Branch 105 of Quezon City.26

Stripped to its core, the issue that has to be resolved in the present petition is: Whether the CA erred
in ruling that the Complaint for Recovery of Ownership, Annulment of Title with Damages, CV No. Q-
97-31250, filed by Galarosa in 1997 is not barred by the Orders dated September 16, 1993 and April
19, 1994, in the reconstitution case, LRC Case No. Q-3536(90).

The Court rules against petitioners and upholds the assailed Decision and Resolution of the CA.

155
Res judicata, which is being invoked by petitioner, presupposes the existence of the following: (1) the
judgment sought to bar the new action must be final; (2) the decision must have been rendered by a
court having jurisdiction over the subject matter and the parties; (3) the disposition of the case must
be a judgment on the merits; and (4) there must be as between the first and second action, identity of
parties, subject matter, and causes of action.27

It has two aspects: first, "bar by prior judgment" which is provided in Rule 39, Section 47(b) of the 1997
Rules of Civil Procedure and second, "conclusiveness of judgment" which is provided in Section 47(c)
of the same Rule, to wit:

Sec. 47. Effect of judgment or final orders. --- The effect of a judgment or final order rendered
by a court of the Philippines having jurisdiction to pronounce the judgment or final order, may
be as follows:

xxxx

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged
or as to any other matter that could have been raised in relation thereto, conclusive between
the parties and their successors in interest by title subsequent to the commencement of the
action or special proceeding, litigating for the same thing and under the same title and in the
same capacity; x x x

(c) In any other litigation between the same parties or their successors in interest, that only is
deemed to have been adjudged in a former judgment or final order which appears upon its
face to have been so adjudged, or which was actually and necessarily included therein or
necessary thereto.

Petitioners claim that the civil case for recovery of ownership should be barred by the orders of the
trial court in the reconstitution proceedings; or at the very least, that the doctrine of conclusiveness of
judgment be applied in this case.

The Court finds that there is neither a bar by prior judgment nor conclusiveness of judgment.

There is "bar by prior judgment" when there is identity of parties, subject matter, and causes of action,
between the first case where the judgment was rendered, and the second case which is sought to be
barred. Under this principle, the judgment in the first case constitutes an absolute bar to the second
action, i.e., the judgment or decree of the court of competent jurisdiction on the merits concludes the
litigation between the parties, as well as their privies and constitutes a bar to a new action or suit
involving the same cause of action before the same or any other tribunal.28

As correctly pointed out by the CA, there is no identity of causes of action between the reconstitution
case and the civil action for recovery of ownership and annulment of title with damages. Thus, there
can be no bar by prior judgment in this case.

A cause of action is the act or omission by which a party violates a right of another.29 It is determined
by the facts alleged in the complaint and not by the prayer therein.30 The test to determine if there is
identity of causes of action is to consider whether the same evidence would sustain both causes of
action, i.e., whether the same evidence which is necessary to sustain the second action would have
been sufficient to authorize a recovery in the first, even if the forms or nature of the two actions be
different.31 When evidence to sustain the respective causes of action in the two cases is not exactly
the same, there is no identity between the causes of action.32

The nature of judicial reconstitution proceedings is the restoration of an instrument or the reissuance
of a new duplicate certificate of title which is supposed to have been lost or destroyed in its original
form and condition.33 Its purpose is to have the title reproduced after proper proceedings in the same
156
form they were when the loss or destruction occurred and not to pass upon the ownership of the land
covered by the lost or destroyed title.34 Possession of a lost certificate of title is not the same as
ownership of the land covered by it, and the certificate does not vest ownership but merely evinces
title over a particular property.35 Indeed, registering land under the Torrens System does not create or
vest title because registration is not a mode of acquiring ownership.36

The civil action filed by respondent is for Recovery of Ownership and Annulment of Title with Damages.
It principally delves on the issue of ownership of the land covered by the title of Rolando Abadilla.
Such issue of ownership of Abadilla was not touched upon in the reconstitution proceedings.

On the other hand, the doctrine of "conclusiveness of judgment" provides that issues actually and
directly resolved in a former suit cannot again be raised in any future case between the same parties
involving a different cause of action.37 Under this doctrine, identity of causes of action is not required
but merely identity of issues. Otherwise stated, conclusiveness of judgment bars the relitigation of
particular facts or issues in another litigation between the same parties on a different claim or cause
of action.38

Readily apparent is the fact that the parties are not the same in the reconstitution proceedings and the
civil case for recovery of ownership and annulment of title with damages. In any case, the applicability
of the doctrine of "conclusiveness of judgment," in this case, is immaterial as the genuineness of the
transfer certificate of title of Galarosa, which is the subject of the reconstitution proceeding, is not
determinative of the outcome of the civil case for recovery of ownership and annulment of title.

The issue of ownership must be threshed out in a separate civil suit and should not be confused with
reconstitution proceedings.

As pronounced by this Court in Lee v. Republic of the Philippines39

[A] reconstitution of title is the re-issuance of a new certificate of title lost or destroyed in its
original form and condition. It does not pass upon the ownership of the land covered by the
lost or destroyed title. Any change in the ownership of the property must be the subject of a
separate suit. Thus, although petitioners are in possession of the land, a separate proceeding
is necessary to thresh out the issue of ownership of the land.40

In the Heirs of De Guzman Tuazon v. Court of Appeals41 the Court also explained that:

[I]n x x x reconstitution under Section 109 of P.D. No. 1529 and R.A. No. 26, the nature of the
action denotes a restoration of the instrument which is supposed to have been lost or
destroyed in its original form and condition. The purpose of the action is merely to have the
same reproduced, after proper proceedings, in the same form they were when the loss or
destruction occurred, and does not pass upon the ownership of the land covered by the lost
or destroyed title. It bears stressing at this point that ownership should not be confused with a
certificate of title. Registering land under the Torrens System does not create or vest title
because registration is not a mode of acquiring ownership. A certificate of title is merely an
evidence of ownership or title over the particular property described therein. Corollarily, any
question involving the issue of ownership must be threshed out in a separate suit, which is
exactly what the private respondents did when they filed Civil Case No. 95-3577 ["Quieting of
Title and Nullification and Cancellation of Title"] before Branch 74. The trial court will then
conduct a full-blown trial wherein the parties will present their respective evidence on the issue
of ownership of the subject properties to enable the court to resolve the said issue.42 x x x

WHEREFORE, the petition is DENIED. The Decision dated May 28, 2001 and Resolution dated July
17, 2001 of the Court of Appeals setting aside the Order dated February 16, 1998 of the Regional Trial
Court, Quezon City, Branch 84 in Civil Case No. Q-97-31250, are AFFIRMED. The trial court is
ordered to proceed with the trial of Civil Case No. Q-97-31250.

157
No costs.

SO ORDERED.

G.R. No. 131277 February 2, 1999

Spouses FRANCISCO and ANGELA C. TANKIKO and Spouses ISAIAS and ANITA E.
VALDEHUEZA, petitioners,

vs.

JUSTINIANO CEZAR, EUGENIO ENDAN, BONIFACIO ACLE, EUSEBIO ANTIG, JULIO

ASENERO, PILAR ARBOLADURA, JUANA BALISTOY, APOLINARIO BAHADE, REMEGIO
CAGADAS, TEODORO CAGANTAS, ALEJANDRO DE LA CERNA, NILO DE LA CRUZ,
REMEDIOS F. COLLERA, TERESITA COLLERA, ANASTACIO DAGANDARA, HEIRS OF
SOTERO ESCOLANA represented by LUZ ESCOLANA, HEIRS OF FELICISIMO
EXCLAMADO represented by ALFREDO EXCLAMADO CARLOS GOMEZ, ELEUTERIO
GUIWAN HEIRS OF TEODORO JANDAYAN represented by MARINA ANAYA VDA. DE
JANDAYAN, HEIRS OF GUILLERMO NARISMA, IGNACIO OPAON, ANTONIO PALMA,
ELADIO RAAGAS, HEIRS OF MARTIN RODRIGUEZ represented by LUZMINDA
RODRIGUEZ ABEJARON, RUFINO SUMAMPONG, HEIRS OF ASUNCION TACDER
represented by EUSEBIO ANTIG, DOMINGO TORDILLO, LUCIANO UAYAN and JULIO
WALAG, respondents.

PANGANIBAN, J.:

Equity may be invoked only in the absence of law; it may supplement the law, but it can neither
contravene nor supplant it.

158
 Statement of the Case

This principle is stressed by this Court in granting the Petition for Review on Certiorari before us
seeking the nullify of the April 16, 1997 Decision of the Court of Appeals 1 in CA-GR CV No. 50025
and its October 13, 1997 Resolution denying reconsideration. The dispositive portion of the
assailed Decision reads as follows:

WHEREFORE, the foregoing considered, the appealed decision is SET

ASIDE and another one entered allowing plaintiffs-appellants to stay in the
premises pending final termination of the administrative proceedings for
cancellation of defendants-appellees' titles and final termination of the
action for reversion and annulment of title. Let notice of lis pendens be
annotated on Original Certificate of Title Nos. T-55515 and T-55516.

Let a copy of this decision be furnished to the Director of Lands and the
Office of the Solicitor General for the administrative investigation of plaintiff-
appellant's complaint and [for] the eventual filing of the petition for the
cancellation of defendants-appellees' title [to] be initiated, expedited if still
pending, and resolved without further delay. 2

By the foregoing disposition, the Court of Appeals effectively reversed the February 9, 1995
Decision 3 of the Regional Trial Court of Misamis Oriental, Branch 17, which disposed:

WHEREFORE, premises considered, the complaint filed in this case

against the defendants by the plaintiffs should be, as it is hereby ordered,
DISMISSED, for lack of merit. Accordingly, the defendants are hereby
declared as owners of the property in litigation as evidenced by their
certificates of title covering their respective portions of Lot No. 3714 and
the plaintiffs, who are now possessing and occupying said parcel of land,
are hereby ordered to vacate the same within ninety (90) days, so that the
defendants can take possession of their respective portions and enjoy the
same as owners thereof.

The counter-claims are, likewise, dismissed for failure to prove the same.
Costs against the plaintiffs. 4

Hence, this recourse to this Court. 5

The Facts

As found by the Court of Appeals, the facts of the case are as follows:

. . . Plaintiffs-appellant [herein respondents] are the actual occupants and

residents of a portion [of land] consisting of 1 ha. 7552 sq. m. (Appellants'
Brief, p. 28, Rollo) of the controverted lot, Lot No. 3714 of the Cadastral
Survey of Cagayan [(]Cadastral Case No. 18, L.R.C. Rec. No. 1562[)] with
the improvements thereon, situated in the Barrio of Lapasan, City of
Cagayan de Oro . . . containing an area of ONE HUNDRED TWENTY SIX
THOUSAND ONE HUNDRED AND TWELVE (126,112) SQUARE
METERS, more or less (Exhibit "2"; Records, pp. 12-13).

Plaintiffs-appellants are miscellaneous sales patent applicants of their

respective portions of the aforedescribed lot occupied by them [(]some as
159
far back as 1965[)] and have been religiously paying taxes on the property.
The action for reconveyance with damages filed before the Regional Trial
Court, Misamis Oriental, Cagayan de Oro City springs from the fact that the
lot in question [(]Lot 3714[)] had been titled under Original Certificate of
Title No. O-740 issued by the then Land Registration Commission on
December 13, 1977 in the name of Patricio Salcedo married to Pilar Nagac.
Said OCT was issued pursuant to Decree of Registration No. N-168305 in
accordance with a decision of the Cadastral Court in Cadastral Case No.
18, LRC Cad. Rec. No. 1562 dated August 6, 1941 penned by the Hon.
Lope Consing (Pre-Trial Brief for Defendant Spouses Francisco and
Angela Tankiko and Spouses Isaias and Anita Valdehueza, Records, p.
258). Subsequently, separate titles (Transfer Certificates of Title NO. T-
55515 and T-55516) were issued to defendant-appellee Tankiko after the
latter purchased Lots 3714-B, 3714-C of the subdivision plan from the Heirs
of Patricio Salcedo represented by Atty. Godofredo Cabildo, their attorney-
in-fact. In turn, defendant-appellee Francisco Tankiko sold Lot 3714-C to
defendant-appellees Isaias and Anita Valdehueza.

Plaintiff-appellants contest the existence of the Consing decision and cite

the decision of the Hon. Eulalio Rosete dated April 18, 1980 [in] Civil Case
No. 6759 involving the neighboring lot (Lot No. 3715) likewise (formerly)
covered by OCT O-740 which makes the following observation regarding
Lot 3714:

There is no record showing that a decision has been

rendered in Cadastral Case No. 18; G.L.T.O Record No.
1562 adjudicating Lots Nos. 3714 and 3715 in favor of
Patricio Salcedo married to Pilar Nagac. (Exh UU and VV).
If there was such a decision it would have been with the
records of the Land Registration Commission inasmuch [as]
the decree was issued only on December 13, 1977 so that
decision was still available on that date.

On the contrary, it was the decision rendered in Epediente

(sic) Catastro No. 18, G.L.R.P Record No. 1562, entitled,
"Commonwealth De Pilipinas, Solicitante, Antonia Abaday,
et al. Reclamantes," rendered on December 19, 1940 which
was found. This decision shows that Lots Nos. 3714 and
3715 were declared public lands. (Exh. WW-2). Said
decision, rendered by Judge Ricardo Summers, reads,
among others.

xxx xxx xxx

Lote No. 3714 — Declarado terreno publico por haber sido

reclamado unicamente por los Directores de Terrenos y
Montes.

Lote No. 3715 — Declarado toreno publico por haber sido

reclamado unificamente porlos Directores de Terrenos y
Montes. (Exh WW-2-A).

. . . (Emphasis Supplied)

160
 xxx xxx xxx

The Court notes that Original Certificate of Title No.

[O-]740 covers not only Lot 3715, but also Lot No. 3714, a
parcel of land which has been occupied and [is] now being
used by the Don Mariano Marcos Polytechnic College.
Before this College, the Misamis Oriental School of Arts and
Trades, has been occupying and using the Lot No. 3714
since before the war. This lot was also declared public land
by the Cadastral Court in Expediente Catastro No. 18
G.L.R.O. Record No. 1562, because only the Directors of
Land and Forestry were the claimants (Exh WW-2-A). It
would seem therefore that Original Certificate of Title No.
[O-]740 is likewise void ab initio as regards this lot. But, this
Court cannot make any pronouncement on this lot because
it has not been admitted for determination.

(Records, pp. 41-43)

In the course of the presentation plaintiffs' evidence in this appealed case,

the parties submitted a stipulation of facts (Records, pp. 392, 427, 429)
wherein the parties admitted the existence of Civil Case No. 6646, Regional
Trial Court Branch 24, Misamis Oriental; and the Decision-Adjudicando
Lotes No Controvertidos rendered by Judge Ricardo Summers in
Expediente Cat. No. 18 G.L.R.O. Rec. No. 1562 on December 14, 1940
which shows on page 6 thereof that Lot 3714 was "declarado terreno
publico". However[,] defendants asserted that Lot 3714 was subsequently
adjudicated to and ordered registered in the name of Patricio Salcedo
pursuant to Decree of Registration No. 168305 issued on August 6, 1941
by Judge Lope Consing but the Original Certificate of Title No. O-740 was
actually issued only on December 13, 1977. Parties further stipulated to the
existence of Civil Case No. 6759 referring to the neighboring Lot 3715 and
the decision rendered therein supra declaring null and void Original
Certificate of Title No. O-740 as regards Lot No. 3715 and containing the
opinion that OCT-O740 was likewise void respecting Lot No. 3714; the
existence of Civil Case No. 89-243 entitled Heirs of Bartolome Calderon,
et al. vs. Salcedo, et al. which was terminated by a Judgment on
Compromise Agreement recognizing Miscellaneous Sales Patent No. 4744
in favor of the Heirs of Bartolome Calderon over a 750 square meter portion
of the land covered by OCT No. O-740; the existence of tax declarations
and tax receipts of the plaintiff; the existence of OCT No. O-740 over Lot
3714, Subdivision Plan of Patricio Salcedo over Lot 3714, Extra-judicial
Settlement of [the] Estate of Patricio Salcedo, and the Special Power of
Attorney in favor of Atty. Godofredo Cabildo as attorney-in-fact of the
Salcedos (pp. 4298-430, Record). 6

Ruling of the Court of Appeals

The Court of Appeals (CA) found that Patricio Salcedo did not acquire any right or title over the
disputed land and, consequently, did not transmit any registrable title to herein petitioners. Never
presented as evidence was any copy of the Consing Decision, which had allegedly authorized
the Decree of Registration of the property in favor of Patricio Salcedo. Evidence also shows that
the land that Patricio Salcedo succeeded in registering in his name had been previously declared
public land on December 19, 1940, in Expediente Cat. No. 18 penned by Judge Ricardo
161
Summers. Under the Regalian Doctrine, no public land can be acquired by private persons without
a grant from the government; since petitioners did not present any evidence that Patricio Salcedo
had acquired the property from the government as a favored recipient — by homestead, free
patent or sales patent — said property could not have been acquired by him.

As the property in dispute is still part of the public domain, respondents are nor the proper parties
to file an action for reconveyance, as they are not owners of the land, but only applicants for sales
patent thereon. However, equitable considerations persuaded the CA to allow plaintiffs-appellants
to remain on the land in question, so that future litigation may be avoided.

Statement of the Issues

In their Memorandum, petitioners claim that the CA erred in its ruling on the following issues:

1. Respondents' legal personality to sue;

2. Decree of Registration;

3. Petitioners as innocent purchasers for value;

4. Allowing respondents to stay in the premises; and

5. Prescription. 7

This Court believes that the pivotal issue in this case is whether the private respondents may be
deemed the proper parties to initiate the present suit.

The Court's Ruling

The petition is meritorious.

Main Issue: Personality to Sue

Although the respondents had no personality to file the action for reconveyance with damages,
the Court of Appeals still ruled that the particular circumstances of this case necessitated the
exercise of equity jurisdiction, in order to avoid leaving unresolved the matter of possession of the
land in question.

On the other hand, petitioners insist that respondents had no legal capacity to file the Complaint,
because they were not the owners of the land but mere applicants for sales parent thereon.
Therefore, petitioners argue that respondents, not being the real parties in interest, have no legal
standing to institute the Complaint in the trial court.

We agree with petitioners. The Court is not persuaded that the circumstances of this case justify
the exercise of equity jurisdiction that would allow a suit to be filed by one who is not a real party
in interest.

First, equity is invoked only when the plaintiff, on the basis of the action filed and the relief sought,
has a clear right that he seeks to enforce, or that would obviously be violated if the action filed
were to be dismissed for lack of standing. In the present case, respondents have no clear
enforceable right, since their claim over the land in question is merely inchoate and uncertain.
Admitting that they are only applicants for sales patents on the land, they are not and they do not
even claim to be owners thereof. In fact, there is no certainty that their applications would even
162
be ruled upon favorably, considering that some of the applications have been pending for more
than ten years already.

Second, it is evident that respondents are not the real parties in interest. Because they admit that
they are not the owners of the land but mere applicants for sales patents thereon, it is daylight
clear that the land is public in character and that it should revert to the State. This being the case,
Section 101 of the Public Land Act categorically declares that only the government may institute
an action to recover ownership of a public land. 8 In Sumail v. CFI, 9 a case involving facts identical
to the present controversy, the Court held that a private party had no personality to institute an
action for reversion of a parcel of land to the public domain, viz.:

Under section 101 above reproduced, only the Solicitor General or the
officer acting in his stead may bring the action for reversion. Consequently,
Sumail may not bring such action or any action which would have the effect
of cancelling a free patent and the corresponding certificate of title issued
on the basis thereof, with the result that the land covered thereby will again
form part of the public domain. Furthermore, there is another reason for
withholding legal personality from Sumail. He does not claim the land to be
his private property. . . . Consequently, even if the parcel were declared
reverted to the public domain, Sumail does not automatically become
owner thereof. He is a mere public land applicant like others who might
apply for the same.

Under Section 2, Rule 3 of the Rules of Court, 10 every action must be prosecuted or defended in
the name of the real party in interest. It further defines a "real party in interest" as one who stands
to be benefited or injured by the judgment in the suit. In Joya v. Presidential Commission on Good
Government, this Court explained that "legal standing means a personal and substantial interest
in the case such that the party has sustained or will sustain direct injury as a result of . . . the act
being challenged. The term "interest" is material interest, an interest in issue and to be affected
by the decree, as distinguished from mere interest in the question involved, or a mere incidental
interest. Moreover, the interest of the party must be personal and not one based on a desire to
vindicate the constitutional right of some third and unrelated party." 11

Clearly, a suit filed by a person who is not a party in interest must be dismissed. Thus, in Lucas
v. Durian, 12 the Court affirmed the dismissal of a Complaint filed by a party who alleged that the
patent was obtained by fraudulent means and, consequently, prayed for the annulment of said
patent and the cancellation of a certificate of title. The Court declared that the proper party to
bring the action was the government, to which the property would revert. Likewise affirming the
dismissal of a Complaint for failure to state a cause of action, the Court in Nebrada v. Heirs of
Alivio 13 noted that the plaintiff, being a mere homestead applicant, was not the real party in
interest to institute an action for reconveyance. In Gabila v. Bariga, 14 the Court further declared:

The present motion to dismiss is actually predicated on Section 1(g), Rule

16 of the Revised Rules of Court, i.e., failure of the complaint to state a
cause of action, for it alleged in paragraph 12 thereof that the plaintiff
admits that he has no right to demand the cancellation or amendment of
the defendant's title, because, even if the said title were cancelled or
amended, the ownership of the land embraced therein, or the portion
thereof affected by the amendment would revert to the public domain. In
his amended complaint, the plaintiff makes no pretense at all that any part
of the land covered by the defendant's title was privately owned by him or
by his predecessors-in-interest. Indeed, it is admitted therein that the said
land was at all times a part of the public domain until December 18, 1964,

163
 when the government issued a title thereon in favor of the defendant. Thus,
if there is any person or entity in relief, it can only by the government.

Verily, the Court stressed that "[i]f the suit is not brought in the name of or against the real party
in interest, a motion to dismiss may be filed on the ground that the complaint states no cause of
action." 15 In fact, a final judgment, may be invalidated if the real parties in interest are not included.
This was underscored by the Court in Arcelona v. CA, 16 in which a final judgment was nullified
because indispensable parties were not impleaded.

In the present dispute, only the State can file a suit for reconveyance of a public land. Therefore,
not being the owners of the land but mere applicants for sales parents thereon, respondents have
no personality to file the suit. Neither will they be directly affected by the judgment in such suit.

Indeed, "[f]or all its conceded merits, equity is available only in the absence of law and not as its
replacement. Equity is described as justice which legality, which simply means that it cannot
supplant although it may, as often happens, supplement the law." 17 To grant respondent standing
in the present case is to go against the express language of the law. Equity cannot give them this
privilege. Equity can only supplement the law, not supplant it.

Having resolved that the respondents have no legal standing to sue and are not the real parties
in interest, we find no more necessity to take up the other issues. They shall become important
only if a proper suit is instituted by the solicitor general in the future.

WHEREFORE, the petition is hereby GRANTED and the assailed Decision is REVERSED and
SET ASIDE. The Complaint filed in Civil Case No. 91-241 before the Regional Trial Court of
Misamis Oriental, Branch 17, is DISMISSED. No costs.

SO ORDERED.

164
G.R. No. 149417 June 4, 2004

GLORIA SANTOS DUEÑAS, petitioner,

vs.
SANTOS SUBDIVISION HOMEOWNERS ASSOCIATION, respondent.

DECISION

QUISUMBING, J.:

For review on certiorari is the Decision1 dated December 29, 2000, of the Court of Appeals in CA-G.R.
SP No. 51601, setting aside the Decision2 of the Housing and Land Use Regulatory Board (HLURB)
in HLURB Case No. REM-A-980227-0032 which earlier affirmed the Decision3 of the HLURB-NCR
Regional Field Office in HLURB Case No. REM-070297-9821. Said Regional Field Office dismissed
the petition of herein respondent Santos Subdivision Homeowners Association (SSHA) seeking to
require herein petitioner, Gloria Santos Dueñas, to provide for an open space in the subdivision for
recreational and community activities. In its assailed decision, the CA remanded the case to the
HLURB for determination of a definitive land area for open space.4 Petitioner assails also the Court of
Appeals’ Resolution5 dated July 31, 2001, denying her motion for reconsideration.

The facts of this case are as follows:

Petitioner Gloria Santos Dueñas is the daughter of the late Cecilio J. Santos who,
during his lifetime, owned a parcel of land with a total area of 2.2 hectares located at
General T. De Leon, Valenzuela City, Metro Manila. In 1966, Cecilio had the realty
subdivided into smaller lots, the whole forming the Cecilio J. Santos Subdivision (for
brevity, Santos Subdivision). The then Land Registration Commission (LRC) approved
the project and the National Housing Authority (NHA) issued the required Certificate
of Registration and License to Sell. At the time of Cecilio’s death in 1988, there were
already several residents and homeowners in Santos Subdivision.

165
Sometime in 1997, the members of the SSHA submitted to the petitioner a resolution asking her to
provide within the subdivision an open space for recreational and other community activities, in
accordance with the provisions of P.D. No. 957,6 as amended by P.D. No. 1216.7 Petitioner, however,
rejected the request, thus, prompting the members of SSHA to seek redress from the NHA.

On April 25, 1997, the NHA General Manager forwarded the SSHA resolution to Romulo Q. Fabul,
Commissioner and Chief Executive Officer of the HLURB in Quezon City.8

In a letter dated May 29, 1997, the Regional Director of the Expanded NCR Field Office, HLURB,
opined that the open space requirement of P.D. No. 957, as amended by P.D. No. 1216, was not
applicable to Santos Subdivision.9

SSHA then filed a petition/motion for reconsideration,10 docketed as HLURB Case No. REM-070297-
9821, which averred among others that: (1) P.D. No. 957 should apply retroactively to Santos
Subdivision, notwithstanding that the subdivision plans were approved in 1966 and (2) Gloria Santos
Dueñas should be bound by the verbal promise made by her late father during his lifetime that an open
space would be provided for in Phase III of Santos Subdivision, the lots of which were at that time
already for sale.

Petitioner denied any knowledge of the allegations of SSHA. She stressed that she was not a party to
the alleged transactions, and had neither participation nor involvement in the development of Santos
Subdivision and the sale of the subdivision’s lots. As affirmative defenses, she raised the following:
(a) It was her late father, Cecilio J. Santos, who owned and developed the subdivision, and she was
neither its owner nor developer; (b) that this suit was filed by an unauthorized entity against a non-
existent person, as SSHA and Santos Subdivision are not juridical entities, authorized by law to
institute or defend against actions; (c) that P.D. No. 957 cannot be given retroactive effect to make it
applicable to Santos Subdivision as the law does not expressly provide for its retroactive applicability;
and (d) that the present petition is barred by laches.

On January 14, 1998, HLURB-NCR disposed of HLURB Case No. REM-070297-9821 in this wise:

In view of the foregoing, the complaint is hereby dismissed.

It is So Ordered.11

In dismissing the case, the HLURB-NCR office ruled that while SSHA failed to present evidence
showing that it is an association duly organized under Philippine law with capacity to sue, nonetheless,
the suit could still prosper if viewed as a suit filed by all its members who signed and verified the
petition. However, the petition failed to show any cause of action against herein petitioner as (1) there
is no evidence showing Santos-Dueñas as the owner/developer or successor-in-interest of Cecilio
Santos, who was the owner/developer and sole proprietor of Santos Subdivision; (2) the LRC-
approved subdivision plan was bereft of any proviso indicating or identifying an open space, as
required by P.D. No. 957, as amended, hence there was no legal basis to compel either Cecilio or his
daughter Santos-Dueñas, as his purported successor, to provide said space; and (3) the alleged verbal
promise of the late Cecilio Santos was inadmissible as evidence under the dead man’s statute.12

SSHA then appealed the NCR office’s ruling to the HLURB Board of Commissioners. The latter body,
however, affirmed the action taken by the HLURB-NCR office, concluding thus:

WHEREFORE, premises considered, the Petition for Review is hereby DISMISSED

and the decision of the Office below is hereby AFFIRMED IN TOTO.

SO ORDERED.13

166
The HLURB Board decreed that there was no basis to compel the petitioner to provide an open space
within Santos Subdivision, inasmuch as the subdivision plans approved on July 8, 1966, did not
provide for said space and there was no law requiring the same at that time. It further ruled that P.D.
No. 957 could not be given retroactive effect in the absence of an express provision in the law. Finally,
it found the action time-barred since it was filed nine (9) years after the death of Cecilio. The Board
noted that SSHA sought to enforce an alleged oral promise of Cecilio, which should have been done
within the six-year prescriptive period provided for under Article 114514 of the Civil Code.

Dissatisfied, respondent sought relief from the Court of Appeals via a petition for review under Rule
43 of the 1997 Rules of Civil Procedure. The petition, docketed as CA-G.R. SP No. 51601, was
decided by the appellate court in this manner:

WHEREFORE, the petition is GRANTED--and the decision, dated January 20, 1999,
of the Housing and Land Use Regulatory Board (HLURB) in HLURB Case No. REM-
A-980227-0032 is hereby REVERSED and SET ASIDE. Accordingly, this case is
ordered REMANDED to the HLURB for the determination of the definitive land area
that shall be used for open space in accordance with law and the rules and standards
prescribed by the HLURB. No pronouncement as to costs.

SO ORDERED.15

In finding for SSHA, the appellate court relied upon Eugenio v. Exec. Sec. Drilon,16 which held that
while P.D. No. 957 did not expressly provide for its retroactive application, nonetheless, it can be
plainly inferred from its intent that it was to be given retroactive effect so as to extend its coverage
even to those contracts executed prior to its effectivity in 1976. The Court of Appeals also held that
the action was neither barred by prescription nor laches as the obligation of a subdivision developer
to provide an open space is not predicated upon an oral contract, but mandated by law, hence, an
action may be brought within ten (10) years from the time the right of action accrues under Article
114417 of the Civil Code. Moreover, the equitable principle of laches will not apply when the claim was
filed within the reglementary period.

Petitioner duly moved for reconsideration, which the Court of Appeals denied on July 31, 2001.

Hence, this petition grounded on the following assignment of errors:

I. THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW BY TAKING

COGNIZANCE OF RESPONDENTS’ PETITION (WHICH ASSAILS THE DECISION
OF THE BOARD OF COMMISSIONERS OF THE HLURB) WHEN JURISDICTION
THEREON IS WITH THE OFFICE OF THE PRESIDENT, AS CLEARLY MANDATED
BY SEC. 2, RULE XVIII OF THE 1996 RULES OF PROCEDURE OF THE HOUSING
AND LAND USE REGULATORY BOARD.

II. IT WAS GRAVE ERROR FOR THE COURT OF APPEALS TO HAVE ASSUMED
JURISDICTION OVER THE PETITION BELOW WHEN RESPONDENTS CLEARLY
FAILED TO EXHAUST THE ADMINISTRATIVE REMEDIES AVAILABLE TO THEM
UNDER THE LAW.

III. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT

RESPONDENT SANTOS SUBDIVISION HOMEOWNERS ASSOCIATION, A NON-
REGISTERED ORGANIZATION, LACKED THE LEGAL PERSONALITY TO SUE.

IV. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT HOLDING THAT

RESPONDENT SANTOS SUBDIVISION HOMEOWNERS ASSOCIATION HAS NO
CAUSE OF ACTION AGAINST PETITIONER; NEITHER WAS SANTOS
SUBDIVISION, A NON-ENTITY, POSSESSED WITH CAPACITY TO BE SUED NOR

167
 IS PETITIONER GLORIA SANTOS-DUEÑAS A PROPER PARTY TO THE CASE,
THE LATTER NOT BEING THE OWNER OR DEVELOPER OF SANTOS
SUBDIVISION.

V. THE COURT OF APPEALS SERIOUSLY ERRED IN SUBSTITUTING ITS

FINDINGS WITH THAT OF THE ADJUDICATION BOARD AND BOARD OF
COMMISSIONERS OF THE HLURB WHEN THEIR DECISION IS BASED ON
SUBSTANTIAL EVIDENCE AND NO GRAVE ABUSE OF DISCRETION CAN BE
ATTRIBUTED TO THEM.

VI. THE COURT OF APPEALS DEVIATED FROM THE EXISTING LAW AND
JURISPRUDENCE WHEN IT RULED THAT P.D. 957 HAS RETROACTIVE
APPLICATION -- WHEN THE LAW ITSELF DOES NOT PROVIDE FOR ITS
RETROACTIVITY AND THE EXISTING JURISPRUDENCE THEREON CLEARLY
PRONOUNCED THAT IT HAS NO RETROACTIVE APPLICATION. TO PROVIDE
RETROACTIVITY TO P.D. 957 WOULD CAUSE IMPAIRMENT OF VESTED
RIGHTS.

VII. WHILE AS A GENERAL RULE, THE FACTUAL FINDINGS OF THE COURT OF

APPEALS IS BINDING ON THE SUPREME COURT, THE SAME IS NOT TRUE
WHEN THE FORMER’S CONCLUSION IS BASED ON SPECULATION, SURMISES
AND CONJECTURES, THE INFERENCE MADE IS MANIFESTLY MISTAKEN OR
ABSURD, THERE IS GRAVE ABUSE OF DISCRETION, JUDGMENT IS BASED ON
MISAPPREHENSION OF FACTS CONTRARY TO THOSE OF THE
ADMINISTRATIVE AGENCY CONCERNED, AND IT WENT BEYOND THE ISSUES
OF THE CASE AND THE SAME IS CONTRARY TO THE ADMISSIONS OF BOTH
PARTIES.18

To our mind, the foregoing may be reduced into the following issues: (1) the applicability of the doctrine
of non-exhaustion of administrative remedies; (2) the legal capacity of respondent to sue the petitioner
herein; and (3) the retroactivity of P.D. No. 957, as amended by P.D. No. 1216.

On the first issue, the petitioner contends that the filing of CA-G.R. SP No. 51601 was premature as
SSHA failed to exhaust all administrative remedies. Petitioner submits that since Section 1,19 Rule 43
of the 1997 Rule of Civil Procedure does not mention the HLURB, the respondent should have
appealed the decision of the HLURB Board in HLURB Case No. REM-A-980227-0032 to the Office of
the President prior to seeking judicial relief. In other words, it is the decision of the Office of the
President,20 and not that of the HLURB Board, which the Court of Appeals may review.

We find petitioner’s contentions bereft of merit. The principle of non-exhaustion of administrative

remedies is, under the factual circumstances of this case, inapplicable. While this Court has held that
before a party is allowed to seek intervention of the courts, it is a pre condition that he avail himself of
all administrative processes afforded him,21 nonetheless, said rule is not without exceptions.22 The
doctrine is a relative one and is flexible depending on the peculiarity and uniqueness of the factual
and circumstantial settings of each case.23

In the instant case, the questions posed are purely legal, namely: (1) whether the respondent had any
right to demand an open space and the petitioner had any legal obligation to provide said open space
within Santos Subdivision under P.D. No. 957, as amended by P.D. No. 1216, and (2) whether the
action had already prescribed under Article 1145 of the Civil Code. Moreover, the Court of Appeals
found that SSHA had sought relief from the Office of the President, but the latter forwarded the case
to the HLURB. In view of the foregoing, we find that in this particular case, there was no need for
SSHA to exhaust all administrative remedies before seeking judicial relief.

On the second issue, the petitioner claims that respondent SSHA failed to present any evidence
showing that it is a legally organized juridical entity, authorized by law to sue or be sued in its own
168
name. Thus, pursuant to Section 1, Rule 324 of the 1997 Rules of Civil Procedure, it has no legal
capacity to file this suit before the HLURB and the Court of Appeals.

SSHA counters that it has the capacity to sue as an association, since it is a member of the Federation
of Valenzuela Homeowners Association, Inc., which is registered with the Securities and Exchange
Commission. In the alternative, the individual members of SSHA who signed both the resolution and
the complaint in this case may, as natural persons, pursue the action.

There is merit in petitioner’s contention. Under Section 1, Rule 3 of the Revised Rules of Court, only
natural or juridical persons, or entities authorized by law may be parties in a civil action. Article 4425 of
the Civil Code enumerates the various classes of juridical persons. Under said Article, an association
is considered a juridical person if the law grants it a personality separate and distinct from that of its
members.26 The records of the present case are bare of any showing by SSHA that it is an association
duly organized under Philippine law. It was thus an error for the HLURB-NCR Office to give due course
to the complaint in HLURB Case No. REM-070297-9821, given the SSHA’s lack of capacity to sue in
its own name. Nor was it proper for said agency to treat the complaint as a suit by all the parties who
signed and verified the complaint. The members cannot represent their association in any suit without
valid and legal authority. Neither can their signatures confer on the association any legal capacity to
sue. Nor will the fact that SSHA belongs to the Federation of Valenzuela Homeowners Association,
Inc., suffice to endow SSHA with the personality and capacity to sue. Mere allegations of membership
in a federation are insufficient and inconsequential. The federation itself has a separate juridical
personality and was not impleaded as a party in HLURB Case No. REM-070297-9821 nor in this case.
Neither was it shown that the federation was authorized to represent SSHA. Facts showing the
capacity of a party to sue or be sued or the authority of a party to sue or be sued in a representative
capacity or the legal existence of an organized association of persons that is made a party, must be
averred.27 Hence, for failing to show that it is a juridical entity, endowed by law with capacity to bring
suits in its own name, SSHA is devoid of any legal capacity, whatsoever, to institute any action.

Anent the third issue, the petitioner ascribes error to the appellate court for holding that P.D. No. 957
has retroactive application. She points out that there is no retroactivity provision in the said decree.
Hence, it cannot be applied retroactively pursuant to Article 428 of the Civil Code of the Philippines.
The same holds true for P.D. No. 1216, which amended Section 31 of P.D. No. 957 and imposed the
open space requirement in subdivisions. Petitioner stresses that P.D. No. 1216 only took effect on
October 14, 1977 or more than ten (10) years after the approval of the subdivision plans of Cecilio
Santos.

Although it may seem that this particular issue, given our ruling on the first issue regarding the lack of
capacity of SSHA to bring any action in its name, is now moot and academic, we are constrained to
still address it.

This petition was brought to us not by respondent SSHA but by Gloria Santos Dueñas who assails the
appellate court’s finding that our ruling in Eugenio v. Exec. Sec. Drilon29 allows P.D. No. 957, as
amended, to apply retroactively.

We find merit in petitioner’s contention.

Eugenio v. Exec. Sec. Drilon is inapplicable. It is not on all fours with the instant case. The issue in
Eugenio was the applicability of P.D. No. 957 to purchase agreements on lots entered into prior to its
enactment where there was non-payment of amortizations, and failure to develop the subdivision. We
held therein that although P.D. No. 957 does not provide for any retroactive application, nonetheless,
the intent of the law of protecting the helpless citizens from the manipulations and machinations of
unscrupulous subdivision and condominium sellers justify its retroactive application to contracts
entered into prior to its enactment. Hence, we ruled that the non-payment of amortizations was justified
under Section 23 of the said decree in view of the failure of the subdivision owner to develop the
subdivision project.

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Unlike Eugenio, non-development of the subdivision is not present in this case, nor any allegation of
non-payment of amortizations. Further, we have held in a subsequent case30 that P.D. No. 957, as
amended, cannot be applied retroactively in view of the absence of any express provision on its
retroactive application. Thus:

…Article 4 of the Civil Code provides that laws shall have no retroactive effect, unless
the contrary is provided. Thus, it is necessary that an express provision for its
retroactive application must be made in the law. There being no such provision in both
P.D. Nos. 957 and 1344, these decrees cannot be applied to a situation that occurred
years before their promulgation….

At any rate, our principal concern in this case is Section 31 of P.D. No. 957, an
amendment introduced by P.D. No. 1216. Properly, the question should focus on the
retroactivity of P.D. No. 1216 and not P.D. No. 957 per se.

We have examined the text of P.D. No. 1216 and nowhere do we find any clause or provision expressly
providing for its retroactive application. Basic is the rule that no statute, decree, ordinance, rule or
regulation shall be given retrospective effect unless explicitly stated.31 Hence, there is no legal basis
to hold that P.D. No. 1216 should apply retroactively.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 51601 are REVERSED and SET ASIDE. The Decision of the HLURB
dated January 20, 1999 sustaining that of its Regional Office is AFFIRMED and REINSTATED. No
pronouncement as to costs.

G.R. No. 153788 November 27, 2009

ROGER V. NAVARRO, Petitioner,

vs.
HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN
T. GO, doing business under the name KARGO ENTERPRISES, Respondents.

DECISION

BRION, J.:

This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA) Decision2
dated October 16, 2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA
rulings affirmed the July 26, 20004 and March 7, 20015 orders of the Regional Trial Court (RTC),
Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarro’s (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 Navarro’s possession.

The first complaint stated:

1. That plaintiff KAREN T. GO is 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,
an entity duly registered and existing under and by virtue of the laws of the Republic of the
Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant
170
 ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth,
Cagayan de Oro City, where he may be served with summons and other processes of the
Honorable Court; that defendant "JOHN DOE" whose real name and address are at present
unknown to plaintiff is hereby joined as party defendant as he may be the person in whose
possession and custody the personal property subject matter of this suit may be found if the
same is not in the possession of defendant ROGER NAVARRO;

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 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 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:

171
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, 19989 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 Navarro’s 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 Go’s 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.
1avvphi1

When the RTC denied Navarro’s 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 Navarro’s petition and affirmed the RTC’s order.13 The CA also
denied Navarro’s 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 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
172
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 Navarro’s insistence that
Kargo Enterprises is Karen Go’s 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 COURT’S 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 Navarro’s 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
173
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.

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.

174
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 Navarro’s 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 Go’s 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 Go’s
paraphernal property, emphasizing the fact that the business is registered solely in Karen Go’s 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

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 husband’s 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

175
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.

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.

176
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 spouse’s 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
cases26 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.

177
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.

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. Navarro’s
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.

178
G.R. No. L-55687 July 30, 1982

JUASING HARDWARE, petitioner,

vs.
THE HONORABLE RAFAEL T. MENDOZA, Judge of the Court of First Instance of Cebu, and
PILAR DOLLA, respondents.

Luis V. Diones, Paulito Y. Cabrera and Victor C. Laborte for petitioner.

Amadeo D. Seno for respondents.

GUERRERO, J.:

In this special civil action for certiorari, petitioner Juasing Hardware seeks to annul the Orders of
respondent Judge dated September 5, 1980 and October 21, 1980 issued in Civil Case No. R-18386.

Records show the pertinent factual and procedural antecedents of the instant Petition to be as follows:

On August 17, 1979, Juasing Hardware, alleging to be a single proprietorship duly organized and
existing under and by virtue of the laws of the Philippines and represented by its manager Ong Bon
Yong, filed a complaint for the collection of a sum of money against Pilar Dolla. 1 The complaint charged
that defendant Dolla failed and refused to pay, despite repeated demands, the purchase price of items,
materials and merchandise which she bought from the plaintiff. 2 In her Answer, defendant stated, among
others, that she "has no knowledge about plaintiff's legal personality and capacity to sue as alleged in ...
the complaint." 3 The case proceeded to pre-trial and trial. After plaintiff had completed the presentation of
its evidence and rested its case, defendant filed a Motion for Dismissal of Action (Demurrer to Evidence) 4
praying that the action be dismissed for plaintiff's lack of legal capacity to sue. Defendant in said Motion
contended that plaintiff Juasing Hardware is a single proprietorship, not a corporation or a partnership duly
registered in accordance with law, and therefore is not a juridical person with legal capacity to bring an
action in court. Plaintiff filed an Opposition and moved for the admission of an Amended Complaint. 5

179
Resolving the foregoing controversy, respondent Judge issued the Order dated September 5, 1980
dismissing the case and denying admission of the Amended Complaint. Pertinent portions of said
Order follow:

The Answer of the defendant to the complaint alleged the lack of legal capacity
to sue of the plaintiff as contained in its affirmative defense. inspite of the
allegation that plaintiff has no legal capacity to sue, the plaintiff insisted in
proceeding to trial instead of amending the Complaint. During the trial, it was
found out that the affirmative defense of defendant of plaintiff's lack of legal
capacity to sue is very evident for plaintiff Juasing Hardware is a single
proprietorship which is neither a partnership nor a corporation. The
amendment therefore ' is now too late it being substantial.

In view of all the foregoing, this case is hereby DISMISSED with costs de oficio.
6

Plaintiff's Motion for Reconsideration of the above Order was denied in another Order issued by
respondent Judge on October 21, 1980. 7

The sole issue in this case is whether or not the lower court committed a grave abuse of discretion
when it dismissed the case below and refused to admit the Amended Complaint filed by therein
plaintiff, now herein petitioner, Juasing Hardware.

Rule 3 of the Revised Rules of Court provides as follows:

Sec. 1. Who may be parties.-Only natural or juridical persons or entities authorized by

law may be parties in a civil action.

Petitioner is definitely not a natural person; nor is it a juridical person as defined in the New Civil Code
of the Philippines thus:

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.

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 allegations 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 in the title
of the case, as is customarily done.

180
Be that as it may, petitioner's contention that respondent Judge erred in not allowing the amendment
of the complaint to correct the designation of the party plaintiff in the lower court, is impressed with
merit. Such an amendment is authorized by Rule 10 of the Revised Rules of Court which provides
thus:

Sec. 4. Formal Amendments. — A defect in the designation of the parties may be summarily
corrected at any stage of the action provided no prejudice is caused thereby to the adverse
party. (Emphasis supplied.)

Contrary to the ruling of respondent Judge, the defect of the complaint in the instant case is merely
formal, not substantial. Substitution of the party plaintiff would not constitute a change in the Identity
of the parties. No unfairness or surprise to private respondent Dolla, defendant in the court a quo,
would result by allowing the amendment, the purpose of which is merely to conform to procedural rules
or to correct a technical error.

In point is the case of Alonzo vs. Villamor, et al. 8 which applied Sec. 110 of the Code of Civil Procedure
authorizing the court "in furtherance of justice ... (to) allow a party to amend any pleading or proceeding
and at any stage of the action, in either the Court of First Instance or the Supreme Court, by adding or
striking out the name of any party, either plaintiff or defendant, or by correcting a mistake in the name of a
party ..." In the Alonzo case, Fr. Eladio Alonzo, a priest of the Roman Catholic Church, brought an action
to recover from therein defendants the value of certain properties taken from the Church. The defendants
contended that Fr. Alonzo was not the real party in interest. This Court, speaking through Justice Moreland,
ordered the substitution of the Roman Catholic Apostolic Church in the place and stead of Eladio Alonzo
as party plaintiff, and aptly held in this wise:

... Defect in form cannot possibly prejudice so long as the substantial is clearly
evident. ...

No one has been misled by the error in the name of the party plaintiff. If we
should by reason of this error send this case back for amendment and new
trial, there would be on the retrial the same complaint, the same answer, the
same defense, the same interests, the same witnesses, and the same
evidence. The name of the plaintiff would constitute the only difference
between the old trial and the new. In our judgment there is not enough in a
name to justify such action.

There is nothing sacred about processes or pleadings, their forms or contents.

Their sole purpose is to facilitate the application of justice to the rival claims of
contending parties. They were created, not to hinder and delay, but to facilitate
and promote, the administration of justice. They do not constitute the thing
itself, which courts are always striving to secure to litigants. They are designed
as the means best adapted to obtain that thing. In other words, they are a
means to an end. When they lose the character of the one and become the
other, the administration of justice is at fault and courts are correspondingly
remiss in the performance of their obvious duty.

The error in this case is purely technical. To take advantage of it for other
purposes than to cure it, does not appeal to a fair sense of justice. Its
presentation as fatal to the plaintiff's case smacks of skill rather than right. A
litigation is not a game of technicalities in which one, more deeply schooled
and skilled in the subtle art of movement and position, entraps and destroys
the other. It is, rather, a contest in which each contending party fully and fairly
lays before the court the facts in issue and then, brushing aside as wholly trivial
and indecisive all imperfections of form and technicalities of procedure, asks
that justice be done upon the merits. Lawsuits, unlike duels, are not to be won
by a rapier's thrust. Technicality, when it deserts its proper office as an aid to
181
 justice and becomes its great hindrance and chief enemy, deserves scant
consideration from courts. There should be no vested rights in technicalities.
No litigant should be permitted to challenge a record of a court ... for defect of
form when his substantial rights have not been prejudiced thereby. 9

We reiterate what this Court had stated in the more recent case of Shaffer vs. Palma 10 that "(t)he courts
should be liberal in allowing amendments to pleadings to avoid multiplicity of suits and in order that t he
real controversies between the parties are presented and the case decided on the merits without
unnecessary delay." 11 This rule applies with more reason and with greater force when, as in the case at
bar, the amendment sought to be made refers to a mere matter of form and no substantial rights are
prejudiced. 12

WHEREFORE, the Petition is hereby granted. The Orders dated September 5, 1980 and October 21,
1980 are hereby annulled and the lower court is hereby ordered to admit the Amended Complaint in
conformity with the pronouncements in this Decision. No costs.

SO ORDERED.

G.R. No. 129008 January 13, 2004

TEODORA A. RIOFERIO, VERONICA O. EVANGELISTA assisted by her husband ZALDY

EVANGELISTA, ALBERTO ORFINADA, and ROWENA O. UNGOS, assisted by her
husband BEDA UNGOS, petitioners,
vs.
COURT OF APPEALS, ESPERANZA P. ORFINADA, LOURDES P. ORFINADA, ALFONSO
ORFINADA, NANCY P. ORFINADA, ALFONSO JAMES P. ORFINADA, CHRISTOPHER P.
ORFINADA and ANGELO P. ORFINADA, respondents.

DECISION

TINGA, J.:

Whether the heirs may bring suit to recover property of the estate pending the appointment of an
administrator is the issue in this case.

This Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeks to set aside the
Decision1 of the Court of Appeals in CA-G.R. SP No. 42053 dated January 31, 1997, as well as
its Resolution2 dated March 26, 1997, denying petitioners’ motion for reconsideration.

On May 13, 1995, Alfonso P. Orfinada, Jr. died without a will in Angeles City leaving several
personal and real properties located in Angeles City, Dagupan City and Kalookan City. 3 He also
left a widow, respondent Esperanza P. Orfinada, whom he married on July 11, 1960 and with
whom he had seven children who are the herein respondents, namely: Lourdes P. Orfinada,
Alfonso "Clyde" P. Orfinada, Nancy P. Orfinada-Happenden, Alfonso James P. Orfinada,
Christopher P. Orfinada, Alfonso Mike P. Orfinada (deceased) and Angelo P. Orfinada.4

Apart from the respondents, the demise of the decedent left in mourning his paramour and their
children. They are petitioner Teodora Riofero, who became a part of his life when he entered into
an extra-marital relationship with her during the subsistence of his marriage to Esperanza
sometime in 1965, and co-petitioners Veronica5, Alberto and Rowena.6
182
On November 14, 1995, respondents Alfonso James and Lourdes Orfinada discovered that on
June 29, 1995, petitioner Teodora Rioferio and her children executed an Extrajudicial Settlement
of Estate of a Deceased Person with Quitclaim involving the properties of the estate of the
decedent located in Dagupan City and that accordingly, the Registry of Deeds in Dagupan issued
Certificates of Titles Nos. 63983, 63984 and 63985 in favor of petitioners Teodora Rioferio,
Veronica Orfinada-Evangelista, Alberto Orfinada and Rowena Orfinada-Ungos. Respondents
also found out that petitioners were able to obtain a loan of P700,000.00 from the Rural Bank of
Mangaldan Inc. by executing a Real Estate Mortgage over the properties subject of the extra-
judicial settlement.7

On December 1, 1995, respondent Alfonso "Clyde" P. Orfinada III filed a Petition for Letters of
Administration docketed as S.P. Case No. 5118 before the Regional Trial Court of Angeles City,
praying that letters of administration encompassing the estate of Alfonso P. Orfinada, Jr. be
issued to him.8

On December 4, 1995, respondents filed a Complaint for the Annulment/Rescission of Extra

Judicial Settlement of Estate of a Deceased Person with Quitclaim, Real Estate Mortgage and
Cancellation of Transfer Certificate of Titles with Nos. 63983, 63985 and 63984 and Other Related
Documents with Damages against petitioners, the Rural Bank of Mangaldan, Inc. and the Register
of Deeds of Dagupan City before the Regional Trial Court, Branch 42, Dagupan City. 9

On February 5, 1996, petitioners filed their Answer to the aforesaid complaint interposing the
defense that the property subject of the contested deed of extra-judicial settlement pertained to
the properties originally belonging to the parents of Teodora Riofero10 and that the titles thereof
were delivered to her as an advance inheritance but the decedent had managed to register them
in his name.11 Petitioners also raised the affirmative defense that respondents are not the real
parties-in-interest but rather the Estate of Alfonso O. Orfinada, Jr. in view of the pendency of the
administration proceedings.12 On April 29, 1996, petitioners filed a Motion to Set Affirmative
Defenses for Hearing13 on the aforesaid ground.

The lower court denied the motion in its Order14 dated June 27, 1996, on the ground that
respondents, as heirs, are the real parties-in-interest especially in the absence of an administrator
who is yet to be appointed in S.P. Case No. 5118. Petitioners moved for its reconsideration15 but
the motion was likewise denied.16

This prompted petitioners to file before the Court of Appeals their Petition for Certiorari under Rule
65 of the Rules of Court docketed as CA G.R. S.P. No. 42053.17 Petitioners averred that the RTC
committed grave abuse of discretion in issuing the assailed order which denied the dismissal of
the case on the ground that the proper party to file the complaint for the annulment of the
extrajudicial settlement of the estate of the deceased is the estate of the decedent and not the
respondents.18

The Court of Appeals rendered the assailed Decision19 dated January 31, 1997, stating that it
discerned no grave abuse of discretion amounting to lack or excess of jurisdiction by the public
respondent judge when he denied petitioners’ motion to set affirmative defenses for hearing in
view of its discretionary nature.

A Motion for Reconsideration was filed by petitioners but it was denied.20 Hence, the petition
before this Court.

The issue presented by the petitioners before this Court is whether the heirs have legal standing
to prosecute the rights belonging to the deceased subsequent to the commencement of the
administration proceedings.21

183
Petitioners vehemently fault the lower court for denying their motion to set the case for preliminary
hearing on their affirmative defense that the proper party to bring the action is the estate of the
decedent and not the respondents. It must be stressed that the holding of a preliminary hearing
on an affirmative defense lies in the discretion of the court. This is clear from the Rules of Court,
thus:

SEC. 5. Pleadings grounds as affirmative defenses.- Any of the grounds for

dismissal provided for in this rule, except improper venue, may be pleaded as an
affirmative defense, and a preliminary hearing may be had thereon as if a motion
to dismiss had been filed.22 (Emphasis supplied.)

Certainly, the incorporation of the word "may" in the provision is clearly indicative of the optional
character of the preliminary hearing. The word denotes discretion and cannot be construed as
having a mandatory effect.23 Subsequently, the electivity of the proceeding was firmed up beyond
cavil by the 1997 Rules of Civil Procedure with the inclusion of the phrase "in the discretion of the
Court", apart from the retention of the word "may" in Section 6,24 in Rule 16 thereof.

Just as no blame of abuse of discretion can be laid on the lower court’s doorstep for not hearing
petitioners’ affirmative defense, it cannot likewise be faulted for recognizing the legal standing of
the respondents as heirs to bring the suit.

Pending the filing of administration proceedings, the heirs without doubt have legal personality to
bring suit in behalf of the estate of the decedent in accordance with the provision of Article 777 of
the New Civil Code "that (t)he rights to succession are transmitted from the moment of the death
of the decedent." The provision in turn is the foundation of the principle that the property, rights
and obligations to the extent and value of the inheritance of a person are transmitted through his
death to another or others by his will or by operation of law.25

Even if administration proceedings have already been commenced, the heirs may still bring the
suit if an administrator has not yet been appointed. This is the proper modality despite the total
lack of advertence to the heirs in the rules on party representation, namely Section 3, Rule 326
and Section 2, Rule 8727 of the Rules of Court. In fact, in the case of Gochan v. Young,28 this
Court recognized the legal standing of the heirs to represent the rights and properties of the
decedent under administration pending the appointment of an administrator. Thus:

The above-quoted rules,29 while permitting an executor or administrator to

represent or to bring suits on behalf of the deceased, do not prohibit the heirs from
representing the deceased. These rules are easily applicable to cases in which
an administrator has already been appointed. But no rule categorically
addresses the situation in which special proceedings for the settlement of
an estate have already been instituted, yet no administrator has been
appointed. In such instances, the heirs cannot be expected to wait for the
appointment of an administrator; then wait further to see if the administrator
appointed would care enough to file a suit to protect the rights and the interests of
the deceased; and in the meantime do nothing while the rights and the properties
of the decedent are violated or dissipated.

Even if there is an appointed administrator, jurisprudence recognizes two exceptions, viz: (1) if
the executor or administrator is unwilling or refuses to bring suit;30 and (2) when the administrator
is alleged to have participated in the act complained of 31 and he is made a party defendant.32
Evidently, the necessity for the heirs to seek judicial relief to recover property of the estate is as
compelling when there is no appointed administrator, if not more, as where there is an appointed
administrator but he is either disinclined to bring suit or is one of the guilty parties himself.

184
All told, therefore, the rule that the heirs have no legal standing to sue for the recovery of property
of the estate during the pendency of administration proceedings has three exceptions, the third
being when there is no appointed administrator such as in this case.

As the appellate court did not commit an error of law in upholding the order of the lower court,
recourse to this Court is not warranted.

WHEREFORE, the petition for review is DENIED. The assailed decision and resolution of the
Court of Appeals are hereby AFFIRMED. No costs.

SO ORDERED.

G.R. No. 131889 March 12, 2001

VIRGINIA O. GOCHAN, FELIX Y. GOCHAN III, MAE GOCHAN EFANN, LOUISE Y. GOCHAN,
ESTEBAN Y. GOCHAN JR., DOMINIC Y.GOCHAN, FELIX 0. GOCHAN III, MERCEDES R.
GOCHAN, ALFREDO R. GOCHAN, ANGELINA R. GOCHAN-HERNAEZ, MARIA MERCED R.
GOCHAN, CRISPO R. GOCHAN JR., MARION R. GOCHAN, MACTAN REALTY
DEVELOPMENT CORPORATION and FELIX GOCHAN & SONS REALTY CORPORATION,
petitioner,
vs.
RICHARD G. YOUNG, DAVID G. YOUNG, JANE G. YOUNG-LLABAN, JOHN D. YOUNG JR.,
MARY G. YOUNG-HSU and ALEXANDER THOMAS G. YOUNG as heirs of Alice Gochan;
the INTESTATE ESTATE OF JOHN D. YOUNG SR.; and CECILIA GOCHAN-UY and MIGUEL
C. UY, for themselves and on behalf and for the benefit of FELIX GOCHAN & SONS REALTY
CORPORATION, respondents.

PANGANIBAN, J.:

A court or tribunal's jurisdiction over the subject matter is determined by the allegations in the
complaint. The fact that certain persons are not registered as stockholders in the books of the
corporation will not bar them from filing a derivative suit, if it is evident from the allegations in the
complaint that they are bona fide stockholders. In view of RA 8799, intra-corporate controversies
are now within the jurisdiction of courts of general jurisdiction, no longer of the Securities and
Exchange Commission. 1âwphi1.nêt

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. The Petition
assails the February 28, 1996 Decision1 of the Court of Appeals (CA), as well as its December
18, 1997 Resolution denying petitioner's Motion for Reconsideration. The dispositive part of the
CA Decision reads as follows:

"WHEREFORE, the petition as far as the heirs of Alice Gochan, is DISMISSED,

without prejudice to filing the same in the regular courts.
185
 SO ORDERED."2

In dismissing the Complaint before the SEC regarding only Alice Gochan's heirs but not the other
complainants, the CA effectively modified the December 9, 1994 Order of the hearing officer 3 of
the Securities and Exchange Commission (SEC). The Order, which was affirmed in full by the
SEC en banc, dismissed the entire case.

The Facts

The undisputed facts are summarized by the Court of Appeals as follows:

"Felix Gochan and Sons Realty Corporation (Gochan Realty, for brevity) was
registered with the SEC on June, 1951, with Felix Gochan, Sr., Maria Pan Nuy Go
Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan as
its incorporators.

"Felix Gochan Sr.'s daughter, Alice, mother of [herein respondents], inherited 50

shares of stock in Gochan Realty from the former.

"Alice died in 1955, leaving the 50 shares to her husband, John Young, Sr.

"In 1962, the Regional Trial Court of Cebu adjudicated 6/14 of these shares to her
children, herein [respondents] Richard Young, David Young, Jane Young Llaban,
John Young Jr., Mary Young Hsu and Alexander Thomas Young.

"Having earned dividends, these stocks numbered 179 by 20 September 1979.

"Five days later (25 September), at which time all the children had reached the age
of majority, their father John Sr., requested Gochan Realty to partition the shares
of his late wife by cancelling the stock certificates in his name and issuing in lieu
thereof, new stock certificates in the names of [herein respondents].

"On 17 October 1979, respondent Gochan Realty refused, citing as reason, the
right of first refusal granted to the remaining stockholders by the Articles of
Incorporation.

"On 21, 1990, [sic] John, Sr. died, leaving the shares to the [respondents].

"On 8 February 1994, [respondents] Cecilia Gochan Uy and Miguel Uy filed a

complaint with the SEC for issuance of shares of stock to the rightful owners,
nullification of shares of stock, reconveyance of property impressed with trust,
accounting, removal of officers and directors and damages against respondents.
A Notice of Lis Pendens was annotated as [sic] real properties of the corporation.

"On 16 March 1994, [herein petitioners] moved to dismiss the complaint alleging
that: (1) the SEC ha[d] no jurisdiction over the nature of the action; (2) the
[respondents] [were] not the real parties-in-interest and ha[d] no capacity to sue;
and (3) [respondents'] causes of action [were] barred by the Statute of Limitations.

"The motion was opposed by herein [respondents].

"On 29 March 1994, [petitioners'] filed a Motion for cancellation of Notice of Lis
Pendens. [Respondents] opposed the said motion.
186
"On 9 December 1994, the SEC, through its Hearing Officer, granted the motion
to dismiss and ordered the cancellation of the notice of lis pendens annotated upon
the titles of the corporate lands. In its order, the SEC opined:

'In the instant case, the complaint admits that complainants Richard G.
Young, David G. Young, Jane G. Young Llaban, John D. Young, Jr., Mary
G. Young Hsu and Alexander Thomas G. Young, who are the children of
the late Alice T. Gochan and the late John D. Young, Sr. are suing in their
own right and as heirs of and/or as the beneficial owners of the shares in
the capital stock of FGSRC held in trust for them during his lifetime by the
late John D. Young. Moreover, it has been shown that said complainants
ha[d] never been x x x stockholder[s] of record of FGSRC to confer them
with the legal capacity to bring and maintain their action. Conformably, the
case cannot be considered as an intra-corporate controversy within the
jurisdiction of this Commission.

'The complainant heirs base what they perceived to be their stockholders'

rights upon the fact of their succession to all the rights, property and interest
of their father, John D. Young, Sr. While their heirship is not disputed, their
right to compel the corporation to register John D. Young's Sr. shares of
stock in their names cannot go unchallenged because the devolution of
property to the heirs by operation of law in succession is subject to just
obligations of the deceased before such property passes to the heirs.
Conformably, until therefore the estate is settled and the payment of the
debts of the deceased is accomplished, the heirs cannot as a matter of
right compel the delivery of the shares of stock to them and register such
transfer in the books of the corporation to recognize them as stockholders.
The complainant heirs succeed to the estate of [the] deceased John D.
Young, Sr. but they do not thereby become stockholders of the corporation.

'Moreover, John D. [Young Sr.'s] shares of stocks form part of his estate
which is the subject of Special Proceedings No. 3694-CEB in the Regional
Trial Court of Cebu, Branch VIII, [par. 4 of the complaint]. As complainants
clearly claim[,] the Intestate Estate of John D. Young, Sr. has an interest in
the subject matter of the instant case. However, actions for the recovery or
protection of the property [such as the shares of stock in question] may be
brought or defended not by the heirs but by the executor or administrator
thereof.

'Complainants further contend that the alleged wrongful acts of the

corporation and its directors constitute fraudulent devices or schemes
which may be detrimental to the stockholders. Again, the injury [is]
perceived[,] as is alleged[,] to have been suffered by complainants as
stockholders, which they are not. Admittedly, the SEC has no jurisdiction
over a controversy wherein one of the parties involved is not or not yet a
stockholder of the corporation. [SEC vs. CA, 201 SCRA 134].

'Further, by the express allegation of the complaint, herein complainants

bring this action as [a] derivative suit on their own behalf and on behalf of
respondent FGSRC.

'Section 5, Rule III of the Revised Rules of Procedure in the Securities and
Exchange Commission provides:

187
 'Section 5. Derivative Suit. No action shall be brought by
stockholder in the right of a corporation unless the complainant was
a stockholder at the time the questioned transaction occurred as
well as at the time the action was filed and remains a stockholder
during the pendency of the action. x x x.'

'The rule is in accord with well settled jurisprudence holding that a

stockholder bringing a derivative action must have been [so] at the time the
transaction or act complained of [took] place. (Pascual vs. Orozco, 19 Phil.
82; Republic vs. Cuaderno, 19 SCRA 671; San Miguel Corporation vs.
Khan, 176 SCRA 462-463) The language of the rule is mandatory, strict
compliance with the terms thereof thus being a condition precedent, a
jurisdictional requirement to the filing of the instant action.

'Otherwise stated, proof of compliance with the requirement must be

sufficiently established for the action to be given due course by this
Commission. The failure to comply with this jurisdictional requirement on
derivative action must necessarily result in the dismissal of the instant
complaint.' (pp. 77-79, Rollo)

"[Respondents] moved for a reconsideration but the same was denied for being
pro-forma.

"[Respondents] appealed to the SEC en banc, contending, among others, that the
SEC ha[d] jurisdiction over the case.

"[Petitioners], on the other hand, contend that the appeal was 97 days late, beyond
the 30-day period for appeals.

"On 3 March 1995, the SEC en banc ruled for the [petitioners,] holding that the
[respondents'] motion for reconsideration did not interrupt the 30-day period for
appeal because said motion was pro-forma."4

Aggrieved, herein respondents then filed a Petition for Review with the Court of Appeals.

Ruling of the Court of Appeals

The Court of Appeals ruled that the SEC had no jurisdiction over the case as far as the heirs of
Alice Gochan were concerned, because they were not yet stockholders of the corporation. On the
other hand, it upheld the capacity of Respondents Cecilia Gochan Uy and her spouse, Miguel Uy.
It also held that the Intestate Estate of John Young Sr. was an indispensable party.

The appellate court further ruled that the cancellation of the notice of lis pendens on the titles of
the corporate real estate was not justified. Moreover, it declared that respondents' Motion for
Reconsideration before the SEC was not pro forma; thus, its filing tolled the appeal period.

Hence, this Petition.5

The Issues

These are the issues presented before us:

188
 "A. Whether or not the Spouses Uy have the personality to file an action before the
SEC against Gochan Realty Corporation.

"B. Whether or not the Spouses Uy could properly bring a derivative suit in the
name of Gochan Realty to redress wrongs allegedly committed against it for which
the directors refused to sue.

"C. Whether or not the intestate estate of John D. Young Sr. is an indispensable
party in the SEC case considering that the individual heirs' shares are still in the
decedent stockholder's name.

"D. Whether or not the cancellation of [the] notice of lis pendens was justified
considering that the suit did not involve real properties owned by Gochan Realty."6

In addition, the Court will determine the effect of Republic Act No.87997 on this case.

The Court's Ruling

The Petition has no merit. In view of the effectivity of RA 8799, however, the case should be
remanded to the proper regional trial court, not to the Securities and Exchange Commission.

First Issue:

Personality of the Spouses Uy to File a Suit Before the SEC

Petitioners argue that Spouses Cecilia and Miguel Uy had no capacity or legal standing to bring
the suit before the SEC on February 8, 1994, because the latter were no longer stockholders at
the time. Allegedly, the stocks had already been purchased by the corporation. Petitioners further
assert that, being allegedly a simple contract of sale cognizable by the regular courts, the
purchase by Gochan Realty of Cecilia Gochan Uy's 210 shares does not come within the purview
of an intra-corporate controversy.

As a general rule, the jurisdiction of a court or tribunal over the subject matter is determined by
the allegations in the complaint.8 For purposes of resolving a motion to dismiss, Cecilia Uy's
averment in the Complaint -that the purchase of her stocks by the corporation was null and void
ab initio - is deemed admitted. It is elementary that a void contract produces no effect either
against or in favor of anyone; it cannot create, modify or extinguish the juridical relation to which
it refers.9 Thus, Cecilia remains a stockholder of the corporation in view of the nullity of the
Contract of Sale. Although she was no longer registered as a stockholder in the corporate records
as of the filing of the case before the SEC, the admitted allegations in the Complaint made her
still a bona fide stockholder of Felix Gochan & Sons Realty Corporation (FGSRC), as between
said parties.

In any event, the present controversy, whether intra-corporate or not, is no longer cognizable by
the SEC, in view of RA 8799, which transferred to regional trial courts the former's jurisdiction
over cases involving intra-corporate disputes.

Action Has Not Prescribed

Petitioners contend that the statute of limitations already bars the Uy spouses' action, be it one
for annulment of a voidable contract or one based upon a written contract. The Complaint,
however, contains respondents' allegation that the sale of the shares of stock was not merely
voidable, but was void ab initio. Below we quote its relevant portion:
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 "38. That on November 21, 1979, respondent Felix Gochan & Sons Realty
Corporation did not have unrestricted retained earnings in its books to cover the
purchase price of the 208 shares of stock it was then buying from complainant
Cecilia Gochan Uy, thereby rendering said purchase null and void ab initio for
being violative of the trust fund doctrine and contrary to law, morals good customs,
public order and public policy;"

Necessarily, petitioners' contention that the action has prescribed cannot be sustained.
Prescription cannot be invoked as a ground if the contract is alleged to be void ab initio.10 It is
axiomatic that the action or defense for the declaration of nullity of a contract does not prescribe. 11

Second Issue:

Derivative Suit and the Spouses Uy

Petitioners also contend that the action filed by the Spouses Uy was not a derivative suit, because
the spouses and not the corporation were the injured parties. The Court is not convinced. The
following quoted portions of the Complaint readily shows allegations of injury to the corporation
itself:

"16. That on information and belief, in further pursuance of the said conspiracy and
for the fraudulent purpose of depressing the value of the stock of the Corporation
and to induce the minority stockholders to sell their shares of stock for an
inadequate consideration as aforesaid, respondent Esteban T. Gochan . . ., in
violation of their duties as directors and officers of the Corporation . . ., unlawfully
and fraudulently appropriated [for] themselves the funds of the Corporation by
drawing excessive amounts in the form of salaries and cash advances. . . and by
otherwise charging their purely personal expenses to the Corporation."

xxx xxx xxx

"41. That the payment of P1,200,000.00 by the Corporation to complainant Cecilia

Gochan Uy for her shares of stock constituted an unlawful, premature and partial
liquidation and distribution of assets to a stockholder, resulting in the impairment
of the capital of the Corporation and prevented it from otherwise utilizing said
amount for its regular and lawful business, to the damage and prejudice of the
Corporation, its creditors, and of complainants as minority stockholders;"12

As early as 1911, this Court has recognized the right of a single stockholder to file derivative suits.
In its words:

"[W]here corporate directors have committed a breach of trust either by their

frauds, ultra vires acts, or negligence, and the corporation is unable or unwilling to
institute suit to remedy the wrong, a single stockholder may institute that suit, suing
on behalf of himself and other stockholders and for the benefit of the corporation,
to bring about a redress of the wrong done directly to the corporation and indirectly
to the stockholders."13

In the present case, the Complaint alleges all the components of a derivative suit. The allegations
of injury to the Spouses Uy can coexist with those pertaining to the corporation. The personal
injury suffered by the spouses cannot disqualify them from filing a derivative suit on behalf of the
corporation. It merely gives rise to an additional cause of action for damages against the erring
directors. This cause of action is also included in the Complaint filed before the SEC.
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The Spouses Uy have the capacity to file a derivative suit in behalf of and for the benefit of the
corporation. The reason is that, as earlier discussed, the allegations of the Complaint make them
out as stockholders at the time the questioned transaction occurred, as well as at the time the
action was filed and during the pendency of the action.

Third Issue:

Capacity of the Intestate Estate of John D. Young Sr.

Petitioners contend that the Intestate Estate of John D. Young Sr. is not an indispensable party,
as there is no showing that it stands to be benefited or injured by any court judgement.

It would be useful to point out at this juncture that one of the causes of action stated in the
Complaint filed with the SEC refers to the registration, in the name of the other heirs of Alice
Gochan Young, of 6/14th of the shares still registered under the name of John D. Young Sr. Since
all the shares that belonged to Alice are still in his name, no final determination can be had without
his estate being impleaded in the suit. His estate is thus an indispensable party with respect to
the cause of action dealing with the registration of the shares in the names of the heirs of Alice.

Petitioners further claim that the Estate of John Young Sr. was not properly represented. They
claim that "when the estate is under administration, suits for the recovery or protection of the
property or rights of the deceased may be brought only by the administrator or executor as
approved by the court."14 The rules relative to this matter do not, however, make any such
categorical and confining statement.

Section 3 of Rule 3 of the Rules of Court, which is cited by petitioners in support of their position,
reads:

"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."

Section 2 of Rule 87 of the same Rules, which also deals with administrators, states:

"Sec. 2. Executor or administrator may bring or defend actions which survive. -For
the recovery or protection of the property or rights of the deceased, an executor or
administrator may bring or defend, in the right of the deceased, actions for causes
which survive."

The above-quoted rules, while permitting an executor or administrator to represent or to bring

suits on behalf of the deceased, do not prohibit the heirs from representing the deceased. These
rules are easily applicable to cases in which an administrator has already been appointed. But no
rule categorically addresses the situation in which special proceedings for the settlement of an
estate have already been instituted, yet no administrator has been appointed. In such instances,
the heirs cannot be expected to wait for the appointment of an administrator; then wait further to
see if the administrator appointed would care enough to file a suit to protect the rights and the
interests of the deceased; and in the meantime do nothing while the rights and the properties of
the decedent are violated or dissipated.1âwphi1.nêt
191
The Rules are to be interpreted liberally in order to promote their objective of securing a just,
speedy and inexpensive disposition of every action and proceeding.15 They cannot be interpreted
in such a way as to unnecessarily put undue hardships on litigants. For the protection of the
interests of the decedent, this Court has in previous instances16 recognized the heirs as proper
representatives of the decedent, even when there is already an administrator appointed by the
court. When no administrator has been appointed, as in this case, there is all the more reason to
recognize the heirs as the proper representatives of the deceased. Since the Rules do not
specifically prohibit them from representing the deceased, and since no administrator had as yet
been appointed at the time of the institution of the Complaint with the SEC, we see nothing wrong
with the fact that it was the heirs of John D. Young Sr. who represented his estate in the case
filed before the SEC.

Fourth Issue

Notice of Lis Pendens

On the issue of the annotation of the Notice of Lis Pendens on the titles of the properties of the
corporation and the other respondents, we still find no reason to disturb the ruling of the Court of
Appeals.

Under the third, fourth and fifth causes of action of the Complaint, there are allegations of breach
of trust and confidence and usurpation of business opportunities in conflict with petitioners'
fiduciary duties to the corporation, resulting in damage to the Corporation. Under these causes of
action, respondents are asking for the delivery to the Corporation of possession of the parcels of
land and their corresponding certificates of title. Hence, the suit necessarily affects the title to or
right of possession of the real property sought to be reconveyed. The Rules of Court 17 allows the
annotation of a notice of lis pendens in actions affecting the title or right of possession of real
property.18 Thus, the Court of Appeals was correct in reversing the SEC Order for the cancellation
of the notice of lis pendens.

The fact that respondents are not stockholders of the Mactan Realty Development Corporation
and the Lapu-Lapu Real Estate Corporation does not make them non-parties to this case. To
repeat, the jurisdiction of a court or tribunal over the subject matter is determined by the
allegations in the Complaint. In this case, it is alleged that the aforementioned corporations are
mere alter egos of the directors-petitioners, and that the former acquired the properties sought to
be re conveyed to FGSRC in violation of the directors-petitioners' fiduciary duty to FGSRC. The
notion of corporate entity will be pierced or disregarded and the individuals composing it will be
treated as identical19 if, as alleged in the present case, the corporate entity is being used as a
cloak or cover for fraud or illegality; as a justification for a wrong; or as an alter ego, an adjunct,
or a business conduit for the sole benefit of the stockholders.

Effect of RA 8799

While we sustain the appellate court, the case can no longer be remanded to the SEC. As earlier
stated, RA 8799, which became effective on August 8, 2000, transferred SEC's jurisdiction over
cases involving intra-corporate disputes to courts of general jurisdiction or to the regional trial
courtS.20 Section 5.2 thereof reads as follows:

"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 these cases. The Commission shall

192
 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 Code. The Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed."

In the light of the Resolution issued by this Court in AM No. 00-8-10-SC,21 the Court Administrator
and the Securities and Exchange Commission should be directed to cause the transfer of the
records of SEC Case No. 02-94-4674 to the appropriate court of general jurisdiction.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED, subject to
the modification that the case be remanded to the proper regional trial court. The December 9,
1994 Order of Securities and Exchange Commission hearing officer dismissing the Complaint
and directing the cancellation of the notice of lis pendens, as well as the March 3, 1995 Order
denying complainants' motion for reconsideration are REVERSED and SET ASIDE. Pursuant to
AM No. 00-8-10-SC, the Office of the Court Administrator and the SEC are DIRECTED to cause
the actual transfer of the records of SEC Case No.02-94-467 4 to the appropriate regional trial
court.

G.R. NO. 145379 December 9, 2005

DAMIANA INTO, Petitioner,

vs.
MARIO VALLE, OCTAVIO VALLE, ALBERTO VALLE, OLIVER VALLE, BRENDA VALLE,
and LUISA VDA. DE VALLE, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

This refers to the petition for review by certiorari under Rule 45 of the Rules of Court assailing the
Decision1 of the Court of Appeals (CA) dated May 5, 2000 and its Resolution2 dated August 31,
2000 denying petitioner’s motion for reconsideration.

The facts are as follows:

On August 13, 1990, petitioner Damiana Into (petitioner) obtained a judgment from the Regional
Trial Court (RTC), Davao City, Branch 14, in Civil Case No. 19-896-89, whereby Eleanor Valle
Siapno (Eleanor) and Oscar Siapno were ordered to pay to petitioner the total amount of
P283,000.00 plus interests.3 The judgment became final and executory. On August 6, 1992,
Sheriffs Alberto C. Esguerra and Diosdado A. Cajes sold at public auction "all the rights, interests,
title, claims and participation pro-indiviso by Eleanor Valle Siapno, married to Oscar Siapno over
the following real properties subject of Special Proceedings No. 63, In Re: In the Matter of the
Intestate Estate of Victorio Valle, Luisa vda. de Valle – Petitioner which is pending consideration
before RTC, Branch 2, Tagum..."4 consisting of six parcels of land covered by certificates of title.
On August 7, 1992, Sheriff Esguerra executed a Provisional Certificate of Sale in favor of
petitioner as the highest bidder.5

On November 23, 1992, herein respondent Luisa vda. de Valle as the surviving spouse of the late
Victorio Valle together with their children, namely, Mario, Octavio, Alberto, Oliver and Brenda, all
surnamed Valle (respondents), filed a complaint against petitioner and the Sheriffs, docketed as
Civil Case No. 2671, for "Declaration of Nullity of Sheriff’s Sale and/or Recovery of Hereditary
Shares, Damages and Attorney’s fees" with the RTC of Tagum, Davao City, raffled to Branch 1.

193
Respondents claim that on February 2, 1991, Eleanor, daughter of Victorio and Luisa, for valuable
consideration, waived her rights to, interests in and participation in all properties, real and
personal, which include the six parcels of land sold at public auction; that at the time of the
execution of the "Waiver of Hereditary Shares and/or Rights" (Waiver) of Eleanor to her co-heirs,
her shares in the subject properties were free from any burden voluntary or involuntary there
being no indication of any writ of attachment or levy annotated or inscribed in the Torrens titles;
that in June 1992, respondent Luisa, as administratrix of the Estate of her husband Victorio Valle,
was served a Sheriff’s Notice of Sale of Real Properties; that despite their verbal notice to
petitioner that the shares of Eleanor have been conveyed, waived and ceded to respondents, the
Sheriffs proceeded with the public auction; that the auction sale conducted by the Sheriffs was
null and void for being irregular and illegal as the subject properties were not validly attached and
levied, and, at the time of the sale, judgment debtor Eleanor had no more rights and interests on
the properties subject of the auction sale.6

On February 3, 1993, petitioner together with the defendant Sheriffs filed a Motion to Dismiss on
the following grounds: that respondents have no capacity to sue considering the pendency of the
settlement of the estate of the late Victorio Valle; that the repudiation made by Eleanor was invalid
as it was not made pursuant to Article 1051 of the Civil Code; that the Waiver executed by Eleanor
cannot prevail over the judgment credit of the petitioner.7

On March 12, 1993, the RTC, Branch 1, issued an Order transferring Civil Case No. 2671 to
Branch 2 where SP Proc. No. 63 is pending.8

Over the objections of respondents, the RTC issued an Order dated August 31, 1993 in Civil Case
No. 2671, portions of which read as follows:

It will be noted that the judgment in Civil Case No. 19-896-89 was rendered on August 13, 1990
while the waiver of her proprietary rights in favor of the plaintiffs was only on February 2, 1991.

Clearly, the obligation of Eleanor Siapno to Damiana Into already existed at the time the waiver
of her hereditary rights was executed in favor of her co-heirs.

The execution, therefore, of the waiver by Eleanor Siapno, naturally, prejudiced the right of
Damiana Into which was already in existence.

"Rights may be waived unless the waiver is contrary to law, public order, public policy, morals, or
good customs, or prejudicial to a third person with a right recognized by law" (Art. 6, New Civil
Code).

There cannot be any doubt that Damiana Into had a right to the properties of Siapno which is
recognized by law.

Article 1051 of the New Civil Code also provides that "The repudiation of an inheritance shall be
made in a public or authentic instrument, or by petition presented to the court having jurisdiction
over the testamentary or intestate proceedings."

Construing the said provision of law, in view of the pendency of the intestate proceedings of the
estate of the late Victorio Valle, the waiver of her hereditary rights in favor of her co-heirs should
have been by petition filed with this court which has acquired jurisdiction over Special Proceedings
No. 63 (Intestate Estate of Victorio Valle).

Nevertheless, since Eleanor Valle Siapno has not yet received her share of the estate of the late
Victorio Valle, the claim of Damiana Into should have been filed with the intestate estate
194
proceeding and not the auction sale of a portion of the property which is still very much a part of
the subject of Special Proceedings No. 63.

In the light of the foregoing, while it is hereby ordered that the present case be dismissed, the
nullity of the questioned auction sale and the provisional sheriff’s sale is also hereby ordered.

SO ORDERED.9

Parties filed their respective motions for reconsideration.

On April 28, 1994, the RTC issued an Order which reads:

In their motion, the plaintiffs contended that the repudiation by Eleanor Siapno of her share in the
estate was for consideration and not gratuitous. Therefore, according to the plaintiffs, Article 6 of
the New Civil Code has no application.

This Court is of the view that whether or not there was consideration, there was an act of
repudiation and, therefore, the requirements of the law should have been observed.

The order of dismissal stands.

The defendants, in their motion for reconsideration, cited Section 7(f), Rule 57 of the Rules of
Court, among others, which reads:

"Properties shall be attached by the officer executing the order in the following manner:

...

(f) The interest of the party against whom attachment is issued in property belonging to the estate
of the decedent, whether as heir, legatee, or devisee, by serving the executor or administrator or
other personal representative of the decedent with a copy of the order and notice that said interest
is attached. A copy of said order of attachment and of said notice shall be filed in the office of the
clerk of the court in which said estate is being settled and served upon the heir, legatee or devisee
concerned."

In the light of the said provision of law, the order declaring as null and void the auction sale and
the provisional sheriff’s sale is hereby set aside and reconsidered.

SO ORDERED.10

Respondents appealed to the CA, docketed as CA-G.R. CV No. 46382. On May 5, 2000, the CA
promulgated its Decision, portions of which read:

After due study, the Court finds merit in the appeal.

In ruling for the dismissal of the complaint below, the lower court committed grave, but correctible
conclusions and applications of law, which directly bear on the validity of its judgment.

Firstly, the lower court erred in ruling that Eleanor Valle Siapno’s alleged repudiation of her
inheritance is invalid, having been improperly made. A close scrutiny of the act of Eleanor, taking
into consideration the statements appearing in her "Waiver of Hereditary Shares and/or Rights"
(p. 8, Records) shows that she did not repudiate her inheritance, but had actually accepted the

195
same, but had waived its enjoyment in exchange for valuable consideration which she had already
received and enjoyed. (Id., at 10) Furthermore, even if such act may be construed as a repudiation
of her inheritance, the same has been validly made through a public document pursuant to Article
1051 of the Civil Code, which states:

"Article 1051. The repudiation of an inheritance shall be made in a public or authentic instrument,
or by a petition duly presented to the court having jurisdiction over the testamentary or intestate
proceedings."

It is undeniable that Eleanor’s act was made through a document duly signed by her and executed
before notary public Hermenegildo Monja, (p. 11, Records) which sufficiently qualifies the same
as a public document. It must be noted that nowhere in the abovequoted article is it required that
in case of the pendency of testamentary or intestate proceedings, any repudiation of inheritance
must be made exclusively by petition in the estate court. Where the law is unambiguous and clear,
it must be applied according to its plain and obvious meaning, according to its express terms.
(Cecilleville Realty and Service Corporation v. Court of Appeals, 278 SCRA 819 [1997])

Furthermore, the fact that the RTC of Davao had ruled Eleanor Valle Siapno as a judgment debtor
of Damiana Into prior to her waiver of inheritance does not render the subsequent levy and auction
sale of the subject properties as a valid measure, not even vis-a-vis the prescription under Rule
57, Section 7(f) of the Rules of Court, which is hereby reproduced:

Sec. 7. Attachment of real and personal property; recording thereof. – Properties shall be attached
by the officer executing the order in the following manner:

...

(f) The interest of the party against whom attachment is issued in property belonging to the estate
of the decedent, whether as heir, legatee, or devisee, by serving the executor or administrator or
other personal representative of the decedent with a copy of the order and notice that said interest
is attached. A copy of said order of attachment and of said notice shall be filed in the office of the
clerk of court in which said estate is being settled and served upon the heir, legatee or devisee
concerned.

If the property sought to be attached is in custodia legis, copy of the order of attachment shall be
filed with the proper court and notice of the attachment shall be filed with the proper court and
notice of the attachment served upon the custodian of such property.

Taken in its proper context, the abovequoted rule of procedure presents merely the remedy of a
claiming party to attach the interests of a defending party in the properties belonging to the estate
of a decedent. In no way, however, does the said provision set forth the rule that such inchoate
interests of a person may be duly levied upon and sold to satisfy the execution of a judgment
debt. It must be noted that an heir’s right of ownership over the properties of the decedent is
merely inchoate as long as the estate has not been fully settled and partitioned. (Estate of Hilario
M. Ruiz v. Court of Appeals, 252 SCRA 541 [1996]) This means that the impending heir has yet
no absolute dominion over any specific property in the decedent’s estate that could be specifically
levied upon and sold at public auction. Any encumbrance of attachment over the heir’s interests
in the estate, therefore, remains a mere probability, and cannot summarily be satisfied without
the final distribution of the properties in the estate.

From the foregoing, it appears that plaintiffs-appellants have good reason to object from the
premature dismissal of its action below. As prospective heirs of the properties of the late Victorio
Valle, they certainly have the capacity to sue against any perceived impropriety or railroaded

196
disposition of the properties under settlement proceedings, as their inheritance stand to be
depleted by the execution even before the final decree of partition or distribution in the partition
proceedings is issued. They have a right to be heard, and to present evidence to advance their
rights. For this reason, the Court finds that the proceedings below regarding the appellant’s action
for declaration of the nullity of the sheriff’s sale should be allowed to proceed.

WHEREFORE, premises considered, the instant appeal is hereby GRANTED, and the appealed
orders of the Regional Trial Court of Davao are hereby SET ASIDE. The said RTC is hereby
ordered to REINSTATE the plaintiffs-appellants’ complaint, and to proceed with the trial of the
same.

SO ORDERED.11

Hence, the present petition on the following grounds:

1. The Court of Appeals erred in holding that the "Waiver of Hereditary Shares and/or Rights"
executed by Eleanor Valle Siapno is valid and that it was properly made. It is not in accord with
law (Articles 6; 1050; 1051 and 1082 of the Civil Code of the Philippines) and the applicable
decisions of the Supreme Court;

2. The Court of Appeals erred in holding that Eleanor Valle Siapno’s interest in the assets of the
estate of her late father, Victorio Valle as an heir is merely inchoate and therefore may not be
levied upon and sold. It is not in accord with Section 7(f) of Rule 57 of the Rules of Court (now
Section 7(e) of Rule 57 of the 1997 Rules of Civil Procedure) and the applicable decisions of the
Supreme Court.

3. The Court of Appeals erred in granting the appeal and denying the Petitioner’s Motion for
Reconsideration and in ordering the RTC of Tagum, Davao . . ."to REINSTATE the plaintiffs-
appellants’ complaint, and to proceed with the trial of the same . . ," because this is not accord
with the applicable decisions of the Supreme Court and this is tantamount to allowing the RTC,
Branch 2 of Tagum (now Tagum City), Province of Davao del Norte to interfere with the levy on
attachment and levy on execution of the interests of Eleanor Valle Siapno in the assets of the
estate of her late father, of the Deputy Sheriff of the RTC, Branch 14 in the City of Davao, which
is a coordinate court.12

In their Comment, respondents contend that: the Waiver is not the waiver contemplated by Article
1051 of the Civil Code; the document is in fact an acknowledgment of the extent of her hereditary
rights and interest to the estate of Eleanor’s deceased father; Eleanor has not actually repudiated
her inheritance but had actually accepted the same and waived its enjoyment in exchange of a
monetary consideration which she had already received long before the execution of the Waiver;
the fact that Eleanor is adjudged as a judgment debtor of petitioner does not justify the subsequent
levy and auction sale of the properties wherein the judgment debtor has a right or interest on,
using Rule 39 of the Rules of Court; the right of heirs to specific distributive shares of inheritance
does not become finally determinable until all the debts of the estate are paid, per Jimoga-on vs.
Belmonte;13 until then their rights are inchoate and cannot be enforced, subject to the existence
of a residue after payment of the debts; the heirs have yet no absolute dominion over any
particular and definite property in the estate of the decedent which can be specifically attached,
levied and sold; Section 7(f), Rule 57 of the Rules of Court requires that the attachment of the
interest of the party against whom attachment is issued in property belonging to the estate of the
decedent is effected by service of said writ of attachment and notice to the executor or
administrator or other personal representative, and, by filing a copy thereof in the Office of the
Clerk of Court in which the estate is being settled; the attachment and levy were not properly
registered or annotated in the certificate of title; the obligation of Eleanor or the judgment against
her was not known to them prior to the execution of the Waiver; the reinstatement of the complaint
197
before the RTC, Branch 2, Tagum, Davao City does not interfere with the judgment of RTC,
Branch 14, Davao City; the complaint in Branch 2 does not seek the reversal of the judgment of
Branch 14; what is prayed for in respondents’ complaint is the invalidation of the act of the Sheriff
in selling the real properties of the decedent, Victorio Valle; it appears in the "Sheriff’s Provisional
Certificate of Sale" that he "sold at public auction the said real properties to the highest bidder;"
RTC, Branch 2, Tagum, Davao City has jurisdiction to nullify the auction sale of the sheriff and
therefore the CA did not err when it ordered the reinstatement of respondents’ complaint.14

Parties filed their respective memoranda, dwelling on the following issues:

1. Whether or not the "Waiver of Hereditary shares and/or Rights" executed by Eleanor Valle
Siapno is valid and that it was properly made;

2. Whether or not Eleanor Valle Siapno’s interests in the assets of the Estate of her late father,
Victorio Valle, as an heir is merely inchoate and therefore may not be levied upon and sold;

3. Whether or not the granting of the appeal and ordering the RTC of Tagum by the Court of
Appeals to reinstate the Respondents’ complaint and to proceed with the trial of the same [is]
tantamount to allowing the RTC, Branch 2 of Tagum (now Tagum City), Province of Davao del
Norte, to interfere with the levy on attachment and levy on execution of the interests of Eleanor
Valle Siapno in the assets of the estate of her late father of the Deputy Sheriff of the RTC Branch
14 of the City of Davao, which is a coordinate court.15

The first and second issues go into the merits of the complaint for "Declaration of Nullity of Sheriff’s
Sale and/or Recovery of Hereditary Shares, Damages and Attorney’s fees." It is gathered from
the pleadings filed by the parties that the issues involve the determination of the following
questions, although not exclusive: (1) Was SP Proc. No. 63 already instituted when the decision
in Civil Case No. 19-896-89 was issued on August 13, 1990?; (2) If in the affirmative, was there
a duly constituted administrator in SP Proc. No. 63 at that time?; (3) Did the Sheriffs in executing
the final decision in Civil Case No. 19-896-89 notify the administratrix and the RTC (Branch 2),
Tagum, Davao City in SP Proc. No. 63 of the final decision in Civil Case No. 19-896-89 in favor
of petitioner and against Eleanor?; (4) Were the Sheriffs properly notified of the Waiver executed
by Eleanor?; (5) Did the writ of attachment issued by RTC, Branch 14, Davao City, validly attach
the properties pursuant to the Rules of Court?; (6) Was Eleanor duly notified of the decision
against her in Civil Case No. 19-896-89?; (7) Was Eleanor in good faith when she executed the
Waiver in favor of the other heirs of the late Victorio Valle?; (8) Was the Waiver submitted to the
RTC in SP Proc. No. 63? If in the affirmative, when?; (9) Was there a proper and valid levy on the
properties?; (10) Under the "Sheriff’s Provisional Certificate of Sale," what was actually sold at
public auction by the sheriffs – the rights, interests, title, claims and participation pro-indiviso of
Eleanor over the real properties subject of SP Proc. No. 63, as stated in the early portion of the
"Sheriff’s Provisional Certificate of Sale," or, the six parcels of land enumerated and described in
said document, as stated in the latter portion of the said certificate of sale?; (11) Were Eleanor’s
interests in the assets of the Estate of Victorio Valle already defined by the court in SP Proc. No.
63 on the date of execution of the final judgment in Civil Case No. 19-896-89? Evidently, these
matters cannot be resolved by this Court at the first instance. It is not a trier of facts. 16 Such
questions may be determined by the RTC only after a full- blown trial of the case

Thus, the Court will resolve only the third issue, i.e., whether or not the CA erred in ordering the
RTC, Branch 2, Tagum, Davao City to reinstate the complaint of respondents and to proceed with
the trial. Corollary to this is the question whether respondents have a valid cause of action against
petitioner.

In her Memorandum, petitioner argues that the CA erred in ordering the RTC of Tagum to reinstate
the complaint of respondents and to proceed with the trial of the same as it is tantamount to
198
allowing the RTC, Branch 2, Tagum to interfere with the levy on attachment and levy on execution
of the interests of Eleanor in the assets of the estate of her late father by the Deputy Sheriff of the
RTC, Branch 14, Davao City which is a coordinate court.17

In their Memorandum, respondents contend that if ever the complaint is reinstated, it will not
necessarily be in disagreement with the final judgment of RTC, Branch 14, Davao City in Civil
Case No. 19-896-89, considering that the issue to be resolved by the RTC, Branch 2, Tagum,
Davao City is limited in the determination of the validity or nullity of the Sheriff’s Sale. 18

The petition lacks merit. The CA did not err in ordering the RTC to reinstate the complaint and to
proceed with the trial of the same. Respondents have a valid cause of action against petitioner.

Section 2, Rule 2 of the Rules of Court provides that a cause of action is the act or omission by
which a party violates a right of another. In De Guzman, Jr. vs. Court of Appeals,19 this Court held:

A cause of action is the fact or combination of facts which affords a party a right to judicial
interference in his behalf. An action means an ordinary suit in a court of justice, by which one
party prosecutes another for the enforcement or protection of a right, or the prosecution or redress
of a wrong.

The cause of action must always consist of two elements: (1) the plaintiff’s primary right and the
defendant’s corresponding primary duty, whatever may be the subject to which they relate –
person, character, property or contract; and (2) the delict or wrongful act or omission of the
defendant, by which the primary right and duty have been violated. The cause of action is
determined not by the prayer of the complaint but by the facts alleged.

A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation on the part of
the named defendant to respect or not to violate such right; and (3) an act or omission on the part
of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of
defendant to the plaintiff for which the latter may maintain an action for recovery of damages.20

In the present case, it is alleged in the complaint that herein respondents are the children and the
wife of the late Victorio Valle whose real and personal properties are subject of SP Proc. No. 63.
In a gist, respondents claim "that without having legal custody of the share or properties of Eleanor
Valle Siapno by inscribing, annotating or indicating the attachment and levy in the certificate of
titles of the properties mentioned in paragraph IV of this complaint, defendants Sheriff proceeded
to sell the properties at public auction inspite of the prior verbal notice to them that the shares of
Eleanor Valle Siapno has been conveyed, waived and ceded to the herein plaintiffs."21 It is clear,
therefore, that respondents seek to protect their rights over the subject real properties as heirs of
the deceased Victorio which the Sheriffs have allegedly violated by selling said properties or
interests therein at public auction. The complaint satisfies the elements of a valid cause of action.

The complaint was filed on November 23, 1992. Prior to the 1997 amendment of the Rules of
Court, an executor or administrator may sue or be sued without joining the party for whose benefit
the action is presented or defended. Section 3, Rule 3 of the old Rules of Court, provides:

SEC. 3. Representative Parties.- A trustee of an express trust, a guardian, executor or

administrator, or a party authorized by statute, may sue or be sued without joining the party for
whose benefit the action is presented or defended; but the court may, at any stage of the
proceedings, order such beneficiary to be made a party. 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.

199
Accordingly, in Ramos vs. Ramos,22 the Court held that the heirs of a decedent have no standing
in court with respect to actions over a property of the estate, if the latter is represented by an
executor or administrator.

Considering that plaintiff-respondent Luisa vda. de Valle is admittedly the administratrix of the
Estate of her late husband Victorio Valle, and considering further that the subject properties
belong to the Estate, the complaint against the Sheriffs who sold the same at public auction
constitutes a valid cause of action. The fact that the children of the decedent are co-plaintiffs is
not a ground to dismiss the complaint.

Pursuant to the present Section 3, Rule 3 of the Rules of Court which took effect on July 1, 1997,
to wit:

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.

and for orderly administration of justice, the administratrix should be allowed by the RTC to
implead the Estate of the deceased Victorio Valle. However, this holds true only if, at this time,
the Estate has not been finally settled in that debts have been paid and the heirs given their
respective shares. In the event that the Estate has been settled, then the Heirs to whom the real
properties or portions thereof, subject of the auction sale, had been adjudged by the probate court
would have the legal personality to be included as plaintiffs in Civil Case No. 2671.

WHEREFORE, the petition is DENIED for lack of merit.

200
G.R. No. 105188 January 23, 1998

MYRON C. PAPA, Administrator of the Testate Estate of Angela M. Butte, petitioner,

vs.
A.U. VALENCIA and CO. INC., FELIX PEÑARROYO, SPS. ARSENIO B. REYES & AMANDA
SANTOS, and DELFIN JAO, respondents.

KAPUNAN, J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Myron C.
Papa seeks to reverse and set aside 1) the Decision dated 27 January 1992 of the Court of
Appeals which affirmed with modification the decision of the trial court; and 2) the Resolution
dated 22 April 1992 of the same court, which denied petitioner's motion for reconsideration of the
above decision.

The antecedent facts of this case are as follows:

Sometime in June 1982, herein private respondents A.U. Valencia and Co., Inc. (hereinafter
referred to as respondent Valencia, for brevity) and Felix Peñarroyo (hereinafter called
respondent Peñarroyo), filed with the Regional Trial Court of Pasig, Branch 151, a complaint for
specific performance against herein petitioner Myron C. Papa, in his capacity as administrator of
the Testate Estate of one Angela M. Butte.

The complaint alleged that on 15 June 1973, petitioner Myron C. Papa, acting as attorney-in-fact
of Angela M. Butte, sold to respondent Peñarroyo, through respondent Valencia, a parcel of land,
consisting of 286.60 square meters, located at corner Retiro and Cadiz Streets, La Loma, Quezon
City, and covered by Transfer Certificate of Title No. 28993 of the Register of Deeds of Quezon
City; that prior to the alleged sale, the said property, together with several other parcels of land
likewise owned by Angela M. Butte, had been mortgaged by her to the Associated Banking
Corporation (now Associated Citizens Bank); that after the alleged sale, but before the title to the
subject property had been released, Angela M. Butte passed away; that despite representations
made by herein respondents to the bank to release the title to the property sold to respondent
Peñarroyo, the bank refused to release it unless and until all the mortgaged properties of the late
Angela M. Butte were also redeemed; that in order to protect his rights and interests over the
property, respondent Peñarroyo caused the annotation on the title of an adverse claim as
evidenced by Entry No. P.E.-6118/T-28993, inscribed on 18 January 1997.

201
The complaint further alleged that it was only upon the release of the title to the property,
sometime in April 1977, that respondents Valencia and Peñarroyo discovered that the mortgage
rights of the bank had been assigned to one Tomas L. Parpana (now deceased), as special
administrator of the Estate of Ramon Papa, Jr., on 12 April 1977; that since then, herein petitioner
had been collecting monthly rentals in the amount of P800.00 from the tenants of the property,
knowing that said property had already been sold to private respondents on 15 June 1973; that
despite repeated demands from said respondents, petitioner refused and failed to deliver the title
to the property. Thereupon, respondents Valencia and Peñarroyo filed a complaint for specific
performance, praying that petitioner be ordered to deliver to respondent Peñarroyo the title to the
subject property (TCT 28993); to turn over to the latter the sum of P72,000.00 as accrued rentals
as of April 1982, and the monthly rental of P800.00 until the property is delivered to respondent
Peñarroyo; to pay respondents the sum of P20,000.00 as attorney's fees; and to pay the costs of
the suit.

In his Answer, petitioner admitted that the lot had been mortgaged to the Associated Banking
Corporation (now Associated Citizens Bank). He contended, however, that the complaint did not
state a cause of action; that the real property in interest was the Testate Estate of Angela M.
Butte, which should have been joined as a party defendant; that the case amounted to a claim
against the Estate of Angela M. Butte and should have been filed in Special Proceedings No. A-
17910 before the Probate Court in Quezon City; and that, if as alleged in the complaint, the
property had been assigned to Tomas L. Parpana, as special administrator of the Estate of Ramon
Papa, Jr., said estate should be impleaded. Petitioner, likewise, claimed that he could not recall
in detail the transaction which allegedly occurred in 1973; that he did not have TCT No. 28993 in
his possession; that he could not be held personally liable as he signed the deed merely as
attorney-in-fact of said Angela M. Butte. Finally, petitioner asseverated that as a result of the filing
of the case, he was compelled to hire the services of counsel for a fee of P20,000.00 for which
respondents should be held liable.

Upon his motion, herein private respondent Delfin Jao was allowed to intervene in the case.
Making common cause with respondents Valencia and Peñarroyo, respondent Jao alleged that
the subject lot which had been sold to respondent Peñarroyo through respondent Valencia was
in turn sold to him on 20 August 1973 for the sum of P71,500.00, upon his paying earnest money
in the amount of P5,000.00. He, therefore, prayed that judgment be rendered in favor of
respondents, the latter in turn be ordered to execute in his favor the appropriate deed of
conveyance covering the property in question and to turn over to him the rentals which aforesaid
respondents sought to collect from petitioner Myron V. Papa.

Respondent Jao, likewise, averred that as a result of petitioner's refusal to deliver the title to the
property to respondents Valencia and Peñarroyo, who in turn failed to deliver the said title to him,
he suffered mental anguish and serious anxiety for which he sought payment of moral damages;
and, additionally, the payment of attorney's fees and costs.

For his part, petitioner, as administrator of the Testate Estate of Angela M. Butte, filed a third-
party complaint against herein private respondents, spouses Arsenio B. Reyes and Amanda
Santos (respondent Reyes spouses, for short). He averred, among other's that the late Angela
M. Butte was the owner of the subject property; that due to non-payment of real estate tax said
property was sold at public auction the City Treasurer of Quezon City to the respondent Reyes
spouses on 21 January 1980 for the sum of P14,000.00; that the one-year period of redemption
had expired; that respondents Valencia and Peñarroyo had sued petitioner Papa as administrator
of the estate of Angela M. Butte, for the delivery of the title to the property; that the same
aforenamed respondents had acknowledged that the price paid by them was insufficient, and that
they were willing to add a reasonable amount or a minimum of P55,000.00 to the price upon
delivery of the property, considering that the same was estimated to be worth P143,000.00; that
petitioner was willing to reimburse respondents Reyes spouses whatever amount they might have
202
paid for taxes and other charges, since the subject property was still registered in the name of the
late Angela M. Butte; that it was inequitable to allow respondent Reyes spouses to acquire
property estimated to be worth P143,000.00, for a measly sum of P14,000.00. Petitioner prayed
that judgment be rendered canceling the tax sale to respondent Reyes spouses; restoring the
subject property to him upon payment by him to said respondent Reyes spouses of the amount
of P14,000.00, plus legal interest; and, ordering respondents Valencia and Peñarroyo to pay him
at least P55,000.00 plus everything they might have to pay the Reyes spouses in recovering the
property.

Respondent Reyes spouses in their Answer raised the defense of prescription of petitioner's right
to redeem the property.

At the trial, only respondent Peñarroyo testified. All the other parties only submitted documentary
proof.

On 29 June 1987, the trial court rendered a decision, the dispositive portion of which reads:

WHEREUPON, judgment is hereby rendered as follows:

1) Allowing defendant to redeem from third-party defendants and ordering the latter to
allow the former to redeem the property in question, by paying the sum of P14,000.00
plus legal interest of 12% thereon from January 21, 1980;

2) Ordering defendant to execute a Deed of Absolute Sale in favor of plaintiff Felix

Peñarroyo covering the property in question and to deliver peaceful possession and
enjoyment of the said property to the said plaintiff, free from any liens and
encumbrances;

Should this not be possible, for any reason not attributable to defendant, said defendant
is ordered to pay to plaintiff Felix Peñarroyo the sum of P45,000.00 plus legal interest of
12% from June 15, 1973;

3) Ordering plaintiff Felix Peñarroyo to execute and deliver to intervenor a deed of

absolute sale over the same property, upon the latter's payment to the former of the
balance of the purchase price of P71,500.00;

Should this not be possible, plaintiff Felix Peñarroyo is ordered to pay intervenor the
sum of P5,000.00 plus legal interest of 12% from August 23, 1973; and

4) Ordering defendant to pay plaintiffs the amount of P5,000.00 for and as attorney's
fees and litigation expenses.

SO ORDERED. 1

Petitioner appealed the aforesaid decision of the trial court to the Court of Appeals, alleging
among others that the sale was never "consummated" as he did not encash the check (in the
amount of P40,000.00) given by respondents Valencia and Peñarroyo in payment of the full
purchase price of the subject lot. He maintained that what said respondent had actually paid was
only the amount of P5,000.00 (in cash) as earnest money.

Respondent Reyes spouses, likewise, appealed the above decision. However, their appeal was
dismissed because of failure to file their appellant's brief.

203
On 27 January 1992, the Court of Appeals rendered a decision, affirming with modification the
trial court's decision, thus:

WHEREFORE, the second paragraph of the dispositive portion of the appealed

decision is MODIFIED, by ordering the defendant-appellant to deliver to plaintiff-
appellees the owner's duplicate of TCT No. 28993 of Angela M. Butte and the
peaceful possession and enjoyment of the lot in question or, if the owner's duplicate
certificate cannot be produced, to authorize the Register of Deeds to cancel it and
issue a certificate of title in the name of Felix Peñarroyo. In all other respects, the
decision appealed from is AFFIRMED. Costs against defendant-appellant Myron C.
Papa.

SO ORDERED. 2

In affirming the trial court's decision, respondent court held that contrary to petitioner's claim that
he did not encash the aforesaid check, and therefore, the sale was not consummated, there was
no evidence at all that petitioner did not, in fact, encash said check. On the other hand, respondent
Peñarroyo testified in court that petitioner Papa had received the amount of P45,000.00 and
issued receipts therefor. According to respondent court, the presumption is that the check was
encashed, especially since the payment by check was not denied by defendant-appellant (herein
petitioner) who, in his Answer, merely alleged that he "can no longer recall the transaction which
is supposed to have happened 10 years ago." 3

On petitioner's claim that he cannot be held personally liable as he had acted merely as attorney-
in-fact of the owner, Angela M. Butte, respondent court held that such contention is without merit.
This action was not brought against him in his personal capacity, but in his capacity as the
administrator of the Testate Estate of Angela M. Butte. 4

On petitioner's contention that the estate of Angela M. Butte should have been joined in the action
as the real party in interest, respondent court held that pursuant to Rule 3, Section 3 of the Rules
of Court, the estate of Angela M. Butte does not have to be joined in the action. Likewise, the
estate of Ramon Papa, Jr., is not an indispensable party under Rule 3, Section 7 of the same
Rules. For the fact is that Ramon Papa, Jr., or his estate, was not a party to the Deed of Absolute
Sale, and it is basic law that contracts bind only those who are parties thereto. 5

Respondent court observed that the conditions under which the mortgage rights of the bank were
assigned are not clear. In any case, any obligation which the estate of Angela M. Butte might
have to the estate of Ramon Papa, Jr. is strictly between them. Respondents Valencia and
Peñarroyo are not bound by any such obligation.

Petitioner filed a motion for reconsideration of the above decision, which motion was denied by
respondent Court of Appeals.

Hence, this petition wherein petitioner raises the following issues:

I. THE CONCLUSION OR FINDING OF THE COURT OF APPEALS THAT THE SALE IN

QUESTION WAS CONSUMMATED IS GROUNDED ON SPECULATION OR
CONJECTURE, AND IS CONTRARY TO THE APPLICABLE LEGAL PRINCIPLE.

II. THE COURT OF APPEALS, IN MODIFYING THE DECISION OF THE TRIAL COURT,
ERRED BECAUSE IT, IN EFFECT, CANCELLED OR NULLIFIED AN ASSIGNMENT OF
THE SUBJECT PROPERTY IN FAVOR OF THE ESTATE OF RAMON PAPA, JR. WHICH
IS NOT A PARTY IN THIS CASE.
204
 III. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE ESTATE OF
ANGELA M. BUTTE AND THE ESTATE OF RAMON PAPA, JR. ARE INDISPENSABLE
PARTIES IN THIS
6
CASE.

Petitioner argues that respondent Court of Appeals erred in concluding that alleged sale of the
subject property had been consummated. He contends that such a conclusion is based on the
erroneous presumption that the check (in the amount of P40,000.00) had been cashed, citing Art.
1249 of the Civil Code, which provides, in part, that payment by checks shall produce the effect
of payment only when they have been cashed or when through the fault of the creditor they have
been impaired. 7 Petitioner insists that he never cashed said check; and, such being the case, its
delivery never produced the effect of payment. Petitioner, while admitting that he had issued
receipts for the payments, asserts that said receipts, particularly the receipt of PCIB Check No.
761025 in the amount of P40,000.00, do not prove payment. He avers that there must be a
showing that said check had been encashed. If, according to petitioner, the check had been
encashed, respondent Peñarroyo should have presented PCIB Check No. 761025 duly stamped
received by the payee, or at least its microfilm copy.

Petitioner finally avers that, in fact, the consideration for the sale was still in the hands of
respondents Valencia and Peñarroyo, as evidenced by a letter addressed to him in which said
respondents wrote, in part:

. . . Please be informed that I had been authorized by Dr. Ramon Papa, Jr., heir of Mrs.
Angela M. Butte to pay you the aforementioned amount of P75,000.00 for the release and
cancellation of subject property's mortgage. The money is with me and if it is alright with
you, I would like to tender the payment as soon as possible. . . . 8

We find no merit in petitioner's arguments.

It is an undisputed fact that respondents Valencia and Peñarroyo had given petitioner Myron C.
Papa the amounts of Five Thousand Pesos (P5,000.00) in cash on 24 May 1973, and Forty
Thousand Pesos (P40,000.00) in check on 15 June 1973, in payment of the purchase price of the
subject lot. Petitioner himself admits having received said amounts, 9 and having issued receipts
therefor. 10 Petitioner's assertion that he never encashed the aforesaid check is not substantiated
and is at odds with his statement in his answer that "he can no longer recall the transaction which
is supposed to have happened 10 years ago." After more than ten (10) years from the payment
in party by cash and in part by check, the presumption is that the check had been encashed. As
already stated, he even waived the presentation of oral evidence.

Granting that petitioner had never encashed the check, his failure to do so for more than ten (10)
years undoubtedly resulted in the impairment of the check through his unreasonable and
unexplained delay.

While it is true that the delivery of a check produces the effect of payment only when it is cashed,
pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the
creditor's unreasonable delay in presentment. The acceptance of a check implies an undertaking
of due diligence in presenting it for payment, and if he from whom it is received sustains loss by
want of such diligence, it will be held to operate as actual payment of the debt or obligation for
which it was given. 11 It has, likewise, been held that if no presentment is made at all, the drawer
cannot be held liable irrespective of loss or injury 12 unless presentment is otherwise excused.
This is in harmony with Article 1249 of the Civil Code under which payment by way of check or
other negotiable instrument is conditioned on its being cashed, except when through the fault of
the creditor, the instrument is impaired. The payee of a check would be a creditor under this

205
provision and if its no-payment is caused by his negligence, payment will be deemed effected and
the obligation for which the check was given as conditional payment will be discharged. 13

Considering that respondents Valencia and Peñarroyo had fulfilled their part of the contract of
sale by delivering the payment of the purchase price, said respondents, therefore, had the right
to compel petitioner to deliver to them the owner's duplicate of TCT No. 28993 of Angela M. Butte
and the peaceful possession and enjoyment of the lot in question.

With regard to the alleged assignment of mortgage rights, respondent Court of Appeals has found
that the conditions under which said mortgage rights of the bank were assigned are not clear.
Indeed, a perusal of the original records of the case would show that there is nothing there that
could shed light on the transactions leading to the said assignment of rights; nor is there any
evidence on record of the conditions under which said mortgage rights were assigned. What is
certain is that despite the said assignment of mortgage rights, the title to the subject property has
remained in the name of the late Angela M. Butte. 14 This much is admitted by petitioner himself
in his answer to respondent's complaint as well as in the third-party complaint that petitioner filed
against respondent-spouses Arsenio B. Reyes and Amanda Santos. 15 Assuming arquendo that
the mortgage rights of the Associated Citizens Bank had been assigned to the estate of Ramon
Papa, Jr., and granting that the assigned mortgage rights validly exists and constitute a lien on
the property, the estate may file the appropriate action to enforce such lien. The cause of action
for specific performance which respondents Valencia and Peñarroyo have against petitioner is
different from the cause of action which the estate of Ramon Papa, Jr. may have to enforce
whatever rights or liens it has on the property by reason of its being an alleged assignee of the
bank's rights of mortgage.

Finally, the estate of Angela M. Butte is not an indispensable party. Under Section 3 of Rule 3 of
the Rules of Court, an executor or administrator may sue or be sued without joining the party for
whose benefit the action is presented or defended, thus:

Sec. 3. Representative parties. — A trustee of an express trust, a guardian, executor or

administrator, or a party authorized by statute, may sue or be sued without joining the
party for whose benefit the action is presented or defended; but the court may, at any
stage of the proceedings, order such beneficiary to be made a party. 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. 16

Neither is the estate of Ramon Papa, Jr. an indispensable party without whom, no final
determination of the action can be had. Whatever prior and subsisting mortgage rights the estate
of Ramon Papa, Jr. has over the property may still be enforced regardless of the change in
ownership thereof.

WHEREFORE, the petition for review is hereby DENIED and the Decision of the Court of Appeals,
dated 27 January 1992 is AFFIRMED.

SO ORDERED.

206
G.R. No. 178529 September 4, 2009

EQUITABLE PCI BANK, INC. (now known as BANCO DE ORO - EPCI, INC.) Petitioner,
vs.
HEIRS OF ANTONIO C. TIU, namely: ARLENE T. FU, MICHAEL U. TIU, ANDREW U. TIU,
EDGAR U. TIU and ERWIN U. TIU, Respondents.

DECISION

CARPIO MORALES, J.:

To secure loans in the aggregate amount of P7 Million obtained by one Gabriel Ching from herein
petitioner Equitable PCI Bank, Inc. (now known as Banco de Oro-EPCI, Inc.),1 Antonio C. Tiu
(Antonio), of which herein respondents allege to be heirs, executed on July 6, 1994 a Real Estate
Mortgage (REM)2 in favor of petitioner covering a lot located in Tacloban City. Before the words
"With my Marital Consent" appearing in the REM is a signature attributed to Antonio’s wife Matilde.

On October 5, 1998, Antonio executed an Amendment to the Real Esate Mortgage3 (AREM)
increasing the amount secured by the mortgage to P26 Million, also bearing a signature attributed
to his wife Matilde above the words "With my Marital Consent."

The property mortgaged was covered by TCT No. T-1381 of the Tacloban Register of Deeds
which, the AREM states, was "registered in the name of the Mortgagor."

Antonio died on December 26, 1999.4

The loan obligation having remained unsettled, petitioner filed in November 2003 before the
Regional Trial Court (RTC) of Tacloban City a "Petition for Sale"5 dated November 4, 2003, for
the extrajudicial foreclosure of the AREM and the sale at public auction of the lot covered thereby.
Acting on the petition, the RTC Clerk of Court and Ex-Oficio Sheriff scheduled the public auction
on December 17, 2003.6

A day before the scheduled auction sale or on December 16, 2003, the herein respondents, Heirs
of Antonio C. Tiu, namely Arlene T. Fu, Michael U. Tiu, Andrew U. Tiu, Edgar U. Tiu, and Erwin
U. Tiu, filed a Complaint/Petition7 before the RTC of Tacloban against petitioner and the Clerk of
Court-Ex Oficio Sheriff, docketed as Civil Case No. 2003-12-205 for annulment of the AREM,
injunction with prayer for issuance of writ of preliminary injunction and/or temporary restraining
order and damages, alleging, among other things, that

x x x the said AREM is without force and effect, the same having been executed without the valid
consent of the wife of mortgagor Antonio C. Tiu who at the time of the execution of the said
207
instrument was already suffering from advance[d] Alzheimer’s Disease and, henceforth,
incapable of giving consent, more so writing and signing her name[.]8 (Emphasis and
underscoring supplied.)1awphi1

The RTC issued a temporary restraining order,9 and subsequently, a writ of preliminary
injunction.10

To the Complaint petitioner filed a Motion to Dismiss,11 raising the following grounds:

THE PLAINTIFFS/PETITIONERS NOT BEING THE REAL PARTIES-IN-INTEREST, THEIR

COMPLAINT STATES NO CAUSE OF ACTION;

II

EVEN IF THERE IS A CAUSE OF ACTION, THE SAME IS ALREADY BARRED BY THE

STATUTE OF LIMITATIONS; and

III

THE PRESENT ACTION BEING A PERSONAL ONE, THE VENUE IS IMPROPERLY LAID.12
(Underscoring supplied)

By Resolution13 of April 14, 2004, Branch 8 of the Tacloban RTC denied the Motion to Dismiss in
this wise:

From the facts of the case, herein plaintiffs/petitioners are so situated that they will either be
benefited or injured in subject action. They are therefore real parties in interest, as they will be
damnified and injured or their inheritance rights and interest on the subject property protected and
preserved in this action. As they are real parties in interest, they therefore have a cause of action
against herein defendant.14

It thus ordered petitioner to file Answer within the reglementary period. Petitioner’s motion for
reconsideration of the said Resolution having been denied,15 it filed a Petition16 for Certiorari,
Prohibition, and Mandamus with prayer for preliminary injunction before the Court of Appeals
which it denied by Decision17 of August 30, 2006, quoting with approval the trial court’s ratio in
denying petitioner’s Motion to Dismiss.

Hence, the present Petition,18 petitioner faulting the Court of Appeals in affirming the trial court’s
denial of its Motion to Dismiss.

Petitioner argues, in the main, that as respondents are not the real parties in interest, their
complaint states no cause of action. Citing Travel Wide Associated, Inc. v. Court of Appeals, 19
petitioner adds that since the party in interest is respondents’ mother but the complaint is not
brought in her name, respondents’ complaint states no cause of action.

The issue in the main thus is whether the complaint filed by respondents-children of Antonio,
without impleading Matilde who must also be Antonio’s heir and who, along with Antonio, was
principally obliged under the AREM sought to be annulled, is dismissible for lack of cause of
action.

The pertinent provision of the Civil Code on annulment of contracts reads:

208
Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby
obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity
of those with whom they contracted; nor can those who exerted intimidation, violence, or undue
influence, or employed fraud, or caused mistake base their action upon these flaws of the contract.
(Emphasis and underscoring supplied)

Upon the other hand, the pertinent provisions of Rule 3 of the Rules of Court (Parties to Civil
Actions) read:

SEC. 2 Parties in interest. ─ A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted or defended in the name of
the real party in interest. (Emphasis and underscoring supplied)

SEC. 3. Representatives as parties. ─ Where the action is allowed to be prosecuted or defended

by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included in
the title of the case and shall be deemed to be the real party in interest. A representative may be
a trustee of an express trust, a guardian, an executor or administrator, or a party authorized by
law or these Rules. An agent acting in his own name and for the benefit of an undisclosed principal
may sue or be sued without joining the principal except when the contract involves things
belonging to the principal. (Emphasis and underscoring supplied)

The AREM was executed by Antonio, with the marital consent of Matilde. Since the mortgaged
property is presumed conjugal, she is obliged principally under the AREM. It is thus she, following
Art. 1397 of the Civil Code vis a vis Sec. 2 of Rule 3 of the Rules of Court, who is the real party
in interest, hence, the action must be prosecuted in her name as she stands to be benefited or
injured in the action.

Assuming that Matilde is indeed incapacitated, it is her legal guardian who should file the action
on her behalf. Not only is there no allegation in the complaint, however, that respondents have
been legally designated as guardians to file the action on her behalf. The name of Matilde, who
is deemed the real party in interest, has not been included in the title of the case, in violation of
Sec. 3 of Rule 3 of the Rules of Court.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated August 30,
2006 is REVERSED and SET ASIDE. Civil Case No. 2003-12-205 lodged before Branch 8 of the
Regional Trial Court of Tacloban City is DISMISSED for lack of cause of action.

SO ORDERED.

209
G.R. No. 74886 December 8, 1992

PRUDENTIAL BANK, petitioner,

vs.
INTERMEDIATE APPELLATE COURT, PHILIPPINE RAYON MILLS, INC. and ANACLETO
R. CHI, respondents.

DAVIDE, JR., J.:

Petitioner seeks to review and set aside the decision 1 of public respondent; Intermediate
Appellate Court (now Court of Appeals), dated 10 March 1986, in AC-G.R. No. 66733 which
affirmed in toto the 15 June 1978 decision of Branch 9 (Quezon City) of the then Court of First
Instance (now Regional Trial Court) of Rizal in Civil Case No. Q-19312. The latter involved an
action instituted by the petitioner for the recovery of a sum of money representing the amount
paid by it to the Nissho Company Ltd. of Japan for textile machinery imported by the defendant,
now private respondent, Philippine Rayon Mills, Inc. (hereinafter Philippine Rayon), represented
by co-defendant Anacleto R. Chi.

The facts which gave rise to the instant controversy are summarized by the public respondent as
follows:

On August 8, 1962, defendant-appellant Philippine Rayon Mills, Inc.

entered into a contract with Nissho Co., Ltd. of Japan for the importation of
textile machineries under a five-year deferred payment plan (Exhibit B,
Plaintiff's Folder of Exhibits, p 2). To effect payment for said machineries,
the defendant-appellant applied for a commercial letter of credit with the
Prudential Bank and Trust Company in favor of Nissho. By virtue of said
application, the Prudential Bank opened Letter of Credit No. DPP-63762
for $128,548.78 (Exhibit A, Ibid., p. 1). Against this letter of credit, drafts
were drawn and issued by Nissho (Exhibits X, X-1 to X-11, Ibid., pp. 65, 66
to 76), which were all paid by the Prudential Bank through its correspondent
in Japan, the Bank of Tokyo, Ltd. As indicated on their faces, two of these
drafts (Exhibit X and X-1, Ibid., pp. 65-66) were accepted by the defendant-
appellant through its president, Anacleto R. Chi, while the others were not
(Exhibits X-2 to X-11, Ibid., pp. 66 to 76).

Upon the arrival of the machineries, the Prudential Bank indorsed the
shipping documents to the defendant-appellant which accepted delivery of
the same. To enable the defendant-appellant to take delivery of the
machineries, it executed, by prior arrangement with the Prudential Bank, a
trust receipt which was signed by Anacleto R. Chi in his capacity as
President (sic) of defendant-appellant company (Exhibit C, Ibid., p. 13).

210
 At the back of the trust receipt is a printed form to be accomplished by two
sureties who, by the very terms and conditions thereof, were to be jointly
and severally liable to the Prudential Bank should the defendant-appellant
fail to pay the total amount or any portion of the drafts issued by Nissho
and paid for by Prudential Bank. The defendant-appellant was able to take
delivery of the textile machineries and installed the same at its factory site
at 69 Obudan Street, Quezon City.

Sometime in 1967, the defendant-appellant ceased business operation

(sic). On December 29, 1969, defendant-appellant's factory was leased by
Yupangco Cotton Mills for an annual rental of P200,000.00 (Exhibit I, Ibid.,
p. 22). The lease was renewed on January 3, 1973 (Exhibit J, Ibid., p. 26).
On January 5, 1974, all the textile machineries in the defendant-appellant's
factory were sold to AIC Development Corporation for P300,000.00 (Exhibit
K, Ibid., p. 29).

The obligation of the defendant-appellant arising from the letter of credit

and the trust receipt remained unpaid and unliquidated. Repeated formal
demands (Exhibits U, V, and W, Ibid., pp. 62, 63, 64) for the payment of
the said trust receipt yielded no result Hence, the present action for the
collection of the principal amount of P956,384.95 was filed on October 3,
1974 against the defendant-appellant and Anacleto R. Chi. In their
respective answers, the defendants interposed identical special defenses,
viz., the complaint states no cause of action; if there is, the same has
prescribed; and the plaintiff is guilty of laches. 2

On 15 June 1978, the trial court rendered its decision the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered sentencing the defendant

Philippine Rayon Mills, Inc. to pay plaintiff the sum of P153,645.22, the
amounts due under Exhibits "X" & "X-1", with interest at 6% per annum
beginning September 15, 1974 until fully paid.

Insofar as the amounts involved in drafts Exhs. "X" (sic) to "X-11", inclusive,
the same not having been accepted by defendant Philippine Rayon Mills,
Inc., plaintiff's cause of action thereon has not accrued, hence, the instant
case is premature.

Insofar as defendant Anacleto R. Chi is concerned, the case is dismissed.

Plaintiff is ordered to pay defendant Anacleto R. Chi the sum of P20,000.00
as attorney's fees.

With costs against defendant Philippine Rayon Mills, Inc.

SO ORDERED. 3

Petitioner appealed the decision to the then Intermediate Appellate Court. In urging the said court
to reverse or modify the decision, petitioner alleged in its Brief that the trial court erred in (a)
disregarding its right to reimbursement from the private respondents for the entire unpaid balance
of the imported machines, the total amount of which was paid to the Nissho Company Ltd., thereby
violating the principle of the third party payor's right to reimbursement provided for in the second
paragraph of Article 1236 of the Civil Code and under the rule against unjust enrichment; (b)
refusing to hold Anacleto R. Chi, as the responsible officer of defendant corporation, liable under

211
Section 13 of P.D No 115 for the entire unpaid balance of the imported machines covered by the
bank's trust receipt (Exhibit "C"); (c) finding that the solidary guaranty clause signed by Anacleto
R. Chi is not a guaranty at all; (d) controverting the judicial admissions of Anacleto R. Chi that he
is at least a simple guarantor of the said trust receipt obligation; (e) contravening, based on the
assumption that Chi is a simple guarantor, Articles 2059, 2060 and 2062 of the Civil Code and
the related evidence and jurisprudence which provide that such liability had already attached; (f)
contravening the judicial admissions of Philippine Rayon with respect to its liability to pay the
petitioner the amounts involved in the drafts (Exhibits "X", "X-l" to "X-11''); and (g) interpreting
"sight" drafts as requiring acceptance by Philippine Rayon before the latter could be held liable
thereon. 4

In its decision, public respondent sustained the trial court in all respects. As to the first and last
assigned errors, it ruled that the provision on unjust enrichment, Article 2142 of the Civil Code,
applies only if there is no express contract between the parties and there is a clear showing that
the payment is justified. In the instant case, the relationship existing between the petitioner and
Philippine Rayon is governed by specific contracts, namely the application for letters of credit, the
promissory note, the drafts and the trust receipt. With respect to the last ten (10) drafts (Exhibits
"X-2" to "X-11") which had not been presented to and were not accepted by Philippine Rayon,
petitioner was not justified in unilaterally paying the amounts stated therein. The public respondent
did not agree with the petitioner's claim that the drafts were sight drafts which did not require
presentment for acceptance to Philippine Rayon because paragraph 8 of the trust receipt
presupposes prior acceptance of the drafts. Since the ten (10) drafts were not presented and
accepted, no valid demand for payment can be made.

Public respondent also disagreed with the petitioner's contention that private respondent Chi is
solidarily liable with Philippine Rayon pursuant to Section 13 of P.D. No. 115 and based on his
signature on the solidary guaranty clause at the dorsal side of the trust receipt. As to the first
contention, the public respondent ruled that the civil liability provided for in said Section 13
attaches only after conviction. As to the second, it expressed misgivings as to whether Chi's
signature on the trust receipt made the latter automatically liable thereon because the so-called
solidary guaranty clause at the dorsal portion of the trust receipt is to be signed not by one (1)
person alone, but by two (2) persons; the last sentence of the same is incomplete and unsigned
by witnesses; and it is not acknowledged before a notary public. Besides, even granting that it
was executed and acknowledged before a notary public, Chi cannot be held liable therefor
because the records fail to show that petitioner had either exhausted the properties of Philippine
Rayon or had resorted to all legal remedies as required in Article 2058 of the Civil Code. As
provided for under Articles 2052 and 2054 of the Civil Code, the obligation of a guarantor is merely
accessory and subsidiary, respectively. Chi's liability would therefore arise only when the principal
debtor fails to comply with his obligation. 5

Its motion to reconsider the decision having been denied by the public respondent in its Resolution
of 11 June 1986, 6 petitioner filed the instant petition on 31 July 1986 submitting the following
legal issues:

I. WHETHER OR NOT THE RESPONDENT APPELLATE COURT

GRIEVOUSLY ERRED IN DENYING PETITIONER'S CLAIM FOR FULL
REIMBURSEMENT AGAINST THE PRIVATE RESPONDENTS FOR THE
PAYMENT PETITIONER MADE TO NISSHO CO. LTD. FOR THE
BENEFIT OF PRIVATE RESPONDENT UNDER ART. 1283 OF THE NEW
CIVIL CODE OF THE PHILIPPINES AND UNDER THE GENERAL
PRINCIPLE AGAINST UNJUST ENRICHMENT;

II. WHETHER OR NOT RESPONDENT CHI IS SOLIDARILY LIABLE

UNDER THE TRUST RECEIPT (EXH. C);
212
 III. WHETHER OR NOT ON THE BASIS OF THE JUDICIAL ADMISSIONS
OF RESPONDENT CHI HE IS LIABLE THEREON AND TO WHAT
EXTENT;

IV. WHETHER OR NOT RESPONDENT CHI IS MERELY A SIMPLE

GUARANTOR; AND IF SO; HAS HIS LIABILITY AS SUCH ALREADY
ATTACHED;

V. WHETHER OR NOT AS THE SIGNATORY AND RESPONSIBLE

OFFICER OF RESPONDENT PHIL. RAYON RESPONDENT CHI IS
PERSONALLY LIABLE PURSUANT TO THE PROVISION OF SECTION
13, P.D. 115;

VI. WHETHER OR NOT RESPONDENT PHIL. RAYON IS LIABLE TO THE

PETITIONER UNDER THE TRUST RECEIPT (EXH. C);

VII. WHETHER OR NOT ON THE BASIS OF THE JUDICIAL

ADMISSIONS RESPONDENT PHIL. RAYON IS LIABLE TO THE
PETITIONER UNDER THE DRAFTS (EXHS. X, X-1 TO X-11) AND TO
WHAT EXTENT;

VIII. WHETHER OR NOT SIGHT DRAFTS REQUIRE PRIOR

ACCEPTANCE FROM RESPONDENT PHIL. RAYON BEFORE THE
LATTER BECOMES LIABLE TO PETITIONER. 7

In the Resolution of 12 March 1990, 8 this Court gave due course to the petition after the filing of
the Comment thereto by private respondent Anacleto Chi and of the Reply to the latter by the
petitioner; both parties were also required to submit their respective memoranda which they
subsequently complied with.

As We see it, the issues may be reduced as follows:

1. Whether presentment for acceptance of the drafts was indispensable to make

Philippine Rayon liable thereon;

2. Whether Philippine Rayon is liable on the basis of the trust receipt;

3. Whether private respondent Chi is jointly and severally liable with Philippine
Rayon for the obligation sought to be enforced and if not, whether he may be
considered a guarantor; in the latter situation, whether the case should have been
dismissed on the ground of lack of cause of action as there was no prior exhaustion
of Philippine Rayon's properties.

Both the trial court and the public respondent ruled that Philippine Rayon could be held liable for
the two (2) drafts, Exhibits "X" and "X-1", because only these appear to have been accepted by
the latter after due presentment. The liability for the remaining ten (10) drafts (Exhibits "X-2" to
"X-11" inclusive) did not arise because the same were not presented for acceptance. In short,
both courts concluded that acceptance of the drafts by Philippine Rayon was indispensable to
make the latter liable thereon. We are unable to agree with this proposition. The transaction in
the case at bar stemmed from Philippine Rayon's application for a commercial letter of credit with
the petitioner in the amount of $128,548.78 to cover the former's contract to purchase and import
loom and textile machinery from Nissho Company, Ltd. of Japan under a five-year deferred

213
payment plan. Petitioner approved the application. As correctly ruled by the trial court in its Order
of 6 March 1975: 9

. . . By virtue of said Application and Agreement for Commercial Letter of

Credit, plaintiff bank 10 was under obligation to pay through its
correspondent bank in Japan the drafts that Nisso (sic) Company, Ltd.,
periodically drew against said letter of credit from 1963 to 1968, pursuant
to plaintiff's contract with the defendant Philippine Rayon Mills, Inc. In turn,
defendant Philippine Rayon Mills, Inc., was obligated to pay plaintiff bank
the amounts of the drafts drawn by Nisso (sic) Company, Ltd. against said
plaintiff bank together with any accruing commercial charges, interest, etc.
pursuant to the terms and conditions stipulated in the Application and
Agreement of Commercial Letter of Credit Annex "A".

A letter of credit is defined as an engagement by a bank or other person made at the request of
a customer that the issuer will honor drafts or other demands for payment upon compliance with
the conditions specified in the credit. 11 Through a letter of credit, the bank merely substitutes its
own promise to pay for one of its customers who in return promises to pay the bank the amount
of funds mentioned in the letter of credit plus credit or commitment fees mutually agreed upon. 12
In the instant case then, the drawee was necessarily the herein petitioner. It was to the latter that
the drafts were presented for payment. In fact, there was no need for acceptance as the issued
drafts are sight drafts. Presentment for acceptance is necessary only in the cases expressly
provided for in Section 143 of the Negotiable Instruments Law (NIL). 13 The said section reads:

Sec. 143. When presentment for acceptance must be made. —

Presentment for acceptance must be made:

(a) Where the bill is payable after sight, or in any other case, where presentment for
acceptance is necessary in order to fix the maturity of the instrument; or

(b) Where the bill expressly stipulates that it shall be presented for acceptance; or

(c) Where the bill is drawn payable elsewhere than at the residence or place of business
of the drawee.

In no other case is presentment for acceptance necessary in order to

render any party to the bill liable.

Obviously then, sight drafts do not require presentment for acceptance.

The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer;
14
this may be done in writing by the drawee in the bill itself, or in a separate instrument. 15

The parties herein agree, and the trial court explicitly ruled, that the subject, drafts are sight drafts.
Said the latter:

. . . In the instant case the drafts being at sight, they are supposed to be
payable upon acceptance unless plaintiff bank has given the Philippine
Rayon Mills Inc. time within which to pay the same. The first two drafts
(Annexes C & D, Exh. X & X-1) were duly accepted as indicated on their
face (sic), and upon such acceptance should have been paid forthwith.
These two drafts were not paid and although Philippine Rayon Mills

214
 ought to have paid the same, the fact remains that until now they are still
unpaid. 16

Corollarily, they are, pursuant to Section 7 of the NIL, payable on demand. Section 7 provides:

Sec. 7. When payable on demand. — An instrument is payable on demand

—

(a) When so it is expressed to be payable on demand, or at sight, or on presentation; or

(b) In which no time for payment in expressed.

Where an instrument is issued, accepted, or indorsed when overdue, it is,

as regards the person so issuing, accepting, or indorsing it, payable on
demand. (emphasis supplied)

Paragraph 8 of the Trust Receipt which reads: "My/our liability for payment at
maturity of any accepted draft, bill of exchange or indebtedness shall not be
extinguished or modified" 17 does not, contrary to the holding of the public
respondent, contemplate prior acceptance by Philippine Rayon, but by the
petitioner. Acceptance, however, was not even necessary in the first place
because the drafts which were eventually issued were sight drafts And even if
these were not sight drafts, thereby necessitating acceptance, it would be the
petitioner — and not Philippine Rayon — which had to accept the same for the
latter was not the drawee. Presentment for acceptance is defined an the production
of a bill of exchange to a drawee for acceptance. 18 The trial court and the public
respondent, therefore, erred in ruling that presentment for acceptance was an
indispensable requisite for Philippine Rayon's liability on the drafts to attach.
Contrary to both courts' pronouncements, Philippine Rayon immediately became
liable thereon upon petitioner's payment thereof. Such is the essence of the letter
of credit issued by the petitioner. A different conclusion would violate the principle
upon which commercial letters of credit are founded because in such a case, both
the beneficiary and the issuer, Nissho Company Ltd. and the petitioner,
respectively, would be placed at the mercy of Philippine Rayon even if the latter
had already received the imported machinery and the petitioner had fully paid for
it. The typical setting and purpose of a letter of credit are described in Hibernia
Bank and Trust Co. vs. J. Aron & Co., Inc., 19 thus:

Commercial letters of credit have come into general use in international

sales transactions where much time necessarily elapses between the sale
and the receipt by a purchaser of the merchandise, during which interval
great price changes may occur. Buyers and sellers struggle for the
advantage of position. The seller is desirous of being paid as surely and as
soon as possible, realizing that the vendee at a distant point has it in his
power to reject on trivial grounds merchandise on arrival, and cause
considerable hardship to the shipper. Letters of credit meet this condition
by affording celerity and certainty of payment. Their purpose is to insure to
a seller payment of a definite amount upon presentation of documents. The
bank deals only with documents. It has nothing to do with the quality of the
merchandise. Disputes as to the merchandise shipped may arise and be
litigated later between vendor and vendee, but they may not impede
acceptance of drafts and payment by the issuing bank when the proper
documents are presented.

215
The trial court and the public respondent likewise erred in disregarding the trust receipt and in not
holding that Philippine Rayon was liable thereon. In People vs. Yu Chai Ho, 20 this Court explains
the nature of a trust receipt by quoting In re Dunlap Carpet Co., 21 thus:

By this arrangement a banker advances money to an intending importer,

and thereby lends the aid of capital, of credit, or of business facilities and
agencies abroad, to the enterprise of foreign commerce. Much of this trade
could hardly be carried on by any other means, and therefore it is of the
first importance that the fundamental factor in the transaction, the banker's
advance of money and credit, should receive the amplest protection.
Accordingly, in order to secure that the banker shall be repaid at the critical
point — that is, when the imported goods finally reach the hands of the
intended vendee — the banker takes the full title to the goods at the very
beginning; he takes it as soon as the goods are bought and settled for by
his payments or acceptances in the foreign country, and he continues to
hold that title as his indispensable security until the goods are sold in the
United States and the vendee is called upon to pay for them. This security
is not an ordinary pledge by the importer to the banker, for the importer has
never owned the goods, and moreover he is not able to deliver the
possession; but the security is the complete title vested originally in the
bankers, and this characteristic of the transaction has again and again
been recognized and protected by the courts. Of course, the title is at
bottom a security title, as it has sometimes been called, and the banker is
always under the obligation to reconvey; but only after his advances have
been fully repaid and after the importer has fulfilled the other terms of the
contract.

As further stated in National Bank vs. Viuda e Hijos de Angel Jose, 22 trust receipts:

. . . [I]n a certain manner, . . . partake of the nature of a conditional sale as

provided by the Chattel Mortgage Law, that is, the importer becomes
absolute owner of the imported merchandise as soon an he has paid its
price. The ownership of the merchandise continues to be vested in the
owner thereof or in the person who has advanced payment, until he has
been paid in full, or if the merchandise has already been sold, the proceeds
of the sale should be turned over to him by the importer or by his
representative or successor in interest.

Under P.D. No. 115, otherwise known an the Trust Receipts Law, which took effect on 29 January
1973, a trust receipt transaction is defined as "any transaction by and between a person referred
to in this Decree as the entruster, and another person referred to in this Decree as the entrustee,
whereby the entruster, who owns or holds absolute title or security interests' over certain specified
goods, documents or instruments, releases the same to the possession of the entrustee upon the
latter's execution and delivery to the entruster of a signed document called the "trust receipt"
wherein the entrustee binds himself to hold the designated goods, documents or instruments in
trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments
with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount
owing to the entruster or as appears in the trust receipt or the goods, instruments themselves if
they are unsold or not otherwise disposed of, in accordance with the terms and conditions
specified in the trusts receipt, or for other purposes substantially equivalent to any one of the
following: . . ."

It is alleged in the complaint that private respondents "not only have presumably put said
machinery to good use and have profited by its operation and/or disposition but very recent
216
information that (sic) reached plaintiff bank that defendants already sold the machinery covered
by the trust receipt to Yupangco Cotton Mills," and that "as trustees of the property covered by
the trust receipt, . . . and therefore acting in fiduciary (sic) capacity, defendants have willfully
violated their duty to account for the whereabouts of the machinery covered by the trust receipt
or for the proceeds of any lease, sale or other disposition of the same that they may have made,
notwithstanding demands therefor; defendants have fraudulently misapplied or converted to their
own use any money realized from the lease, sale, and other disposition of said machinery." 23
While there is no specific prayer for the delivery to the petitioner by Philippine Rayon of the
proceeds of the sale of the machinery covered by the trust receipt, such relief is covered by the
general prayer for "such further and other relief as may be just and equitable on the premises." 24
And although it is true that the petitioner commenced a criminal action for the violation of the Trust
Receipts Law, no legal obstacle prevented it from enforcing the civil liability arising out of the trust,
receipt in a separate civil action. Under Section 13 of the Trust Receipts Law, the failure of an
entrustee to turn over the proceeds of the sale of goods, documents or instruments covered by a
trust receipt to the extent of the amount owing to the entruster or as appear in the trust receipt or
to return said goods, documents or instruments if they were not sold or disposed of in accordance
with the terms of the trust receipt shall constitute the crime of estafa, punishable under the
provisions of Article 315, paragraph 1(b) of the Revised Penal Code. 25 Under Article 33 of the
Civil Code, a civil action for damages, entirely separate and distinct from the criminal action, may
be brought by the injured party in cases of defamation, fraud and physical injuries. Estafa falls
under fraud.

We also conclude, for the reason hereinafter discussed, and not for that adduced by the public
respondent, that private respondent Chi's signature in the dorsal portion of the trust receipt did
not bind him solidarily with Philippine Rayon. The statement at the dorsal portion of the said trust
receipt, which petitioner describes as a "solidary guaranty clause", reads:

In consideration of the PRUDENTIAL BANK AND TRUST COMPANY complying with the
foregoing, we jointly and severally agree and undertake to pay on demand to the
PRUDENTIAL BANK AND TRUST COMPANY all sums of money which the said
PRUDENTIAL BANK AND TRUST COMPANY may call upon us to pay arising out of or
pertaining to, and/or in any event connected with the default of and/or non-fulfillment in
any respect of the undertaking of the aforesaid:

PHILIPPINE RAYON MILLS, INC.

We further agree that the PRUDENTIAL BANK AND TRUST COMPANY does not have
to take any steps or exhaust its remedy against aforesaid:

before making demand on me/us.

(Sgd.) Anacleto R. Chi

ANACLETO R. CHI 26

Petitioner insists that by virtue of the clear wording of the statement, specifically the clause ". . .
we jointly and severally agree and undertake . . .," and the concluding sentence on exhaustion,
Chi's liability therein is solidary.

In holding otherwise, the public respondent ratiocinates as follows:

With respect to the second argument, we have our misgivings as to

whether the mere signature of defendant-appellee Chi of (sic) the guaranty
agreement, Exhibit "C-1", will make it an actionable document. It should be

217
 noted that Exhibit "C-1" was prepared and printed by the plaintiff-appellant.
A perusal of Exhibit "C-1" shows that it was to be signed and executed by
two persons. It was signed only by defendant-appellee Chi. Exhibit "C-1"
was to be witnessed by two persons, but no one signed in that capacity.
The last sentence of the guaranty clause is incomplete. Furthermore, the
plaintiff-appellant also failed to have the purported guarantee clause
acknowledged before a notary public. All these show that the alleged
guaranty provision was disregarded and, therefore, not consummated.

But granting arguendo that the guaranty provision in Exhibit "C-1" was fully
executed and acknowledged still defendant-appellee Chi cannot be held
liable thereunder because the records show that the plaintiff-appellant had
neither exhausted the property of the defendant-appellant nor had it
resorted to all legal remedies against the said defendant-appellant as
provided in Article 2058 of the Civil Code. The obligation of a guarantor is
merely accessory under Article 2052 of the Civil Code and subsidiary under
Article 2054 of the Civil Code. Therefore, the liability of the defendant-
appellee arises only when the principal debtor fails to comply with his
obligation. 27

Our own reading of the questioned solidary guaranty clause yields no other conclusion than that
the obligation of Chi is only that of a guarantor. This is further bolstered by the last sentence which
speaks of waiver of exhaustion, which, nevertheless, is ineffective in this case because the space
therein for the party whose property may not be exhausted was not filled up. Under Article 2058
of the Civil Code, the defense of exhaustion (excussion) may be raised by a guarantor before he
may be held liable for the obligation. Petitioner likewise admits that the questioned provision is a
solidary guaranty clause, thereby clearly distinguishing it from a contract of surety. It, however,
described the guaranty as solidary between the guarantors; this would have been correct if two
(2) guarantors had signed it. The clause "we jointly and severally agree and undertake" refers to
the undertaking of the two (2) parties who are to sign it or to the liability existing between
themselves. It does not refer to the undertaking between either one or both of them on the one
hand and the petitioner on the other with respect to the liability described under the trust receipt.
Elsewise stated, their liability is not divisible as between them, i.e., it can be enforced to its full
extent against any one of them.

Furthermore, any doubt as to the import, or true intent of the solidary guaranty clause should be
resolved against the petitioner. The trust receipt, together with the questioned solidary guaranty
clause, is on a form drafted and prepared solely by the petitioner; Chi's participation therein is
limited to the affixing of his signature thereon. It is, therefore, a contract of adhesion; 28 as such,
it must be strictly construed against the party responsible for its preparation. 29

Neither can We agree with the reasoning of the public respondent that this solidary guaranty
clause was effectively disregarded simply because it was not signed and witnessed by two (2)
persons and acknowledged before a notary public. While indeed, the clause ought to have been
signed by two (2) guarantors, the fact that it was only Chi who signed the same did not make his
act an idle ceremony or render the clause totally meaningless. By his signing, Chi became the
sole guarantor. The attestation by witnesses and the acknowledgement before a notary public are
not required by law to make a party liable on the instrument. The rule is that contracts shall be
obligatory in whatever form they may have been entered into, provided all the essential requisites
for their validity are present; however, when the law requires that a contract be in some form in
order that it may be valid or enforceable, or that it be proved in a certain way, that requirement is
absolute and indispensable. 30 With respect to a guaranty, 31 which is a promise to answer for the
debt or default of another, the law merely requires that it, or some note or memorandum thereof,
be in writing. Otherwise, it would be unenforceable unless ratified. 32 While the acknowledgement
218
of a surety before a notary public is required to make the same a public document, under Article
1358 of the Civil Code, a contract of guaranty does not have to appear in a public document.

And now to the other ground relied upon by the petitioner as basis for the solidary liability of Chi,
namely the criminal proceedings against the latter for the violation of P.D. No. 115. Petitioner
claims that because of the said criminal proceedings, Chi would be answerable for the civil liability
arising therefrom pursuant to Section 13 of P.D. No. 115. Public respondent rejected this claim
because such civil liability presupposes prior conviction as can be gleaned from the phrase
"without prejudice to the civil liability arising from the criminal offense." Both are wrong. The said
section reads:

Sec. 13. Penalty Clause. — The failure of an entrustee to turn over the
proceeds of the sale of the goods, documents or instruments covered by a
trust receipt to the extent of the amount owing to the entruster or as appears
in the trust receipt or to return said goods, documents or instruments if they
were not sold or disposed of in accordance with the terms of the trust
receipt shall constitute the crime of estafa, punishable under the provisions
of Article Three hundred and fifteen, paragraph one (b) of Act Numbered
Three thousand eight hundred and fifteen, as amended, otherwise known
as the Revised Penal Code. If the violation or offense is committed by a
corporation, partnership, association or other juridical entities, the penalty
provided for in this Decree shall be imposed upon the directors, officers,
employees or other officials or persons therein responsible for the offense,
without prejudice to the civil liabilities arising from the criminal offense.

A close examination of the quoted provision reveals that it is the last sentence which provides for
the correct solution. It is clear that if the violation or offense is committed by a corporation,
partnership, association or other juridical entities, the penalty shall be imposed upon the directors,
officers, employees or other officials or persons therein responsible for the offense. The penalty
referred to is imprisonment, the duration of which would depend on the amount of the fraud as
provided for in Article 315 of the Revised Penal Code. The reason for this is obvious: corporations,
partnerships, associations and other juridical entities cannot be put in jail. However, it is these
entities which are made liable for the civil liability arising from the criminal offense. This is the
import of the clause "without prejudice to the civil liabilities arising from the criminal offense." And,
as We stated earlier, since that violation of a trust receipt constitutes fraud under Article 33 of the
Civil Code, petitioner was acting well within its rights in filing an independent civil action to enforce
the civil liability arising therefrom against Philippine Rayon.

The remaining issue to be resolved concerns the propriety of the dismissal of the case against
private respondent Chi. The trial court based the dismissal, and the respondent Court its
affirmance thereof, on the theory that Chi is not liable on the trust receipt in any capacity — either
as surety or as guarantor — because his signature at the dorsal portion thereof was useless; and
even if he could be bound by such signature as a simple guarantor, he cannot, pursuant to Article
2058 of the Civil Code, be compelled to pay until
after petitioner has exhausted and resorted to all legal remedies against the principal debtor,
Philippine Rayon. The records fail to show that petitioner had done so 33 Reliance is thus placed
on Article 2058 of the Civil Code which provides:

Art. 2056. The guarantor cannot be compelled to pay the creditor unless
the latter has exhausted all the property of the debtor, and has resorted to
all the legal remedies against the debtor.

Simply stated, there is as yet no cause of action against Chi.

219
We are not persuaded. Excussion is not a condition sine qua non for the institution of an action
against a guarantor. In Southern Motors, Inc. vs. Barbosa, 34 this Court stated:

4. Although an ordinary personal guarantor — not a mortgagor or pledgor

— may demand the aforementioned exhaustion, the creditor may, prior
thereto, secure a judgment against said guarantor, who shall be entitled,
however, to a deferment of the execution of said judgment against him until
after the properties of the principal debtor shall have been exhausted to
satisfy the obligation involved in the case.

There was then nothing procedurally objectionable in impleading private respondent Chi as a co-
defendant in Civil Case No. Q-19312 before the trial court. As a matter of fact, Section 6, Rule 3
of the Rules of Court on permissive joinder of parties explicitly allows it. It reads:

Sec. 6. Permissive joinder of parties. — All persons in whom or against

whom any right to relief in respect to or arising out of the same transaction
or series of transactions is alleged to exist, whether jointly, severally, or in
the alternative, may, except as otherwise provided in these rules, join as
plaintiffs or be joined as defendants in one complaint, where any question
of law or fact common to all such plaintiffs or to all such defendants may
arise in the action; but the court may make such orders as may be just to
prevent any plaintiff or defendant from being embarrassed or put to
expense in connection with any proceedings in which he may have no
interest.

This is the equity rule relating to multifariousness. It is based on trial convenience and is designed
to permit the joinder of plaintiffs or defendants whenever there is a common question of law or
fact. It will save the parties unnecessary work, trouble and expense. 35

However, Chi's liability is limited to the principal obligation in the trust receipt plus all the
accessories thereof including judicial costs; with respect to the latter, he shall only be liable for
those costs incurred after being judicially required to pay. 36 Interest and damages, being
accessories of the principal obligation, should also be paid; these, however, shall run only from
the date of the filing of the complaint. Attorney's fees may even be allowed in appropriate cases.
37

In the instant case, the attorney's fees to be paid by Chi cannot be the same as that to be paid by
Philippine Rayon since it is only the trust receipt that is covered by the guaranty and not the full
extent of the latter's liability. All things considered, he can be held liable for the sum of P10,000.00
as attorney's fees in favor of the petitioner.

Thus, the trial court committed grave abuse of discretion in dismissing the complaint as against
private respondent Chi and condemning petitioner to pay him P20,000.00 as attorney's fees.

In the light of the foregoing, it would no longer necessary to discuss the other issues raised by
the petitioner

WHEREFORE, the instant Petition is hereby GRANTED.

The appealed Decision of 10 March 1986 of the public respondent in AC-G.R. CV

No. 66733 and, necessarily, that of Branch 9 (Quezon City) of the then Court of
First Instance of Rizal in Civil Case No. Q-19312 are hereby REVERSED and SET
ASIDE and another is hereby entered:
220
 1. Declaring private respondent Philippine Rayon Mills, Inc. liable on the twelve drafts
in question (Exhibits "X", "X-1" to "X-11", inclusive) and on the trust receipt (Exhibit
"C"), and ordering it to pay petitioner: (a) the amounts due thereon in the total sum of
P956,384.95 as of 15 September 1974, with interest thereon at six percent (6%) per
annum from 16 September 1974 until it is fully paid, less whatever may have been
applied thereto by virtue of foreclosure of mortgages, if any; (b) a sum equal to ten
percent (10%) of the aforesaid amount as attorney's fees; and (c) the costs.

2. Declaring private respondent Anacleto R. Chi secondarily liable on the trust receipt
and ordering him to pay the face value thereof, with interest at the legal rate,
commencing from the date of the filing of the complaint in Civil Case No. Q-19312
until the same is fully paid as well as the costs and attorney's fees in the sum of
P10,000.00 if the writ of execution for the enforcement of the above awards against
Philippine Rayon Mills, Inc. is returned unsatisfied.

Costs against private respondents. SO ORDERED.

221
G.R. No. L-3884 November 29, 1951

INTERNATIONAL COLLEGES, INC., petitioner-appellee,

vs.
NIEVES ARGONZA, ET AL., respondents-appellants.

Avena, Villaflores & Lopez for petitioner and appellee.

Cecilio I. Lim and Atanacio Mardo for respondents and appellants.

REYES, J.:

This case had its origin in the Municipal Court of Manila where 25 dismissed teachers of the
International Colleges, Inc., a domestic corporation, jointly sued this entity for unpaid salaries, the
complaint alleging that plaintiffs were employed by defendant for the whole school year ending
April 30, l949, any specified salary each, but that without justification and in violation of their
contract they were on December l0, l948, dismissed by defendant without being paid their
respective salaries due under the contract, all aggregating P14,211.13 but with the highest
individual claim not exceeding P1,300. Instead of filing an answer defendant moved for dismissal,
contending that there was misjoinder of parties-plaintiff and that the total amount involved was
beyond the jurisdiction of the court. The motion having been denied, defendant took the case by
certiorari to the Court of First Instance of Manila. Upholding defendant's contention, that court
revoked the order complained of and ordered the complaint in the municipal court dismissed
without pronouncement as to costs. From this decision the plaintiffs have appealed, alleging that
the lower court erred in holding (1) that there was a misjoinder of parties-plaintiff and (2) that it
was the aggregate amount of plaintiffs' claim and not the amount of each claim that should
constitute the basis for determining the court's jurisdiction.

The first specification of error has no basis, it appearing from the order denying plaintiffs' motion
for reconsideration that the lower court has receded from its former position on the question of
misjoinder of parties plaintiff and has denied said motion simply on the ground that the municipal
court had no jurisdiction over the amount involved. Nevertheless, we are constrained to express
an opinion on said question since the appellee seeks to uphold the decision appealed from, not
only on the ground of lack of jurisdiction on the part of the municipal court but also on the ground
of misjoinder of parties plaintiff.

Our view is that the joinder of the 25 plaintiffs in one single complaint against the defendant is
authorized by section 6 of Rule 3 of the Rules of Court, which reads:

SEC. 6. Permissive joinder of parties.—All persons in whom or against whom any

right to relief in respect to or arising out of the transaction or series of transactions
is alleged to exist, whether jointly, severally, or in the alternative, may, except as
otherwise provided in these rules, join as plaintiffs or be joined as defendants in
one complaint, where any question of law or fact common to all such plaintiffs or
to all such defendants may arise in the action; but the court may make such orders
as may be just to prevent any plaintiff or defendant from being embarassed or put
to expense in connection with any proceedings in which he may have no interest.

222
Commenting on this section of the Rules Chief Justice Moran says:

The principle contained in this provision amplifies the old procedure. Formerly, it
was only community of interest in the same subject which constituted a ground for
joinder of parties; now, it is also the existence of a question of fact or of law,
provided the relief sought for or against the several parties arises from the same
transaction or series of transactions whether jointly, severally, or in the alternative.
In this connection, the term "transaction" means not only a stipulation or
agreement, but any event resulting in wrong, without regard to whether the wrong
has been done by violence, neglect or breach of contract. And the term "series of
transactions" is equivalent to "transactions" connected with the same subject of
the action.

For instance, A, B, C, and D are owners, respectively, of four houses destoyed by

fire caused by sparks coming from a defective chimney of a passing locomotive
owned by the Manila Railroad Company. Under the old procedure, the four owners
cannot join in a single complaint for damages against the Manila Railroad
Company, for the reason that they do not have a community of interest in the same
subject of the litigation, each of them being interested in covering the value of his
house alone. Under the new procedure, they may join in a single complaint, for a
right to relief is alleged to exist in their favor severally arising out of the same cause,
namely, the single negligent act of the defendant by which the four houses were
destroyed by fire, and which is also a common question of fact to all of the four
plaintiffs.

Again, several farmers, defending upon a system for the irrigation of their crops,
have sustained damages by reason of the diversion of the water from said system
by the defendant company. Under the old procedure, those several farmers cannot
unite in a single action, they having no community of interest in the same subject,
for each of them is interested in the damages to his own farm and not in those of
the others. But, under the new procedure, they may join in a single action, for their
right to relief arises from the occurence, namely, the diversion of the water from
the aforesaid system, which is also a question of fact common to all of them.

A collector of taxes for three political subdivisions in the United States gave a single
fidelity bond. The state law imposed on each political subdivision a liability for each
proportionate share of the bond premium. Held: The surety could join the three
parties as defendants in an action to recover the premium although each of them
is liable seperately for one third of the premium, the right to relief having arisen
from the same transaction, namely, the giving of the bond, and there is a question
of fact or of law common to all of the three defendants.

If a collision of motor cars, a chauffer sustained personal injuries and damages are
caused to the car he was driving, two causes of action arise: one, in favor of the
chauffer for the injuries caused to his person, and another, in favor of the owner of
the car for the damages caused thereto. Under the old procedure, it is doubtful
whether the owner and the chauffer may join in a single complaint, because they
are not interested in the same subject, each of them claiming a different and
seperate kind of damages, but under the new procedure, they may join, because
a right of relief exists in their favor arising out of the same transaction or occurence,
namely, the collision, and a question of fact will arise at the trial common to both
of them.

223
 If a person has a title to a real property which he has been possessing for many
years, and four persons united by the same purpose, successively deprived him
of the property and later partioned it among themselves; under the old procedure
it was doubtful whether the four persons could be joined in a single action, each of
them being interested only in the portion he is occupying and not in the portions
respectively occupied by the others. But under the new procedure, it is clear that
they may be joined in a single complaint, because a right to relief is alleged to exist
against all of them arising out of a series of occurrences, and question of fact
common to all of them will arise in the action, that is, the ownership and possession
for years of the plaintiff.

As previously indicated, it is not enough that there be a question of fact common

to several parties in order that they may be joined; it is essential that a right of relief
should exist in favor of, or against, all of them in respect to, or arising out of, the
same transaction or series of transactions. If the right to relief does not arise out
of the same transactions or series of transactions, although there may be a
common question of fact, joinder is not proper. For instance, if the plaintiff has a
single title to and has been for many years in possession of, two parcels of land,
one of which had been taken by force by one of the defendants nine years ago,
and the other, by the other defendant five years ago under different circumstances,
the two defendants cannot be joined, for there is no right or relief against them
arising out of the same transaction or occurence, the acts of dispossessions having
been done seperately, at different times and in a different manner, although there
is a question of fact common to them, which is the plaintiff's ownership and
possession of the property.

Professor Sunderland rightly says that under these new rules a number of joinders
are permissible, such as claims for damages in the alternative against two
independent tortfeasors; damages for injury to a house by the owner and the
occupier; damages claimed by many persons affected by the same libelous
statement; claims against a person causing a personal injury and a physician who
afterwards negligently treats the patient.

Under the new liberal rule of joinder, a situation may arise in which, while one of
the parties is proving his claim, the other parties may have no interest therein and
may remain idle in court. In this event, the above section provides that "the court
may make such orders as may be just to prevent any plaintiff or defendant from
being embarassed or put to expense in connection with any proceedings in which
he may have no interest." For instance, in the first illustration given above, while
one of the owners of the houses burned is proving the value of his house, the
others may have nothing to do in court, they having no interest in the subject matter
of the evidence being presented. In such case, the court may fix another time or
date for each of the other plaintiffs to introduce their respective proofs. (I Moran,
Rules of Court, 3rd rev. ed., 36-40).

On all fours with the present case is that of A. Soriano y Cia. vs. Gonzalo M. Jose, et al., * G.R.
No. L-3211 decided May 30, l950, where various employees of that company who had been
against it in the municipal court to collect a month's salary each in lieu of 30 days' notice. The
procedure was sanctioned by this Court section of the Rules. In our opinion all that section
requires is that there be a question of fact common to the several parties that have been joined
as plaintiffs and that a right of relief exists in favor of all of them in respect to or arising out of the
same transaction or series of transactions "whether jointly, severally, or in the alternative." These
requisites are fulfilled in the present case where the joint plaintiffs allege to have a right to relief
arising out of the same transaction or series of transaction consisting in the mass dismissal of the
224
plaintiffs from defendant's employ, an action or series of actions giving rise to a question of law
common to all of the plaintiffs. Our conclusion, therefore, is that the joinder of the 25 plaintiffs in
one single complaint was proper in this case.

The above-cited is also decisive on the question raised in the second specification of error. In that
case the complaint alleged that prior to August 28, l929, A. Soriano y Cia. had engaged the
plaintiffs as employees or laborers at its surplus department at Santa Mesa yard in different
capacities, and that on diverse dates between May 17 and September 30, 1948, A. Soriano y Cia.
had dismissed them without cause and the plaintiffs, 29 in number, brought a joint complaint in
the municipal court against their former employer, praying that judgement be rendered sentencing
defendant to pay each of them one month's salary in lieu of 30 day's notice. The total of the claims
was P5,235, but the largest single claim was only P300. Contending that the municipal court had
no jurisdiction to try the action because the amount of the demand exceeded P2,000, exclusive
of interest and costs, the defendant filed a motion to dismiss, and, after that motion was denied,
instituted proceedings for certiorari in the Court of First Instance. The petition for certiorari having
been denied in that court the defendant appealed to this Court, and the question presented was
whether the jurisdiction of the municipal court was governed by the amount of each claim or by
the aggregate sum of all the claims when there were several plaintiffs suing jointly but having
independent causes of action. Passing on that question, this Court said:

The point wherein the parties are not in agreement is whether the claim of each
plaintiff or the aggregate claims of all is the measure of jurisdiction. This question
has been the subject of decisions by American courts. In Hackner vs. Guaranty
Trust Co. of New York, 4 Fed. Rules Serv. 378; U.S. Circuit Court of Appeals,
Second Circuit, Jan. 13, 1941; 117 F. (2nd) 95, it was held that "when two or more
plaintiffs, each having seperate and distinct demand, join in a single suit, the
demand, of each must be of the requisite jurisdictional amount. Aggregation of the
claims are of a joint nature, as when it is sought to enforce a single right in which
plaintiffs have a common interest." As American Jurisprudence, Vol. 14, p 413,
puts it, "Where several claimants have seperate and distinct demands against a
defendant or defendants, which may properly joined in a single suit, the claims can
not be added together to make up the required jurisdictional amount; each
seperate claim furnishes the jurisdictional test."

The petitioner believes that the joining of plaintiffs having seperate claims should
be controlled by the principle bearing on the court jurisdiction in suit where one
plaintiffs alleges in one complaint several independent causes of action, in which
case it is the aggregate amount which determines the jurisdiction. But there is a
fundamental difference between such cases and one like that before us. In the
first, the total demand accrues to one person, while in the latter only part of the
combined demand, which does not exceed the jurisdictional amount, pertains to a
single plaintiff. In other words, the court takes into account what one party would
recover and not what is adjudged to all the parties or some of them.

There would be more similarity if the present case were compared with one in
which several actions commenced by different plaintiffs, handled by the same
attorneys, raising the same questions, and founded on the same facts or evidence,
were tried together and only one judgement were handed down. If the plaintiffs
and the court had adopted such procedure, we do not think that the court
jurisdiction would be open to attack on the ground that the judgement, by reason
of the joint trial, adjudicated a greater amount than the law allowed. Yet the only
difference between the hypothetical case we have given and the case at bar is that
in the latter, only one complaint was filed instead of as many as there are plaintiffs.
The sole effect, and we should say the sole purpose, of the new rule on joinder of
225
 parties is to save them unnecessary work, trouble and expense, consistent with
the liberal spirit of the new Rules, and not to enlarge the court's jurisdiction as
applied to the amount in controversy.

It is effect argued that plaintiffs could, through collision, shift the court jurisdiction
if individual demands rather than their aggregate were used as the criterion. It is
the other way around; it is the adoption of the opposite theory, as we see it, which
would open the door to manipulation. Several plaintiffs wishing to avoid trial in the
justice of the peace court could combine their demands in one complaint so as to
put the action beyond the jurisdiction of the inferior court.

In view of the foregoing, the decision appealed from is revoked, and the complaint of the teachers
(appellants herein), ordered reinstated in the municipal court of Manila.

The appellants shall recover costs.

226
G.R. No. L-3211 May 30, 1950

A. SORIANO Y CIA., petitioner-appellant,

vs.
GONZALO M. JOSE, ELPIDIO MENDOZA, ET AL., respondents-appellees.

TUASON, J.:

This an appeal from an order of the Court of First Instance of Manila denying a petition for a
certiorari filed against Judge Almeda Lopez of the municipal court. The question for decision is
whether the jurisdiction of the municipal court is governed by the amount of each claim or by the
aggregate sum of all the claims when there are several plaintiffs suing jointly but having
independent causes of action.

The essential facts are not in dispute. Alleging that prior to August 28, 1948, A. Soriano y Cia,
engaged the plaintiffs as employees or laborers at its surplus department at Sta. Mesa yard in
different capacities, and that on diverse dates between May 17 and September 30, 1948, Soriano
y Cia. had dismissed them without cause, the plaintiffs, twenty-nine in number, brought a joint
complaint in the municipal court, which was docketed as civil case No. 6058, against their former
employer, praying that judgment be rendered sentencing the defendant to pay each of them one
month salary in lieu of 30 days' notice. The total of the claim is P5,235, and the largest single
claim is P300. Contending that the municipal court had no jurisdiction to try the action because
the amount of the demand exceeded P2,000, exclusive of interest and costs, the defendant filed
a motion to dismiss, and, after that motion was denied, instituted proceedings for certiorari in the
Court of First Instance, the result of which is stated at the outset of this decision.

It is admitted that the plaintiffs' demands are separate, distinct and independent of one another.
Nevertheless, it is also admitted that the plaintiffs' joint suit is proper, expressly authorized by
section 6 of Rule 3, entitled "Permissive Joinder of Parties," which provides that "All persons in
whom or against whom any right to relief in respect to or arising out of the same transaction or
series of transactions is alleged to exist, whether jointly severally, or in the alternative, may, except
as otherwise provided in these rules, join as plaintiffs or be joined as defendants in one complaint,
where any question of the law or fact common to all such plaintiffs or to all such defendants may
arise in the action."

The point wherein the parties are not in agreement is whether the claim of each plaintiff or the
aggregate claims of all is the measure of jurisdiction. This question has been the subject of
decisions by American courts. In Hackner vs. Guaranty Trust Co. of New York (4 Fed. Rules
Serv., 378; U.S. Circuit Court of Appeals, Second Circuit, Jan. 13, 1941; 117 F. [2d], 95), it was
held that, "when two or more plaintiffs, each having a separate and distinct demand, join in a
single suit, the demand of each must be of the requisite jurisdictional amount. Aggregation of the
claims to make up the jurisdictional amount is permitted only if the claims are of a joint nature, as
when it is sought to enforce a single right in which plaintiffs have a common interest." As American
Jurisprudence, Vol. 14, p. 413, puts it, "Where several claimants have separate and distinct
demands against a defendant or defendants, which may properly be joined in a single suit, the
227
claims can not be added together to make up the required jurisdictional amount; each separate
claim furnishes the jurisdictional test."

The petitioner believes that the joining of plaintiffs having separate claims should be controlled by
the principle bearing on the court's jurisdiction in suits where one plaintiff alleges in one complaint
several independent causes of action, in which case it is the aggregate amount which determines
the jurisdiction. But there is a fundamental difference between such cases and one like that before
us. In the first, the total demand accrues to one person, while in the latter only part of the combined
demand, which does not exceed the jurisdictional amount, pertains to a single plaintiff. In other
words, the court takes into account what one party would recover and not what is adjudge to all
the parties or some of them.

There would be more similarity if the present case were compared with one in which several
actions commenced by different plaintiffs, handled by the same attorneys, raising the same
questions, and founded on the same facts or evidence, were tried together and only one judgment
were handed down. If the plaintiffs and the court had adopted such procedure, we do not think
that the court's jurisdiction would be open to attack on the ground that the judgment, by treason
of the joint trial, adjudicated a greater amount than the law allowed. Yet the only difference
between the hypothetical case we have given and the case at the bar is that in the latter, only one
complaint was filed instead of as many as there are plaintiffs. The sole effect, and we should say
that the sole purpose, of the new rule on joinder of parties is to save them unnecessary work,
trouble and expense, consistent with the liberal spirit of the new Rules, and not to enlarge the
court's jurisdiction as applied to the amount in controversy.

It is in effect argued that plaintiffs could, through collusion, shift the court's jurisdiction if individual
demands rather than their aggregate were used as the criterion. It is the other way around; it is
the adoption of the opposite theory, as we see it, which would open the trial in the justice of the
peace court combine their demands in one complaint so as to put the action beyond the
jurisdiction of the inferior court.

Upon the foregoing considerations, the judgment appealed from will be affirmed with costs against
the appellant. So ordered.

228
G.R. No. L-66620 September 24, 1986

REMEDIO V. FLORES, petitioner,

vs.
HON. JUDGE HEILIA S. MALLARE-PHILLIPPS, IGNACIO BINONGCAL & FERNANDO
CALION, respondents.

Lucio A. Dixon for respondent F. Calion.

FERIA, J.:

The Court rules that the application of the totality rule under Section 33(l) of Batas Pambansa Blg.
129 and Section 11 of the Interim Rules is subject to the requirements for the permissive joinder
of parties under Section 6 of Rule 3 which provides as follows:

Permissive joinder of parties.-All persons in whom or against whom any

right to relief in respect to or arising out of the same transaction or series
of transactions is alleged to exist, whether jointly, severally, or in the
alternative, may, except as otherwise provided in these rules, join as
plaintiffs or be joined as defendants in one complaint, where any question
of law or fact common to all such plaintiffs or to all such defendants may
arise in the action; but the court may make such orders as may be just to
prevent any plaintiff or defendant from being embarrassed or put to
expense in connection with any proceedings in which he may have no
interest.

Petitioner has appealed by certiorari from the order of Judge Heilia S. Mallare-Phillipps of the
Regional Trial Court of Baguio City and Benguet Province which dismissed his complaint for lack
of jurisdiction. Petitioner did not attach to his petition a copy of his complaint in the erroneous
belief that the entire original record of the case shall be transmitted to this Court pursuant to the
second paragraph of Section 39 of BP129. This provision applies only to ordinary appeals from
the regional trial court to the Court of Appeals (Section 20 of the Interim Rules). Appeals to this
Court by petition for review on certiorari are governed by Rule 45 of the Rules of Court (Section
25 of the Interim Rules).

However, the order appealed from states that the first cause of action alleged in the complaint
was against respondent Ignacio Binongcal for refusing to pay the amount of P11,643.00
representing cost of truck tires which he purchased on credit from petitioner on various occasions
from August to October, 1981; and the second cause of action was against respondent Fernando
Calion for allegedly refusing to pay the amount of P10,212.00 representing cost of truck tires
which he purchased on credit from petitioner on several occasions from March, 1981 to January,
1982.

229
On December 15, 1983, counsel for respondent Binongcal filed a Motion to Dismiss on the ground
of lack of jurisdiction since the amount of the demand against said respondent was only
P11,643.00, and under Section 19(8) of BP129 the regional trial court shall exercise exclusive
original jurisdiction if the amount of the demand is more than twenty thousand pesos
(P20,000.00). It was further averred in said motion that although another person, Fernando
Calion, was allegedly indebted to petitioner in the amount of P10,212.00, his obligation was
separate and distinct from that of the other respondent. At the hearing of said Motion to Dismiss,
counsel for respondent Calion joined in moving for the dismissal of the complaint on the ground
of lack of jurisdiction. Counsel for petitioner opposed the Motion to Dismiss. As above stated, the
trial court dismissed the complaint for lack of jurisdiction.

Petitioner maintains that the lower court has jurisdiction over the case following the "novel" totality
rule introduced in Section 33(l) of BP129 and Section 11 of the Interim Rules.

The pertinent portion of Section 33(l) of BP129 reads as follows:

... Provided,That where there are several claims or causes of action

between the same or different parties, embodied in the same complaint,
the amount of the demand shall be the totality of the claims in all the causes
of action, irrespective of whether the causes of action arose out of the same
or different transactions. ...

Section 11 of the Interim Rules provides thus:

Application of the totality rule.-In actions where the jurisdiction of the court
is dependent on the amount involved, the test of jurisdiction shall be the
aggregate sum of all the money demands, exclusive only of interest and
costs, irrespective of whether or not the separate claims are owned by or
due to different parties. If any demand is for damages in a civil action, the
amount thereof must be specifically alleged.

Petitioner compares the above-quoted provisions with the pertinent portion of the former rule
under Section 88 of the Judiciary Act of 1948 as amended which reads as follows:

... Where there are several claims or causes of action between the same
parties embodied in the same complaint, the amount of the demand shall
be the totality of the demand in all the causes of action, irrespective of
whether the causes of action arose out of the same or different
transactions; but where the claims or causes of action joined in a single
complaint are separately owned by or due to different parties, each
separate claim shall furnish the jurisdictional test. ...

and argues that with the deletion of the proviso in the former rule, the totality rule was reduced to
clarity and brevity and the jurisdictional test is the totality of the claims in all, not in each, of the
causes of action, irrespective of whether the causes of action arose out of the same or different
transactions.

This argument is partly correct. There is no difference between the former and present rules in
cases where a plaintiff sues a defendant on two or more separate causes of action. In such cases,
the amount of the demand shall be the totality of the claims in all the causes of action irrespective
of whether the causes of action arose out of the same or different transactions. If the total demand
exceeds twenty thousand pesos, then the regional trial court has jurisdiction. Needless to state,
if the causes of action are separate and independent, their joinder in one complaint is permissive

230
and not mandatory, and any cause of action where the amount of the demand is twenty thousand
pesos or less may be the subject of a separate complaint filed with a metropolitan or municipal
trial court.

On the other hand, there is a difference between the former and present rules in cases where two
or more plaintiffs having separate causes of action against a defendant join in a single complaint.
Under the former rule, "where the claims or causes of action joined in a single complaint are
separately owned by or due to different parties, each separate claim shall furnish the jurisdictional
test" (Section 88 of the Judiciary Act of 1948 as amended, supra). This was based on the ruling
in the case of Vda. de Rosario vs. Justice of the Peace, 99 Phil. 693. As worded, the former rule
applied only to cases of permissive joinder of parties plaintiff. However, it was also applicable to
cases of permissive joinder of parties defendant, as may be deduced from the ruling in the case
of Brillo vs. Buklatan, thus:

Furthermore, the first cause of action is composed of separate claims

against several defendants of different amounts each of which is not more
than P2,000 and falls under the jurisdiction of the justice of the peace court
under section 88 of Republic Act No, 296. The several claims do not seem
to arise from the same transaction or series of transactions and there seem
to be no questions of law or of fact common to all the defendants as may
warrant their joinder under Rule 3, section 6. Therefore, if new complaints
are to be filed in the name of the real party in interest they should be filed
in the justice of the peace court. (87 Phil. 519, 520, reiterated in Gacula vs.
Martinez, 88 Phil. 142, 146)

Under the present law, the totality rule is applied also to cases where two or more plaintiffs having
separate causes of action against a defendant join in a single complaint, as well as to cases where
a plaintiff has separate causes of action against two or more defendants joined in a single
complaint. However, the causes of action in favor of the two or more plaintiffs or against the two
or more defendants should arise out of the same transaction or series of transactions and there
should be a common question of law or fact, as provided in Section 6 of Rule 3.

The difference between the former and present rules in cases of permissive joinder of parties may
be illustrated by the two cases which were cited in the case of Vda. de Rosario vs. Justice of the
Peace (supra) as exceptions to the totality rule. In the case of Soriano y Cia vs. Jose (86 Phil.
523), where twenty-nine dismissed employees joined in a complaint against the defendant to
collect their respective claims, each of which was within the jurisdiction of the municipal court
although the total exceeded the jurisdictional amount, this Court held that under the law then the
municipal court had jurisdiction. In said case, although the plaintiffs' demands were separate,
distinct and independent of one another, their joint suit was authorized under Section 6 of Rule 3
and each separate claim furnished the jurisdictional test. In the case of International Colleges,
Inc. vs. Argonza (90 Phil. 470), where twenty-five dismissed teachers jointly sued the defendant
for unpaid salaries, this Court also held that the municipal court had jurisdiction because the
amount of each claim was within, although the total exceeded, its jurisdiction and it was a case of
permissive joinder of parties plaintiff under Section 6 of Rule 3.

Under the present law, the two cases above cited (assuming they do not fall under the Labor
Code) would be under the jurisdiction of the regional trial court. Similarly, in the abovecited cases
of Brillo vs. Buklatan and Gacula vs. Martinez (supra), if the separate claims against the several
defendants arose out of the same transaction or series of transactions and there is a common
question of law or fact, they would now be under the jurisdiction of the regional trial court.

In other words, in cases of permissive joinder of parties, whether as plaintiffs or as defendants,

under Section 6 of Rule 3, the total of all the claims shall now furnish the jurisdictional test.
231
Needless to state also, if instead of joining or being joined in one complaint separate actions are
filed by or against the parties, the amount demanded in each complaint shall furnish the
jurisdictional test.

In the case at bar, the lower court correctly held that the jurisdictional test is subject to the rules
on joinder of parties pursuant to Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Court
and that, after a careful scrutiny of the complaint, it appears that there is a misjoinder of parties
for the reason that the claims against respondents Binongcal and Calion are separate and distinct
and neither of which falls within its jurisdiction.

WHEREFORE, the order appealed from is affirmed, without pronouncement as to costs.

SO ORDERED.

232
G.R. No. 164801 June 30, 2006

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
HEIRS OF ESTANISLAO MILITAR AND DEOGRACIAS MILITAR, represented by
TRANQUILINA MILITAR, Respondents.

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

G.R. No. 165165 June 30, 2006

SPOUSES JOHNNY LUCERO AND NONA ARIETE, Petitioners,

vs.
HEIRS OF ESTANISLAO MILITAR, DEOGRACIAS MILITAR, and TRANQUILINA MILITAR
(deceased), now represented by AZUCENA MILITAR, FREDDIE MILITAR, EDUARDO
MILITAR, ROMEO L. MILITAR, NELLY LY BOLANIO, LETICIA LY and DELIA LY SI ASOYCO,
Respondents.

RESOLUTION

YNARES-SANTIAGO, J.:

Before us are the motions for reconsideration filed by petitioners Philippine National Bank (PNB)
in G.R. No. 164801 and Spouses Johnny Lucero and Nona Ariete (Lucero Spouses) in G.R. No.
165165 seeking a reconsideration of our August 18, 2005 Decision in these consolidated cases
which affirmed in toto the June 4, 2004 Decision and August 4, 2004 Resolution of the Court of
Appeals in CA-G.R. CV No. 54831 holding that both petitioners PNB and the Lucero Spouses
were not mortgagee and buyers in good faith, respectively.

In their separate motions for reconsideration, both petitioners PNB and the Lucero Spouses in
the main assert that they were mortgagee and buyers for value in good faith, respectively. Thus,
the Lucero Spouses pray that we "take a second hard look at the facts and circumstances of the
case." Respondents however argue that PNB cannot be considered a mortgagee in good faith as
it failed to inspect the disputed property when offered to it as security for the loan, which could
have led it to discover the forged instruments of sale. Similarly, the Lucero Spouses cannot be
regarded as innocent purchasers for value, respondents’ claim, as they failed to inquire from the
occupants of the disputed property the status of the property. Before revisiting the facts and
circumstances of the instant case, a review of existing jurisprudence may be expedient in
resolving the twin motions for reconsideration.

In Cabuhat v. Court of Appeals, we said that "it is well-settled that even if the procurement of a
certificate of title was tainted with fraud and misrepresentation, such defective title may be the
source of a completely legal and valid title in the hands of an innocent purchaser for value. Thus
–

233
Where innocent third persons, relying on the correctness of the certificate of title thus issued,
acquire rights over the property the court cannot disregard such rights and order the total
cancellation of the certificate. The effect of such an outright cancellation would be to impair public
confidence in the certificate of title, for everyone dealing with property registered under the
Torrens system would have to inquire in every instance whether the title has been regularly or
irregularly issued. This is contrary to the evident purpose of the law. Every person dealing with
registered land may safely rely on the correctness of the certificate of title issued therefor and the
law will in no way oblige him to go behind the certificate to determine the condition of the property. 1

Cabuhat was later invoked by Clemente v. Razo2 and Velasquez, Jr. v. Court of Appeals.3
Accordingly, in Lim v. Chuatoco we said that "it is a familiar doctrine that a forged or fraudulent
document may become the root of a valid title, if the property has already been transferred from
the name of the owner to that of the forger. This doctrine serves to emphasize that a person who
deals with registered property in good faith will acquire good title from a forger and be absolutely
protected by a Torrens title. In the final analysis, the resolution of this case depends on whether
the petitioners are purchasers in good faith."4

In a litany of cases, we have defined a purchaser in good faith as one who buys property of
another without notice that some other person has a right to, or interest in, such property and
pays full and fair price for the same at the time of such purchase or before he has notice of the
claim or interest of some other person in the property.5

Thus, as a general rule, where the land sold is in the possession of a person other than the
vendor, the purchaser must go beyond the certificate of title and make inquiries concerning the
actual possessor. A buyer of real property which is in possession of another must be wary and
investigate the rights of the latter. Otherwise, without such inquiry, the buyer cannot be said to be
in good faith and cannot have any right over the property.6 We explained this principle in
Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals and also held therein that
this rule likewise applies to mortgagees of real property7 –

As this Court explained in the case of Spouses Mathay v. Court of Appeals:

Although it is a recognized principle that a person dealing on a registered land need not go beyond
its certificate of title, it is also a firmly settled rule that where there are circumstances which would
put a party on guard and prompt him to investigate or inspect the property being sold to him, such
as the presence of occupants/tenants thereon, it is of course, expected from the purchaser of a
valued piece of land to inquire first into the status or nature of possession of the occupants, i.e.,
whether or not the occupants possess the land en concepto de dueño, in the concept of the
owner. As is the common practice in the real estate industry, an ocular inspection of the premises
involved is a safeguard a cautious and prudent purchaser usually takes. Should he find out that
the land he intends to buy is occupied by anybody else other than the seller who, as in this case,
is not in actual possession, it would then be incumbent upon the purchaser to verify the extent of
the occupant’s possessory rights. The failure of a prospective buyer to take such precautionary
steps would mean negligence on his part and would thereby preclude him from claiming or
invoking the rights of a "purchaser in good faith."

This Rule equally applies to mortgagees of real property. In the case of Crisostomo v. Court of
Appeals the Court held –

It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should
put a reasonable man upon his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of his vendor or mortgagor. His mere refusal to believe that
such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in
the vendor’s or mortgagor’s title, will not make him an innocent purchaser or mortgagee for value,
234
if it afterwards develops that the title was in fact defective, and it appears that he had such notice
of the defects as would have led to its discovery had he acted with the measure of a prudent man
in like situation.

Accordingly, for a purchaser of a property in the possession of another to be in good faith, he

must exercise due diligence, conduct an investigation, and weigh the surrounding facts and
circumstances like what any prudent man in a similar situation would do. In Domalanta v.
Commission on Elections8 we noted the use in other jurisdictions of the terms "man of reasonable
caution"9 and "ordinarily prudent and cautious man."10 These terms, we said, are legally
synonymous and their reference is not to a person with training in law such as a prosecutor or a
judge but to the average man on the street. It ought to be emphasized that the average man
weighs facts and circumstances without resorting to the calibration of our technical rules of
evidence of which his knowledge is nil. Rather, he relies on the calculus of common sense of
which all reasonable men have an abundance. And, "[b]y law and jurisprudence, a mistake upon
a doubtful or difficult question of law may properly be the basis of good faith."11

On the other hand, a mortgagee, particularly a bank or financial institution whose business is
impressed with public interest, is expected to exercise more care and prudence than a private
individual in its dealings, even those involving registered lands.12 In Sunshine Finance and
Investment Corp. v. Intermediate Appellate Court we presumed that an investment and financing
corporation "is experienced in its business. Ascertainment of the status and condition of properties
offered to it as security for loans it extends must be a standard and indispensable part of its
operations. Surely, it cannot simply rely on an examination of a Torrens certificate to determine
what the subject property looks like as its condition is not apparent in the document. The land
might be in a depressed area. There might be squatters on it. It might be easily inundated. It might
be an interior lot, without convenient access. These and other similar factors determine the value
of the property and so should be of practical concern to the (investment and financing
corporation)."13

In fine, the diligence with which the law requires the individual or a corporation at all times to
govern a particular conduct varies with the nature of the situation in which one is placed, and the
importance of the act which is to be performed.14

Similarly, in ascertaining good faith, or the lack of it, which is a question of intention, courts are
necessarily controlled by the evidence as to the conduct and outward acts by which alone the
inward motive may, with safety, be determined. Good faith, or want of it, is capable of being
ascertained only from the acts of one claiming its presence, for it is a condition of the mind which
can be judged by actual or fancied token or signs.15 Good faith, or want of it, is not a visible,
tangible fact that can be seen or touched, but rather a state or condition of mind which can only
be judged by actual or fancied token or signs.16 Good faith connotes an honest intention to abstain
from taking unconscientious advantage of another.17 Accordingly, in University of the East v.
Jader we said that "[g]ood faith connotes an honest intention to abstain from taking undue
advantage of another, even though the forms and technicalities of law, together with the absence
of all information or belief of facts, would render the transaction unconscientious."18

Withal, in Sigaya v. Mayuga the Court said that "good faith consists in the possessor’s belief that
the person from whom he received the thing was the owner of the same and could convey his
title. Good faith, while it is always to be presumed in the absence of proof to the contrary, requires
a well founded belief that the person from whom title was received was himself the owner of the
land, with the right to convey it. There is good faith where there is an honest intention to abstain
from taking any unconscientious advantage of another. Otherwise stated, good faith is the
opposite of fraud and it refers to the state of mind which is manifested by the acts of the individual
concerned."19

235
Contrastingly, in Magat, Jr. v. Court of Appeals the Court explained that "[b]ad faith does not
simply connote bad judgment or negligence. It imports a dishonest purpose or some moral
obliquity and conscious doing of wrong. It means a breach of a known duty through some motive
or interest or ill will that partakes of the nature of fraud."20 In Arenas v. Court of Appeals the Court
held that the determination of whether one acted in bad faith is evidentiary in nature. 21 Thus
"[s]uch acts (of bad faith) must be substantiated by evidence."22 Indeed, the unbroken
jurisprudence is that "[b]ad faith under the law cannot be presumed; it must be established by
clear and convincing evidence.23

All told, the ascertainment of good faith, or lack of it, and the determination of whether due
diligence and prudence were exercised or not, are questions of fact. And while settled is the
principle that this Court is not a trier of facts24 and the general rule is that the determination of
whether or not a buyer or mortgagee is in good faith is generally outside the province of this Court
to determine in a petition for review,25 inGabriel v. Spouses Mabanta we said that "[t]his rule,
however, is not an iron-clad rule. In Floro v. Llenado we enumerated the various exceptions and
one which finds application to the present case is when the findings of the Court of Appeals are
contrary to those of the trial court."26 Thus, in Clemente v. Razo we held that "the issue of whether
or not one is an innocent purchaser for value is a question of fact which, as a rule, is not for this
Court to determine. In the same breath, however, there are recognized exceptions to such rule,
not the least of which is when, as in this case, the findings of the Court of Appeals are contrary to
that of the trial court."27

In the instant case, the trial court which had the sole opportunity to observe first hand the
demeanor of witnesses and consider the relative weight of the evidence presented, concluded
that "Philippine National Bank and Spouses Johnny Lucero and Nona Ariete are purchasers in
good faith." Respondent appellate court however found that neither the PNB nor the Lucero
Spouses can be regarded as buyers in good faith as they failed to inquire from the possessors
the status of the disputed property. We thus go back to the records of the case and the
substantiated allegations.

We begin with petitioner PNB. While it may be true that the bank could not have known the forgery
committed by the Jalbuna Spouses at the time the disputed property was mortgaged to it, still it
could not be completely exonerated from any liability arising from its apparent omission, if not
negligence, to further investigate the nature of the possession or the title of the respondents who
were the alleged occupants of the property. PNB did not present any witness before the trial court
who had personal knowledge of whether or not the bank had conducted the requisite ocular
inspection or investigation before accepting the property as security for the loan of the Jalbuna
Spouses.

Perhaps PNB inordinately relied on the presumption of regularity in its compliance with the
requirements for the Extrajudicial Foreclosure of Mortgage, such as the publication of the notice
of auction sale, and assumed that the burden of proof was on the respondents to prove that the
bank was remiss in its obligation. Perhaps too, the bank assumed that its presumed compliance
with the foregoing requirements was sufficient to operate as a constructive notice to all those
claiming ownership of or a right to possess the mortgaged property, or those who would be
adversely affected by the impending foreclosure sale. It does not however alter the fact that the
only witness presented by PNB merely inherited from his predecessor the records relating to the
account of the Jalbuna Spouses, and hence had no personal knowledge of whether or not an
ocular inspection was in fact conducted on the property. Thus –

Atty. Bañares:

Q Did you not know whether there was an inspector who made the inspection of the property?

236
A I do not know.28

xxxx

Q So, is it safe to conclude now that you do not know whether Philippine National Bank sent some
inspectors to Lot 3017-B before the loan…

Court:

Answered, he did not know. How will he know?

Atty. Bañares:

That will be all, Your Honor.29

Indeed, had petitioner PNB conducted an ocular inspection as it claims, it would have found out
that the mortgagors, Spouses Jalbuna, were not in actual possession of the property but herein
respondents and their predecessors-in-interest, which information should have put it on inquiry
as to the real status of the property. Consequently, petitioner PNB should have inquired into the
circumstances of the possession by herein respondents and their predecessors in interest.

In fine, there is no showing that petitioner PNB, a banking institution, which is expected to exercise
more care and prudence in its dealings involving registered land, ascertained the status and
condition of the property being offered to it as a security for the loan before it approved the loan.
Hence, we therefore find that there is no reversible error committed by the Court of Appeals in
finding that PNB could not be considered a mortgagee in good faith.

We now go to petitioners Lucero Spouses. The Lucero Spouses knew from the very beginning
that the disputed property was occupied by third parties. They resided in the adjoining property.
Thus, they went beyond the title of petitioner PNB, and upon inquiry, were made to believe that
the partial occupation by private respondents of the disputed property was merely being tolerated
by the rightful owner. Accordingly, before the trial court, petitioner Nona A. Lucero testified that –

Atty. Posecion:

Q Did your mother not tell you that the Militar family has been residing in the land so that it would
be difficult if you buy the land?

A No, because I will make (the) transaction (with) the Philippine National Bank, not (with) the
Militars.

Q So that you disregarded whatever right the Militars have over the land, right?

A No, because the vendee/buyer has the authority to make expenses for all the squatters.30

The Lucero Spouses also knew that petitioner PNB had already acquired the property in a
foreclosure sale and that petitioner PNB had in fact transferred the title to its name for almost five
years already. Their belief that petitioner PNB thereafter had the right to transfer title over the
disputed property was strengthened by the fact that they similarly consolidated their ownership
over the adjoining property after buying it from respondent Romeo Militar and assuming his loan
with petitioner PNB.31

237
The reliance of the Lucero Spouses, who never participated in the auction sale, on the right of
petitioner PNB which had the title in its name for almost five years already is not totally misplaced.
On June 5, 1975 the disputed property was mortgaged to petitioner PNB. Some three years later,
on September 5, 1978, the mortgaged property was extrajudicially foreclosed when the
mortgagors defaulted in the payment of their loan obligation, with petitioner PNB as the sole and
highest bidder for P119,961.36. Some four years thereafter, or on November 11, 1982, a deed of
sale was executed in favor of petitioner PNB after the mortgagors failed to redeem the disputed
property. On December 6, 1982, title over the disputed property was issued to petitioner PNB.
Thus, presented during trial were, among others, the Affidavit of Publication of Sheriff’s Notice of
Sale at Public Auction showing that petitioner PNB complied with the law on extrajudicial
foreclosure of mortgage;32 the Certificate of Sale at Public Auction of September 5, 1978 issued
in favor of petitioner PNB as the highest bidder in the auction sale of the lot covering the disputed
property;33 and the Certification of September 27, 1994 issued by the Register of Deeds of Iloilo
stating that title to the lot covering the disputed property was issued in favor of PNB. 34 All told, it
took almost eight years for petitioner PNB to consolidate its title over the disputed property from
the time it was mortgaged to it.lawphil.net

The Lucero Spouses purchased the disputed property from petitioner PNB as an acquired asset
for P229,000.00 and only on November 9, 1987, or some nine years after it extrajudicially
foreclosed the property, and some five years after title was transferred to it. Hence, we cannot
really say that they acquired the property in bad faith; on the other hand, we are more convinced,
if not for fairness, equity and justice, that they acquired the disputed property in good faith and for
a valuable consideration on the basis of the clean title of the bank.

And between the bank whose proof of ownership is the title acquired after years of foreclosure
proceedings and sale, and the supposed tolerated occupation of herein respondents whose rights
are dubious, and at best vague, petitioners Lucero Spouses cannot be faulted for considering
petitioner PNB as having a better right over herein respondents and could very well rely on the
title of the bank. After all, even this Court has "take(n) judicial notice of the uniform practice of
financing institutions to investigate, examine and assess the real property offered as security for
any loan application."35 It must be remembered that the prudence required of the Lucero Spouses
is not that of a person with training in law, but rather that of an average man who "weighs facts
and circumstances without resorting to the calibration of our technical rules of evidence of which
his knowledge is nil."36 Hence, petitioners Lucero Spouses bought the disputed property with the
honest belief that petitioner PNB was its rightful owner and could convey title to the property. They
can therefore be considered as buyers in good faith as they have exercised due diligence required
under the circumstances.

Also, nowhere in the records does it show that the Lucero Spouses were in bad faith. Neither
were private respondents able to prove it, much less were they able to establish it by clear and
convincing evidence as required by the rules. On the contrary, the trial court found that the Lucero
Spouses acted in good faith "since they bought the lot in question from defendant, Philippine
National Bank."37 They could rely on what appears on the face of the Certificate of Title in light of
the attendant circumstances, especially after considering that the requirements for the
extrajudicial foreclosure of mortgage such as publication and notice appear to have been
religiously complied with by PNB.

In contrast, we find, after a meticulous scrutiny of the records, that the respondents are not entirely
blameless. They have not established their right or interest in the property aside from their belated
and unsubstantiated allegation that they were the successors-in-interest of Deogracias, Glicerio,
Tomas and Caridad, all surnamed Militar. Deogracias died on March 17, 1964, Glicerio on March
22, 1939, Tomas on August 20, 1959, and Caridad on April 29, 1957. Since the deaths of their
alleged predecessors-in-interest, respondents have not shown that they have taken even the
initial steps to have the property registered in their names. Nor have they even alleged that they
238
paid any real property tax on the disputed property like any real owner should do. For this would
have put them on notice that the said property has been registered in the name of a third party.

Thus, to reiterate for emphasis, the Deed of Sale which transferred the property to the Spouses
Jalbuna was executed on April 24, 1975. Clearly, respondents had more than enough time and
opportunity from the death of their ascendants to institute proceedings to have the property
adjudicated to them, if indeed it was true that they were the lawful heirs of Deogracias, Glicerio,
Tomas and Caridad, and were the new owners of the property by succession. This, they did not
do. If they did, the forgery allegedly committed by the Jalbuna Spouses which resulted in the Deed
of Absolute Sale of April 24, 1975 could not have been committed or pushed through and the
Lucero Spouses, as a consequence, would not have been induced to buy the property.

The Jalbuna Spouses acquired title to the property on April 29, 1975. From that time on the
doctrine of "constructive notice" was already in effect against all persons claiming any title or
interests in the property adverse to the registered owners.38

On June 5, 1975, the Spouses Jalbuna mortgaged the property to PNB. On the same date, the
mortgage was registered with the Register of Deeds of Iloilo City. Again, from that date, the
respondents were deemed to have "constructive notice" of the registration.

Philippine National Bank foreclosed the mortgage on September 5, 1978. The Notice of
Extrajudicial Foreclosure of Mortgage was published in a newspaper of general circulation. The
publication likewise operated as "constructive notice" to all persons who would be adversely
affected by the impending foreclosure of the property. A Certificate of Sale over the property was
issued in favor of PNB as the highest bidder in the auction sale. The Certificate of Sale was again
registered and annotated in the title of the property. Again, the respondents had "constructive
notice" of the registration.

On November 11, 1982, PNB consolidated its title to the property and a Deed of Sale was issued
in its favor. On December 6, 1982, a Transfer Certificate of Title was issued in favor of PNB.
Respondents should likewise be charged with notice of such fact. Since that time up to November
9, 1987 when the property was sold to the Lucero Spouses, or for five (5) long years, the property
was an acquired asset of the bank. During this time it can be deduced that it was the bank who
paid the real estate taxes and who appeared as owner in the tax declarations and other
documents pertaining to the property.

It would appear that it was PNB who exercised acts of ownership over the property during the
five-year period, not the respondents who are now claiming to be the owners. There is no
evidence of any act of ownership exercised by the respondents, such as payment of taxes and
introduction of improvements which would have shown, by preponderance of evidence, the right
of ownership to or interest in the property, aside form their occupation thereof by mere tolerance.
Since the death of their predecessors, there has not even been a showing that respondents
verified, inquired or investigated with the Register of Deeds or the Assessor’s Office as to the
status of the property. If only respondents have been more vigilant in the enforcement of their
alleged rights and interests, the property would not have been sold to third persons who paid
valuable consideration thereto. Far from being vigilant, however, respondents have shown sheer
disinterest in their claim to the property, thus leading to the well-founded conclusion that their
claimed ownership rights are not anchored in reality. Vigilantibus sed non dormientibus jura
subveniunt. The law aids the vigilant, not those who slumber on their rights.1avvphil.net

More. On November 9, 1987, the property was sold by PNB to the petitioners Lucero Spouses
and a Transfer Certificate of Title was issued in their name on November 11, 1987. The
respondents however filed their Complaint for reconveyance and damages only on October 2,
1989, or nearly two (2) years after title to the property was issued in favor of the Lucero Spouses.
239
Respondents in fact amended their complaint three (3) times, the last one on December 26, 1994.
Clearly, the actuations of respondents were not normal for those claiming in good faith legitimate
ownership over a parcel of land sufficient to make third persons conclude that their claim is well-
founded as against the registered owner, in this case, PNB. Indeed, respondents were frozen in
the shackles of inactivity for too long. They bestirred themselves for their long slumber after the
Lucero Spouses started to recover possession of the property which is a mere incident to the
ownership that they have already gained. In essence, the respondents slept on their rights, and
hence, must suffer the consequences of their passivity and inaction.

WHEREFORE, the August 18, 2005 Decision of this Court is hereby MODIFIED. The Motion for
Reconsideration of the Philippine National Bank is DENIED WITH FINALITY. However, the
Motion for Reconsideration of the Spouses Johnny Lucero and Nona Ariete is GRANTED, and
the October 18, 1995 Decision of the Regional Trial Court of Iloilo, Br. 38, in Civil Case No. 18836
insofar as it holds Spouses Johnny Lucero and Nona Ariete as innocent purchasers for value in
good faith is REINSTATED and their title to Lot 3017-B under TCT No. 76938 issued on
November 11, 1987 is declared and so confirmed as VALID.

SO ORDERED.

240
THIRD DIVISION

G.R. No. 166519 March 31, 2009

NIEVES PLASABAS and MARCOS MALAZARTE, Petitioners,

vs.
COURT OF APPEALS (Special Former Ninth Division), DOMINADOR LUMEN, and
AURORA AUNZO, Respondents.

DECISION

NACHURA, J.:

Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court are the May
12, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 43085 and the December 1,
2004 Resolution2 denying reconsideration of the challenged decision.

The pertinent facts and proceedings follow.

In 1974, petitioners3 filed a complaint for recovery of title to property with damages before the
Court of First Instance (now, Regional Trial Court [RTC]) of Maasin, Southern Leyte against
respondents. The case was docketed as Civil Case No. R-1949. The property subject of the case
was a parcel of coconut land in Canturing, Maasin, Southern Leyte, declared under Tax
Declaration No. 3587 in the name of petitioner Nieves with an area of 2.6360 hectares.4 In their
complaint, petitioners prayed that judgment be rendered confirming their rights and legal title to
the subject property and ordering the defendants to vacate the occupied portion and to pay
damages.5

Respondents, for their part, denied petitioners’ allegation of ownership and possession of the
premises, and interposed, as their main defense, that the subject land was inherited by all the
parties from their common ancestor, Francisco Plasabas.6

Revealed in the course of the trial was that petitioner Nieves, contrary to her allegations in the
complaint, was not the sole and absolute owner of the land. Based on the testimonies of
petitioners’ witnesses, the property passed on from Francisco to his son, Leoncio; then to Jovita
Talam, petitioner Nieves’ grandmother; then to Antonina Talam, her mother; and then to her and
her siblings—Jose, Victor and Victoria.7

After resting their case, respondents raised in their memorandum the argument that the case
should have been terminated at inception for petitioners’ failure to implead indispensable parties,
the other co-owners – Jose, Victor and Victoria.

In its April 19, 1993 Order,8 the trial court, without ruling on the merits, dismissed the case without
prejudice, thus:

241
This Court, much as it wants to decide the instant case on the merits, being one of the old inherited
cases left behind, finds difficulty if not impossibility of doing so at this stage of the proceedings
when both parties have already rested their cases. Reluctantly, it agrees with the defendants in
the observation that some important indispensable consideration is conspicuously wanting or
missing.

It is not the Court’s wish to turn its back on the crucial part of the case, which is the pronouncement
of the judgment to settle the issues raised in the pleadings of the parties once and for all, after all
the time, effort and expense spent in going through the trial process.

But, rules are rules. They have to be followed, to arrive at a fair and just verdict. Section 7, Rule
3 of the Rules of Court provides:

"x x x 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."

What the Court wants to say here is that the instant case should have been dismissed without
prejudice a long time ago for lack of cause of action as the plaintiffs spouses Marcos Malazarte
and Nieves Plasabas Malazarte have no complete legal personality to sue by themselves alone
without joining the brothers and sisters of Nieves who are as INDISPENSABLE as the latter in
the final determination of the case. Not impleading them, any judgment would have no
effectiveness.

They are that indispensable that a final decree would necessarily affect their rights, so that the
Court cannot proceed without their presence. There are abundant authorities in this regard. Thus
–

"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. (People, et al. v. Rodriguez, et al., G.R. Nos.
L-14059-62, September 30, 1959) (sic)

"Parties in interest without whom no final determination can be had of an action shall be joined
either as plaintiffs or defendants. (Sec. 7, Rule 3, Rules of Court). The burden of procuring the
presence of all indispensable parties is on the plaintiff. (39 Amjur [sic] 885). The evident purpose
of the rule is to prevent the multiplicity of suits by requiring the person arresting a right against the
defendant to include with him, either as co-plaintiffs or as co-defendants, all persons standing in
the same position, so that the whole matter in dispute may be determined once and for all in one
litigation. (Palarca v. Baginsi, 38 Phil. 177, 178).

"An indispensable party is a party who has such an interest in the controversy or subject matter
that a final adjudication cannot be made, in his absence, without inquiring or affecting such
interest; a party who has not only an interest of such a nature that a final decree cannot be made
without affecting his interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience. (67 C.J.S. 892).
Indispensable parties are those without whom no action can be finally determined." (Sanidad v.
Cabataje, 5 Phil. 204)

242
WHEREFORE, IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, both the complaint and
the counterclaim in the instant case are ordered DISMISSED without prejudice. No
pronouncement as to costs.

SO ORDERED.9

Aggrieved, petitioners elevated the case to the CA. In the challenged May 12, 2004 Decision, 10
the appellate court affirmed the ruling of the trial court. The CA, further, declared that the non-
joinder of the indispensable parties would violate the principle of due process, and that Article 487
of the Civil Code could not be applied considering that the complaint was not for ejectment, but
for recovery of title or a reivindicatory action.11

With their motion for reconsideration denied in the further assailed December 1, 2004
Resolution,12 petitioners filed the instant petition.

The Court grants the petition and remands the case to the trial court for disposition on the merits.

Article 487 of the Civil Code provides that any one of the co-owners may bring an action for
ejectment.1avvphi1.zw+ The article covers all kinds of actions for the recovery of possession,
including an accion publiciana and a reivindicatory action. A co-owner may file suit without
necessarily joining all the other co-owners as co-plaintiffs because the suit is deemed to be
instituted for the benefit of all. Any judgment of the court in favor of the plaintiff will benefit the
other co-owners, but if the judgment is adverse, the same cannot prejudice the rights of the
unimpleaded co-owners.13

With this disquisition, there is no need to determine whether petitioners’ complaint is one for
ejectment or for recovery of title. To repeat, Article 487 of the Civil Code applies to both actions.

Thus, petitioners, in their complaint, do not have to implead their co-owners as parties. The only
exception to this rule is when the action is for the benefit of the plaintiff alone who claims to be
the sole owner and is, thus, entitled to the possession thereof. In such a case, the action will not
prosper unless the plaintiff impleads the other co-owners who are indispensable parties.14

Here, the allegation of petitioners in their complaint that they are the sole owners of the property
in litigation is immaterial, considering that they acknowledged during the trial that the property is
co-owned by Nieves and her siblings, and that petitioners have been authorized by the co-owners
to pursue the case on the latter’s behalf.15 Impleading the other co-owners is, therefore, not
mandatory, because, as mentioned earlier, the suit is deemed to be instituted for the benefit of
all.

In any event, the trial and appellate courts committed reversible error when they summarily
dismissed the case, after both parties had rested their cases following a protracted trial
commencing in 1974, on the sole ground of failure to implead indispensable parties. The rule is
settled that the non-joinder of indispensable parties is not a ground for the dismissal of an action.
The remedy is to implead the non-party claimed to be indispensable. Parties may be added by
order of the court on motion of the party or on its own initiative at any stage of the action and/or
at such times as are just. If petitioner refuses to implead an indispensable party despite the order
of the court, the latter may dismiss the complaint/petition for the plaintiff’s/petitioner's failure to
comply therewith.16

WHEREFORE, premises considered, the instant petition is GRANTED, and the case is
REMANDED to the trial court for appropriate proceedings. The trial court is further DIRECTED to
decide on the merits of the civil case WITH DISPATCH.
243
SO ORDERED.

G.R. No. 151900 August 30, 2005

CHRISTINE CHUA, Petitioners,

vs.
JORGE TORRES and ANTONIO BELTRAN, Respondents.

DECISION

Tinga, J.:

The Court settles an issue, heretofore undecided, on whether the absence of the signature in the
required verification and certification against forum-shopping of a party misjoined as a plaintiff is
a valid ground for the dismissal of the complaint. We rule in the negative.

The relevant facts in this Petition for Review are culled from the records.

On 24 October 2001, a complaint for damages was lodged before the Regional Trial Court (RTC)
of Caloocan City, Branch 126.1 The complaint was filed by Christine Chua, herein petitioner,
impleading her brother Jonathan Chua as a necessary co-plaintiff. Named as defendants in the
suit were herein respondents Jorge Torres and Antonio Beltran. Torres was the owner of the 9th
Avenue Caltex Service Center (Caltex Service Center), while Beltran was an employee of the
said establishment as the head of its Sales and Collection Division.2

The complaint alleged that on 3 April 2000, Jonathan Chua issued in favor of the Caltex Service
Center his personal Rizal Commercial Banking Corporation (RCBC) Check No. 0412802 in the
amount of Nine Thousand Eight Hundred Forty Nine Pesos and Twenty Centavos (P9,849.20) in
payment for purchases of diesel oil. However, the check was dishonored by the drawee bank
when presented for payment on the ground that the account was closed. Beltran then sent
petitioner a demand letter informing her of the dishonor of the check and demanding the payment
thereof. Petitioner ignored the demand letter on the ground that she was not the one who issued
the said check.

Without bothering to ascertain who had actually issued the check, Beltran instituted against
petitioner a criminal action for violation of Batas Pambansa Bilang 22 (B.P. 22). Subsequently, a
criminal information was filed against petitioner with the Metropolitan Trial Court (MTC) of
Caloocan City, Branch 50.3 The MTC then issued a warrant of arrest against petitioner. The police
officers tasked with serving the warrant looked for her in her residence, in the auto repair shop of
her brother, and even at the Manila Central University were she was enrolled as a medical
student, all to the alleged embarrassment and "social humiliation" of petitioner. 4

Beltran’s purported negligence amounted to either malicious prosecution or serious defamation

in prosecuting petitioner resulting from the issuance of a check she herself did not draw, and
served cause for a claim of moral damages. On the other hand, Torres, as employer of Beltran,
was alleged to have failed to observe the diligence of a good father of the family to prevent the
damage suffered by petitioner. Exemplary damages and attorney’s fees were likewise sought,
thus bringing the
5
aggregate total of damages claimed to Two Million Pesos (P2,000,000.00), plus costs of suit.
244
Significantly, while Jonathan Chua was named as a plaintiff to the suit, it was explicitly qualified
in the second paragraph of the complaint that he was being "impleaded here-in as a necessary
party-plaintiff".6 There was no allegation in the complaint of any damage or injury sustained by
Jonathan, and the prayer therein expressly named petitioner as the only party to whom
respondents were sought to recompense.7 Neither did Jonathan Chua sign any verification or
certification against forum-shopping, although petitioner did sign an attestation, wherein she
identified herself as "the principal plaintiff".8

Upon motion of respondents, the RTC ordered the dismissal of the complaint9 on the ground that
Jonathan Chua had not executed a certification against forum-shopping. The RTC stressed that
Section 5, Rule 7 of the Rules of Civil Procedure, the rule requiring the

certification, makes no distinction whether the plaintiff required to execute the certification is a
principal party, a nominal party or a necessary party. Instead, the provision requires that a plaintiff
or principal party who files a complaint or initiatory pleading execute such certification. Jonathan
Chua, being a plaintiff in this case, was obliged to execute or sign such certification.10 Hence, his
failure to do so in violation of the mandatory rule requiring the certification against forum-shopping
constituted valid cause for the dismissal of the petition.11

After the RTC denied the motion for reconsideration12 lodged by petitioner, the matter was
elevated directly to this Court by way of petition for review under Rule 45, raising a purely legal
question,13 cast, if somewhat unwieldily, as "whether or not a co-plaintiff impleaded only as a
necessary party, who however has no claim for relief or is not asserting any claim for relief in the
complaint, should also make a certification against forum shopping."14

Preliminarily, it bears noting that Jonathan Chua did not sign as well any verification to the
complaint, ostensibly in violation of Section 7, Rule 4 of the Rules of Civil Procedure. The RTC
failed to mention such fact, as does petitioner in her present petition. In their arguments before
this Court, respondents do refer in passing to the verification requirement15, but do not place any
particular focus thereto. The verification requirement is separate from the certification
requirement.16 It is noted that as a matter of practice, the verification is usually accomplished at
the same time as the certification against forum-shopping; hence the customary nomenclature,
"Verification and Certification of Non Forum-Shopping" or its variants. For this reason, it is quite
possible that the RTC meant to assail as well the failure of Jonathan Chua to verify the complaint.

The verification requirement is significant, as it is intended to secure an assurance that the

allegations in the pleading are true and correct and not the product of the imagination or a matter
of speculation, and that the pleading is filed in good faith.17 The absence of a proper verification
is cause to treat the pleading as unsigned and dismissible.18 It would be as well that the Court
discuss whether under the circumstances, Jonathan Chua is also required to execute a
verification in respect to petitioner’s complaint.

Having established the proper parameters of the petition, we proceed to the core issues. We find
the petition has merit, although we appreciate the situation differently from petitioner. Our decision
proceeds from the fundamental premise that Jonathan Chua was misjoined as a party plaintiff in
this case.

It is elementary that it is only in the name of a real party in interest that a civil suit may be
prosecuted.19 Under Section 2, Rule 3 of the Rules of Civil Procedure, a real party in interest is
the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to
the avails of the suit. "Interest" within the meaning of the rule means material interest, an interest
in issue and to be affected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest.20 One having no right or interest to protect cannot invoke
the jurisdiction of the court as a party plaintiff in an action.21 To qualify a person to be a real party
245
in interest in whose name an action must be prosecuted, he must appear to be the present real
owner of the right sought to enforced.22

The subject complaint does not allege any rights of Jonathan Chua violated by respondents,
present any rights of his to be enforced, or seek in his behalf any rights to the avails of suit. In
short, Jonathan claims nothing, and for nothing, in the subject complaint. If he alone filed the
complaint, it would have been dismissed on the ground that the complaint states no cause of
action, instituted as it was by a person who was not a real party in interest.

But was it proper for petitioner to have even impleaded Jonathan as a co-plaintiff in the first place?
Petitioner alleged in her complaint that Jonathan was a necessary party, and remains consistent
to that claim even before this Court. She however fails to demonstrate how Jonathan can be
considered as a necessary party, other than by noting that he was "the one who really
issued the check in controversy."23 Such fact, if proven, may establish the malice of respondents
in filing the criminal case against petitioner for violation of B.P. 22, but does not create the need
to require Jonathan’s participation as a necessary party.

Section 8, Rule 7 of the Rules of Civil Procedure defines a necessary party as "one who is not
indispensable but who ought to be joined as a party if complete relief is to be accorded as to those
already parties, or for a complete determination or settlement of the claim subject of the action." 24
Necessary parties are those whose presence is necessary to adjudicate the whole controversy,
but whose interests are so far separable that a final decree can be made in their absence without
affecting them.25

An example of a necessary party may be found in Seno v. Mangubat.26 Petitioner therein sold her
property through a deed of sale to three vendees. Two of the vendees then sold their shares to
the third buyer, who then sold the property to another set of persons. Thereafter, petitioner, who
claimed that the true intent of the first sale was an equitable mortgage, filed a complaint seeking
the reformation of the deed of sale and the annulment of the second sale. The question arose
whether the two vendees who had since disposed of their shares should be considered as
indispensable parties or necessary parties. In concluding that they were only necessary parties,
the Court reasoned:

In the present case, there are no rights of defendants Andres Evangelista and Bienvenido
Mangubat to be safeguarded if the sale should be held to be in fact an absolute sale nor if the
sale is held to be an equitable mortgage. Defendant Marcos Mangubat became the absolute
owner of the subject property by virtue of the sale to him of the shares of the aforementioned
defendants in the property. Said defendants no longer have any interest in the subject
property. However, being parties to the instrument sought to be reformed, their presence
is necessary in order to settle all the possible issues of the controversy. Whether the
disputed sale be declared an absolute sale or an equitable mortgage, the rights of all the
defendants will have been amply protected. Defendants-spouses Luzame in any event may
enforce their rights against defendant Marcos Mangubat.27

In Seno, the persons deemed by the Court as necessary parties may have had already disposed
of their interests in the property. However, should the lower court therein grant the prayer for the
reformation of the deed of sale, the ruling will undoubtedly have an effect on such parties, on
matters such as the purchase price which they may have received, and on whatever transmission
of rights that may have occurred between them and the vendor.

In contrast, Jonathan Chua does not stand to be affected should the RTC rule either favorably or
unfavorably of the complaint. This is due to the nature of the cause of action of the complaint,
which alleges an injury personal to petitioner, and the relief prayed for, which is to be adjudicated

246
solely to petitioner. There is no allegation in the complaint alleging any violation or omission of
any right of Jonathan, either arising from contract or from law.

It may be so that Jonathan may be called to testify by his sister, in order to prove the essential
allegation that she did not issue the check in question, and perhaps such testimony would be vital
to petitioner’s cause of action. But this does not mean that Jonathan should be deemed a
necessary party, as such circumstance would merely place him in the same class as those
witnesses whose testimony would be necessary to prove the allegations of the complaint. But the
fact remains that Jonathan would stand unaffected by the final ruling on the complaint. The judicial
confirmation or rejection of the allegations therein, or grant or denial of the reliefs prayed for will
not infringe on or augment any of his rights under the law. If there would be any effect to Jonathan
of the RTC’s ultimate decision on the complaint, it would be merely emotional, arising from
whatever ties of kinship he may retain towards his sister, and no different from whatever effects
that may be similarly sustained on petitioner’s immediate family.

Since we are unconvinced by petitioner’s basic premise that Jonathan was a necessary party, it
is unnecessary to directly settle the issue as couched by petitioner of "whether or not a co-plaintiff
impleaded only as a necessary party, who however has no claim for relief or is not asserting any
claim for relief in the complaint, should also make a certification against forum shopping." 28 We
can note, as the RTC did, that Section 5, Rule 7 of the 1997 Rules of Civil Procedure makes no
distinctions that would expressly exempt a necessary party from executing the certification against
forum shopping. Nonetheless, there are dimensions to the matter, heretofore unraised, that may
unsettle a strict application of the rule, such as if the necessary party is impleaded as a plaintiff
or counterclaimant without his knowledge or against his will.29 But these circumstances relevant
to a necessary party are not present in this case, and thus require no further comment upon for
now.

Instead, what the Court may rule upon is whether the absence of the signature of the person
misjoined as a party-plaintiff in either the verification page or certification against forum-shopping
is ground for the dismissal of the action. We rule that it is not so, and that the RTC erred in
dismissing the instant complaint. There is no judicial precedent affirming or rejecting such a view,
but we are comfortable with making such a pronouncement. A misjoined party plaintiff has no
business participating in the case as a plaintiff in the first place, and it would make little sense to
require the misjoined party in complying with all the requirements expected of plaintiffs.

At the same time, Section 11, Rule 3 of the 1997 Rules of Civil Procedure states:

Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties
may be dropped or added by order of the court on motion of any party or on its own initiative at
any stage of the action and on such terms as are just. Any claim against a misjoined party may
be severed and proceeded with separately.30

Clearly, misjoinder of parties is not fatal to the complaint. The rule prohibits dismissal of a suit on
the ground of non-joinder or misjoinder of parties.31 Moreover, the dropping of misjoined parties
from the complaint may be done motu proprio by the court, at any stage, without need for a motion
to such effect from the adverse party.32 Section 11, Rule 3 indicates that the misjoinder of parties,
while erroneous, may be corrected with ease through amendment, without further hindrance to
the prosecution of the suit.

It should then follow that any act or omission committed by a misjoined party plaintiff should not
be cause for impediment to the prosecution of the case, much less for the dismissal of the suit.
After all, such party should not have been included in the first place, and no efficacy should be
accorded to whatever act or omission of

247
the party.33 Since the misjoined party plaintiff receives no recognition from the court as either an
indispensable or necessary party-plaintiff, it then follows that whatever action or inaction the
misjoined party may take on the verification or certification against forum-shopping is
inconsequential. Hence, it should not have mattered to the RTC that Jonathan Chua had failed to
sign the certification against forum-shopping, since he was misjoined as a plaintiff in the first
place. The fact that Jonathan was misjoined is clear on the face of the complaint itself, and the
error of the RTC in dismissing the complaint is not obviated by the fact that the adverse party
failed to raise this point. After all, the RTC could have motu proprio dropped Jonathan as a plaintiff,
for the reasons above-stated which should have been evident to it upon examination of the
complaint.

There may be a school of thought that would nonetheless find some satisfaction in petitioner’s
woes before the RTC, as it was her error in the first place of wrongfully impleading her brother as
a party plaintiff which ultimately served as cause for the dismissal of the complaint. The blame
may in the final analysis lie with petitioner, yet we should not construe the rules of procedure to
quench an unnecessary thirst to punish at the expense of the intellectual integrity of the rules. For
our Rules of Court do not regard the misjoinder of parties as an error of fatal consequence, and
the logical extension of this principle is to consider those procedural acts or omissions of misjoined
parties as of similar import.

WHEREFORE, the Petition is GRANTED. The Orders dated 3 December 2001 and 15 January
2002 of the Regional Trial Court of Caloocan City, Branch 126, in Civil Case No. C-19863 are
SET ASIDE, and the Complaint in the aforementioned case is REINSTATED. The lower court is
enjoined to hear and decide the case with deliberate dispatch. No pronouncement as to costs.

SO ORDERED.

248
G.R. No. L-44339 December 2, 1987

CRISANTA F. SENO, CAROLA SENO SANTOS, MANUEL SENO, JR., DIANA SENO
CONDER, EMILY SENO and WALTER SENO, plaintiffs,
vs.
MARCOS MANGUBAT and Spouses FRANCISCO LUZAME and VERGITA PENAFLOR,
ANDRES EVANGELISTA and BIENVENIDO MANGUBAT, defendants.

GANCAYCO, J.:

This is an appeal that was certified to this Court by the Court of Appeals 1 from the order of the
Court of First Instance of Rizal, Branch 1, dated September 29,1972 in Civil Case No. 12205
dismissing the action for reformation of instrument and annulment of subsequent sale. 2

This case stemmed from a complaint filed by plaintiffs on August 29, 1969 seeking 1) the
reformation of a Deed of Sale executed in favor of defendant Marcos Mangubat and, 2) the
annulment of a subsequent sale to defendant spouses Francisco Luzame and Vergita Penaflor
of a parcel of land in Barrio Dongalo, Paranaque, Rizal covered by OCT No. 1197 of the Land
Registry of Rizal.

The material allegations of the complaint so far as they affect the present appeal are to the
following effect: that plaintiff Crisanta Seno, a widow, approached defendant Marcos Mangubat
sometime in 1961 to negotiate with him a mortgage over the subject parcel of land so she can
pay off a previous indebtedness; that she had herein defendant agreed on a mortgage for the
sum of P15,000.00 with interest of 2% a month payable every month and that as long as the
interest is being paid, the mortgage over the property will not be foreclosed; that on the assurance
of defendant Marcos Mangubat, a practicing lawyer, that he win respect their true agreement on
the mortgage, plaintiff Crisanta F. Seno agreed to the execution of a Deed of Absolute Sale over
the subject property for a consideration of P5,000.00 in favor of defendant Marcos Mangubat and
certain Andres Evangelista and Bienvenido Mangubat on July 17, 1961; 3 that defendant Marcos
Mangubat was able to obtain a title in his name and the other alleged vendees Andres Evangelista
and Bienvenido Mangubat; that on January 8, 1962 Andres Evangelista and Bienvenido
Mangubat executed a Deed of Absolute Sale transferring their share in the subject property to
defendant Marcos Mangubat; that defendant Marcos Mangubat was able to obtain a title over the
subject property in his name by virtue of this latter sale; that plaintiff Crisanta F. Seno continued
paying defendant Marcos Mangubat the usurious 2% interest per month; that sometime in 1963,
when plaintiff Crisanta F. Seno failed to pay the monthly interest of 2%, she was sued for
ejectment by defendant Marcos Mangubat alleging non-payment of rentals; that sometime in the
later week of January 1969, plaintiff Crisanta F. Seno learned that defendant Marcos Mangubat
sold the subject property in favor of spouses Francisco Luzame and Vergita Penaflor for the sum
of P10,000.00 on January 14, 1969; 4 that defendant spouses Francisco Luzame and Vergita
Penaflor bought the property in bad faith since they had knowledge of the circumstances
surrounding the transaction between plaintiff and defendant Marcos Mangubat; that defendant
spouses Luzame filed an ejectment case against plaintiff Crisanta Seno for alleged non-payment
of rentals.

249
On motion of defendant spouses Luzame and Penaflor, the trial court ordered on October 20,
1975 the inclusion as defendants of Andres Evangelista and Bienvenido Mangubat on the ground
that they are indispensable parties, on December 29, 1971, plaintiffs filed their amended
complaint in compliance with the court's order of October 20, impleading Andres Evangelista and
Bienvenido Mangubat as defendants.

The newly impleaded defendants moved for the dismissal of the case against them on the ground
of prescription which motion was granted by the court in its order of July 3, 1972, the dispositive
portion of which reads —

xxx xxx xxx

Considering that under Art. 1144 of the Civil Code of the Philippines, an
action upon a written contract must be brought within 10 years from the
time the right of action accrued, and considering further the opposition of
plaintiffs which we find to be justified and meritorious, this Court resolves
to dismiss as it hereby dismisses the case only as against defendants
Andres Evangelista and Bienvenido Mangubat.

xxx xxx xxx 5

Defendants Luzame and Penaflor in their motion for reconsideration represented by Atty. Jose
Manacop and defendant Marcos Mangubat in his Supplement to motion for reconsideration or in
support of Atty. Manacop's motion for reconsideration asked the court a quo to dismiss the case
against all the defendants. The court a quo in its order of September 27, 1972 reconsidered its
order of July 3rd and dismissed the case against all the defendants holding that the court is no
longer in a position to grant plaintiffs' demands, principally the reformation of subject Deed of
Absolute Sale.

The motion for reconsideration filed by the plaintiffs of the foregoing order was denied by the trial
court in its order of January 17, 1973; 6 hence, an appeal was brought before the Court of Appeals
praying for the reversal of the orders of the court a quo dated September 27, 1972 and January
17, 1973 and for the remand of the case to the court a quo for further proceedings.

The Court of Appeals certified the instant case to this Court holding that the assignment of errors
made by plaintiffs in their appeal raised purely legal questions, to wit —

1) Are defendants Andres Evangelista and Bienvenido Mangubat indispensable parties in

the case without whom no action can be properly taken thereon?

2) If they are such, has the action prescribed against them in view of Art. I 1 44, Civil
Code?

3) If they are not, was the dismissal of said defendants a legal grounds for dismissal of
the complaint as against the other defendants? and

4) Was the dismissal of the case without a hearing on the merits in accordance with law?
7

The first issue We need to resolve is whether or not defendants Andres Evangelista and
Bienvenido Mangubat are indispensable parties. Plaintiffs contend that said defendants being
more dummies of defendant Marcos Mangubat and therefore not real parties in interest, there is
no room for the application of Sec. 7, Rule 3 of the Revised Rules of Court.
250
For the determination of this issue, We find it necessary to consider the distinction between
indispensable and proper parties as clearly stated in Sections 7 and 8, Rule 3 of the Revised
Rules of Court which provide:

Sec. 7. Compulsory joinder of indispensable parties. — Parties in interest without whom

no final determination can be had of an action shall be joined either as plaintiffs or
defendants.

Sec. 8. Joinder of proper parties. — When persons who are not indispensable but who
ought to be parties if complete relief is to be accorded as between those already parties,
have not been made parties and are subject to the jurisdiction of the court as to both
service of process and venue, the court shall order them summoned to appear in the
action. But the court may, in its discretion, proceed in the action without making such
persons parties, and the judgment rendered therein shall be without prejudice to the
rights of such persons.

Under Section 7, indispensable parties must always be joined either as plaintiffs or defendants,
for the court cannot proceed without them. Necessary parties 8 must be joined, under Section 8,
in order to adjudicate the whole controversy and avoid multiplicity of suits. 9

Indispensable parties are those with such an interest in the controversy that a final decree would
necessarily affect their rights, so that the courts cannot proceed without their presence. Necessary
parties are those whose presence is necessary to adjudicate the whole controversy, but whose
interests are so far separable that a final decree can be made in their absence without affecting
them. 10

Defendants cite Alberto vs. Mananghala 11 to support their theory that defendants Andres
Evangelista and Bienvenido Mangubat are indispensable parties. Thus —

xxx xxx xxx

One of the issues raised by the parties is whether the transactions carried out by and
between Arcadio Ramos and the deceased Vicente Feliciano is a sale with pacto de retro
or simply an equitable mortgage. If it be held that it is an equitable mortgage, then their
right would be defeated and they would be held liable for warranty and eviction under the
law to Casimiro Mananghala This being so, it would seem clear that the presence of all
the heirs of Vicente Feliciano in this case is indispensable in order that they may protect
their interests. They are entitled to be heard. They may have a valid defense which may
have the effect of defeating the claim of the plaintiffs. This however, was not done, for
some of the heirs of Vicente Feliciano were not served with summons and consequently
have not entered their appearance. This is in violation of Section 7, Rule 3 of the Rules
of Court.

xxx xxx xxx

We, however, find this case inapplicable to the case at bar.

In the present case, there are no rights of defendants Andres Evangelista and Bienvenido
Mangubat to be safeguarded if the sale should be held to be in fact an absolute sale nor if the
sale is held to be an equitable mortgage. Defendant Marcos Mangubat became the absolute
owner of the subject property by virtue of the sale to him of the shares of the aforementioned
defendants in the property. Said defendants no longer have any interest in the subject property.
However, being parties to the instrument sought to be reformed, their presence is necessary in
251
order to settle all the possible issues of tile controversy. Whether the disputed sale be declared
an absolute sale or an equitable mortgage, the rights of all the defendants will have been amply
protected. Defendants-spouses Luzame in any event may enforce their rights against defendant
Marcos Mangubat.

In fact the plaintiffs were not after defendants Andres Evangelista and Bienvenido Mangubat as
shown by their non-inclusion in the complaint and their opposition to the motion to include said
defendants in the complaint as indispensable parties. It was only because they were ordered by
the court a quo that they included the said defendants in the complaint. The lower court
erroneously held that the said defendants are indispensable parties.

Notwithstanding, defendants Andres Evangelista and Bienvenido Mangubat not being

indispensable parties but only proper parties, their joinder as parties defendants was correctly
ordered being in accordance with Sec. 8 of Rule 3.

We, therefore, need to settle the next issue of whether the action against them has prescribed in
view of Art. 1144, Civil Code, which provides:

The following actions must be brought ten years from the time the right of
action accrues:

1) Upon a written contract;

xxx xxx xxx

The complaint clearly alleged that the deed of sale executed on July 17, 1961 did not express the
true intention of the parties and should be reformed into the mortgage it actually was. Such
allegations are binding for purposes of determining the motion to dismiss (which hypothetically
admits the allegations in the complaint). The prescriptive period for such actions based upon a
written contract and for reformation thereof is ten years as provided in Article 1144 of the Civil
Code. Such right to reformation is expressly recognized in Article 1365 of the same Code which
provides:

If two parties agree upon the mortgage or pledge of real or personal

property, but the instrument states that the property is sold absolutely or
with a right of repurchase, reformation of the instrument is proper. 12

Article 1605 of the Civil Code 13 in conjunction with Article 1604 14 likewise allows the apparent
vendor to ask for the reformation of the instrument.

Plaintiffs argue that:

A grave and palpable error was committed by the court a quo in holding that the
prescriptive period must be counted from the date of execution of the deed of sale on
July 17, 1961 up to the date of filing of the Amended Complaint on December 29, 1971.

The important reckoning point is the date of filing of the original complaint on August 29,
1969. It has been held that amendments in pleadings do not necessarily expunge those
previously filed; That amendments made, more so when ordered by the court, relate back
to the date of the original complaint, as in the case at bar, the claim asserted in the
amended pleading arose out of the same conduct, transaction or occurrence, and that
amendment presupposes the existence of something to be amended, and, therefore, the

252
 tolling of the period should relate back to the filing of the pleading sought to be amended
(Philippine Independent Church v. Mateo, et al., L-14793, April 28, 1961). 15

In the case of Pangasinan Transportation Co. vs. Philippine Farming Co., Ltd., 16 this Court held
that where the original complaint states a cause of action but does it imperfectly and afterwards
an amended complaint is filed correcting the defect, the plea of prescription will relate to the time
of the filing of the original complaint. However, in the case of Aetna Insurance Co. vs. Luzon
Stevedoring Corporation, 17 We held that this rule would not apply to the party impleaded for the
first time in the amended complaint.

In Aetna, the defendant Barber Lines Far East Service was impleaded for the first time in the
amended complaint which was filed after the one-year period for prescription. The order of the
lower court dismissing the amended complaint against the said defendant was affirmed by this
Court.

In the instant case, defendants Andres Evangelista and Bienvenido Mangubat were only
impleaded in the amended complaint of December 29, 1971 or ten (10) years, five (5) months
and twelve (12) days from July 17, 1961 the date of execution of the subject Deed of Absolute
Sale, clearly more than the ten (10) year prescriptive period.

Anent the third and fourth issues, the theory of the plaintiffs is that the complaint should not have
been dismiss as against said defendants but instead the court a quo should have proceeded with
a trial on the merits because there is an issue of fact appearing on the pleadings, that is, that
defendants Andres Evangelista and Bienvenido Mangubat were mere dummies of defendant
Marcos Mangubat.

It should be remembereenvenidd that the court a quo dismissed the complaint against defendants
Andres Evangelista and Bio Mangubat upon their motion to dismiss on the ground of prescription.

Section 3, Rule 16 relating to motion to dismiss , provides that "after hearing, the court may deny
or grant the motion or allow amendment, or may defer the hearing and determination of the motion
until the trial if the ground alleged therein does not appear to be indubitable."

A motion to dismiss on the ground of prescription will be given due course only if the complaint
shows upon its face that the action has already prescribed. 18 If it does not so appear, the
determination of the motion to dismiss must be deferred until trial. 19

Under the circumstances of this case, the ground of prescription alleged by aforementioned
defendants was apparent on the face of the complaint. As earlier pointed out in this decision, the
action against said defendants has prescribed. The court a quo properly ordered its dismissal as
what it originally did in its order of July 3, 1972.

The plaintiffs now maintain that assuming the action against defendants Andres Evangelista and
Bienvenido Mangubat had already prescribed, this defense was personal to them and could not
legally encompass the position of defendant Marcos Mangubat; that the latter defendant, could
be held solely responsible to plaintiffs, having become absolute owner of the property subject
matter of the July 17, 1961 instrument, or in the least he could be held accountable for his 1/3
share of the property. 20

One case which the lower court particularly applied to justify dismissal of the case against the
other defendants was Pillado vs. Francisco. 21 In said case, plaintiffs filed an action for the
annulment of the contract of sale of a certain real estate executed by the Philippine National Bank
(PNB) in favor of the spouses Estela Francisco and Vivencio Lasala Defendant PNB submitted
253
an answer while defendant spouses filed a motion to dismiss on the ground that the complaint
stated no cause of action and that plaintiffs have no legal capacity to sue. Said defendant spouses
subsequently filed an additional motion to dismiss on the ground that the cause of action of
plaintiff, if any, had prescribed. The court ordered the dismissal of the complaint which dismissal
became final. Plaintiffs then asked the court to continue the case against PNB but the latter moved
for the dismissal on the ground that the court had lost, or had been divested of its jurisdiction over
the case through the release of the defendant spouses, who were indispensable parties. The
court granted the motion to dismiss holding that defendant spouses who were the vendees were
indispensable parties in an action for the rescission of the sale. From this order, the plaintiff
appealed to this Court. This Court affirmed the order holding that the indispensable parties having
been discharged by the trial court, the Court is no longer in a position to grant the plaintiff's
demands, principally the revocation of the Deed of Sale in their favor.

As We have already held that defendants Andres Evangelista and Bienvenido Mangubat are not
indispensable but proper parties, Pillado cannot therefore, be applied to the case at bar. In that
case, the parties discharged were indispensable being the purchasers and the present holders of
the subject property. In the instant case, the parties discharged were the original vendees who
have since transferred their interest in the subject property to one of the original co-vendees, and
the latter after having been vested with absolute title over the subject property sold the same to
defendants spouses Luzame. Whereas in the former case, the court was no longer in a position
to grant the relief sought by the plaintiffs, in the latter, the trial court may still be able to grant
plaintiffs' demands for reformation of the instrument and annulment of subsequent sale if after
trial on the merits, plaintiffs prove their allegations that defendants Andres Evangelista and
Bienvenido Mangubat were in fact were dummies of Marcos Mangubat and that the sale executed
on July 17, 1961 was in reality an equitable mortgage.

By the dismissal of the case against defendants Andres Evangelista and Bienvenido Mangubat,
the court a quo had lost jurisdiction over them. We have already pointed out that the joinder of
proper parties is necessary in order to determine all the possible issues of the controversy; but if
for some reason or another it is not possible to join them, as when they are out of the jurisdiction
of the Court, the court may proceed without them, and the judgment that may be rendered shall
be without prejudice to their rights. 22 Hence, notwithstanding the absence of said defendants, the
court could still proceed with the trial of the case as against the remaining defendants in
accordance with Sec. 8 of Rule 3.

Nevertheless, the court is constrained to affirm the dismissal of the complaint against all the
defendants as there is merit in the argument raised by defendants-appellees that plaintiffs are
barred by laches to bring suit against them.

Laches (or estoppel by laches) is unreasonable delay in the bringing of a cause of action before
the courts of justice. 23 As defined by this Court, "laches is failure or neglect for an unreasonable
and unexplained length of time, to do that which by exercising due diligence, could or should have
been done earlier, it is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled thereto either has abandoned it or declined to
assert it. 24

A perusal of the records shows that from t he time of the execution of the deed of sale on July 17,
1961 to the time of the filing of the present complaint on August 29, 1969 or a period of 8 years,
I month and 12 days, plaintiffs never took any step to enforce their rights which they claim to have
despite the several opportunities available to them.

Defendant Marcos Mangubat filed an ejectment suit against plaintiff Crisanta Seno in 1963 and
this fact was admitted by the plaintiffs in their complaint. For failure of plaintiff to appear in the

254
case, a decision was rendered by the trial court ordering plaintiffs to vacate the subject property
25
which decision was duly executed. 26

It further appears from the complaint that plaintiffs were well aware of the transfer of the title from
the name of plaintiff Crisanta Seno to the names of defendants Marcos Mangubat, Andres
Evangelista and Bienvenido Mangubat and subsequently to the name of defendant Marcos
Mangubat alone as early as 1963 when the ejectment case was filed against plaintiffs, and also
they did not do anything about it.

In January 1969, plaintiffs learned of the sale of the subject property to defendants-spouses
Luzame. but it was only on August 29, 1969 when plaintiffs brought this action and only after an
ejectment case was filed by said defendant spouses against plaintiff Crisanta Seno before the
Municipal Court of Paranaque, Rizal on August 4, 1969.

As defendants-appellees contend, before the nine-year period lapsed, plaintiffs never raised a
voice to protest against all these proceedings. They chose to sleep on their rights and to rely on
defendants' alleged word that their true agreement would be respected rather than bring their
grievances to a court of law. However, when an ejectment case was filed against them just when
the 10-year prescriptive period for bringing of their suit was nearly over, they finally decided to
stake their claim against the defendants.

The essence of laches is not merely lapse of time. It is essential that there be also acquiescence
in the alleged wrong or lack of diligence in seeking a remedy. 27 The doctrine of laches or of "stale
demands" is based on public policy which requires, for the peace of society, the discouragement
of stale claims and, unlike the statute of limitations not a mere question of time but is principally
a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted.
28

By the negligence of plaintiffs in asserting their rights for an unreasonable length of time, they are
now forever precluded from enforcing whatever right they may have against defendants. Indeed,
it is an indicia of the infirmity of their claim.

Moreover, as against plaintiff's allegation that the defendant spouses Luzame are purchasers in
bad faith. We hold that the legal presumption of good faith on the part of said defendant spouses
must prevail.

Plaintiffs would have Us believe that defendant spouses being their erstwhile neighbors and
friends had knowledge of the circumstances surrounding the transaction between plaintiff
Crisanta Seno and Defendant Marcos Mangubat which therefore makes them purchasers in bad
faith.

Defendant spouses, however, claim that they came to know of the existence of the original title of
plaintiff Crisanta Seno only when they verified the title to the land in 1969 when it was being
offered to them by co-defendant Marcos Mangubat. They deny that they are neighbors much less
friends of plaintiffs,

In order that a purchaser of land with a Torrens title may be considered as a purchaser in good
faith, it is enough that he examines the latest certificate of title which in this case is that issued in
the name of the immediate transferor. 29 The purchaser is not bound by the original certificate of
title but only by the certificate of title of the person from whom he has purchased the property. 30

Good faith, while it is always to be presumed in the absence of proof to the contrary, requires a
well-founded belief that the person from whom title was received was himself the owner of the
255
land, with the right to convey it. 31 In this regard, a buyer of real estate should exercise ordinary
care in purchasing land, 32 so that one who purchases real property should make inquiries about
the right of those in possession thereof. 33

The well-known rule in this jurisdiction is that a person dealing with a registered land has a right
to rely upon the face of the Torrens Certificate of Title and to dispense with the need of inquiring
further, except when the party concerned has actual knowledge of facts and circumstances that
would impel a reasonably cautious man to make such inquiry. 34

It is true that by the possession of plaintiffs of the subject property, defendant spouses Luzame
should have been put on their guard and should have taken precautionary steps in ascertaining
the interest of the possessors of the land. The defendant spouses did verify the title to the property
with the Register of Deeds and finding that the latest title was in the name of defendant Marcos
Mangubat, they, had every reason to rely on such title. Besides, there was the ejectment suit filed
by defendant Marcos Mangubat against plaintiff Crisanta Seno which was decided in favor of the
former. The defendant spouses could not be faulted for believing that the possession of the
plaintiffs was in the concept of lessee; in fact said defendant spouses also filed an ejectment suit
against plaintiffs.

This Court had occasion to rule that possession by the appellees, either by themselves or through
their predecessors in interest, if there was such possession at all, would be unavailing against the
holder of a Torrens Certificate of Title covering the parcels of land now in question. 35

Thus, where innocent third persons relying on the correctness of the certificate of title issued,
acquire rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate for that would impair public confidence in the certificate of title;
otherwise everyone dealing with property registered under the torrens system would have to
inquire in every instance as to whether the title had been regularly or irregularly issued by the
court. Indeed, this is contrary to the evident purpose of the law. Every person dealing with
registered land may safely rely on the correctness of the certificate of title issued therefore and
the law will in no way oblige him to go behind the certificate to determine the condition of the
property. Stated differently, an innocent purchaser for value relying on a torrens title issued is
protected . 36

We therefore hold and find that defendants spouses Luzame are purchasers in good faith and for
value of the questioned property.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the order of dismissal dated September 29,
1972 and the order denying the motion for reconsideration dated January 13, 1973 of the Court
of First Instance of Rizal, Branch I, are hereby AFFIRMED. No costs.

SO ORDERED.

256
G.R. No. L-41380 October 18, 1988

ORLANDO LAGAZON plaintiff-appellant,

vs.
VISIA P. REYES, defendant-appellee.

MEDIALDEA, J.:

In its Resolution dated August 20,1975 (p. 69, Rollo), in CA-G.R. No. 56483-R entitled,
"ORLANDO LAGAZON, Plaintiff-Appellant, versus VISIA P. REYES, Defendant-Appellee," the
Court of Appeals certified the said case to Us upon its findings that the assigned errors raise
purely questions of law.

The antecedent facts are as follows:

On April 1, 1972, a passenger-type jeepney driven by Moises San Angel collided with a motorized
tricycle driven by plaintiff-appellant, Orlando Lagazon, at San Gabriel, Macabebe, Pampanga. As
a result thereof, the tricycle was damaged and Lagazon suffered injuries.

On April 25,1972, Lagazon filed a criminal complaint (p. 25, Rollo) for damage to property and
serious physical injuries thru reckless imprudence against San Angel, with the Municipal Court
(now Municipal Circuit Trial Court) of Macabebe, Pampanga, which was docketed as Criminal
Case No. 277.

On June 30, 1972, San Angel, upon being arraigned in the criminal case filed, entered the plea
of guilty to the offense charged. On the same date, the Municipal, Court rendered its decision (pp.
25-27, Rollo) wherein, inter alia, it stated:

xxx xxx xxx

The damage caused in the commission of the clime and admitted by the
accused is P604.00 and for this damage a fine should be imposed. The
prosecution in this case reserved its right to institute a separate civil action
for damages.

WHEREFORE, this Court finds the accused guilty beyond reasonable

doubt of the crime of Damage to Property and Serious Physical Injuries
thru Reckless Imprudence, and hereby sentences him to suffer
imprisonment of two (2) months of arresto mayor and to pay a fine of
P604.00.

SO ORDERED.

On January 11, 1973, Lagazon filed a civil complaint (pp. 2124, Rollo) against the defendant-
appellee, Visia P. Reyes, for damages with the Court of First Instance (now Regional Trial Court)
of Pampanga which was docketed as Civil Case No. 3975 (29623). Lagazon alleged that Reyes
was the lawful and registered owner of that vehicle driven by Moises San Angel on April 1, 1972;
257
that Reyes was the employer of San Angel; that on the aforesaid date, San Angel drove his vehicle
in a reckless and imprudent manner which resulted in damage to his Lagazon tricycle and injuries
to his person; that as a consequence thereof, he filed a criminal complaint (docketed as Criminal
Case No. 277) on April 25, 1972 against San Angel with the Municipal Court of Macabebe,
Pampanga; and that on June 30, 1972, San Angel pleaded guilty to the offense charged and was
sentenced to suffer imprisonment of two (2) months of arresto mayor and to pay a fine of P604.00.
He prayed that judgment be rendered ordering Reyes to pay to him P2,980.00 as actual and
compensatory damages; P3,000.00 as moral damages; P3,000.00 as attorney's fees; and the
costs of suit.

At the initial hearing of the aforesaid civil case, counsel for Lagazon announced to the trial court
that the complaint was filed against Reyes for the latter's liability under Article 103 of the Revised
Penal Code based upon the conviction of San Angel in the criminal case filed with the Municipal
Court of Macabebe, Pampanga, upon a plea of guilty (p. 39, Rollo).

On December 3,1973, after a full-blown trial of the civil case, the trial court rendered its decision
(pp. 31-42, Rollo). The court, inter alia, stated:

xxx xxx xxx

In the instant case, which is pursued under the provisions of the Revised
Penal Code, defendant's liability is only subsidiary, but Moises San Angel
has not been sued in a civil action and his property has not been exhausted.
Failing in this regard, there is no liability on the part of the employer, herein
defendant Visia P. Reyes.

xxx xxx xxx

WHEREFORE, in view of the foregoing consideration, judgment is hereby

rendered in favor of the defendant Visia P. Reyes and against the plaintiff
Orlando Lagazon, dismissing the instant complaint, without
pronouncement as to costs. Defendant's counterclaim is likewise
dismissed for lack of factual and legal basis.

SO ORDERED.

On February 11, 1974, Lagazon filed a notice of appeal to the Court of Appeals.

In his brief dated June 23, 1975 (pp. 53-61, Rollo), Lagazon raised the following errors committed
by the court a quo:

1. The lower court erred in dismissing the complaint on pure technicality;

and

2. The lower court erred in not ordering motu proprio that the employee be
impleaded as a party defendant.

Lagazon also announced to the Court of Appeals that on February 11, 1974 (the same date when
his notice of appeal was filed), he filed a civil case for damages against Moises San Angel with
the Court of First Instance of Pampanga; and that the said case was already submitted for
decision by the same court.

258
On August 15, 1975, Lagazon filed a motion (pp. 67-68, Rollo) with the Court of Appeals to admit
the decision dated June 14, 1975 of the Court of First Instance of Pampanga in Civil Case No.
73-59-M entitled, "Orlando Lagazon, Plaintiff, versus Moises San Angel, Defendant" (pp. 63-65,
Rollo), as annex "A" to his brief, which the Court of Appeals granted in its Resolution dated August
20,1975 (p. 69, Rollo). The dispositive portion of said decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and

against the defendant, ordering the defendant to pay to the plaintiff—

(a) P2,980.00 as actual and compensatory damages;

(b) P3,000.00 as moral damages;
(c) P3,000.00 as attorney's fees; and
(d) Costs of suit.

Defendant's counter-claim is dismissed for lack of factual and legal basis.

SO ORDERED.

The main issue to he resolved is whether or not it was still necessary to sue the employee, San
Angel, with his employer, Reyes, ' for the latter's subsidiary liability under Article 103 of the
Revised Penal Code.

A person criminally liable is also civilly liable. Upon the institution of the criminal action, the civil
action for the recovery of the civil liability arising from the crime is also impliedly instituted unless
waived, or the filing of the separate action therefor is reserved. Under Article 103 of the Revised
Penal Code, the employer is subsidiarily liable for the adjudicated civil liability of his employee in
the event of the latter's insolvency. The decision convicting an employee in a criminal case is
binding and conclusive upon the defendant employer in a civil case filed to enforce the latter's
subsidiary liability under the said article not only with regard to the former's (employee) civil liability
but also with regard to its amount because the liability of an employer cannot be separated but
follows that of his employee (Miranda vs. Malate Garage and Taxicab, 99 Phil. 670).

However, before the employer may be held subsidiarily liable for the adjudicated civil liability of
his employee, certain facts must be proved. In Ozoa vs. De Madula, et al., G.R. No. 62955,
December 22, 1987, We held:

But the foregoing statement does not exhaust the entirety of the rules
relevant and applicable to the juridical situation under consideration. There
is the additional precept, of which sight should not be lost because
essential to due process, that before the employer's subsidiary liability is
exacted, there must be adequate evidence establishing that (1) he is
indeed the employer of the convict (2) that he is engaged in some kind of
industry; (3) the crime was committed by the employee in the discharge of
his duties; and (4) execution against the employee is unsatisfied. The
determination of these issues need not be done in a separate civil action.
But a determination there must be, on the basis of evidence that the
offended party and the employer may fully and freely present; and this may
be done in the same criminal action at which the employee's liability,
criminal and civil, has been pronounced. It may be done at a hearing set
for that precise purpose, with due notice to the employer, as part of the
proceeding for the execution of the judgment.

259
In the instant case, plaintiff-appellant, Lagazon, reserved his right to institute a separate civil
action while the criminal case filed against the employee, San Angel, was still pending before the
Municipal Court of Macabebe, Pampanga. Accordingly, no civil liability was adjudged against San
Angel after he pleaded guilty to the offense charged.

It is very clear, therefore, that when plaintiff-appellant, Lagazon, filed his complaint against the
defendant-appellee, Reyes, on January 11, 1973, there was still no adjudicated civil liability of the
latter's employee, San Angel. There is no ipso facto subsidiary liability of an employer under
Article 103 where his employee has not been previously convicted of the offense charged and
adjudged civilly liable. If the plaintiff-appellant desired to recover directly from the defendant-
appellee in view of the apparent insolvency of the latter's employee, he should have included this
employee in that complaint filed by him as a party defendant. By that process, the trial court could
then render judgment holding the employee civilly liable in an amount previously determined by it
and ordering the defendant-appellee, Reyes, to pay subsidiarily such amount in the event that the
former is insolvent or is unable to satisfy the judgment (Yumul vs. Juliano, 72 Phil. 94).

Lagazon contends that instead of dismissing the complaint, the trial court should have ordered
that San Angel be impleaded as a party defendant if it believed all along that the latter was an
indispensable party in the civil action to enforce the subsidiary liability of Reyes under Article 103
of the Revised Penal Code. This contention is impressed with merit. The court a quo should have
ordered that San Angel be impleaded as a party defendant in accordance with Rule 3, Section
11, of the Rules of Court, which provides:

Sec. 11. Misjoinder and non-joinder of parties.—Misjoinder of parties is not

ground for dismissal of an action. Parties may be dropped or added by
order of the court on motion of any party or on its own initiative at any stage
of the action and on such terms as are just. Any claim against a party may
be severed and proceeded with separately.

The aim of the rule is that all persons materially interested, either legally or beneficially, in the
subject-matter of the suit, should be made parties to it in order that the whole matter in dispute
may be determined once and for all in one litigation, thus avoiding multiplicity of suits (67 C.J.S.
939-940).

Ordinarily, the instant case should be remanded to the court a quo for further proceedings.
However, such action is no longer necessary considering that a decision in Civil Case No. 73-59-
M entitled, "Orlando Lagazon, Plaintiff, versus Moises San Angel, Defendant," was already
rendered on June 14, 1975, finding San Angel civilly liable to Lagazon and ordering the former to
pay the latter an amount by way of damages. In this connection, if Lagazon, by virtue of the said
decision, had already recovered from San Angel the entire amount adjudged as the latter's civil
liability, there would be no subsidiary liability on the part of Reyes to speak of. However, if there
was no such recovery or where the recovery was only for a partial amount due to the insolvency
of San Angel, and Lagazon desires to enforce Reyes subsidiary liability for the entire amount or
the remaining unpaid amount, as the case may be, he may take the proper steps towards that
end by proving the requirements outlined in Ozoa vs. De Madula, et al., supra, with the decision
in Civil Case No. 73-59-M as the basis therefor.

ACCORDINGLY, the questioned Decision of the Trial Court is hereby SET ASIDE. No costs.

SO ORDERED.

260
G.R. No. 157434 September 19, 2006

SPOUSES CLARO and NIDA BAUTISTA, petitioners,

vs.
BERLINDA F. SILVA, Represented by HERMES J. DORADO, in his capacity as Attorney-
In-Fact, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

To establish his status as a buyer for value in good faith, a person dealing with land registered in
the name of and occupied by the seller need only show that he relied on the face of the seller's
certificate of title.1 But for a person dealing with land registered in the name of and occupied by
the seller whose capacity to sell is restricted, such as by Articles 1662 and 1733 of the Civil Code
or Article 1244 of the Family Code, he must show that he inquired into the latter's capacity to sell
in order to establish himself as a buyer for value in good faith.5 The extent of his inquiry depends
on the proof of capacity of the seller. If the proof of capacity consists of a special power of attorney
duly notarized, mere inspection of the face of such public document already constitutes sufficient
inquiry. If no such special power of attorney is provided or there is one but there appear flaws in
its notarial acknowledgment mere inspection of the document will not do; the buyer must show
that his investigation went beyond the document and into the circumstances of its execution.

Appealed by Petition for Review on Certiorari under Rule 45 of the Rules of Court are the
November 21, 2001 Decision6 of the Court of Appeals (CA) in CA-G.R. CV No. 487677 which
affirmed in toto the January 10, 1995 Decision of the Regional Trial Court (RTC) in Civil Case No.
3091-V-89, and the February 27, 2003 CA Resolution which denied the motion for
reconsideration.

Civil Case No. 3091-V-89 is a Complaint for Annulment of Deed of Absolute Sale and Transfer
Certificate of Title (TCT) No. V-2765, Reconveyance and Damages filed with the RTC, Branch
171, Valenzuela, Metro Manila by Berlina F. Silva (Berlina), through Hermes Dorado (Dorado) as
Attorney-in-Fact, against Spouses Claro and Nida Bautista (Spouses Bautista). Spouses Bautista
filed their Answer8 and a Third-Party Complaint against Berlina's husband, Pedro M. Silva
(Pedro).9 In an Order dated August 6, 1991, the RTC declared third-party defendant Pedro in
default for failure to file an answer to the Third-Party Complaint.10

The undisputed facts of the case, as found by the RTC, are as follows:

1. That Transfer Certificate of Title No. B-37189 of the Registry of Deeds for xxx Metro
Manila District III over a parcel of land (Lot 42, Block 10, of the subdivision plan (LRC)
Psd-210217, Sheet 2, being a portion of Lot 903, Malinta Estate, LRC Record No. 5941)
situated in xxx Barrio of Parada, Valenzuela, Metro Manila, containing an area of 216
square meters, more or less, was registered in the names of Spouses Berlina F. Silva and
Pedro M. Silva on August 14, 1980;
261
 2. That on March 3, 1988, Pedro M. Silva, for himself and as attorney-in-fact of his wife
Berlina F. Silva, thru a Special Power of Attorney purportedly executed on November 18,
1987 by Berlina F. Silva in his favor, signed and executed a Deed of Absolute Sale over
the said parcel of land covered by Transfer Certificate of Title No. B-37189 in favor of
defendants-spouses Claro Bautista and Nida Bautista; and

3. That as a consequence, Transfer Certificate of Title No. 37189 was cancelled and in
lieu thereof, Transfer Certificate of Title No. V-2765 of the Registry of Deeds for the
Valenzuela Branch was issued in the names of Spouses Claro Bautista and Nida Bautista
on March 4, 1988.11

Based on the evidence presented, the RTC also found that the signature appearing on the Special
Power of Attorney (SPA) as that of Berlina Silva is a forgery, and that consequently the Deed of
Absolute Sale executed by Pedro in favor of Spouses Bautista is not authorized by Berlina.12

The RTC rendered judgment on January 10, 1995, the decretal portion of which reads:

WHEREFORE, Judgment is hereby rendered:

1. Declaring the Deed of Absolute Sale dated March 3, 1988 executed by Pedro M. Silva,
for himself and as attorney-in-fact of Berlina F. Silva, in favor of defendants-spouses Claro
Bautista and Nida Bautista over the parcel of land, described and covered by Transfer
Certificate of Title No. B-37189 Metro Manila District III, null and void and the resulting
Transfer Certificate of Title No. V-2765 of Valenzuela Registry in the name of Spouses
Claro Bautista and Nida Bautista cancelled and that Transfer Certificate of Title No. B-
37189 reinstated.

2. Ordering defendants to reconvey the property covered by the said Transfer Certificate
of Title No. V-2765 together with the improvements thereon to the plaintiff.

3. Condemning the defendants to pay the plaintiff the sum of P5,000.00 in the concept of
reasonable attorney's fees and the costs of suit.

Defendants' counterclaim is dismissed.

Judgment on default is hereby entered in favor of the third-party plaintiffs Spouses Claro
Bautista and Nida Bautista against third-party defendants Pedro M. Silva, condemning the
third-party defendant Pedro Silva to indemnify/pay third-party plaintiffs Spouses Claro
Bautista and Nida Bautista the amount of Seventy Thousand Pesos (P70,000.00) the
contract price of the sale of the property, with interest at the legal rate from the date of the
execution of the said document on March 3, 1988 until the amount is fully paid and for
whatever amount that the third–party plaintiffs were adjudged and paid to the plaintiff by
reason of this decision and the costs of suit.

SO ORDERED.13

Spouses Bautista filed an appeal with the CA which, in its November 21, 2001 Decision, affirmed
in toto the RTC decision;14 and, in a Resolution

dated February 27, 2003, denied the Motion for Reconsideration.15

Hence, the herein petition filed by Spouses Bautista praying that the CA Decision and Resolution
be annulled and set aside on the following grounds:
262
 I. Respondent as represented by Hermes Dorado in his capacity as attorney-in-fact has
no legal authority to file action against spouses petitioners.

II. The petitioners are considered as purchasers in good faith and for value having relied
upon a Special Power of Attorney which appears legal, valid and genuine on its face.

III. Gratia argumenti that the special power of attorney is a forgery and the deed of sale
executed by the husband is null and void, the nullity [thereof] does not include the one half
share of the husband.16

The petition fails for lack of merit.

As to the first ground, petitioners argue that for lack of authority of Dorado to represent
respondent, the latter's Complaint failed to state a cause of action and should have been
dismissed.17

The argument holds no water.

True, there was no written authority for Dorado to represent respondent in the filing of her
Complaint. However, no written authorization of Dorado was needed because the Complaint was
actually filed by respondent, and not merely through Dorado as her attorney-in-fact. As correctly
observed by the CA, respondent herself signed the verification attached to the Complaint. 18 She
stated therein that she is the plaintiff in Civil Case No. 3091-V-89 and that she caused the
preparation of the Complaint.19 Respondent also personally testified on the facts alleged in her
Complaint.20 In reality, respondent acted for and by herself, and not through any representative,
when she filed the Complaint. Therefore, respondent being the real party in interest, by virtue of
the then prevailing Articles 16621 and 17322 of the Civil Code, the Complaint she filed sufficiently
stated a cause of action. The sufficiency of the Complaint was not affected by the inclusion of
Dorado as party representative for this was an obvious error which, under Section 11 of Rule 3,23
is not a ground for dismissal, as it may be corrected by the court, on its own initiative and at any
stage of the action, by dropping such party from the complaint.24

Anent the second ground, there is no merit to petitioners' claim that they are purchasers in good
faith.

That the SPA is a forgery is a finding of the RTC and the CA on a question of fact. 25 The same is
conclusive upon the Court, 26 especially as it is based on the expert opinion of the NBI which
constitutes more than clear, positive and convincing evidence that respondent did not sign the
SPA, and on the uncontroverted Certification of Dorado that respondent was in Germany working
as a nurse when the SPA was purportedly executed in 1987.

The SPA being a forgery, it did not vest in Pedro any authority to alienate the subject property
without the consent of respondent. Absent such marital consent, the deed of sale was a nullity.27

But then petitioners disclaim any participation in the forgery of the SPA or in the unauthorized
sale of the subject property. They are adamant that even with their knowledge that respondent
was in Germany at the time of the sale, they acted in good faith when they bought the subject
property from Pedro alone because the latter was equipped with a SPA which contains a notarial
acknowledgment that the same is valid and authentic.28 They invoke the status of buyers in good
faith whose registered title in the property is already indefeasible and against which the remedy
of reconveyance is no longer available.29 In the alternative, petitioners offer that should
respondent be declared entitled to reconveyance, let it affect her portion only but not that of
Pedro.30
263
Whether or not petitioners are buyers for value in good faith is a question of fact not cognizable
by us in a petition for review.31 We resolve only questions of law; we do not try facts nor examine
testimonial or documentary evidence on record. We leave these to the trial and appellate courts
to whose findings and conclusions we accord great weight and respect, especially when their
findings concur.32 We may have at times reversed their findings and conclusions but we resort to
this only under exceptional circumstances as when it is shown that said courts failed to take into
account certain relevant facts which, if properly considered, would justify a different conclusion.33
No such exceptional circumstance obtains in the present case for we find the conclusions of the
RTC and CA supported by the established facts and applicable law. However, we do not fully
subscribe to some of their views on why petitioners cannot be considered in good faith, as we will
discuss below.

A holder of registered title may invoke the status of a buyer for value in good faith as a defense
against any action questioning his title.34 Such status, however, is never presumed but must be
proven by the person invoking it.35

A buyer for value in good faith is one who buys property of another, without notice that some other
person has a right to, or interest in, such property and pays full and fair price for the same, at the
time of such purchase, or before he has notice of the claim or interest of some other persons in
the property. He buys the property with the well-founded belief that the person from whom
he receives the thing had title to the property and capacity to convey it.36

To prove good faith, a buyer of registered and titled land need only show that he relied on the
face of the title to the property. He need not prove that he made further inquiry for he is not obliged
to explore beyond the four corners of the title.37 Such degree of proof of good faith, however, is
sufficient only when the following conditions concur: first, the seller is the registered owner of the
land; 38 second, the latter is in possession thereof;39 and third, at the time of the sale, the buyer
was not aware of any claim or interest of some other person in the property,40 or of any defect or
restriction in the title of the seller or in his capacity to convey title to the property. 41

Absent one or two of the foregoing conditions, then the law itself puts the buyer on notice and
obliges the latter to exercise a higher degree of diligence by scrutinizing the certificate of title and
examining all factual circumstances in order to determine the seller's title and capacity to transfer
any interest in the property.42 Under such circumstance, it is no longer sufficient for said buyer to
merely show that he relied on the face of the title; he must now also show that he exercised
reasonable precaution by inquiring beyond the title.43 Failure to exercise such degree of
precaution makes him a buyer in bad faith.44

In the present case, petitioners were dealing with a seller (Pedro) who had title to and possession
of the land but, as indicated on the face of his title, whose capacity to sell was restricted, in that
the marital consent of respondent is required before he could convey the property. To prove good
faith then, petitioners must show that they inquired not only into the title of Pedro but also into his
capacity to sell.

According to petitioners, to determine Pedro's capacity to sell, they conducted the following forms
of inquiry: first, they inspected the photocopy of the SPA presented to them by Pedro; 45 second,
they brought said copy to Atty. Lorenzo Lucero (the notary public who prepared the deed of sale)
and asked whether it was genuine;46 and third, they inspected the original copy of the SPA after
they advanced payment of Php55,000.00 to Pedro.47 Essentially, petitioners relied on the SPA,
specifically on its notarial acknowledgment which states that respondent appeared before the
notary public and acknowledged having executed the SPA in favor of Pedro.

264
The RTC and CA, however, found such inquiry superficial. They expected of petitioners an
investigation not only into the whereabouts of respondent at the time of the execution of the SPA48
but also into the genuineness of the signature appearing on it.49

We find such requirements of the RTC and CA too stringent that to adopt them would be to throw
commerce into madness where buyers run around to probe the circumstances surrounding each
piece of sales document while sellers scramble to produce evidence of its good order. Remember
that it is not just any scrap of paper that is under scrutiny but a SPA, the execution and attestation
of which a notary public has intervened.

To what extent, therefore, should an inquiry into a notarized special power of attorney go in order
for one to qualify as a buyer for value in good faith?

We agree with one author who said:

x x x To speak of "notice", as applied to the grantee, is to follow the language of the Statue
of Elizabeth. Its proviso protects the man who purchases "upon good consideration and
bona fide * * * not having at the time * * * any manner of notice or knowledge." The
term "notice", however, is really but an approach to the test of good faith, and all modern
legislation tends toward that point.

Thus, some present day statutes (outside of the Uniform Law) may speak of notice, actual
and constructive, and define both terms, but they should be "liberally construed, so as to
protect bona fide purchaser for value." They may require the grantee to have "knowledge"
of the debtor's intent, but save for technical purposes of pleading, the term is read in the
light of the rules we are studying. It comes always to a question of the grantee's good faith
as distinct from mere negligence. 50

There must, indeed, be more than negligence. There must be a conscious turning away
from the subject x x x. As put by the Supreme Court, the grantee must take the
consequences if he "chooses to remain ignorant of what the necessities of the case
require him to know." The search, therefore, is described by the question, did the
grantee make a choice between not knowing and finding out the truth; or were the
circumstances such that he was not faced with that choice? (Emphasis ours)

This means that no automatic correlation exists between the state of forgery of a document and
the bad faith of the buyer who relies on it. A test has to be done whether the buyer had a choice
between knowing the forgery and finding it out, or he had no such choice at all.

When the document under scrutiny is a special power of attorney that is duly notarized, we know
it to be a public document where the notarial acknowledgment is prima facie evidence of the fact
of its due execution.51 A buyer presented with such a document would have no choice between
knowing and finding out whether a forger lurks beneath the signature on it. The notarial
acknowledgment has removed that choice from him and replaced it with a presumption
sanctioned by law that the affiant appeared before the notary public and acknowledged that he
executed the document, understood its import and signed it. In reality, he is deprived of such
choice not because he is incapable of knowing and finding out but because, under our notarial
system, he has been given the luxury of merely relying on the presumption of regularity of a duly
notarized SPA. And he cannot be faulted for that because it is precisely that fiction of regularity
which holds together commercial transactions across borders and time.

In sum, all things being equal, a person dealing with a seller who has possession and title to
the property but whose capacity to sell is restricted, qualifies as a buyer in good faith if he proves

265
that he inquired into the title of the seller as well as into the latter's capacity to sell; and that in his
inquiry, he relied on the notarial acknowledgment found in the seller's duly notarized special power
of attorney. He need not prove anything more for it is already the function of the notarial
acknowledgment to establish the appearance of the parties to the document, its due execution
and authenticity.52

Note that we expressly made the foregoing rule applicable only under the operative words "duly
notarized" and "all things being equal." Thus, said rule should not apply when there is an apparent
flaw afflicting the notarial acknowledgment of the special power of attorney as would cast doubt
on the due execution and authenticity of the document; or when the buyer has actual notice of
circumstances outside the document that would render suspect its genuineness.

In Domingo v. Reed,53 we found that the special power of attorney relied upon by the buyers
contained a defective notarial acknowledgment in that it stated there that only the agent-wife
signed the document before the notary public while the principal-husband did not. Such flaw
rendered the notarial acknowledgment of no effect and reduced the special power of attorney into
a private document. We declared the buyer who relied on the private special power of attorney a
buyer in bad faith.

In Lao v. Villones-Lao,54 and Estacio v. Jaranilla,55 we found that the buyers knew of circumstances
extrinsic to the special power of attorney which put in question the actual execution of said document.
In Domingo Lao, the buyer knew that the agent-wife was estranged from the principal-husband but
was living within the same city. In the Estacio case, we found admissions by the buyers that they knew
that at the time of the purported execution of the special power of attorney, the alleged principal was
not in the Philippines. In both cases we held that the buyers were not in good faith, not because we
found any outward defect in the notarial acknowledgment of the special powers of attorney, but
because the latter had actual notice of facts that should have put them on deeper inquiry into the
capacity to sell of the seller.

In the present case, petitioners knew that Berlina was in Germany at the time they were buying the
property and the SPA relied upon by petitioners has a defective notarial acknowledgment. The SPA
was a mere photocopy56 and we are not convinced that there ever was an original copy of said SPA
as it was only this photocopy that was testified to by petitioner Nida Bautista and offered into evidence
by her counsel.57 We emphasize this fact because it was actually this photocopy that was relied upon
by petitioners before they entered into the deed of sale with Pedro. As admitted to by petitioner Nida
Bautista, upon inspection of the photocopy of the SPA, they gave Pedro an advanced payment of
Php55,000.00; this signifies that, without further investigation on the SPA, petitioners had agreed to
buy the subject property from Pedro.

But then said photocopy of the SPA contains no notarial seal. A notarial seal is a mark, image or
impression on a document which would indicate that the notary public has officially signed it.58 There
being no notarial seal, the signature of the notary public on the notarial certificate was therefore
incomplete. The notarial certificate being deficient, it was as if the notarial acknowledgment was
unsigned. The photocopy of the SPA has no notarial acknowledgment to speak of. It was a mere
private document which petitioners cannot foist as a banner of good faith.

All told, it was not sufficient evidence of good faith that petitioners merely relied on the photocopy of
the SPA as this turned out to be a mere private document. They should have adduced more evidence
that they looked beyond it. They did not. Instead, they took no precautions at all. They verified with
Atty. Lucero whether the SPA was authentic but then the latter was not the notary public who prepared
the document. Worse, they purposely failed to inquire who was the notary public who prepared the
SPA. Finally, petitioners conducted the transaction in haste. It took them all but three days or from
March 2 to 4, 1988 to enter into the deed of sale, notwithstanding the restriction on the capacity to sell
of Pedro.59 In no way then may petitioners qualify as buyers for value in good faith.

266
That said, we come to the third issue on whether petitioners may retain the portion of Pedro Silva in the
subject property. Certainly not. It is well-settled that the nullity of the sale of conjugal property contracted
by the husband without the marital consent of the wife affects the entire property, not just the share of the
wife.60 We see no reason to deviate from this rule.

WHEREFORE, the petition is hereby DENIED. The Decision dated November 21, 2001 and Resolution dated
February 27, 2003 of the Court of Appeal are AFFIRMED.

G.R. No. L-22909 January 28, 1925

VICTORIANO BORLASA, ET AL., plaintiffs-appellants,

vs.
VICENTE POLISTICO, ET AL., defendants-appellees.

STREET, J.:

This action was instituted in the Court of First Instance of Laguna on July 25, 1917, by Victoriano
Borlasa and others against Vicente Polistico and others, chiefly for the purpose of securing the
dissolution of a voluntary association named Turuhan Polistico & Co., and to compel the defendants
to account for and surrender the money and property of the association in order that its affairs may be
liquidated and its assets applied according to law. The trial judge having sustained a demurrer for
defect of parties and the plaintiffs electing not to amend, the cause was dismissed, and from this order
an appeal was taken by the plaintiffs to this court.

The material allegations of the complaint, so far as affects the present appeal, are to the following
effect: In the month of April, 1911, the plaintiffs and defendants, together with several hundred other
persons, formed an association under the name of Turuhan Polistico & Co. Vicente Polistico, the
principal defendant herein, was elected president and treasurer of the association, and his house in
Lilio, Laguna, was made its principal place of business. The life of the association was fixed at fifteen
years, and under the by-laws each member obligated himself to pay to Vicente Polistico, as president-
treasurer, before 3 o'clock in the afternoon of every Sunday the sum of 50 centavos, except that on
every fifth Sunday the amount was P1, if the president elected to call this amount, as he always did. It
is alleged that from April, 1911, until April, 1917, the sums of money mentioned above were paid
weekly by all of the members of the society with few irregularities. The inducement to these weekly
contributions was found in provisions of the by-laws to the effect that a lottery should be conducted
weekly among the members of the association and that the successful member should be paid the
amount collected each week, from which, however, the president-treasurer of the society was to
receive the sum of P200, to be held by him as funds of the society.

It is further alleged that by virtue of these weekly lotteries Vicente Polistico, as president-treasurer of
the association, received sums of money amounting to P74,000, more or less, in the period stated,
which he still retains in his power or has applied to the purchase of real property largely in his own
name and partly in the names of others. The defendants in the complaint are the members of the
board of directors of the association, including Vicente Polistico, as president-treasurer, Alfonso Noble,
secretary, Felix Garcia and Vivencio Zulaybar, as promoter (propagandistas), and Afroniano de la
Peña and Tomas Orencia, as members (vocales) of the board.

In an amended answer the defendants raised the question of lack of parties and set out a list of some
hundreds of persons whom they alleged should be brought in as parties defendant on the ground,
among others, that they were in default in the payment of their dues to the association. On November
28, 1922, the court made an order requiring the plaintiffs to amend their complaint within a stated
period so as to include all of the members of the Turnuhan Polistico & Co. either as plaintiffs or
defendants. The plaintiffs excepted to this order, but acquiesced to the extent of amending their
complaint by adding as additional parties plaintiff some hundreds of persons, residents of Lilio, said to
be members of the association and desirous of being joined as plaintiffs. Some of these new plaintiffs
had not been named in the list submitted by the defendants with their amended answer; and on the
267
other hand many names in said list were here omitted, it being claimed by the plaintiffs that the persons
omitted were not residents of Lilio but residents of other places and that their relation to the society,
so far as the plaintiffs could discover, was fictitious. The defendants demurred to the amended
complaint on the ground that it showed on its face a lack of necessary parties and this demurrer was
sustained, with the ultimate result of the dismissal of the action, as stated in the first paragraph of this
opinion.

The trial judge appears to have supposed that all the members of the Turnuhan Polistico & Co. should
be brought in either plaintiffs or defendants. This notion is entirely mistaken. The situation involved is
precisely the one contemplated in section 118 of the Code of Civil Procedure, where one or more may
sue for the benefit of all. It is evident from the showing made in the complaint, and from the proceedings
in the court below, that it would be impossible to make all of the persons in interest parties to the cases
and to require all of the members of the association to be joined as parties would be tantamount to a
denial of justice.

The general rule with reference to the making of parties in a civil action requires, of course, the joinder
of all necessary parties wherever possible, and the joinder of all indispensable parties under any and
all conditions, the presence of those latter being a sine qua non of the exercise of judicial power. The
class suit contemplates an exceptional situation where there are numerous persons all in the same
plight and all together constituting a constituency whose presence in the litigation is absolutely
indispensable to the administration of justice. Here the strict application of the rule as to indispensable
parties would require that each and every individual in the class should be present. But at this point
the practice is so far relaxed as to permit the suit to proceed, when the class is sufficient represented
to enable the court to deal properly and justly with that interest and with all other interest involved in
the suit. In the class suit, then, representation of a class interest which will be affected by the judgment
is indispensable; but it is not indispensable to make each member of the class an actual party.

A common illustration in American procedure of the situation justifying a class suit is that presented
by the creditors' bill, which is filed by one party interested in the estate of an insolvent, to secure the
distribution of the assets distributable among all the creditors. In such cases the common practice is
for one creditor to sue as plaintiff in behalf of himself and other creditors. (Johnson vs. Waters, 111
U.S., 640; 28 Law. ed., 547.) Another illustration is found in the case of Smith vs. Swormstedt (16
How., 288; 14 Law. ed., 942), where a limited number of individuals interested in a trust for the benefit
of superannuated preachers were permitted to maintain an action in their own names and as
representatives of all other persons in the same right.

His Honor, the trial judge, in sustaining this demurrer was possibly influenced to some extent by the
case of Rallonza vs. Evangelista (15 Phil., 531); but we do not consider that case controlling, inasmuch
as that was an action for the recovery of real property and the different parties in interest had
determinable, though undivided interests, in the property there in question. In the present case, the
controversy involves an indivisible right affecting many individuals whose particular interest is of
indeterminate extent and is incapable of separation.

The addition of some hundreds of persons to the number of the plaintiffs, made in the amendment to
the complaint of December 13, 1922, was unnecessary, and as the presence of so many parties is
bound to prove embarrassing to the litigation from death or removal, it is suggested that upon the
return of this record to the lower court for further proceedings, the plaintiff shall again amend their
complaint by dismissing as to unnecessary parties plaintiffs, but retaining a sufficient number of
responsible persons to secure liability for costs and fairly to present all the members of the association.

There is another feature of the complaint which makes a slight amendment desirable, which is, that
the complaint should be made to show on its face that the action is intended to be litigated as a class
suit. We accordingly recommend that the plaintiffs further amend by adding after the names of the
parties plaintiffs the words, "in their own behalf and in behalf of other members of Turuhan Polistico &
Co."

268
The order appealed from is reversed, the demurrer of the defendants based upon supposed lack of
parties is overruled, and the defendants are required to answer to the amended complaint within the
time allowed by law and the rules of the court. The costs of this appeal will be paid by the defendants.
So ordered.

G.R. No. 166620 April 20, 2010

ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO V. PADRIGANO, JEAN R. DE

MESA, LEAH P. DELA CRUZ, ANDY V. MACASAQUIT, SENEN B. CORDOBA, ALBERT
BRILLANTES, GLORIA BISDA, JOVITA V. CONCEPCION, TERESITA G. CARVAJAL,
ROSANNA T. MALIWANAG, RICHARD ODERON, CECILIA ESTERNON, BENEDICTO
CABRAL, MA. VICTORIA E. LAROCO, CESAR ANDRA, FELICISIMO GALACIO, ELSA R.
CALMA, FILOMENA A. GALANG, JEAN PAUL MELEGRITO, CLARO G. SANTIAGO, JR.,
EDUARDO FRIAS, REYNALDO O. ANDAL, NEPHTALIE IMPERIO, RUEL BALAGTAS,
VICTOR R. ORTIZ, FRANCISCO P. REYES, JR., ELISEO M. BALAGOT, JR., JOSE C.
MONSALVE, JR., ARTURO ADSUARA, F.C. LADRERO, JR., NELSON PADUA, MARCELA
C. SAYAO, ANGELITO MALAKAS, GLORIA RAMENTO, JULIANA SUPLEO, MANUEL
MENDRIQUE, E. TAYLAN, CARMELA BOBIS, DANILO VARGAS, ROY-LEO C. PABLO,
ALLAN VILLANUEVA, VICENTE R. VELASCO, JR., IMELDA ERENO, FLORIZA M. CATIIS,
RANIEL R. BASCO, E. JALIJALI, MARIO C. CARAAN, DOLORES M. AVIADO, MICHAEL P.
LAPLANA, GUILLERMO G. SORIANO, ALICE E. SOJO, ARTHUR G. NARNE, LETICIA
SORIANO, FEDERICO RAMOS, JR., PETERSON CAAMPUED, RODELIO L. GOMEZ,
ANTONIO D. GARCIA, JR., ANTONIO GALO, A. SANCHEZ, SOL E. TAMAYO, JOSEPHINE
A.M. COCJIN, DAMIAN QUINTO, JR., EDLYN MARIANO, M.A. MALANUM, ALFREDO S.
ESTRELLA, and JESUS MEL SAYO, Petitioners,
vs.
EDUARDO R. ERMITA, in his capacity as Executive Secretary, The Director General of the
Philippine Information Agency and The National Treasurer, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

The present controversy arose from a Petition for Certiorari and prohibition challenging the
constitutionality of Executive Order No. 378 dated October 25, 2004, issued by President Gloria
Macapagal Arroyo (President Arroyo). Petitioners characterize their action as a class suit filed on
their own behalf and on behalf of all their co-employees at the National Printing Office (NPO).

The NPO was formed on July 25, 1987, during the term of former President Corazon C. Aquino
(President Aquino), by virtue of Executive Order No. 2851 which provided, among others, the
creation of the NPO from the merger of the Government Printing Office and the relevant printing
units of the Philippine Information Agency (PIA). Section 6 of Executive Order No. 285 reads:

SECTION 6. Creation of the National Printing Office. – There is hereby created a National Printing
Office out of the merger of the Government Printing Office and the relevant printing units of the
Philippine Information Agency. The Office shall have exclusive printing jurisdiction over the
following:

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

b. Printing of officials ballots;

269
 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 NPO’s
appropriation in the General Appropriations Act to its income.

Perceiving Executive Order No. 378 as a threat to their security of tenure as employees of the
NPO, petitioners now challenge its constitutionality, contending that: (1) it is beyond the executive
powers of President Arroyo to amend or repeal Executive Order No. 285 issued by former
President Aquino when the latter still exercised legislative powers; and (2) Executive Order No.
378 violates petitioners’ security of tenure, because it paves the way for the gradual abolition of
the NPO.

We dismiss the petition.

270
Before proceeding to resolve the substantive issues, the Court must first delve into a procedural
matter. Since petitioners instituted this case as a class suit, the Court, thus, must first determine
if the petition indeed qualifies as one. In Board of Optometry v. Colet,2 we held that "[c]ourts must
exercise utmost caution before allowing a class suit, which is the exception to the requirement of
joinder of all indispensable parties. For while no difficulty may arise if the decision secured is
favorable to the plaintiffs, a quandary would result if the decision were otherwise as those who
were deemed impleaded by their self-appointed representatives would certainly claim denial of
due process."

Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:

Sec. 12. Class suit. – When the subject matter of the controversy is one of common or general
interest to many persons so numerous that it is impracticable to join all as parties, a number of
them which the court finds to be sufficiently numerous and representative as to fully protect the
interests of all concerned may sue or defend for the benefit of all. Any party in interest shall have
the right to intervene to protect his individual interest.

From the foregoing definition, the requisites of a class suit are: 1) the subject matter of controversy
is one of common or general interest to many persons; 2) the parties affected are so numerous
that it is impracticable to bring them all to court; and 3) the parties bringing the class suit are
sufficiently numerous or representative of the class and can fully protect the interests of all
concerned.

In Mathay v. The Consolidated Bank and Trust Company,3 the Court held that:

An action does not become a class suit merely because it is designated as such in the pleadings.
Whether the suit is or is not a class suit depends upon the attending facts, and the complaint, or
other pleading initiating the class action should allege the existence of the necessary facts, to wit,
the existence of a subject matter of common interest, and the existence of a class and the number
of persons in the alleged class, in order that the court might be enabled to determine whether the
members of the class are so numerous as to make it impracticable to bring them all before the
court, to contrast the number appearing on the record with the number in the class and to
determine whether claimants on record adequately represent the class and the subject matter of
general or common interest. (Emphases ours.)

Here, the petition failed to state the number of NPO employees who would be affected by the
assailed Executive Order and who were allegedly represented by petitioners. It was the Solicitor
General, as counsel for respondents, who pointed out that there were about 549 employees in
the NPO.4 The 67 petitioners undeniably comprised a small fraction of the NPO employees whom
they claimed to represent. Subsequently, 32 of the original petitioners executed an Affidavit of
Desistance, while one signed a letter denying ever signing the petition,5 ostensibly reducing the
number of petitioners to 34. We note that counsel for the petitioners challenged the validity of the
desistance or withdrawal of some of the petitioners and insinuated that such desistance was due
to pressure from people "close to the seat of power."6 Still, even if we were to disregard the
affidavit of desistance filed by some of the petitioners, it is highly doubtful that a sufficient,
representative number of NPO employees have instituted this purported class suit. A perusal of
the petition itself would show that of the 67 petitioners who signed the Verification/Certification of
Non-Forum Shopping, only 20 petitioners were in fact mentioned in the jurat as having duly
subscribed the petition before the notary public. In other words, only 20 petitioners effectively
instituted the present case.

Indeed, in MVRS Publications, Inc. v. Islamic Da’wah 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
271
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 Ibañes v. Roman Catholic Church8 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 Desistance10 was attached, was filed by the President of the National Printing Office
Workers Association (NAPOWA). The said manifestation expressed NAPOWA’s opposition to the
filing of the instant petition in any court. Even if we take into account the contention of petitioners’
counsel that the NAPOWA President had no legal standing to file such manifestation, the said
pleading is a clear indication that there is a divergence of opinions and views among the members
of the class sought to be represented, and not all are in favor of filing the present suit. There is
here an apparent conflict between petitioners’ interests and those of the persons whom they claim
to represent. Since it cannot be said that petitioners sufficiently represent the interests of the
entire class, the instant case cannot be properly treated as a class suit.

As to the merits of the case, the petition raises two main grounds to assail the constitutionality of
Executive Order No. 378:

First, it is contended that President Arroyo cannot amend or repeal Executive Order No. 285 by
the mere issuance of another executive order (Executive Order No. 378). Petitioners maintain
that former President Aquino’s 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 President’s 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;
272
 (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
President’s continuing authority to reorganize.13 (Emphasis ours.)

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

Pertinent to the case at bar, Section 31 of the Administrative Code of 1987 quoted above
authorizes the President (a) to restructure the internal organization of the Office of the President
Proper, including the immediate Offices, the President Special Assistants/Advisers System and
the Common Staff Support System, by abolishing, consolidating or merging units thereof or
transferring functions from one unit to another, and (b) to transfer functions or offices from the
Office of the President to any other Department or Agency in the Executive Branch, and vice
versa.

Concomitant to such power to abolish, merge or consolidate offices in the Office of the President
Proper and to transfer functions/offices not only among the offices in the Office of President
Proper but also the rest of the Office of the President and the Executive Branch, the President
implicitly has the power to effect less radical or less substantive changes to the functional and
internal structure of the Office of the President, including the modification of functions of such
executive agencies as the exigencies of the service may require.

In the case at bar, there was neither an abolition of the NPO nor a removal of any of its functions
to be transferred to another agency. Under the assailed Executive Order No. 378, the NPO
remains the main printing arm of the government for all kinds of government forms and
publications but in the interest of greater economy and encouraging efficiency and profitability, it
must now compete with the private sector for certain government printing jobs, with the exception
of election paraphernalia which remains the exclusive responsibility of the NPO, together with the
Bangko Sentral ng Pilipinas, as the Commission on Elections may determine. At most, there was
a mere alteration of the main function of the NPO by limiting the exclusivity of its printing
responsibility to election forms.15

273
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 President’s 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 President’s 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
Estrada’s 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 Act19 the President’s authority to effect
organizational changes in the department or agency under the executive structure, thus:

274
We adhere to the precedent or ruling in Larin that this provision recognizes the authority of the
President to effect organizational changes in the department or agency under the executive
structure. Such a ruling further finds support in Section 78 of Republic Act No. 8760. Under this
law, the heads of departments, bureaus, offices and agencies and other entities in the Executive
Branch are directed (a) to conduct a comprehensive review of their respective mandates,
missions, objectives, functions, programs, projects, activities and systems and procedures; (b)
identify activities which are no longer essential in the delivery of public services and which may
be scaled down, phased-out or abolished; and (c) adopt measures that will result in the
streamlined organization and improved overall performance of their respective agencies. Section
78 ends up with the mandate that the actual streamlining and productivity improvement in agency
organization and operation shall be effected pursuant to Circulars or Orders issued for the
purpose by the Office of the President. x x x.20 (Emphasis ours)

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

Section 77. Organized Changes. – Unless otherwise provided by law or directed by the President of
the Philippines, no changes in key positions or organizational units in any department or agency shall
be authorized in their respective organizational structures and funded from appropriations provided by
this Act.

Section 78. Institutional Strengthening and Productivity Improvement in Agency Organization and
Operations and Implementation of Organization/Reorganization Mandated by Law. The Government
shall adopt institutional strengthening and productivity improvement measures to improve service
delivery and enhance productivity in the government, as directed by the President of the Philippines.
The heads of departments, bureaus, offices, agencies, and other entities of the Executive Branch shall
accordingly conduct a comprehensive review of their respective mandates, missions, objectives,
functions, programs, projects, activities and systems and procedures; identify areas where
improvements are necessary; and implement corresponding structural, functional and operational
adjustments that will result in streamlined organization and operations and improved performance and
productivity: PROVIDED, That actual streamlining and productivity improvements in agency
organization and operations, as authorized by the President of the Philippines for the purpose,
including the utilization of savings generated from such activities, shall be in accordance with the rules
and regulations to be issued by the DBM, upon consultation with the Presidential Committee on
Effective Governance: PROVIDED, FURTHER, That in the implementation of
organizations/reorganizations, or specific changes in agency structure, functions and operations as a
result of institutional strengthening or as mandated by law, the appropriation, including the functions,
projects, purposes and activities of agencies concerned may be realigned as may be necessary:
PROVIDED, FINALLY, That any unexpended balances or savings in appropriations may be made
available for payment of retirement gratuities and separation benefits to affected personnel, as
authorized under existing laws. (Emphases and underscoring ours.)

Implicitly, the aforequoted provisions in the appropriations law recognize the power of the
President to reorganize even executive offices already funded by the said appropriations act,
including the power to implement structural, functional, and operational adjustments in the
executive bureaucracy and, in so doing, modify or realign appropriations of funds as may be
necessary under such reorganization. Thus, insofar as petitioners protest the limitation of the
NPO’s 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,
275
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 President’s
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 President’s power to restructure the
internal organization of the Office of the President Proper, by abolishing, consolidating or merging
units hereof or transferring functions from one unit to another, while Section 31(2) and (3) concern
executive offices outside the Office of the President Proper allowing the President to transfer any
function under the Office of the President to any other Department or Agency and vice-versa, and
the transfer of any agency under the Office of the President to any other department or agency
and vice-versa.

In the present instance, involving neither an abolition nor transfer of offices, the assailed action is
a mere reorganization under the general provisions of the law consisting mainly of streamlining
the NTA in the interest of simplicity, economy and efficiency. It is an act well within the authority
of the President motivated and carried out, according to the findings of the appellate court, in
good faith, a factual assessment that this Court could only but accept. 22 (Emphases and
underscoring supplied.)

In the more recent case of Tondo Medical Center Employees Association v. Court of Appeals, 23
which involved a structural and functional reorganization of the Department of Health under an
executive order, we reiterated the principle that the power of the President to reorganize agencies
under the executive department by executive or administrative order is constitutionally and
statutorily recognized. We held in that case:

This Court has already ruled in a number of cases that the President may, by executive or
administrative order, direct the reorganization of government entities under the Executive
Department. This is also sanctioned under the Constitution, as well as other statutes.

Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he president shall have control
of all executive departments, bureaus and offices." Section 31, Book III, Chapter 10 of Executive
Order No. 292, also known as the Administrative Code of 1987 reads:

SEC. 31. Continuing Authority of the President to Reorganize his Office - The President, subject
to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency,
shall have continuing authority to reorganize the administrative structure of the Office of the
President. For this purpose, he may take any of the following actions:

xxxx

In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the rationale behind the
President’s 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
276
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 President’s 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 Secretary25 that:

The Constitution’s 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 President’s power to reorganize.

In establishing an executive department, bureau or office, the legislature necessarily ordains an

executive agency’s position in the scheme of administrative structure. Such determination is
primary, but subject to the President’s 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:

277
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.271avvphi1

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. Mison28 that:

Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in
good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the purpose
of economy or to make bureaucracy more efficient. In that event, no dismissal (in case of a
dismissal) or separation actually occurs because the position itself ceases to exist. And in that
case, security of tenure would not be a Chinese wall. Be that as it may, if the "abolition," which is
nothing else but a separation or removal, is done for political reasons or purposely to defeat
security of tenure, or otherwise not in good faith, no valid "abolition" takes place and whatever
"abolition" is done, is void ab initio. There is an invalid "abolition" as where there is merely a
change of nomenclature of positions, or where claims of economy are belied by the existence of
ample funds. (Emphasis ours.)

Stated alternatively, the presidential power to reorganize agencies and offices in the executive
branch of government is subject to the condition that such reorganization is carried out in good
faith.

If the reorganization is done in good faith, the abolition of positions, which results in loss of security
of tenure of affected government employees, would be valid. In Buklod ng Kawaning EIIB v.
Zamora,29 we even observed that there was no such thing as an absolute right to hold office.
278
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 NPO’s 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 Arroyo’s 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.

279
G.R. No. L-23136 August 26, 1974

ISMAEL MATHAY, JOSEFINA MATHAY, DIOGRACIAS T. REYES and S. ADOR DIONISIO,

plaintiffs-appellants,
vs.
THE CONSOLIDATED BANK AND TRUST COMPANY, JOSE MARINO OLONDRIZ,
WILFRIDO C. TECSON, SIMON R. PATERNO, FERMIN Z. CARAM, JR., ANTONIO P.
MADRIGAL, JOSE P. MADRIGAL, CLAUDIO TEEHANKEE, and ALFONSO JUAN
OLONDRIZ, defendants-appellees. CIPRIANO AZADA, MARIA CRISTINA OLONDRIZ
PERTIERRA jointly with her husband ARTURO PERTIERRA, and MARIA DEL PUY
OLONDRIZ DE STEVENS, movants-intervenors-appellants.

ZALDIVAR, J.:p

In this appeal, appellants-plaintiffs and movants-intervenors seek the reversal of the order dated
March 21, 1964 of the Court of First Instance of Manila dismissing the complaint together with all
other pending incidents in Civil Case No. 55810.

The complaint in this case, filed on December 24, 1963 as a class suit, under Section 12, Rule 3,
of the Rules of Court, contained six causes of action. Under the first cause of action, plaintiffs-
appellants alleged that they were, on or before March 28, 1962, stockholders in the Consolidated
Mines, Inc. (hereinafter referred to as CMI), a corporation duly organized and existing under
Philippine laws; that the stockholders of the CMI, including the plaintiffs-appellants, passed, at a
regular stockholders' meeting, a Resolution providing: (a) that the Consolidated Bank & Trust Co.
(hereinafter referred to as Bank) be organized with an authorized capital of P20,000,000.00; (b)
that the organization be undertaken by a Board of Organizers composed of the President and
Members of the Board of Directors of the CMI; (c) that all stockholders of the CMI, who were
legally qualified to become stockholders, would be entitled to subscribe to the capital stock of the
proposed Bank "at par value to the same extent and in the same amount as said stockholders'
respective share holdings in the CMI," as shown in its stock books on a date to be fixed by the
Board of Directors [which date was subsequently fixed as January 15, 1963], provided that the
right to subscribe should be exercised within thirty days from the date so fixed, and "that if such
right to subscription be not so exercised then the stockholders concerned shall be deemed to
have thereby waived and released ipso facto their right to such subscription in favor of the Interim
Board of Organizers of the Defendant Bank or their assignees;" and (d) that the Board of Directors
of the CMI be authorized to declare a "special dividend" in an amount it would fix, which the
subscribing stockholders might authorize to be paid directly to the treasurer of the proposed Bank
in payment of the subscriptions; that the President and members of the Board of Directors of the
CMI, who are the individuals-defendants-appellees in the instant case, constituted themselves as
the Interim Board of Organizers; that said Board sent out, on or about November 20, 1962, to the
CMI stockholders, including the plaintiffs-appellants, circular letters with "Pre-Incorporation
Agreement to Subscribe" forms that provided that the payment of the subscription should be made
in cash from time to time or by the application of the special dividend declared by the CMI, and
that the subscription must be made within the period from December 4, 1962 to January 15, 1963,
"otherwise such subscription right shall be deemed to have been thereby ipso facto waived and
released in favor of the Board of Organizers of the Defendant Bank and their assignees"; that the
plaintiffs-appellants accomplished and filed their respective "Pre-Incorporation Agreement to
Subscribe" and paid in full their subscriptions; that plaintiffs-appellants and the other CMI
subscribing stockholders in whose behalf the action was brought also subscribed to a very
substantial amount of shares; that on June 25, 1963, the Board of Organizers caused the
execution of the Articles or Incorporation of the proposed Bank indicating an original subscription
of 50,000 shares worth P5,000,000 subscribed and paid only by six of the individuals-defendants-
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appellees, namely, Antonio P. Madrigal, Jose P. Madrigal Simon R. Paterno, Fermin Z. Caram,
Jr., Claudio Teehankee, and Wilfredo C. Tecson, thereby excluding the plaintiffs-appellants and
the other CMI subscribing stockholders who had already subscribed; that the execution of said
Articles of Incorporation was "in violation of law and in breach of trust and contractual agreement
as a means to gain control of Defendant Bank by Defendant Individuals and persons or entities
chosen by them and for their personal profit or gain in disregard of the rights of Plaintiffs and other
CMI Subscribing Stockholders;" that the paid-in capital stock was raised, as required by the
Monetary Board, to P8,000,000.00, and individuals-defendants-appellees caused to be issued
from the unissued shares 30,000 shares amounting to P3,000,000.00, all of which were again
subscribed and paid for entirely by individuals-defendants-appellees or entities chosen by them
"to the exclusion of Plaintiffs and other CMI subscribing stockholders" "in violation of law and
breach of trust and of the contractual agreement embodied in the contractual agreement of March
28, 1962"; that the Articles were filed with the Securities and Exchange Commission which issued
the Certificate of Incorporation on June 25, 1963; that as of the date of the Complaint, the
plaintiffs-appellants and other CMI subscribing stockholders had been denied, through the
unlawful acts and manipulation of the defendant Bank and Individuals-defendants-appellees, the
right to subscribe at par value, in proportion to their equities established under their respective
"Pre-Incorporation Agreements to Subscribe" to the capital stock, i.e., (a) to the original issue of
50,000 shares and/or (b) to the additional issue of 30,000 shares, and/or (c) in that portion of said
original or additional issue which was unsubscribed; that the individuals-defendants-appellees
and the persons chosen by them had unlawfully acquired stockholdings in the defendant-appellee
Bank in excess of what they were lawfully entitled and held such shares "in trust" for the plaintiffs-
appellants and the other CMI stockholders; that it would have been vain and futile to resort to intra
corporate remedies under the facts and circumstances alleged above. As relief on the first cause
of action, plaintiffs-appellants prayed that the subscriptions and share holdings acquired by the
individuals-defendants- appellees and the persons chosen by them, to the extent that plaintiffs-
appellants and the other CMI stockholders had been deprived of their right to subscribe, be
annulled and transferred to plaintiffs-appellants and other CMI subscribing stockholders.

Besides reproducing all the above allegations in the other causes of action, plaintiffs-appellants
further alleged under the second cause of action that on or about August 28, 1963, defendants-
appellees Antonio P. Madrigal, Jose P. Madrigal: Fermin Z. Caram, Jr., and Wilfredo C. Tecson
"falsely certified to the calling of a special stockholders' meeting allegedly pursuant to due notice
and call of Defendant Bank" although plaintiffs-appellants and other CMI stockholders were not
notified thereof, and amended the Articles of Incorporation increasing the number of Directors
from 6 to 7, and had the illegally created Position of Director filled up by defendant-appellee
Alfonso Juan Olondriz, who was not competent or qualified to hold such position. In the third
cause of action, plaintiffs-appellants claimed actual damages in an amount equivalent to the
difference between the par value of the shares they were entitled, but failed, to acquire and the
higher market value of the same shares. In the fourth cause of action, Plaintiffs-appellants claimed
moral damages; in the fifth, exemplary damages; and in the sixth, attorney's fees.

In his manifestation to the court on January 4, 1964, Francisco Sevilla, who was one of the original
plaintiffs, withdrew. On January 15, 1964 Cipriano Azada, Maria Cristina Olondriz Pertierra, Maria
del Puy Olondriz de Stevens (who later withdrew as intervenors-appellants) and Carmen Sievert
de Amoyo, filed a motion to intervene, and to join the plaintiffs-appellants on record, to which
motion defendants-appellees, except Fermin Z. Caram, Jr., filed, on January 17, 1964 their
opposition.

On February 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a motion to dismiss
on the grounds that (a) plaintiffs-appellants had no legal standing or capacity to institute the
alleged class suit; (b) that the complaint did not state a sufficient and valid cause of action; and
(c) that plaintiffs-appellants' complaint against the increase of the number of directors did not

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likewise state a cause of action. Plaintiffs-appellants filed their opposition thereto on February 21,
1964.

On March 4, 1964 appellants, plaintiffs and intervenors, filed a verified petition for a writ of
preliminary injunction to enjoin defendants-appellees from considering or ratifying by resolution,
at the meeting of the stockholders of defendant-appellee Bank to be held the following day, the
unlawful apportionment of the shares of the defendant-appellee Bank and the illegal amendment
to its Articles of Incorporation increasing the number of Directors, The Court, after hearing,
granted the writ, but subsequently set it aside upon the appellees' filing a counter bond.

Some subscribers to the capital stock of the Bank like Concepcion Zuluaga, et al., and Carlos
Moran Sison, et al., filed separate manifestations that they were opposing and disauthorizing the
suit of plaintiffs-appellants.

On March 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a supplemental

ground for their motion to dismiss, to wit, that the stockholders, except Fermin Z. Caram, Jr., who
abstained, had unanimously, at their regular annual meeting held on March 5, 1964, ratified and
confirmed all the actuations of the organizers-directors in the incorporation, organization and
establishment of the Bank.

In its order, dated March 21, 1964, the trial court granted the motion to dismiss, holding, among
other things, that the class suit could not be maintained because of the absence of a showing in
the complaint that the plaintiffs-appellants were sufficiently numerous and representative, and
that the complaint failed to state a cause of action. From said order, appellants, plaintiffs and
intervenors, interposed this appeal to this Court on questions of law and fact, contending that the
lower court erred as follows:

1. In holding that plaintiffs-appellants could not maintain the present class

suit because of the absence of a showing in the complaint that they were
sufficiently numerous and representative;

II. In holding that the instant action could not be maintained as a class suit
because plaintiffs-appellants did not have a common legal interest in the
subject matter of the suit;

III. In dismissing the present class suit on the ground that it did not meet
the requirements of Rule 3, section 12 of the Rules of Court;

IV. In holding that the complaint was fatally defective in that it failed to state
with particularity that plaintiffs-appellants had resorted to, and exhausted,
intra-corporate remedies;

V. In resolving defendants-appellees' motion on the basis of facts not

alleged in the complaint;

VI. In holding that plaintiffs-appellants' complaint stated no valid cause of

action against defendants-appellees;

VII. In not holding that a trust relationship existed between the Interim
Board of Organizers of defendant-appellee Bank and the CMI subscribing
stockholders and in not holding that the waiver was in favor of the Board of
Trustees for the CMI subscribing stockholders;

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 VIII. In holding that the failure of plaintiffs-appellants to allege that they had
paid or had offered to pay for the shares allegedly pertaining to them
constituted another ground for dismissal;

XI. In holding that the allegations under the second cause of action stated
no valid cause of action due to a fatal omission to allege that plaintiffs-
appellants were stockholders of record at the time of the holding of the
special stockholders' meeting;

X. In holding that plaintiffs-appellants' complaint stated no cause of action

against defendant-appellee Bank; and

XI. In considering the resolution of ratification and confirmation and in

holding that the resolution rendered the issues in this case moot.

The assigned error revolve around two questions namely: (1) whether the instant action could be
maintained as a class suit, and (2) whether the complaint stated a cause of action. These issues
alone will be discussed.

1. Appellants contended in the first three assigned errors that the trial court erred in holding that
the present suit could not be maintained as a class suit, and in support thereof argued that the
propriety of a class suit should be determined by the common interest in the subject matter of the
controversy; that in the instant case there existed such common interest which consisted not only
in the recovery of the shares of which the appellants were unlawfully deprived, but also in divesting
the individuals-defendants-appellees and the person or entities chosen by them of control of the
appellee Bank. 1 ; that the complaint showed that besides the four plaintiff-appellants of record,
and the four movant-intervenors-appellants there were in the appellee Bank many other
stockholders who, tough similarly situated as the appellants, did not formally include themselves
as parties on record in view of the representative character of the suit; that the test, in order to
determine the legal standing of a party to institute a class suit, was not one, of number, but
whether or not the interest of said party was representative of the persons in whose behalf the
class suit was instituted; that granting arguendo, that the plaintiffs-appellants were not sufficiently
numerous and representative, the court should not have dismissed the action, for insufficiency of
number in a class suit was not a ground for a motion to dismiss, and the court should have treated
the suit as an action under Rule 3, section 6, of the Rules of Court which permits a joinder of
parties.

Defendants-appellees, on the contrary, stressed that the instant suit was instituted as a class suit
and the plaintiffs-appellants did not sue in their individual capacities for the protection of their
individual interests; that the plaintiffs appellants of record could not be considered numerous and
representative, as said plaintiffs-appellants were only four out of 1,500 stockholders, and owned
only 8 shares out of the 80,000 shares of stock of the appellee Bank; that even if to the four
plaintiffs-appellants were added the four movants-intervenors-appellants the situation would be
the same as two of the intervenors, to wit, Ma. Cristina Olondriz Pertierra and Ma. del Puy Olondriz
de Stevens, could not sue as they did not have their husbands' consent; that it was necessary
that in a class suit the complaint itself should allege facts showing that the plaintiffs were
sufficiently numerous and representative, and this did not obtain in the instant case, as the
complaint did not. even allege how many other CMI stockholders were "similarly situated"; that
the withdrawal of one plaintiff, Francisco Sevilla, the subsequent disclaimers of any interest in the
suit made in two separate pleadings by other CMI stockholders and the disauthorization of their
being represented by plaintiffs-appellants by the 986 (out of 1,663) stockholders who attended
the annual meeting of bank stockholders on March 5, 1964, completely negated plaintiffs-
appellants' pretension that they were sufficiently numerous and representative or that there were
many other stockholders similarly situated whom the plaintiffs-appellants allegedly represented;
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that plaintiffs-appellants did not have that common or general interest required by the Rules of
Court in the subject matter of the suit. 2

In their Reply Brief, appellants insisted that non-compliance with Section 12, Rule 3, not being
one enumerated in Rules 16 and 17, was not a ground for dismissal; that the requirements for a
class had been complied with; that the required common interest existed even if the interests
were several for there was a common question of law or fact and a common relief was sought;
that the common or general interest could be in the object of the action, in the result of the
proceedings, or in the question involved in the action, as long as there was a common right based
on the same essential facts; that plaintiffs-appellants adequately represented the aggrieved group
of bank stockholders, inasmuch as appellants' interests were not antagonistic to those of the
latter, and appellants were in the same position as the group in whose behalf the complaint was
filed.

The governing statutory provision for the maintenance of a class suit is Section 12 of Rule 3 of
the Rules of Court, which reads as follows:

Sec. 12. Class suit — When the subject matter of the controversy is one of
common or general interest to many persons, and the parties are so
numerous that it is impracticable to bring them all before the court, one or
more may sue or defend for the benefit of -ill. But in such case the court
shall make sure that the parties actually before it are sufficiently numerous
and representative so that all interests concerned are fully protected. Any
party in interest shall have a right to intervene in protection of his individual
interest.

The necessary elements for the maintenance of a class suit are accordingly: (1) that the subject
matter of the controversy be one of common or general interest to many persons, and (2) that
such persons be so numerous as to make it impracticable to bring them all to the court. An action
does not become a class suit merely because it is designated as such in the pleadings. Whether
the suit is or is not a class quit depends upon the attending facts, and the complaint, or other
pleading initiating the class action should allege the existence of the necessary facts, to wit, the
existence of a subject matter of common interest, and the existence of a class and the number of
persons in the alleged class, 3 in order that the court might be enabled to determine whether the
members of the class are so numerous as to make it impracticable to bring them all before the
court, to contrast the number appearing on the record with the number in the class and to
determine whether claimants on record adequately represent the class and the subject matter of
general or common interest. 4

The complaint in the instant case explicitly declared that the plaintiffs- appellants instituted the
"present class suit under Section 12, Rule 3, of the Rules of Court in. behalf of CMI subscribing
stockholders" 5 but did not state the number of said CMI subscribing stockholders so that the trial
court could not infer, much less make sure as explicitly required by the sufficiently numerous and
representative in order that all statutory provision, that the parties actually before it were interests
concerned might be fully protected, and that it was impracticable to bring such a large number of
parties before the court.

The statute also requires, as a prerequisite to a class suit, that the subject-matter of the
controversy be of common or general interest to numerous persons. Although it has been
remarked that the "innocent 'common or general interest' requirement is not very helpful in
determining whether or not the suit is proper", 6 the decided cases in our jurisdiction have more
incisively certified the matter when there is such common or general interest in the subject matter
of the controversy. By the phrase "subject matter of the action" is meant "the physical facts, the

284
things real or personal, the money, lands, chattels, and the like, in relation to which the suit is
prosecuted, and not the delict or wrong committed by the defendant." 7

This Court has ruled that a class suit did not lie in an action for recovery of real property where
separate portions of the same parcel were occupied and claimed individually by different parties
to the exclusion of each other, such that the different parties had determinable, though undivided
interests, in the property in question. 8 It his likewise held that a class suit would not lie against
319 defendants individually occupying different portions of a big parcel of land, where each
defendant had an interest only in the particular portion he was occupying, which portion was
completely different from the other portions individually occupied by other defendants, for the
applicable section 118 of the Code of Civil Procedure relates to a common and general interest
in single specific things and not to distinct ones. 9 In an action for the recovery of amounts that
represented surcharges allegedly collected by the city from some 30,000 customers of four movie
houses, it was held that a class suit did not lie, as no one plaintiff had any right to, or any share
in the amounts individually claimed by the others, as each of them was entitled, if at all, only to
the return of what he had personally paid. 10

The interest, subject matter of the class suits in the above cited cases, is analogous to the interest
claimed by appellants in the instant case. The interest that appellants, plaintiffs and intervenors,
and the CMI stockholders had in the subject matter of this suit — the portion of stocks offering of
the Bank left unsubscribed by CMI stockholders who failed to exercise their right to subscribe on
or before January 15, 1963 — was several, not common or general in the sense required by the
statute. Each one of the appellants and the CMI stockholders had determinable interest; each
one had a right, if any, only to his respective portion of the stocks. No one of them had any right
to, or any interest in, the stock to which another was entitled. Anent this point, the trial court
correctly remarked:

It appears to be the theory of the plaintiffs borne out by the prayer, that
each subscribing CMI stockholder is entitled to further subscribe to a
certain Proportion depending upon his stockholding in the CMI, of the P8
million capital stock of the defendant bank open to subscription (out of the
20 million authorized capital stock) as well as the unsubscribed portion of
the P8 million stock offering which were left unsubscribed by those CMI
stockholders who for one reason or another had failed to exercise their
subscription rights on or before January 15, 1963. Under the plaintiffs'
theory therefore, each subscribing CMI stockholder was entitled to
subscribe to a definite number of shares both in the original offering of P8
million and in that part thereof not subscribed on or before the deadline
mentioned, so that one subscribing CMI stockholder may be entitled to
subscribe to one share, another to 3 shares and a third to 11 shares, and
so on, depending upon the amount and extent of CMI stockholding. But
except for the fact that a question of law — the proper interpretation of the
waiver provisions of the CMI stockholders' resolution of March 28, 1962 —
is common to all, each CMI subscribing stock holder has a legal interest in,
and a claim to, only his respective proportion of shares in the defendant
bank, and none with regard to any of the shares to which another
stockholder is entitled. Thus plaintiff Ismael Mathay has no legal interest in,
or claim to, any share claimed by any or all of his co-plaintiffs from the
defendant individuals. Hence, no CMI subscribing stockholder or, for that
matter, not any number of CMI stockholders can maintain a class suit in
behalf of others,... 11

Even if it be assumed, for the sake of argument, that the appellants and the CMI stockholders
suffered wrongs that had been committed by similar means and even pursuant to a single plan of
285
the Interim Board of Organizers of the Bank, the wrong suffered by each of them would constitute
a wrong separate from those suffered by the other stockholders, and those wrongs alone would
not create that common or general interest in the subject matter of the controversy as would entitle
any one of them to bring a class suit on behalf of the others. Anent this point it has been said that:

Separate wrongs to separate persons, although committed by similar

means and even pursuant to a single plan, do not alone create a 'common'
or 'general' interest in those who are wronged so as to entitle them to
maintain a representative action. 12

Appellants, however, insisted, citing American authorities, 13 that a class suit might be brought
even if the interests of plaintiffs-appellants might be several as long as there was a common
question of law or fact affecting them and a common relief was sought. We have no conflict with
the authorities cited; those were rulings under the Federal Rules of Civil Procedure, pursuant to
Rule 23 of which, there were three types of class suits, namely: the true, the hybrid, and the
spurious, and these three had only one feature in common, that is, in each the persons
constituting the class must be so numerous as to make it impracticable to bring them all before
the court. The authorities cited by plaintiffs-appellants refer to the spurious class action (Rule 23
(a) (3) which involves a right sought to be enforced, which is several, and there is a common
question of law or fact affecting the several rights and a common relief is sought. 14 The spurious
class action is merely a permissive joinder device; between the members of the class there is no
jural relationship, and the right or liability of each is distinct, the class being formed solely by the
presence of a common question of law or fact. 15 This permissive joinder is provided in Section 6
of Rule 3, of our Rules of Court. Such joinder is not and cannot be regarded as a class suit, which
this action purported and was intended to be as per averment of the complaint.

It may be granted that the claims of all the appellants involved the same question of law. But this
alone, as said above, did not constitute the common interest over the subject matter indispensable
in a class suit. The right to purchase or subscribe to the shares of the proposed Bank, claimed by
appellants herein, is analogous to the right of preemption that stockholders have when their
corporation increases its capital. The right to preemption, it has been said, is personal to each
stockholder, 16 and while a stockholder may maintain a suit to compel the issuance of his
proportionate share of stock, it has been ruled, nevertheless, that he may not maintain a
representative action on behalf of other stockholders who are similarly situated. 17 By analogy,
the right of each of the appellants to subscribe to the waived stocks was personal, and no one of
them could maintain on behalf of others similarly situated a representative suit.

Straining to make it appear that appellants and the CMI subscribing stockholders had a common
or general interest in the subject matter of the suit, appellants stressed in their brief that one of
the reliefs sought in the instant action was "to divest defendant individuality and the persons or
entities chosen by them of control of the defendant bank." 18 This relief allegedly sought by
appellants did not, however, appear either in the text or in the prayer of the complaint.

Appellants, furthermore, insisted that insufficiency of number in a class suit was not a ground for
dismissal of one action. This Court has, however, said that where it appeared that no sufficient
representative parties had been joined, the dismissal by the trial court of the action, despite the
contention by plaintiffs that it was a class suit, was correct. 19 Moreover, insofar as the instant
case is concerned, even if it be granted for the sake of argument, that the suit could not be
dismissed on that ground, it could have been dismissed, nevertheless, on the ground of lack of
cause of action which will be presently discussed. .

2. Appellants supported their assigned error that the court erred in holding that the complaint
stated no valid cause of action, by claiming that paragraph 15 together with the other allegations
of the complaint to the effect that defendants-appellees had unlawfully acquired stockholdings in
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the capital stock of defendant-appellee Bank in excess of what they were lawfully entitled to, in
violation of law and in breach of trust and the contractual agreement, constituted a valid and
sufficient cause of action; 20 and that only the allegations in the complaint should have been
considered by the trial court in determining whether the complaint stated a cause of action or not.

Defendants-appellees, on the contrary, maintained that the allegations of the complaint should
not be the only ones to be considered in determining whether there is a cause of action; that even
if the ultimate facts alleged in the first cause of action of the complaint be the only ones considered
the complaint would still fail to state a valid cause of action on the following grounds: first, there
was no allegation regarding appellants' qualification to subscribe to the capital stock of the
appellee Bank, for under the CMI stockholders' resolution of March 28, 1962, only those qualified
under the law were entitled to subscribe, and under the regulations of the Monetary Board, only
natural-born Filipino citizens could be stockholders of a banking corporation organized under the
laws of the Philippines, and nowhere did the complaint alleged that plaintiffs-appellants were
natural born Filipino citizens. 21 Second, appellants' averment in paragraph 8 that they
"subscribed," and their averment in paragraph 15 that they were "denied the right to subscribe ...
to the capital stock of the defendant Bank", were inconsistent, and hence neutralized each other,
thereby leaving in shambles the first cause of action. Third, there was no allegation that appellants
had not yet received or had not been issued the corresponding certificates of stock covering the
shares they had subscribed and paid for. Fourth, the allegations failed to show the existence of
the supposed trust; and fifth, the complaint failed to allege that plaintiffs-appellants had paid or
offered to pay for the shares allegedly pertaining to them. 22

Let us premise the legal principles governing the motion to dismiss on the ground of lack of cause
of action.

Section 1, Rule 16 of the Rules of Court providing in part that: .

Within the time for pleading a motion to dismiss may be made on any of
the following grounds: ....

(g) That the complaint states no cause of action. ..1.

explicitly requires that the sufficiency of the complaint must be tested exclusively on the basis of
the complaint itself and no other should be considered when the ground for motion to dismiss is
that the complaint states no cause of action. Pursuant thereto this Court has ruled that:

As a rule the sufficiency of the complaint, when Challenged in a motion to dismiss, must be
determined exclusively on the basis of the facts alleged therein. 23

It has been likewise held that a motion to dismiss based on lack of cause of action hypothetically
admits the truth of the allegations of fact made in the complaint. 24 It is to be noted that only the
facts well pleaded in the complaint, and likewise, any inferences fairly deducible therefrom, are
deemed admitted by a motion to dismiss. Neither allegations of conclusions 25 nor allegations of
facts the falsity of which the court may take judicial notice are deemed admitted. 26 The question,
therefore, submitted to the Court in a motion to dismiss based on lack of cause of action is not
whether the facts alleged in the complaint are true, for these are hypothetically admitted, but
whether the facts alleged are sufficient to constitute a cause of action such that the court may
render a valid judgment upon the facts alleged therein.

A cause of action is an act or omission of one party in violation of the legal right of the other. Its
essential elements are, namely: (1) the existence of a legal right in the plaintiff, (2) a correlative
legal duty in the defendant, and (3) an act or omission of the defendant in violation of plaintiff's

287
right with consequential injury or damage to the plaintiff for which he may maintain an action for
the recovery of damages or other appropriate relief. 27 On the other hand, Section 3 of Rule 6 of
the Rules of Court provides that the complaint must state the ultimate facts constituting the
plaintiff's cause of action. Hence, where the complaint states ultimate facts that constitute the
three essential elements of a cause of action, the complaint states a cause of action; 28 otherwise,
the complaint must succumb to a motion to dismiss on that ground.

The legal principles having been premised, let us now analyze and discuss appellant's various
causes of action.

Appellants' first cause of action, pursuant to what has been premised above, should have
consisted of: (1) the right of appellants as well as of the other CMI stockholders to subscribe, in
proportion to their equities established under their respective "Pre-Incorporation Agreements to
Subscribe", to that portion of the capital stock which was unsubscribed because of failure of the
CMI stockholders to exercise their right to subscribe thereto; (2) the legal duty of the appellant to
have said portion of the capital stock to be subscribed by appellants and other CMI stockholders;
and (3) the violation or breach of said right of appellants and other CMI stockholders by the
appellees.

Did the complaint state the important and substantial facts directly forming the basis of the primary
right claimed by plaintiffs? Before proceeding to elucidate this question, it should be noted that a
bare allegation that one is entitled to something is an allegation of a conclusion. Such allegations
adds nothing to the pleading, it being necessary to plead specifically the facts upon which such
conclusion is founded. 29 The complaint alleged that appellants were stockholders of the CMI; that
as such stockholders, they were entitled; by virtue of the resolution of March 28, 1962, to
subscribe to the capital stock of the proposed Consolidated Bank and Trust Co., at par value to
the same extent and in the same amount as said stockholders' respective share holdings in the
CMI as shown in the latter's stock book as of January 15, 1963, the right to subscribe to be
exercised until January 15, 1963, provided said stockholders of the CMI were qualified under the
law to become stockholders of the proposed Bank; 30 that appellants accomplished and filed their
respective "Pre-Incorporation Agreements to Subscribe" and fully paid the subscription. 31

These alleged specific facts did not even show that appellants were entitled to subscribe to the
capital stock of the proposed Bank, for said right depended on a condition precedent, which was,
that they were qualified under the law to become stockholders of the Bank, and there was no
direct averment in the complaint of the facts that qualified them to become stockholders of the
Bank. The allegation of the fact that they subscribed to the stock did not, by necessary implication,
show that they were possessed of the necessary qualifications to become stockholders of the
proposed Bank.

Assuming arguendo that appellants were qualified to become stockholders of the Bank, they could
subscribe, pursuant to the explicit terms of the resolution of March 28, 1962, "to the same extent
and in the same amount as said stockholders' respective stockholdings in the CMI" as of January
15, 1963. 32 This was the measure of the right they could claim to subscribe to waived stocks.
Appellants did not even aver that the stocks waived to the subscription of which they claimed the
right to subscribe, were comprised in "the extent and amount" of their respective share holdings
in the CMI. It is not surprising that they did not make such an averment for they did not even
allege the amount of shares of stock to which they claimed they were entitled to subscribe. The
failure of the complaint to plead specifically the above facts rendered it impossible for the court to
conclude by natural reasoning that the appellants and other CMI stockholders had a right to
subscribe to the waived shares of stock, and made any allegation to that effect a conclusion of
the pleader, not an ultimate fact, in accordance with the test suggested by the California Supreme
Court, to wit:

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 If from the facts in evidence, the result can be reached by that process of
natural reasoning adopted in the investigation of truth, it becomes an
ultimate fact, to be found as such. If, on the other hand, resort must be had
to the artificial processes of the law, in order to reach a final determination,
the result is a conclusion of law. 33

Let us now pass to the second and third elements that would have constituted the first cause of
action. Did the complaint allege as ultimate facts the legal duty of defendants-appellees to have
a portion of the capital stock subscribed to by appellants? Did the complaint allege as ultimate
facts that defendants appellees had violated appellants' right?

Even if it be assumed arguendo that defendants-appellees had the duty to have the waived stocks
subscribed to by the CMI stockholders, this duty was not owed to all the CMI stockholders, but
only to such CMI stockholders as were qualified to become stockholders of the proposed Bank.
Inasmuch as it has been shown that the complaint did not contain ultimate facts to show that
plaintiffs-appellants were qualified to become stockholders of the Bank, it follows that the
complaint did not show that defendants-appellees were under duty to have plaintiffs-appellants
subscribe to the stocks of the proposed Bank. It inevitably follows also that the complaint did not
contain ultimate facts to show that the right of the plaintiffs-appellants to subscribe to the shares
of the proposed Bank had been violated by defendants-appellees. How could a non-existent right
be violated?

Let us continue the discussion further. The complaint alleged that by virtue of the resolution of
March 28, 1962, the President and Members of the Board of Directors of the CMI would be
constituted as a Board of Organizers to undertake and carry out the organization of the Bank; 34
that the Board of Organizers was constituted and proceeded with the establishment of the Bank,
35
that the persons composing the Board of Organizers were the individuals-defendants-
appellees; 36 that the Board of Organizers sent our circular letters with "Pre-Incorporation
Agreement to Subscribe" forms 37 which specified, among others, "such subscription right shall
be deemed ipso facto waived and released in favor of the Board of Organizers of the defendant
Bank and their assignees"; 38 that in the Articles of Incorporation prepared by the Board of
Organizers, the individuals-defendants-appellees alone appeared to have subscribe to the 50,
shares; 39 and that individuals-defendants-appellees again subscribe to all the additional 30,000
shares. 40 From these facts, appellants concluded that they were denied their right to subscribe
in proportion to their equities; 41 that the individuals-defendants-appellees unlawfully acquired
stockholdings far in excess of what they were lawfully entitled in violation of law and in breach of
trust and of contractual agreement; 42 and that, because of matters already alleged, the
individuals-defendants-appellees "hold their shares in the defendant bank in trust for plaintiffs." 43

The allegation in the complaint that the individuals-defendants-appellees held their shares "in
trust" for plaintiffs-appellants without averment of the facts from which the court could conclude
the existence of the alleged trust, was not deemed admitted by the motion to dismiss for that was
a conclusion of law. Express averments "that a party was the beneficial owner of certain property;
... that property or money was received or held in trust, or for the use of another; that particular
funds were trust funds; that a particular transaction created an irrevocable trust; that a person
held Property as constructive trustee; that on the transfer of certain property a trust resulted" have
been considered as mere conclusions of law. 44 The facts alleged in the complaint did not, by
logical reasoning, necessarily lead to the conclusion that defendants-appellees were trustees in
favor of appellants of the shares of stock waived by the CMI stockholders who failed to exercise
their right to subscribe. In this connection, it has been likewise said that:

"The general rule is that an allegation of duty in terms unaccompanied by a statement of the facts
showing the existence of the duty, is a mere conclusion of law, unless there is a relation set forth
from which the law raises the duty." 45
289
In like manner, the allegation that individuals-defendants-appellees held said shares in trust was
no more than an interpretation by appellants of the effect of the waiver clause of the Resolution
and as such it was again a mere conclusion of law. It has been said that:

The following are also conclusions of law: ... an allegation characterizing

an instrument or purporting to interpret it and state its effects, ... 46

Allegations in petition in the nature of conclusions about the meaning of contract, inconsistent
with stated terms of the contract, cannot be considered. 47

The allegation that the defendants-appellee acquired stockholdings far in excess of what they
were lawfully entitled, in violation of law and in breach of trust and of contractual agreement, is
also mere conclusion of law.

Of course, the allegation that there was a violation of trust duty was plainly a conclusion of law,
for "a mere allegation that it was the duty of a party to do this or that, or that he was guilty of a
breach of duty, is a statement of a conclusion not of fact." 48

An averment ... that an act was 'unlawful' or 'wrongful' is a mere legal

conclusion or opinion of the pleader. 49

Moreover, plaintiffs-appellants did not state in the complaint the amount of subscription the
individual defendant-appellee were entitled to; hence there was no basis for the court to determine
what amount subscribed to by them was excessive.

From what has been said, it is clear that the ultimate facts stated under the first cause of action
are not sufficient to constitute a cause of action.

The further allegations in the second cause of action that the calling of a special meeting was
"falsely certified", that the seventh position of Director was "illegally created" and that defendant
Alfonso Juan Olondriz was "not competent or qualified" to be a director are mere conclusions of
law, the same not being necessarily inferable from the ultimate facts stated in the first and second
causes of action. It has been held in this connection that:

An averment that ... an act was 'unlawful' or 'wrongful' is a mere legal

conclusion or opinion of the pleader. The same is true of allegations that
an instrument was 'illegally' certified or ... that an act was arbitrarily done
..." 50

A pleader states a mere conclusion when he makes any of the following

allegations: that a party was incapacitated to enter into a contract or convey
property ... 51

The third, fourth, fifth and sixth causes of action depended on the first cause of action, which, as
has been shown, did not state ultimate facts sufficient to constitute a cause of action. It stands to
reason, therefore, that said causes of action would also be fatally defective.

It having been shown that the complaint failed to state ultimate facts to constitute a cause of
action, it becomes unnecessary to discuss the other assignments of errors.

WHEREFORE, the instant appeal is dismissed, and the order dated March 21, 1964 of the Court
of First Instance of Manila dismissing the complaint in Civil Case No. 55810 is affirmed, with costs
in this instance against appellants. It is so ordered.
290
G.R. No. 135306 January 28, 2003

MVRS PUBLICATIONS, INC., MARS C. LACONSAY, MYLA C. AGUJA and AGUSTINO G.

BINEGAS, JR., petitioners,
vs.
ISLAMIC DA'WAH COUNCIL OF THE PHILIPPINES, INC., ABDULRAHMAN R.T. LINZAG,
IBRAHIM F.P. ARCILLA, ABDUL RASHID DE GUZMAN, AL-FARED DA SILVA and
IBRAHIM B.A. JUNIO, respondents.

BELLOSILLO, J.:

I may utterly detest what you write, but I shall fight to the death to make it possible for you to
continue writing it. —

Voltaire

VOLTAIRE'S PONTIFICAL VERSE bestirs once again the basic liberties to free speech and free
press — liberties that belong as well, if not more, to those who question, who do not conform,
who differ. For the ultimate good which we all strive to achieve for ourselves and our posterity
can better be reached by a free exchange of ideas, where the best test of truth is the power of
the thought to get itself accepted in the competition of the free market — not just the ideas we
desire, but including those thoughts we despise.1

ISLAMIC DA'WAH COUNCIL OF THE PHILIPPINES, INC., a local federation of more than
seventy (70) Muslim religious organizations, and individual Muslims ABDULRAHMAN R.T.
LINZAG, IBRAHIM F.P. ARCILLA, ABDUL RASHID DE GUZMAN, AL-FARED DA SILVA and
IBRAHIM B.A. JUNIO, filed in the Regional Trial Court of Manila a complaint for damages in their
own behalf and as a class suit in behalf of the Muslim members nationwide against MVRS
PUBLICATIONS, INC., MARS C. LACONSAY, MYLA C. AGUJA and AGUSTINO G. BINEGAS,
JR., arising from an article published in the 1 August 1992 issue of Bulgar, a daily tabloid. The
article reads:

"ALAM BA NINYO?

Na ang mga baboy at kahit anong uri ng hayop sa Mindanao ay hindi kinakain ng mga Muslim?

Para sa kanila ang mga ito ay isang sagradong bagay. Hindi nila ito kailangang kainin kahit na
sila pa ay magutom at mawalan ng ulam sa tuwing sila ay kakain. Ginagawa nila itong Diyos at
sinasamba pa nila ito sa tuwing araw ng kanilang pangingilin lalung-lalo na sa araw na tinatawag
nilang 'Ramadan'."

The complaint alleged that the libelous statement was insulting and damaging to the Muslims;
that these words alluding to the pig as the God of the Muslims was not only published out of sheer
ignorance but with intent to hurt the feelings, cast insult and disparage the Muslims and Islam, as
a religion in this country, in violation of law, public policy, good morals and human relations; that
on account of these libelous words Bulgar insulted not only the Muslims in the Philippines but the
entire Muslim world, especially every Muslim individual in non-Muslim countries.

MVRS PUBLICATIONS, INC., and AGUSTINO G. BINEGAS, JR., in their defense, contended
that the article did not mention respondents as the object of the article and therefore were not

291
entitled to damages; and, that the article was merely an expression of belief or opinion and was
published without malice nor intention to cause damage, prejudice or injury to Muslims.2

On 30 June 1995 the trial court dismissed the complaint holding that the plaintiffs failed to
establish their cause of action since the persons allegedly defamed by the article were not
specifically identified —

It must be noted that the persons allegedly defamed, the herein plaintiffs, were not identified with
specificity. The subject article was directed at the Muslims without mentioning or identifying the
herein plaintiffs x x x. It is thus apparent that the alleged libelous article refers to the larger
collectivity of Muslims for which the readers of the libel could not readily identify the personalities
of the persons defamed. Hence, it is difficult for an individual Muslim member to prove that the
defamatory remarks apply to him. The evidence presented in this case failed to convince this
court that, indeed, the defamatory remarks really applied to the herein plaintiffs.3

On 27 August 1998 the Court of Appeals reversed the decision of the trial court. It opined that it
was "clear from the disputed article that the defamation was directed to all adherents of the Islamic
faith. It stated that pigs were sacred and idolized as god by members of the Muslim religion. This
libelous imputation undeniably applied to the plaintiff-appellants who are Muslims sharing the
same religious beliefs." It added that the suit for damages was a "class suit" and that ISLAMIC
DA'WAH COUNCIL OF THE PHILIPPINES, INC.'s religious status as a Muslim umbrella
organization gave it the requisite personality to sue and protect the interests of all Muslims.4

Hence, the instant petition for review assailing the findings of the appellate court (a) on the
existence of the elements of libel, (b) the right of respondents to institute the class suit, and, (c)
the liability of petitioners for moral damages, exemplary damages, attorney's fees and costs of
suit.

Defamation, which includes libel and slander, means the offense of injuring a person's character,
fame or reputation through false and malicious statements.5 It is that which tends to injure
reputation or to diminish the esteem, respect, good will or confidence in the plaintiff or to excite
derogatory feelings or opinions about the plaintiff.6 It is the publication of anything which is
injurious to the good name or reputation of another or tends to bring him into disrepute.7
Defamation is an invasion of a relational interest since it involves the opinion which others in the
community may have, or tend to have, of the plaintiff.8

It must be stressed that words which are merely insulting are not actionable as libel or slander
per se, and mere words of general abuse however opprobrious, ill-natured, or vexatious, whether
written or spoken, do not constitute a basis for an action for defamation in the absence of an
allegation for special damages.9 The fact that the language is offensive to the plaintiff does not
make it actionable by itself.10

Declarations made about a large class of people cannot be interpreted to advert to an identified
or identifiable individual. Absent circumstances specifically pointing or alluding to a particular
member of a class, no member of such class has a right of action11 without at all impairing the
equally demanding right of free speech and expression, as well as of the press, under the Bill of
Rights.12 Thus, in Newsweek, Inc. v. Intermediate Appellate Court,13 we dismissed a complaint
for libel against Newsweek, Inc., on the ground that private respondents failed to state a cause
of action since they made no allegation in the complaint that anything contained in the article
complained of specifically referred to any of them. Private respondents, incorporated associations
of sugarcane planters in Negros Occidental claiming to have 8,500 members and several
individual members, filed a class action suit for damages in behalf of all sugarcane planters in
Negros Occidental. The complaint filed in the Court of First Instance of Bacolod City alleged that
Newsweek, Inc., committed libel against them by the publication of the article "Island of Fear" in
292
its weekly newsmagazine allegedly depicting Negros Province as a place dominated by wealthy
landowners and sugar planters who not only exploited the impoverished and underpaid
sugarcane workers but also brutalized and killed them with impunity. Private respondents alleged
that the article showed a deliberate and malicious use of falsehood, slanted presentation and/or
misrepresentation of facts intended to put the sugarcane planters in a bad light, expose them to
public ridicule, discredit and humiliation in the Philippines and abroad, and make them the objects
of hatred, contempt and hostility of their agricultural workers and of the public in general. We
ratiocinated —

x x x where the defamation is alleged to have been directed at a group or class, it is essential that
the statement must be so sweeping or all-embracing as to apply to every individual in that group
or class, or sufficiently specific so that each individual in the class or group can prove that the
defamatory statement specifically pointed to him, so that he can bring the action separately, if
need be x x x x The case at bar is not a class suit. It is not a case where one or more may sue
for the benefit of all, or where the representation of class interest affected by the judgment or
decree is indispensable to make each member of the class an actual party. We have here a case
where each of the plaintiffs has a separate and distinct reputation in the community. They do not
have a common or general interest in the subject matter of the controversy.

In the present case, there was no fairly identifiable person who was allegedly injured by the Bulgar
article. Since the persons allegedly defamed could not be identifiable, private respondents have
no individual causes of action; hence, they cannot sue for a class allegedly disparaged. Private
respondents must have a cause of action in common with the class to which they belong to in
order for the case to prosper.

An individual Muslim has a reputation that is personal, separate and distinct in the community.
Each Muslim, as part of the larger Muslim community in the Philippines of over five (5) million
people, belongs to a different trade and profession; each has a varying interest and a divergent
political and religious view — some may be conservative, others liberal. A Muslim may find the
article dishonorable, even blasphemous; others may find it as an opportunity to strengthen their
faith and educate the non-believers and the "infidels." There is no injury to the reputation of the
individual Muslims who constitute this community that can give rise to an action for group libel.
Each reputation is personal in character to every person. Together, the Muslims do not have a
single common reputation that will give them a common or general interest in the subject matter
of the controversy.

In Arcand v. The Evening Call Publishing Company,14 the United States Court of Appeals held
that one guiding principle of group libel is that defamation of a large group does not give rise to a
cause of action on the part of an individual unless it can be shown that he is the target of the
defamatory matter.

The rule on libel has been restrictive. In an American case,15 a person had allegedly committed
libel against all persons of the Jewish religion. The Court held that there could be no libel against
an extensive community in common law. In an English case, where libel consisted of allegations
of immorality in a Catholic nunnery, the Court considered that if the libel were on the whole Roman
Catholic Church generally, then the defendant must be absolved.16 With regard to the largest
sectors in society, including religious groups, it may be generally concluded that no criminal action
at the behest of the state, or civil action on behalf of the individual, will lie.

In another case, the plaintiffs claimed that all Muslims, numbering more than 600 million, were
defamed by the airing of a national television broadcast of a film depicting the public execution of
a Saudi Arabian princess accused of adultery, and alleging that such film was "insulting and
defamatory" to the Islamic religion.17 The United States District Court of the Northern District of
California concluded that the plaintiffs' prayer for $20 Billion in damages arising from "an
293
international conspiracy to insult, ridicule, discredit and abuse followers of Islam throughout the
world, Arabs and the Kingdom of Saudi Arabia" bordered on the "frivolous," ruling that the plaintiffs
had failed to demonstrate an actionable claim for defamation. The California Court stressed that
the aim of the law on defamation was to protect individuals; a group may be sufficiently large that
a statement concerning it could not defame individual group members.18

Philip Wittenberg, in his book "Dangerous Words: A Guide to the Law of Libel,"19 discusses the
inappropriateness of any action for tortious libel involving large groups, and provides a succinct
illustration:

There are groupings which may be finite enough so that a description of the body is a description
of the members. Here the problem is merely one of evaluation. Is the description of the member
implicit in the description of the body, or is there a possibility that a description of the body may
consist of a variety of persons, those included within the charge, and those excluded from it?

A general charge that the lawyers in the city are shysters would obviously not be a charge that
all of the lawyers were shysters. A charge that the lawyers in a local point in a great city, such as
Times Square in New York City, were shysters would obviously not include all of the lawyers who
practiced in that district; but a statement that all of the lawyers who practiced in a particular
building in that district were shysters would be a specific charge, so that any lawyer having an
office within that building could sue.

If the group is a very large one, then the alleged libelous statement is considered to have no
application to anyone in particular, since one might as well defame all mankind. Not only does
the group as such have no action; the plaintiff does not establish any personal reference to
himself.20 At present, modern societal groups are both numerous and complex. The same
principle follows with these groups: as the size of these groups increases, the chances for
members of such groups to recover damages on tortious libel become elusive. This principle is
said to embrace two (2) important public policies: first, where the group referred to is large, the
courts presume that no reasonable reader would take the statements as so literally applying to
each individual member; and second, the limitation on liability would satisfactorily safeguard
freedom of speech and expression, as well as of the press, effecting a sound compromise
between the conflicting fundamental interests involved in libel cases.21

In the instant case, the Muslim community is too vast as to readily ascertain who among the
Muslims were particularly defamed. The size of the group renders the reference as indeterminate
and generic as a similar attack on Catholics, Protestants, Buddhists or Mormons would do. The
word "Muslim" is descriptive of those who are believers of Islam, a religion divided into varying
sects, such as the Sunnites, the Shiites, the Kharijites, the Sufis and others based upon political
and theological distinctions. "Muslim" is a name which describes only a general segment of the
Philippine population, comprising a heterogeneous body whose construction is not so well defined
as to render it impossible for any representative identification.

The Christian religion in the Philippines is likewise divided into different sects: Catholic, Baptist,
Episcopalian, Presbyterian, Lutheran, and other groups the essence of which may lie in an
inspired charlatan, whose temple may be a corner house in the fringes of the countryside. As with
the Christian religion, so it is with other religions that represent the nation's culturally diverse
people and minister to each one's spiritual needs. The Muslim population may be divided into
smaller groups with varying agenda, from the prayerful conservative to the passionately radical.
These divisions in the Muslim population may still be too large and ambiguous to provide a
reasonable inference to any personality who can bring a case in an action for libel.

294
The foregoing are in essence the same view scholarly expressed by Mr. Justice Reynato S. Puno
in the course of the deliberations in this case. We extensively reproduce hereunder his
comprehensive and penetrating discussion on group libel —

Defamation is made up of the twin torts of libel and slander — the one being, in general, written,
while the other in general is oral. In either form, defamation is an invasion of the interest in
reputation and good name. This is a "relational interest" since it involves the opinion others in the
community may have, or tend to have of the plaintiff.

The law of defamation protects the interest in reputation — the interest in acquiring, retaining and
enjoying one's reputation as good as one's character and conduct warrant. The mere fact that the
plaintiff's feelings and sensibilities have been offended is not enough to create a cause of action
for defamation. Defamation requires that something be communicated to a third person that may
affect the opinion others may have of the plaintiff. The unprivileged communication must be
shown of a statement that would tend to hurt plaintiff's reputation, to impair plaintiff's standing in
the community.

Although the gist of an action for defamation is an injury to reputation, the focus of a defamation
action is upon the allegedly defamatory statement itself and its predictable effect upon third
persons. A statement is ordinarily considered defamatory if it "tend[s] to expose one to public
hatred, shame, obloquy, contumely, odium, contempt, ridicule, aversion, ostracism, degradation
or disgracex x x." The Restatement of Torts defines a defamatory statement as one that "tends
to so harm the reputation of another as to lower him in the estimation of the community or to deter
third persons from associating or dealing with him."

Consequently as a prerequisite to recovery, it is necessary for the plaintiff to prove as part of his
prima facie case that the defendant (1) published a statement that was (2) defamatory (3) of and
concerning the plaintiff.

The rule in libel is that the action must be brought by the person against whom the defamatory
charge has been made. In the American jurisdiction, no action lies by a third person for damages
suffered by reason of defamation of another person, even though the plaintiff suffers some injury
therefrom. For recovery in defamation cases, it is necessary that the publication be "of and
concerning the plaintiff." Even when a publication may be clearly defamatory as to somebody, if
the words have no personal application to the plaintiff, they are not actionable by him. If no one
is identified, there can be no libel because no one's reputation has been injured x x x x

In fine, in order for one to maintain an action for an alleged defamatory statement, it must appear
that the plaintiff is the person with reference to whom the statement was made. This principle is
of vital importance in cases where a group or class is defamed since, usually, the larger the
collective, the more difficult it is for an individual member to show that he was the person at whom
the defamation was directed.

If the defamatory statements were directed at a small, restricted group of persons, they applied
to any member of the group, and an individual member could maintain an action for defamation.
When the defamatory language was used toward a small group or class, including every member,
it has been held that the defamatory language referred to each member so that each could
maintain an action. This small group or class may be a jury, persons engaged in certain
businesses, professions or employments, a restricted subdivision of a particular class, a society,
a football team, a family, small groups of union officials, a board of public officers, or engineers
of a particular company.

295
In contrast, if defamatory words are used broadly in respect to a large class or group of persons,
and there is nothing that points, or by proper colloquium or innuendo can be made to apply, to a
particular member of the class or group, no member has a right of action for libel or slander.
Where the defamatory matter had no special, personal application and was so general that no
individual damages could be presumed, and where the class referred to was so numerous that
great vexation and oppression might grow out of the multiplicity of suits, no private action could
be maintained. This rule has been applied to defamatory publications concerning groups or
classes of persons engaged in a particular business, profession or employment, directed at
associations or groups of association officials, and to those directed at miscellaneous groups or
classes of persons.

Distinguishing a small group — which if defamed entitles all its members to sue from a large
group — which if defamed entitles no one to sue — is not always so simple. Some authorities
have noted that in cases permitting recovery, the group generally has twenty five (25) or fewer
members. However, there is usually no articulated limit on size. Suits have been permitted by
members of fairly large groups when some distinguishing characteristic of the individual or group
increases the likelihood that the statement could be interpreted to apply individually. For example,
a single player on the 60 to 70 man Oklahoma University football team was permitted to sue when
a writer accused the entire team of taking amphetamines to "hop up" its performance; the
individual was a fullback, i.e., a significant position on the team and had played in all but two of
the team's games.

A prime consideration, therefore, is the public perception of the size of the group and whether a
statement will be interpreted to refer to every member. The more organized and cohesive a group,
the easier it is to tar all its members with the same brush and the more likely a court will permit a
suit from an individual even if the group includes more than twenty five (25) members. At some
point, however, increasing size may be seen to dilute the harm to individuals and any resulting
injury will fall beneath the threshold for a viable lawsuit.

x x x x There are many other groupings of men than those that are contained within the foregoing
group classifications. There are all the religions of the world, there are all the political and
ideological beliefs; there are the many colors of the human race. Group defamation has been a
fertile and dangerous weapon of attack on various racial, religious and political minorities. Some
states, therefore, have passed statutes to prevent concerted efforts to harass minority groups in
the United States by making it a crime to circulate insidious rumors against racial and religious
groups. Thus far, any civil remedy for such broadside defamation has been lacking.

There have been numerous attempts by individual members to seek redress in the courts for libel
on these groups, but very few have succeeded because it felt that the groups are too large and
poorly defined to support a finding that the plaintiff was singled out for personal attack x x x x
(citations omitted).

Our conclusion therefore is that the statements published by petitioners in the instant case did
not specifically identify nor refer to any particular individuals who were purportedly the subject of
the alleged libelous publication. Respondents can scarcely claim to having been singled out for
social censure pointedly resulting in damages.

A contrary view is expressed that what is involved in the present case is an intentional tortious
act causing mental distress and not an action for libel. That opinion invokes Chaplinsky v. New
Hampshire22 where the U.S. Supreme Court held that words heaping extreme profanity, intended
merely to incite hostility, hatred or violence, have no social value and do not enjoy constitutional
protection; and Beauharnais v. Illinois23 where it was also ruled that hate speech which denigrates

296
a group of persons identified by their religion, race or ethnic origin defames that group and the
law may validly prohibit such speech on the same ground as defamation of an individual.

We do not agree to the contrary view articulated in the immediately preceding paragraph.
Primarily, an "emotional distress" tort action is personal in nature, i.e., it is a civil action filed by
an individual24 to assuage the injuries to his emotional tranquility due to personal attacks on his
character. It has no application in the instant case since no particular individual was identified in
the disputed article of Bulgar. Also, the purported damage caused by the article, assuming there
was any, falls under the principle of relational harm — which includes harm to social relationships
in the community in the form of defamation; as distinguished from the principle of reactive harm
— which includes injuries to individual emotional tranquility in the form of an infliction of emotional
distress. In their complaint, respondents clearly asserted an alleged harm to the standing of
Muslims in the community, especially to their activities in propagating their faith in Metro Manila
and in other non-Muslim communities in the country.25 It is thus beyond cavil that the present
case falls within the application of the relational harm principle of tort actions for defamation,
rather than the reactive harm principle on which the concept of emotional distress properly
belongs.

Moreover, under the Second Restatement of the Law, to recover for the intentional infliction of
emotional distress the plaintiff must show that: (a) The conduct of the defendant was intentional
or in reckless disregard of the plaintiff; (b) The conduct was extreme and outrageous; (c) There
was a causal connection between the defendant's conduct and the plaintiff's mental distress; and,
(d) The plaintiff's mental distress was extreme and severe.26

"Extreme and outrageous conduct" means conduct that is so outrageous in character, and so
extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as
atrocious, and utterly intolerable in civilized society. The defendant's actions must have been so
terrifying as naturally to humiliate, embarrass or frighten the plaintiff.27 Generally, conduct will be
found to be actionable where the recitation of the facts to an average member of the community
would arouse his resentment against the actor, and lead him or her to exclaim, "Outrageous!" as
his or her reaction.28

"Emotional distress" means any highly unpleasant mental reaction such as extreme grief, shame,
humiliation, embarrassment, anger, disappointment, worry, nausea, mental suffering and
anguish, shock, fright, horror, and chagrin.29 "Severe emotional distress," in some jurisdictions,
refers to any type of severe and disabling emotional or mental condition which may be generally
recognized and diagnosed by professionals trained to do so, including posttraumatic stress
disorder, neurosis, psychosis, chronic depression, or phobia.30 The plaintiff is required to show,
among other things, that he or she has suffered emotional distress so severe that no reasonable
person could be expected to endure it; severity of the distress is an element of the cause of action,
not simply a matter of damages.31

Any party seeking recovery for mental anguish must prove more than mere worry, anxiety,
vexation, embarrassment, or anger. Liability does not arise from mere insults, indignities, threats,
annoyances, petty expressions, or other trivialities. In determining whether the tort of outrage had
been committed, a plaintiff is necessarily expected and required to be hardened to a certain
amount of criticism, rough language, and to occasional acts and words that are definitely
inconsiderate and unkind; the mere fact that the actor knows that the other will regard the conduct
as insulting, or will have his feelings hurt, is not enough.32

Hustler Magazine v. Falwell33 illustrates the test case of a civil action for damages on intentional
infliction of emotional distress. A parody appeared in Hustler magazine featuring the American
fundamentalist preacher and evangelist Reverend Jerry Falwell depicting him in an inebriated
state having an incestuous, sexual liaison with his mother in an outhouse. Falwell sued Hustler
297
and its publisher Larry Flynt for damages. The United States District Court for the Western District
of Virginia ruled that the parody was not libelous, because no reasonable reader would have
understood it as a factual assertion that Falwell engaged in the act described. The jury, however,
awarded $200,000 in damages on a separate count of "intentional infliction of emotional distress,"
a cause of action that did not require a false statement of fact to be made. The United States
Supreme Court in a unanimous decision overturned the jury verdict of the Virginia Court and held
that Reverend Falwell may not recover for intentional infliction of emotional distress. It was argued
that the material might be deemed outrageous and may have been intended to cause severe
emotional distress, but these circumstances were not sufficient to overcome the free speech
rights guaranteed under the First Amendment of the United States Constitution. Simply stated,
an intentional tort causing emotional distress must necessarily give way to the fundamental right
to free speech.

It must be observed that although Falwell was regarded by the U.S. High Court as a "public
figure," he was an individual particularly singled out or identified in the parody appearing on
Hustler magazine. Also, the emotional distress allegedly suffered by Reverend Falwell involved
a reactive interest — an emotional response to the parody which supposedly injured his
psychological well-being.

Verily, our position is clear that the conduct of petitioners was not extreme or outrageous. Neither
was the emotional distress allegedly suffered by respondents so severe that no reasonable
person could be expected to endure it. There is no evidence on record that points to that result.

Professor William Prosser, views tort actions on intentional infliction of emotional distress in this
manner34 —

There is virtually unanimous agreement that such ordinary defendants are not liable for mere
insult, indignity, annoyance, or even threats, where the case is lacking in other circumstances of
aggravation. The reasons are not far to seek. Our manners, and with them our law, have not yet
progressed to the point where we are able to afford a remedy in the form of tort damages for all
intended mental disturbance. Liability of course cannot be extended to every trivial indignity x x x
x The plaintiff must necessarily be expected and required to be hardened to a certain amount of
rough language, and to acts that are definitely inconsiderate and unkind x x x The plaintiff cannot
recover merely because of hurt feelings.

Professor Calvert Magruder reinforces Prosser with this succinct observation, viz:35

There is no occasion for the law to intervene in every case where someone's feelings are hurt.
There must still be freedom to express an unflattering opinion, and some safety valve must be
left through which irascible tempers may blow off relatively harmless steam.

Thus, it is evident that even American courts are reluctant to adopt a rule of recovery for emotional
harm that would "open up a wide vista of litigation in the field of bad manners," an area in which
a "toughening of the mental hide" was thought to be a more appropriate remedy. 36 Perhaps of
greater concern were the questions of causation, proof, and the ability to accurately assess
damages for emotional harm, each of which continues to concern courts today.37

In this connection, the doctrines in Chaplinsky and Beauharnais had largely been superseded by
subsequent First Amendment doctrines. Back in simpler times in the history of free expression
the Supreme Court appeared to espouse a theory, known as the Two-Class Theory, that treated
certain types of expression as taboo forms of speech, beneath the dignity of the First Amendment.
The most celebrated statement of this view was expressed in Chaplinsky:

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There are certain well-defined and narrowly limited classes of speech, the prevention and
punishment of which have never been thought to raise any Constitutional problem. These include
the lewd and obscene, the profane, the libelous, and the insulting or "fighting" words — those
which by their very utterance inflict injury or tend to incite an immediate breach of the peace. It
has been well observed that such utterances are no essential part of any exposition of ideas, and
are of such slight social value as a step to truth that any benefit that may be derived from them is
clearly outweighed by the social interest in order and morality.

Today, however, the theory is no longer viable; modern First Amendment principles have passed
it by. American courts no longer accept the view that speech may be proscribed merely because
it is "lewd," "profane," "insulting" or otherwise vulgar or offensive.38 Cohen v. California39 is
illustrative: Paul Robert Cohen wore a jacket bearing the words "Fuck the Draft" in a Los Angeles
courthouse in April 1968, which caused his eventual arrest. Cohen was convicted for violating a
California statute prohibiting any person from "disturb[ing] the peace x x x by offensive conduct."
The U.S. Supreme Court conceded that Cohen's expletive contained in his jacket was "vulgar,"
but it concluded that his speech was nonetheless protected by the right to free speech. It was
neither considered an "incitement" to illegal action nor "obscenity." It did not constitute insulting
or "fighting" words for it had not been directed at a person who was likely to retaliate or at
someone who could not avoid the message. In other words, no one was present in the Los
Angeles courthouse who would have regarded Cohen's speech as a direct personal insult, nor
was there any danger of reactive violence against him.

No specific individual was targeted in the allegedly defamatory words printed on Cohen's jacket.
The conviction could only be justified by California's desire to exercise the broad power in
preserving the cleanliness of discourse in the public sphere, which the U.S. Supreme Court
refused to grant to the State, holding that no objective distinctions can be made between vulgar
and nonvulgar speech, and that the emotive elements of speech are just as essential in the
exercise of this right as the purely cognitive. As Mr. Justice Harlan so eloquently wrote: "[O]ne
man's vulgarity is another man's lyric x x x words are often chosen as much for their emotive as
their cognitive force."40 With Cohen, the U.S. Supreme Court finally laid the Constitutional
foundation for judicial protection of provocative and potentially offensive speech.

Similarly, libelous speech is no longer outside the First Amendment protection. Only one small
piece of the Two-Class Theory in Chaplinsky survives — U.S. courts continue to treat "obscene"
speech as not within the protection of the First Amendment at all. With respect to the "fighting
words" doctrine, while it remains alive it was modified by the current rigorous clear and present
danger test.41 Thus, in Cohen the U.S. Supreme Court in applying the test held that there was no
showing that Cohen's jacket bearing the words "Fuck the Draft" had threatened to provoke
imminent violence; and that protecting the sensibilities of onlookers was not sufficiently
compelling interest to restrain Cohen's speech.

Beauharnais, which closely followed the Chaplinsky doctrine, suffered the same fate as
Chaplinsky. Indeed, when Beauharnais was decided in 1952, the Two-Class Theory was still
flourishing. While concededly the U.S. High Tribunal did not formally abandon Beauharnais, the
seminal shifts in U.S. constitutional jurisprudence substantially undercut Beauharnais and
seriously undermined what is left of its vitality as a precedent. Among the cases that dealt a
crushing impact on Beauharnais and rendered it almost certainly a dead letter case law are
Brandenburg v. Ohio,42 and, again, Cohen v. California.43 These decisions recognize a much
narrower set of permissible grounds for restricting speech than did Beauharnais.44

In Brandenburg, appellant who was a leader of the Ku Klux Klan was convicted under the Ohio
Criminal Syndicalism Statute for advocating the necessity, duty and propriety of crime, sabotage,
violence, or unlawful methods of terrorism as a means of accomplishing industrial or political
reforms; and for voluntarily assembling with a group formed to teach or advocate the doctrines of
299
criminal syndicalism. Appellant challenged the statute and was sustained by the U.S. Supreme
Court, holding that the advocacy of illegal action becomes punishable only if such advocacy is
directed to inciting or producing imminent lawless action and is likely to incite or produce such
action.45 Except in unusual instances, Brandenburg protects the advocacy of lawlessness as long
as such speech is not translated into action.

The importance of the Brandenburg ruling cannot be overemphasized. Prof. Smolla affirmed that
"Brandenburg must be understood as overruling Beauharnais and eliminating the possibility of
treating group libel under the same First Amendment standards as individual libel." 46 It may well
be considered as one of the lynchpins of the modern doctrine of free speech, which seeks to give
special protection to politically relevant speech.

In any case, respondents' lack of cause of action cannot be cured by the filing of a class suit. As
correctly pointed out by Mr. Justice Jose C. Vitug during the deliberations, "an element of a class
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 parties 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.47

The rules require that courts must make sure that the persons intervening should be sufficiently
numerous to fully protect the interests of all concerned. In the present controversy, Islamic Da'wah
Council of the Philippines, Inc., seeks in effect to assert the interests not only of the Muslims in
the Philippines but of the whole Muslim world as well. Private respondents obviously lack the
sufficiency of numbers to represent such a global group; neither have they been able to
demonstrate the identity of their interests with those they seek to represent. Unless it can be
shown that there can be a safe guaranty that those absent will be adequately represented by
those present, a class suit, given its magnitude in this instance, would be unavailing."48

Likewise on the matter of damages, we agree that "moral damages may be recovered only if the
plaintiff is able to satisfactorily prove the existence of the factual basis for the damages and its
causal connection with the acts complained of,49 and so it must be, as moral damages although
incapable of pecuniary estimation are designed not to impose a penalty but to compensate for
injury sustained and actual damages suffered.50 Exemplary damages, on the other hand, may
only be awarded if claimant is able to establish his right to moral, temperate, liquidated or
compensatory damages.51 Unfortunately, neither of the requirements to sustain an award for
either of these damages would appear to have been adequately established by respondents."

In a pluralistic society like the Philippines where misinformation about another individual's religion
is as commonplace as self-appointed critics of government, it would be more appropriate to
respect the fair criticism of religious principles, including those which may be outrageously
appalling, immensely erroneous, or those couched as fairly informative comments. The greater
danger in our society is the possibility that it may encourage the frequency of suits among
religious fundamentalists, whether Christian, Muslim, Hindu, Buddhist, Jewish, or others. This
would unnecessarily make the civil courts a battleground to assert their spiritual ideas, and
advance their respective religious agenda.

It need not be stressed that this Court has no power to determine which is proper religious conduct
or belief; neither does it have the authority to rule on the merits of one religion over another, nor
declare which belief to uphold or cast asunder, for the validity of religious beliefs or values are
outside the sphere of the judiciary. Such matters are better left for the religious authorities to
address what is rightfully within their doctrine and realm of influence. Courts must be viewpoint-
neutral when it comes to religious matters if only to affirm the neutrality principle of free speech
rights under modern jurisprudence where "[a]ll ideas are treated equal in the eyes of the First
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Amendment — even those ideas that are universally condemned and run counter to constitutional
principles."52 Under the right to free speech, "there is no such thing as a false idea. However
pernicious an opinion may seem, we depend for its correction not on the conscience of judges
and juries but on the competition of other ideas."53 Denying certiorari and affirming the appellate
court decision would surely create a chilling effect on the constitutional guarantees of freedom of
speech, of expression, and of the press.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals dated
27 August 1998 is REVERSED and SET ASIDE, and the Decision of the RTC-Br. 4, Manila,
dismissing the complaint for lack of merit, is REINSTATED and AFFIRMED. No pronouncement
as to costs.

SO ORDERED.

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G.R. No. L-4695 December 12, 1908

NICOMEDES IBAÑES, ET AL., plaintiffs-appellees,

vs.
THE ROMAN CATHOLIC APOSTOLIC CHURCH, ET AL., defendants-appellants.

WILLARD, J.:

The history of the image of the Holy Child of Ternate (Santo Niño de Ternate), to which this case
relates, is as follows:

After Kue-Sing, called by the Spaniards of the time a Chinese pirate, had driven the Dutch from
Formosa in 1662, he sent an ambassador to Manila, demanding that the Philippines submit to his
rule and become one of his tributary states. It was in the time of Don Sabiniano Manrique de Lara,
governor and captain-general. Having refused to submit to the Chinese demand, the captain-
general, in preparation for the threatened invasion, ordered the abandonment, not only of the
posts held by the Spaniards at Zamboanga and other parts of Mindanao, but also of that of
Ternate in the Moluccas, which had been taken by them in 1606 and held since that time. The
garrison of Ternate, thus evacuated, came to Manila in 1663.

The Mardicas (men of the sea), a race very friendly to the Spaniards, accompanied
the latter to Manila, taking with them to their new country the Holy Child of Ternate,
patron of their town, whose image they held in great veneration. Land was
assigned to them in Maragondon, Province of Cavite, where they established the
town of Ternate, the present inhabitants of which are the descendants of those
loyal islanders. (Historia de Filipinas. Montero, Tomo I, p. 327).

In the Revista de Filipinas for the years 1875 and 1876 there appeared an article written on May
4, 1863, by one who then visited Ternate to inquire concerning the tradition there current relating
to the image. One of the oldest inhabitants of the place, speaking to the author of the article, said:

It is true, sir, that we originally came from a far distant country. When Don
Sabiniano Manrique de Lara was governor of these Islands, about the year 1654,
he learned that there was being prepared a great expedition in China, consisting
of many ships and thousands of men for the conquest of the Philippines. He
thereupon endeavored to gather together in Manila as many fighting men as
possible to resist this powerful enemy and wrote to Ternate, in the Moluccas, from
whence came our forefathers, that the few Spaniards soldiers that were there
should come to reinforce the troops in Manila. As soon as the plight of Manila was
known, vessels were prepared, and the head of the expedition asked what
Mardicas wished to go to the war. Our ancestors volunteered to the number of two
hundred, and came with their Spanish missionary, a Franciscan, bringing the
venerated image of the Holy Child that is the patron of our church. After their arrival
there was no war, but many of our ancestors served on his majesty's ships;
afterwards they were assigned land to live upon, which is now known as
Bagumbayan. In the middle of the last century of the government had the Mardicas
come here in order to protect Maragondon from the continual attacks of the Moros,
and since that time our forefathers and we have been established here. That is all
I know of our predecessors.

Though this article lacks something of the seriousness of his history, it agrees in the main with
appears from other sources, but, as will be seen hereafter, the Mardicas were established in
Maragondon much earlier than the middle of the eighteenth century. Ternate was at that time a

302
hamlet (barrio) of the town (pueblo) of Maragondon and is situated on the coast of the Province
of Cavite, opposite the Island of Corregidor. It was later made a separate town.

Established there probably not later that 1700, nothing appears as to the Mardicas until 1740,
when —

His reverence, the provincial father, Fulcheiro de Spilimbergo, of this town and
church of Maragondon, saw the book of elections of the perfect and other officials
of his holy congregation or brotherhood of the holy name of Jesus of Ternate, and
it appeared to him that not only should it be preserved and cherished with all care
... is one of the most tender and glorious memories of these Islands, glorious for
its antiquity, since it dates its commencement from the founding of Christianity in
this province by the preaching of the apostle San Francisco Xavier ... most tender
and devout; since in memory of those fervent Mardicas who, seeing themselves
abandoned by the Spaniards, in order to maintain their Christianity, with pious
generosity abandoned their country, homes, and privileges, and came to these
Islands in order to live in security in or holy Catholic faith, bringing with them their
cherished image of the Holy Child Jesus as in triumph of their fidelity.

In the same year the Archbishop of Manila "conceded forty days' indulgence to those who should
devotedly recite a Pater Noster, Ave Maria, before the holy image of the Most Holy Child Jesus
of Ternate which is venerated in the parochial church of Maragondon."

In 1769 the Archbishop of Manila "conceded eighty days' indulgence to those who should
devotedly recite a Pater Noster, Ave Maria, before the holy image of the Most Holy Child Jesus
of Ternate, which is venerated in the parochial church of Maragondon."

It appears clearly from these documents that the image was in those days in the parish church of
Maragondon and not in the hamlet of Ternate.

As has been seen from the declaration made by the father provincial, Fulcheiro de Spilimbergo,
there then existed an organization called by him congregacion or hermandad, and later cofradia,
which amused certain duties or rights in connection with the image. One of the witnesses for the
plaintiffs testified as follows in regard to the duties of the officers of the cofradia:

Q. On entering upon their duties, what work and obligations devolve upon
the hermano mayor, majordomo and secretary who represented the
confradia? — A. The hermano mayor is he who acts as president of the
festivities on holidays, and solicits contribution from the public; the
majordomo cares for and has the saint in his charge; it is the majordomo
who takes the saint (to the church) before mass and afterwards brings it
back.

Q. And the secretary? — A. He keeps the papers of the alms of the saint.

There is no doubt that at least as late as 1803 the Santo Niño was kept in the parish church of
Maragondon. There is some doubt as to the custom relating to the celebration of the festival of
the saint with reference to the number of days during which it was exhibited in Ternate. The writer
above referred to says:

Every year, on the 31st of December, the day before the holiday, the Mardicas
went to Maragondon to get their precious patron. The day following they took it out
on the water, celebrating the most animated pilgrimage, with great shouting and
303
 war dances in the evening; afterwards they returned the patron to the church of
that town which is about half a league away.

The hermano mayor of the cofradia in his petition of 1797 said:

That it being the custom ... of the Mardicas who garrison the Barra of the said town
of Maragondon to celebrate the day of the Circumcision of the Child God, whose
image they took there on that day, assisted by innumerable devotees from various
towns.

The parish priest of Maragondon, in his report of December 16, 1797, said:

That it is very certain that in the place called Barra of this town there exist a
hermitage, built of grass and bamboo, and to which, once a year, the image of the
Holy Child of Ternate is taken, and ... in the parish church, and is placed in said
hermitage on the eve of its fiesta, so that the faithful may adore it. They bring the
said image from the town two days before the holiday, which is the day of
circumcision, and afterwards take it back on the evening of the day before his
anniversary, in order to celebrate the holiday in that parish, since it is not
celebrated in the hermitage. Such is the custom of the Mardicas here who have
charge of and care for the archicofradia of the Holy Child — and in another report
of December 27, 1804, he stated —

At the time I commenced to be curate thereof, I found a cofradia of the Holy Child,
cared for and managed by the Mardicas who reside there ... of this town, which
image is in charge of and placed in the side altar of the church; by a custom which
dates from their origin, they celebrate the fiesta in this church on the day of the
circumcision with such circumstance that, in order to celebrate it, they first take it
from here and carry it hidden to the place called Barra and place it in the hermitage
there on the eve of fiesta, so that the faithful who attend may adore it; on the
evening of the same day they publicly return it to this town, and proceed with the
celebration of the fiesta.

Whatever may have been the custom prior to November 30, 1803, by the decree of that date
made by the court of the vicar general (juzgado provisoral) permission was granted to the
Mardicas to have the image exposed in the chapel of their barrio for the first five days of January,
upon certain conditions, the sixth of which was as follows:

Sixth. That the chapel shall always be closed at the termination of services when
the Holy Child is not there, because it has to be returned to the church. At the
termination of the holidays, one or two deputies are to be assigned to care for it,
and to insure that there be not the least irreverence or profanation in such a holy
place.

The festival for that year was apparently so celebrated, but as the one for the next year
approached, the parish priest of Maragondon and the inhabitants of the pueblo produced an order
the ecclesiastical authorities giving to the priest the right to suspend for the year the celebration
in the barrio.

This he did. What took place when he made the announcement is best described in his own words
when he reported the affair to the archbishop:

304
 ILLUSTRIOUS AND MOST REVEREND SIR: I can do no less than acquaint you
with that has happened in this town. Having received your decision on the
consultation made with respect to the celebration of the fiesta of the new year, I
made it known to the principles of the town and the Mardicas hermanos de la
cofradia. I asked them where they wished to celebrate the fiesta and they replied
that it should be as ordered. I was of the opinion that it would be better to hold it in
the towns being more decent and commodious for the purpose, and also for the
sake of ancient custom, and I decided in view of the said instructions that the fiesta
should be celebrated there. They all appeared to be agreeable, and without any
dissensions on either side, as were also the people and the Mardicas of the said
cofradia. On the eve of the fiesta all was in readiness and vespers were about to
be sung, when suddenly and without leave, there entered the church a number of
Mardicas, provide with lances and other arms drawn from their scabbards, who
drove the congregation from the church. They then ascended the altar, without any
respect or fear of the Lord, and took away the Child with them to celebrate their
fiesta.

All present were startled at the occurrence and were greatly frightened, especially
the women and children, who screamed. We were all astonished and confused at
such a rare occurrence and when I was told of the affair I ran to the choir to listen,
but on arrival I found that they were already carrying off the child Jesus in great
hastle. Thank God, however, that no other accident occurred, as the people did
not know of the affair until after it was over, and consequently offered no
resistance.

The views of the Mardicas were expressed in the report which their hermano mayor made the
occurrence to the archbishop. He said, among other things:

The parish priest and the inhabitants of the town have always been opposed to the
desires of the hermanos of said holy congregation. Their object is none other than
to deprive the Mardicas of their right of preference to celebrate the fiesta in the
hermitage erected in said barrio. The priest was influenced by the gifts of candles
contributed by the faithful devotes of other districts and provinces and of those of
the town interested in gambling in their houses and fattening their purses. Thus
the poor Mardicas suffered from the persecution of the said priest and those of the
town for this cause. ... The priest, carrying out his ideas ... called the hermanos de
la cofradia: He said that he was in receipt of an order communicated by Your
Grace's secretary to alter the provisions of the said decree. The hermanos were
surprised at the news, and seeing that in the evening of that day the vespers had
to be held, they did not know what to do, as the priest said that the image of the
Holy Child could only be taken to its hermitage before twelve o'clock, but at four
o'clock it had to be turned to the church for vespers. In a respectful manner the
hermanos represented to the priest that the hermitage was already decorated in
anticipation of the celebration of high mass, the priest of San Roque having been
called upon the purpose and to preach. They received no consolation in their
affliction, however, as the priest remained firm. The faithful devotees were in equal
confusion, as all went to the hermitage, where last year the fiesta was held, and
met with this unlooked-for result. Some remained while others returned home, as
no body gave the true examination of the affair. The Mardicas, men and women,
wept in the streets for their misfortune, clamoring at the top of their voices for the
divine image, through whose intervention God had so often saved them from the
hand of impious Moros. To such a degree did the sentiments of the unfortunate
people attain, that some young men, doubtless induced by their fervent devotion
to the divine image, that evening went to get it, and bring it to the hermitage; in
305
 order to avoid recognition they hid themselves from the elder folk, and particularly
from the hermanos de la confradia, who afterwards essayed to return the image to
the church. Truly, only men that were blind with love and devotion such as they
possess for their lives by a bloody opposition of the entire town of Maragondon. At
tremendous risk, those youths, who it is said did not number more than seven,
forgot their parents and their lives, merely to go and fetch the divine image and
take it to its hermitage. They entered the church, not with the intention to give
offense, but to suffer, and so it would seem that their action might be forgiven them,
taking into account the reason for its commission.

The order which gave the priest the right to suspend the decree of November 30, 1803, for the
year 1804 only, provided that as to the future further action would be taken by the ecclesiastical
authorities. The matter was referred to the assessor, who reported in favor of the Mardicas,
advising the archbishop to order that "the custom be followed in the celebration of the fiesta by
the aforesaid Mardicas, the latter to conform to the orders given by the ecclesiastical judges on
the said date of November 30, whose chapters they must observe." Such an order was made by
the archbishop of March 6, 1805, and the promotor fiscal, on the 26th of March of the same year,
gave an opinion to the same effect.

It appears from the record that the matter really in dispute was not so as to whether the Mardicas
were entitled to the permanent possession of the image, but as to whether the festival should be
celebrated in the barrio or in the pueblo, and this question was decided in favor of the barrio. For
it will be observed that the final judgment directed that the provisions of the decree of November
30, 1803, be observed, among which was the sixth condition, above quoted, by which the
Mardicas were required to return the image to the church of Maragondon.

From that time more than fifty years passed, as to which period the record contains no written
evidence. Where the image was during that time, does not appear. Witnesses in the case, whose
memory goes back to about 1855, says that, since their recollection, the image was not then in
the church of Maragondon, but was kept in a box in a private house in the barrio by the majordomo
of the cofradia, and that every Friday it was taken to the chapel, where it was worshipped.

About 1863 a church was built in Ternate and the image was immediately located therein, where
it remained until 1896. At the outbreak in Cavite of the rebellion against Spain of that year, the
parish priest, a native of the Islands, filed to the mountains and from that retreat ordered the
president of the pueblo of Ternate to take the image from the church and bring it to the mountains.
This was done and it there remained until the amnesty of 1897, when it was returned to the church
of Ternate. It there remained until 1903, when a party of men, among whom were some of the
plaintiffs, entered the church during the absence of the priest, seized the image, carried it out and
placed it in a chapel of the Independent Filipino Church in the same pueblo of Ternate. Under
orders of the executive branch of the Government it was taken therefrom by a military force of
scouts, placed in the church of Maragondon, and the persons taking it from the church of Ternate
were prosecuted for robbery. That case was dismissed, and the image ordered to remain in the
custody of the Roman Catholic priest of Maragondon in the church of that pueblo until the right
thereto could be determined in a civil judicial proceeding. Thereupon this action was brought.

The plaintiffs are thirteen in number. The complaint being as follows:

United States of America, Philippine Islands, in the Court of First Instance of Cavite. — No. ——
. —Nicomedes Ibañes, Bernardo Ramos, Pedro Zapanta, Pelagio Ninon, Andres Ninon,
Victoriano Ramos, Hermenegildo Dinglay, Damaso Hernandez, Ciriaco Ramos, Cenon Zapanta,
Baldomero Dionis, Rafael Ramos, Raymundo Salcedo, for themselves and in the name of the
other inhabitants of the town of Ternate, plaintiffs, vs. the Roman Catholic Apostolic Church and

306
its representative, the parish priest of Naic, Valentin Velasco, defendants, for the proprietorship
of an image of the Holy Child.

The plaintiffs as express above, as inhabitants of the town of Ternate, for

themselves and in the name of all the other inhabitants of said town, appear before
the court and bring complaints against the defendant, alleging as a cause of action
that:

xxx xxx xxx

There are no other allegations in the complaint as to the right of the plaintiffs to represent the
inhabitants of Ternate, nor is there any proof whatever in the case upon this point. The claim of
the plaintiffs is that the persons who were at the time of the presentation of the complaint the
inhabitants of Ternate were the owners in common of the image considered as a piece of personal
property. There is no evidence to show that the present plaintiffs, or any one of the present
inhabitants of Ternate, were the heirs or in any way related to any of the two hundred Mardicas
who came to the Philippines nearly two hundred and fifty years ago. The claim of the plaintiffs is
apparently not rested upon the proposition that they are entitled to relief because they are such
heirs, but because they live in the pueblo. Their view seems to be that the heirs of the Mardicas
living in other pueblos have no interest in the image.lawphil.net

Nor is there any evidence in the case to show how many, if any, of the plaintiffs or of the present
inhabitants of Ternate, who are some 2,460 people, belong to the Roman Catholic Church. It will
have been observed that, when the Mardicas came here, there came with them a priest of the
Roman Catholic Church; that the image has always been used in connection with the worship of
the religion professed by that church; that the cofradia was an organization of that church, and by
terms of the decree of November 30, 1803, necessarily had to have as its rector a priest of that
religion; that the disposition of the image has always been at the charge of the church's officers,
and that a recourse has always been had to them to determine any rights relating thereto.

Passing the question as to whether the Roman Catholic Church is not the owner of the image,
the question may be asked, whether under these circumstances it can be said that any one has
a proprietary right in this image who is not a Roman Catholic? If among the Mardicas who first
came here there had been on who did not profess that religion, would he have any participation
therein? Are the Chinese who now live in Ternate part owners of the image? These are questions
which we do not feel called upon to decide, for the case must be resolved upon the point made
by the defendant at the very commencement of the action, to wit, that the thirteen persons named
as plaintiffs have no right to maintain it.

The plaintiffs rely upon article 118 of the Code of Civil Procedure, which is as follows:

When the subject-matter of the controversy is one of common or general interest

to many persons, and the parties are so numerous that it is impracticable to bring
them all before the court, one or more may sue or defend for the benefit of all. But
in such case any party in interest shall have a right to intervene in protection of his
individual interests, and the court shall make sure that the parties actually before
it are sufficiently numerous and representative so that all interests concerned are
fully protected.

No case has been called to our attention in which this section or rule which it enunciates has been
applied where the ownership of personal property is involved and where it is claimed to belong to
persons who at a particular time reside in a particular place, or where the ownership changes as
persons move in or out of such locality.

307
In the case of Macon and Birmingham Railroad vs. Gibson (85 Ga., 1; s. c. 21 Am. St., 135), it
appeared that the railroad, in accordance with the terms of its charter, if it built its railroad within
5 miles of the town of Thomaston, had to build it within the corporate limits, or within 1 mile of the
court-house. It was there held that two citizens of the town had a right to maintain a suit in behalf
of themselves and of their fellow citizens, to prevent the railroad from violating its charter. The
court said that the object and of the provision in the charter was to prevent the decline and decay
of the town in consequence of having a railroad in the vicinity but not near enough to prevent
some rival town from springing up, and that the citizens of Thomaston had a peculiar and vital
interest therein. It will be seen that in this case the ownership of personal property was not
involved.lawphil.net

The case of Wheelock vs. First Presbyterian Church (119 Cal., 477), did involve the ownership of
certain property and two persons were allowed to bring the action in behalf of others, but it there
appeared that the persons who belonged to the Central Presbyterian Church, and whom the two
plaintiffs represented, numbered 369 and were well known. In other words, that they were the
members of a well-defined unincorporated society. The case of Smith vs. Swormstedt (16 How.,
288), involved the division of the Methodist Church of the United States into two bodies, Methodist
Church North and Methodist Church South. The matter in controversy was a property known as
The Book Concern. The only persons interested in this property were the preachers belonging to
the two churches, of whom there were about 1,500 in the Church South and about 3,800 in the
Church North. These persons were well known and could be identified, and six of the preachers
belonging to the Church South were allowed to maintain the action for themselves and for all their
fellow-preachers in that body. It will be seen that no one of these three cases is like the present
one, wherein no one of the inhabitants of Ternate has vested interest in the property in question
which would survive his removal from the town and in which another person, by moving into the
town, acquired an interest.

But even if this section were applicable to such a case as the present, the action could not be
maintained. In the case of Smith vs. Swormstedt, above cited, the court said, at page 303:

In all cases where exception to the general rule are allowed, and a few are
permitted to sue and defend on behalf of the many, by representation, care must
be taken that persons are brought on the record fairly representing the interest or
right involved, so that it may be fully and honestly tried.

In Macon and Birmingham Railroad vs. Gibson, above cited, the court said:

It is true that as only two of the citizens have become parties, it is rather a small
representation of the whole community; but considering the publicity of the case
and of the interest involved in it, and the fact that the suit is located in Upson
County and will be tried (if tried at all) at the county town, which is the town whose
citizens are interested, there can be no cause to apprehend that the two plaintiffs
on the face of the petition will be disposed, or if so disposed, allowed to
misrepresent the community in whose behalf they have brought this suit. No doubt
it is somewhat discretionary with a court of equity as to how many representatives
of a class will, or ought to be, regarded as a fair representation of the whole class
in the given instance.

It is sufficiently appears from the record in this case that it is a controversy between the Roman
Catholic Church on one side and the Independent Filipino Church on the other. That it is the
purpose of the plaintiffs, if they secure possession of the image, to place it in the chapel of the
Independent Church is also very clear. What number of the inhabitants of the town (2,460
according to the census) are members of the Roman Catholic Church and what part are members
of the Independent Filipino Church does not appear. But it is very apparent that many of the
308
inhabitants are opposed to the transfer of the image from the Roman Catholic Church. Under the
circumstances, the thirteen plaintiffs do not fairly represent all of the inhabitants of the town. Their
interest and the interests of some of the others are diametrically opposed. For this reason this
action can not be maintained.itc-alf

The judgment of the court below is reversed, and the defendants are acquitted of the complaint,
with the costs of the first instance against the plaintiffs. No costs will be allowed to either party in
this court. So ordered.

309
EN BANC

G.R. No. L-24031 August 19, 1967

THE AMERICAN INSURANCE COMPANY, plaintiff-appellant,

vs.
MACONDRAY and CO., INC., REPUBLIC OF THE PHILIPPINES and BUREAU OF
CUSTOMS, defendants.
REPUBLIC OF THE PHILIPPINES and BUREAU OF CUSTOMS, defendants-appellees.

ANGELES, J.:

On appeal from an order of the Court of First Instance of Manila, dismissing the complaint in Civil
Case No. 57118 of said court as against the Republic of the Philippines and the Bureau of
Customs.

On May 21, 1964, the American Insurance Company filed a complaint against Macondray Co.,
Inc. and the Bureau of Customs, as alternative defendants, for the recovery of a sum of money.
In its answer, the Bureau of Customs prayed for the dismissal of the case, one of its defenses
being that "it is not a juridical entity endowed with capacity to sue or be sued, in any case, it cannot
be sued without its consent."

On July 3, 1964, the plaintiff filed an amended complaint, this time including the Republic of the
Philippines as party defendant. The action is for the collection of a sum of money representing an
unsatisfied claim for loss and non-delivery of goods consigned to an importer who was subrogated
by the plaintiff as insurer, upon payment by the latter of the loss. It was alleged that the goods
were loaded on board certain vessels at New York, U.S.A., of which vessels Macondray & Co.,
Inc. was the agent in the Philippines, and upon arrival of the goods in Manila, the defendants
"either failed to discharge all the cargoes completely or having discharged the same completely
thereafter failed to take the transhipment of the cargoes, resulting in their loss and non-delivery"
to the consignee. The participation of the Bureau of Customs in the transaction, as alleged in
paragraph 4 of the complaint, is as follows:

4. That since November 21, 1962, defendant Bureau has been operating the
arrastre service at the port of Manila through its division known as Customs
Arrastre Service created for the purpose, charged with the duty of receiving
imported cargoes discharged from ocean carriers and safekeeping and in due
course delivering the same to the owners thereof or to such other parties as are
entitled to delivery thereof, upon such delivery being duly approved.

The claim for the loss was duly filed against the defendants, Macondray & Co., Inc. and the
Bureau of Customs which, according to plaintiff, refused and failed to pay the same.

On August 24, 1964, the Republic of the Philippines and the Bureau of Customs, through counsel,
filed a motion to dismiss the complaint, on the ground that the court had no jurisdiction over the
subject matter of the action as to them, as operator of the arrastre service the amount involved
being less than P10,000.00, falling within the exclusive jurisdiction of the City Court of Manila.

After the consideration of the motion and the opposition thereto, the lower court dismissed the
case with respect to the Government and the Bureau of Customs upon the ground set forth in
their motion.

As above stated, the plaintiff appealed from this order.1äwphï1.ñët

310
The question raised in appellant's brief is whether a money claim of less than P10,000.00, which
allegedly arose from the failure of the Bureau of Customs in its arrastre service, may be joined
with a subject matter involving admiralty in one suit, filed in the Court of First Instance against
alternative defendants. This is not a novel question. In a string of cases, this Court has ruled in
the affirmative where the money claim and the admiralty aspect of the suit arose, as in the present
case, out of one and the same transaction.1

Paragraph 10 of the complaint discloses that at the time the case was instituted, plaintiff was not
certain as to when and in whose custody the goods were lost, hence, the joinder of alternative
parties and causes of action, which is sanctioned by the following provisions of the Rules of Court:

Joinder of causes of action.—Subject to rules regarding jurisdiction, venue and

joinder of parties, a party may in one pleading state, in the alternative or otherwise,
as many causes of action as he may have against an opposing party (a) if the said
causes of action arise out of the same contract, transaction or relation between the
parties, or (b) if the cause of action are for demands for money, or are of the same
nature and character.

In the cases falling under clause (a) of the preceding paragraph, the action shall
be filed in the inferior court unless any of the causes joined falls within the
jurisdiction of the Court of First Instance, in which case it shall be filed in the latter
court. (Sec. 5, Rule 2, Rules of Court.)

Alternative Defendants.—Where the plaintiff is uncertain against which of several

persons he is entitled to relief, he may join any or all of them as defendants in the
alternative, although a right to relief against one may be inconsistent with a right
to relief against the other. (Sec. 13, Rule 3, Rules of Court.)

Applying these rules, this Court in the case of Switzerland General Insurance Co., Ltd. v. Java
Pacific and Hoegh Lines and the Manila Railroad, G.R. No. L-21760, April 30, 1966, stated:

As may be seen, the instant case comes within the purview of the rule above
quoted for therein it is postulated that a party may in one pleading state in the
alternative as many causes of action as he may have against an opposing party if
they arise from the same transaction with the particularity that the case may be
filed in the Court of First Instance if any of said cause of action falls within its
jurisdiction. This is precisely what was done in this particular case. Because of the
uncertainty of the place where the disappearance of the shipment occurred,
plaintiff brought the case in the alternative before the Court of First Instance upon
the theory that it may have occurred while the shipment was in transit or while in
the custody of the arrastre operator.

From the allegations in the complaint, it appears that the causes of action against the alternative
defendants arose out of the same transactions and/or contracts, and one of the causes of action
— that of admiralty against the Macondray & Co., Inc. — falls within the jurisdiction of the Court
of First Instance [Sec. 44 (d), Republic Act 296, as amended]. Consequently, the said court has
jurisdiction to try the case in its entirety.

But a matter of transcendental importance remains to be considered in view of the lack of any
allegation in the complaint that the Republic of the Philippines has given its consent to be sued.
While it is true that the absence of such an allegation is not one of the instances in which the court
motu proprio may dismiss the complaint, and although it was not relied upon by the Republic in
its motion to dismiss, since it inherently vitiates the complaint and as it may be passed upon at

311
any stage of the proceedings, we believe it is within our power to determine at this instance, the
effect of the absence of such an allegation.

Non-suability of the State without its consent is one of the basic principles which underlie our
republican form of government. It derives its force from the will of the people in freely creating a
representative government through which they have agreed to exercise the powers and discharge
the duties of the sovereignty for the common good and general welfare. (Metran vs. Paredes, L-
1232, January 12, 1948) Justice Holmes has aptly stated the basis for the principle thus: "A
sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on
the legal and practical ground that there can be no legal right as against the authority that makes
the law on which the right depends." (Kawananakaoa vs. Pdyblank, 206 U.S. 349) A contrary
principles would dissipate the time and energy of the State in endless suits against it, which would
be subversive of the public interest.

It is the duty of a party attempting to show liability on the part of the Government to allege in the
complaint, as basis of the cause of action, that the Republic of the Philippines has consented to
be sued, either by special law covering special subject matter or by general law expressing the
terms on which such consent is given. Such an allegation is essential to create a justiciable cause
of action against the Government, without which the complaint suffers from a fatal defect. In the
case at bar, no such allegation was made. The case against the Republic may therefore be
dismissed. And since the Bureau of Customs is but a finger of the Department of Finance, with
no personality of its own apart from that of the national Government (Mobil Philippines
Exploration, Inc. vs. Bureau of Customs and Arrastre Service, L-23139, December 17, 1966), the
complaint as against it may also be dismissed.

Upon the foregoing considerations, the complaint as against the Republic of the Philippines and
the Bureau of Customs is hereby dismissed. No costs.

312
G.R. No. L-21760 April 30, 1966

SWITZERLAND GENERAL INSURANCE CO., LTD., plaintiff-appellee,

vs.
JAVA PACIFIC and HOEGH LINES, ET AL., defendants.
MANILA RAILROAD COMPANY, defendant-appellant.

BAUTISTA ANGELO, J.:

On August 30, 1961, 1,000 bags of American wheat flour were shipped on board the vessel SS
"Friesland" belonging to Java Pacific and Hoegh Lines for transportation to the Philippines, the
shipment being consigned to Climaco Trading of Manila and insured by the Switzerland General
Insurance Company against all risks of loss and damage.

The vessel arrived in Manila on October 6, 1961 and subsequently discharged its cargo into the
custody of the Manila Port Service, a subsidiary of the Manila Railroad Company. Before taking actual
delivery of the shipment the consignee, through its broker, was allowed to examine the shipment in
the presence of a representative of the Manila Port Service with the result that certain deficiencies and
shortages were found for which the insurer was compelled to pay the consignee the amount of
P1,117.07. 1äwphï1.ñët

The steamship company offered to pay the insurer the sum of P16.32 representing its liability for the
shipment in question while the Manila Port Service offered to pay the amount of P175.68 in full
settlement of the entire claim, and these offers not having been accepted, the insurance company
commenced the instant action before the Court of First Instance of Manila for the recovery of said
amount of P1,117.07 making as alternative defendants both the steamship company as well as the
Manila Railroad Company because at the time of the filing of the complaint it was not known whether
the loss occurred while the goods were in transit or while they were already in the custody of the
Manila Port Service.

After hearing, the court a quo rendered judgment sentencing defendant Manila Railroad Company to
pay the plaintiff the amount claimed in the complaint, with costs against said defendant. Defendant
steamship company was absolved from the complaint.

The Manila Railroad Company interposed the present appeal.

Considering that the action against Java Pacific and Hoegh Lines is one of admiralty and belongs to
the jurisdiction of the court of first instance while the action against the Manila Railroad Company is
based on the arrastre contract which, because of the amount involved, comes under the exclusive
jurisdiction of the municipal court, can the instant case be taken cognizance of by the former upon the
theory that both defendants are sued in the alternative?

The answer must be in the affirmative bearing in mind that the cause of action against the alternative
defendants arose out of the same transaction which is the recovery of the value of the lost merchandise
and the nature of the loss could not be determined at the moment. This view finds support in Section
5, Rule 2 of the Rules of Court which provides:

SEC. 5. Joinder of causes of action.—Subject to rules regarding jurisdiction, venue

and joinder of parties, a party may in one pleading state, in the alternative or otherwise,
as many causes of action as he may have against an opposing party (a) if the said
causes of action arise out of the same contract, or transaction or relation between the
parties, or (b) if the causes of action are for demands for money, or are of the same
nature and character.

313
 In the cases falling under clause (a) of the preceding paragraph, the action shall be
filed in the inferior court unless any of the causes joined falls within the jurisdiction of
the Court of First Instance, in which case it shall be filed in the latter court.

In the cases falling under clause (b) the jurisdiction shall be determined by the
aggregate amount of the demands, if for money, or by their nature and character, if
otherwise.

As may be seen, the instant case comes within the purview of the rule abovequoted for therein it is
postulated that a party may in one pleading state in the alternative as many causes of action as he
may have against an opposing party if they arise from the same transaction with the particularity that
the case may be filed in the Court of First Instance in any of said causes of action falls exclusively
within its jurisdiction. This is precisely what was done in this particular case. Because of the uncertainty
of the place where the disappearance of the shipment occurred, plaintiff brought the case in the
alternative before the Court of First Instance upon the theory that it may have occurred while the
shipment was in transit or while in the custody of the arrastre operator.

This case also finds support in International Harvester Company of the Philippines vs. Aragon, et al.,
84 Phil. 363. In said case, the complaint was filed in the municipal court against both the shipping
company as agent of the vessel on which the shipment was loaded and the Manila Railroad Company,
Inc. as alternative defendants, seeking to recover the sum of P200.00 as value of the undelivered
goods, it being uncertain whether said cargo was lost at sea or while in storage at the Port of Manila.
In affirming the dismissal of the case this Court stated that the municipal court had no jurisdiction over
the same because it is predicated on the contract of carriage by sea which falls within the exclusive
jurisdiction of the court of first instance. And reasoning by analogy, we may say that the instant case
also falls exclusively within the jurisdiction of the Court of First Instance of Manila upon the theory that
the loss or disappearance of a portion of the shipment may have taken place during the voyage and
hence it involves a maritime case which falls within the original jurisdiction of said court.

The fact that the amount sought to be collected is less than its jurisdictional limit is of no moment,
because the cause of action being indivisible, covering as it does laws on ordinary as well as maritime
contract, such jurisdictional limitation as to amount must yield to the greater jurisdiction of the court as
to subject matter for reasons of expediency and convenience.

Constitutional and statutory provisions conferring jurisdiction on the inferior courts of

demands below certain amounts do not forbid determination of said demands in the
superior court where they are connected with larger claims or with a type of demand
solely within the jurisdiction of the superior court. (21 C.J.S., p. 81, emphasis supplied.)

The contention that the provisional claim filed by appellee infringes Section 15 of the Management
Contract simply because it was filed one day before the date of the last discharge of the shipment is
untenable because such filing may be considered as a substantial compliance with said section which
provides that it should be filed within 15 days from the date of discharge of the last package from the
carrying vessel. If upon the examination of the shipment certain shortages were found and that
examination took place in the presence of the representatives of both parties, the notice given to
appellant regarding a claim for certain loss or damage, even if premature, should be deemed to
controvert the shortcoming that has been actually discovered. Since the purpose of the claim is merely
to put the party affected on guard so that it may take whatever steps may be necessary to protect its
interest, we find no error on the part of the court a quo to consider said provisional claim as a
substantial compliance with the requirement above referred to.

Nor do we find tenable the contention that appellee's acceptance of the offer of settlement of appellant
should be deemed a waiver of the present action because the acceptance was conditional and the
condition was not accepted. The doctrine of estoppel cannot, therefore, be slapped against appellee.

Wherefore, the decision appealed from is affirmed. No costs.

314
G.R. No. L-54242 November 25, 1983

MAGDALENA ESTATE, INC., plaintiff-appellee,

vs.
RENE NIETO and HELEN GARCIA, defendants-appellants.

RELOVA, J.: ñ é+.£ªwph!1

Appeal from the judgment of the then Court of First Instance of Rizal in Quezon City, ordering
defendants-appellants Rene Nieto and Helen Garcia to pay plaintiff-appellee: têñ.£îhqw â£

1) the sum of P11, 999.00, with interest there on at the rate of 7% per annum
beginning April 21, 1970, the date of the letter of demand, until the same shall
have been fully paid;

2) the sum of P2,000.00 as and for attorney's fees; and

3) the cost of the suit. (p. 41, Record on Appeal)

The facts which led to the above judgment are summarized by the trial court as follows: têñ.£îhqw â£

The evidence shows that the defendants herein bought from the plaintiff a parcel of land
located at New Manila Subdivision, Quezon City. Even if defendants had not fully paid
the consideration for the said lot, by special arrangement with the plaintiff, the former
were able to have the title to said lot transferred in their names. They had made partial
payments only and the balance of their account in the amount of P12,000.00 was
secured by a promissory note which they executed on November 3, 1960, under the
following terms and conditions to wit: (a) the defendants shall pay plaintiff the sum of
P12,000.00, with interest thereon at the rate of 7% per annum said amount to be payable
without demand in consecutive monthly installments of not less than P500.00 per month,
beginning December 3, 1960, and on the third day of each month thereafter, until fully
paid; (b) in case of failure to pay any monthly installment due, the total obligation, or the
balance thereof, shad automatically become due and immediately payable; (c) that the
plaintiff shall have the right to enforce payment of the obligation, together with the
corresponding interest, including attorney's fees and the costs of suit in case of litigation
to enforce collection of the said obligation (Exhibit "C"). Out of the aforesaid amount of
Pl2,000.00, defendants paid only P100.00 in two installments of P50.00 each The first
payment was made on January 29, 1963 and the second payment was made on March
14, 1963, leaving a balance of Pl1,999.90, exclusive of interests. Plaintiff wrote
defendants a letter of demand calling the attention of the latter about the installments in
arrears under the terms and conditions of the promissory notes; but in spite of the said
letter, defendants did not comply with their obligation. Plaintiff referred the matter to its
legal counsel, who, in turn, sent defendants a letter of demand dated April 21, 1970
which letter was received by the defendants (Exhibits "D", "D-l" & "D-2"). Despite receipt
of said letter, defendants did not comply and even failed to make a reply. Plaintiff
presented further a statement of account stating therein that the amount still owing to it,
inclusive of interest up to September 19, 1972 is P21,876.44; P11,999.00, the amount
of the principal and P9,976.44 the amount of interest from November 3, 1960 up to
September 19,1972 (Exhibit "E"). (pp. 33-34, Rollo)

There was an ex-parte reception of evidence because the defendants-appellants had been declared
in default, plaintiff having complied with the court's order allowing service of summons and copy of the

315
complaint upon the defendants-appellants through publication of the same in a newspaper of general
circulation (Daily Mirror), pursuant to Section 16, Rule 14 of the Rules of Court.

Plaintiff claims that summons could not be served personally upon the defendants because they
concealed themselves to avoid service upon them; and, that when the sheriff went to the Jai-Alai
Corporation of the Philippines at Cebu City where defendant-appellant Rene Nieto holds office, as
manager, he could not be found thereat but, when the decision was served at the same address, the
defendants-appellants were able to receive it.

In this appeal, defendants-appellants contend that the lower court erred: (1) in allowing service of
summons by publication, and consequently, the trial court did not acquire jurisdiction over the
defendants-appellants, and the decision is therefore void; (2) in granting relief to plaintiff-appellee
when its cause of action is barred by laches; (3) in lifting its orders dismissing the complaint for failure
to prosecute and (4) in granting interests from November 3, 1960.

There is merit in this appeal. It is true that in Fontanilla vs. Dominguez, 73 Phil. 579, it was held that
service of summons by publication is proper in all actions without distinction, provided the defendant
is residing in the Philippines but his Identity is unknown or his address cannot be ascertained.
However, in a later case, Pantaleon vs. Asuncion, 105 Phil. 765, the Court, speaking through then
Justice Roberto Concepcion, ruled that "it is a well-settled principle of Constitutional Law that, in an
action strictly in personam, like the one at bar, personal service of summons, within the forum, is
essential to the acquisition of jurisdiction divert the person of the defendant, who does not voluntarily
submit himself to the authority of the court. In other words, summons by publication cannot —
consistently with the due process clause in the Bill of Rights—confer upon the court jurisdiction over
said defendant." And, quoting 16A C.J.S., pp. 786, 789, as follows: "Due process of law requires
personal service to support a personal judgment, and, when the proceeding is strictly in personam
brought to determine the personal rights and obligations of the parties, personal service within the
state or a voluntary appearance in the case is essential to the acquisition of jurisdiction so as to
constitute compliance with the constitutional requirement of due process. ... Although a state
legislature has more control over the form of service on its own residents than non-residents, it has
been held that in actions in personam ... service by publication on resident defendants, who are
personally within the state and can be found therein is not "due process of law", and a statute allowing
it is unconstitutional."

The action of herein plaintiff-appellee, being in personam, the doctrine laid down in Pantaleon vs.
Asuncion (supra) finds application. And, the latest expression of such a doctrine comes from Justice
J. B. L. Reyes in the case of Citizens' Surety and Insurance Company, Inc. vs. Melencio-Herrera, 38
SCRA 369, in these words: "... the Court could not validly acquire jurisdiction on a non-appearing
defendant, absent a personal service of summons within the forum... The proper recourse for a creditor
in the same situation as petitioner is to locate properties, real or personal, of the resident defendant
debtor with unknown address and cause them to be attached under Rule 57, Section 1 (f), in which
case, the attachment converts the action into a proceeding in rem or quasi in rem and the summons
by publication may then accordingly be deemed valid and effective."

Inasmuch as in the case at bar the lower court did not acquire jurisdiction over the person of the
defendants-appellants, We find it unnecessary to discuss the other assigned errors raised by them.

WHEREFORE, the decision, dated October 5, 1972 of the court a quo, is hereby SET ASIDE and the
case is remanded to the trial court for proper service of summons and trial.

SO ORDERED. 1äw phï1.ñët

316
EN BANC

G.R. No. L-13141 May 22, 1959

VICENTA PANTALEON, plaintiff-appellee,

vs.
HONORATO ASUNCION, defendant-appellant.

CONCEPCION, J.:

This is an appeal, taken by defendant Honorato Asuncion from an order denying a petition for
relief from an order declaring him in default and a judgment by default.

On June 12, 1953, plaintiff, Vicenta Pantaleon, instituted this action, in the Court of First Instance
of Nueva Ecija, to recover from said Asuncion, the sum of P2,000.00, with interest thereon, in
addition to attorney's fees. The summons originally issued was returned by the sheriff of Nueva
Ecija unserved, with the statement that, according to reliable information, Asuncion was residing
in B-24 Tala Estate, Caloocan, Rizal. An alias summons was issued, therefore, for service in the
place last mentioned. However, the provincial sheriff of Rizal returned it unserved, with
information that Asuncion had left the Tala Estate since February 18, 1952, and that diligent efforts
to locate him proved to no avail. On plaintiff's motion, the court ordered, on March 9, 1955, that
defendant be summoned by publication, and the summons was published on March 21 and 28,
and April 4, 1955, in the "Examiner", said to be a newspaper of general circulation in Nueva Ecija.
Having failed to appear or answer the complaint within the period stated in the summons,
defendant was, by an order dated July 12, 1955, declared in default. Subsequently, or on
September 8, 1955, after a hearing held in the absence of the defendant and without notice to
him, the court rendered judgment for the plaintiff and against said defendant, for the sum of
P2,300.00, with interest thereon at the legal rate, from October 28, 1948, and costs.

About forty-six (46) days later, or on October 24, 1955, the defendant filed a petition for relief from
said order of July 12, 1955, and from said judgment, dated September 8, 1955, and upon the
ground of mistake and excusable negligence. Annexed to said petition were defendant's affidavit
and his verified answer. In the affidavit, Asuncion stated that, on September 26, 1955, at 34
Pitimine Street, San Francisco del Monte Quezon City, which is his residence, he received notice
of a registered letter at the Post Office in San Jose, Nueva Ecija, his old family residence; that he
proceeded immediately to the latter municipality to claim said letter, which he received on
September 28, 1955; that the letter contained copy of said order of July 12, 1955, and of the
judgment of September 8, 1955, much to his surprise, for he had not been summoned or notified
of the hearing of this case; that had copy of the summons and of the order for its publication been
sent to him by mail, as provided in Rule 7, section 21, of the Rules of Court said summons and
order would have reached him, "as the judgment herein had"; and that his failure to appear before
the court is excusable it being due to the mistake of the authorities concerned in not complying
with the provisions of said section. Upon denial of said petition for relief, defendant perfected his
present appeal, which is predicated upon the theory that the aforementioned summons by
publication had not been made in conformity with the Rules of Court.

More specifically, defendant maintains that copy of the summons and of the order for the
publication thereof were not deposited "in the post office, postage prepaid, directed to the
defendant by ordinary mail to his last known address", in violation of Rule 7, section 21, of the
Rules of Court, and that, had this provision been complied with, said summons and order of
publication would have reached him, as had the decision appealed from. Said section 21 reads:

317
 If the service has been made by publication, service may be proved by the affidavit
of the printer, his foreman or principal clerk, or of the editor, business or advertising
manager, to which affidavit a copy of the publication shall be attached, and by an
affidavit showing the deposit of a copy of the summons and order for publication
in the post office, postage prepaid, directed to the defendant by ordinary mail to
his last known address. (Emphasis supplied.).

Plaintiff alleges, however, that the provision applicable to the case at bar is not this section 21,
but section 16, of Rule 7, of the Rules of Court, which provides:

Whenever the defendant is designated as an unknown owner, or the like, or

whenever the address of a defendant is unknown and cannot be ascertained by
diligent inquiry, service may, by leave of court, be effect upon him by publication
in such places and for such times as the court may order.

It is, moreover, urged by the plaintiff that the requirement, in said section 21, of an affidavit
showing that copy of the summons and of the order for its publication had been sent by mail to
defendant's last known address, refers to the extraterritorial service of summons, provided for in
section 17 of said Rule 7, pursuant to which:

When the defendant does not reside and is not found in the Philippines and the
action affects the personal status of the plaintiff or relates to, or the subject of which
is, property within the Philippines, in which the defendant has or claims a lien or
interest, actual or contingent, or in which the relief demanded consists, wholly or
in part, in excluding the defendant from any interest therein, or the property of the
defendant has been attached within the Philippines, service may, by leave of court,
be effected out of the Philippines by personal service as under section 7; or by
registered mail; or by publication in such places and for such time as the court may
order, in which case a copy of the summons and order of the court shall be sent
by ordinary mail to the last known address of the defendant; or in any other manner
the court may deem sufficient. Any order granting such leave shall specify a
reasonable time, which shall not be less than sixty (60) days after notice, within
which the defendant must answer.

Said section 21, however, is unqualified. It prescribes the "proof of service by publication",
regardless of whether the defendant is a resident of the Philippines or not. Section 16 must be
read in relation to section 21, which complements it. Then, too, we conceive of no reason, and
plaintiff has suggested none, why copy of the summons and of the order for its publication should
be mailed to non-resident defendants, but not to resident defendants. We can not even say that
defendant herein, who, according to the return of the Sheriff of Nueva Ecija, was reportedly
residing in Rizal — where he, in fact (San Francisco del Monte and Quezon City used to be part
of Rizal), was residing — could reasonably be expected to read the summons published in a
newspaper said to be a general circulation in Nueva Ecija.

Considering that strict compliance with the terms of the statute is necessary to confer jurisdiction
through service by publication (Bachrach Garage and Taxi Co. vs. Hotchkiss and Co., 34 Phil.,
506; Banco Español-Filipino vs. Palanca, 37 Phil., 921; Mills vs. Smiley, 9 Idaho 317, 325, 76
Pac. 785; Charles vs. Marrow, 99 Mo. 638; Sunderland, Cases on Procedure, Annotated, Trial
Practice, p. 51), the conclusion is inescapable that the lower court had no authority whatsoever
to issue the order of July 12, 1955, declaring the defendant in default and to render the decision
of September 8, 1955, and that both are null and void ad initio.

Apart from the foregoing, it is a well-settled principle of Constitutional Law that, in an action strictly
in personam, like the one at bar, personal service of summons, within the forum, is essential to
318
the acquisition of jurisdiction over the person of the defendant, who does not voluntarily submit
himself to the authority of the court. In other words, summons by publication cannot — consistently
with the due process clause in the Bill of Rights — confer upon the court jurisdiction over said
defendant.

Due process of law requires personal service to support a personal judgment, and,
when the proceeding is strictly in personam brought to determine the personal
rights and obligations of the parties, personal service within the state or a voluntary
appearance in the case is essential to the acquisition of jurisdiction so as to
constitute compliance with the constitutional requirement of due process. . . .

Although a state legislature has more control over the form of service on its own
residents than nonresidents, it has been held that in action in personam . . . service
by publication on resident defendants, who are personally within the state and can
be found therein is not "due process of law", and a statute allowing it is
unconstitutional. (16A C.J.S., pp. 786, 789; Emphasis ours.)

Lastly, from the viewpoint of substantial justice and equity, we are of the opinion that defendant's
petition for relief should have been granted. To begin with, it was filed well within the periods
provided in the Rules of Court. Secondly, and, this is more important, defendant's verified answer,
which was attached to said petition, contains allegations which, if true, constitute a good defense.
Thus, for instance, in paragraph (2) of the "special denials" therein, he alleged:

That it is not true that he failed to pay the said indebtedness of his said wife, as
alleged in paragraph 3 of the complaint, for as a matter of fact, plaintiff and
defendant agreed upon a settlement of the said indebtedness of the latter's
deceased wife on December 5, 1948, whereby defendant was allowed to pay it out
of his monthly salary by instalment of P10.00 monthly beginning January, 1949,
and in accordance therewith, defendant paid unto plaintiff the following sums:

Instalment for January-February, 1948

March 1949— P30.00 paid personally

April 2, 1949— 10.00 by money order 7488
May 11, 1949— 10.00 by money order 7921
June 10, 1949— 10.00 by money order 8230
July 11, 1949— 10.00 by money order 8595
August 10, 1949— 10.00 by money order 8943
September 1949— 10.00 paid personally
October 1949— 10.00 paid personally
November 14, 1949— 10.00 by money order 9776
December 13, 1949— 10.00 by money order 0076
January 10, 1950— 10.00 by money order 0445
February 9, 1950— 10.00 by money order 0731
March 10, 1950— 10.00 by money order 1149
April 10, 1950— 10.00 by money order 1387
May 11, 1950— 10.00 by money order 1990
June 12, 1950— 10.00 by money order 1055
July 11, 1950— 10.00 by money order 8850
August 11, 1950— 10.00 by money order 9293
September 6, 1950— 10.00 by money order 9618
October 10, 1950— 10.00 by money order 0008
November 8, 1950— 10.00 by money order 0369
December 1950— 10.00 paid personally
319
 January 2, 1951— 10.00 paid personally
February 10, 1951— 10.00 paid personally
March 12, 1951— 10.00 paid personally
April 1951— 10.00 paid personally
May 1951— 10.00 paid personally
June 1951— 10.00 paid personally
July 1951— 10.00 paid personally
August 1951— 10.00 paid personally
September 1951— 10.00 paid personally
November 1951— 10.00 paid personally
December 1951— 10.00 paid personally
September 1952— 30.00 paid personally
December 1952— 20.00 paid personally
January 1953— 10.00 paid personally
February 1953— 10.00 paid personally
March 1953— 10.00 paid personally
April 1953— 10.00 paid personally
May 1953— 10.00
Total paid — P460.00

The specification of the dates of payment, of the amounts paid each time, of the manner in which
each payment was made, and of the number of the money orders in which eighteen (18) payments
had been effected, constitutes a strong indication of the probable veracity of said allegation, fully
justifying the grant of an opportunity to prove the same.

Wherefore, said order of July 12, 1955, and the aforementioned decision of September 8, 1955,
are hereby set aside and annulled, and let the record of this case be remanded to the lower court
for further proceedings with costs against plaintiff-appellee. It is so ordered.

320
G.R. No. 172595 April 10, 2008

BIENVENIDO EJERCITO and JOSE MARTINEZ, petitioners,

vs.
M.R. VARGAS CONSTRUCTION, BRION, MARCIAL R. VARGAS, Sole Owner, RENATO
AGARAO**, respondents.

DECISION

TINGA, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
assailing the Court of Appeals' Decision1 and Resolution2 in CA-G.R. SP No. 89001. The appellate
court's decision dismissed the petition for certiorari, which sought to set aside the Order 3 dated
08 November 2004 issued by Hon. Marie Christine Jacob, Presiding Judge of the Regional Trial
Court (RTC) of Quezon City, Branch 100. The appellate court's resolution denied petitioners'
motion for reconsideration of the decision.

As culled from the records, the following factual antecedents appear:

On 5 March 2004, the City Government of Quezon City, represented by Mayor Feliciano
Belmonte, Jr., entered into a construction contract4 with M.R. Vargas Construction, represented
by Marcial Vargas in his capacity as general manager of the said business enterprise, for the
improvement and concreting of Panay Avenue.5 Pursuant to the contract, the business enterprise
commenced its clearing operations by removing the structures and uprooting the trees along the
thoroughfare. Its foreman, Renato Agarao, supervised the clearing operations. 6

Claiming that the clearing operations lacked the necessary permit and prior consultation,
petitioners Bienvenido Ejercito and Jose Martinez, as well as a certain Oscar Baria, brought the
matter to the attention of the barangay authorities, Mayor Belmonte, Senator Ma. Ana Consuelo
A.S. Madrigal, the Department of Environment and Natural Resources and the Philippine Coconut
Authority.7

The efforts of petitioners proved unsuccessful. Hence, on 10 September 2004, they filed a petition
for injunction before the Quezon City RTC. The petition named "M.R. Vargas Construction Co.,
represented by herein Marcial R. Vargas and Renato Agarao," as respondent.8

The Petition,9 docketed as Civil Case No. Q-04-53687, indicated that "Respondent M.R. Vargas
Construction, is an entity, with office address at the 4th Floor, President Tower, Timog Avenue
corner Scout Ybardaloza [sic] St., Quezon City, represented herein by its President Marcial
Vargas and its construction foreman Renato Agarao, where they may be served with summons
and other court processes."10

The petition was accompanied with an application for a temporary restraining order (TRO) and a
writ of preliminary injunction.11 Thus, the Office of the Clerk of Court forthwith issued summons
and notice of raffle on 10 September 2004.12 Upon service of the processes on the
aforementioned address, they were returned unserved on the ground that respondent enterprise
was unknown thereat.13

The petition was subsequently raffled to the sala of Judge Jacob, before which petitioners'
application for a temporary restraining order was heard on 15 September 2004. 14 On the same
day, when Agarao was also present in court, Judge Jacob issued a TRO directing respondent
enterprise to desist from cutting, damaging or transferring the trees found along Panay Avenue. 15
321
On 23 September 2004, the Mangoba Tan Agus Law Offices filed a special appearance on behalf
of respondent enterprise and moved for the dismissal of the petition as well as the quashal of the
temporary restraining order on the ground of lack of jurisdiction over respondent enterprise. The
motion also assailed the raffle of the case for having been conducted in violation of Section 4,
Rule 58 of the Rules of Court; the issuance of the TRO without requiring the posting of a bond;
the failure to implead the Government of Quezon City despite its being the real party-in-interest;
and petitioners' application for the injunctive writ which was allegedly grossly defective in form
and substance.16

The motion to dismiss the petition and to quash the TRO was heard on 24 September 2004. 17
Before the hearing, a court interpreter showed to respondent enterprise's counsel a copy of the
summons and of the notice of raffle in which appear a signature at the bottom of each copy,
apparently indicating the receipt of the summons.18 On the mistaken belief that the summons was
received by respondent enterprise, at the hearing of the motion, its counsel withdrew two of the
grounds stated in the motion, to wit, lack of jurisdiction and irregularity in the raffle of the case.19

At the hearing of petitioners' application for a writ of preliminary injunction on 1 October 2004, the
counsel for respondent enterprise manifested that he was adopting the arguments in the motion
to quash the TRO.20 On 6 October 2004, the RTC issued an Order granting petitioners' application
for a writ of preliminary injunction.21

On 7 October 2004, counsel for respondent enterprise filed a manifestation with urgent omnibus
motion to nullify the proceedings and to cite petitioners and the process server in contempt of
court.22 He argued that respondent enterprise failed to receive the summons, alleging that it was
herein petitioner Jose Martinez who signed as recipient thereof as well as of the notice of raffle
that was served on 10 September 2004.23

On 18 October 2004, the writ of preliminary injunction was issued. Subsequently, petitioners filed
a motion for ocular inspection and another motion praying that respondent enterprise be ordered
to

restore the structures damaged by its clearing operations.24

On 8 November 2004, the RTC issued the assailed Order,25 nullifying the proceedings thus far
conducted in the case.26 Petitioners sought reconsideration, but the motion was denied in an
Order dated 20 December 2004.27

Thus, petitioners filed a petition for certiorari before the Court of Appeals assailing the 8 November
2004 Order issued by Judge Jacob.28 This time, aside from Judge Jacob and the enterprise "M.R.
Vargas Construction" itself, the petition also named Marcial R. Vargas and Renato Agarao, the
enterprise's owner and foreman, respectively, as individual respondents. The separate addresses
of said respondents were also indicated in the initial part of the petition.

It was argued in the petition that Judge Jacob committed grave abuse of direction in nullifying the
proceedings on the ground of lack of jurisdiction in view of Agarao's presence at the hearing on
petitioners' application for TRO, in failing to act on petitioners' pending motions and in directing
instead the issuance of new summons on respondent enterprise.29

On 10 October 2005, the Court of Appeals rendered the assailed Decision dismissing the petition
for certiorari for lack of merit.30 In its Order dated 28 April 2006, the Court of Appeals denied
petitioners' motion for reconsideration.

Hence, the instant petition attributes the following errors to the Court of Appeals:
322
 I.

THE COURT OF APPEALS ERRED IN RULING THAT THE REGIONAL TRIAL COURT
DID NOT OBTAIN JURISDICTION OVER THE RESPONDENTS, DEPSITE THE
RECEIPT OF COURT PROCESSES AND VOLUNTARY APPEARANCE BEFORE THE
COURTS.

II.

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE WITHDRAWAL BY

PRIVATE RESPONDENTS OF THE GROUND OF ABSENCE OF JURISDICTION OVER
ITS PERSON CONSTITUTED A WAIVER OF SUCH OBJECTION31

The instant petition¾which similarly impleads the enterprise, M.R. Vargas Construction, Marcial
R. Vargas and Renato Agarao as respondents¾raises two issues, namely: (1) whether the trial
court acquired jurisdiction over respondent enterprise and (2) whether the defense of lack of
jurisdiction had been waived.

Jurisdiction over the defendant is acquired either upon a valid service of summons or the
defendant's voluntary appearance in court. When the defendant does not voluntarily submit to the
court's jurisdiction or when there is no valid service of summons, any judgment of the court, which
has no jurisdiction over the person of the defendant is null and void. In an action strictly in
personam, personal service on the defendant is the preferred mode of service, that is, by handing
a copy of the summons to the defendant in person.32

Citing the jurisdictional implications of the failure of service of summons, the Court of Appeals
concluded that no grave abuse of discretion was committed by Judge Jacob in nullifying the
proceedings thus far conducted in the case based on the finding that the summons had not been
served on respondent enterprise and that Agarao, despite being present at the 15 September
2004 hearing, was not authorized to represent respondent enterprise in said hearing.

Petitioners take exception. They argue that the trial court acquired jurisdiction over respondent
enterprise, an entity without juridical personality, through the appearance of its foreman, Agarao,
at the 15 September 2004 hearing on the TRO application. Petitioners theorize that the voluntary
appearance of Agarao in said hearing was equivalent to service of summons binding upon
respondent enterprise, following by analogy, Section 8, Rule 1433 which allows the service of
summons on any of the defendants associated to an entity without juridical personality.
Furthermore, they contend that the receipt by a certain Rona Adol of the court processes was
binding upon respondent enterprise because the latter did not deny the authority of Adol to receive
communications on its behalf.

Petitioners' argument is untenable.

At the outset, it is worthy to note that both the Court of Appeals and the trial court found that
summons was not served on respondent enterprise. The Officer's Return stated essentially that
the server failed to serve the summons on respondent enterprise because it could not be found
at the address alleged in the petition. This factual finding, especially when affirmed by the
appellate court, is conclusive upon this Court and should not be disturbed because this Court is
not a trier of facts.

A sole proprietorship does not possess a juridical personality separate and distinct from the
personality of the owner of the enterprise. The law does not vest a separate legal personality on
the sole proprietorship or empower it to file or defend an action in court.34 Only natural or juridical
323
persons or entities authorized by law may be parties to a civil action and every action must be
prosecuted and defended in the name of the real parties-in-interest.35

The records show that respondent enterprise, M.R. Vargas Construction Co., is a sole
proprietorship and, therefore, an entity without juridical personality. Clearly, the real party-in-
interest is Marcial R. Vargas who is the owner of the enterprise. Thus, the petition for injunction
should have impleaded him as the party respondent either simply by mention of his name or by
denominating him as doing business under the name and style of "M.R. Vargas Construction Co."
It was erroneous to refer to him, as the petition did in both its caption and body, as representing
the enterprise. Petitioners apparently realized this procedural lapse when in the petition for
certiorari filed before the Court of Appeals and in the instant petition, M.R. Vargas Construction,
Marcial R. Vargas and Renato Agaro were separately named as individual respondents.

Since respondent enterprise is only a sole proprietorship, an entity without juridical personality,
the suit for injunction may be instituted only against its owner, Marcial Vargas. Accordingly
summons should have been served on Vargas himself, following Rule 14, Sections 636 and 737 of
the Rules of Court on personal service and substituted service. In the instant case, no service of
summons, whether personal or substituted, was effected on Vargas. It is well-established that
summons upon a respondent or a defendant must be served by handing a copy thereof to him in
person or, if he refuses to receive it, by tendering it to him. Personal service of summons most
effectively ensures that the notice desired under the constitutional requirement of due process is
accomplished. If however efforts to find him personally would make prompt service impossible,
service may be completed by substituted service, i.e., by leaving copies of the summons at his
dwelling house or residence with some person of suitable age and discretion then residing therein
or by leaving the copies at his office or regular place of business with some competent person in
charge thereof.38

The modes of service of summons should be strictly followed in order that the court may acquire
jurisdiction over the respondents, and failure to strictly comply with the requirements of the rules
regarding the order of its publication is a fatal defect in the service of summons. It cannot be
overemphasized that the statutory requirements on service of summons, whether personally, by
substituted service or by publication, must be followed strictly, faithfully and fully, and any mode
of service other than that prescribed by the statute is considered ineffective.39

Agarao was not a party respondent in the injunction case before the trial court. Certainly, he is
not a real party-in-interest against whom the injunction suit may be brought, absent any showing
that he is also an owner or he acts as an agent of respondent enterprise. Agarao is only a foreman,
bereft of any authority to defend the suit on behalf of respondent enterprise. As earlier mentioned,
the suit against an entity without juridical personality like respondent enterprise may be instituted
only by or against its owner. Impleading Agarao as a party-respondent in the suit for injunction
would have no legal consequence. In any event, the petition for injunction described Agarao only
as a representative of M.R. Vargas Construction Co., which is a mere inconsequentiality
considering that only Vargas, as its sole owner, is authorized by the Rules of Court to defend the
suit on behalf of the enterprise.

Despite Agarao's not being a party-respondent, petitioners nevertheless confuse his presence or
attendance at the hearing on the application for TRO with the notion of voluntary appearance,
which interpretation has a legal nuance as far as jurisdiction is concerned. While it is true that an
appearance in whatever form, without explicitly objecting to the jurisdiction of the court over the
person, is a submission to the jurisdiction of the court over the person, the appearance must
constitute a positive act on the part of the litigant manifesting an intention to submit to the court's
jurisdiction.40 Thus, in the instances where the Court upheld the jurisdiction of the trial court over
the person of the defendant, the parties showed the intention to participate or be bound by the
proceedings through the filing of a motion, a plea or an answer.41
324
Neither is the service of the notice of hearing on the application for a TRO on a certain Rona Adol
binding on respondent enterprise. The records show that Rona Adol received the notice of hearing
on behalf of an entity named JCB. More importantly, for purposes of acquiring jurisdiction over
the person of the defendant, the Rules require the service of summons and not of any other court
processes.

Petitioners also contend that respondent enterprise waived the defense of lack of jurisdiction
when its counsel actively demanded positive action on the omnibus motion. The argument is
implausible.

It should be noted that when the defendant's appearance is made precisely to object to the
jurisdiction of the court over his person, it cannot be considered as appearance in court.42 Such
was the purpose of the omnibus motion, as counsel for respondent enterprise precisely
manifested therein that he erroneously believed that Vargas himself had received the summons
when in fact it was petitioner Martinez who signed as recipient of the summons. Noteworthy is the
fact that when the counsel first appeared in court his appearance was "special" in character and
was only for the purpose of questioning the court's jurisdiction over Vargas, considering that the
latter never received the summons. However, the counsel was shown a copy of the summons
where a signature appears at the bottom which led him to believe that the summons was actually
received by Vargas when in fact it was petitioner Martinez himself who affixed his signature as
recipient thereof. When the counsel discovered his mistake, he lost no time pleading that the
proceedings be nullified and that petitioners and the process server be cited for contempt of court.
Both the trial and appellate courts concluded that the improvident withdrawal of the defense of
lack of jurisdiction was an innocuous error, proceeding on the undeniable fact that the summons
was not properly served on Vargas. Thus, the Court of Appeals did not commit a reversible error
when it affirmed the trial court's nullification of the proceedings for lack of jurisdiction.

WHEREFORE, the instant petition for certiorari is DENIED. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 89001 are AFFIRMED in toto. Costs against petitioners.

The temporary restraining order issued in this case is DISSOLVED.

SO ORDERED.

325
G.R. No. 150135 October 30, 2006

SPOUSES ANTONIO F. ALGURA and LORENCITA S.J. ALGURA, petitioners,

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

DECISION

VELASCO, JR., J.:

Anyone who has ever struggled with poverty

knows how extremely expensive it is to be poor.
–– James Baldwin

The Constitution affords litigants—moneyed or poor—equal access to the courts; moreover, it

specifically provides that poverty shall not bar any person from having access to the courts.1
Accordingly, laws and rules must be formulated, interpreted, and implemented pursuant to the
intent and spirit of this constitutional provision. As such, filing fees, though one of the essential
elements in court procedures, should not be an obstacle to poor litigants' opportunity to seek
redress for their grievances before the courts.

The Case

This Petition for Review on Certiorari seeks the annulment of the September 11, 2001 Order of
the Regional Trial Court (RTC) of Naga City, Branch 27, in Civil Case No. 99-4403 entitled
Spouses Antonio F. Algura and Lorencita S.J. Algura v. The Local Government Unit of the City of
Naga, et al., dismissing the case for failure of petitioners Algura spouses to pay the required filing
fees.2 Since the instant petition involves only a question of law based on facts established from
the pleadings and documents submitted by the parties,3 the Court gives due course to the instant
petition sanctioned under Section 2(c) of Rule 41 on Appeal from the RTCs, and governed by
Rule 45 of the 1997 Rules of Civil Procedure.

The Facts

On September 1, 1999, spouses Antonio F. Algura and Lorencita S.J. Algura filed a Verified
Complaint dated August 30, 19994 for damages against the Naga City Government and its
officers, arising from the alleged illegal demolition of their residence and boarding house and for
payment of lost income derived from fees paid by their boarders amounting to PhP 7,000.00
monthly.

Simultaneously, petitioners filed an Ex-Parte Motion to Litigate as Indigent Litigants,5 to which

petitioner Antonio Algura's Pay Slip No. 2457360 (Annex "A" of motion) was appended, showing
a gross monthly income of Ten Thousand Four Hundred Seventy Four Pesos (PhP 10,474.00)
and a net pay of Three Thousand Six Hundred Sixteen Pesos and Ninety Nine Centavos (PhP
3,616.99) for [the month of] July 1999.6 Also attached as Annex "B" to the motion was a July 14,
1999 Certification7 issued by the Office of the City Assessor of Naga City, which stated that
petitioners had no property declared in their name for taxation purposes.

Finding that petitioners' motion to litigate as indigent litigants was meritorious, Executive Judge
Jose T. Atienza of the Naga City RTC, in the September 1, 1999 Order,8 granted petitioners' plea
for exemption from filing fees.

326
Meanwhile, as a result of respondent Naga City Government's demolition of a portion of
petitioners' house, the Alguras allegedly lost a monthly income of PhP 7,000.00 from their
boarders' rentals. With the loss of the rentals, the meager income from Lorencita Algura's sari-
sari store and Antonio Algura's small take home pay became insufficient for the expenses of the
Algura spouses and their six (6) children for their basic needs including food, bills, clothes, and
schooling, among others.

On October 13, 1999, respondents filed an Answer with Counterclaim dated October 10, 1999, 9
arguing that the defenses of the petitioners in the complaint had no cause of action, the spouses'
boarding house blocked the road right of way, and said structure was a nuisance per se.

Praying that the counterclaim of defendants (respondents) be dismissed, petitioners then filed
their Reply with Ex-Parte Request for a Pre-Trial Setting10 before the Naga City RTC on October
19, 1999. On February 3, 2000, a pre-trial was held wherein respondents asked for five (5) days
within which to file a Motion to Disqualify Petitioners as Indigent Litigants.

On March 13, 2000, respondents filed a Motion to Disqualify the Plaintiffs for Non-Payment of
Filing Fees dated March 10, 2000.11 They asserted that in addition to the more than PhP 3,000.00
net income of petitioner Antonio Algura, who is a member of the Philippine National Police, spouse
Lorencita Algura also had a mini-store and a computer shop on the ground floor of their residence
along Bayawas St., Sta. Cruz, Naga City. Also, respondents claimed that petitioners' second floor
was used as their residence and as a boarding house, from which they earned more than PhP
3,000.00 a month. In addition, it was claimed that petitioners derived additional income from their
computer shop patronized by students and from several boarders who paid rentals to them.
Hence, respondents concluded that petitioners were not indigent litigants.

On March 28, 2000, petitioners subsequently interposed their Opposition to the Motion12 to
respondents' motion to disqualify them for non-payment of filing fees.

On April 14, 2000, the Naga City RTC issued an Order disqualifying petitioners as indigent litigants
on the ground that they failed to substantiate their claim for exemption from payment of legal fees
and to comply with the third paragraph of Rule 141, Section 18 of the Revised Rules of Court—
directing them to pay the requisite filing fees.13

On April 28, 2000, petitioners filed a Motion for Reconsideration of the April 14, 2000 Order. On
May 8, 2000, respondents then filed their Comment/Objections to petitioner's Motion for
Reconsideration.

On May 5, 2000, the trial court issued an Order14 giving petitioners the opportunity to comply with
the requisites laid down in Section 18, Rule 141, for them to qualify as indigent litigants.

On May 13, 2000, petitioners submitted their Compliance15 attaching the affidavits of petitioner
Lorencita Algura16 and Erlinda Bangate,17 to comply with the requirements of then Rule 141,
Section 18 of the Rules of Court and in support of their claim to be declared as indigent litigants.

In her May 13, 2000 Affidavit, petitioner Lorencita Algura claimed that the demolition of their small
dwelling deprived her of a monthly income amounting to PhP 7,000.00. She, her husband, and
their six (6) minor children had to rely mainly on her husband's salary as a policeman which
provided them a monthly amount of PhP 3,500.00, more or less. Also, they did not own any real
property as certified by the assessor's office of Naga City. More so, according to her, the meager
net income from her small sari-sari store and the rentals of some boarders, plus the salary of her
husband, were not enough to pay the family's basic necessities.

327
To buttress their position as qualified indigent litigants, petitioners also submitted the affidavit of
Erlinda Bangate, who attested under oath, that she personally knew spouses Antonio Algura and
Lorencita Algura, who were her neighbors; that they derived substantial income from their
boarders; that they lost said income from their boarders' rentals when the Local Government Unit
of the City of Naga, through its officers, demolished part of their house because from that time,
only a few boarders could be accommodated; that the income from the small store, the boarders,
and the meager salary of Antonio Algura were insufficient for their basic necessities like food and
clothing, considering that the Algura spouses had six (6) children; and that she knew that
petitioners did not own any real property.

Thereafter, Naga City RTC Acting Presiding Judge Andres B. Barsaga, Jr. issued his July 17,
200018 Order denying the petitioners' Motion for Reconsideration.

Judge Barsaga ratiocinated that the pay slip of Antonio F. Algura showed that the "GROSS
INCOME or TOTAL EARNINGS of plaintiff Algura [was] ₧10,474.00 which amount [was] over
and above the amount mentioned in the first paragraph of Rule 141, Section 18 for pauper litigants
residing outside Metro Manila."19 Said rule provides that the gross income of the litigant should
not exceed PhP 3,000.00 a month and shall not own real estate with an assessed value of PhP
50,000.00. The trial court found that, in Lorencita S.J. Algura's May 13, 2000 Affidavit, nowhere
was it stated that she and her immediate family did not earn a gross income of PhP 3,000.00.

The Issue

Unconvinced of the said ruling, the Alguras instituted the instant petition raising a solitary issue
for the consideration of the Court: whether petitioners should be considered as indigent litigants
who qualify for exemption from paying filing fees.

The Ruling of the Court

The petition is meritorious.

A review of the history of the Rules of Court on suits in forma pauperis (pauper litigant) is
necessary before the Court rules on the issue of the Algura spouses' claim to exemption from
paying filing fees.

When the Rules of Court took effect on January 1, 1964, the rule on pauper litigants was found
in Rule 3, Section 22 which provided that:

Section 22. Pauper litigant.—Any court may authorize a litigant to prosecute his action or
defense as a pauper upon a proper showing that he has no means to that effect by
affidavits, certificate of the corresponding provincial, city or municipal treasurer, or
otherwise. Such authority[,] once given[,] shall include an exemption from payment of legal
fees and from filing appeal bond, printed record and printed brief. The legal fees shall be
a lien to any judgment rendered in the case [favorable] to the pauper, unless the court
otherwise provides.

From the same Rules of Court, Rule 141 on Legal Fees, on the other hand, did not contain any
provision on pauper litigants.

On July 19, 1984, the Court, in Administrative Matter No. 83-6-389-0 (formerly G.R. No. 64274),
approved the recommendation of the Committee on the Revision of Rates and Charges of Court
Fees, through its Chairman, then Justice Felix V. Makasiar, to revise the fees in Rule 141 of the

328
Rules of Court to generate funds to effectively cover administrative costs for services rendered
by the courts.20 A provision on pauper litigants was inserted which reads:

Section 16. Pauper-litigants exempt from payment of court fees.—Pauper-litigants

include wage earners whose gross income do not exceed P2,000.00 a month or
P24,000.00 a year for those residing in Metro Manila, and P1,500.00 a month or
P18,000.00 a year for those residing outside Metro Manila, or those who do not own real
property with an assessed value of not more than P24,000.00, or not more than
P18,000.00 as the case may be.

Such exemption shall include exemption from payment of fees for filing appeal bond,
printed record and printed brief.

The legal fees shall be a lien on the monetary or property judgment rendered in favor of
the pauper-litigant.

To be entitled to the exemption herein provided, the pauper-litigant shall execute an

affidavit that he does not earn the gross income abovementioned, nor own any real
property with the assessed value afore-mentioned [sic], supported by a certification to that
effect by the provincial, city or town assessor or treasurer.

When the Rules of Court on Civil Procedure were amended by the 1997 Rules of Civil Procedure
(inclusive of Rules 1 to 71) in Supreme Court Resolution in Bar Matter No. 803 dated April 8,
1997, which became effective on July 1, 1997, Rule 3, Section 22 of the Revised Rules of Court
was superseded by Rule 3, Section 21 of said 1997 Rules of Civil Procedure, as follows:

Section 21. Indigent party.—A party may be authorized to litigate his action, claim or
defense as an indigent if the court, upon an ex parte application and hearing, is satisfied
that the party is one who has no money or property sufficient and available for food, shelter
and basic necessities for himself and his family.

Such authority shall include an exemption from payment of docket and other lawful fees,
and of transcripts of stenographic notes which the court may order to be furnished him.
The amount of the docket and other lawful fees which the indigent was exempted from
paying shall be a lien on any judgment rendered in the case favorable to the indigent,
unless the court otherwise provides.

Any adverse party may contest the grant of such authority at any time before judgment is
rendered by the trial court. If the court should determine after hearing that the party
declared as an indigent is in fact a person with sufficient income or property, the proper
docket and other lawful fees shall be assessed and collected by the clerk of court. If
payment is not made within the time fixed by the court, execution shall issue for the
payment thereof, without prejudice to such other sanctions as the court may impose.

At the time the Rules on Civil Procedure were amended by the Court in Bar Matter No. 803,
however, there was no amendment made on Rule 141, Section 16 on pauper litigants.

On March 1, 2000, Rule 141 on Legal Fees was amended by the Court in A.M. No. 00-2-01-SC,
whereby certain fees were increased or adjusted. In this Resolution, the Court amended Section
16 of Rule 141, making it Section 18, which now reads:

Section 18. Pauper-litigants exempt from payment of legal fees.—Pauper litigants (a)
whose gross income and that of their immediate family do not exceed four thousand
329
 (P4,000.00) pesos a month if residing in Metro Manila, and three thousand (P3,000.00)
pesos a month if residing outside Metro Manila, and (b) who do not own real property with
an assessed value of more than fifty thousand (P50,000.00) pesos shall be exempt from
the payment of legal fees.

The legal fees shall be a lien on any judgment rendered in the case favorably to the pauper
litigant, unless the court otherwise provides.

To be entitled to the exemption herein provided, the litigant shall execute an affidavit that
he and his immediate family do not earn the gross income abovementioned, nor do they
own any real property with the assessed value aforementioned, supported by an affidavit
of a disinterested person attesting to the truth of the litigant's affidavit.

Any falsity in the affidavit of a litigant or disinterested person shall be sufficient cause to
strike out the pleading of that party, without prejudice to whatever criminal liability may
have been incurred.

It can be readily seen that the rule on pauper litigants was inserted in Rule 141 without revoking
or amending Section 21 of Rule 3, which provides for the exemption of pauper litigants from
payment of filing fees. Thus, on March 1, 2000, there were two existing rules on pauper litigants;
namely, Rule 3, Section 21 and Rule 141, Section 18.

On August 16, 2004, Section 18 of Rule 141 was further amended in Administrative Matter No.
04-2-04-SC, which became effective on the same date. It then became Section 19 of Rule 141,
to wit:

Sec. 19. Indigent litigants exempt from payment of legal fees.– INDIGENT LITIGANTS (A)
WHOSE GROSS INCOME AND THAT OF THEIR IMMEDIATE FAMILY DO NOT EXCEED AN
AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE OF AN EMPLOYEE AND (B) WHO DO
NOT OWN REAL PROPERTY WITH A FAIR MARKET VALUE AS STATED IN THE CURRENT
TAX DECLARATION OF MORE THAN THREE HUNDRED THOUSAND (P300,000.00) PESOS
SHALL BE EXEMPT FROM PAYMENT OF LEGAL FEES.

The legal fees shall be a lien on any judgment rendered in the case favorable to the indigent
litigant unless the court otherwise provides.

To be entitled to the exemption herein provided, the litigant shall execute an affidavit that
he and his immediate family do not earn a gross income abovementioned, and they do not
own any real property with the fair value aforementioned, supported by an affidavit of a
disinterested person attesting to the truth of the litigant's affidavit. The current tax
declaration, if any, shall be attached to the litigant's affidavit.

Any falsity in the affidavit of litigant or disinterested person shall be sufficient cause to dismiss
the complaint or action or to strike out the pleading of that party, without prejudice to whatever
criminal liability may have been incurred. (Emphasis supplied.)

Amendments to Rule 141 (including the amendment to Rule 141, Section 18) were made to
implement RA 9227 which brought about new increases in filing fees. Specifically, in the August
16, 2004 amendment, the ceiling for the gross income of litigants applying for exemption and that
of their immediate family was increased from PhP 4,000.00 a month in Metro Manila and PhP
3,000.00 a month outside Metro Manila, to double the monthly minimum wage of an employee;
and the maximum value of the property owned by the applicant was increased from an assessed
value of PhP 50,000.00 to a maximum market value of PhP 300,000.00, to be able to

330
accommodate more indigent litigants and promote easier access to justice by the poor and the
marginalized in the wake of these new increases in filing fees.

Even if there was an amendment to Rule 141 on August 16, 2004, there was still no amendment
or recall of Rule 3, Section 21 on indigent litigants.

With this historical backdrop, let us now move on to the sole issue—whether petitioners are
exempt from the payment of filing fees.

It is undisputed that the Complaint (Civil Case No. 99-4403) was filed on September 1, 1999.
However, the Naga City RTC, in its April 14, 2000 and July 17, 2000 Orders, incorrectly applied
Rule 141, Section 18 on Legal Fees when the applicable rules at that time were Rule 3, Section
21 on Indigent Party which took effect on July 1, 1997 and Rule 141, Section 16 on Pauper
Litigants which became effective on July 19, 1984 up to February 28, 2000.

The old Section 16, Rule 141 requires applicants to file an ex-parte motion to litigate as a pauper
litigant by submitting an affidavit that they do not have a gross income of PhP 2,000.00 a month
or PhP 24,000.00 a year for those residing in Metro Manila and PhP 1,500.00 a month or PhP
18,000.00 a year for those residing outside Metro Manila or those who do not own real property
with an assessed value of not more than PhP 24,000.00 or not more than PhP 18,000.00 as the
case may be. Thus, there are two requirements: a) income requirement—the applicants should
not have a gross monthly income of more than PhP 1,500.00, and b) property requirement––they
should not own property with an assessed value of not more than PhP 18,000.00.

In the case at bar, petitioners Alguras submitted the Affidavits of petitioner Lorencita Algura and
neighbor Erlinda Bangate, the pay slip of petitioner Antonio F. Algura showing a gross monthly
income of PhP 10,474.00,21 and a Certification of the Naga City assessor stating that petitioners
do not have property declared in their names for taxation.22 Undoubtedly, petitioners do not own
real property as shown by the Certification of the Naga City assessor and so the property
requirement is met. However with respect to the income requirement, it is clear that the gross
monthly income of PhP 10,474.00 of petitioner Antonio F. Algura and the PhP 3,000.00 income
of Lorencita Algura when combined, were above the PhP 1,500.00 monthly income threshold
prescribed by then Rule 141, Section 16 and therefore, the income requirement was not satisfied.
The trial court was therefore correct in disqualifying petitioners Alguras as indigent litigants
although the court should have applied Rule 141, Section 16 which was in effect at the time of
the filing of the application on September 1, 1999. Even if Rule 141, Section 18 (which superseded
Rule 141, Section 16 on March 1, 2000) were applied, still the application could not have been
granted as the combined PhP 13,474.00 income of petitioners was beyond the PhP 3,000.00
monthly income threshold.

Unrelenting, petitioners however argue in their Motion for Reconsideration of the April 14, 2000
Order disqualifying them as indigent litigants23 that the rules have been relaxed by relying on Rule
3, Section 21 of the 1997 Rules of Civil procedure which authorizes parties to litigate their action
as indigents if the court is satisfied that the party is "one who has no money or property sufficient
and available for food, shelter and basic necessities for himself and his family." The trial court did
not give credence to this view of petitioners and simply applied Rule 141 but ignored Rule 3,
Section 21 on Indigent Party.

The position of petitioners on the need to use Rule 3, Section 21 on their application to litigate as
indigent litigants brings to the fore the issue on whether a trial court has to apply both Rule 141,
Section 16 and Rule 3, Section 21 on such applications or should the court apply only Rule 141,
Section 16 and discard Rule 3, Section 21 as having been superseded by Rule 141, Section 16
on Legal Fees.

331
The Court rules that Rule 3, Section 21 and Rule 141, Section 16 (later amended as Rule 141,
Section 18 on March 1, 2000 and subsequently amended by Rule 141, Section 19 on August 16,
2003, which is now the present rule) are still valid and enforceable rules on indigent litigants.

For one, the history of the two seemingly conflicting rules readily reveals that it was not the intent
of the Court to consider the old Section 22 of Rule 3, which took effect on January 1, 1994 to have
been amended and superseded by Rule 141, Section 16, which took effect on July 19, 1984
through A.M. No. 83-6-389-0. If that is the case, then the Supreme Court, upon the
recommendation of the Committee on the Revision on Rules, could have already deleted Section
22 from Rule 3 when it amended Rules 1 to 71 and approved the 1997 Rules of Civil Procedure,
which took effect on July 1, 1997. The fact that Section 22 which became Rule 3, Section 21 on
indigent litigant was retained in the rules of procedure, even elaborating on the meaning of an
indigent party, and was also strengthened by the addition of a third paragraph on the right to
contest the grant of authority to litigate only goes to show that there was no intent at all to consider
said rule as expunged from the 1997 Rules of Civil Procedure.

Furthermore, Rule 141 on indigent litigants was amended twice: first on March 1, 2000 and the
second on August 16, 2004; and yet, despite these two amendments, there was no attempt to
delete Section 21 from said Rule 3. This clearly evinces the desire of the Court to maintain the
two (2) rules on indigent litigants to cover applications to litigate as an indigent litigant.

It may be argued that Rule 3, Section 21 has been impliedly repealed by the recent 2000 and
2004 amendments to Rule 141 on legal fees. This position is bereft of merit. Implied repeals are
frowned upon unless the intent of the framers of the rules is unequivocal. It has been consistently
ruled that:

(r)epeals by implication are not favored, and will not be decreed, unless it is manifest that
the legislature so intended. As laws are presumed to be passed with deliberation and with
full knowledge of all existing ones on the subject, it is but reasonable to conclude that in
passing a statute[,] it was not intended to interfere with or abrogate any former law relating
to same matter, unless the repugnancy between the two is not only irreconcilable, but also
clear and convincing, and flowing necessarily from the language used, unless the later act
fully embraces the subject matter of the earlier, or unless the reason for the earlier act is
beyond peradventure removed. Hence, every effort must be used to make all acts stand
and if, by any reasonable construction they can be reconciled, the later act will not operate
as a repeal of the earlier.24 (Emphasis supplied).

Instead of declaring that Rule 3, Section 21 has been superseded and impliedly amended by
Section 18 and later Section 19 of Rule 141, the Court finds that the two rules can and should be
harmonized.

The Court opts to reconcile Rule 3, Section 21 and Rule 141, Section 19 because it is a settled
principle that when conflicts are seen between two provisions, all efforts must be made to
harmonize them. Hence, "every statute [or rule] must be so construed and harmonized with other
statutes [or rules] as to form a uniform system of jurisprudence."25

In Manila Jockey Club, Inc. v. Court of Appeals, this Court enunciated that in the interpretation of
seemingly conflicting laws, efforts must be made to first harmonize them. This Court thus ruled:

Consequently, every statute should be construed in such a way that will harmonize it with
existing laws. This principle is expressed in the legal maxim 'interpretare et concordare
leges legibus est optimus interpretandi,' that is, to interpret and to do it in such a way as
to harmonize laws with laws is the best method of interpretation.26

332
In the light of the foregoing considerations, therefore, the two (2) rules can stand together and are
compatible with each other. When an application to litigate as an indigent litigant is filed, the court
shall scrutinize the affidavits and supporting documents submitted by the applicant to determine
if the applicant complies with the income and property standards prescribed in the present Section
19 of Rule 141—that is, the applicant's gross income and that of the applicant's immediate family
do not exceed an amount double the monthly minimum wage of an employee; and the applicant
does not own real property with a fair market value of more than Three Hundred Thousand Pesos
(PhP 300,000.00). If the trial court finds that the applicant meets the income and property
requirements, the authority to litigate as indigent litigant is automatically granted and the grant is
a matter of right.

However, if the trial court finds that one or both requirements have not been met, then it would
set a hearing to enable the applicant to prove that the applicant has "no money or property
sufficient and available for food, shelter and basic necessities for himself and his family." In that
hearing, the adverse party may adduce countervailing evidence to disprove the evidence
presented by the applicant; after which the trial court will rule on the application depending on the
evidence adduced. In addition, Section 21 of Rule 3 also provides that the adverse party may
later still contest the grant of such authority at any time before judgment is rendered by the trial
court, possibly based on newly discovered evidence not obtained at the time the application was
heard. If the court determines after hearing, that the party declared as an indigent is in fact a
person with sufficient income or property, the proper docket and other lawful fees shall be
assessed and collected by the clerk of court. If payment is not made within the time fixed by the
court, execution shall issue or the payment of prescribed fees shall be made, without prejudice to
such other sanctions as the court may impose.

The Court concedes that Rule 141, Section 19 provides specific standards while Rule 3, Section
21 does not clearly draw the limits of the entitlement to the exemption. Knowing that the litigants
may abuse the grant of authority, the trial court must use sound discretion and scrutinize evidence
strictly in granting exemptions, aware that the applicant has not hurdled the precise standards
under Rule 141. The trial court must also guard against abuse and misuse of the privilege to
litigate as an indigent litigant to prevent the filing of exorbitant claims which would otherwise be
regulated by a legal fee requirement.

Thus, the trial court should have applied Rule 3, Section 21 to the application of the Alguras after
their affidavits and supporting documents showed that petitioners did not satisfy the twin
requirements on gross monthly income and ownership of real property under Rule 141. Instead
of disqualifying the Alguras as indigent litigants, the trial court should have called a hearing as
required by Rule 3, Section 21 to enable the petitioners to adduce evidence to show that they
didn't have property and money sufficient and available for food, shelter, and basic necessities
for them and their family.27 In that hearing, the respondents would have had the right to also
present evidence to refute the allegations and evidence in support of the application of the
petitioners to litigate as indigent litigants. Since this Court is not a trier of facts, it will have to
remand the case to the trial court to determine whether petitioners can be considered as indigent
litigants using the standards set in Rule 3, Section 21.

Recapitulating the rules on indigent litigants, therefore, if the applicant for exemption meets the
salary and property requirements under Section 19 of Rule 141, then the grant of the application
is mandatory. On the other hand, when the application does not satisfy one or both requirements,
then the application should not be denied outright; instead, the court should apply the "indigency
test" under Section 21 of Rule 3 and use its sound discretion in determining the merits of the
prayer for exemption.

Access to justice by the impoverished is held sacrosanct under Article III, Section 11 of the 1987
Constitution. The Action Program for Judicial Reforms (APJR) itself, initiated by former Chief
333
Justice Hilario G. Davide, Jr., placed prime importance on 'easy access to justice by the poor' as
one of its six major components. Likewise, the judicial philosophy of Liberty and Prosperity of
Chief Justice Artemio V. Panganiban makes it imperative that the courts shall not only safeguard
but also enhance the rights of individuals—which are considered sacred under the 1987
Constitution. Without doubt, one of the most precious rights which must be shielded and secured
is the unhampered access to the justice system by the poor, the underprivileged, and the
marginalized.

WHEREFORE, the petition is GRANTED and the April 14, 2000 Order granting the disqualification of
petitioners, the July 17, 2000 Order denying petitioners' Motion for Reconsideration, and the September
11, 2001 Order dismissing the case in Civil Case No. RTC-99-4403 before the Naga City RTC, Branch 27
are ANNULLED and SET ASIDE. Furthermore, the Naga City RTC is ordered to set the "Ex-Parte Motion
to Litigate as Indigent Litigants" for hearing and apply Rule 3, Section 21 of the 1997 Rules of Civil
Procedure to determine whether petitioners can qualify as indigent litigants.

No costs.

G.R. No. 103533 December 15, 1998

MANILA JOCKEY CLUB, INC. AND PHILIPPINE RACING CLUB, INC., petitioners,
vs.
THE COURT OF APPEALS AND PHILIPPINE RACING COMMISSION, respondents.

QUISUMBING, J.:

This is a Petition for Review on Certiorari seeking the reversal of the decision 1 of the Court of
Appeals in CA-G.R. SP No. 25251 dated September 17, 1991 and the resolution 2 dated January
8, 1992, which denied the motion for reconsideration. At issue here is the control and disposition
of "breakages" 3 in connection with the conduct of horse-racing.

The pertinent facts on record are as follows:

On June 18, 1948, Congress approved Republic Act No. 309, entitled "An Act to Regulate Horse-
Racing in the Philippines." This Act consolidated all existing laws and amended inconsistent
provisions relative to horse racing. It provided for the distribution of gross receipts from the sale
of betting tickets, but is silent on the allocation of so-called "breakages." Thus the practice,
according to the petitioners, was to use the "breakages" for the anti-bookies drive and other sales
promotions activities of the horse racing clubs.

On October 23, 1992, petitioners, Manila Jockey Club, Inc. (MJCI) and Philippine Racing Club,
Inc. (PRCI), were granted franchises to operate and maintain race tracks for horse racing in the
City of Manila and the Province of Rizal by virtue of Republic Act Nos. 6631 and 6632,
respectively, and allowed to hold horse races, with bets, on the following dates:

. . . Saturdays, Sundays and official holidays of the year, excluding

Thursday and Fridays of the Holy Week, June twelfth, commonly known as
Independence Day, Election Day and December thirtieth, commonly known
as Rizal Day.(Sec. 5 of R.A. 6631)

. . . Saturday, Sundays, and official holiday of the year, except on those

official holidays where the law expressly provides that no horse races are
to be held. The grantee may also conduct races on the eve of any public
334
 holiday to start not earlier than five-thirty (5:30) o'clock in the afternoon but
not to exceed five days a year. (Sec. 7 of R.A. 6632)

Said laws carried provisions on the allocation of "breakages" to beneficiaries as follows:

Franchise Laws

R.A. 6631 4 R.A. 6632 5

(for MJCI) (for PRCI)

Provincial or city hospitals 25%

Rehabilitation of drug addicts 25% 50%
For the benefit of Philippine
Amateur Athletes Federation 50% 25%

Charitable institutions 25%

On March 20, 1974, Presidential Decree No. 420 was issued creating the Philippine Racing
Commission (PHILRACOM), giving it exclusive jurisdiction and control over every aspect of the
conduct of horse racing, including the framing and scheduling of races. 6 By virtue of this power,
the PHILRACOM authorized the holding of races on Wednesdays starting on December 22, 1976.
7

In connection with the new schedule of races, petitioners made a joint query regarding the
ownership of breakages accumulated during Wednesday races. In response to the query,
PHILRACOM rendered its opinion in a letter dated September 20, 1978. It declared that the
breakages belonged to the racing clubs concerned, to wit:

We find no further need to dissect the provisions of P.D. 420 to come to a

legal conclusion. As can be clearly seen from the foregoing discussion and
based on the established precedents, there can be no doubt that the
breakage of Wednesday races shall belong to the racing club concerned. 8

Consequently, the petitioners allocated the proceeds of breakages for their own
business purpose:

Thereafter, PHILRACOM authorized the holding of races on Thursdays from November 15, 1984
to December 31, 1984 and on Tuesdays since January 15, 1985 up to the present. These mid-
week races are in addition to those days specifically mentioned in R.A. 6631 and R.A. 6632.
Likewise, petition allocated the breakages from these races for their own uses.

On December 16, 1986 President Corazon Aquino amended certain provisions Sec. 4 of R.A.
8631 and Sec. 6 of R.A. 6632 through Executive Orders No. 88 and 89. Under these Executive
Orders, breakages were allocated to beneficiaries, as follows:

Franchise Laws

E.O. 89 9 E.O. 88 10

(for MJCI) (for PRCI)

Provincial or city hospitals 25%

335
 Rehabilitation of drug addicts 25% 50%
For the benefit of Philippine
Racing Commission 50% 25%
Charitable institutions 25%

On April 23, 1987, PHILRACOM itself addressed a query to the Office of the President asking
which agency is entitled to dispose of the proceeds of the "breakages" derived from the Tuesday
and Wednesday races.

In a letter dated May 21, 1987, the Office of the President, through then Deputy Executive
Secretary Catalino Macaraig, Jr., replied that "the disposition of the breakages rightfully belongs
to PHILRACOM, not only those derived from the Saturday, Sunday and holiday races, but also
from the Tuesday and Wednesday races in accordance with the distribution scheme prescribed
in said Executive Orders". 11

Controversy arose when herein respondent PHILRACOM, sent a series of demand letters to
petitioners MJCI and PRCI, requesting its share in the "breakages" of mid-week-races and proof
of remittances to other legal beneficiaries as provided under the franchise laws. On June 8, 1987,
PHILRACOM sent a letter of demand to petitioners MJCI and PRCI asking them to remit
PHILRACOM's share in the "breakages" derived from the Tuesday, Wednesday and Thursday
races in this wise:

xxx xxx xxx

Pursuant to Board Resolution dated December 21, 1986, and Executive

Order Nos. 88 and 89 series of 1986, and the authority given by the Office
of the President dated May 21, 1987, please remit to the Commission the
following:

1) PHILRACOM's share in the breakages derived from Wednesday racing for the
period starting December 22, 1976 up to the December 31, 1986.

2) PHILRACOM's share in the breakages derived from Thursday racing for the period
starting November 15, 1984 up to December 31, 1984; and

3) PHILRACOM's share in the breakages derived from Tuesday racing for the period
starting January 15, 1985 up to December, 1986.

4) Kindly furnish the Commission with the breakdown of all breakages derived from
Tuesday, Thursdays and Wednesdays racing that you have remitted to the legal
beneficiaries. 12

On June 16, 1987, petitioners MJCI and PRCI sought reconsideration 13 of the May 21, 1987
opinion of then Deputy Executive Secretary Macaraig, but the same was denied by the Office of
the President in its letter dated April 11, 1988. 14

On April 25, 1988, PHILRACOM wrote another letter 15 to the petitioners MJCI and PRCI seeking
the remittance of its share in the breakages. Again, on June 13, 1990, PHILRACOM reiterated its
previous demand embodied in its letter of April 25, 1 988. 16

Petitioners ignored said demand. Instead, they filed a Petition for Declaratory Relief before the
Regional Trial Court, Branch 150 of Makati, on the ground that there is a conflict between the
336
previous opinion of PHILRACOM dated September 20, 1978 and the present position of
PHILRACOM, as declared and affirmed by the Office of the President in its letters dated May 21,
1987 and April 11, 1988. Petitioners averred that there was an "actual controversy" between the
parties, which should be resolved.

On March 11, 1991, the trial court rendered judgment, disposing as follows:

WHEREFORE, and in view of all the foregoing considerations, the Court

hereby declares and decides as follows:

a) Executive Orders Nos. 88 and 89 do not and cannot cover the disposition
and allocation of mid-week races, particularly those authorized to be held
during Tuesdays, Wednesdays and those which are not authorized under
Republic Acts 6631 and 6632; and

b) The ownership by the Manila Jockey Club, Inc. and the Philippine Racing
Club, Inc. of the breakages they derive from mid-week races shall not be
disturbed, with the reminder that the breakages should be strictly and wholly
utilized for the purpose for which ownership thereof has been vested upon
said racing entities.

SO ORDERED. 17

Dissatisfied, respondent PHILRACOM filed a Petition for Certiorari with prayer for the issuance of
a writ of preliminary injunction before this Court, raising the lone question of whether or not E.O.
Nos. 88 and 89 cover breakages derived from the mid-week races. However, we referred the
case to the Court of Appeals, which eventually reversed the decision of the trial court, and ruled
as follows:

xxx xxx xxx

The decision on the part of PHILRACOM to authorize additional racing days had the
effect of widening the scope of Section 5 of RA 6631 and Section 7 of RA 6632.
Consequently, private respondents derive their privilege to hold races on the
designated days not only their franchise acts but also from the order issued by the
PHILRACOM. No provision of law became inconsistent with the passage of the Order
granting additional racing days. Neither was there a special provision set to govern
those mid-week races. The reason is simple. There was no need for any new
provisions because there are enough general provisions to cover them. The
provisions on the disposition and allocation of breakages being general in character
apply to breakages derived on any racing day. 18

xxx xxx xxx

WHEREFORE, based on the foregoing analysis and interpretation of the laws in

question, the judgment of the trial court is hereby SET ASIDE. Decision is hereby
rendered:

1. declaring Section 4 of RA 6631 as amended by E.O. 89 and Section 6 of RA 6632

as amended by E.O. 88 to cover the disposition and allocation of breakages derived
on all races conducted by private respondents on any racing day, whether as
provided for under Section 4 of RA 6631 or Section 6 of RA 6632 or as ordered by
PHILRACOM in the exercise of its powers under P.D. 420;
337
 2. ordering private respondent to remit to PHILRACOM its share under E.O. 88 and
E.O. 89 derived from races held on Tuesday, Wednesdays, Thursday as authorized
by PHILRACOM.

SO ORDERED. 19

Petitioners filed a motion for reconsideration, but it was denied for lack of merit, with respondent
Court of Appeals further declaring that:

xxx xxx xxx

In so far as the prospective application of Executive Orders Nos. 88 and 89 is

concerned. We have no disagreement with the respondents. Since PHILRACOM
became the beneficiary of the breakages only upon effectivity of Executive Order Nos.
88 and 89, it is therefore entitled to such breakages from December 16, 1986 when
said Executive Orders were issued. However, we do not concede that respondents
are entitled to breakages prior to December 16, 1986 because it is clear that the
applicable laws from 1976 to December 16, 1986 were R.A. 6631 and R.A. 6632,
which specifically apportion the breakages to specified beneficiaries among which was
the PAAF, a government agency. Since respondents admit that PHILRACOM
(Petitioner) was merely placed in lieu of PAAF as beneficiary/recipient of breakages,
then whatever breakages was due to PAAF as one of the beneficiaries under R.A.
Nos. 6631 and 6632 accrued to or should belong to PHILRACOM as successor to the
defunct PAAF.

Finding the Motion for Reconsideration without merit, and for reasons indicated, the
Motion is denied.

SO ORDERED. 20

Consequent to the aforequoted adverse decision, petitioners MJCI and PRCI filed this petition for
review under Rule 45.

The main issue brought by the parties for the Court's resolution is: Who are the rightful
beneficiaries of the breakages derived from mid-week races? This issue also carries an ancillary
question: assuming PHILRACOM is entitled to the mid-week breakages under the law, should the
petitioners remit the money from the time the mid-week races started, or only upon the
promulgation of E.O. Nos. 88 and 89?

Petitioners assert that franchise laws should be construed to apply the distribution scheme
specifically and exclusively to the racing days enumerated in Sec. 5 of R.A. 6631, and Sec. 7 of
R.A. 6632. They claim that disposition of breakages under these laws should be limited to races
conducted on "all Saturdays, Sundays, and official holidays of the year, except, on those official
holidays where the law expressly provides that no horse races are to be held", hence, there is no
doubt that the breakages of Wednesday races shall belong to the racing clubs concerned. 21 They
even advance the view that "where a statute by its terms is expressly limited to certain matters, it
may not by interpretation or construction be extended to other matters" 22

However, respondent PHILRACOM contends that R.A. Nos. 6631 and 6632 are laws intended
primarily to grant petitioners their respective franchises to construct, operate, and maintain a race
track for horse racing. 23 When PHILRACOM added mid-week races, the franchises given to the
petitioners remained the same. Logically, what applies to races authorized under Republic Act
Nos. 6631 and 6632 should also apply to races additionally authorized by PHILRACOM, namely
338
mid-week races, because these are general provisions which apply general rues and procedures
governing the operation of the races. Consequently, if the authorized racing days are extended,
these races must therefore be governed by the same rules and provisions generally provided
therein.

We find petitioners' position on the main issue lacking in merit and far from persuasive.

Franchise laws are privileges 24 conferred by the government on corporations to do that "which
does not belong to the citizens of the country generally by common right". 25 As a rule, a franchise
springs from contracts between the sovereign power and the private corporation for purposes of
individual advantage as well as public benefit. 26 Thus, a franchise partakes of a double nature
and character. 27 In so far as it affects or concerns the public, it is public juris and subject to
governmental control. 28 The legislature may prescribe the conditions and terms upon which it
may be held, and the duty of grantee to the public exercising it. 29

As grantees of a franchise, petitioners derive their existence from the same. Petitioners'
operations are governed by all existing rules relative to horse racing provided they are not
inconsistent with each other and could be reasonably harmonized. Therefore, the applicable laws
are R.A. 309, as amended, R.A. 6631 and 6632, as amended by E.O. 88 and 89, P.D. 420 and
the orders issued PHILRACOM. Consequently, every statute should be construed in such a way
that will harmonize it with existing laws. This principle is expressed in the legal maxim "interpretare
et concordare leges legibus est optimus interpretandi", that is, to interpret and to do it in such a
way as to harmonize laws with laws is the best method of interpretation. 30

A reasonable reading of the horse racing laws favors the determination that the entities
enumerated in the distribution scheme provided under R.A. Nos. 6631 and 6632, as amended by
Executive Orders 88 and 89, are the rightful beneficiaries of breakages from mid-week races.
Petitioners should therefore remit the proceeds of breakages to those benefactors designated by
the aforesaid laws.

The holding of horse races on Wednesdays is in addition to the existing schedule of races
authorized by law. Since this new schedule became part of R.A. 6631 and 6632 the set of
procedures in the franchise laws applicable to the conduct of horse racing business must likewise
be applicable to Wednesday or other mid-week races. A fortiori, the granting of the mid-week
races does not require another legislative act to reiterate the manner of allocating the proceeds
of betting tickets. Neither does the allocation of breakages under the same provision need to be
isolated to construe another distribution scheme. No law can be viewed in a condition of isolation
or as the beginning of a new legal system. 31 A supplemental law becomes an addition to the
existing statutes, or a section thereof; and its effect is not to change in any way the provisions of
the latter but merely to extend the operation thereof, or give additional power to enforce its
provisions, as the case may be. In enacting a particular statute, legislators are presumed to have
full knowledge and to taken full cognizance of the existing laws on the same subject or those
relating thereto.

Proceeding to the subsidiary issue, the period for the remittance of breakages to the beneficiaries
should have commenced from the time PHILRACOM authorized the holding of mid-week races
because R.A. Nos. 6631 and 6632 were ready in effect then. The petitioners contend that they
cannot be held retroactively liable to respondent PHILRACOM for breakages prior to the effectivity
of E.O. Nos. 88 and 89. They assert that the real intent behind E.O. Nos. 88 and 89 was to favor
the respondent PHILRACOM anew with the benefits which formerly had accrued in favor of
Philippine Amateur Athletic Federation (PAAF). They opine that since laws operate prospectively
unless the legislator intends to give them retroactive effect, the accrual of these breakages should
start on December 16, 1986, the date of effectivity of E.O. Nos. 88 and 89. 32 Now, even if one of
the benefactors of breakages, the PAAF, as provided by R.A. 6631 and 6632 had ceased
339
operation, it is still not proper for the petitioners to presume that they were entitled to PAAF's
share. When the petitioners mistakenly appropriated the breakages for themselves, they became
the implied trustees for those legally entitled to the proceeds. This is in consonance with Article
1456 of the Civil Code, which provides that:

Art. 1456 — If property is acquired through mistake or fraud, the person

obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes.

The petitioners should have properly set aside amount for the defunct PAAF, until an alternative
beneficiary was designated, which as subsequently provided for by Executive Order Nos. 88 and
89, is PHILRACOM:

xxx xxx xxx

Secs. 2 — All the cash balances and accumulated amounts corresponding to the share
of the Philippine Amateur Athletic Federation/Ministry of Youth and Sports
Development, pursuant to Section 6 of Republic Act No. 6632, not remitted by the
Philippine Racing Club, Inc./Manila Jockey Club Inc., are hereby transferred to the
Philippine Racing Commission to be constituted into a TRUST FUND to be used
exclusively for the payment of additional prizes for races sponsored by the Commission
and for necessary outlays and other expenses relative to horse-breeding activities of
the National Stud Farm. . . . . . . [E.O. No. 88]

xxx xxx xxx

Sec. 2. Any provision of law to the contrary notwithstanding, all cash balances and
accumulated amounts corresponding to the share of the Philippine Amateur Athletic
Federation/Ministry of Youth and Sports Development, pursuant to Republic Act No.
6631, not remitted by the Manila Jockey Club, Inc., are hereby constituted into a TRUST
FUND to be used exclusively for the payment of additional prizes for races sponsored
by the Philippine Racing Commission and for the necessary capital outlays and other
expenses relative to horse-breeding activities of the National Stud Farm. . . . . . . . [E.O.
No. 89]

While herein petitioners might have relied on a prior opinion issued by an administrative body, the
well-entrenched principle is that the State could not be estopped by a mistake committed by its
officials or agents. 33 Well-settled also is the rule that the erroneous application of the law by public
officers does not prevent a subsequent correct application of the law. 34 Although there was an
initial interpretation of the law by PHILRACOM, a court of law could not be precluded from setting
that interpretation aside if later on it is shown to be inappropriate.

Moreover, the detrimental consequences of depriving the city hospitals and other institutions of
the funds needed for rehabilitation of drug dependents and other patients are all too obvious. It
goes without saying that the allocation of breakages in favor of said institutions is a policy decision
in pursuance of social development goals worthy of judicial approbation.

Nor could we be oblivious to the reality that horse racing although authorized by law is still a form
of gambling. Gambling is essentially antagonistic to the aims of enhancing national productivity
and self-reliance. 35 For this reason, legislative franchises impose limitations on horse racing and
betting. Petitioner's contention that a gambling franchise is a public contract protected by the
Constitutional provision on non-impairment of contract could not be left unqualified. For as well
said in Lim vs. Pacquing: 36

340
 . . . it should be remembered that a franchise is not in the strict sense a
simple contract but rather it is, more importantly, a mere privilege specially
in matters which are within the government's power to regulate and even
prohibit through the exercise of the police power. Thus, a gambling
franchise is always subject to the exercise of police power for the public
welfare. 37

That is why we need to stress anew that a statute which authorizes a gambling activity or business
should be strictly construed, and every reasonable doubt be resolved so as to limit rather than
expand the powers and rights claimed by franchise holders under its authority. 38

WHEREFORE, there being no reversible error, the appealed decision and the resolution of the
respondent Court of Appeals in CA-G.R. SP No. 25251, are hereby AFFIRMED, and the instant
petition is hereby DENIED for lack of merit.

Costs against petitioners.

SO ORDERED.

341
G.R. No. 143365 December 4, 2008

GENEROSO SALIGUMBA, ERNESTO SALIGUMBA, and HEIRS OF SPOUSES VALERIA

SALIGUMBA AND ELISEO SALIGUMBA, SR., petitioners,
vs.
MONICA PALANOG, respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review of the Decision dated 24 May 2000 of the Regional Trial Court, Branch
5, Kalibo, Aklan (RTC-Branch 5) in Civil Case No. 5288 for Revival of Judgment. The case is an
offshoot of the action for Quieting of Title with Damages in Civil Case No. 2570.

The Facts

Monica Palanog, assisted by her husband Avelino Palanog (spouses Palanogs), filed a complaint
dated 28 February 1977 for Quieting of Title with Damages against defendants, spouses Valeria
Saligumba and Eliseo Saligumba, Sr. (spouses Saligumbas), before the Regional Trial Court,
Branch 3, Kalibo, Aklan (RTC-Branch 3). The case was docketed as Civil Case No. 2570. In the
complaint, spouses Palanogs alleged that they have been in actual, open, adverse and
continuous possession as owners for more than 50 years of a parcel of land located in Solido,
Nabas, Aklan. The spouses Saligumbas allegedly prevented them from entering and residing on
the subject premises and had destroyed the barbed wires enclosing the land. Spouses Palanogs
prayed that they be declared the true and rightful owners of the land in question.

When the case was called for pre-trial on 22 September 1977, Atty. Edilberto Miralles (Atty.
Miralles), counsel for spouses Saligumbas, verbally moved for the appointment of a commissioner
to delimit the land in question. Rizalino Go, Deputy Sheriff of Aklan, was appointed commissioner
and was directed to submit his report and sketch within 30 days.1 Present during the delimitation
were spouses Palanogs, spouses Saligumbas, and Ernesto Saligumba, son of spouses
Saligumbas.2

After submission of the Commissioner’s Report, spouses Palanogs, upon motion, were granted
10 days to amend their complaint to conform with the items mentioned in the report.3

Thereafter, trial on the merits ensued. At the hearing on 1 June 1984, only the counsel for spouses
Palanogs appeared. The trial court issued an order resetting the hearing to 15 August 1984 and
likewise directed spouses Saligumbas to secure the services of another counsel who should be
ready on that date.4 The order sent to Eliseo Saligumba, Sr. was returned to the court unserved
with the notation "Party–Deceased" while the order sent to defendant Valeria Saligumba was
returned with the notation "Party in Manila."5

At the hearing on 15 August 1984, spouses Palanogs’ direct examination was suspended and the
continuation of the hearing was set on 25 October 1984. The trial court stated that Atty. Miralles,
who had not withdrawn as counsel for spouses Saligumbas despite his appointment as Municipal
Circuit Trial Court judge, would be held responsible for the case of spouses Saligumbas until he
formally withdrew as counsel. The trial court reminded Atty. Miralles to secure the consent of
spouses Saligumbas for his withdrawal.6 A copy of this order was sent to Valeria Saligumba but
the same was returned unserved with the notation "Party in Manila."7
342
The hearing set on 25 October 1984 was reset to 25 January 1985 and the trial court directed
that a copy of this order be sent to Eliseo Saligumba, Jr. at COA, PNB, Manila.8

The presentation of evidence for spouses Palanogs resumed on 25 January 1985 despite the
motion of Atty. Miralles for postponement on the ground that his client was sick. The exhibits were
admitted and plaintiffs spouses Palanogs rested their case. Reception of evidence for the
defendants spouses Saligumbas was scheduled on 3, 4, and 5 June 1985.9

On 3 June 1985, only spouses Palanogs and counsel appeared. Upon motion of the spouses
Palanogs, spouses Saligumbas were deemed to have waived the presentation of their evidence.

On 3 August 1987, after a lapse of more than two years, the trial court considered the case
submitted for decision.

On 7 August 1987, RTC-Branch 3 rendered a judgment in Civil Case No. 2570 declaring spouses
Palanogs the lawful owners of the subject land and ordering spouses Saligumbas, their agents,
representatives and all persons acting in privity with them to vacate the premises and restore
possession to spouses Palanogs.

The trial court, in a separate Order dated 7 August 1987, directed that a copy of the court’s
decision be furnished plaintiff Monica Palanog and defendant Valeria Saligumba.

Thereafter, a motion for the issuance of a writ of execution of the said decision was filed but the
trial court, in its Order dated 8 May 1997, ruled that since more than five years had elapsed after
the date of its finality, the decision could no longer be executed by mere motion.

Thus, on 9 May 1997, Monica Palanog (respondent), now a widow, filed a Complaint seeking to
revive and enforce the Decision dated 7 August 1987 in Civil Case No. 2570 which she claimed
has not been barred by the statute of limitations. She impleaded petitioners Generoso Saligumba
and Ernesto Saligumba, the heirs and children of the spouses Saligumbas, as defendants. The
case was docketed as Civil Case No. 5288 before the RTC-Branch 5.

Petitioner Generoso Saligumba, for himself and in representation of his brother Ernesto who was
out of the country working as a seaman, engaged the services of the Public Attorney’s Office,
Kalibo, Aklan which filed a motion for time to allow them to file a responsive pleading. Petitioner
Generoso Saligumba filed his Answer10 alleging that: (1) respondent had no cause of action; (2)
the spouses Saligumbas died while Civil Case No. 2570 was pending and no order of substitution
was issued and hence, the trial was null and void; and (3) the court did not acquire jurisdiction
over the heirs of the spouses Saligumbas and therefore, the judgment was not binding on them.

Meanwhile, on 19 December 1997, the trial court granted respondent’s motion to implead
additional defendants namely, Eliseo Saligumba, Jr. and Eduardo Saligumba, who are also the
heirs and children of spouses Saligumbas.11 They were, however, declared in default on 1
October 1999 for failure to file any responsive pleading.12

The Trial Court’s Ruling

On 24 May 2000, the RTC-Branch 5 rendered a decision in favor of respondent ordering the
revival of judgment in Civil Case No. 2570. The trial court ruled that the non-substitution of the
deceased spouses did not have any legal significance. The land subject of Civil Case No. 2570
was the exclusive property of defendant Valeria Saligumba who inherited the same from her
deceased parents. The death of her husband, Eliseo Saligumba, Sr., did not change the
complexion of the ownership of the property that would require his substitution. The spouses
343
Saligumbas’ children, who are the petitioners in this case, had no right to the property while
Valeria Saligumba was still alive. The trial court further found that when defendant Valeria
Saligumba died, her lawyer, Atty. Miralles, did not inform the court of the death of his client. The
trial court thus ruled that the non-substitution of the deceased defendant was solely due to the
negligence of counsel. Moreover, petitioner Ernesto Saligumba could not feign ignorance of Civil
Case No. 2570 as he was present during the delimitation of the subject land. The trial court
likewise held that the decision in Civil Case No. 2570 could not be the subject of a collateral
attack. There must be a direct action for the annulment of the said decision.

Petitioners elevated the matter directly to this Court. Hence, the present petition.

The Court’s Ruling

The instant case is an action for revival of judgment and the judgment sought to be revived in this
case is the decision in the action for quieting of title with damages in Civil Case No. 2570. This is
not one for annulment of judgment.

An action for revival of judgment is no more than a procedural means of securing the execution
of a previous judgment which has become dormant after the passage of five years without it being
executed upon motion of the prevailing party. It is not intended to re-open any issue affecting the
merits of the judgment debtor’s case nor the propriety or correctness of the first judgment. 13 An
action for revival of judgment is a new and independent action, different and distinct from either
the recovery of property case or the reconstitution case, wherein the cause of action is the
decision itself and not the merits of the action upon which the judgment sought to be enforced is
rendered.14 Revival of judgment is premised on the assumption that the decision to be revived,
either by motion or by independent action, is already final and executory.15

The RTC-Branch 3 Decision dated 7 August 1987 in Civil Case No. 2570 had been rendered final
and executory by the lapse of time with no motion for reconsideration nor appeal having been
filed. While it may be true that the judgment in Civil Case No. 2570 may be revived and its
execution may be had, the issue now before us is whether or not execution of judgment can be
issued against petitioners who claim that they are not bound by the RTC-Branch 3 Decision dated
7 August 1987 in Civil Case No. 2570.

Petitioners contend that the RTC-Branch 3 Decision of 7 August 1987 in Civil Case No. 2570 is
null and void since there was no proper substitution of the deceased spouses Saligumbas despite
the trial court’s knowledge that the deceased spouses Saligumbas were no longer represented
by counsel. They argue that they were deprived of due process and justice was not duly served
on them.

Petitioners argue that the trial court even acknowledged the fact of death of spouses Saligumbas
but justified the validity of the decision rendered in that case despite lack of substitution because
of the negligence or fault of their counsel. Petitioners contend that the duty of counsel for the
deceased spouses Saligumbas to inform the court of the death of his clients and to furnish the
name and address of the executor, administrator, heir or legal representative of the decedent
under Rule 3 presupposes adequate or active representation by counsel. However, the relation
of attorney and client was already terminated by the appointment of counsel on record, Atty.
Miralles, as Municipal Circuit Trial Court judge even before the deaths of the spouses Saligumbas
were known. Petitioners invoke the Order of 1 June 1984 directing the spouses Saligumbas to
secure the services of another lawyer to replace Atty. Miralles. The registered mail containing that
order was returned to the trial court with the notation that Eliseo Saligumba, Sr. was "deceased."
Petitioners thus question the decision in Civil Case No. 2570 as being void and of no legal effect
because their parents were not duly represented by counsel of record. Petitioners further argue
that they have never taken part in the proceedings in Civil Case No. 2570 nor did they voluntarily
344
appear or participate in the case. It is unfair to bind them in a decision rendered against their
deceased parents. Therefore, being a void judgment, it has no legal nor binding effect on
petitioners.

Civil Case No. 2570 is an action for quieting of title with damages which is an action involving real
property. It is an action that survives pursuant to Section 1, Rule 8716 as the claim is not
extinguished by the death of a party. And when a party dies in an action that survives, Section 17
of Rule 3 of the Revised Rules of Court17 provides for the procedure, thus:

Section 17. Death of Party. - After a party dies and the claim is not thereby extinguished,
the court shall order, upon proper notice, the legal representative of the deceased to
appear and to be substituted for the deceased, within a period of thirty (30) days, or within
such time as may be granted. If the legal representative fails to appear within said time,
the court may order the opposing party to procure the appointment of a legal
representative of the deceased within a time to be specified by the court, and the
representative shall immediately appear for and on behalf of the interest of the deceased.
The court charges involved in procuring such appointment, if defrayed by the opposing
party, may be recovered as costs. The heirs of the deceased may be allowed to be
substituted for the deceased, without requiring the appointment of an executor or
administrator and the court may appoint guardian ad litem for the minor heirs. (Emphasis
supplied)

Under the express terms of Section 17, in case of death of a party, and upon proper notice, it is
the duty of the court to order the legal representative or heir of the deceased to appear for the
deceased. In the instant case, it is true that the trial court, after receiving an informal notice of
death by the mere notation in the envelopes, failed to order the appearance of the legal
representative or heir of the deceased. There was no court order for deceased’s legal
representative or heir to appear, nor did any such legal representative ever appear in court to be
substituted for the deceased. Neither did the respondent ever procure the appointment of such
legal representative, nor did the heirs ever ask to be substituted.

It appears that Eliseo Saligumba, Sr. died on 18 February 1984 while Valeria Saligumba died on
2 February 1985. No motion for the substitution of the spouses was filed nor an order issued for
the substitution of the deceased spouses Saligumbas in Civil Case No. 2570. Atty. Miralles and
petitioner Eliseo Saligumba, Jr., despite notices sent to them to appear, never confirmed the death
of Eliseo Saligumba, Sr. and Valeria Saligumba. The record is bereft of any evidence proving the
death of the spouses, except the mere notations in the envelopes enclosing the trial court’s orders
which were returned unserved.

Section 17 is explicit that the duty of the court to order the legal representative or heir to appear
arises only "upon proper notice." The notation "Party-Deceased" on the unserved notices could
not be the "proper notice" contemplated by the rule. As the trial court could not be expected to
know or take judicial notice of the death of a party without the proper manifestation from counsel,
the trial court was well within its jurisdiction to proceed as it did with the case. Moreover, there is
no showing that the court’s proceedings were tainted with irregularities.18

Likewise, the plaintiff or his attorney or representative could not be expected to know of the death
of the defendant if the attorney for the deceased defendant did not notify the plaintiff or his attorney
of such death as required by the rules.19 The judge cannot be blamed for sending copies of the
orders and notices to defendants spouses in the absence of proof of death or manifestation to
that effect from counsel.20

Section 16, Rule 3 of the Revised Rules of Court likewise expressly provides:

345
 SEC. 16. Duty of attorney upon death, incapacity or incompetency of party. - Whenever a
party to a pending case dies, becomes incapacitated or incompetent, it shall be the duty
of his attorney to inform the court promptly of such death, incapacity or incompetency, and
to give the name and residence of his executor, administrator, guardian or other legal
representative.

It is the duty of counsel for the deceased to inform the court of the death of his client. The failure
of counsel to comply with his duty under Section 16 to

inform the court of the death of his client and the non-substitution of such party will not invalidate
the proceedings and the judgment thereon if the action survives the death of such party. The
decision rendered shall bind the party’s successor-in-interest.21

The rules operate on the presumption that the attorney for the deceased party is in a better
position than the attorney for the adverse party to know about the death of his client and to inform
the court of the name and address of his legal representative.22

Atty. Miralles continued to represent the deceased spouses even after the latter’s demise. Acting
on their behalf, Atty. Miralles even asked for postponement of the hearings and did not even
confirm the death of his clients nor his appointment as Municipal Circuit Trial Court judge. These
clearly negate petitioners’ contention that Atty. Miralles ceased to be spouses Saligumbas’
counsel.

Atty. Miralles still remained the counsel of the spouses Saligumbas despite the alleged
appointment as judge. Records show that when Civil Case No. 2570 was called for trial on 25
October 1984, Atty. Miralles appeared and moved for a postponement. The 25 October 1984
Order reads:

ORDER

Upon petition of Judge Miralles who is still the counsel on record of this case and who is
held responsible for anything that will happen in this case, postpone the hearing of this
case to JANUARY 25, 1985 AT 8:30 in the morning. x x x23

The trial court issued an Order dated 1 June 1984 directing the defendants to secure the services
of another counsel. This order was sent to Eliseo Saligumba, Sr. by registered mail but the same
was returned with the notation "Party-Deceased" while the notice to Valeria Saligumba was
returned with the notation "Party in Manila."24 Eliseo Saligumba, Sr. died on 18 February 1984.
When Atty. Miralles appeared in court on 25 October 1984, he did not affirm nor inform the court
of the death of his client. There was no formal substitution. The trial court issued an order resetting
the hearing to 25 January 1985 and directed that a copy of the order be furnished petitioner Eliseo
Saligumba, Jr. at COA, PNB, Manila by registered mail.25 When the case was called on 25
January 1985, Atty. Miralles sought for another postponement on the ground that his client was
sick and under medical treatment in Manila.26 Again, there was no manifestation from counsel
about the death of Eliseo Saligumba, Sr. The trial court issued an Order dated 25 January 1985
setting the reception of evidence for the defendants on 3, 4, and 5 June 1985. A copy of this order
was sent to Eliseo Saligumba, Jr. by registered mail. Nonetheless, as the trial court in Civil Case
No. 5288 declared, the non-substitution of Eliseo Saligumba, Sr. did not have any legal
significance as the land subject of Civil Case No. 2570 was the exclusive property of Valeria
Saligumba who inherited it from her deceased parents.

This notwithstanding, when Valeria Saligumba died on 2 February 1985, Atty. Miralles again did
not inform the trial court of the death of Valeria Saligumba. There was no formal substitution nor

346
submission of proof of death of Valeria Saligumba. Atty. Miralles was remiss in his duty under
Section 16, Rule 3 of the Revised Rules of Court. The counsel of record is obligated to protect his
client’s interest until he is released from his professional relationship with his client. For its part,
the court could recognize no other representation on behalf of the client except such counsel of
record until a formal substitution of attorney is effected.27

An attorney must make an application to the court to withdraw as counsel, for the relation does
not terminate formally until there is a withdrawal of record; at least, so far as the opposite party is
concerned, the relation otherwise continues until the end of the litigation.28 Unless properly
relieved, the counsel is responsible for the conduct of the case.29 Until his withdrawal shall have
been approved, the lawyer remains counsel of record who is expected by his client as well as by
the court to do what the interests of his client require. He must still appear on the date of hearing
for the attorney-client relation does not terminate formally until there is a withdrawal of record.30

Petitioners should have questioned immediately the validity of the proceedings absent any formal
substitution. Yet, despite the court’s alleged lack of jurisdiction over the persons of petitioners,
petitioners never bothered to challenge the same, and in fact allowed the proceedings to go on
until the trial court rendered its decision. There was no motion for reconsideration, appeal or even
an action to annul the judgment in Civil Case No. 2570. Petitioners themselves could not feign
ignorance of the case since during the pendency of Civil Case No. 2570, petitioner Ernesto
Saligumba, son of the deceased spouses, was among the persons present during the delimitation
of the land in question before the Commissioner held on 5 November 1977. 31 Petitioner Eliseo
Saligumba, Jr. was likewise furnished a copy of the trial court’s orders and notices. It was only
the Answer filed by petitioner Generoso Saligumba in Civil Case No. 5288 that confirmed the
dates when the spouses Saligumbas died and named the latter’s children. Consequently, Atty.
Miralles was responsible for the conduct of the case since he had not been properly relieved as
counsel of record. His acts bind his clients and the latter’s successors-in-interest.

In the present case for revival of judgment, the other petitioners have not shown much interest in
the case. Petitioners Eliseo Saligumba, Jr. and Eduardo Saligumba were declared in default for
failure to file their answer. Petitioner Ernesto Saligumba was out of the country working as a
seaman. Only petitioner Generoso Saligumba filed an Answer to the complaint. The petition filed
in this Court was signed only by petitioner Generoso Saligumba as someone signed on behalf of
petitioner Ernesto Saligumba without the latter’s authority to do so.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 24 May 2000 of the
Regional Trial Court, Branch 5, Kalibo, Aklan in Civil Case No. 5288. Costs against petitioners.

SO ORDERED

347