Вы находитесь на странице: 1из 69

[1999V140] VIVENCIO M. RUIZ, EMILIO D. CASTELLANES and BLAS A. MIRANDA, petitioners, vs.

THE COURT OF APPEALS, and PEDRO V. GARCIA, as represented by his legal representative, MA. LUISA G. MAGPAYO, respondents.1999 Feb 253rd DivisionG.R. No. 116909D E C I S I O N PURISIMA, J.: Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking review of the 26 November 1993 Decision1 [Annex "B," Petition; Rollo, pp. 36-42.] and 02 September 1994 Resolution2 [Annex "A," Petition; Rollo, p. 34.] of the Court of Appeals3 [Seventeenth Division. Composed of Justices Alfredo L. Benipayo (Chairman), Ricardo P. Galvez (ponente) and Eubulo G. Verzola (member)] in CA-G.R. CV No. 34360. The late Pedro V. Garcia was a businessman with substantial shareholdings in V. C. Ponce Co., Inc. consisting of shares of stock and real properties. Sometime in 1977, an internal conflict developed and besieged the company, engendering suits between respondent Garcia and V.C. Ponce Co., Inc. over the former's funds and assets. On March 10, 1977, respondent Pedro V. Garcia engaged the legal services of herein petitioners, Attys. Vivencio M. Ruiz and Emilio D. Castellanes, and an Agreement denominated as a Contract of Retainership4 [Annex "A ," CA Records, pp. 51-52.] was executed by them, the pertinent portion of which, reads: " CONTRACT OF RETAINERSHIP I, PEDRO V. GARCIA, of legal age, amrried to Remedios T. Garcia and residing at #100 Adelita Chioco St., Phase II, B.F. Homes, Paraaque, Metro Manila, do hereby declare and certify that I have engaged and retained, as I do hereby retain and engage, the services of Atty. V. M. RUIZ and his associate, E.D. CASTELLANES as my counsel to handle, protect and prosecute all cases involving my rights and interests and that of my family in the 370,000 shares of stocks which we own in the V. C. Ponce Co., Inc., especially the case I have filed against Vicente C. Ponce before the Securities and Exchange Commission (SEC Case No. 001451, Series of 1977), all other related and allied cases, both civil and criminal, which may be assigned to and accepted by him or which have been specifically endorsed to him and now pending before the courts and other venues. Xxx xxx xxx and IN CONSIDERATION of the services of the said attorney, I do hereby assign and transfer to him, his heirs, executors and assigns, forever, fifteen (15%) percent of all my/our shares of stock aforesaid, fully paid, evidenced by Certificate of Stock Nos. 003, 010, and 004, issued by the Corporation in our respective names x x x and of all the benefits and dividends due but not declared and paid on said shares from 1963 up to the execution of this retainership, including any/all monies and assets due us and other recoverables, for me and my family, and, in addition, I further agree to pay the said attorney a yearly retainership fee of P24,000.00 per annum in twelve (12) equal monthly payments of P2,000.00 each, payable on or before the 5th of every ensuing month starting April 1977.

Accordingly, the petitioners handled Civil Case Nos. 14297 and 17713 which were consolidated before Branch 13 of the Court of First Instance in Pasig, Rizal. Civil Case No. Pq-6596 was before Branch 29, of the Court of First Instance in Pasay City. On July 22, 1982, Pablo V. Garcia unilaterally terminated the said Contract of Retainership on the alleged ground that the petitioners, his lawyers, failed to settle amicably his (Garcia) differences with V. C. Ponce Co., Inc. Petitioners were paid attorney's fees up to the month of July, 1982. Thereafter, the petitioners Ruiz and Castellanes manifested their withdrawal as counsel for Pedro V. Garcia and moved that their attorney's lien be put on record,5 [Annex "E," CA Record, p. 24.] in the cases involved. Such motion was granted by the trial court. On February 9, 1984, petitioners Ruiz and Castellanes brought their action "For Collection of Sum of Money and for Specific Performance", docketed as Civil Case No. 6465 before Branch 140, of the Regional Trial Court in Makati City. On September 27, 1990, while the said case was pending before the said lower court of origin, Pedro V. Garcia died. And so, on October 4, 1990, after notifying the trial court of the demise of their client, counsel moved for the dismissal of the case, invoking Section 21, Rule 3 of the Rules of Court.6 [Rollo, p. 19; 1964 Rules of Court.] On February 8, 1991, the lower court issued an Order dismissing petitioners' complaint, stating that: " x x x the Court is of the opinion and so holds that the present action is one for recovery of money or interest in whatever recovery the deceased defendant may obtain in cases for which the plaintiff's services were contracted; and that plaintiff's client, the herein defendant, died before final judgment in this case, hence, Section 21 of Rule 3 of the Rules of Court applies ." On appeal, the Court of Appeals handed down its challenged Decision, disposing, thus: "WHEREFORE, the Order appealed from is herby MODIFIED to read, as follows: 'In view of the foregoing, the motion to dismiss and the supplemental motion are hereby granted. Civil Case No. 6364 is hereby DISMISSED in accordance with Section 21, Rule 3 of the Rules of Court, and the notice of lis pendens annotated in T.C.T. No. 64567 is hereby ordered cancelled. No pronouncement as to cost." With the denial of their motion for reconsideration, petitioners found their way to this Court via the present Petition; theorizing, that: I. RESPONDENT COURT ERRED IN FINDING THAT THE INSTANT CASE FOR RECOVERY OF ATTORNEY'S PROFESSIONAL FEES WHICH HAD NOT BEEN ADJUDICATED BY FINAL PRONOUNCEMENT IS ABATED BY THE DEATH OF THE DEFENDANT-CLIENT AND SHOULD THEREFORE BE DISMISSED IN ACCORDANCE WITH SECTION 21, RULE 3 OF THE RULES OF COURT.

II. RESPONDENT COURT ERRED IN NOT TAKING JUDICIAL NOTICE OF THE DECISION OF THE THEN INTERMEDIATE APPELLATE COURT IN AC-G.R. NO. SP-05291 FINDING THE INSTANT CASE ONE FOR RECOVERY OF LAND OR AN INTEREST THEREIN; III. RESPONDENT COURT ERRED IN FINDING THAT THE INSTANT CASE IS ONE "TO COMPEL THE CLIENTDEFENDANT TO RECOGNIZE FOREMOST THE EXISTENCE OF THE ATTORNEY-CLIENT RELATIONSHIP AFTER IT WAS SEVERRED AND AS A CONSEQUENCE, INCIDENTALLY CLAIM PAYMENT OF THEIR PROFESSIONAL FEES. The pivot of inquiry here is: Whether or not the case at bar has survived the death of the private respondent, Pedro V. Garcia. It is petitioners' theory that the action they brought below was, among others, for the enforcement of their charging lien in Civil Case Nos. 14297 and 17713, and Civil Case No. Pq-6596; which involved a claim over the real properties litigated upon, and therefore, an action which survived the death of their client, Pedro V. Garcia. Section 21, Rule 3 of the Rules of Court7 [1964 Rules of Court.] provides: "Where claims does not survive - When the action is for recovery of money, debt or interest thereon, and the defendant dies before final judgment in the Court of First Instance, it shall be dismissed to be prosecuted in the manner especially provided in these rules. To begin with, the aforequoted provision of law was modified by the enactment of the 1997 Civil Procedure, Section 20, Rule 3 of which, reads: " When the action is for recovery of money arising from contract, express or implied, and the defendant dies before final entry of final judgment in the court in which the action was pending at the time of such death, it shall not be dismissed but shall be allowed to continue until entry of final judgment. A favorable judgment obtained by the plaintiff therein shall be enforced in the manner especially provided in these Rules for prosecuting claims against the estate of a deceased person. It is a fundamental rule in legal hermeneutics that "statutes regulating the procedure of the courts will be construed as applicable to actions pending and undetermined at the time of the passage,"8 [Atlas vs. Court of Appeals, 201 SCRA 51.] Considering that the case under scrutiny was passed upon by the lower courts under the old rule, it follows that the old rule governs. Under the plain language of Section 21, Rule 3 of B.P. 129, it is beyond cavil that "if the defendant dies before the Court of First Instance or the Regional Trial Court has rendered a judgment, the action is dismissed and the plaintiff is required to file a money claim against the estate of the deceased. But if the defendant dies after the said court has rendered a judgment and pending appeal, the action is not

dismissed and the deceased defendant is substituted by his executor or administrator or legal heirs."9 [Paredes vs. Moya, 61 SCRA 526.] To determine whether the action survives or not, the Court ruling in Bonilla vs. Barcena (71 SCRA 491) comes to the fore, thus: "The question as to whether an action survives or not depends on the nature of the action and the damage sued for (Iron Gate Bank vs. Brady, 184 U.S. 665, 22 SCT, 46 L.ed 739). In the cause of action which survive, the wrong complained affects primarily and principally property and property rights, the injuries to the person being merely incidental, while in the causes of action which do not survive, the injury complained of is to the person, the property and rights of property affected being incidental." The core of petitioners' argument is that action should not be dismissed since their complaint involves not just monetary claim but also real properties, as well.. Petitioners' contention is untenable. While they maintain that what they are claiming include real properties, their Complaint is captioned as "For Collection of Money and for Specific Performance." Obviously, the petitioners themselves, who are lawyers, believed that their cause of action against the private respondent is in the nature of actio in personam. "Actio in personam is a personal action seeking redress against a particular person. Personal actions are such whereby a man claims a debt, or personal duty, or damages in lieu thereof."10 [R.S. Vasan (Ed.), Latin Words and Phrases for Lawyers.] In the present case, petitioners seek to recover attorney's fees from private respondent for professional services they rendered to the latter. Attorney's fee is basically a compensation.11 [7 Am Jur 2d, "Attorneys At Law," 327, p. 340, citing Central R. & Banking Co. vs. Petters, 113 US 116.] In its ordinary sense, "the term (compensation) applies not only to salaries, but to compensation by fees for specific service." 12 [Kuenzle & Streiff Inc. vs. Commissioner of Internal Revenue, 120 Phil. 1099.] Viewed in proper perspective, an action to recover attorney's fees is basically a monetary claim, which under Section 21, Rule 3 of B.P. 129 is an action that does not survive. Such is the fate of Civil Case No. 6465. Petitioners theorize that the inclusion of real properties as part of the attorney's fees private respondent owe them, converted the action into one that survives or at the very least, split the action into one that did not survive, with respect to the monetary obligation, and which survived, with respect to the real properties of the deceased. In Harden vs. Harden, 20 SCRA 706, the Court ruled that an action for the satisfaction of attorney's fees is founded on a personal obligation which does not survive the death of the defendant before adjudication.13 [Climaco vs. Siy Uy, 19 SCRA 858.] As enunciated in Bonila, the litmus test in determining what action survives and what does not depends on the nature of the action and not on the object or kind of property sought to be recovered.

All things studiedly considered, we are of the opinion, and, so hold, that the respondent Court of Appeals erred not in affirming the decision of the court a quo. WHEREFORE, the Petition is hereby DENIED; and the decision of the Court of Appeals in CA-G.R. CV No. 34360 AFFIRMED in toto. No pronouncement as to costs. SO ORDERED. Romero (Chairman), Panganiban, and Gonzaga-Reyes, JJ., concur. Vitug, J., on official business abroad. [1999V468] SPOUSES AUGUSTO HONTIVEROS and MARIA HONTIVEROS, petitioners vs. REGIONAL TRIAL COURT, Branch 25, Iloilo City and SPOUSES GREGORIO HONTIVEROS and TEODORA AYSON, respondents.1999 Jun 292nd DivisionG.R. No. 125465D E C I S I O N MENDOZA, J.: On December 3, 1990, petitioners, the spouses Augusto and Maria Hontiveros, filed a complaint for damages against private respondents Gregorio Hontiveros and Teodora Ayson before the Regional Trial Court of Iloilo City, Branch 25, where it was docketed as Civil Case No. 19504. In said complaint, petitioners alleged that they are the owners of a parcel of land, in the town of Jamindan, Province of Capiz, as shown by OCT No. 0-2124, issued pursuant to the decision of the Intermediate Appellate Court, dated April 12, 1984, which modified the decision of the Court of First Instance of Capiz, dated January 23, 1975, in a land registration case1 [Docketed as Land Registration Case No. N-581-25, LRC Rec. No. 288.] filed by private respondent Gregorio Hontiveros; that petitioners were deprived of income from the land as a result of the filing of the land registration case; that such income consisted of rentals from tenants of the land in the amount of P66,000.00 per year from 1968 to 1987, and P595,000.00 per year thereafter; and that private respondents filed the land registration case and withheld possession of the land from petitioners in bad faith.2 [See Amended Complaint; Petition, Annex A; Rollo, pp. 28-30.] In their answer, private respondents denied that they were married and alleged that private respondent Hontiveros was a widower while private respondent Ayson was single. They denied that they had deprived petitioners of possession of and income from the land. On the contrary, they alleged that possession of the property in question had already been transferred to petitioners on August 7, 1985, by virtue of a writ of possession, dated July 18, 1985, issued by the clerk of court of the Regional Trial Court of Capiz, Mambusao, the return thereof having been received by petitioners counsel; that since then, petitioners have been directly receiving rentals from the tenants of the land; that the complaint failed to state a cause of action since it did not allege that earnest efforts towards a compromise had been made, considering that petitioner Augusto Hontiveros and private respondent Gregorio Hontiveros are brothers; that the decision of the Intermediate Appellate Court in Land Registration Case No. N-581-25 was null and void since it was based upon a ground which was not passed upon by the trial court; that petitioners claim for damages was barred by prescription with respect to claims before 1984; that there were no rentals due since private respondent Hontiveros was a possessor in good faith and for value;

and that private respondent Ayson had nothing to do with the case as she was not married to private respondent Gregorio Hontiveros and did not have any proprietary interest in the subject property. Private respondents prayed for the dismissal of the complaint and for an order against petitioners to pay damages to private respondents by way of counterclaim, as well as reconveyance of the subject land to private respondents.3 [See Amended Answer; Petition, Annex B; Rollo, pp. 31-35.] On May 16, 1991, petitioners filed an Amended Complaint to insert therein an allegation that "earnest efforts towards a compromise have been made between the parties but the same were unsuccessful." In due time, private respondents filed an Answer to Amended Complaint with Counterclaim, in which they denied, among other things, that earnest efforts had been made to reach a compromise but the parties were unsuccessful. On July 19, 1995, petitioners moved for a judgment on the pleadings on the ground that private respondents answer did not tender an issue or that it otherwise admitted the material allegations of the complaint.4 [Petition, Annex C; Rollo, pp. 36-46.] Private respondents opposed the motion alleging that they had denied petitioners claims and thus tendered certain issues of fact which could only be resolved after trial.5 [Petition, Annex H.] On November 23, 1995, the trial court denied petitioners motion. At the same time, however, it dismissed the case on the ground that the complaint was not verified as required by Art. 151 of the Family Code and, therefore, it did not believe that earnest efforts had been made to arrive at a compromise. The order of the trial court reads:6 [Id., Annex E.] The Court, after an assessment of the diverging views and arguments presented by both parties, is of the opinion and so holds that judgment on the pleadings is inappropriate not only for the fact that the defendants in their answer, particularly in its paragraph 3 to the amended complaint, specifically denied the claim of damages against them, but also because of the ruling in De Cruz vs. Cruz, G.R. No. 27759, April 17, 1970 (32 SCRA 307), citing Rili vs. Chunaco, 98 Phil. 505, which ruled that the party claiming damages must satisfactorily prove the amount thereof and that though the rule is that failure to specifically deny the allegations in the complaint or counter-claim is deemed an admission of said allegations, there is however an exception to it, that is, that when the allegations refer to the amount of damages, the allegations must still be proved. This ruling is in accord with the provision of Section 1, Rule 9 of the Rules of Court. That while the plaintiffs in their amended complaint allege that earnest efforts towards a compromise with the defendants were made, the fact is that their complaint was not verified as provided in Article 151 of the Family Code. Besides, it is not believed that there were indeed earnest efforts made to patch up and/or reconcile the two feuding brothers, Gregorio and Augusto, both surnamed Hontiveros. The submission of the plaintiffs that, assuming no such earnest efforts were made, the same is not necessary or jurisdictional in the light of the ruling in Rufino Magbaleta, et al., petitioners, vs. Hon. Arsenio M. Gonong, et al., respondents, No. L-44903, April 22, 1977, is, to the mind of this Court, not

applicable to the case at bar for the fact is the rationale in that case is not present in the instant case considering these salient points: a) Teodora Ayson, the alleged wife of defendant Gregorio Hontiveros and allegedly not a member of the Hontiveros Family, is not shown to be really the wife of Gregorio, a fact which Gregorio also denied in their verified answer to the amended complaint; b) Teodora Ayson has not been shown to have acquired any proprietary right or interest in the land that was litigated by Gregorio and Augusto, unlike in the cited case of Magbaleta where it was shown that a stranger to the family acquired certain right; c) In the decision rendered by the appellate court no mention was made at all of the name of Teodora Ayson as part-awardee of Lot 37 that was adjudged to Gregorio other than himself who was therein described as a widower. Moreover, Teodora was never mentioned in said decision, nor in the amended complaint and in the amended motion for judgment on the pleadings that she ever took any part in the act or transaction that gave rise to the damages allegedly suffered by the plaintiffs for which they now claim some compensation. WHEREFORE, in the light of all the foregoing premises, the Court orders, as it hereby orders, the dismissal of this case with cost against the plaintiffs. SO ORDERED. Petitioners moved for a reconsideration of the order of dismissal, but their motion was denied.7 [Id., Annex F.] Hence, this petition for review on certiorari. Petitioners contend: I. THE REGIONAL TRIAL COURT PALPABLY ERRED IN DISMISSING THE COMPLAINT ON THE GROUND THAT IT DOES NOT ALLEGE UNDER OATH THAT EARNEST EFFORTS TOWARD A COMPROMISE WERE MADE PRIOR TO THE FILING THEREOF AS REQUIRED BY ARTICLE 151 OF THE FAMILY CODE. II. THE REGIONAL TRIAL COURT PALPABLY ERRED IN NOT DENYING THE MOTION FOR JUDGMENT ON THE PLEADINGS AND ORDERING A TRIAL ON THE MERITS. Private respondents raise a preliminary question. They argue that petitioners should have brought this case on appeal to the Court of Appeals since the order of the trial court judge was actually a decision on the merits. On the other hand, even if petition for certiorari were the proper remedy, they contend that the petition is defective because the judge of the trial court has not been impleaded as a respondent.8 [Comment/Answer, pp. 1-2; Rollo, pp. 60-61.] Private respondents contention is without merit. The petition in this case was filed pursuant to Rule 45 of the Rules of Court. As explained in Atlas Consolidated Mining and Development Corporation v. Court of Appeals:9 [201 SCRA 51, 58-59 (1991)] Under Section 5, subparagraph (2)(e), Article VIII of the 1987 Constitution, the Supreme Court is vested with the power to review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the

Rules of Court may provide, final judgments and orders of lower courts in all cases in which only an error or question of law is involved. A similar provision is contained in Section 17, fourth paragraph, subparagraph (4) of the Judiciary Act of 1948, as amended by Republic Act No. 5440. And, in such cases where only questions of law are involved, Section 25 of the Interim Rules and Guidelines implementing Batas Pambansa Blg. 129, in conjunction with Section 3 of Republic Act No. 5440, provides that the appeal to the Supreme Court shall be taken by petition for certiorari which shall be governed by Rule 45 of the Rules of Court. The rule, therefore, is that direct appeals to this Court from the trial court on questions of law have to be through the filing of a petition for review on certiorari. It has been held that: x x x when a CFI (RTC) adjudicates a case in the exercise of its original jurisdiction, the correct mode of elevating the judgment to the Court of Appeals is by ordinary appeal, or appeal by writ of error, involving merely the filing of a notice of appeal - except only if the appeal is taken in special proceedings and other cases wherein multiple appeals are allowed under the law, in which even the filing of a record on appeal is additionally required. Of course, when the appeal would involve purely questions of law or any of the other cases (except criminal cases as stated hereunder) specified in Section 5(2), Article X of the Constitution, it should be taken to the Supreme Court by petition for review on certiorari in accordance with Rules 42 and 45 of the Rules of Court. By way of implementation of the aforestated provisions of law, this Court issued on March 9, 1990 Circular No. 2-90, paragraph 2 of which provides: 2. Appeals from Regional Courts to the Supreme Court. Except in criminal cases where the penalty imposed is life imprisonment or reclusion perpetua, judgments of regional trial courts may be appealed to the Supreme Court only by petition for review on certiorari in accordance with Rule 45 of the Rules of Court in relation to Section 17 of the Judiciary Act of 1948, as amended, this being the clear intendment of the provision of the Interim Rules that (a)ppeals to the Supreme Court shall be taken by petition for certiorari which shall be governed by Rule 45 of the Rules of Court. Under the foregoing considerations, therefore, the inescapable conclusion is that herein petitioner adopted the correct mode of appeal in G.R. No. 88354 by filing with this Court a petition to review on certiorari the decision of the Regional Trail Court of Pasig in Civil Case No. 25528 and raising therein purely questions of law. In Meneses v. Court of Appeals, it was held:10 [237 SCRA 484, 491-492 (1994)] It must also be stressed that the trial courts order of 5 June 1992 dismissing the petitioners complaint was, whether it was right or wrong, a final order because it had put an end to the particular matter resolved, or settled definitely the matter therein disposed of and left nothing more to be done by the trial court except the execution of the order. It is a firmly settled rule that the remedy against such order is the remedy of appeal and not certiorari. That appeal may be solely on questions of law, in which case it may be taken only to this Court; or on questions of fact and law, in which case the appeal should be

brought to the Court of Appeals. Pursuant to Murillo v. Consul, the appeal to this Court should be by petition for review on certiorari in accordance with Rule 45 of the Rules of Court. As private respondents themselves admit, the order of November 23, 1995 is a final order from which an appeal can be taken. It is final in the sense that it disposes of the pending action before the court and puts an end to the litigation so that nothing more was left for the trial court to do.11 [Allied Free Workers Union v. Judge Estipona, 113 Phil. 748 (1961)] Furthermore, as the questions raised are questions of law, petition for review on certiorari is the proper mode of appeal. These questions are: (1) whether after denying petitioners motion for judgment on the pleadings, the trial court could dismiss their complaint motu proprio for failure to comply with Art. 151 of the Family Code which provides that no suit between members of the same family shall prosper unless it appears from the complaint, which must be verified, that earnest efforts towards a compromise have been made but the same have failed; and (2) whether Art. 151 applies to this case. These questions do not require an examination of the probative value of evidence presented and the truth or falsehood of facts asserted which questions of fact would entail.12 [See Roman Catholic Archbishop of Manila v. Court of Appeals, 258 SCRA 195, 199 (1996)] On the other hand, petitioners contend that the trial court erred in dismissing the complaint when no motion to that effect was made by any of the parties. The} point out that, in opposing the motion for judgment on the pleadings, private respondents did not seek the dismissal of the case but only the denial of petitioners motion. Indeed, what private respondents asked was that trial be held on the merits. Of course, there are instances when the trial court may order the dismissal of the case even without a motion to that effect filed by any of the parties. In Baja v. Macandog,13 [158 SCRA 391, 396-397 (1986)] this Court mentioned these cases, to wit: The court cannot dismiss a case motu proprio without violating the plaintiffs right to be heard, except in the following instances: if the plaintiff fails to appear at the time of the trial; if he fails to prosecute his action for an unreasonable length of time; or if he fails to comply with the rules or any order of the court; or if the court finds that it has no jurisdiction over the subject matter of the suit. However, none of these exceptions appears in this case. Moreover, the trial court itself found that "judgment on the pleadings is inappropriate not only for the fact that [private respondents] in their answer . . . specifically denied the claim of damages against them, but also because of the [rule] . . . that the party claiming damages must satisfactorily prove the amount thereof. . . ." Necessarily, a trial must be held. Rule 19 of the Rules of Court provides:14 [Now Rule 34 of the 1997 Rules of Civil Procedure.] SECTION 1. Judgment on the pleadings. Where an answer fails to tender an issue, or otherwise admits the material allegation of the adverse partys pleading, the court may, on motion of the party, direct

judgment on such pleading. But in actions for annulment of marriage or for legal separation the material facts alleged in the complaint shall always be proved. Under the rules, if there is no controverted matter in the case after the answer is filed, the trial court has the discretion to grant a motion for judgment on the pleadings filed by a party.15 [1 V. J. Francisco, The Revised Rules of Court in the Philippines 1033 (1973)] Where there are actual issues raised in the answer, such as one involving damages, which require the presentation of evidence and assessment thereof by the trial court, it is improper for the judge to render judgment based on the pleadings alone.16 [Rocamora v. RTC, Cebu (Branch VIII), 167 SCRA 615 (1988); 1 M. V. Moran, Comment on the Rules of Court 538 (1967)] In this case, aside from the amount of damages, the following factual issues have to be resolved, namely, (1) private respondent Teodora Aysons participation and/or liability, if any, to petitioners and (2) the nature, extent, and duration of private respondents possession of the subject property. The trial court, therefore, correctly denied petitioners motion for judgment on the pleadings. However, the trial court erred in dismissing petitioners complaint on the ground that, although it alleged that earnest efforts had been made toward the settlement of the case but they proved futile, the complaint was not verified for which reason the trial court could not believe the veracity of the allegation. The absence of the verification required in Art. 151 does not affect the jurisdiction of the court over the subject matter of the complaint. The verification is merely a formal requirement intended to secure an assurance that matters which are alleged are true and correct. If the court doubted the veracity of the allegations regarding efforts made to settle the case among members of the same family, it could simply have ordered petitioners to verify them. As this Court has already ruled, the court may simply order the correction of unverified pleadings or act on it and waive strict compliance with the rules in order that the ends of justice may be served.17 [See Vda. de Gabriel v. Court of Appeals, 264 SCRA 137 (1996); Sy v. Habicon-Garayblas, 228 SCRA 644 (1993); Buenaventura v. Halili, 149 SCRA 22 (1987)] Otherwise, mere suspicion or doubt on the part of the trial court as to the truth of the allegation that earnest efforts had been made toward a compromise but the parties efforts proved unsuccessful is not a ground for the dismissal of an action. Only if it is later shown that such efforts had not really been exerted would the court be justified in dismissing the action. Thus, Art. 151 provides: No suit between members of the same family shall prosper unless it should appear from the verified complaint or petition that earnest efforts toward a compromise have been made, but that the same have failed. It if is shown that no such efforts were in fact made, the case must be dismissed. This rule shall not apply to cases which may not be the subject of compromise under the Civil Code. Moreover, as petitioners contend, Art. 151 of the Family Code does not apply in this case since the suit is not exclusively among family members. Citing several cases18 [Magbaleta v. Gonong, 76 SCRA 511 (1977); Gayon v. Gayon, 36 SCRA 104 (1970); Mendez v. Eugenia, 80 SCRA 82 (1977); Gonzales v. Lopez, 160 SCRA 346 (1988); Guerrero v. RTC, Ilocos Norte, Br. XVI, 229 SCRA 274 (1994)] decided by this Court, petitioners claim that whenever a stranger is a party in a case involving family members, the requisite

showing of earnest efforts to compromise is no longer mandatory. They argue that since private respondent Ayson is admittedly a stranger to the Hontiveros family, the case is not covered by the requirements of Art. 151 of the Family Code. We agree with petitioners. The inclusion of private respondent Ayson as defendant and petitioner Maria Hontiveros as plaintiff takes the case out of the ambit of Art. 151 of the Family Code. Under this provision, the phrase "members of the same family" refers to the husband and wife, parents and children, ascendants and descendants, and brothers and sisters, whether full or half-blood.19 [Family Code, Art. 150.] As this Court held in Guerrero v. RTC, Ilocos Norte, Br. XVI:20 [229 SCRA 274, 278 (1994)] As early as two decades ago, we already ruled in Gayon v. Gayon that the enumeration of "brothers and sisters" as members of the same family does not comprehend "sisters-in-law." In that case, then Chief Justice Concepcion emphasized that "sisters-in-law" (hence, also "brothers-in-law") are not listed under Art. 217 of the New Civil Code as members of the same family. Since Art. 150 of the Family Code repeats essentially the same enumeration of "members of the family," we find no reason to alter existing jurisprudence on the mater. Consequently, the court a quo erred in ruling that petitioner Guerrero, being a brother-in-law of private respondent Hernando, was required to exert earnest efforts towards a compromise before filing the present suit. Religious relationship and relationship by affinity are not given any legal effect in this jurisdiction.21 [1 A. M. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 504 (1990)] Consequently, private respondent Ayson, who is described in the complaint as the spouse of respondent Hontiveros, and petitioner Maria Hontiveros, who is admittedly the spouse of petitioner Augusto Hontiveros, are considered strangers to the Hontiveros family, for purposes of Art. 151. Petitioners finally question the constitutionality of Art. 151 of the Family Code on the ground that it in effect amends the Rules of Court. This, according to them, cannot be done since the Constitution reserves in favor of the Supreme Court the power to promulgate rules of pleadings and procedure. Considering the conclusion we have reached in this case, however, it is unnecessary for present purposes to pass upon this question. Courts do not pass upon constitutional questions unless they are the very lis mota of the case. WHEREFORE, the petition is GRANTED and the Order, dated November 23, 1995 of the Regional Trial Court of Iloilo City, Branch 25 is SET ASIDE and the case is remanded to the trial court for further proceedings not inconsistent with this decision. SO ORDERED. Bellosillo (Chairman), Puno, Quisumbing, and Buena, JJ., concur. [1999V829] REPUBLIC OF THE PHILIPPINES, represented by the SECRETARY OF AGRICULTURE, petitioner, vs. THE HON. COURT OF APPEALS, HON. VIVENCIO A. BANTUGAN, Presiding Judge of the

Regional Trial Court, Brach 55, Alaminos, Pangasinan, and HEIRS OF ZENAIDA BUSTRIA-TIGNO, represented by CAMILO TIGNO, respondents.1999 Sep 302nd DivisionG.R. No. 122269D E C I S I O N MENDOZA, J.: For review is the decision1 [Per Associate Justice Eduardo G. Montenegro and concurred in by Associate Justices Jorge S. Imperial and Jose C. De La Rama.] of the Court of Appeals, dated October 4, 1995, in CAG.R. SP No. 34013, dismissing a petition filed by the Republic of the Philippines for the annulment of the decision of the Regional Trial Court of Alaminos, Pangasinan, which declared private respondents to be the absolute owners of a piece of land in Barangay Malacapas, Dasol, Pangasinan. The government, as petitioner, prays that the aforesaid decision of the trial court rendered in Civil Case No. A-1759, be annulled. The facts are stated in the following portion of the decision of the Court of Appeals: Sometime in 1957, one Matias Bustamante filed with the then CFI of Pangasinan an application for registration under Act No. 496, as amended, of a tract of land containing an area of 880,000 square meters, more or less, situated in Barangay Malacapas, Dasol, Pangasinan. Both the Director of Forestry and the Director of Fisheries filed oppositions to the aforecited application, alleging among others, that 'said parcel of land, with the exception of 97,525 square meters, is a part of the Timber Land Block "A" Land Classification Project 44, which is converted into fish ponds.' Isidro Bustria [private respondents' predecessor-in-interest] and Julian Bustria, also opposed the said application for the land registration, alleging that they 'have in the year 1943 occupied in good faith their respective portions having a total area of fifty (50) hectares, more or less x x x converted their respective portions into fish ponds x x x and actually possessed and occupied their respective portions x x x exclusively against all persons, except the Director of Forestry & Director of Fishery.' After trial, the lower court rendered a Decision in favor of applicant Bustamante. On appeal to this Honorable Court, docketed as CA-G.R. No. 30058-R, it was found that 783, 275 square meters of the land applied for were accretions added to applicant Bustamante's riceland of 9.7525 hectares, and that said accretion was caused by the sea on the southward portion of said riceland. This Honorable Court then ruled: This being so, the said accretion belongs - not to the riparian owner - but the State. All lands thrown up by the sea and formed upon the shores, belong to he national domain and are for public use, in accordance with the provisions of the Law on Waters of August 3, 1866 (Insular Government vs. Aldecoa, 19 Phil. 505) (p. 20, Decision, November 16, 1967). Thus, modifying the judgment of the lower court, this Honorable Court rendered a Decicision on November 16, 1967, disposing: IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby modified so that only 9.7525 of the land applied for is hereby adjudicated and ordered to be registered in the name of the applicant, the remaining area being hereby declared land of the public domain belonging to the Republic of the

Philippines, without prejudice to whatever rights oppositors Isidro Bustria and Julian Bustria may have acquired over portions of the area thus declared as land of the public domain, with costs against applicant. SO ORDERED. When brought up on certiorari to the Supreme Court, the foregoing Judgment was affirmed in toto in the Resolution in G.R. No. L-18605 dated February 29, 1968. It is relevant to state at this point that the parcel of land that is presently the subject of the dispute in the instant case, Lot No. 7764, CAD 624-D (Portion) [Psu-155696, Lot 3 (Portion)], forms part of the above-mentioned parcel of land declared by this Honorable Court as belonging to he public domain, classified/zonified land available for fispond development, per L.C. Map No. 3175, approved on June 24, 1984, under administrative Order No. 4-1829 (Annex 'D', Petition). The subject lot contains an area of 49,999 square meters, more or less. This lot has been leased to Mr. Porfirio Morado by the [Republic of the Philippines], represented by the Secretary of Agriculture, for a period of twenty-five (25) years, or up to December 31, 2013, under Fishpond Lease Agreement No. 5132, dated August 17, 1989 (Annex 'E', Petition). On July 6, 1988, however, the late Zenaida Bustria [daughter of Isidro Bustria] filed a complaint against Porfirio Morado in the Regional Trial Court of Alaminos, Pangasinan, Branch 55, for ownership and possession over the lot in question [docketed as Civil Case No. A-1759]. Herein petitioner, the Republic of the Philippines, was not made a party to that suit. In her complaint, Zenaida Bustria claimed absolute ownership and quiet and peaceful possession of several lots under PSU-155696 surveyed in the name of her father, Isidro Bustria. She further asserted that said Porfirio Morado maliciously applied for a fishpond permit with the Bureau of Fisheries and Aquatic Resources over Lot 3 thereof (the subject lot), well-knowing that said lot had always been occupied, possessed and worked by her and her predecessors-in-interest. Porfirio Morado denied the allegations in the complaint, claiming that the lot in question is part of the public domain which he developed and converted into a fishpond. Due, however, to Porfirio Morado's and his counsel's failure to appear at the pre-trial and subsequent court hearings, the trial court subsequently declared Porfirio Morado 'as in default.' On December 17, 1991, respondent Judge rendered a decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered: (a) Declaring the plaintiff as the exclusive and absolute owner of the land in question stated in paragraph 4 of the Complaint and entitled to the exclusive and quiet possession of the said land; and (b) Ordering the defendant to pay the plaintiff the amount of P15,000.00 as attorney's fees and the sum of P500.00 per day of hearing of the counsel, plus costs.

(Annex 'A', Petition) On January 23, 1992, Porfirio Morado filed a Petition for Relief from Judgment which was denied on July 21, 1992 for lack of merit. On July 8, 1992, a writ of execution was issued, and it was implemented by Sheriffs Manuel O. de Asis and Sheriff Cesar A. Gines. Spouses Porfirio Morado and Juliana Morado thereafter filed with this Honorable Court a Petition for Certiorari with Writ of Preliminary Injuction, docketed as CA-G.R. No. 28932. In a Resolution dated December 11, 1992, the Petition was denied for lack of merit. The related Motion for Reconsideration was denied in the Resolution dated February 18, 1993. (Rollo, pp. 107-112) 2 [Rollo, pp. 27-30.] April 19, 1994, petitioner, invoking 9 of B.P. Blg. 129,3 [The Judiciary Reorganization Act of 1980.] filed with the Court of Appeals a petition for the annulment of the trial court's decision, dated December 17, 1991. Petitioner alleged that the land in question is within the classified/zonified alienable and disposable land for fishpond development, per L.C. Map No. 3175 approved on June 24, 1984, under Administrative Order No. 4-1829 and that since the land formed part of the public domain, the Bureau of Fisheries and Aquatic Resources (BFAR) has jurisdiction over its disposition in accordance with P.D. No. 704, 4. On October 4, 1995 the Court of Appeals rendered a decision dismissing the petition.4 [Rollo, p. 32.] Hence, this petition for review. The judgment rendered in a case may be annulled on any of the following grounds: (a) the judgment is void for want of jurisdiction or for lack of due process of law; or (b) it was obtained through extrinsic fraud.5 [Santiago v. Ceniza, 5 SCRA 494 (1962); Mercado v. Ubay, 187 SCRA 719 (1990); Ruiz v. Court of Appeals, 201 SCRA 577 (1991); Regidor v. Court of Appeals, 219 SCRA 530 (1993); Santos v. Court of Appeals, 224 SCRA 673 (1993); LapuLapu Development & Housing Corp. v. Risos, 261 SCRA 517 (1996).] The question in this case is whether the decision of the Regional Trial Court is void on any of these grounds. The preliminary question, however, is whether the government can bring such action even though it was not a party to the action in which the decision sought to be annulled was rendered. We shall deal with these questions in inverse order. First, is the question whether petitioner has personality to bring the action below. To begin with, an action to recover a parcel of land is in personam. As such, it is binding only between the parties thereto, as this Court explained in Ching v. Court of Appeals,6 [181 SCRA 9, 15-16 (1990).] viz: An action to redeem, or to recover title to or possession of, real property is not an action in rem or an action against the whole world, like a land registration proceeding or the probate of a will; it is an action in personam, so much so that a judgment therein is binding only upon the parties properly impleaded and duly heard or given an opportunity to be heard. Actions in personam and actions in rem differ in that the former are directed against specific persons and seek personal judgments, while the latter are directed against the thing or property or status of a person and seek judgments with respect thereto as

against the whole world. An action to recover a parcel of land is a real action but it is an action in personam, for it binds a particular individual only although it concerns the right to a tangible thing. The appellate court, holding that the proceedings before the trial court were in personam, ruled that since petitioner was not a party to Civil Case No. A-1759, it is not a real party-in-interest and, therefore, has no personality to bring the action for annulment of the judgment rendered in that case. The appellate court said: Private respondents are correct. Civil Case No. A-1759 was purely for "Ownership and Possession". The decision sought to be annulled is solely "between the private respondents [the Bustrias] and Porfirio Morado" (Rollo, p. 142.). Petitioner Republic was not a party in the case and is not bound by the judgment rendered therein. It is settled, a real party-in-interest is one who stands to be benefited or injured by the judgment in the suit (Salonga vs. Warner Barnes & Co., Ltd., 88 Phil. 128; University of the Philippines Board of Regents vs. Ligot-Telan, 227 SCRA 342; Tampingco vs. Intermediate Appellate Court, 207 SCRA 652; Republic vs. Sandiganbayan, 203 SCRA 310; Travelwide Associated Sales, Inc. vs. Court of appeals, 199 SCRA 205). Petitioner Republic not being a party, and the judgment not being in rem, it does not stand to be benefited or injured by the judgment sought. Petitioner Republic can on its own, and even without resorting to this petition for annulment of judgment, institute the proper action to assert its claim that the "subject lot is a land forming part of the public domain" (Rollo, p. 145). It need not seek the annulment of the subject judgment, in Civil Case No. A-1759 in which it was not a party and involves merely a question of ownership and possession between plaintiffs Zenaida B. Bustria and defendant Porfirio Morado and which decision is not binding on it, to be able to assert its claim or interest in the property. It is clear for this reason that petitioner is not a real party-in-interest (Section 2, Rule 3, Revised rules of Court).7 [Rollo, pp. 31-32.] The appellate court is in error. In Islamic Da'wah Council of the Phils. v. Court of Appeals,8 [178 SCRA 178 (1989).]8 this Court held that a party claiming ownership of a parcel of land which is the subject of foreclosure proceedings has a sufficient interest to bring an action for annulment of the judgment rendered in the foreclosure proceedings even though it was not a party in such proceedings. It was held: [A] person need not be a party to the judgment sought to be annulled. What is essential is that he can prove his allegation that the judgment was obtained by the use of fraud and collusion and he would be adversely affected thereby. In this present case it is true that the heirs of Araneta are not parties to the foreclosure case. Neither are they principally nor secondarily bound by the judgment rendered therein. However, in their petition filed with the Court of Appeals they alleged fraud and connivance perpetuated by and between the Da Silvas and the Council as would adversely affect them. This allegation, if fully subsantiated by preponderance of evidence, could be the basis for the annulment of Civil Case No. Q-43476.9 [Id., at 186.]

This ruling was reiterated in Top Management Programs Corp. v. Court of Appeals.10 [222 SCRA 763 (1993).] The next question is whether the Regional Trial Court had jurisdiction to declare the land in question to belong to private respondent. The government asserts that the lot is within the "classified/zonified alienable and disposable land for fishpond developent," hence, it is part of the public domain;11 [Rollo, pp. 13 and 61.] that under P.D. No. 704, 4, jurisdiction over its disposition is vested in the BFAR; that unlike agricultural land, public lands which are declared suitable for fishpond purposes may only be disposed of by way of license, concession, or lease; and that possession thereof, no matter how long, cannot ripen into private ownership.12 [Rollo, pp. 13 and 61.] On the other hand, private respondents do not deny that Isidro Bustria, to whom they trace their ownership, previously filed a fishpond application with the BFAR over the disputed land.13 [Rollo, pp. 66 and 86.] Neither do they deny that the disputed land formed part of the public domain. They insist, however, that P.D. No. 704 applies only to "lands suitable for fishpond purposes" while the land in dispute is already a "fully developed fishpond." They assert ownership of the subject lot through open and continuous possession of their predecessor-in-interest since the Second World War.14 [Rollo, p. 90.] We agree with petitioner. The State clearly stands to be adversely affected by the trial court's disposition of inalienable public land. The land involved in this case was classified as public land suitable for fishpond development.15 [Rollo, p. 61] In controversies involving the disposition of public land, the burden of overcoming the presumption of state ownership of lands of the public domain lies upon the private claimant.16 [Republic v. Register of Deeds of Quezon City, 244 SCRA 537 (1995).] Private respondents have not discharged this burden. The fact that the land in dispute was transformed into a "fully developed fishpond" does not mean that it has lost its character as one declared "suitable for fishpond purposes" under the decree. By applying for a fishpond permit with BFAR, Isidro Bautista admitted the character of the land as one suitable for fishpond development since the disposition of such lands is vested in the BFAR. Consequently, private respondents, as his successors-in-interests, are estopped from claiming otherwise. It is settled under the Public Land Law17 [C.A. No. 141, 48(b).] that alienable public land held by a possessor, personally or through his predecessor-in-interest, openly, continuously, and exclusively for 30 years is ipso jure converted to private property by the mere lapse of time.18 [Director of Land v. Bengzon, 152 SCRA 369 (1987); Director of Lands v. Court of Appeals, 158 SCRA 568 (1988); De Ocsio v. Court of Appeals, 170 SCRA 729 (1989); Director of Lands v. Iglesia Ni Kristo, 200 SCRA 606 (1991).] However, only public lands classified as agricultural19 [CONST., Art. XII, 3.] are alienable. Lands declared for fishery purposes are not alienable20 [CONST., Art. XII, 2; Presidential Decree No. 704, 23.] and their possession, no matter how long continued, cannot ripen into ownership. Since the disposition of lands declared suitable for fishpond purposes fall within the jurisdiction of the BFAR, in accordance with P.D. No 704, 4,21 [Jurisdiction of the Bureau. - The Bureau shall have

jurisdiction and responsibility in the management, conservation, development, protection, utilization and disposition of all fishery and aquatic resources of the country except municipal waters which shall be under the municipal or city government concerned: Provided, that fish pens and seaweed culture in municipal centers shall be under the jurisdiction of the Bureau: Provided, further, That all municipal or city ordinances and resolutions affecting fishing and fisheries and any disposition thereunder shall be submitted to the Secretary for appropriate action and shall have full force and affect only upon his approval. The Bureau shall also have the authority to regulate and supervise the production, capture and gathering of fish and fishery/aquatic products. The Bureau shall prepare and implement, upon approval of the Fishery Industry Development Council, a Fishery Industry Development Program.] the trial court's decision, dated December 17, 1991, is null and void. The trial court has no jurisdiction to make a disposition of inalienable public land. If, as claimed, Porfirio Morado secured a fishpond permit through fraud and misrepresentation, private respondent's sole recourse, if any, is to secure the annulment of the same before the BFAR and apply for a new one in their favor, provided that they are qualified therefor. What they did, however, was not only to bring their action in the wrong forum but to ask to be declared owners of the land in dispute. WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals, Ninth Division, in CAG.R. SP No. 34013, dated October 4, 1995, is REVERSED AND SET ASIDE. The decision of Regional Trial Court of Alaminos, Pangasinan, Branch 55, in Civil Case No. A-1759 is hereby declared NULL AND VOID. SO ORDERED. Bellosillo, J., (Chairman), Quisumbing, and Buena, JJ., concur. [1999R1180] REYNALDO T. COMETA and STATE INVESTMENT TRUST, INC., petitioners, vs. COURT OF APPEALS, HON. GEORGE MACLI-ING, in his capacity as Presiding Judge, Regional Trial Court, Quezon City, Branch 100, REYNALDO S. GUEVARRA and HONEYCOMB BUILDERS, INC., respondents.1999 Dec 292nd DivisionG.R. No. 124062R E S O L U T I O N MENDOZA, J.: Petitioners move for a reconsideration of the decision in this case. They contend (1) that the complaint and its annexes show that petitioners acted with probable cause and without malice in charging private respondent Reynaldo Guevarra with falsification of public documents, and (2) that the non-inclusion in the civil case for malicious prosecution of the government prosecutors who directed the filing in court of the criminal case shows the existence of probable cause and the absence of malice. Contending that the prosecution of private respondent Guevarra for falsification was grounded on probable cause, they cite our ruling in Martinez vs. United Finance Corporation,[1] where a plaintiff's complaint for malicious prosecution was dismissed upon showing that the same complaint contained the following allegations: (1) a preliminary investigation was conducted by the fiscal; (2) despite plaintiff's opposition, an information was filed by the fiscal; (3) plaintiff was acquitted of the offense charged.

On the other hand, private respondents argue in their Opposition to petitioners' motion for reconsideration that the absence of probable cause is sufficiently alleged in their complaint that petitioners' criminal action against private respondent Guevarra had no basis in fact and in law as well as by virtue of the trial court's dismissal of the criminal case for falsification of public documents on private respondent Guevarra's demurrer to the evidence. We have carefully considered the parties' arguments and now resolve to grant petitioners' motion for reconsideration. The facts are set forth at pages 1 to 6 of the decision in this case and are hereby incorporated into this resolution by reference. Since petitioners seek the dismissal of the complaint against them on the ground that it does not state a sufficient cause of action, the question for determination is whether, taking the facts alleged in the complaint and its annexes to be true, they constitute a cause of action, and not whether these allegations of facts are true.[2] As stated in our decision in this case, a complaint for malicious prosecution states a cause of action if it alleges the following: (1) that the defendant was himself the prosecutor or that at least the prosecution was instituted at his instance; (2) that the prosecution finally terminated in the acquittal of the plaintiff; (3) that in bringing the action the prosecutor acted without probable cause; and (4) that the prosecutor was actuated by malice, i.e. by improper and sinister motives.[3] Does the complaint in this case allege these as facts? The complaint alleges in relevant parts: 12. Sometime in 1989, while SIHI's appeal from the order of the lower court was still pending with the appellate courts, SIHI and Cometa filed a criminal case against Guevara for falsification of Public Documents which was docketed in the Office of the Provincial Fiscal of Makati, Metro Manila, entitled "State Investment House, Inc. vs. Reynaldo S. Guevara", I.S. No. 89-3747. The basis of the aforesaid case filed by the defendants against Guevara is a supposed Affidavit of Undertaking dated September 9, 1987 which had allegedly been submitted by the plaintiffs with the (HLURB) in connection with its application of a License to Sell its townhouse units in the RSG Condominium-Gueventville II. According to the defendants, the Affidavit of Undertaking is a forgery because the signature therein purporting to be that of Cometa is not Cometa's signature. 13. After the parties had submitted their respective Affidavits, the Office of the Makati Provincial Fiscal dismissed the case filed by the defendants against Guevara. Notwithstanding this, the defendants appealed to the Department of Justice and the latter reversed the dismissal of the case by the Makati Provincial Fiscal and ordered the filing of the corresponding information in court. Consequently, a criminal information was filed against Guevara in the Regional Trial Court of Makati, Metro Manila. The case was raffled to Branch 61 of the said court and docketed therein as Criminal Case No. 90-3018 entitled "People of the Philippines, Plaintiff, vs. Reynaldo s. Guevara, Accused". 14. Upon the filing of the information, a Warrant of Arrest was issued against Guevara. Guevara posted the necessary bail bond and the warrant for his arrest was lifted.

15. After Guevara had been arraigned and after he had entered a plea of not guilty, the prosecution represented by a private prosecutor hired by the defendants, presented its evidence against Guevara. The principal evidence submitted by the prosecution consists of the sworn testimony of Cometa to the effect that Guevara had submitted the forged document with the HLURB in connection with HBI's application for the issuance of a License to Sell the condominium units in the RSG CondominiumGueventville II. 16. After the prosecution had rested its case, Guevara filed a Motion to Dismiss on a Demurrer to the Evidence, contending that all the evidence submitted by the prosecution do not suffice to show that he had committed the crime for which he has been accused. 17. On March 26, 1992, the Regional Trial Court of Makati issued an order, granting Guevara's Motion to Dismiss on a Demurrer to the Evidence and ordered the dismissal of the criminal case for falsification of public documents against him. A copy of the said order is herewith attached and made an integral part hereof as Annex "A" 18. Based on the evidence presented by the defendants against Guevara in the aforesaid criminal case and based on the order of the Regional Trial Court of Makati dismissing the case against Guevara, it is clear that the defendants had maliciously prosecuted Guevara, to his and HBI's embarassment, damage and prejudice. The criminal case filed by the defendants against Guevara had absolutely no basis in fact and in law. Quite clearly, defendants had filed the aforesaid case with the sole intent of harassing and pressuring Guevara, in his capacity as Chairman of GIDC, to give in to their illicit and malicious desire to appropriate the remaining unsold properties of GIDC and/or to influence the appellate courts to decide in their favor, their appeal of the lower court's decision in the GIDC case. The first two requisites are sufficiently alleged in the complaint. We may also take as sufficiently pleaded the fourth requisite, i.e., malice. As stated in the original decision in this case, a general averment of malice is sufficient in view of Rule 8, 5 of the Rules of Civil Procedure. Accordingly, the allegation in par. 18 that petitioners filed the criminal case for the purpose of harassing and pressuring Guevarra, in his capacity as chairman of Guevent Industrial Development Corporation (GIDC), to give in to their illicit and malicious desire to appropriate the remaining unsold properties of the corporation, may be considered sufficient. The question, however, is whether the third requisite, i.e., that the prosecutor acted without probable cause, has been sufficiently alleged. To be sure, lack of probable cause is an element separate and distinct from that of malice. It follows, therefore, that one cannot be held liable in damages for maliciously instituting a prosecution where he acted with probable cause. Obviously, a determination that there was no probable cause cannot be made to rest solely on the fact that the trial court, acting on private respondent Guevarra's demurrer to evidence, dismissed the criminal prosecution, just as it cannot be made to turn on the fact that the Department of Justice reversed the fiscal's findings and ordered the criminal case against private respondent Guevarra to be filed in court. The first would transform all acquittals into veritable countersuits for malicious

prosecution. On the other hand, the second would result in the dismissal of all complaints for malicious prosecutions.[4] Accordingly, the inquiry should be whether sufficient facts are alleged showing that in bringing the criminal action, the defendant in the civil action for malicious prosecution acted without probable cause. This Court has ruled that for purposes of malicious prosecution, "probable cause" means "such facts and circumstances as would excite the belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted."[5] In this case, even if we consider the allegations in the complaint as true, as well as the order of the trial court annexed thereto, we do not find the same sufficient to establish the absence of probable cause. On the contrary, tested by the definition of what constitutes "probable cause," the prosecution evidence shows probable cause for believing that private respondent Guevarra was indeed responsible for the forgery of the Letter of Undertaking (Exh. N). As summarized by the trial court in its order of March 26, 1992, the evidence of the prosecution is as follows: To prove that the subject UNDERTAKING (Exhibit "N") is falsified, the prosecution presented the testimony of complaining witness REYNALDO COMETA to prove that as President of the STATE INVESTMENT he did not execute the document of undertaking and thus, the subject document (Exhibit "N") is falsified and his signature thereat is not his signature. To corroborate the testimony of COMETA, the NBI handwriting expert LUZVIMINDA C. SABADO, submitted the questioned Documents Report No. 278-688 dated 21 June 1988 to show that the signature above the name of COMETA in the subject undertaking (Exhibit "N") and the specimen signatures of COMETA WERE not written by one and the same person (Exhibit "Y"). To prove that accused falsified and/or caused the falsification of the subject undertaking (Exhibit "N"), the prosecution presented the records of the HOUSING BOARD which include the "Official Form" letterapplication (Exhibit "J") submitted by accused together with the required documents enumerated therein which supposedly included the undertaking to release mortgage. The testimony of a HOUSING BOARD official, Ms. Floredeliza Manuel was presented to testify as an official of the HOUSING BOARD the standard procedure is that the BOARD requires from applicants for authority such as that applied for by accused, the following requirements were quoted by the prosecution in page 5 of their OPPOSITION and reproduced hereunder: Q Can you recall some of the requirements? A Well, we require a memorandum of agreement between the HLURB, the bank, and a memorandum of agreement executed by the bank, the developer and the Owner and HLURB. We also require if the title is clean so we require an affidavit to the effect that it is free from any encumbrances and then we also require a bank because it is under escrow, so there is a trustee bank because all the money will be deposited in the bank. And if the property is mortgaged then we require an affidavit of undertaking from any banking or financing institution or if it is mortgaged with the private person then we also require an affidavit of undertaking from that person, sir. (TSN, 24 July 1991, pp. 6-7; emphasis added).

Q Now, you said that if the property covered by an application for a license to sell is mortgaged, your office required the submission of an affidavit of undertaking? A Yes, sir. Q If there is no affidavit of undertaking, what action is taken on the application? A We will not recommend that for approval, sir. (TSN, 24 July 1991, p. 13) The documentary evidence marked from Exhibits "A" to "EE" is mostly the corporate papers and titles of the GUEVENT and HONEYCOMB to prove that accused GUEVARRA is an incorporator, stockholder, director and officer of the said corporations except for Exhibits involving the subject documents to be segregated in the later findings. It is true that in dismissing the criminal case against private respondent, the trial court found that "there is neither direct nor circumstantial evidence to prove that accused is the author of this falsified document (Exh. N)" and for this reason ordered: WHEREFORE, premises above considered, for failure of the prosecution to establish a prima facie case against accused, the MOTION TO DISMISS is hereby GRANTED, and the charge against accused REYNALDO GUEVARRA for Falsification of Public Documents is hereby DISMISSED without pronouncement as to costs. According to the trial court, the circumstantial evidence presented by the prosecution did not add up to a prima facie case against the accused.[6] It adverted to the fact that the forged Letter of Undertaking was dated September 9, 1987, while private respondent Guevarra's application, with documents attached to it, was dated September 3, 1987. In this circumstance, the trial court thought it was not clear that the accused was responsible for sending the document dated September 9, 1987 and, therefore, the legal presumption that the possessor of a forged instrument is also the forger did not apply. Moreover, the trial court noted that the accused, through an affidavit, had represented to the Housing and Land Use Regulatory Board that the property, subject of the application, was unencumbered. Hence, there was no need for the accused to submit a letter of undertaking since such was required only if the property was mortgaged. For this reason, the trial court ruled that the evidence for the prosecution did not establish "a prima facie case against accused [private private respondent Reynaldo Guevarra]." However, prima facie evidence is different from probable cause. Prima facie evidence requires a degree or quantum of proof greater than probable cause. "[It] denotes evidence which, if unexplained or uncontradicted, is sufficient to sustain a prosecution or establish the facts, as to counterbalance the presumption of innocence and warrant the conviction of the accused."[7] On the other hand, probable cause for the filing of an information merely means "reasonable ground for belief in the existence of facts warranting the proceedings complained of, or an apparent state of facts found to exist upon reasonable inquiry which would induce a reasonably intelligent and prudent man to believe that the accused person has committed the crime."[8] What is needed to bring an action in court is simply probable cause, not prima

facie evidence.[9] In the terminology of the Rules of Criminal Procedure,[10] what is required for bringing a criminal action is only such evidence as is sufficient to "engender a well founded belief as to the facts of the commission of a crime and the respondent's probable guilt thereof." The finding of the trial court in the criminal case does not imply lack of probable cause in bringing the case. To the contrary, its findings, as shown above, clearly show that petitioners had reasonable ground to believe that private respondent Guevarra was responsible for the forged Letter of Undertaking (Exh. N) which was submitted to the HLURB in connection with the application of the Honeycomb Builders Inc. for a license to sell units at the RSG Condominium Guentville II Subdivision. It is noteworthy that in pars. 6 to 8 of their complaint, private respondents admitted that the properties were mortgaged to petitioner SITI. A letter of undertaking by the mortgagee was thus needed for the issuance of a license to sell to HBI. We, therefore, hold that the complaint in this case fails to state a cause of action against petitioners. WHEREFORE, petitioners' motion for reconsideration is GRANTED, the decision of the Court of Appeals is REVERSED, and the complaint against petitioners in Civil Case Q-93-15691 is DISMISSED for failure to state a cause of action. SO ORDERED.

[1999V854] SULPICIA VENTURA, petitioner, vs. HON. FRANCIS J. MILITANTE, in His Capacity as Presiding Judge, Regional Trial Court, 7th Judicial District, Branch XII, Cebu City; and JOHN UY, respondents.1999 Oct 51st DivisionG.R. No. 63145D E C I S I O N [The case was reraffled to the ponente on August 2, 1999.] PUNO, J.: This is a Petition for Certiorari assailing the Order1 [Annex "K" of the Petition, Rollo, p. 36.] of public respondent directing her to file an Answer to the Complaint for a Sum of Money with Damages filed by private respondent after denying her Motion to Dismiss.2 [Annex "B" of the Petition, Rollo, p. 16. Petitioner's Motion for Reconsideration was also denied.] There is no dispute as to the following relevant facts: Private respondent filed a Complaint for a Sum of Money and Damages against petitioner which reads: "REPUBLIC OF THE PHILIPPINES COURT OF FIRST INSTANCE OF CEBU 14th Judicial District BRANCH ____

MR. JOHN UY, Proprietor of Cebu Textar Auto Supply, Plaintiff, - versus - CIVIL CASE NO. R-21968 For: SUM OF MONEY AND DAMAGES ESTATE OF CARLOS NGO as represented by surviving spouse Ms. SULPICIA VENTURA, Defendant. Oo - - - - - - - - - - - - - - - - - - - - - - - -/// "COMPLAINT "PLAINTIFF, thru counsel, unto this Honorable Court, most respectfully states that: "1. He is of legal age, Filipino and proprietor of Cebu Textar Auto Supply whose postal address is at 177 Leon Kilat St., Cebu City, while the defendant is an estate of Carlos Ngo as represented by surviving spouse Ms. Sulpicia Ventura with residence and postal address at-Back [sic] of Chong Hua Hospital, Cebu City where summons and other processes of the Court could be effected; "2. During the lifetime of Carlos Ngo he was indebted with the plaintiff in the amount of P48,889.70 as evidenced by the hereto attached statement marked as Annexes A and A-1 which account was obtained by him for the benefit of his family; "3. Said obligation is already due and demandable and the defendant thru Ms. Ventura who is ostensibly taking care of the properties/estate of deceased Carlos Ngo, refused, failed and neglected and still continues to refuse, fail and neglect to pay despite repeated demands; "4. As a consequence of the refusal to pay the plaintiff was compelled to retain the services of counsel with whom he contracted to pay P10,000.00 as attorney's fees. Upon institution of this complaint, he has further incurred initial litigation expenditures in the sum of P4,000.00. "WHEREFORE, this Honorable Court is most respectfully prayed to render judgment for the plaintiff by"1. Ordering the defendant to pay the plaintiff the sum of P48,889.70 plus interest until the obligation is fully paid; "2. Ordering the defendant to pay the plaintiff the amount of P10,000.00 as attorney's fees plus P4,000.00 as reimbursement of the initial litigation expenditures. "FURTHER plaintiff prays for such other relief or remedy in accordance with law, justice and equity. "Cebu City, Philippines, March 29, 1982. "x x x"3 [Annex "A" of the Petition, Rollo, pp. 13-15.]

Petitioner moved to dismiss the foregoing complaint on the ground that "the estate of Carlos Ngo has no legal personality," the same being "neither a natural nor legal person in contemplation of law"4 [Annex "B" of the Petition, Rollo, p. 16.]. In his Opposition to Motion to Dismiss,5 [Annex "C" of the Petition, Rollo, pp. 17-18.] petitioner insisted that since "the money claim subject of this case actually represents the costs of automotive spare parts/replacements contracted by deceased Carlos Ngo during his lifetime for the benefit/business of the family x x x the conjugal partnership x x x shall be accountable for the payment thereof."6 [Annex "C" of the Petition, Rollo, p. 17.] Subsequently, private respondent's counsel manifested that he is poised to "amend the complaint in order to state the correct party defendant that he intends to sue in this case"7 [Annex "D", Rollo, p. 19.]. The public respondent gave private respondent fifteen (15) days to make the amendment. Petitioner filed a Motion for Reconsideration8 [Annex "E" of the Petition, Rollo, pp. 20-22.] of the order of public respondent permitting private respondent to amend his complaint. First, she argued that the action instituted by the private respondent to recover P48,889.70, representing the unpaid price of the automotive spare parts purchased by her deceased husband during his lifetime, is a money claim which, under Section 21, Rule 3 of the Revised Rules of Court, does not survive, the same having been filed after Carlos Ngo had already died. Second, she claimed that the public respondent never acquired jurisdiction over the subject matter of the case which, being an action to recover a sum of money from a deceased person, may only be heard by a probate court. Private respondent opposed the foregoing motion.9 [Annex "F" of the Petition, Rollo, pp. 26-27.] He insisted that petitioner, being the wife of the deceased Carlos Ngo, is liable to pay the obligation which benefited their family. Public respondent issued an Order giving private respondent twenty four (24) hours to file his amended complaint "so that the Court can determine for itself whether there is really a cause of action against the defendant who would be substituted to the Estate of Carlos Ngo," considering that "it would seem from the arguments of counsel for plaintiff x x x that the debt incurred by the deceased Carlong [sic] Ngo was in behalf of the conjugal partnership so that the wife of Carlos Ngo might be liable to pay the obligation".10 [Annex "G", Rollo, p. 28.] Private respondent then filed his Amended Complaint11 [Annex "H", Rollo, pp. 29-30.] with the new allegations underscored therein as follows: "REPUBLIC OF THE PHILIPPINES COURT OF FIRST INSTANCE OF CEBU 14th Judicial District BRANCH XII MR. JOHN UY, Proprietor of Cebu Textar Auto Supply, Plaintiff,

- versus - CIVIL CASE NO. R-21968 For: SUM OF MONEY AND MS. SULPICIA VENTURA, DAMAGES Defendant. Oo - - - - - - - - - - - - - - - - - - - - - - -x "AMENDED COMPLAINT "PLAINTIFF thru counsel, unto this Honorable Court most respectfully states that: "1. x x x "2. During the lifetime of Carlos Ngo he and his wife, the defendant herein are indebted with the plaintiff in the amount of P48,889.70 as evidenced by the hereto attached statement marked as Annexes A and A-1 which account was obtained for the benefit of their family and is being confirmed by their son Roy Ngo per his signature marked as Annex "A-2"; "3. x x x "4. For several times, the defendant had concealed herself in her house when the plaintiff's representative went to her residence to collect payment of the said account; "5. x x x "x x x."12 [Ibid.] Petitioner filed a Comment to Plaintiff's Amended Complaint.13 [Annex "I", Rollo, pp. 32-33.] She reiterated that whether the unsecured debt was contracted by her husband alone or as a charge against the conjugal partnership of gains, it cannot be denied that her husband was now deceased, the said debt does not survive him, the conjugal partnership of gains is terminated upon the death of one of the spouses, and the debts and charges against the conjugal partnership of gains may only be paid after an inventory is made in the appropriate testate or intestate proceeding. Private respondent filed a Rejoinder to Defendant's Comment.14 [Annex "J", Rollo, pp. 34-35.] He countered that the defendant in his amended complaint was now petitioner and that she was not deceased, hence the inapplicability of the legal rules on the abatement of money claims in case the defendant dies pending their prosecution. Public respondent issued the herein assailed order which reads as follows: "ORDER "This case is called today to deal on the motion for reconsideration of the order of this Court dated November 16, 1982 denying the motion of the defendant to dismiss the complaint.

"In its order of November 16, 1982, the Court in the interest of justice advised the plaintiff to make the proper amendment so that the proper party defendant may be impleaded considering that the motion to dismiss then was anchored on the ground that the estate of Carlos Ngo was not a natural nor juridical person, hence it could not be sued. On December 23, 1982, the plaintiff amended its complaint and this time the defendant is already Sulpicia Ventura. The defendant now argues that even the amended complaint would show that this is really a collection of a debt of the conjugal partnership of deceased Carlong [sic] Ngo and his wife. "Perusing the amended complaint, the Court finds that in Paragraph 2 the allegation states: "During the lifetime of Carlos Ngo, he and his wife, the defendant, are indebted with the plaintiff in the amount of P48,689.70, (sic) etc.," so that the indebtedness was incurred by Carlos Ngo and defendant Sulpicia Ventura and since Carlos Ngo is now dead that will not preclude the plaintiff from filing a case against the living defendant, Sulpicia Ventura. "WHEREFORE, the motion for reconsideration is hereby DENIED and the defendant may file her answer within fifteen (15) days from today. "IT IS SO ORDERED."15 [Annex "K", Rollo, p. 36.] Petitioner scurried to this Court praying that the foregoing order of the public respondent be set aside and the amended complaint of private respondent, ordered dismissed.16 [Rollo, p. 12.] We grant the petition. First. Sec. 1, Rule 3 of the Revised Rules of Court provided that "only natural or judicial persons, or entities authorized by law may be parties in a civil action". This was the rule in 1982 at the time that private respondent filed his complaint against petitioner. In 1997, the rules on civil procedure were revised, but Sec. 1, Rule 3 remained largely unaltered, except for the change of the word, "judicial" to "juridical". Parties may be either plaintiffs or defendants. The plaintiff in an action is the party complaining, and a proper party plaintiff is essential to confer jurisdiction on the court.17 [59 Am Jur 2d, Sec. 19, p. 407.] In order to maintain an action in a court of justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a person in law and possessed of a legal entity as either a natural or an artificial person, and no suit can be lawfully prosecuted save in the name of such a person.18 [Ibid.] The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes a judicial proceeding, to name the proper party defendant to his cause of action.19 [59 Am Jur 2d, Sec. 41, p. 438.] In a suit or proceeding in personam of an adversary character, the court can acquire no jurisdiction for the purpose of trial or judgment until a party defendant who actually or legally exists and is legally capable of being sued, is brought before it.20 [Id., Sec. 42, p. 439.] It has even been held that the question of the legal personality of a party defendant is a question of substance going to the jurisdiction of the court and not one of procedure.21 [Ibid.]

The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving spouse Ms. Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the ground that the defendant as named in the complaint had no legal personality. We agree. Neither a dead person nor his estate may be a party plaintiff in a court action. A deceased person does not have such legal entity as is necessary to bring action so much so that a motion to substitute cannot lie and should be denied by the court.22 [59 Am Jur 2d, Sec. 20, p. 407, citing Robertson v. Brown, 75 ND 109, 25 NW 2d 781.] An action begun by a decedent's estate cannot be said to have been begun by a legal person, since an estate is not a legal entity; such an action is a nullity and a motion to amend the party plaintiff will not likewise lie, there being nothing before the court to amend.23 [Id., p. 408, citing Estate of Schoeller v. Becker, 33 Conn Supp 79, 360 A2d 905.] Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent, a decedent does not have the capacity to be sued and may not be named a party defendant in a court action.24 [59 Am Jur 2d, Sec. 42, p. 440, citing Bricker v. Borah (5th Dist) 127III App 3d 722, 82 III Dec. 707, 469 NE2d 241; Jacobson v. Union Story Trust & Sav. Bank (Iowa) 338 NW2d 161; Cromwell v. Ripley, 11 Md App 173, 273 A2d 218; Chandler v. Dunlop, 311 Mass 1, 39 NE2d 969; Thompson v. Peck, 320 Pa 27, 181 A 597; Gillespie v. Johnson, 157 W Va 904, 209 SE 2d 143.] Second. It is clear that the original complaint of private respondent against the estate of Carlos Ngo was a suit against Carlos Ngo himself who was already dead at the time of the filing of said complaint. At that time, and this, private respondent admitted, no special proceeding to settle his estate had been filed in court. As such, the trial court did not acquire jurisdiction over either the deceased Carlos Ngo or his estate. To cure this fatal defect, private respondent amended his original complaint. In his amended complaint, private respondent deleted the estate of Carlos Ngo and named petitioner as the defendant. When petitioner, in her comment to the amended complaint, reasoned that the conjugal partnership of gains between her and Carlos Ngo was terminated upon the latter's death and that the debt which he contracted, assuming it was a charge against the conjugal property, could only be paid after an inventory is made in the appropriate testate or intestate proceeding, private respondent simply reiterated his demand that petitioner pay her husband's debt which, he insisted, redounded to the benefit of everyone in her family. It is true that amendments to pleadings are liberally allowed in furtherance of justice, in order that every case may so far as possible be determined on its real facts, and in order to speed the trial of causes or prevent the circuitry of action and unnecessary expense.25 [Regalado, Florenz D., Remedial Law Compendium, Volume One, 1997 edition, p. 181, citing Cese v. GSIS, 109 Phil. 306, 309 (1960).] But amendments cannot be allowed so as to confer jurisdiction upon a court that never acquired it in the first place.26 [Rosario and Untalan v. Carangdang, et al., 96 Phil. 845 (1955), cited in Campos Rueda Corporation v. Bautista, 6 SCRA 240, 244 (1962).] When it is evident that the court has no jurisdiction over the person and the subject matter and that the pleading is so fatally defective as not to be susceptible of amendment, or that to permit such amendment would radically alter the theory and the nature of the action, then the court should refuse the amendment of the defective pleading and order

the dismissal of the case.27 [Alvarez, et al. v. Commonwealth of the Phil., et al., 65 Phil. 302, 315-316 (1938).] Moreover, as correctly argued by petitioner, the conjugal partnership terminates upon the death of either spouse.28 [Art. 175, Civil Code; Art. 126, Family Code.] After the death of one of the spouses, in case it is necessary to sell any portion of the conjugal property in order to pay outstanding obligations of the partnership, such sale must be made in the manner and with the formalities established by the Rules of Court for the sale of the property of deceased persons.29 [Tolentino, Arturo M., Commentaries and Jurisprudence on the Civil Code of the Philippines, Volume One with the Family Code of the Philippines, 1990 edition, p. 463.] Where a complaint is brought against the surviving spouse for the recovery of an indebtedness chargeable against said conjugal property, any judgment obtained thereby is void.30 [Francisco, Vicente J., The Revised Rules of Court in the Philippines, Special Proceedings, Volume V-B, 1970 edition, p. 182, citing Calma v. Tanedo, 66 Phil. 594, 598 (1938).] The proper action should be in the form of a claim to be filed in the testate or intestate proceedings of the deceased spouse.31 [Tolentino, supra.] In many cases as in the instant one, even after the death of one of the spouses, there is no liquidation of the conjugal partnership. This does not mean, however, that the conjugal partnership continues.32 [Id., p. 466.]And private respondent cannot be said to have no remedy. Under Sec. 6, Rule 78 of the Revised Rules of Court, he may apply in court for letters of administration in his capacity as a principal creditor of the deceased Carlos Ngo if after thirty (30) days from his death, petitioner failed to apply for administration or request that administration be granted to some other person. WHEREFORE, the instant petition for certiorari is GRANTED. The Amended Complaint filed by private respondent is HEREBY DISMISSED. SO ORDERED. [1999V483] ESTER JANE VIRGINIA F. ALMORA and ALBERT F. ALMORA, petitioners, vs. HON. COURT OF APPEALS, ORLANDO PERALTA and RUDY PERALTA, respondents.1999 Jul 23rd DivisionG.R. No. 116151D E C I S I O N GONZAGA-REYES, J.: Before us for review on certiorari is the decision of respondent Court of Appeals in CA G.R. CV No. 28239, promulgated on June 6, 1994,1 [Penned by Justice Ramon Mabutas, Jr., with the concurrence of Justices Arturo B. Buena and Jainal D. Rasul.] which reversed the decision of the court a quo2 [Civil Case No. 533-R, Regional Trial Court of Baguio City, Branch 6, presided over by Judge Ruben C. Ayson.] and dismissed the complaint in an accion publiciana with damages filed by herein petitioners. Briefly, the antecedents of the case are: On February 13, 1985, petitioners filed a complaint against private respondents Orlando Peralta and Rudy Peralta with the Regional Trial Court in Baguio City. In their complaint, petitioners sought the recovery of possession of a parcel of land located in Abatan, Buguias, Benguet, with an area of about

830 square meters, which was occupied by herein private respondents.3 [Rollo, 51.] As found by the lower court, the disputed property is public land, such being a part of the Mount Data National Reservation Park, over which Ben Almora, the late father of petitioners, was granted an occupancy permit by the Bureau of Forestry, and over which Ben Almora and petitioners herein have consistently paid real property taxes since the propertys declaration in 1945 until 1987.4 *Ibid., 11, 52.+ As borne out by the evidence of plaintiffs-petitioners in the lower court, the land covered by the occupancy permit was subsequently divided into two lots, the southern portion of which was denominated as Lot A with an area of one hectare, and the northern portion of which was called Lot B, with an area of four hectares.5 [Ibid., 8. Office of the President Decision No. 1039, s. 1974 (see subsequent discussion) discloses that Ben Almora "filed an application for a special use permit of Lots A and B, which was granted under Permit No. 9143-F. In 1932, the permit was cancelled for the reason that the land is needed for forest protection purposes. In 1935, Almora was granted Private Camp Permit No. Cs-28-J for Lot A only with an area of 5,305 square meters. This permit, which expired in the same year (1935), was renewed under Pc-53 in 1948, covering the same lot (Lot A). Almora was never again permitted to occupy Lot B."] It is not controverted that on May 30, 1958, Ben Almora leased the disputed property and the building situated thereon in favor of Federico Peralta, the now deceased father of private respondents, as evidenced by a Contract of Lease, in which Ben Almora represented himself to be the "true and lawful owner" of the leased property,6 [Ibid., 8-10.] and in which Federico Peralta acknowledged the said true and lawful ownership of Ben Almora.7 [Ibid.] The Contract of Lease likewise contained a stipulation that if the lessee faithfully and continuously pays the monthly rentals for a period of three years, he will become the lawful and exclusive owner of the building subject of the lease, but excluding the lot which shall continue to be rented thereafter.8 [Ibid.] As presented in evidence by petitioners, Federico Peralta failed to pay the rentals as they fell due, thus prompting Ben Almora to file a case for unlawful detainer and recovery of unpaid rentals against Peralta with the Municipal Trial Court of Buguias, Benguet. The MTC ruled in favor of Almora, ordering Peralta to vacate the premises of the leased property and to pay the arrears in rentals. The MTC decision was affirmed by the defunct Court of First Instance of Baguio and Benguet on December 29, 1972, which decision on appeal became final and executory, no appeal having been interposed to the Court of Appeals or Supreme Court.9 [Ibid., 10.] Inspite of said decision, the Peraltas refused to vacate the premises of the disputed property; rather, they continued to occupy it even when the house of Federico Peralta standing thereon was burned down on January 14, 1971. When Federico Peralta died, his three children, namely, Orlando, Rodolfo and Milagros, built their respective houses on the lot and continued to occupy the same. Before his death, Ben Almora sold the land in question, covered by and forming part of the property declared under Tax Declaration No. 9577, together with his other lands, to his children, petitioners herein, through a Deed of Sale of Unregistered Lands dated August 1, 1981.10 [Ibid.] Private respondents did not dispute the fact of the lease between Ben Almora and their father, Federico Peralta, but contended that their father, along with the other lessees of Lots A and B, ceased to pay rentals upon learning that Ben Almora had no title to the lands he was leasing out, but was merely

issued an occupancy permit by the Bureau of Forestry.11 [Ibid., 10-11.] They also pointed out that the permit granted to Ben Almora embodied specific restrictions against the alienation or subletting of the subject property.12 [Ibid., 11.] On August 12, 1959, after refusing to pay rentals, Federico Peralta filed a Miscellaneous Sales Application of his own with the Bureau of Lands, over the portion of Lot A that he was occupying. The other lessees followed suit.13 [Ibid.] These conflicting claims to occupy and use the disputed lots reached the Secretary of Agriculture and Natural Resources (SANR) and the Office of the President for resolution. Per Decision No. 1039 dated July 18, 1974, series of 1974, the Office of the President decided in favor of Federico Peralta and the other lessees-applicants, upholding their right to also file applications for permits to occupy and use the respective portions occupied by them as against the claim of Ben Almora that he already owned the said properties by virtue of prescription, and directing that Almora and all the occupants of the land be allowed to continue their occupation thereof upon the issuance of occupancy permits by the Bureau of Forest Development.14 [Ibid., 12; Office of the President Decision No. 1039, s. 1974, 4.] On April 30, 1990, the Regional Trial Court in Baguio City rendered a decision in favor of plaintiffs, petitioners herein, in Civil Case No. 533-R ordering private respondents to vacate the premises of the property and to restore the possession thereof to petitioners, on the basis of Ben Almoras and plaintiffs actual physical possession and occupation of the property prior to defendants and the latters predecessor-in-interest, Federico Peralta. In upholding plaintiffs-petitioners claim, the court a quo stated: "Plaintiffs and their predecessor-in-interest Ben Almora entered, occupied, improved and possessed the land in question way back in 1945 whereas defendants and their predecessor-in-interest Federico Peralta took possession of the land in question only by May 30, 1958 when Federico Peralta leased the same from Ben Almora. The prior possession of plaintiffs and their predecessor-in-interest Ben Almora, therefore, antedates that of defendants by about 13 years. More, defendants entry and possession of the land in question was by virtue of a lease from plaintiffs and therefore cannot be said even as adverse possession at the inception. A lessee clearly cannot deny the ownership of his lessor (Tui vs. CA, 37 SCRA 99)."15 [Ibid., 13.] The RTC went on to stress that its decision is focused solely on the issue of who has prior possession of the land in question, and does not, nor is it meant to, impede on the jurisdiction of the Director of Lands to alienate, sell or dispose of public lands, such as the one in dispute, under the provisions of Commonwealth Act No. 141, or the Public Land Act, as amended.16 Ibid., 15.] It further held, citing Pitargue vs. Sorilla17 [92 Phil. 5.17] and Reynoso vs. Court of Appeals18 [170 SCRA 546.], that the fact that the Bureau of Lands has jurisdiction to alienate and dispose of public lands does not deprive regular courts, particularly the RTC, of the jurisdiction to determine who is in actual prior possession for the purpose of preventing breaches of the peace and disorder, and the same is not considered as interfering with the function of the Bureau of Lands.19 [Rollo, 14-15.] The Court of Appeals reversed the decision of the RTC, instead giving credence to the following arguments of defendants, private respondents herein:

1. Plaintiffs failed to establish their claim that they and their predecessor-in-interest are the lawful and absolute owners of the disputed land, in the light of the clear finding of the lower court and of the Office of the President that Ben Almora was merely granted an occupancy permit thereon, which permit "does not confer upon the permittee any right of alienation."20 [Ibid., 19-20.] The Court of Appeals also upheld the argument of private respondents that "considering xxx that (Federico Peralta) was prohibited to lease or alienate the same, it follows that he was guilty of bad faith in representing himself as the owner of the said land, and naturally as a necessary consequence, the said contract of lease can only be viewed as nothing but a null and void instrument from the beginning and without force and effect whatsoever insofar as the land is concerned. As a further consequence, the said deed of sale executed by Ben Almora in favor of the plaintiffs is likewise a nullity and without force and effect insofar as Lots A and B are concerned for the same reason that Ben Almora was not the real owner thereof xxx ."21 [Ibid., 20.] 2. The question of prior possession has already been resolved in the unlawful detainer case filed by Ben Almora against Federico Peralta in October 1960, which was decided in favor of Almora, and which decision was affirmed on appeal by the then Court of First Instance of Baguio and Benguet in Civil Case No. 1783, on December 29, 1972. As argued by private respondents, the decision in the earlier case would have been sufficient to oust the Peraltas from possession of the land had the said decision been implemented by way of a writ of execution within the prescribed period of five years from the date of its finality.22 [Ibid., 24-25; Sec. 6, Rule 39, Rules of Court.] However, Ben Almora did not avail of his right to have the decision executed accordingly; neither did he seek to have the judgment revived within the next five years following the lapse of the first five years.23 [Ibid., Id.] Resultantly, the claim is deemed to have been abandoned and Ben Almoras successors-in-interest cannot be allowed to recover the property through this belated accion publiciana for the reason that such is barred by res judicata. Private respondents further argued that the issue of lawful possession was likewise put to rest by the Decision of the Office of the President, which declared that " xxx the only just and equitable solution to this case is to allow (Ben) Almora and his brother and all the occupants of Lots A and B to continue their respective occupation of the same upon the issuance of the necessary permits by the Bureau of Forest Development. xxx xxx Ben Almora and his brother Galap Almora and the appelllants Cobcobo, Aquisio, Mangali, Garcia, (Federico) Peralta and Basilio and the Benguet Development Co., Inc. are hereby ordered to file their respective applications for the necessary permits for the use or occupation of the lots on which their houses or improvements are situated."24 [Decision of the Office of the President No. 1039, s. 1974, 4-5.] 3. Plaintiffs-petitioners are guilty of forum-shopping, for instituting numerous actions in various courts to recover possession of the disputed property. In addition to the unlawful detainer case abovediscussed which Ben Almora and plaintiffs failed to have executed, it was also Ben Almora who filed the petition with the Director of Forestry seeking the ejectment of Federico Peralta and the other lessees of the land in question, which petition triggered a thorough investigation that finally culminated in the Decision of the Office of the President No. 1039, s. 1974, rendered on July 15, 1974, and which has since

become final and executory.25 [Rollo, 26.] Yet another action was filed by Ben Almora in the Municipal Trial Court of Atok-Buguias, Benguet, entitled Ben Almora vs. Federico Peralta, Rudy Peralta, et. al., for forcible entry and unlawful detainer with preliminary prohibition and mandatory injunction.26 [Ibid.] The complaint was dismissed in an Order of Dismissal dated February 11, 1978, which order Ben Almora questioned on appeal to the Court of First Instance of Baguio and Benguet as Civil Case No. 378. The CFI, in turn, rendered a decision on April 18, 1979, affirming in toto the Order of Dismissal of the MTC.27 [Ibid.] It is the contention of herein private respondents that the case at bar, an accion publiciana instituted 27 years since the execution of the lease contract in 1958, and involving substantially the same parties, seeks to recover possession over the disputed property on the basis of the same claim of ownership and right of possession as has been asserted and ruled upon in the above-adverted cases. In its decision, the Court of Appeals also took note of the fact that petitioners herein failed to file their appellees brief in the said Court within the prescribed period, a matter which the CA treated as "(giving) rise to a presumption that the appellants brief bore the torch of truth --- and therefore should be given full faith and credence". The Court pointed out that this rule "rests on the universal principle of human conduct which leads us to repel an unfounded imputation of claim (Wheat vs. Croom, 7 Ala. 349)" and that "such principle (on tacit admission) also stands aloft under the canopy of Section 32, Rule 130 of the New Rules on Evidence."28 [Ibid., 18.] In this petition for review on certiorari, petitioners raise the following grounds: "1. The Hon. Court of Appeals seriously erred in not considering the evidence as to the ownership and lawful possession of petitioners predecessor-in-interest over the land in controversy; 2. The Hon. Court of Appeals committed a serious error in disregarding the uncontroverted evidence of the petitioners and taking as gospel truth all the arguments and misrepresentations of the private respondents herein; and 3. The Hon. Court of Appeals failed to consider in the rendition of its decision the evidence and the law applicable on the matter. In the course of this appeal, private respondents brought up several procedural matters which we summarize as follows: (1) the petition was filed out of time, resulting in this Courts failure to acquire jurisdiction and take cognizance of the appeal;29 [Ibid., 76; Comment of Private Respondents, 2, citing Gutierrez vs. Court of Appeals, G.R. No. L-25972, November 26, 1968; Roman Catholic Bishop of Tuguegarao vs. Director of Lands, 34 Phil. 623; Estateof Cordova vs. Albado, 34 Phil. 920; Miranda vs. Guanzon, 92 Phil. 168.] (2) no motion for reconsideration was filed in the Court of Appeals, thus depriving the said court of an opportunity to correct any errors as it may have made;30 [Ibid.] and (3) the petition raises questions of fact which are not the proper subject of review in a petition for review under Rule 45. The records bear that the decision of the Court of Appeals was received by petitioners on June 14, 1994, and that on June 29, 1994, petitioners filed a motion for extension of time with this Court, praying for an

additional 15 days within which to file a petition for review.31 [Ibid.] Inasmuch as this Petition was filed by registered mail on July 13, 1994, We find that the petition was filed with this Court in due time. Private respondents next contend that this Petition should not be given due course for failure of petitioners to file a motion for reconsideration of the decision of the Court of Appeals, thus depriving respondent court of the opportunity to correct on reconsideration such errors as it may have committed.32 [Ibid.] Rule 45, Section 1 of the Rules of Court, however, distinctly provides that "A party may appeal by certiorari from a judgment of the Court of Appeals, by filing with the Supreme Court a petition for certiorari within fifteen (15) days from notice of judgment, or of the denial of his motion for reconsideration filed in due time." The conjunctive "or" clearly indicates that the 15-day reglementary period for the filing of a petition for certiorari under Rule 45 commences either from notice of the questioned judgment or from notice of denial of the appellants motion for reconsideration.33 *In Refugia vs. Court of Appeals, 258 SCRA 347, if a motion for reconsideration is filed during the 15-day reglementary period, the losing party has only the remaining period within which to file a petition for review.] A prior motion for reconsideration is not indispensable for a petition for review on certiorari under Rule 45 to prosper. The reliance of private respondents in the cases cited in their Comment34 [Rollo, 76; Confederation of Citizens Labor Union (CCLU) vs. NLRC, 60 SCRA 450; Sy It vs. Tiangco, 4 SCRA 436; Del Pilar Transit, Inc. vs. Public Service Commission, 31 SCRA 372.] is unfounded, for all of these cases addressed petitions for certiorari grounded on grave abuse of discretion, or what is now known as special civil action of certiorari under Rule 65 of the Rules of Court. For such action to commence, the Rules require that the petitioner be left with "no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law."35 [Sec. 1, Rule 65, Rules of Court.] A motion for reconsideration of an assailed decision is deemed a plain and adequate remedy provided by law.36 [Solis vs. National Labor Relations Commission, 263 SCRA 629.] Where, under Rule 45, certiorari is resorted to as a mode of appeal, the indispensability of a motion for reconsideration is negated, and the party aggrieved may validly file a petition for review on certiorari with the Supreme Court within 15 days from notice of judgment of the Court of Appeals. Thirdly, in their assignment of errors, petitioners would have us appreciate and rule upon evidence of ownership and lawful possession of their predecessor-in-interest over the land in question which, allegedly, was disregarded by respondent court in the rendition of its decision. In other words, petitioners seek to involve us in a re-evaluation of the factual veracity and probative value of the evidence they submitted in the lower court, contrary to the dictates of Rule 45 that only questions of law may be raised and resolved on petition.37 [Sec. 2(2), Rule 45, Rules of Court; Engineering and Machinery Corporation vs. Court of Appeals, 252 SCRA 156.] Absent any whimsical or capricious exercise of judgment, and unless the lack of any basis for the conclusions made by the lower courts be amply demonstrated, the Supreme Court will not disturb such factual findings.38 [Taedo vs. Court of Appeals, 252 SCRA 80.] Be that as it may, We do not feel precluded from expressing our displeasure at petitioners action in raising for our review these questions of fact and charging respondent court of misappreciating the

evidence in the light of their failure to file an appellees brief with respondent court, which brief would have been the proper vehicle for presenting petitioners arguments. Neither did petitioners file a motion for reconsideration before assailing the decision of the respondent court on certiorari, a fact which, while not detrimental to this Petitions being given due course, is gravely indicative of petitioners disinterest in pursuing its case in the Court of Appeals, and of availing of all the remedies accorded them by law. For the alleged failure of respondent court to accord petitioners their desired relief, petitioners have only themselves to blame. Having set aside these procedural issues, We proceed to evaluate the merits of this Petition. Petitioners would have us reverse the decision of respondent court and affirm the ruling of the RTC of Baguio City, i.e., to restore possession of the property to plaintiffs-petitioners on the basis of prior possession thereof, and pending the Bureau of Lands determination as to who among the various applicants is entitled to the land. It is not controverted that the possession of plaintiffs-petitioners antedated that of private respondents by 13 years, their predecessor-in-interest, Ben Almora, having entered the land in question in 1945 while Federico Peralta leased the land from Ben Almora only in 1958. This leads us to the question: Do private respondents hold a better right of possession over the property than petitioners, who had prior possession thereof? We hold in the affirmative. A perusal of the entire records of the case shows that Federico Peralta was granted an occupancy permit over the disputed property by the Bureau of Forestry. In the Order denying Ben Almoras motion for reconsideration of Decision No. 1039, s. 1974, supra, the Office of the President declared: "But even assuming that the motion for reconsideration of Almora was filed within the reglamentary period, this Office still finds no compelling reason to disturb its decision. As regards the claim of Almora that he has acquired ownership over the disputed lots by virtue of his alleged possession thereof for more than thirty years, this Office maintains that in order to acquire a land by acquisitive prescription the possession and occupation must be in the concept of owner: open, continuous, exclusive and notorious. (Molina vs. De Bacud, L-20195, April 27, 1967, 19 SCRA 1956) The possession of the Almoras of the contested lots was not exclusive and was in fact interrupted by the adverse possessions of the other claimants who were similarly granted occupancy permits by the Bureau of forestry (now Bureau of Forest Development). mphasis supplied) In view of the foregoing, the instant motion for reconsideration is hereby denied."39 [Records of the Case, 45-46.] The granting of the occupancy permits was raised in the Answer dated June 3, 198540 [Ibid., 19.] and Memorandum dated August 15, 1985,41 [Ibid., 41-44; Memorandum (in support of motion to dismiss incident to preliminary hearing on the affirmative defenses), 1-4.] respectively, of defendants-private respondents filed in the RTC of Baguio City, and was not denied by plaintiffs-petitioners in their Reply

dated June 21, 1985,42 [Ibid., 25.42] also filed in the aforecited court, which acknowledged the granting of such permits but alleged that the same was done in unlawful collaboration with officers of the Bureau of Forest Development. Such granting of permits was also mentioned in the Decision of the RTC of Baguio City,43 [Rollo, 52.] and in the Decision of the Court of Appeals.44 [Ibid., 8.] The issuance of an occupancy permit to Federico Peralta as a claimant in the administrative case vested upon him and private respondents, as his successors-in-interest, possessory rights over the land in dispute to the exclusion of all others, except the State and such persons as may hold legal and equitable title under law. Such issuance also resulted in the dispossession of petitioners and the tacit cancellation of petitioners permit over the same land, to the extent of the property covered by the permit issued to Peralta, as the fact of possession cannot be recognized at the same time in two different persons.45 [Art. 538, Civil Code.] It is also not disputed that Federico Peralta filed a Miscellaneous Sales Application over the disputed property upon learning that such land, as he was then leasing from Ben Almora, was not owned by Almora. This Court has, time and again, recognized the possessory rights of a sales applicant over a public land before the approval of his application.46 [See Pitargue vs. Sorilla, 92 Phil. 5; Lequigan vs. Katalbas, 105 Phil. 645; Reynoso vs. Court of Appeals, 170 SCRA 546.] In Reynoso vs. Court of Appeals, 170 SCRA 546, citing Pitargue vs. Sorilla, 92 Phil. 5, We held that" xxx even pending the investigation of, and resolution on, an application by a bona fide occupant, xxx by the priority of (the occupants) application and record of his entry, he acquires a right to the possession of the public land he applied for against any other public land applicant, which right may be protected by the possessory action of forcible entry or by any other suitable remedy that our rules provide." As the present possessors of the property, by virtue of a permit to ocupy granted by the governmental authority vested with the power to issue the same, prior to the perfection of a sales application over the same property, private respondents possessory rights are preferred over anyone elses, and clearly surpass the claim of petitioners of prior possession, which has long since terminated. Neither may we accord credence to petitioners claim of ownership of the disputed land. Petitioners source this claim of ownership from Executive Order No. 180, dated May 10, 1956, and Executive Order No. 87, series of 1967, which grant to all Igorot vegetable farmers occupying farm lots within the Mount Data National Park Reservation and Central Cordillera Forest Reserve an opportunity to acquire the lots they are cultivating. Under the provisions of said Executive Orders, all interested and qualified persons shall file applications for grant of title in accordance with the Public Land Act and subject to the approval of a screening committee composed of government representatives.47 [See Executive Order No. 180, s. 1956; Secs. 1-3, Executive Order No. 87, s. 1967.] Firstly, recovery upon claim of ownership has no place in an accion publiciana. Where the object of the parties is to recover dominion over the property as owner, the appropriate action to file is an accion reinvindicatoria, and not a plenary action to recover possession as the case herein, which involves restitution of possession only, when the cause of dispossession is not among those covered by the

grounds for forcible entry and unlawful detainer, or when possession has been lost for more than one year and can no longer be maintained under Rule 70 of the Rules of Court.48 [Del Rosario vs. Celosia, 26 Phil. 404; Sec. 1, Rule 70, Rules of Court.] Secondly, and granting arguendo that this Court may lawfully pass upon the issue of ownership, there is no indication in the records that Ben Almora or petitioners filed the necessary application for grant of title over the disputed land. Plaintiffs-petitioners cannot possibly rely on acquisitive prescription as the means by which they obtained ownership over the land,49 [Under the provisions of Sec. 48(b) of Commonwealth Act No. 141, as amended, or the Public Land Act, public agricultural lands may be acquired through open, continuous, exclusive and notorious possession and occupation under a bona fide claim of acquisition of ownership.] as the Executive Orders clearly lay down a procedure for application for, and award of title to, properties in the Mount Data National Reservation Park. IN VIEW OF THE FOREGOING, the Petition is DENIED and the Decision of the Court of Appeals dismissing the Complaint in Civil No. 533-R is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. [1999V899] ALEXANDER G. ASUNCION, petitioner, vs. EDUARDO B. EVANGELISTA and COURT OF APPEALS, respondents.1999 Oct 131st DivisionG.R. No. 133491D E C I S I O N PUNO, J.: This is a petition for review of the Decision of the respondent Court of Appeals1 [CA-G.R. CV No. 49743.] rescinding the Memorandum of Agreement of the parties and assessing against the petitioner damages in the amount of P32,644,420.55. These are the relevant facts. Since 1970, private respondent has been operating a piggery on his landholdings in Barangay Loma de Gato, Marilao, Bulacan.2 [TSN dated July 24, 1987, p. 6.] Until 1980, he operated the piggery under the trade name Embassy Farms as a single proprietorship.3 [Id., p. 14.] In October 1981, private respondent, his wife, Epifania C. Evangelista, and three (3) others, namely, Angel L. Santos, Jr., Amando C. Martin and Teofilo J. Mesina, organized Embassy Farms, Inc. and registered it with the Securities and Exchange Commission.4 [Ibid., Articles of Incorporation of Embassy Farms, Inc. marked as Exh. "A" for Plaintiff and as Exh. "4-A" for Defendant.] Private respondent was the majority stockholder of the corporation, with ninety percent (90%) of the shares in his name. He also served as its president and chief executive officer. Its principal office was established at the piggery facility that had been existing on the landholdings of private respondent in Barangay Loma de Gato, Marilao, Bulacan, consisting of about 104,447 sq. m.5 [Articles of Incorporation, supra.] On September 9, 1980, private respondent borrowed five hundred thousand pesos (P500,000.00) from Paluwagan ng Bayan Savings and Loan Association to use as working capital for Embassy Farms. He

executed a real estate mortgage on three of his properties in Barangay Loma de Gato, Marilao, Bulacan as security for the loan.6 [Real Estate Mortgage marked as Exh. "18".] On November 4, 1981, private respondent mortgaged ten (10) titles more in favor of PAIC Savings and Mortgage Bank, formerly First Summa Savings and Mortgage Bank, as security for a loan he obtained from it in the amount of one million seven hundred twelve thousand pesos (P1,712,000.00).7 [Mortgage marked as Exh. "16".] On February 16, 1982, private respondent obtained another loan in the amount of eight hundred forty four thousand six hundred twenty five and seventy eight centavos (P844,625.78) from Mercator Finance Corporation. The loan was secured by a real estate mortgage8 [Mortgage marked as Exh. "17".] on five (5) other landholdings of private respondent, all situated in Bulacan. Private respondent obtained these personal loans to provide himself working capital to run the farm and sustain its operations. His aggregate debt exposure totaled three million fifty six thousand six hundred twenty five and seventy eight centavos (P3,056,625.78). Private respondent defaulted in his loan payments. Of the PAIC loan that should have been paid on an equal quarterly amortization basis for three (3) years from October 31, 1981, eight (8) quarterly amortizations totaling one million five hundred one thousand nine hundred eighty eight and eight centavos (P1,501,988.08) fell due by January 12, 1984. Against this overdue amount, only two hundred eighty thousand seven hundred forty eight and fifty one centavos (P280,748.51) was remitted by private respondent.9 [Letter dated September 12, 1984 signed by Emily R. Varua, Senior Vice President, Marketing Group, PAIC Savings & Mortgage Bank marked as Annex "H".] By June 1984, private respondent's aggregate debt had ballooned to almost six million pesos (P6,000,000.00)10 [The exact amount of P5,998,955.65 can be found on page 2 of the Memorandum of Agreement, marked as Exh. "15" for Defendant and as Exh. "C" for Plaintiff. This was confirmed by private respondent during the direct examination conducted by his counsel in this wise: "Q........I will call your attention to the second whereas clause of the Memorandum of Agreement x x x which reads: 'Whereas, Eduardo Evangelista has personal loans with the institution herein below enumerated, correspondingly, with the amount of indebtedness inclusive of interest up to June 30, 1984 and the total of which is P5,998,955.65.' Was that your indebtedness with these financial institutions x x x? "A........Yes, sir as far as I can remember that was the correct figure." (TSN dated July 24, 1987, p. 7)] in overdue principal payments, interests, penalties and other financial charges. On August 2, 1984, petitioner and private respondent executed a Memorandum of Agreement containing the following terms and conditions: "MEMORANDUM OF AGREEMENT KNOW ALL MEN BY THESE PRESENTS:

"This Memorandum of Agreement made and executed this ___ day of July, 1984, here in _______, Metro Manila, by and between "ALEXANDER G. ASUNCION, of legal age, Filipino, married to Perlita Asuncion, and resident of No. 7 A. Lake Street, San Juan, Metro Manila, hereinafter referred to as AGA; "- and "EDUARDO B. EVANGELISTA, of legal age, Filipino, married to Epifania C. Evangelista, and resident of No. 113 R. Terona Street, BF Homes, Paranaque, Metro Manila, hereinafter referred to as EBE. "WITNESSETH: "WHEREAS, EBE is the registered and absolute owner of nineteen (19) parcels of agricultural lands with an aggregate area of 104,447 square meters more or less, all situated in LOMA DE GATO, Marilao, Bulacan, hereinbelow enumerated by the covering certificates of title and the corresponding area as follows: "x x x "WHEREAS, EBE is likewise the controlling interest of 90% to 100% of the paid-in equity of EMBASSY FARMS, INC., which corporation is the registered owner of a piggery, situated in the above enumerated real properties, with stocks, equipment and facilities as shown in the inventory thereof as of July 4, 1984, hereto attached as Schedule "A" and made an integral part hereof; "WHEREAS, EBE has personal loans with the institutions herein below enumerated correspondingly with the amount of indebtedness, inclusive of interest, up to June 30, 1984: "a) PAIC BANK . . . . . . . . "b) PALUWAGAN SAVINGS BANK ...1. CB-IBRD .......- P558,110.44 ...2. Comm'l loan ...- P835,863.76 1,393,974.20 "c) MERCATOR FINANCE CORP. TOTAL 1,846,012.96 P5,998,955.65 P2,758,968.49

"WHEREAS, EBE has offered to AGA and the latter has accepted the transfer to him by EBE, of the whole of EBE's controlling interest in EMBASSY FARMS, INC. as well as all of his above enumerated parcels of real property together with any and all improvements thereon subject to the following terms and conditions: "NOW, THEREFORE, for and in consideration of the foregoing, the parties herein agree as follows:

"1) That EBE hereby cedes, transfers and conveys unto AGA all of his above enumerated parcels of real property together with any and all improvements thereon, and in connection with such transfer, hereby undertakes to execute, sign and deliver any and all documents appropriate for the same, either in favor of AGA or his nominees; "2) That EBE hereby likewise cedes, transfers and conveys in a manner absolute and irrevocable any and all of his shares [of] stocks in the aforesaid EMBASSY FARMS, INC., outstanding [in] his name in the books of incorporation, as well as any and all rights, interests and participation in the said corporation by reason of such shares [of] stocks or otherwise, EBE shall, within a reasonable time, from signing hereof, cause to be so transferred to AGA or his nominee such shares of stocks in said corporation as are held on record by 3rd parties, until the total of such shares so transferred shall constitute 90% of the paid-in equity of said corporation; "3) That upon signing hereof, AGA shall pay EBE the sum of P1,000,000.00 and the further amount of P500,000.00 within a period of 90 days from and after such signing; "4) That AGA shall upon signing hereof, make available, as and for operating expenses of the farm or piggery the sum of P300,000.00 to be followed by amount of P300,000.00 within 30 days from such signing and 60 days thereafter, the amount of P150,000.00; "5) AGA shall assume all of the aforestated obligations of EBE with the institution aforementioned and in connection therewith, he shall make available for payment to PALUWAGAN SAVINGS BANK, upon signing of this 'MEMORANDUM OF AGREEMENT', the amount of P100,000.00, representing 50% of the amount required by the said bank for the restructuring of the aforestated loan of EBE therewith; "6) That also upon signing of these presents, AGA shall make available for payment to MERCATOR FINANCE CORPORATION the amount of P100,000.00 representing 50% of the amount required by the latter for restructuring of the aforesaid obligation to it of EBE; "7) That upon signing of this agreement, EBE shall make available for payment to PALUWAGAN SAVINGS BANK the amount of P100,000.00 and the same amount to MERCATOR FINANCE CORPORATION corresponding to the other halves of the aforestated amount called for by the said institution in the preceding paragraphs 5 and 6 hereof; "8) That upon signing hereof, EBE shall cause the turn-over to AGA of the effective control and management of the aforesaid piggery, from EMBASSY FARMS, over which EBE hereby warrants to have effective control up to and until such turnover to AGA; "9) EBE hereby warrants not only free and marketable titles to the shares (of) stock of EMBASSY FARMS, INC. that he transfers hereby but also effective control, amounting to ownership of the other shares of stock of such corporation which are outstanding in the books of said corporation in the name of 3rd parties, which shares of stock he could always dispose of therefore [sic] any time and in any manner he may deem proper;

"10) EBE shall secure supplier's credit and feed ingredients, veterinary supplies, etc. up to P500,000.00 and over a period of three (3) months in order to be able to augment the effective operation of the farm; "11) Within 90 days from signing of this agreement, AGA shall make available for the farm P250,000.00, payable to him within one year from and after the grant of the same, with stated interest of 24% per annum, the proceeds of which to be utilized exclusively for the operation of the farm; "12) That within a reasonable time from signing of this agreement, AGA shall organize and register a corporation (thereafter referred to as new corporation) with authorized capital stock of exactly P10,000,000.00 with P1,000,000.00 worth of paid-in shares of stock thereof, to be allocated or assigned to EBE [sic] said corporation shall, upon its registration take over all the rights and liabilities of AGA hereunder saving the one stipulated in paragraph no. ___ hereof; "13) On or before November 1984, AGA shall pay EBE P144,941.88 plus interest at 24% per annum in payment of the feed ingredients, mixed feeds and veterinary supplies mentioned in Schedule "A" which EBE makes available to aforesaid piggery. He shall likewise reimburse to EBE on or before January 1985, the amount of P200,000.00 with interest at 24% per annum representing advances of the latter to PALUWAGAN SAVINGS BANK and MERCATOR FINANCE CORPORATION pursuant to paragraph 7 above; "14) That in connection with the aforesaid P1,000,000.00 worth of shares [of] stock in the new corporation, stipulated above to be allocated or assigned to EBE, the parties hereby agree that within eighteen (18) months from and after such assignment or allotment, AGA shall acquire, at par, from EBE 50% thereof, with reservation to acquire the other 50% within a period of 30 months after such allotment, with premium of 50% of par value, if the commitments or targets mentioned in paragraph 17 herein shall have been met; "15) That for the operation of the farm or piggery, the parties hereby agree that EBE shall serve as President and Chief Executive thereof, at a stated monthly salary of P15,000.00; Alberto M. Ladores as General Manager at P10,000.00 a month, V. Gregorio as Comptroller at P3,500.00 a month; "16) The parties herein likewise agree to pay, when able, compensation to the following the amounts correspondingly indicated. Thus a) V.S. Abadia - Chairperson of the Board at P 10,000.00 b) A.G. Asuncion c) V.M. de Vera d) E. Ll. Umali "17) Being senior operating officers of the farm, EBE and A.M. Ladores, shall submit to AGA, their respective position charter plans and programs for the farm for the next three (3) years, within 30 to 45 days after signing hereof, substantially in the form hereto attached as Schedule "B";

"18) That within the next three (3) months, an Agribusiness Management Company which includes a feedmilling operations shall be established. The officers thereof shall be Alexander G. Asuncion as Chairman, Vicente M. de Vera as Vice-Chairman, Edgardo Ll. Umali as Treasurer, Eduardo B. Evangelista as President and General Manager, and Alberto M. Ladores as Executive Vice-President. This management company shall be contracted for providing the over-all management of EMBASSY FARMS. EDUARDO B. EVANGELISTA and ALBERTO M. LADORES will have shares in the company and shall form the executive management team of said company, for which they will be remunerated in terms of salary and profit sharing. "IN WITNESS WHEREOF, the parties have hereunto affixed their signatures this 2nd day of August, 1984. (Sgd.) ALEXANDER G. ASUNCION (Sgd.) EDUARDO B. EVANGELISTA SIGNED IN THE PRESENCE OF: (Sgd.) VIOLETA S. ABADIA (Sgd.) ALBERTO M. LADORES x x x".11 [Marked as Exh. "C" for Plaintiff and as Exh. "1" for Defendant.] Upon the execution of the Memorandum of Agreement, petitioner paid private respondent one million pesos (P1,000,000.00) in compliance with paragraph 3 thereof. Although this was unreceipted, private respondent admitted receiving the same when he testified in open court.12 [Private respondent testified, thus: "ATTY. COMIA "Q........What is the truth now in your honest opinion. How much was actually all in all paid by Alexander Asuncion the plaintiff in this case on account of this memorandum of agreement. "x x x "WITNESS "A........He has been claiming he has spent around P3,000,000.00 but payments for this amount were made to several parties and not to me. All I received from him as downpayment per memorandum of agreement is more than P1M, I think P1.5M or P1.25M, your Honor." (TSN dated July 27, 1987, p. 39) "ATTY. COMIA: "Q........Last time you testified that you have received from the plaintiff in this case under the memorandum of agreement a sum between P1,500,000.00 to P1,750,000.00? "A........More or less as downpayment under the memorandum of agreement.

"Q........Was this paid to you just after the signing of the memorandum of agreement? "A........On three occasions after the signing of the memorandum of agreement, sir." (TSN dated July 28, 1987, p. 14)] In further compliance with paragraph 3, petitioner paid to private respondent the amount of five hundred thousand pesos (P500,000.00) within a ninety-day (90) period in four (4) disbursements, to wit: Date of Payment Voucher No Actual Recipient of the Money Amount Paid Aug. 15, 1984 3468.13 [Exh. "X", signed by Victoria Gregorio, the treasurer of Embassy Farms, Inc., who received the amount in behalf of private respondent; signature is marked as Exh. "X-1".] Victoria Gregorio (for private respondent) P100,000.00 Aug. 23, 1984 3504.14 [Exh. "BB", also signed by Victoria Gregorio for private respondent; signature marked as Exh. "BB-1".] Victoria Gregorio (for private respondent) P100,000.00 Aug. 29, 1984 3547.15 [Exh. "CC" signed by Victoria Gregorio for private respondent; signature marked as Exh. "CC-1".] Victoria Gregorio (for private respondent) P100,000.00 Sept. 26, 1984 3765.16 [Exh. "S". The voucher bears the signature of private respondent, marked as Exh. "S-1".] Private Respondent P200,000.00

Total

P500,000.00

In compliance with paragraph 4 of the Memorandum of Agreement, petitioner paid private respondent three hundred thousand pesos (P300,000.00),17 [Cash Voucher No. 0003 dated July 13, 1984 marked as Exh. "V", signed by private respondent; signature marked as Exh. "V-1".] upon its signing on August 2, 1984. The second installment, in the like amount of three hundred thousand pesos (P300,000.00) which became due between August 2, 1984 and September 2, 1984, was supposed to be remitted by petitioner to private respondent for the purpose of financing the operations of the piggery pursuant to the Memorandum. Instead, petitioner agreed to pay to PAIC Savings & Mortgage Bank the following amounts, to wit: Date of Payment Voucher No. Actual Recipient of the Money Amount Paid Aug. 8, 1984 3224.18 [Exh. "T".] PAIC Savings & Mortgage Bank P200,000.00 19 [PAIC Savings & Mortgage Bank Receipt No. 11279-A dated August 9, 1984 marked as Exh. "I".] Aug. 27, 1984 3310.20 [Exh. "U".] PAIC Savings & Mortgage Bank P100,000.00 21 [PAIC Savings & Mortgage Bank Receipt No. 11405-A dated August 28, 1984 marked as Exh. "H".] in order to facilitate the restructuring of private respondent's loans with said bank. It is significant to note that under the Memorandum of Agreement, petitioner agreed to shoulder only the loan restructuring fees required by Paluwagan ng Bayan Savings and Loan Association Bank and Mercator Finance Corporation.22 [Paragraph Nos. 5 and 6 of the Memorandum of Agreement.] Nonetheless, petitioner made the above payment in view of the letter of PAIC Savings & Mortgage Bank dated July 6, 1984 approving private respondent's request for the restructuring of his loan.

A third installment in the amount of one hundred fifty thousand pesos (P150,000.00) which was due between September 2, 1984 and November 2, 1984 was paid by petitioner to private respondent in the following tranches: Date of Payment Voucher No. Actual Recipient of Money Amount Paid Sept. 19, 1984 DV No. 370723 [Exh. "AA", signed by Victoria Gregorio for private respondent; signature marked as Exh. "AA-1".] Victoria Gregorio (for Embassy Farms) P 20,000.00 Sept. 26, 1984 DV No. 377024 [Exh. "Z", signed by private respondent; signature marked as Exh. "Z-1".] Private Respondent P 30,000.00 Oct. 16, 1984 DV No. 387825 [Exh. "DD", signed by private respondent; signature marked as Exh. "DD-1".] Private Respondent P100,000.00 Aside from paying the aforesaid amount of three hundred thousand pesos (P300,000.00) to PAIC Savings & Mortgage Bank in compliance with paragraph 5 of the Memorandum of Agreement requiring petitioner to assume the loan obligations of private respondent, petitioner also paid four hundred thousand pesos (P400,000.00) in favor of Paluwagan ng Bayan Savings and Loan Association for the restructuring of private respondent's26 [Disbursement Voucher No. 4284 dated December 26, 1984 marked as Exh. "KK". An employee of Paluwagan ng Bayan Savings and Loan Association signed the voucher to prove receipt of the amount; signature marked as Exh. "KK-1".] loan and one hundred thousand pesos (P100,000.00)27 [Disbursement Voucher No. 4047 dated November 9, 1984 marked as Exh. "EE", signed by private respondent; signature marked as Exh. "EE-1".] for the restructuring of his loan with Mercator Finance Corporation.

In substantial compliance with paragraph 11 wherein petitioner was further obligated to provide credit in the amount of two hundred fifty thousand pesos (P250,000.00) to be exclusively spent for the operations of the piggery but payable to him within one (1) year from the grant thereof with stated interest of 24% per annum, petitioner made available two hundred thousand pesos (P200,000.00).28 [Cash Voucher No. 0004 dated July 13, 1984 marked as Exh. "W", signed by private respondent; signature marked as Exh. "W-1".] Under paragraph 13, petitioner paid one hundred forty four thousand nine hundred forty one pesos and eighty eight centavos (P144,941.88) for feed ingredients, mixed feeds and veterinary supplies included in the inventory turned over by private respondent to petitioner. Petitioner made the payment in the following tranches: Date of Payment Disbursement/Cash Voucher Actual Recipient of the Money Amount Paid March 28, 1985 DV No. 476029 [Exh. "FF", signed by private respondent; signature marked as Exh. "FEU-1".29 private respondent P 37,000.00 July 30, 1985 DV No. 26630 [Exh. "GG", signed by private respondent; signature marked as Exh. "GG-1".] private respondent P 30,000.00 Aug. 9, 1985 DV No. 33731 [Exh. "HH". The signature of R. Tamaliga, driver of private respondent who received the amount in his behalf, is marked as Exh. "HH-1".] R. Tamaliga (for private respondent) P 30,000.00 Aug. 16, 1985 DV No. 37932 [Exh. "II", signed by R. Tamaliga for private respondent; signature marked as Exh. "II-1".]

R. Tamaliga (for private respondent) P 30,000.00 Aug. 23, 1985 DV No. 41133 [Exh. "JJ", signed by R. Tamaliga for private respondent; signature marked as Exh. "JJ-1".] R. Tamaliga (for private respondent) P 17,941.88 TOTAL P144,941.88

Over and above all the foregoing amounts paid by petitioner to private respondent in accordance with his undertakings under the Memorandum of Agreement, he also paid management bonuses to private respondent, Vicente M. de Vera and Edgardo Ll. Umali, in the amounts of fifty thousand pesos (P50,000.00), thirty thousand pesos (P30,000.00) and twenty thousand pesos (P20,000.00), respectively.34 [Disbursement Voucher No. 3640 dated September 13, 1984 marked as Exh. "Y", signed by private respondent; signature marked as Exh. "Y-1".] The total amount thus paid by petitioner to private respondent and invested in Embassy Farms, Inc. as of August 1985, or in a span of a year from the time that they executed the Memorandum of Agreement, was three million one hundred ninety four thousand nine hundred forty one and eighty eight centavos (P3,194,941.88). For his part, private respondent was obligated under the Memorandum of Agreement to "execute, sign and deliver any and all documents" necessary for the transfer and conveyance of several parcels of land he owned but mortgaged with the banks and financial institutions and to "cede, transfer and convey in a manner absolute and irrevocable any and all of his shares of stocks in Embassy Farms, Inc." as well as "cause to be so transferred to petitioner or his nominee such shares of stock until they constitute 90% of the paid-in equity of said corporation"35 [Paragraph Nos. 1 and 2 of the Memorandum of Agreement.] By December 1985, however, more than a year after the signing of the Memorandum of Agreement, the landholdings of private respondent which were mortgaged to Paluwagan ng Bayan Savings and Loan Association, PAIC Savings and Mortgage Bank and Mercator Finance Corporation still remained titled in his name. Neither did he inform said mortgagees of the transfer of his lands. As to the shares of stock, it was incumbent upon private respondent to endorse and deliver them to petitioner so he could also have them transferred in his name, but private respondent never did. He refused to honor his obligations under the Memorandum of Agreement and even countered with a demand letter of his own. He accused petitioner of having failed to restructure his loans with Paluwagan ng Bayan Savings and Loan Association, PAIC Savings and Mortgage Bank and Mercator Finance Corporation and blamed him for the foreclosure of his landholdings, including the piggery site of Embassy Farms, Inc. On April 10, 1986, petitioner filed in the Regional Trial Court a complaint for rescission of the Memorandum of Agreement with a prayer for damages.36 [Docketed as Civil Case No. 53335 and raffled to Branch 70, Regional Trial Court, Pasig, Metro Manila.]

On July 1, 1994, the trial court rendered judgment in favor of private respondent. It ruled: "The principal issue in this case is whether it is [petitioner] or [private respondent] who reneged on their obligations under the Memorandum of Agreement. "Based upon the pleadings and the evidence, it is clear that [petitioner] failed to comply with his undertaking under paragraph 5 of the Memorandum of Agreement to assume all of the obligations of [private respondent] with the PAIC Bank, the Paluwagan Savings Bank and the Mercator Finance Corporation amounting in the aggregate to P5,998,955.65. In addition [petitioner] also failed to comply with his obligations under paragraph 12 and 18 of the Agreement x x x. "x x x "The Memorandum of Agreement is essentially a contract of sale where [private respondent] agreed to sell his nineteen parcels of land and his shares in Embassy Farms, in consideration, among others, of the assumption by [petitioner] of [private respondent's] loans with three financial institutions. As a matter of law and practice, it is incumbent upon the vendee to first comply with his obligations under the contract of sale before he can demand performance by the vendor. In a contract of sale, the vendor is not required to deliver the thing sold until the price is paid. x x x "Consequently, since [petitioner], at the time of the commencement of the action, had admittedly not complied with his obligations under the Agreement, he had no right to demand compliance on the part of [private respondent] with the latter's obligations or to ask rescission with damages. If there is anybody who has the right to seek rescission and ask for damages, it is certainly [private respondent] the injured party - who in fact has opted for rescission. Accordingly, the Court holds that [private respondent] is entitled to rescission of the Agreement. "x x x "Since it was [petitioner] who failed to perform his obligations as vendee under the Agreement and there is no showing that [private respondent] refused or was not in a position to comply with is own undertakings, the latter is entitled to recover damages. The evidence shows that [private respondent] actually formally demanded compliance by [petitioner] with his obligations in a letter dated January 31, 1986."37 [Decision of the Regional Trial Court dated July 1, 1994, pp. 6-8, Rollo, pp. 167-169.] The dispositive portion of the foregoing decision reads as follows: "WHEREFORE, this Court hereby declares the Memorandum of Agreement dated 2 August 1984 rescinded and of no further force and effect. "This Court likewise orders the payment by the plaintiff to the defendant of the following: "(1) P32,644,420.55 as actual or compensatory damages arising from the rescission of the Memorandum of Agreement with legal rate of interest at 6% per annum until fully paid;

"(2) P887,300.00 for the repayment of the loan granted by the defendant to the plaintiff, with interest at the stipulated rate of 36% per annum until fully paid; and "(3) P100,000.00 as attorney's fees. "No pronouncement as to costs. "SO ORDERED."38 [Id., p. 11, Rollo, p. 172.] On July 12, 1994, a copy of the decision of the trial court was sent by registered mail to petitioner's counsel of record, Atty. Romeo Z. Comia. However, unknown to petitioner, Atty. Comia died while the case was still pending in the trial court. On August 25, 1994, private respondent filed in the trial court a Notice of Death of petitioner's counsel, with a request that a copy of its decision be personally served on petitioner. On August 31, 1994, the trial court issued an Order stating that the registry receipt evidencing the mailing of a copy of its decision to petitioner did not bear any date. It nonetheless denied the motion of private respondent for personal service of a copy of its decision on petitioner. On September 12, 1994, private respondent filed by registered mail a Motion for Execution. On September 28, 1994, the trial court granted said motion. On October 3, 1994, private respondent filed an Ex Parte Motion for Appointment of Special Sheriff. Accordingly, Deputy Sheriff Solminio de las Armas was appointed by the trial court. On October 6, 1994, the trial court issued a writ of execution against petitioner. On October 20, 1994, petitioner filed in the trial court a Notice of Appeal, Substitution of Counsel, and an Urgent Motion to Recall the Order of Execution and Quash the Writ of Execution. On October 28, 1994, the trial court issued an Order suspending the execution of its decision. On November 9, 1994, the trial court issued an Order stopping the execution proceedings and approving petitioner's appeal. Both petitioner and private respondent repaired to the Court of Appeals. Petitioner prayed for the reversal of the decision of the trial court while private respondent assailed the last two orders of the trial court dated October 28 and November 9, 1994. On February 2, 1998, respondent Court of Appeals affirmed the decision of the trial court and ordered its immediate execution. The orders dated October 28 and November 9, 1994 halting execution proceedings were nullified. The respondent Court of Appeals held, first, as concerns the undated registry receipt:

"The rule that if no date appears in the registry receipt there is no period within which to reckon the fifteen-day reglementary period to appeal is however subject to waiver. The motion for a writ of execution and the corresponding order for the enforcement of the writ of execution were duly served upon [petitioner] yet he failed to question the irregularity before filing a notice of appeal."39 [Decision, supra, p. 12, Rollo, p. 69.] and second, as concerns the nature of the Memorandum of Agreement: "[Petitioner] contended that the MOA is actually a joint venture agreement. "x x x "The element that there be mutual right of control is wanting in the MOA entered into between [petitioner] and [private respondent]. Under Condition No. 9, [private respondent] shall transfer the effective control, amounting to ownership of the Embassy Farms, Inc. to [petitioner]. The creation of a new company by [petitioner] under Conditions No. 12 and 15 wherein [private respondent] was to be appointed as President and Chief Executive does not partake of the nature of joint venture by [petitioner] as the absolute owner and [private respondent] who is to be remunerated only in terms of salaries and profit sharing, the later being a usual fringe benefit in private associations. "Instead, the MOA is akin to a contract of sale as correctly held by the trial court x x x. "x x x."40 [Id., pp. 12-13, Rollo, pp. 69-70.] On February 2, 1998, petitioner filed a Motion for Reconsideration of the foregoing decision. On March 17, 1998, private respondent filed an Opposition thereto with an Ex-parte Motion for Issuance of a Writ of Attachment. On April 17, 1998, respondent Court of Appeals issued a Resolution41 [Rollo, p. 75.] denying petitioner's Motion for Reconsideration and noting private respondent's Ex-Parte Motion for Issuance of a Writ of Attachment. Hence this petition raising the following issues: "1. WHETHER OR NOT THE JULY 1, 1994 DECISION OF THE REGIONAL TRIAL COURT WAS ALREADY FINAL AND EXECUTORY WHEN ASUNCION FILED HIS NOTICE OF APPEAL. "2. WHETHER OR NOT THE MEMORANDUM OF AGREEMENT EXECUTED BETWEEN ASUNCION AND EVANGELISTA WAS IN THE NATURE OF A CONTRACT OF SALE OR A JOINT VENTURE. "3. WHETHER IT WAS ASUNCION OR EVANGELISTA WHO FIRST RENEGED OR FAILED TO COMPLY WITH HIS CORRESPONDING OBLIGATIONS UNDER THE MEMORANDUM OF AGREEMENT."42 [Petition dated May 15, 1998, p. 12, Rollo, p. 19.] The petition is meritorious.

One. The respondent Court of Appeals erred in holding that the decision of the trial court dated July 1, 1994 had become final and executory. It is established that petitioner was not aware of his counsel's death while the case was pending in the trial court. He could not have known, therefore, that a copy of the trial court's decision was sent by registered mail to his counsel. Indeed, it was private respondent who notified the trial court of the death of petitioner's counsel and who requested that a copy of the decision be served personally to petitioner. His request was, however, denied. While petitioner was furnished a copy of the decision by mail, the registry receipt evidencing its date of mailing did not bear a date. There was, therefore, no date from which to reckon the reglementary period to appeal. That petitioner received a copy of the motion and order for writ of execution should not be taken as a waiver of his right to appeal. Not only is petitioner a non-lawyer who could not be expected to know the legal consequences of the motion and the order, but the case is of such merit that it deserves a liberal interpretation of the rules in the interest of justice. Two. The respondent Court of Appeals ruled that the Memorandum of Agreement was a contract of sale whereby private respondent sold his piggery, Embassy Farms, Inc., with the land on which it stood and his shares of stock therein, in consideration of the monetary equivalent of his aggregate debt obligations to be assumed and paid by petitioner. It found that petitioner failed to assume private respondent's loans with Paluwagan ng Bayan Savings & Loan Association, PAIC Savings & Mortgage Bank and Mercator Finance Corporation. Consequently, rescission of the Memorandum of Agreement was ordered and private respondent was awarded more than thirty two million pesos (P32,000,000.00) in compensatory damages, which included the alleged proceeds from the sale of hogs during the period of time that private respondent was replaced as president and chief executive officer as well as the value of his landholdings which were foreclosed because of his failure to pay his debt obligations with the said banks. After a meticulous perusal of the voluminous records of this case, we hold that the respondent Court of Appeals grossly misappreciated the facts and the applicable law. Under the Memorandum of Agreement, it was the obligation of private respondent to cede and convey, in a manner absolute and irrevocable, his real properties and stockholdings in the farm in favor of petitioner in exchange for, among others, the outright payment by petitioner of a lump sum, the continuous operation of the piggery at his expense and the assumption by petitioner of all the financial obligations of private respondent upon their restructuring. The records show that while petitioner paid private respondent the stipulated lump sum and gave more money for the restructuring of private respondent's loans and for the continued operation of Embassy Farms, Inc., private respondent never executed a deed of sale with assumption of mortgage over his landholdings, and although he endorsed in blank his certificates of stock, he never delivered them to petitioner to effectuate their valid transfer. Private respondent admitted in open court that he refused to comply with his twin obligations to execute the necessary documents of conveyance for the mortgaged parcels of land and to deliver the certificates of stock in Embassy Farms in favor of petitioner. He stated on the witness stand, thus: "ATTY. MECIAS:

"Q........Now, there is also a mention of nineteen (19) parcels of land as being owned by you as situated in Don Marigato, Marilao, Bulacan and do you know where are the certificates of title over these parcels of land? "WITNESS: "A........This certificate of title mentioned these are all in the possession of PAEC Bank and MERCATOR Finance Corporation. "ATTY. MECIAS: "Q........Were there any titles given or delivered to Paluwagan Savings Bank? "A........There was one (1), but when I was about to pay the loan they were returned to me. "Q........In paragraph 1 of Exhibit 'C' you undertook to cede, transfer and convey to Asuncion, the plaintiff the execution of said parcels of property together with improvements in connection with such transfer you undertook to execute, sign and deliver the whole document appropriate on the same in favor of the plaintiff Asuncion or his nominees. Did you actually execute and sign, deliver that document as mentioned here? "A........May I have an [sic] specific document. What kind of document? "Q........Appropriate conveyance of sale? "A........The only document I know which mention (sic) here is the memorandum of agreement which we sign together with the plaintiff. "ATTY. MECIAS: "Q........I am referring to the document which you have to execute in favor of Alexander G. Asuncion to cede, transfer and convey those property. Did you execute the document? "WITNESS: "A ........I did not. "Q........What was your reason for not executing those documents? "A........I did hold on to convey those documents particularly the stock certificate because I was waiting for the plaintiff Asuncion to comply with his obligation to assume all my loan with the three (3) financial institutions."43 [TSN dated March 1, 1990, pp. 9-11.] It is specious for private respondent to justify his refusal to execute the deed of conveyance on the alleged petitioner's failure to assume his loans with the three financial institutions. It is an established fact that petitioner made, in behalf of private respondent, loan payments in the amount of four hundred thousand pesos (P400,000.00) to Paluwagan ng Bayan Savings and Loan Association, one hundred

thousand pesos (P100,000.00) to Mercator Finance Corporation and three hundred thousand pesos (P300,000.00) to PAIC Savings & Mortgage Bank. These payments, which were made in addition to outright sums of money given by petitioner to private respondent and to the farm for its operation, prove petitioner's willingness and readiness to assume private respondent's obligations. It is true that petitioner stopped making further loan payments to the banks, causing them to foreclose private respondent's mortgaged properties. He could hardly, however, be faulted for stopping his further exposure, considering that private respondent has reneged with his obligation to cede his lands and his shareholdings. Private respondent is clearly obliged under the Memorandum of Agreement to execute the deed of conveyance with assumption of mortgage in favor of petitioner. Had such deed been executed, the interests of both petitioner and private respondent would have been simultaneously secured, the former, as regards his ownership rights over the subject lands sold to him, and the latter, as regards the substitution, in his place, of petitioner as the new debtor in his loan obligations with Paluwagan ng Bayan Savings and Loan Association, PAIC Savings and Mortgage Bank and Mercator Finance Corporation. Private respondent, however, failed and refused, despite demands, to execute this legal document. It follows that petitioner could not be faulted when he desisted from further paying private respondent's debts. It strikes us as strange that the respondent court failed to appreciate these facts which were established by overwhelming evidence. The very evidence of the private respondent showed that petitioner did make the payments for the restructuring of the former's debts. In light of these payments, private respondent errs in insisting that petitioner cannot be said to have assumed his loan obligations because petitioner never executed a formal assumption of mortgage. It is private respondent's obligation under the Memorandum of Agreement to execute a deed of sale with assumption of mortgage, and he cannot insist that it was petitioner's obligation to execute a formal assumption of mortgage independent of and distinct from the deed of sale. Under private respondent's inequitous thesis, petitioner would have shelled out millions of pesos to pay his loans and save his lands from foreclosure, only to leave him with nothing in exchange therefor. Three. The impugned Decision rests on the conclusion that the parties' Memorandum of Agreement is a contract of sale where a price certain is paid in exchange for a determinate thing that is sold and delivered. An examination of the Memorandum of Agreement, however, will show that it constitutes not a mere isolated, simple, short-term business deal calling for the outright sale and purchase of land and shares of stocks belonging to private respondent, but a set of chronological, reciprocal and conditional obligations that both petitioner and private respondent must faithfully comply with to ensure the full enforcement of all its stipulations. The Memorandum of Agreement does not merely stipulate that petitioner has purchased private respondent's landholdings and shares of stock in Embassy Farms, Inc. for the price equivalent to private respondent's total outstanding loans which petitioner shall assume. The Memorandum of Agreement spells out a much more complicated, long-term business arrangement involving the transfer of Embassy

Farms, Inc. to petitioner, the restructuring of private respondent's loans, the financing by petitioner of the continued operations of the piggery, the organization of a new corporation to replace Embassy Farms, Inc. as well as an agribusiness management company, all at the expense of petitioner, and the payment of specified compensation packages to certain officers of Embassy Farms, Inc. In fine, petitioner and private respondent entered into what the law regards as reciprocal obligations. Of such specie of legal contracts, Tolentino says: "x x x Reciprocity arises from identity of cause, and necessarily the two obligations are created at the same time. "Reciprocal obligations, therefore, are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other."44 [Tolentino, Arturo, Commentaries and Jurisprudence on the Civil Code of the Philippines, Volume Four, 1985 edition, p. 175.] Article 1191 of the Civil Code governs the situation where there is non-compliance by one party in case of reciprocal obligations. It provides: "The power to rescind the obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. "The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. "The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. "This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 2388 and the Mortgage Law." The effect of rescission is also provided in the Civil Code in Article 1385: "Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest, consequently, it can be carried out only when he who demands rescission can return whatever he may be obligated to restore. "Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. "In this case, indemnity for damages may be demanded from the persons causing the loss." Private respondent admitted in open court that petitioner paid him the initial sum of one million pesos (P1,000,000.00) upon the signing of the Memorandum of Agreement as well as various sums of money as fees for the restructuring of his loans. Thereupon, private respondent was obligated to execute a

deed of sale with assumption of mortgage, both in compliance with the Memorandum of Agreement and to ensure the legal efficacy of petitioner's promise to assume his loan obligations. We find that private respondent failed to perform his substantial obligations under the Memorandum of Agreement. Hence, petitioner sought the rescission of the Memorandum of Agreement and ceased infusing capital into the piggery business of private respondent. Private respondent later justified his refusal to execute any deed of sale and deliver the certificates of stock by accusing petitioner of having failed to assume his debts. We hold that private respondent's insistence that petitioner execute a formal assumption of mortgage independent and separate from his own execution of a deed of sale is legally untenable, considering that a recorded real estate mortgage is a lien inseparable from the property mortgaged and until discharged, it follows the property.45 [Id., Volume Five, 1992 edition, p. 555.] In his testimony, private respondent stated that he would be committing economic suicide if he executed a deed of sale because he would then be transferring his lands to petitioner without the latter first assuming his loan obligations. This posturing is puerile. Even without a formal assumption of mortgage, the mortgage follows the property whoever the possessor may be. It is an elementary principle in civil law that a real mortgage subsists notwithstanding changes of ownership and all subsequent purchases of the property must respect the mortgage, whether the transfer to them be with or without the consent of the mortgagee.46 [Ibid.] Four. Prescinding from these premises, we hold that the award of thirty two million six hundred fortyfour thousand four hundred twenty pesos and fifty five centavos (P32,644,420.55) in damages to private respondent is totally baseless. The trial court and the respondent court computed the award in the following manner: "x x x [T]his Court finds that [private respondent] is entitled to the following actual damages: "I. ........LAND Value of Land Mortgaged to and Foreclosed by Mercator P2,726,100.00 Less: Mortgage as of 8/2/84 1,846,012.96 P 880,087.04 Value of Land Mortgaged to and Foreclosed by PAIC 6,736,180.00 Less: Mortgage as of 8/2/84 2,758,968.49 P3,977,211.04

II. ........STOCKS AND FACILITIES Livestock Feedmill Machinery Feed Ingredients P2,889,998.00 70,000.00 144,941.88 Less: Payments made 103,941.88 41,000.00 Feed Mixer 2,128.00 Drugs Inventory 35,258.00 III. ........EARNINGS OF EMBASSY FARMS 27,748,738.00 P35,644,420.55 "From the aforesaid aggregate amount of P35,644,420.55 should be deducted the payments made by [petitioner] totaling P3,000,000.00. Thus, the net effect is that [private respondent] is entitled to the amount of P32,644,420.55, with interest at the legal rate of 6% until fully paid. "In addition, [private respondent] is entitled to be paid the amount of P500,000.00 which he granted as a loan to [petitioner] outside of the Memorandum of Agreement. What is due to [private respondent] after deducting the payments made by [petitioner] and adding the interest is as follows: Loan of [private respondent] to [petitioner] P500,000.00 Less: Payments made 270,000.00

P230,000.00 Add: Stipulated interest (36% p.a. up to 1/31/93 540,000.00 Add: Stipulated interest up to 6/30/94 117,300.00 657,300.00 P887,300.00 "The circumstances of this case indicate that [petitioner] acted in a wanton, fraudulent, reckless or malevolent manner within the purview of Article 2232 of the Civil Code. Despite the fact that [petitioner] had not performed his obligations as a vendee, he pre-empted [private respondent] by filing this action for rescission, ousted [private respondent] as a director of Embassy Farms, Inc., transferred the shares of [private respondent] to himself and his nominees, and assumed full control and management of Embassy Farms, Inc. until he was enjoined by Court in an order issued by then Presiding Judge Zenaida Baltazar dated July 30, 1987. Considering the bad faith and malevolence shown by [petitioner] in his conduct towards [private respondent] in the performance of his obligations under the Memorandum of Agreement, this Court, by way of example and correction for the public good, holds that [private respondent] is entitled to exemplary damages in the amount of P500,000.00. "This Court likewise finds that [private respondent] is entitled to attorney's fees and expenses of litigation. Considering the complexity and difficulty of this case and the protracted proceedings, this Court awards attorney's fees and expenses of litigation in the amount of P350,000.00,"47 [Decision of the Regional Trial Court dated July 1, 1994, pp. 6-11, Rollo, pp. 167-172.] summarized in the following dispositive portion: "WHEREFORE, this Court hereby declares the Memorandum of Agreement dated 2 August 1984 rescinded and of no further force and effect. "This Court likewise orders the payment by the plaintiff to the defendant of the following: "(1) P32,644,420.55 as actual or compensatory damages arising from the rescission of the Memorandum of Agreement with legal rate of interest at 6% per annum until fully paid; "(2) P887,300.00 for the repayment of the loan granted by the defendant to the plaintiff, with interest at the stipulated rate of 36% per annum until fully paid; and "(3) P100,000.00 as attorney's fees. "No pronouncement as to costs.

"SO ORDERED."48 [Id., p. 11, Rollo, p. 172.] We, therefore, strike down the foregoing award of actual or compensatory damages and attorney's fees. Petitioner was further ordered to pay twenty seven million seven hundred forty-eight thousand seven hundred thirty eight pesos (P27,748,738.00) representing earnings of Embassy Farms, Inc. as additional compensatory damages. The only piece of evidence supporting the award is private respondent's Exh. "29"49 [Defendant's Formal Offer of Documentary Evidence, p. 82; entitled, "SALES OF HOGS STARTING ON JULY 4, 1984 WHEN ALEXANDER G. ASUNCION (AGA) ASSIGNED MS. VICKY GREGORIO AS HIS COMPTROLLER AT EMBASSY FARMS, INC. AT LOMA DE GATO, MARILAO, BULACAN WHICH WAS TWENTY-NINE (29) DAYS EARLIER THAN THE SCHEDULED TURN OVER (AUGUST 2, 1984) TO HIM BY EDUARDO B. EVANGELISTA (EBE) OF THE EFFECTIVE CONTROL AND MANAGEMENT OF SAID FARM", dated November 21, 1990.] which was signed as certified correct by no one else but private respondent. It bore no reference to any receipt, voucher or any other document signed by petitioner or anyone in his behalf, and it even states that it was Vicky Gregorio, not private respondent, who was present during the alleged sales of hogs at the piggery. Exh. "29" was duly objected to and its contents vehemently denied by petitioner but to no avail. This Court cannot countenance the grant of such an unjustified and unconscionable amount of damages on the basis of nothing but a self-serving and hearsay document. As we have ruled in the case of Lufthansa German Airlines vs. CA, et al.:50 [243 SCRA 600, 615 (1995), citing Dichoso v. CA, 192 SCRA 169 (1990)and Hua Liong Electric Corp. v. Reyes, 145 SCRA 713 (1986). Lufthansa is cited in Del Rosario v. Court of Appeals, 267 SCRA 158, 170-171 (1997)] "Actual or compensatory damages cannot be presumed, but must be duly proved and proved with reasonable degree of certainty. A court cannot rely on speculations, conjectures or guesswork as to the fact and the amount of damages, but must depend upon competent proof that they have (been) suffered and on evidence of the actual amount thereof." Neither may this Court allow the grant of damages corresponding to the value of the land foreclosed by private respondent's creditors upon the latter's failure to make his loan payments. Private respondent, in his amended counterclaim, prayed for the rescission of the Memorandum of Agreement. In case of rescission, while damages may be assessed in favor of the prejudiced party, only those kinds of damages consistent with the remedy of rescission may be granted, keeping in mind that had the parties opted for specific performance, other kinds of damages would have been called for which are absolutely distinct from those kinds of damages accruing in the case of rescission. The vintage but still sound teaching of the case of Rios and Reyes v. Jacinto, Palma y Hermanos, S.C.,51 [49 Phil. 7, 12-13 (1926)] a 1926 case, is apropos: "x x x [A]n obligation may be resolved if one of the obligors fails to comply with that which is incumbent upon him; and it is declared that the person prejudiced may elect between exacting the fulfillment of the obligation (specific performance) and its resolution, with compensation for damage and payment of interest in either case. x x x It will be noted that he is not entitled to pursue both of these inconsistent remedies; and slight advertence to the logic of the situation will teach us that, in estimating the damages to be awarded in case of rescission, those elements of damages only can be admitted that are

compatible with the idea of rescission; and of course in estimating the damages to be awarded in case the lessor elects for specific performance only those elements of damages can be admitted which are compatible with the conception of specific performance. It follows that damages which would only be consistent with the conception of specific performance cannot be awarded in an action where rescission is sought. "x x x Now it is an inseparable incident of resolution or rescission that the parties are bound to restore to each the thing which has been the subject matter of the contract, precisely as in the situation where a decree of nullity is granted. In the common case of the resolution of a contract of sale for failure of the purchaser to pay the stipulated price, the seller is entitled to be restored to the possession of the thing sold, if it has already been delivered. But he cannot have both the thing sold and the price which was agreed to be paid, for the resolution of the contract has the effect of destroying the obligation to pay the price. Similarly, in the case of the resolution, or rescission of a contract of lease, the lessor is entitled to be restored to the possession of the leased premises, but he cannot have both the possession of the leased premises for the remainder of the term and the rent which the other party had contracted to pay. The termination of the lease has the effect of destroying the obligation to pay rent for the future." Compensatory damages consisting of the value of private respondent's foreclosed landholdings would have been proper in case he resorted to the remedy of specific performance, not rescission. Since his counterclaim prayed for the rescission of the Memorandum of Agreement, it was grave error on the part of the respondent court to have enforced said agreement by ordering petitioner to pay him the value of the landholdings. This Court holds, in fine, that the Memorandum of Agreement entered into by petitioner and private respondent should indeed be rescinded. As aforediscussed, the respondent appellate court erred in assessing damages against petitioner for his refusal to fully pay private respondent's overdue loans. Such refusal was justified, considering that private respondent was the first to refuse to deliver to petitioner the lands and certificates of stock that were the consideration for the almost six million pesos in debt that petitioner was to assume and pay. Five. Nevertheless, neither is petitioner entitled to recover the amount of P3,194,941.88 that he spent as lump sum payment, as feeds and veterinary costs for the continued operation of the piggery and as loan restructuring fees. Mutual restitution is required in rescission, but this presupposes that both parties may be restored in their original situation.52 [Grace Park Engineering Co., Inc. v. Dimaporo, 107 SCRA 266 273 (1981)] In this case, it cannot be gainsaid that an essential part of the consideration of the amount of P3,194,941.88 paid by the petitioner was taking over the effective management of Embassy Farms, Inc. Mutual restitution would require, thus, that petitioner restore private respondent in the effective management of said corporation and that private respondent return said amount to petitioner. This, however, has been rendered impossible by the foreclosure of the landholdings of private respondent and the shutdown of the piggery's operations. Private respondent has lost in his venture, and while he is not blameless for his unfortunate fate, to still order him to remit a considerable amount of money without receiving anything in return would certainly run counter to the essence of rescission as a remedy in equity.53 [Tolentino, supra, pp. 570-571.]

WHEREFORE, the instant petition for review is hereby GRANTED. The Decision of the Court of Appeals dated February 2, 1998 is REVERSED and SET ASIDE. The Memorandum of Agreement entered into by petitioner and private respondent on August 2, 1984 is hereby DECLARED RESCINDED. No damages. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 191388 March 9, 2011

ASIA UNITED BANK, CHRISTINE T. CHAN, and FLORANTE C. DEL MUNDO, Petitioners, vs. GOODLAND COMPANY, INC., Respondent. DECISION DEL CASTILLO, J.: The costly consequence of forum shopping should remind the parties to ever be mindful against abusing court processes. Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court assailing the Decision2 dated June 5, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 90114, as well as its Resolution3 dated February 17, 2010, which denied a reconsideration of the assailed Decision. The dispositive portion of the appellate courts Decision reads: WHEREFORE, the appeal is GRANTED and the appealed Order dated March 15, 2007 is REVERSED and SET ASIDE. In lieu thereof, another is entered ordering the DENIAL of appellee banks motion to dismiss and directing the REINSTATEMENT of appellants complaint as well as the REMAND of the case to the trial court for further proceedings. SO ORDERED.4 Factual Antecedents Respondent Goodland Company, Inc. (Goodland) executed a Third Party Real Estate Mortgage (REM) over two parcels of land located in the Municipality of Sta. Rosa, Laguna and covered by Transfer Certificates of Title (TCT) Nos. 3216725 and 3216736 in favor of petitioner Asia United Bank (AUB). The mortgage secured the obligation amounting to P250 million of Radiomarine Network, Inc. (RMNI), doing business as Smartnet Philippines, to AUB. The REM was duly registered on March 8, 2001 in the Registry of Deeds of Calamba, Laguna.7

Goodland then filed a Complaint8 docketed as Civil Case No. B-6242 before Branch 25 of the Regional Trial Court (RTC) of Bian, Laguna for the annulment of the REM on the ground that the same was falsified and done in contravention of the parties verbal agreement (Annulment Case). While the Annulment Case was pending, RMNI defaulted in the payment of its obligation to AUB, prompting the latter to exercise its right under the REM to extrajudicially foreclose the mortgage. It filed its Application for Extrajudicial Foreclosure of Real Estate Mortgage under Act No. 3135, as amended with the Office of the Executive Judge of the RTC of Bian, Laguna on October 19, 2006.9 The mortgaged properties were sold in public auction to AUB as the highest bidder. It was issued a Certificate of Sale, which was registered with the Registry of Deeds of Calamba on November 23, 2006. Before AUB could consolidate its title, Goodland filed on November 28, 2006 another Complaint10 docketed as Civil Case No. B-7110 before Branch 25 of the RTC of Bian, Laguna, against AUB and its officers, petitioners Christine Chan and Florante del Mundo. This Complaint sought to annul the foreclosure sale and to enjoin the consolidation of title in favor of AUB (Injunction Case). Goodland asserted the alleged falsified nature of the REM as basis for its prayer for injunction. A few days later, AUB consolidated its ownership over the foreclosed properties and obtained new titles, TCT Nos. T-65703111 and 657032,12in its name from the Registry of Deeds of Calamba. Petitioners then filed on December 11, 2006 a Motion to Dismiss with Opposition to a Temporary Restraining Order in the Injunction Case.13 They brought to the trial courts attention Goodlands forum shopping given the pendency of the Annulment Case. They argued that the two cases both rely on the alleged falsification of the real estate mortgage as basis for the reliefs sought. Ruling of the Regional Trial Court (Injunction Case) On March 15, 2007, the trial court acted favorably on petitioners motion and dismissed the Injunction Case with prejudice on the grounds of forum shopping and litis pendentia.14 The trial court explained that the Injunction Case and the Annulment Case are both founded on the same transactions, same essential facts and circumstances, and raise substantially the same issues. The addition of the application for a writ of preliminary injunction does not vary the similarity between the two cases. The trial court further noted that Goodland could have prayed for injunctive relief as ancillary remedy in the Annulment Case. Finally, the trial court stated that any judgment in the Annulment Case regarding the validity of the REM would constitute res judicata on the Injunction Case. Ruling of the Court of Appeals15 (Injunction Case) Goodland appealed16 the same to the CA. Meanwhile, AUB filed an Ex-Parte Application for Writ of Possession on December 18, 2006, which was granted on March 15, 2007. The writ was issued on March 26, 2007 and AUB obtained possession of the foreclosed properties on April 2, 2007. On June 5, 2009, the CA promulgated its assailed Decision, which ruled in favor of Goodland and ordered the reinstatement of the Injunction Case in the trial court.17

The CA rejected petitioners contention that Goodlands appeal raised pure questions of law,18 which are within the jurisdiction of the Supreme Court under Rule 45.19 Instead, it found Goodlands Rule 41 appeal to be proper because it involved both questions of fact and of law. The CA held that a question of fact existed because petitioners themselves questioned in their Brief the veracity of Goodlands Certification of Non-Forum Shopping.20 The CA conceded that Goodlands Brief failed to comply with the formal requirements, which are all grounds for the dismissal of the appeal,21 e.g., failure of the appellant to serve and file the required number of copies of its brief on all appellees and absence of page references to the record. However, it relaxed the rules so as to completely resolve the rights and obligations of the parties. The CA, however, warned Goodland that its future lapses will be dealt with more severely.22 The CA further ruled against petitioners argument that the delivery of the foreclosed properties to AUBs possession has rendered Goodlands appeal moot. It explained that the Injunction Appeal involving the annulment of extrajudicial foreclosure sale can proceed independently of petitioners application for a writ of possession.23 The CA then concluded that Goodland was not guilty of forum shopping when it initiated the Annulment and Injunction Cases. The CA held that the reliefs sought in the two cases were different. The Annulment Case sought the nullification of the real estate mortgage, while the Injunction Case sought the nullification of the foreclosure proceedings as well as to enjoin the consolidation of title in favor of petitioners.24 The CA further held that aside from the difference in reliefs sought, the two cases were independent of each other because the facts or evidence that supported their respective causes of action were different. The acts which gave rise to the Injunction Case (i.e., the extrajudicial foreclosure proceedings) occurred long after the filing of the Annulment Case.25 The appellate court also held that any decision in either case will not constitute res judicata on the other. It explained that the validity of the real estate mortgage has no "automatic bearing" on the validity of the extrajudicial foreclosure proceedings.26 Moreover, according to the CA, the fact that Goodland stated in its Certification of Non-Forum Shopping in the Injunction Case that the Annulment Case was pending belied the existence of forum shopping.27 Petitioners filed a Motion for Reconsideration28 on July 2, 2009, which was denied in the assailed Resolution of February 17, 2010.29 Hence, the instant petition. Ruling in G.R. No. 190231 (Annulment Case) Contemporaneously with the proceedings of the Injunction Case, the earlier Annulment Case (Civil Case No. B-6242) was also dismissed by the trial court on the ground of forum shopping on August 16, 2007.30 Goodland filed an appeal31 of the dismissal to the CA, which appeal was granted. The CA ordered on August 11, 2009 the reinstatement of the Annulment Case in the trial court.32 AUB then filed with this Court a Petition for Review,33 docketed as G.R. No. 190231 and entitled Asia United Bank and Abraham Co v. Goodland Company, Inc.

On December 8, 2010, the Courts First Division reversed the CA ruling and resolved the appeal in AUBs favor.34The sole issue resolved by the Court was whether Goodland committed willful and deliberate forum shopping by filing Civil Case Nos. B-6242 (Annulment Case) and B-7110 (Injunction Case). The Court ruled that Goodland committed forum shopping because both cases asserted non-consent to the mortgage as the only basis for seeking the nullification of the REM, as well as the injunction of the foreclosure. When Goodland did not notify the trial court of the subsequent filing of the injunction complaint, Goodland revealed its "furtive intent to conceal the filing of Civil Case No. B-7110 for the purpose of securing a favorable judgment." Thus, the Court concluded that the trial court was correct in dismissing the annulment case with prejudice. The dispositive portion of the said Resolution reads as follows:
lavvphil

WHEREFORE, the petition is hereby GRANTED. The August 11, 2009 decision and November 10, 2009 resolution of the Court of Appeals in CA-GR CV No. 9126[9] are REVERSED and SET ASIDE. The August 16, 2007 and December 5, 2007 orders of the Regional Trial Court of Bian, Laguna, Branch 25 in Civil Case No. B-6242 are REINSTATED.35 Goodland filed a Motion for Reconsideration36 but the same was denied with finality in the Courts Resolution dated January 19, 2011. Issue37 The parties present several issues for the Courts resolution. Most of these address the procedural infirmities that attended Goodlands appeal to the CA, making such appeal improper and dismissible. The crux of the case, however, lies in the issue of whether the successive filing of the Annulment and Injunction Cases constitute forum shopping. Petitioners Arguments Petitioners maintain that Goodland is guilty of forum shopping because it sought in the Annulment Case to annul the REM on the ground that it was falsified and unlawfully filled-out; while in the Injunction Case, Goodland wanted to nullify the foreclosure sale arising from the same REM on the ground that the REM was falsified and unlawfully filled-out. Clearly, Goodlands complaints rise and fall on the issue of whether the REM is valid. This requires the presentation of the same evidence in the Annulment and Injunction Cases.38 Goodlands Arguments Goodland counters that it did not commit forum shopping because the causes of action for the Injunction and Annulment Cases are different. The Annulment Case is for the annulment of REM; while the Injunction Case is for the annulment of the extrajudicial foreclosure sale. Goodland argues that any judgment in the Annulment Case, regardless of which party is successful, would not amount to res judicata in the Injunction Case.39 Our Ruling We grant the petition. There is forum shopping "when a party repetitively avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending

in or already resolved adversely by some other court."40 The different ways by which forum shopping may be committed were explained in Chua v. Metropolitan Bank & Trust Company:41 Forum shopping can be committed in three ways: (1) filing multiple cases based on the same cause of action and with the same prayer, the previous case not having been resolved yet (where the ground for dismissal is litis pendentia); (2) filing multiple cases based on the same cause of action and the same prayer, the previous case having been finally resolved (where the ground for dismissal is res judicata); and (3) filing multiple cases based on the same cause of action, but with different prayers (splitting causes of action, where the ground for dismissal is also either litis pendentia or res judicata). Common in these types of forum shopping is the identity of the cause of action in the different cases filed. Cause of action is defined as "the act or omission by which a party violates the right of another."42 The cause of action in the earlier Annulment Case is the alleged nullity of the REM (due to its allegedly falsified or spurious nature) which is allegedly violative of Goodlands right to the mortgaged property. It serves as the basis for the prayer for the nullification of the REM. The Injunction Case involves the same cause of action, inasmuch as it also invokes the nullity of the REM as the basis for the prayer for the nullification of the extrajudicial foreclosure and for injunction against consolidation of title. While the main relief sought in the Annulment Case (nullification of the REM) is ostensibly different from the main relief sought in the Injunction Case (nullification of the extrajudicial foreclosure and injunction against consolidation of title), the cause of action which serves as the basis for the said reliefs remains the same the alleged nullity of the REM. Thus, what is involved here is the third way of committing forum shopping, i.e., filing multiple cases based on the same cause of action, but with different prayers. As previously held by the Court, there is still forum shopping even if the reliefs prayed for in the two cases are different, so long as both cases raise substantially the same issues.43 There can be no determination of the validity of the extrajudicial foreclosure and the propriety of injunction in the Injunction Case without necessarily ruling on the validity of the REM, which is already the subject of the Annulment Case. The identity of the causes of action in the two cases entails that the validity of the mortgage will be ruled upon in both, and creates a possibility that the two rulings will conflict with each other. This is precisely what is sought to be avoided by the rule against forum shopping. The substantial identity of the two cases remains even if the parties should add different grounds or legal theories for the nullity of the REM or should alter the designation or form of the action. The well-entrenched rule is that "a party cannot, by varying the form of action, or adopting a different method of presenting his case, escape the operation of the principle that one and the same cause of action shall not be twice litigated."44 The CA ruled that the two cases are different because the events that gave rise to them are different. The CA rationalized that the Annulment Case was brought about by the execution of a falsified document, while the Injunction Case arose from AUBs foreclosure based on a falsified document. The distinction is illusory. The cause of action for both cases is the alleged nullity of the REM due to its falsified or spurious nature. It is this nullity of the REM which Goodland sought to establish in the Annulment Case. It is also this nullity of the REM which Goodland asserted in the Injunction Case as basis for seeking to nullify the foreclosure and enjoin the consolidation of title. Clearly, the trial court cannot decide the Injunction Case without ruling on the validity of the mortgage, which issue is already within the jurisdiction of the trial court in the Annulment Case.

The recent development in Asia United Bank v. Goodland Company, Inc.,45 which involved substantially the same parties and the same issue is another reason for Goodlands loss in the instant case. The issue that Goodland committed deliberate forum shopping when it successively filed the Annulment and Injunction Cases against AUB and its officers was decided with finality therein. This ruling is conclusive on the petitioners and Goodland considering that they are substantially the same parties in that earlier case. Given our ruling above that the Injunction Case ought to be dismissed for forum shopping, there is no need to rule further on the procedural infirmities raised by petitioners against Goodlands appeal. WHEREFORE, premises considered, the Petition is GRANTED. The June 5, 2009 Decision of the Court of Appeals and its February 17, 2010 Resolution in CA-G.R. CV No. 90114 are hereby REVERSED and SET ASIDE. The March 15, 2007 Order of Branch 25 of the Regional Trial Court of Bian, Laguna DISMISSING Civil Case No. B-7110 is hereby REINSTATED and AFFIRMED. SO ORDERED. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 192217 March 2, 2011

DANILO L. PAREL, Petitioner, vs. HEIRS OF SIMEON PRUDENCIO, Respondents. DECISION VELASCO, JR., J.: This Petition for Review on Certiorari under Rule 45 assails the February 4, 2010 Decision1 and April 22, 2010 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 105709, which affirmed the Orders dated February 15, 2008 and July 31, 2008, respectively, of the Regional Trial Court (RTC), Branch 60 in Baguio City, in Civil Case No. 2493-R for recovery of possession and damages. The Facts A complaint for recovery of possession and damages was filed by Simeon Prudencio (Simeon) against Danilo Parel (Danilo) with the RTC in Baguio City. Simeon alleged that he was the owner of a two-story house at No. 61 Forbes Park National Reservation in Baguio City. Simeon allowed Danilo and his parents to live on the ground floor of the house since his wife was the elder sister of Danilos father, Florentino.3 In November 1985, Simeon needed the whole house back and thus informed Danilo and his parents that they had to vacate the place. Danilos parents acceded to Simeons demand. Danilo, however, remained in the house with his family despite repeated demands on him to surrender the premises. This development drove Simeon to institute an action for recovery of possession and damages.4

Danilo offered a different version of events. He maintained that the land on which Simeons house was constructed was in his father Florentinos name. He explained that his father Florentino, who had by then passed away, did not have enough funds to build a house and thus made a deal with Simeon for them to just contribute money for the construction of a house on Florentinos land. Florentino and Simeon were, thus, co-owners of the house of which Simeon claims sole ownership.5 The Ruling of the Trial Court On December 15, 1993, the RTC ruled in favor of Danilo. The dispositive portion of the RTC Decision reads: WHEREFORE, premises considered, the Court hereby declares that the house erected at [No.] 61 DPS Compound, Baguio City is owned in common by the late Florentino Parel and herein plaintiff Simeon Prudencio and as such the plaintiff cannot evict the defendant as heirs of the deceased Florentino Parel from said property, nor to recover said premises from herein defendant. Likewise, the plaintiff is ordered to: (a) pay the defendant in the total sum of P20,000.00 for moral and actual damages; (b) pay the defendant P20,000.00 in Attorneys fees and P3,300 in appearance fees; (c) pay the costs of this suit. SO ORDERED.6 The Ruling of the Appellate Court On March 31, 2000, the CA, on Simeons appeal, rendered a Decision7 reversing the RTC Decision as follows: WHEREFORE, the decision appealed from is hereby SET ASIDE and a new one is entered declaring plaintiff-appellant as the new owner of the residential building at 61 Forbes Park National Reservation, near DPD Compound, Baguio City; appellee is ordered to surrender possession of the ground floor thereof to appellant immediately. Further, appellee is hereby ordered to pay appellant P2,0000/month [sic] for use or occupancy thereof from April 1988 until the former actually vacates the same, and the sum of P50,000.00 as attorneys fees. And costs of suit. SO ORDERED. Danilo challenged the CA Decision before this Court via an appeal by certiorari under Rule 45 of the Rules of Court. On April 19, 2006, this Court issued its Decision8 in G.R. No. 146556, affirming the CA Decision. On May 9, 2007, Simeon sought to enforce this Courts April 19, 2006 Decision and thus filed a Motion for Issuance of Writ of Execution.9

On June 19, 2007, Danilo filed his Comment10 on Simeons Motion for Issuance of Writ of Execution. He prayed that the PhP 2,000 monthly rental he was ordered to pay be computed from April 1988 to March 1994 only since he had vacated the premises by April 1994. On February 15, 2008, the RTC ruled as quoted below: WHEREFORE, premises considered, let a Writ of Execution be issued to enforce the decision of the Court in the above-entitled case.11 A Motion for Reconsideration of the February 15, 2008 RTC Order was filed by Danilo. On July 31, 2008, the RTC issued another Order12 denying the motion. The dispositive portion of the Order is quoted below: WHEREFORE, premises duly considered, the Motion for Reconsideration is hereby denied for lack of merit. Let a Writ of Execution be issued to enforce the decision of the Court in the above-entitled case. SO ORDERED. On February 5, 2009, the RTC ordered the following: Furthermore, the decision in the above-entitled case has already become final and executory. To reiterate, this Court, much less the defendant, cannot modify the decision of the higher courts which has now become final and executory. The defendant is bound by the said decision and he cannot alter the same nor substitute his own interpretation thereof. WHEREFORE, the foregoing premises considered, the Motion filed by the defendant is DENIED. The Court reiterates its order dated July 31, 2008 for the issuance of a Writ of Execution to enforce the decision of the Court in the instant case. SO ORDERED.13 On February 23, 2009, Danilo filed a Supplemental Petition with Urgent Motion for Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction to enjoin the RTC from enforcing the judgment against Danilo for him to pay PhP 2,000 in monthly rentals from April 1994 onwards. On August 23, 2010, this Court issued a Resolution requiring Simeon to file his Comment on Danilos Petition for Review on Certiorari. On October 28, 2010, Simeon filed his Comment before Us. He argued that the RTC and CA correctly ruled that the prayer for a reduction of back rentals should be denied, since Danilo never turned over possession of the subject premises to him. The Issues I Whether the CA committed an error of law in upholding the RTC Order dated February 15, 2008.

II Whether the Court of Appeals committed an error of law in upholding the RTC Order dated July 31, 2008 The Ruling of This Court Danilo questions the following order of the CA: Further, appellee is hereby ordered to pay appellant P2,0000/month [sic] for use or occupancy thereof from April 1988 until the former actually vacates the same, and the sum of P50,000.00 as attorneys fees. And costs of suit.14 We resolve to grant the petition. Danilo argues that he vacated the subject premises in April 1994 and claims that he stated this fact in his Comment on Simeons Motion for Issuance of Writ of Execution dated May 9, 2007 and in his Motion for Reconsideration before this Court on June 12, 2006. He, thus, argues that the monthly rentals he should pay should only be from April 1988 to March 1994. He alleges that the CA committed an error in law in upholding the RTC Orders dated February 15, 2008 and July 31, 2008. The questioned February 15, 2008 RTC Order stated: x x x The defendant should have filed his comment on any appropriate pleading before the Court or in the Supreme Court at the time when he actually vacated the premises, but he did not. Perhaps, still hoping that the decision of the higher courts would be in his favor. All told, the defendant never intended to surrender the premises to the plaintiff even after he vacated it in April 1994. For this reason, he should now suffer the consequences. It must be reiterated that this Court cannot now modify the decision of the higher courts which has now become final and executory.15 On July 31, 2008, the RTC ruled: While the alleged supervening facts and circumstances which changed the situation of the parties in the instant case occurred before finality of the judgment, as in Morta vs. Bagagnan, the factual backdrop in the aforecited jurisprudence does not call for its application in the present case. In the cited case, the complainants have been ousted from the subject premises pursuant to the decision of the DARAB in two cases involving the same parcel of lot before the decision of the Supreme Court attained finality. In the case at bar, defendant claims to have vacated the subject premises as early as April 1994. This allegation however was belied by the fact that he did not turn[over] the premises to the plaintiff, a fact which has been stipulated by the parties. Defendant did not effectively and completely relinquish possession of the subject premises to the plaintiff thereby depriving the latter of effective possession and beneficial use thereof. To reiterate, defendant never intended to surrender the premises to the plaintiff even after he vacated it in 1994. Defendants failure to seasonably bring to the attention of either the Court of Appeals or the Supreme Court of the supposed change in the circumstances of the parties cannot be excused. Had the Court of Appeals or the Supreme Court been seasonably informed of such fact, the appellate Courts would have considered the same in their respective decisions. It must be noted that defendant had more than enough time from April 1994 to June 2006, a total of 12 years, within which he could have informed the two appellate Courts of the supposed change in the circumstances of the parties, but he did not.

He only belatedly informed the Supreme Court in its motion for reconsideration after the latter Court issued it decision, in the hope of reducing the full payment of back rentals.16
1avvphi1

It is true that Danilo should have brought to the Courts attention the date he actually left the subject premises at an earlier time. The RTC is also correct in ruling that the judgment involved was already final and executory. However, it would be inequitable to order him to pay monthly rentals "until he actually vacates" when it has not been determined when he actually vacated the ground floor of Simeons house. He would be paying monthly rentals indefinitely. The RTC should have determined via hearing if Danilos allegation were true and accordingly modified the period Danilo is to be held accountable for monthly rentals. Unjustified delay in the enforcement of a judgment sets at naught the role of courts in disposing justiciable controversies with finality.17 Once a judgment becomes final and executory, all the issues between the parties are deemed resolved and laid to rest. All that remains is the execution of the decision which is a matter of right.18 Banaga v. Majaducon,19 however, enumerates the instances where a writ of execution may be appealed: 1) the writ of execution varies the judgment; 2) there has been a change in the situation of the parties making execution inequitable or unjust; 3) execution is sought to be enforced against property exempt from execution; 4) it appears that the controversy has never been subject to the judgment of the court; 5) the terms of the judgment are not clear enough and there remains room for interpretation thereof; or 6) it appears that the writ of execution has been improvidently issued, or that it is defective in substance, or is issued against the wrong party, or that the judgment debt has been paid or otherwise satisfied, or the writ was issued without authority; In these exceptional circumstances, considerations of justice and equity dictate that there be some mode available to the party aggrieved of elevating the question to a higher court. That mode of elevation may be either by appeal (writ of error or certiorari), or by a special civil action of certiorari, prohibition, or mandamus. The instant case falls under one of the exceptions cited above. The fact that Danilo has left the property under dispute is a change in the situation of the parties that would make execution inequitable or unjust. Moreover, there are exceptions that have been previously considered by the Court as meriting a relaxation of the rules in order to serve substantial justice. These are: (1) matters of life, liberty, honor or property; (2) the existence of special or compelling circumstances; (3) the merits of the case; (4) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules; (5) a lack of any showing that the review sought is merely frivolous and dilatory; and (6) the other party will not be unjustly prejudiced thereby.20 We find that Danilos

situation merits a relaxation of the rules since special circumstances are involved; to determine if his allegation were true would allow a final resolution of the case. Applicable, too, is what Sec. 5, Rule 135 of the Rules of Court states as one of the powers of a court: Section 5. Inherent powers of the courts.3/4 Every court shall have power: xxxx (g) To amend and control its process and orders so as to make them conformable to law and justice. Thus, the Court ruled in Mejia v. Gabayan:21 x x x The inherent power of the court carries with it the right to determine every question of fact and law which may be involved in the execution. The court may stay or suspend the execution of its judgment if warranted by the higher interest of justice. It has the authority to cause a modification of the decision when it becomes imperative in the higher interest of justice or when supervening events warrant it. The court is also vested with inherent power to stay the enforcement of its decision based on antecedent facts which show fraud in its rendition or want of jurisdiction of the trial court apparent on the record. (Emphasis supplied.) The writ of execution sought to be implemented does not take into consideration the circumstances that merit a modification of judgment. Given that there is a pending issue regarding the execution of judgment, the RTC should have afforded the parties the opportunity to adduce evidence to determine the period within which Danilo should pay monthly rentals before issuing the writ of execution in the instant case. Should Danilo be unable to substantiate his claim that he vacated the premises in April 1994, the period to pay monthly rentals should be until June 19, 2007, the date he informed the CA that he had already left the premises. WHEREFORE, the petition is GRANTED. The CA Decision in CA-G.R. SP No. 105709 is hereby SET ASIDE. The RTC, Branch 60 in Baguio City is ORDERED to determine the actual date petitioner left the subject premises before issuing the writ of execution in Civil Case No. 2493-R that will be based on the resolution of said issue. SO ORDERED.