Cases for 23 June 2014

SECOND DIVISION
G.R. No. 182435 August 13, 2012
LILIA B. ADA, LUZ B. ADANZA, FLORA C. BA YLON, REMO BA YLON, JOSE BA YLON, ERIC
BA YLON, FLORENTINO BA YLON, and MA. RUBY BA YLON, Petitioners,
vs.
FLORANTE BA YLON, Respondent.
VILLARAMA, JR.,
*

D E C I S I O N
REYES, J .:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision
1
dated October 26, 2007 rendered by the Court of Appeals (CA) in
CA-G.R. CV No. 01746. The assailed decision partially reversed and set aside the Decision
2
dated
October 20, 2005 issued ~y the Regional Trial Court (RTC), Tan jay City, Negros Oriental, Branch 43
in Civil Case No. 11657.
The Antecedent Facts
This case involves the estate of spouses Florentino Baylon and Maximina Elnas Baylon (Spouses
Baylon) who died on November 7, 1961 and May 5, 1974, respectively.
3
At the time of their death,
Spouses Baylon were survived by their legitimate children, namely, Rita Baylon (Rita), Victoria Baylon
(Victoria), Dolores Baylon (Dolores), Panfila Gomez (Panfila), Ramon Baylon (Ramon) and herein
petitioner Lilia B. Ada (Lilia).
Dolores died intestate and without issue on August 4, 1976. Victoria died on November 11, 1981 and
was survived by her daughter, herein petitioner Luz B. Adanza. Ramon died intestate on July 8, 1989
and was survived by herein respondent Florante Baylon (Florante), his child from his first marriage,
as well as by petitioner Flora Baylon, his second wife, and their legitimate children, namely, Ramon,
Jr. and herein petitioners Remo, Jose, Eric, Florentino and Ma. Ruby, all surnamed Baylon.
On July 3, 1996, the petitioners filed with the RTC a Complaint
4
for partition, accounting and
damages against Florante, Rita and Panfila. They alleged therein that Spouses Baylon, during their
lifetime, owned 43 parcels of land
5
all situated in Negros Oriental. After the death of Spouses Baylon,
they claimed that Rita took possession of the said parcels of land and appropriated for herself the
income from the same. Using the income produced by the said parcels of land, Rita allegedly
purchased two parcels of land, Lot No. 4709
6
and half of Lot No. 4706,
7
situated in Canda-uay,
Dumaguete City. The petitioners averred that Rita refused to effect a partition of the said parcels of
land.
In their Answer,
8
Florante, Rita and Panfila asserted that they and the petitioners co-owned 22
9
out of
the 43 parcels of land mentioned in the latters complaint, whereas Rita actually owned 10 parcels of
land
10
out of the 43 parcels which the petitioners sought to partition, while the remaining 11 parcels of
land are separately owned by Petra Cafino Adanza,
11
Florante,
12
Meliton Adalia,
13
Consorcia
Adanza,
14
Lilia
15
and Santiago Mendez.
16
Further, they claimed that Lot No. 4709 and half of Lot No.
4706 were acquired by Rita using her own money. They denied that Rita appropriated solely for
herself the income of the estate of Spouses Baylon, and expressed no objection to the partition of the
estate of Spouses Baylon, but only with respect to the co-owned parcels of land.
During the pendency of the case, Rita, through a Deed of Donation dated July 6, 1997, conveyed Lot
No. 4709 and half of Lot No. 4706 to Florante. On July 16, 2000, Rita died intestate and without any
issue. Thereafter, learning of the said donation inter vivos in favor of Florante, the petitioners filed a
Supplemental Pleading
17
dated February 6, 2002, praying that the said donation in favor of the
respondent be rescinded in accordance with Article 1381(4) of the Civil Code. They further alleged
that Rita was already sick and very weak when the said Deed of Donation was supposedly executed
and, thus, could not have validly given her consent thereto.
Florante and Panfila opposed the rescission of the said donation, asserting that Article 1381(4) of the
Civil Code applies only when there is already a prior judicial decree on who between the contending
parties actually owned the properties under litigation.
18

The RTC Decision
On October 20, 2005, the RTC rendered a Decision,
19
the decretal portion of which reads:
Wherefore judgment is hereby rendered:
(1) declaring the existence of co-ownership over parcels nos. 1, 2, 3, 5, 7, 10, 13, 14,
16, 17, 18, 26, 29, 30, 33, 34, 35, 36, 40 and 41 described in the complaint;
(2) directing that the above mentioned parcels of land be partitioned among the heirs of
Florentino Baylon and Maximina Baylon;
(3) declaring a co-ownership on the properties of Rita Baylon namely parcels no[s]. 6,
11, 12, 20, 24, 27, 31, 32, 39 and 42 and directing that it shall be partitioned among her
heirs who are the plaintiffs and defendant in this case;
(4) declaring the donation inter vivos rescinded without prejudice to the share of
Florante Baylon to the estate of Rita Baylon and directing that parcels nos. 1 and 2
paragraph V of the complaint be included in the division of the property as of Rita
Baylon among her heirs, the parties in this case;
(5) excluding from the co-ownership parcels nos. 20, 21, 22, 9, 43, 4, 8, 19 and 37.
Considering that the parties failed to settle this case amicably and could not agree on the partition,
the parties are directed to nominate a representative to act as commissioner to make the partition. He
shall immediately take [his] oath of office upon [his] appointment. The commissioner shall make a
report of all the proceedings as to the partition within fifteen (15) days from the completion of this
partition. The parties are given ten (10) days within which to object to the report after which the Court
shall act on the commissioner report.
SO ORDERED.
20
(Emphasis ours)
The RTC held that the death of Rita during the pendency of the case, having died intestate and
without any issue, had rendered the issue of ownership insofar as parcels of land which she claims as
her own moot since the parties below are the heirs to her estate. Thus, the RTC regarded Rita as the
owner of the said 10 parcels of land and, accordingly, directed that the same be partitioned among
her heirs. Nevertheless, the RTC rescinded the donation inter vivos of Lot No. 4709 and half of Lot
No. 4706 in favor of Florante. In rescinding the said donation inter vivos, the RTC explained that:
However, with respect to lot nos. 4709 and 4706 which [Rita] had conveyed to Florante Baylon by
way of donation inter vivos, the plaintiffs in their supplemental pleadings (sic) assailed the same to be
rescissible on the ground that it was entered into by the defendant Rita Baylon without the knowledge
and approval of the litigants [or] of competent judicial authority. The subject parcels of lands are
involved in the case for which plaintiffs have asked the Court to partition the same among the heirs of
Florentino Baylon and Maximina Elnas.
Clearly, the donation inter vivos in favor of Florante Baylon was executed to prejudice the plaintiffs
right to succeed to the estate of Rita Baylon in case of death considering that as testified by Florante
Baylon, Rita Baylon was very weak and he tried to give her vitamins x x x. The donation inter vivos
executed by Rita Baylon in favor of Florante Baylon is rescissible for the reason that it refers to the
parcels of land in litigation x x x without the knowledge and approval of the plaintiffs or of this Court.
However, the rescission shall not affect the share of Florante Baylon to the estate of Rita Baylon.
21

Florante sought reconsideration of the Decision dated October 20, 2005 of the RTC insofar as it
rescinded the donation of Lot No. 4709 and half of Lot No. 4706 in his favor.
22
He asserted that, at the
time of Ritas death on July 16, 2000, Lot No. 4709 and half of Lot No. 4706 were no longer part of
her estate as the same had already been conveyed to him through a donation inter vivos three years
earlier. Thus, Florante maintained that Lot No. 4709 and half of Lot No. 4706 should not be included
in the properties that should be partitioned among the heirs of Rita.
On July 28, 2006, the RTC issued an Order
23
which denied the motion for reconsideration filed by
Florante.
The CA Decision
On appeal, the CA rendered a Decision
24
dated October 26, 2007, the dispositive portion of which
reads:
WHEREFORE, the Decision dated October 20, 2005 and Order dated July 28, 2006
are REVERSEDand SET ASIDE insofar as they decreed the rescission of the Deed of Donation
dated July 6, 1997 and the inclusion of lot no. 4709 and half of lot no. 4706 in the estate of Rita
Baylon. The case isREMANDED to the trial court for the determination of ownership of lot no. 4709
and half of lot no. 4706.
SO ORDERED.
25

The CA held that before the petitioners may file an action for rescission, they must first obtain a
favorable judicial ruling that Lot No. 4709 and half of Lot No. 4706 actually belonged to the estate of
Spouses Baylon and not to Rita. Until then, the CA asserted, an action for rescission is premature.
Further, the CA ruled that the petitioners action for rescission cannot be joined with their action for
partition, accounting and damages through a mere supplemental pleading. Thus:
If Lot No. 4709 and half of Lot No. 4706 belonged to the Spouses estate, then Rita Baylons donation
thereof in favor of Florante Baylon, in excess of her undivided share therein as co-heir, is void.
Surely, she could not have validly disposed of something she did not own. In such a case, an action
for rescission of the donation may, therefore, prosper.
If the lots, however, are found to have belonged exclusively to Rita Baylon, during her lifetime, her
donation thereof in favor of Florante Baylon is valid. For then, she merely exercised her ownership
right to dispose of what legally belonged to her. Upon her death, the lots no longer form part of her
estate as their ownership now pertains to Florante Baylon. On this score, an action for rescission
against such donation will not prosper. x x x.
Verily, before plaintiffs-appellees may file an action for rescission, they must first obtain a favorable
judicial ruling that lot no. 4709 and half of lot no. 4706 actually belonged to the estate of Spouses
Florentino and Maximina Baylon, and not to Rita Baylon during her lifetime. Until then, an action for
rescission is premature. For this matter, the applicability of Article 1381, paragraph 4, of the New Civil
Code must likewise await the trial courts resolution of the issue of ownership.
Be that as it may, an action for rescission should be filed by the parties concerned independent of the
proceedings below. The first cannot simply be lumped up with the second through a mere
supplemental pleading.
26
(Citation omitted)
The petitioners sought reconsideration
27
of the Decision dated October 26, 2007 but it was denied by
the CA in its Resolution
28
dated March 6, 2008.
Hence, this petition.
Issue
The lone issue to be resolved by this Court is whether the CA erred in ruling that the donation inter
vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante may only be rescinded if there is
already a judicial determination that the same actually belonged to the estate of Spouses Baylon.
The Courts Ruling
The petition is partly meritorious.
Procedural Matters
Before resolving the lone substantive issue in the instant case, this Court deems it proper to address
certain procedural matters that need to be threshed out which, by laxity or otherwise, were not raised
by the parties herein.
Misjoinder of Causes of Action
The complaint filed by the petitioners with the RTC involves two separate, distinct and independent
actions partition and rescission. First, the petitioners raised the refusal of their co-heirs, Florante,
Rita and Panfila, to partition the properties which they inherited from Spouses Baylon. Second, in
their supplemental pleading, the petitioners assailed the donation inter vivos of Lot No. 4709 and half
of Lot No. 4706 made by Rita in favor of Florante pendente lite.
The actions of partition and
rescission cannot be joined in a
single action.
By a joinder of actions, or more properly, a joinder of causes of action is meant the uniting of two or
more demands or rights of action in one action, the statement of more than one cause of action in a
declaration. It is the union of two or more civil causes of action, each of which could be made the
basis of a separate suit, in the same complaint, declaration or petition. A plaintiff may under certain
circumstances join several distinct demands, controversies or rights of action in one declaration,
complaint or petition.
29

The objectives of the rule or provision are to avoid a multiplicity of suits where the same parties and
subject matter are to be dealt with by effecting in one action a complete determination of all matters in
controversy and litigation between the parties involving one subject matter, and to expedite the
disposition of litigation at minimum cost. The provision should be construed so as to avoid such
multiplicity, where possible, without prejudice to the rights of the litigants.
30

Nevertheless, while parties to an action may assert in one pleading, in the alternative or otherwise, as
many causes of action as they may have against an opposing party, such joinder of causes of action
is subject to the condition, inter alia, that the joinder shall not include special civil actions governed by
special rules.
31

Here, there was a misjoinder of causes of action. The action for partition filed by the petitioners could
not be joined with the action for the rescission of the said donation inter vivos in favor of Florante.
Lest it be overlooked, an action for partition is a special civil action governed by Rule 69 of the Rules
of Court while an action for rescission is an ordinary civil action governed by the ordinary rules of civil
procedure. The variance in the procedure in the special civil action of partition and in the ordinary civil
action of rescission precludes their joinder in one complaint or their being tried in a single proceeding
to avoid confusion in determining what rules shall govern the conduct of the proceedings as well as in
the determination of the presence of requisite elements of each particular cause of action.
32

A misjoined cause of action, if not
severed upon motion of a party or
by the court sua sponte, may be
adjudicated by the court together
with the other causes of action.
Nevertheless, misjoinder of causes of action is not a ground for dismissal. Indeed, the courts have the
power, acting upon the motion of a party to the case or sua sponte, to order the severance of the
misjoined cause of action to be proceeded with separately.
33
However, if there is no objection to the
improper joinder or the court did not motu proprio direct a severance, then there exists no bar in the
simultaneous adjudication of all the erroneously joined causes of action. On this score, our
disquisition in Republic of the Philippines v. Herbieto
34
is instructive, viz:
This Court, however, disagrees with petitioner Republic in this regard. This procedural lapse
committed by the respondents should not affect the jurisdiction of the MTC to proceed with and hear
their application for registration of the Subject Lots.
x x x x
Considering every application for land registration filed in strict accordance with the Property
Registration Decree as a single cause of action, then the defect in the joint application for registration
filed by the respondents with the MTC constitutes a misjoinder of causes of action and parties.
Instead of a single or joint application for registration, respondents Jeremias and David, more
appropriately, should have filed separate applications for registration of Lots No. 8422 and 8423,
respectively.
Misjoinder of causes of action and parties do not involve a question of jurisdiction of the court to hear
and proceed with the case. They are not even accepted grounds for dismissal thereof. Instead, under
the Rules of Court, the misjoinder of causes of action and parties involve an implied admission of the
courts jurisdiction. It acknowledges the power of the court, acting upon the motion of a party to the
case or on its own initiative, to order the severance of the misjoined cause of action, to be proceeded
with separately (in case of misjoinder of causes of action); and/or the dropping of a party and the
severance of any claim against said misjoined party, also to be proceeded with separately (in case of
misjoinder of parties).
35
(Citations omitted)
It should be emphasized that the foregoing rule only applies if the court trying the case has
jurisdiction over all of the causes of action therein notwithstanding the misjoinder of the same. If the
court trying the case has no jurisdiction over a misjoined cause of action, then such misjoined cause
of action has to be severed from the other causes of action, and if not so severed, any adjudication
rendered by the court with respect to the same would be a nullity.
Here, Florante posed no objection, and neither did the RTC direct the severance of the petitioners
action for rescission from their action for partition. While this may be a patent omission on the part of
the RTC, this does not constitute a ground to assail the validity and correctness of its decision. The
RTC validly adjudicated the issues raised in the actions for partition and rescission filed by the
petitioners.
Asserting a New Cause of Action in a Supplemental Pleading
In its Decision dated October 26, 2007, the CA pointed out that the said action for rescission should
have been filed by the petitioners independently of the proceedings in the action for partition. It
opined that the action for rescission could not be lumped up with the action for partition through a
mere supplemental pleading.
We do not agree.
A supplemental pleading may raise
a new cause of action as long as it
has some relation to the original
cause of action set forth in the
original complaint.
Section 6, Rule 10 of the Rules of Court reads:
Sec. 6. Supplemental Pleadings. Upon motion of a party the court may, upon reasonable notice and
upon such terms as are just, permit him to serve a supplemental pleading setting forth transactions,
occurrences or events which have happened since the date of the pleading sought to be
supplemented. The adverse party may plead thereto within ten (10) days from notice of the order
admitting the supplemental pleading.
In Young v. Spouses Sy,
36
this Court had the opportunity to elucidate on the purpose of a
supplemental pleading. Thus:
As its very name denotes, a supplemental pleading only serves to bolster or add something to the
primary pleading. A supplement exists side by side with the original. It does not replace that which it
supplements. Moreover, a supplemental pleading assumes that the original pleading is to stand and
that the issues joined with the original pleading remained an issue to be tried in the action. It is but a
continuation of the complaint. Its usual office is to set up new facts which justify, enlarge or change
the kind of relief with respect to the same subject matter as the controversy referred to in the original
complaint.
The purpose of the supplemental pleading is to bring into the records new facts which will enlarge or
change the kind of relief to which the plaintiff is entitled; hence, any supplemental facts which further
develop the original right of action, or extend to vary the relief, are available by way of supplemental
complaint even though they themselves constitute a right of action.
37
(Citations omitted and emphasis
ours)
Thus, a supplemental pleading may properly allege transactions, occurrences or events which had
transpired after the filing of the pleading sought to be supplemented, even if the said supplemental
facts constitute another cause of action.
Admittedly, in Leobrera v. Court of Appeals,
38
we held that a supplemental pleading must be based
on matters arising subsequent to the original pleading related to the claim or defense presented
therein, and founded on the same cause of action. We further stressed therein that a supplemental
pleading may not be used to try a new cause of action.
However, in Planters Development Bank v. LZK Holdings and Development Corp.,
39
we clarified that,
while a matter stated in a supplemental complaint should have some relation to the cause of action
set forth in the original pleading, the fact that the supplemental pleading technically states a new
cause of action should not be a bar to its allowance but only a matter that may be considered by the
court in the exercise of its discretion. In such cases, we stressed that a broad definition of "cause of
action" should be applied.
Here, the issue as to the validity of the donation inter vivos of Lot No. 4709 and half of Lot No. 4706
made by Rita in favor of Florante is a new cause of action that occurred after the filing of the original
complaint. However, the petitioners prayer for the rescission of the said donation inter vivos in their
supplemental pleading is germane to, and is in fact, intertwined with the cause of action in the
partition case. Lot No. 4709 and half of Lot No. 4706 are included among the properties that were
sought to be partitioned.
The petitioners supplemental pleading merely amplified the original cause of action, on account of
the gratuitous conveyance of Lot No. 4709 and half of Lot No. 4706 after the filing of the original
complaint and prayed for additional reliefs, i.e., rescission. Indeed, the petitioners claim that the said
lots form part of the estate of Spouses Baylon, but cannot be partitioned unless the gratuitous
conveyance of the same is rescinded. Thus, the principal issue raised by the petitioners in their
original complaint remained the same.
Main Issue: Propriety of Rescission
After having threshed out the procedural matters, we now proceed to adjudicate the substantial issue
presented by the instant petition.
The petitioners assert that the CA erred in remanding the case to the RTC for the determination of
ownership of Lot No. 4709 and half of Lot No. 4706. They maintain that the RTC aptly rescinded the
said donation inter vivos of Lot No. 4709 and half of Lot No. 4706 pursuant to Article 1381(4) of the
Civil Code.
In his Comment,
40
Florante asserts that before the petitioners may file an action for rescission, they
must first obtain a favorable judicial ruling that Lot No. 4709 and half of Lot No. 4706 actually
belonged to the estate of Spouses Baylon. Until then, Florante avers that an action for rescission
would be premature.
The petitioners contentions are well-taken.
The resolution of the instant dispute is fundamentally contingent upon a determination of whether the
donation inter vivos of Lot No. 4709 and half of Lot No. 4706 in favor of Florante may be rescinded
pursuant to Article 1381(4) of the Civil Code on the ground that the same was made during the
pendency of the action for partition with the RTC.
Rescission is a remedy to address
the damage or injury caused to the
contracting parties or third
persons.
Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure
the reparation of damages caused to them by a contract, even if it should be valid, by means of the
restoration of things to their condition at the moment prior to the celebration of said contract.
41
It is a
remedy to make ineffective a contract, validly entered into and therefore obligatory under normal
conditions, by reason of external causes resulting in a pecuniary prejudice to one of the contracting
parties or their creditors.
42

Contracts which are rescissible are valid contracts having all the essential requisites of a contract, but
by reason of injury or damage caused to either of the parties therein or to third persons are
considered defective and, thus, may be rescinded.
The kinds of rescissible contracts, according to the reason for their susceptibility to rescission, are the
following: first, those which are rescissible because of lesion or prejudice;
43
second, those which are
rescissible on account of fraud or bad faith;
44
and third, those which, by special provisions of
law,
45
are susceptible to rescission.
46

Contracts which refer to things
subject of litigation is rescissible
pursuant to Article 1381(4) of the
Civil Code.
Contracts which are rescissible due to fraud or bad faith include those which involve things under
litigation, if they have been entered into by the defendant without the knowledge and approval of the
litigants or of competent judicial authority. Thus, Article 1381(4) of the Civil Code provides:
Art. 1381. The following contracts are rescissible:
x x x x
(4) Those which refer to things under litigation if they have been entered into by the defendant without
the knowledge and approval of the litigants or of competent judicial authority.
The rescission of a contract under Article 1381(4) of the Civil Code only requires the concurrence of
the following: first, the defendant, during the pendency of the case, enters into a contract which refers
to the thing subject of litigation; and second, the said contract was entered into without the knowledge
and approval of the litigants or of a competent judicial authority. As long as the foregoing requisites
concur, it becomes the duty of the court to order the rescission of the said contract.
The reason for this is simple. Article 1381(4) seeks to remedy the presence of bad faith among the
parties to a case and/or any fraudulent act which they may commit with respect to the thing subject of
litigation.
When a thing is the subject of a judicial controversy, it should ultimately be bound by whatever
disposition the court shall render. The parties to the case are therefore expected, in deference to the
courts exercise of jurisdiction over the case, to refrain from doing acts which would dissipate or
debase the thing subject of the litigation or otherwise render the impending decision therein
ineffectual.
There is, then, a restriction on the disposition by the parties of the thing that is the subject of the
litigation. Article 1381(4) of the Civil Code requires that any contract entered into by a defendant in a
case which refers to things under litigation should be with the knowledge and approval of the litigants
or of a competent judicial authority.
Further, any disposition of the thing subject of litigation or any act which tends to render inutile the
courts impending disposition in such case, sans the knowledge and approval of the litigants or of the
court, is unmistakably and irrefutably indicative of bad faith. Such acts undermine the authority of the
court to lay down the respective rights of the parties in a case relative to the thing subject of litigation
and bind them to such determination.
It should be stressed, though, that the defendant in such a case is not absolutely proscribed from
entering into a contract which refer to things under litigation. If, for instance, a defendant enters into a
contract which conveys the thing under litigation during the pendency of the case, the conveyance
would be valid, there being no definite disposition yet coming from the court with respect to the thing
subject of litigation. After all, notwithstanding that the subject thereof is a thing under litigation, such
conveyance is but merely an exercise of ownership.
This is true even if the defendant effected the conveyance without the knowledge and approval of the
litigants or of a competent judicial authority. The absence of such knowledge or approval would not
precipitate the invalidity of an otherwise valid contract. Nevertheless, such contract, though
considered valid, may be rescinded at the instance of the other litigants pursuant to Article 1381(4) of
the Civil Code.
Here, contrary to the CAs disposition, the RTC aptly ordered the rescission of the donation inter vivos
of Lot No. 4709 and half of Lot No. 4706 in favor of Florante. The petitioners had sufficiently
established the presence of the requisites for the rescission of a contract pursuant to Article 1381(4)
of the Civil Code. It is undisputed that, at the time they were gratuitously conveyed by Rita, Lot No.
4709 and half of Lot No. 4706 are among the properties that were the subject of the partition case
then pending with the RTC. It is also undisputed that Rita, then one of the defendants in the partition
case with the RTC, did not inform nor sought the approval from the petitioners or of the RTC with
regard to the donation inter vivos of the said parcels of land to Florante.
Although the gratuitous conveyance of the said parcels of land in favor of Florante was valid, the
donation inter vivos of the same being merely an exercise of ownership, Ritas failure to inform and
seek the approval of the petitioners or the RTC regarding the conveyance gave the petitioners the
right to have the said donation rescinded pursuant to Article 1381(4) of the Civil Code.
Rescission under Article 1381(4) of
the Civil Code is not preconditioned
upon the judicial determination as
to the ownership of the thing
subject of litigation.
In this regard, we also find the assertion that rescission may only be had after the RTC had finally
determined that the parcels of land belonged to the estate of Spouses Baylon intrinsically amiss. The
petitioners right to institute the action for rescission pursuant to Article 1381(4) of the Civil Code is
not preconditioned upon the RTCs determination as to the ownership of the said parcels of land.
It bears stressing that the right to ask for the rescission of a contract under Article 1381(4) of the Civil
Code is not contingent upon the final determination of the ownership of the thing subject of litigation.
The primordial purpose of Article 1381(4) of the Civil Code is to secure the possible effectivity of the
impending judgment by a court with respect to the thing subject of litigation. It seeks to protect the
binding effect of a courts impending adjudication vis--vis the thing subject of litigation regardless of
which among the contending claims therein would subsequently be upheld. Accordingly, a definitive
judicial determination with respect to the thing subject of litigation is not a condition sine qua non
before the rescissory action contemplated under Article 1381(4) of the Civil Code may be instituted.
Moreover, conceding that the right to bring the rescissory action pursuant to Article 1381(4) of the
Civil Code is preconditioned upon a judicial determination with regard to the thing subject litigation,
this would only bring about the very predicament that the said provision of law seeks to obviate.
Assuming arguendo that a rescissory action under Article 1381(4) of the Civil Code could only be
instituted after the dispute with respect to the thing subject of litigation is judicially determined, there is
the possibility that the same may had already been conveyed to third persons acting in good faith,
rendering any judicial determination with regard to the thing subject of litigation illusory. Surely, this
paradoxical eventuality is not what the law had envisioned.
Even if the donation inter vivos is
validly rescinded, a determination
as to the ownership of the subject
parcels of land is still necessary.
Having established that the RTC had aptly ordered the rescission of the said donation inter vivos in
favor of Florante, the issue that has to be resolved by this Court is whether there is still a need to
determine the ownership of Lot No. 4709 and half of Lot No. 4706.
In opting not to make a determination as to the ownership of Lot No. 4709 and half of Lot No. 4706,
the RTC reasoned that the parties in the proceedings before it constitute not only the surviving heirs
of Spouses Baylon but the surviving heirs of Rita as well. As intimated earlier, Rita died intestate
during the pendency of the proceedings with the RTC without any issue, leaving the parties in the
proceedings before the RTC as her surviving heirs. Thus, the RTC insinuated, a definitive
determination as to the ownership of the said parcels of land is unnecessary since, in any case, the
said parcels of land would ultimately be adjudicated to the parties in the proceedings before it.
We do not agree.
Admittedly, whoever may be adjudicated as the owner of Lot No. 4709 and half of Lot No. 4706, be it
Rita or Spouses Baylon, the same would ultimately be transmitted to the parties in the proceedings
before the RTC as they are the only surviving heirs of both Spouses Baylon and Rita. However, the
RTC failed to realize that a definitive adjudication as to the ownership of Lot No. 4709 and half of Lot
No. 4706 is essential in this case as it affects the authority of the RTC to direct the partition of the
said parcels of land. Simply put, the RTC cannot properly direct the partition of Lot No. 4709 and half
of Lot No. 4706 until and unless it determines that the said parcels of land indeed form part of the
estate of Spouses Baylon.
It should be stressed that the partition proceedings before the RTC only covers the properties co-
owned by the parties therein in their respective capacity as the surviving heirs of Spouses Baylon.
Hence, the authority of the RTC to issue an order of partition in the proceedings before it only affects
those properties which actually belonged to the estate of Spouses Baylon.
In this regard, if Lot No. 4709 and half of Lot No. 4706, as unwaveringly claimed by Florante, are
indeed exclusively owned by Rita, then the said parcels of land may not be partitioned simultaneously
with the other properties subject of the partition case before the RTC. In such case, although the
parties in the case before the RTC are still co-owners of the said parcels of land, the RTC would not
have the authority to direct the partition of the said parcels of land as the proceedings before it is only
concerned with the estate of Spouses Baylon.
WHEREFORE, in consideration of the foregoing disquisitions, the petition is PARTIALLY GRANTED.
The Decision dated October 26, 2007 issued by the Court of Appeals in CA-G.R. CV No. 01746
is MODIFIED in that the Decision dated October 20, 2005 issued by the Regional Trial Court, Tanjay
City, Negros Oriental, Branch 43 in Civil Case No. 11657, insofar as it decreed the rescission of the
Deed of Donation dated July 6, 1997 is herebyREINSTATED. The case is REMANDED to the trial
court for the determination of the ownership of Lot No. 4709 and half of Lot No. 4706 in accordance
with this Decision.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO<br />Senior Associate Justice
Chairperson, Second Division
ARTURO D. BRION
Associate Justice
MARTIN S. VILLARAMA, JR.
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice
C E R T I F I C A T I O N
I certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.
ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296
The Judiciary Act of 1948, as amended)


Footnotes
*
Additional member per Special Order No. 1274 dated July 30, 2012 vice Associate Justice
Maria Lourdes P.A. Sereno.
1
Penned by Associate Justice Amy C. Lazaro-Javier, with Associate Justices Pampio A.
Abarintos and Francisco P. Acosta, concurring; rolla, pp. 17-24.
2
Under the sal a of Judge Winston M. Villegas; id. at 68-77.
3
Id. at 59.
4
Id. at 36-51.
5
Covered by Original Certificate of Title (OCT) Nos. FV-17761, FV-17763, FV-17753, FV-
17775, FV-29781, FV-17757, FV-17754, FV-17776, FV-17778, FV-17760, FV-17758, FV-
17762, FV-17764, FV-17766, FV-17767, FV-17769 and FV-27756 and Tax Declaration Nos.
85-11-071, 85-04-019, 85-11-013, 85-06-047, 85-06-048, 85-07-069, 88-06-109-A, 94-25-
0021-A, 94-25-0020-A, 94-25-0056-A, 94-25-0057-A, 94-25-0286-A, 94-25-0285-A, 85-13-086,
85-06-007, 85-13-148, 85-09-010-A, 85-13-047, 85-09-076-A, 85-09-054-A, 93-001-10-270R,
85-09-044-A, 85-08-035, 85-08-058, 85-09-134 and 85-11-068.
6
Covered by Transfer Certificate of Title (TCT) No. 2775.
7
Covered by TCT No. 2973.
8
Rollo, pp. 53-55.
9
OCT Nos. FV-17761, FV-17763, FV-17753, FV-29781, FV-17754, FV-17760, FV-17764, FV-
17767 and FV-17769 and Tax Declaration Nos. 85-11-071, 85-11-013, 85-06-047, 85-06-048,
94-25-0285-A, 85-06-007, 85-13-148, 85-09-010-A, 85-09-054-A, 93-001-10-270R, 85-09-044-
A, 85-08-035 and 85-09-134.
10
OCT Nos. FV-17757, FV-17758, FV-17762, FV-17766 and FV-27756 and Tax Declaration
Nos. 88-06-109-A, 94-25-0057-A, 85-13-086, 85-13-047 and 85-09-076-A.
11
OCT No. FV-17778 and Tax Declaration No. 85-11-068.
12
OCT Nos. FV-17775 and FV-17776 and Tax Declaration Nos. 85-07-069, 94-25-0056-A and
85-08-058.
13
Tax Declaration No. 85-04-019.
14
Tax Declaration No. 94-25-0021-A.
15
Tax Declaration No. 94-25-0020-A.
16
Tax Declaration No. 94-25-0286-A.
17
Rollo, pp. 57-58.
18
Id. at 20.
19
Id. at 68-77.
20
Id. at 77.
21
Id. at 76-77.
22
Id. at 78-79.
23
Id. at 80-81.
24
Id. at 17-24.
25
Id. at 23.
26
Id. at 22-23.
27
Id. at 25-28.
28
Id. at 31.
29
Republic v. Hernandez, 323 Phil. 606, 624-625 (1996).
30
Id. at 625.
31
THE RULES OF COURT, Rule 2, Section 5.
32
See Francisco, Remedial Law Compendium, Vol. 1, 9th Rev. Ed., p. 77.
33
THE RULES OF COURT, Rule 2, Section 6.
34
498 Phil. 227 (2005).
35
Id. at 237-239.
36
534 Phil. 246 (2006).
37
Id. at 260.
38
252 Phil. 737 (1989).
39
496 Phil. 263 (2005).
40
Rollo, pp. 96-99.
41
Tolentino, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE
PHILIPPINES, Vol. IV, 1991 ed., p. 570.
42
Caguioa, Comments and Cases on Civil Law, Vol. IV, 1968 ed., pp. 443-444.
43
See CIVIL CODE OF THE PHILIPPINES, Articles 1381(1) and (2) and 1098.
44
See CIVIL CODE OF THE PHILIPPINES, Articles 1381(3) and (4) and 1382.
45
See CIVIL CODE OF THE PHILIPPINES, Articles 1189, 1191, 1526, 1534, 1538, 1539,
1542, 1556, 1560, 1567 and 1659.
46
Supra note 42, at 446; Reyes and Puno, An Outline of Philippine Civil Law, Vol. IV, 1957
ed., pp. 233-235.

FIRST DIVISION
G.R. No. 162956 April 10, 2008
FAUSTINO REYES, ESPERIDION REYES, JULIETA C. RIVERA, and EUTIQUIO DICO,
JR., petitioners,
vs.
PETER B. ENRIQUEZ, for himself and Attorney-in-Fact of his daughter DEBORAH ANN C.
ENRIQUEZ, and SPS. DIONISIO FERNANDEZ and CATALINA FERNANDEZ, respondents.
D E C I S I O N
PUNO, C.J .:
This case is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court from the
decision of the Court of Appeals (CA) dated September 29, 2003 in CA G.R. CV No. 68147, entitled
"Peter B. Enriquez, et al. v. Faustino Reyes, et al., reversing the decision of the Regional Trial Court
(RTC) of Cebu City, Branch XI dated June 29, 2000, which dismissed the complaint filed by the
respondents herein.
1

The subject matter of the present case is a parcel of land known as Lot No. 1851 Flr-133 with an
aggregate area of 2,017 square meters located in Talisay, Cebu.
2

According to petitioners Faustino Reyes, Esperidion Reyes, Julieta C. Rivera, and Eutiquio Dico, Jr.,
they are the lawful heirs of Dionisia Reyes who co-owned the subject parcel of land with Anacleto
Cabrera as evidenced by Transfer Certificate of Title (TCT) No. RT-3551 (T-8070). On April 17, 1996,
petitioners executed an Extrajudicial Settlement with Sale of the Estate of Dionisia Reyes (the Extra
Judicial Settlement) involving a portion of the subject parcel of land. On March 21, 1997, the
petitioners and the known heirs of Anacleto Cabrera executed a Segregation of Real Estate and
Confirmation of Sale (the Segregation and Confirmation) over the same property. By virtue of the
aforestated documents, TCT No. RT-35551 (T-8070) was cancelled and new TCTs were issued: (1)
TCT No. T-98576 in the name of Anacleto Cabrera covering Lot 1851-A; (2) TCT No. T-98577
covering Lot 1851-B in the name of petitioner Eutiquio Dico, Jr.; (3) TCT No. T-98578 covering Lot
1851-C in the name of petitioner Faustino Reyes; (4) TCT No. T-98579 covering Lot 1851-D in the
name of petitioner Esperidion Reyes; (5) TCT No. T-98580 covering Lot 1851-E in the name of
petitioner Julieta G. Rivera; (6) TCT No. T-98581 covering Lot 1851-F in the name of Felipe Dico; and
(7) TCT No. T-98582 covering Lot 1851-G in the name of Archimedes C. Villaluz.
3

Respondents Peter B. Enriquez (Peter) for himself and on behalf of his minor daughter Deborah Ann
C. Enriquez (Deborah Ann), also known as Dina Abdullah Enriquez Alsagoff, on the other hand,
alleges that their predecessor-in-interest Anacleto Cabrera and his wife Patricia Seguera Cabrera
(collectively the Spouses Cabrera) owned pro-indiviso share in the subject parcel of land or 1051
sq. m. They further allege that Spouses Cabrera were survived by two daughters Graciana, who
died single and without issue, and Etta, the wife of respondent Peter and mother of respondent
Deborah Ann who succeeded their parents rights and took possession of the 1051 sq. m. of the
subject parcel of land. During her lifetime, Graciana sold her share over the land to Etta. Thus,
making the latter the sole owner of the one-half share of the subject parcel of land. Subsequently,
Etta died and the property passed on to petitioners Peter and Deborah Ann by virtue of an Extra-
Judicial Settlement of Estate. On June 19, 1999, petitioners Peter and Deborah Ann sold 200 sq. m.
out of the 1051 sq. m. for P200,000.00 to Spouses Dionisio and Catalina Fernandez (Spouses
Fernandez), also their co-respondents in the case at bar. After the sale, Spouses Fernandez took
possession of the said area in the subject parcel of land.
4

When Spouses Fernandez, tried to register their share in the subject land, they discovered that
certain documents prevent them from doing so: (1) Affidavit by Anacleto Cabrera dated March 16,
1957 stating that his share in Lot No. 1851, the subject property, is approximately 369 sq. m.; (2)
Affidavit by Dionisia Reyes dated July 13, 1929 stating that Anacleto only owned of Lot No. 1851,
while 302.55 sq. m. belongs to Dionisia and the rest of the property is co-owned by Nicolasa Bacalso,
Juan Reyes, Florentino Reyes and Maximiano Dico; (3) Extra-Judicial Settlement with Sale of the
Estate of Dionisia Reyes dated April 17, 1996; (4) certificates of title in the name of the herein
petitioners; and (5) Deed of Segregation of Real Estate and Confirmation of Sale dated March 21,
1997 executed by the alleged heirs of Dionisia Reyes and Anacleto Cabrera. Alleging that the
foregoing documents are fraudulent and fictitious, the respondents filed a complaint for annulment or
nullification of the aforementioned documents and for damages.
5
They likewise prayed for the
"repartition and resubdivision" of the subject property.
6

The RTC, upon motion of the herein petitioners, dismissed the case on the ground that the
respondents-plaintiffs were actually seeking first and foremost to be declared heirs of Anacleto
Cabrera since they can not demand the partition of the real property without first being declared as
legal heirs and such may not be done in an ordinary civil action, as in this case, but through a special
proceeding specifically instituted for the purpose.
7

On appeal, the Court of Appeals (CA) reversed the RTC and directed the trial court to proceed with
the hearing of the case.
8
The Motion for Reconsideration filed by the herein petitioners was similarly
denied.
9

Hence this petition.
The primary issue in this case is whether or not the respondents have to institute a special
proceeding to determine their status as heirs of Anacleto Cabrera before they can file an ordinary civil
action to nullify the affidavits of Anacleto Cabrera and Dionisia Reyes, the Extra-Judicial Settlement
with the Sale of Estate of Dionisia Reyes, and the Deed of Segregation of Real Estate and
Confirmation of Sale executed by the heirs of Dionisia Reyes and the heirs of Anacleto Cabrera, as
well as to cancel the new transfer certificates of title issued by virtue of the above-questioned
documents.
We answer in the affirmative.
An ordinary civil action is one by which a party sues another for the enforcement or protection of a
right, or the prevention or redress of a wrong.
10
A special proceeding, on the other hand, is a remedy
by which a party seeks to establish a status, a right or a particular fact.
11

The Rules of Court provide that only a real party in interest is allowed to prosecute and defend an
action in court.
12
A real party in interest is the one who stands to be benefited or injured by the
judgment in the suit or the one entitled to the avails thereof.
13
Such interest, to be considered a real
interest, must be one which is present and substantial, as distinguished from a mere expectancy, or a
future, contingent, subordinate or consequential interest.
14
A plaintiff is a real party in interest when
he is the one who has a legal right to enforce or protect, while a defendant is a real party in interest
when he is the one who has a correlative legal obligation to redress a wrong done to the plaintiff by
reason of the defendants act or omission which had violated the legal right of the former.
15
The
purpose of the rule is to protect persons against undue and unnecessary litigation.
16
It likewise
ensures that the court will have the benefit of having before it the real adverse parties in the
consideration of a case.
17
Thus, a plaintiffs right to institute an ordinary civil action should be based
on his own right to the relief sought.
In cases wherein alleged heirs of a decedent in whose name a property was registered sue to recover
the said property through the institution of an ordinary civil action, such as a complaint for
reconveyance and partition,
18
or nullification of transfer certificate of titles and other deeds or
documents related thereto,
19
this Court has consistently ruled that a declaration of heirship is
improper in an ordinary civil action since the matter is "within the exclusive competence of the court in
a special proceeding."
20
In the recent case of Portugal v. Portugal-Beltran,
21
the Court had the
occasion to clarify its ruling on the issue at hand, to wit:
The common doctrine in Litam, Solivio and Guilas in which the adverse parties are putative
heirs to the estate of a decedent or parties to the special proceedings for its settlement is that if
the special proceedings are pending, or if there are no special proceedings filed but there
is, under the circumstances of the case, a need to file one, then the determination of,
among other issues, heirship should be raised and settled in said special
proceedings. Where special proceedings had been instituted but had been finally closed and
terminated, however, or if a putative heir has lost the right to have himself declared in the
special proceedings as co-heir and he can no longer ask for its re-opening, then an ordinary
civil action can be filed for his declaration as heir in order to bring about the annulment of the
partition or distribution or adjudication of a property or properties belonging to the estate of the
deceased.
22

In the instant case, while the complaint was denominated as an action for the "Declaration of Non-
Existency[sic], Nullity of Deeds, and Cancellation of Certificates of Title, etc.," a review of the
allegations therein reveals that the right being asserted by the respondents are their right as heirs of
Anacleto Cabrera who they claim co-owned one-half of the subject property and not merely one-
fourth as stated in the documents the respondents sought to annul. As correctly pointed out by the
trial court, the ruling in the case of Heirs of Guido Yaptinchay v. Hon. Roy del Rosario
23
is
applicable in the case at bar. In the said case, the petitioners therein, claiming to be the legal heirs of
the late Guido and Isabel Yaptinchay filed for annulment of the transfer certificates of title issued in
the name of Golden Bay Realty Corporation on the ground that the subject properties rightfully belong
to the petitioners predecessor and by virtue of succession have passed on to them. In affirming the
trial court therein, this Court ruled:
...(T)he plaintiffs who claimed to be the legal heirs of the said Guido and Isabel Yaptinchay
have not shown any proof or even a semblance of it except the allegations that they are the
legal heirs of the aforementioned Yaptinchays that they have been declared the legal heirs
of the deceased couple. Now, the determination of who are the legal heirs of the deceased
couple must be made in the proper special proceedings in court, and not in an ordinary suit for
reconveyance of property. This must take precedence over the action for reconveyance.
24

In the same manner, the respondents herein, except for their allegations, have yet to substantiate
their claim as the legal heirs of Anacleto Cabrera who are, thus, entitled to the subject property.
Neither is there anything in the records of this case which would show that a special proceeding to
have themselves declared as heirs of Anacleto Cabrera had been instituted. As such, the trial court
correctly dismissed the case for there is a lack of cause of action when a case is instituted by parties
who are not real parties in interest. While a declaration of heirship was not prayed for in the
complaint, it is clear from the allegations therein that the right the respondents sought to protect or
enforce is that of an heir of one of the registered co-owners of the property prior to the issuance of the
new transfer certificates of title that they seek to cancel. Thus, there is a need to establish their status
as such heirs in the proper forum.
Furthermore, in Portugal,
25
the Court held that it would be superfluous to still subject the estate to
administration proceedings since a determination of the parties' status as heirs could be achieved in
the ordinary civil case filed because it appeared from the records of the case that the only property
left by the decedent was the subject matter of the case and that the parties have already presented
evidence to establish their right as heirs of the decedent. In the present case, however, nothing in the
records of this case shows that the only property left by the deceased Anacleto Cabrera is the subject
lot, and neither had respondents Peter and Deborah Ann presented any evidence to establish their
rights as heirs, considering especially that it appears that there are other heirs of Anacleto Cabrera
who are not parties in this case that had signed one of the questioned documents. Hence, under the
circumstances in this case, this Court finds that a determination of the rights of respondents Peter
and Deborah Ann as heirs of Anacleto Cabrera in a special proceeding is necessary.
IN VIEW WHEREOF, the petition is GRANTED. The decision of the Court of Appeals is
hereby REVERSED and the decision of the Regional Trial Court dated June 29,
2000 DISMISSING the complaint is REINSTATED.
No costs.
SO ORDERED.
REYNATO S. PUNO
Chief Justice


WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
RENATO C. CORONA
Associate Justice
*
ADOLFO S. AZCUNA
Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.
REYNATO S. PUNO
Chief Justice


Footnotes
*
On official leave.
1
Rollo, p. 10.
2
Id. at p. 88.
3
Id. at pp. 12-13.
4
Id. at pp. 88-89.
5
Id. at pp. 89-90.
6
Id. at p. 34.
7
Id. at pp. 43-44.
8
Id. at pp. 20-26.
9
Id. at pp. 28-29.
10
Sec. 1 (a), Rule 1, Rules of Court.
11
Id. at Sec. 1(c), Rule 1.
12
Id. at Sec. 2, Rule 3.
13
Id.
14
Ibonilla v. Province of Cebu, G.R. No. 97463, June 26, 1992 citing Garcia v. David, 67 Phil.
279 (1939).
15
Id. citing Lee v. Romillo, Jr., G.R. No. L-60937, May 28, 1988, 161 SCRA 589.
16
Fajardo v. Freedom to Build, Inc., 400 Phil. 1272 (2000) citing Moore v. Jamieson, 45L Pa
299, 306 A2d 283.
17
Id. citing Washakie Country School Dist. v. Herschier, (Wyo) 606 P2d 310 cert. den. 449
U.S. 824, 66 L. Ed. 2d 28, 101 S. Ct. 86.
18
Solivio v. Court of Appeals, G.R. No. 83484, February 12, 1990, 182 SCRA 119 (1990).
19
Portugal v. Portugal-Beltran, G.R. No. 155555, August 16, 2005, 467 SCRA 184.
20
Litam, etc., et al. v. Rivera, 100 Phil. 364 (1956).
21
Supra note 19.
22
Id; emphases supplied.
23
Heirs of Guido Yaptinchay v. Hon. Roy del Rosario, G.R. No. 124320, March 2, 1999, 304
SCRA 18.
24
Id.
25
Supra note 19.

SECOND DIVISION
G.R. No. 183984 April 13, 2011
ARTURO SARTE FLORES, Petitioner,
vs.
SPOUSES ENRICO L. LINDO, JR. and EDNA C. LINDO, Respondents.
D E C I S I O N
CARPIO, J .:
The Case
Before the Court is a petition for review
1
assailing the 30 May 2008 Decision
2
and the 4 August 2008
Resolution
3
of the Court of Appeals in CA-G.R. SP No. 94003.
The Antecedent Facts
The facts, as gleaned from the Court of Appeals Decision, are as follows:
On 31 October 1995, Edna Lindo (Edna) obtained a loan from Arturo Flores (petitioner) amounting
to P400,000 payable on 1 December 1995 with 3% compounded monthly interest and 3% surcharge
in case of late payment. To secure the loan, Edna executed a Deed of Real Estate Mortgage
4
(the
Deed) covering a property in the name of Edna and her husband Enrico (Enrico) Lindo, Jr.
(collectively, respondents). Edna also signed a Promissory Note
5
and the Deed for herself and for
Enrico as his attorney-in-fact.
Edna issued three checks as partial payments for the loan. All checks were dishonored for
insufficiency of funds, prompting petitioner to file a Complaint for Foreclosure of Mortgage with
Damages against respondents. The case was raffled to the Regional Trial Court of Manila, Branch 33
(RTC, Branch 33) and docketed as Civil Case No. 00-97942.
In its 30 September 2003 Decision,
6
the RTC, Branch 33 ruled that petitioner was not entitled to
judicial foreclosure of the mortgage. The RTC, Branch 33 found that the Deed was executed by Edna
without the consent and authority of Enrico. The RTC, Branch 33 noted that the Deed was executed
on 31 October 1995 while the Special Power of Attorney (SPA) executed by Enrico was only dated 4
November 1995.
The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the loan from
Edna as he could file a personal action against her. However, the RTC, Branch 33 ruled that it had no
jurisdiction over the personal action which should be filed in the place where the plaintiff or the
defendant resides in accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure.
Petitioner filed a motion for reconsideration. In its Order
7
dated 8 January 2004, the RTC, Branch 33
denied the motion for lack of merit.
On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages against
respondents. It was raffled to Branch 42 (RTC, Branch 42) of the Regional Trial Court of Manila, and
docketed as Civil Case No. 04-110858.
Respondents filed their Answer with Affirmative Defenses and Counterclaims where they admitted the
loan but stated that it only amounted to P340,000. Respondents further alleged that Enrico was not a
party to the loan because it was contracted by Edna without Enricos signature. Respondents prayed
for the dismissal of the case on the grounds of improper venue, res judicata and forum-shopping,
invoking the Decision of the RTC, Branch 33. On 7 March 2005, respondents also filed a Motion to
Dismiss on the grounds of res judicata and lack of cause of action.
The Decision of the Trial Court
On 22 July 2005, the RTC, Branch 42 issued an Order
8
denying the motion to dismiss. The RTC,
Branch 42 ruled that res judicata will not apply to rights, claims or demands which, although growing
out of the same subject matter, constitute separate or distinct causes of action and were not put in
issue in the former action. Respondents filed a motion for reconsideration. In its Order
9
dated 8
February 2006, the RTC, Branch 42 denied respondents motion. The RTC, Branch 42 ruled that the
RTC, Branch 33 expressly stated that its decision did not mean that petitioner could no longer recover
the loan petitioner extended to Edna.
Respondents filed a Petition for Certiorari and Mandamus with Prayer for a Writ of Preliminary
Injunction and/or Temporary Restraining Order before the Court of Appeals.
The Decision of the Court of Appeals
In its 30 May 2008 Decision, the Court of Appeals set aside the 22 July 2005 and 8 February 2006
Orders of the RTC, Branch 42 for having been issued with grave abuse of discretion.
The Court of Appeals ruled that while the general rule is that a motion to dismiss is interlocutory and
not appealable, the rule admits of exceptions. The Court of Appeals ruled that the RTC, Branch 42
acted with grave abuse of discretion in denying respondents motion to dismiss.
The Court of Appeals ruled that under Section 3, Rule 2 of the 1997 Rules of Civil Procedure, a party
may not institute more than one suit for a single cause of action. If two or more suits are instituted on
the basis of the same cause of action, the filing of one on a judgment upon the merits in any one is
available ground for the dismissal of the others. The Court of Appeals ruled that on a nonpayment of
a note secured by a mortgage, the creditor has a single cause of action against the debtor, that is
recovery of the credit with execution of the suit. Thus, the creditor may institute two alternative
remedies: either a personal action for the collection of debt or a real action to foreclose the mortgage,
but not both. The Court of Appeals ruled that petitioner had only one cause of action against Edna for
her failure to pay her obligation and he could not split the single cause of action by filing separately a
foreclosure proceeding and a collection case. By filing a petition for foreclosure of the real estate
mortgage, the Court of Appeals held that petitioner had already waived his personal action to recover
the amount covered by the promissory note.
Petitioner filed a motion for reconsideration. In its 4 August 2008 Resolution, the Court of Appeals
denied the motion.
Hence, the petition before this Court.
The Issue
The sole issue in this case is whether the Court of Appeals committed a reversible error in dismissing
the complaint for collection of sum of money on the ground of multiplicity of suits.
The Ruling of this Court
The petition has merit.
The rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor, that is,
to recover the debt.
10
The mortgage-creditor has the option of either filing a personal action for
collection of sum of money or instituting a real action to foreclose on the mortgage security.
11
An
election of the first bars recourse to the second, otherwise there would be multiplicity of suits in which
the debtor would be tossed from one venue to another depending on the location of the mortgaged
properties and the residence of the parties.
12

The two remedies are alternative and each remedy is complete by itself.
13
If the mortgagee opts to
foreclose the real estate mortgage, he waives the action for the collection of the debt, and vice
versa.
14
The Court explained:
x x x in the absence of express statutory provisions, a mortgage creditor may institute against the
mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In other
words, he may pursue either of the two remedies, but not both. By such election, his cause of action
can by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to
bring a personal action will leave open to him all the properties of the debtor for attachment and
execution, even including the mortgaged property itself. And, if he waives such personal action and
pursues his remedy against the mortgaged property, an unsatisfied judgment thereon would still give
him the right to sue for deficiency judgment, in which case, all the properties of the defendant, other
than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either
case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the
pursuit of one or the other remedy are purely accidental and are all under his right of election. On the
other hand, a rule that would authorize the plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the mortgaged property, would result not only
in multiplicity of suits so offensive to justice (Soriano v. Enriques, 24 Phil. 584) and obnoxious to law
and equity (Osorio v. San Agustin, 25 Phil. 404), but also in subjecting the defendant to the vexation
of being sued in the place of his residence or of the residence of the plaintiff, and then again in the
place where the property lies.
15

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

In this case, however, there are circumstances that the Court takes into consideration.
Petitioner filed an action for foreclosure of mortgage. The RTC, Branch 33 ruled that petitioner was
not entitled to judicial foreclosure because the Deed of Real Estate Mortgage was executed without
Enricos consent. The RTC, Branch 33 stated:
All these circumstances certainly conspired against the plaintiff who has the burden of proving his
cause of action. On the other hand, said circumstances tend to support the claim of defendant Edna
Lindo that her husband did not consent to the mortgage of their conjugal property and that the loan
application was her personal decision.
Accordingly, since the Deed of Real Estate Mortgage was executed by defendant Edna Lindo lacks
the consent or authority of her husband Enrico Lindo, the Deed of Real Estate Mortgage is void
pursuant to Article 96 of the Family Code.
This does not mean, however, that the plaintiff cannot recover the P400,000 loan plus interest which
he extended to defendant Edna Lindo. He can institute a personal action against the defendant for
the amount due which should be filed in the place where the plaintiff resides, or where the defendant
or any of the principal defendants resides at the election of the plaintiff in accordance with Section 2,
Rule 4 of the Revised Rules on Civil Procedure. This Court has no jurisdiction to try such personal
action.
17

Edna did not deny before the RTC, Branch 33 that she obtained the loan. She claimed, however, that
her husband did not give his consent and that he was not aware of the transaction.
18
Hence, the RTC,
Branch 33 held that petitioner could still recover the amount due from Edna through a personal action
over which it had no jurisdiction.
Edna also filed an action for declaratory relief before the RTC, Branch 93 of San Pedro Laguna (RTC,
Branch 93), which ruled:
At issue in this case is the validity of the promissory note and the Real Estate Mortgage executed by
Edna Lindo without the consent of her husband.
The real estate mortgage executed by petition Edna Lindo over their conjugal property is undoubtedly
an act of strict dominion and must be consented to by her husband to be effective. In the instant case,
the real estate mortgage, absent the authority or consent of the husband, is necessarily void. Indeed,
the real estate mortgage is this case was executed on October 31, 1995 and the subsequent special
power of attorney dated November 4, 1995 cannot be made to retroact to October 31, 1995 to
validate the mortgage previously made by petitioner.
The liability of Edna Lindo on the principal contract of the loan however subsists notwithstanding the
illegality of the mortgage. Indeed, where a mortgage is not valid, the principal obligation which it
guarantees is not thereby rendered null and void. That obligation matures and becomes demandable
in accordance with the stipulation pertaining to it. Under the foregoing circumstances, what is lost is
merely the right to foreclose the mortgage as a special remedy for satisfying or settling the
indebtedness which is the principal obligation. In case of nullity, the mortgage deed remains as
evidence or proof of a personal obligation of the debtor and the amount due to the creditor may be
enforced in an ordinary action.
In view of the foregoing, judgment is hereby rendered declaring the deed of real estate mortgage as
void in the absence of the authority or consent of petitioners spouse therein. The liability of petitioner
on the principal contract of loan however subsists notwithstanding the illegality of the real estate
mortgage.
19

The RTC, Branch 93 also ruled that Ednas liability is not affected by the illegality of the real estate
mortgage.
Both the RTC, Branch 33 and the RTC, Branch 93 misapplied the rules.
Article 124 of the Family Code provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both
spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to
the court by the wife for proper remedy, which must be availed of within five years from the date of
contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the administration
of the conjugal properties, the other spouse may assume sole powers of administration. These
powers do not include disposition or encumbrance without authority of the court or the written consent
of the other spouse. In the absence of such authority or consent the disposition or encumbrance shall
be void. However, the transaction shall be construed as a continuing offer on the part of the
consenting spouse and the third person, and may be perfected as a binding contract upon the
acceptance by the other spouse or authorization by the court before the offer is withdrawn by
either or both offerors. (Emphasis supplied)
Article 124 of the Family Code of which applies to conjugal partnership property, is a reproduction of
Article 96 of the Family Code which applies to community property.
Both Article 96 and Article 127 of the Family Code provide that the powers do not include disposition
or encumbrance without the written consent of the other spouse. Any disposition or encumbrance
without the written consent shall be void. However, both provisions also state that "the transaction
shall be construed as a continuing offer on the part of the consenting spouse and the third
person, and may be perfected as a binding contract upon the acceptance by the other
spouse x x x before the offer is withdrawn by either or both offerors."
In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31
October 1995. The Special Power of Attorney was executed on 4 November 1995. The execution of
the SPA is the acceptance by the other spouse that perfected the continuing offer as a binding
contract between the parties, making the Deed of Real Estate Mortgage a valid contract.
However, as the Court of Appeals noted, petitioner allowed the decisions of the RTC, Branch 33 and
the RTC, Branch 93 to become final and executory without asking the courts for an alternative relief.
The Court of Appeals stated that petitioner merely relied on the declarations of these courts that he
could file a separate personal action and thus failed to observe the rules and settled jurisprudence on
multiplicity of suits, closing petitioners avenue for recovery of the loan.
Nevertheless, petitioner still has a remedy under the law.
In Chieng v. Santos,
20
this Court ruled that a mortgage-creditor may institute against the mortgage-
debtor either a personal action for debt or a real action to foreclose the mortgage. The Court ruled
that the remedies are alternative and not cumulative and held that the filing of a criminal action for
violation of Batas Pambansa Blg. 22 was in effect a collection suit or a suit for the recovery of the
mortgage-debt.
21
In that case, however, this Courtpro hac vice, ruled that respondents could still be
held liable for the balance of the loan, applying the principle that no person may unjustly enrich
himself at the expense of another.
22

The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides:
Art. 22. Every person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall
return the same to him.
There is unjust enrichment "when a person unjustly retains a benefit to the loss of another, or when a
person retains money or property of another against the fundamental principles of justice, equity and
good conscience."
23
The principle of unjust enrichment requires two conditions: (1) that a person is
benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of
another.
24
1avvphi1
The main objective of the principle against unjust enrichment is to prevent one from enriching himself
at the expense of another without just cause or consideration.
25
The principle is applicable in this
case considering that Edna admitted obtaining a loan from petitioners, and the same has not been
fully paid without just cause. The Deed was declared void erroneously at the instance of Edna, first
when she raised it as a defense before the RTC, Branch 33 and second, when she filed an action for
declaratory relief before the RTC, Branch 93. Petitioner could not be expected to ask the RTC,
Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he should have done,
because the RTC, Branch 33 already stated that it had no jurisdiction over any personal action that
petitioner might have against Edna.
Considering the circumstances of this case, the principle against unjust enrichment, being a
substantive law, should prevail over the procedural rule on multiplicity of suits. The Court of Appeals,
in the assailed decision, found that Edna admitted the loan, except that she claimed it only amounted
to P340,000. Edna should not be allowed to unjustly enrich herself because of the erroneous
decisions of the two trial courts when she questioned the validity of the Deed. Moreover, Edna still
has an opportunity to submit her defenses before the RTC, Branch 42 on her claim as to the amount
of her indebtedness.
WHEREFORE, the 30 May 2008 Decision and the 4 August 2008 Resolution of the Court of Appeals
in CA-G.R. SP No. 94003 are SET ASIDE. The Regional Trial Court of Manila, Branch 42 is directed
to proceed with the trial of Civil Case No. 04-110858.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
ANTONIO EDUARDO B. NACHURA
Associate Justice
DIOSDADO M. PERALTA
Associate Justice
ROBERTO A. ABAD
Associate Justice
JOSE C. MENDOZA
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Chief Justice


Footnotes
1
Under Rule 45 of the 1997 Rules of Civil Procedure.
2
Rollo, pp. 7-16. Penned by Associate Justice Noel G. Tijam with Associate Justices Martin S.
Villarama, Jr. (now Supreme Court Justice) and Andres B. Reyes, Jr., concurring.
3
Id. at 18-20.
4
Id. at 53-60.
5
Id. at 52.
6
Id. at 84-88. Penned by Judge Reynaldo G. Ros.
7
Id. at 89-90.
8
Id. at 48-50. Penned by Judge Guillermo G. Purganan.
9
Id. at 51. Penned by Judge Vedasto R. Marco.
10
Tanchan v. Allied Banking Corporation, G.R. No. 164510, 25 November 2008, 571 SCRA
512.
11
Id.
12
Id.
13
BPI Family Savings Bank, Inc. v. Vda. De Coscolluela, G.R. No. 167724, 27 June 2006, 493
SCRA 472.
14
Id.
15
Id. at 493 citing Bachrach Motor Co., Inc. v. Esteban Icaragal and Oriental Commercial Co.,
Inc., 68 Phil. 287 (1939).
16
Id.
17
Rollo, pp. 87-88.
18
Id. at 86.
19
Id. at 81-82.
20
G.R. No. 169647, 31 August 2007, 531 SCRA 730.
21
Id.
22
Id.
23
Republic v. Court of Appeals, G.R. No. 160379, 14 August 2009, 596 SCRA 57
citing Benguet Corporation v. Department of Environment and Natural Resources-Mines
Adjudication Board, G.R. No. 163101, 13 February 2008, 545 SCRA 196 and Cool Car
Philippines, Inc. v. Ushio Realty and Development Corporation, G.R. No. 138088, 23 Janaury
2006, 479 SCRA 404.
24
Republic v. Court of Appeals, supra.
25
P.C. Javier & Sons, Inc. v. Court of Appeals, 500 Phil. 419 (2005).

THIRD DIVISION
G.R. No. 157547 February 23, 2011
HEIRS OF EDUARDO SIMON, Petitioners,
vs.
ELVIN
*
CHAN AND THE COURT OF APPEALS, Respondent.
D E C I S I O N
BERSAMIN, J .:
There is no independent civil action to recover the civil liability arising from the issuance of an
unfunded check prohibited and punished under Batas Pambansa Bilang 22 (BP 22).
Antecedents
On July 11, 1997, the Office of the City Prosecutor of Manila filed in the Metropolitan Trial Court of
Manila (MeTC) an information charging the late Eduardo Simon (Simon) with a violation of BP 22,
docketed as Criminal Case No. 275381 entitled People v. Eduardo Simon. The accusatory portion
reads:
That sometime in December 1996 in the City of Manila, Philippines, the said accused, did then and
there willfully, unlawfully and feloniously make or draw and issue to Elvin Chan to apply on account or
for value Landbank Check No. 0007280 dated December 26, 1996 payable to cash in the amount
of P336,000.00 said accused well knowing that at the time of issue she/he/they did not have sufficient
funds in or credit with the drawee bank for payment of such check in full upon its presentment, which
check when presented for payment within ninety (90) days from the date thereof was subsequently
dishonored by the drawee bank for Account Closed and despite receipt of notice of such dishonor,
said accused failed to pay said Elvin Chan the amount of the check or to make arrangement for full
payment of the same within five (5) banking days after receiving said notice.
CONTRARY TO LAW.
1

More than three years later, or on August 3, 2000, respondent Elvin Chan commenced in the MeTC
in Pasay City a civil action for the collection of the principal amount of P336,000.00, coupled with an
application for a writ of preliminary attachment (docketed as Civil Case No. 915-00).
2
He alleged in
his complaint the following:
xxx
2. Sometime in December 1996 defendant employing fraud, deceit, and misrepresentation
encashed a check dated December 26, 1996 in the amount of P336,000.00 to the plaintiff
assuring the latter that the check is duly funded and that he had an existing account with the
Land Bank of the Philippines, xerox copy of the said check is hereto attached as Annex "A";
3. However, when said check was presented for payment the same was dishonored on the
ground that the account of the defendant with the Land Bank of the Philippines has been
closed contrary to his representation that he has an existing account with the said bank and
that the said check was duly funded and will be honored when presented for payment;
4. Demands had been made to the defendant for him to make good the payment of the value
of the check, xerox copy of the letter of demand is hereto attached as Annex "B", but despite
such demand defendant refused and continues to refuse to comply with plaintiffs valid
demand;
5. Due to the unlawful failure of the defendant to comply with the plaintiffs valid demands,
plaintiff has been compelled to retain the services of counsel for which he agreed to pay as
reasonable attorneys fees the amount of P50,000.00 plus additional amount of P2,000.00 per
appearance.
ALLEGATION IN SUPPORT OF PRAYER
FOR PRELIMINARY ATTACHMENT
6. The defendant as previously alleged has been guilty of fraud in contracting the obligation
upon which this action is brought and that there is no sufficient security for the claims sought in
this action which fraud consist in the misrepresentation by the defendant that he has an
existing account and sufficient funds to cover the check when in fact his account was already
closed at the time he issued a check;
7. That the plaintiff has a sufficient cause of action and this action is one which falls under
Section 1, sub-paragraph (d), Rule 57 of the Revised Rules of Court of the Philippines and the
amount due the plaintiff is as much as the sum for which the plaintiff seeks the writ of
preliminary attachment;
8. That the plaintiff is willing and able to post a bond conditioned upon the payment of
damages should it be finally found out that the plaintiff is not entitled to the issuance of a writ of
preliminary attachment.
3

On August 9, 2000, the MeTC in Pasay City issued a writ of preliminary attachment, which was
implemented on August 17, 2000 through the sheriff attaching a Nissan vehicle of Simon.
4

On August 17, 2000, Simon filed an urgent motion to dismiss with application to charge plaintiffs
attachment bond for damages,
5
pertinently averring:
xxx
On the ground of litis pendentia, that is, as a consequence of the pendency of another action between
the instant parties for the same cause before the Metropolitan Trial Court of Manila, Branch X (10)
entitled "People of the Philippines vs. Eduardo Simon", docketed thereat as Criminal Case No.
275381-CR, the instant action is dismissable under Section 1, (e), Rule 16, 1997 Rules of Civil
Procedure, xxx
xxx
While the instant case is civil in nature and character as contradistinguished from the said Criminal
Case No. 915-00 in the Metropolitan Trial Court of Manila, Branch X (10), the basis of the instant civil
action is the herein plaintiffs criminal complaint against defendant arising from a charge of violation of
Batas Pambansa Blg. 22 as a consequence of the alleged dishonor in plaintiffs hands upon
presentment for payment with drawee bank a Land Bank Check No. 0007280 dated December 26,
1996 in the amount of P336,000- drawn allegedly issued to plaintiff by defendant who is the accused
in said case, a photocopy of the Criminal information filed by the Assistant City Prosecutor of Manila
on June 11, 1997 hereto attached and made integral part hereof as Annex "1".
It is our understanding of the law and the rules, that, "when a criminal action is instituted, the civil
action for recovery of civil liability arising from the offense charged is impliedly instituted with the
criminal action, unless the offended party expressly waives the civil action or reserves his right to
institute it separately xxx.
On August 29, 2000, Chan opposed Simons urgent motion to dismiss with application to charge
plaintiffs attachment bond for damages, stating:
1. The sole ground upon which defendant seeks to dismiss plaintiffs complaint is the alleged
pendency of another action between the same parties for the same cause, contending among
others that the pendency of Criminal Case No. 275381-CR entitled "People of the Philippines
vs. Eduardo Simon" renders this case dismissable;
2. The defendant further contends that under Section 1, Rule 111 of the Revised Rules of
Court, the filing of the criminal action, the civil action for recovery of civil liability arising from
the offense charged is impliedly instituted with the criminal action which the plaintiff does not
contest; however, it is the submission of the plaintiff that an implied reservation of the right to
file a civil action has already been made, first, by the fact that the information for violation of
B.P. 22 in Criminal Case No. 2753841 does not at all make any allegation of damages suffered
by the plaintiff nor is there any claim for recovery of damages; on top of this the plaintiff as
private complainant in the criminal case, during the presentation of the prosecution evidence
was not represented at all by a private prosecutor such that no evidence has been adduced by
the prosecution on the criminal case to prove damages; all of these we respectfully submit
demonstrate an effective implied reservation of the right of the plaintiff to file a separate civil
action for damages;
3. The defendant relies on Section 3 sub-paragraph (a) Rule 111 of the Revised Rules of Court
which mandates that after a criminal action has been commenced the civil action cannot be
instituted until final judgment has been rendered in the criminal action; however, the defendant
overlooks and conveniently failed to consider that under Section 2, Rule 111 which provides as
follows:
In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code of the
Philippines, an independent civil action entirely separate and distinct from the criminal action,
may be brought by the injured party during the pendency of criminal case provided the right is
reserved as required in the preceding section. Such civil action shall proceed independently of
the criminal prosecution, and shall require only a preponderance of evidence.
In as much as the case is one that falls under Art. 33 of the Civil Code of the Philippines as it is
based on fraud, this action therefore may be prosecuted independently of the criminal action;
4. In fact we would even venture to state that even without any reservation at all of the right to
file a separate civil action still the plaintiff is authorized to file this instant case because the
plaintiff seeks to enforce an obligation which the defendant owes to the plaintiff by virtue of the
negotiable instruments law. The plaintiff in this case sued the defendant to enforce his liability
as drawer in favor of the plaintiff as payee of the check. Assuming the allegation of the
defendant of the alleged circumstances relative to the issuance of the check, still when he
delivered the check payable to bearer to that certain Pedro Domingo, as it was payable to
cash, the same may be negotiated by delivery by who ever was the bearer of the check and
such negotiation was valid and effective against the drawer;
5. Indeed, assuming as true the allegations of the defendant regarding the circumstances
relative to the issuance of the check it would be entirely impossible for the plaintiff to have
been aware that such check was intended only for a definite person and was not negotiable
considering that the said check was payable to bearer and was not even crossed;
6. We contend that what cannot be prosecuted separate and apart from the criminal case
without a reservation is a civil action arising from the criminal offense charged. However, in this
instant case since the liability of the defendant are imposed and the rights of the plaintiff are
created by the negotiable instruments law, even without any reservation at all this instant
action may still be prosecuted;
7. Having this shown, the merits of plaintiffs complaint the application for damages against the
bond is totally without any legal support and perforce should be dismissed outright.
6

On October 23, 2000, the MeTC in Pasay City granted Simons urgent motion to dismiss with
application to charge plaintiffs attachment bond for damages,
7
dismissing the complaint of Chan
because:
xxx
After study of the arguments of the parties, the court resolves to GRANT the Motion to Dismiss and
the application to charge plaintiffs bond for damages.
For "litis pendentia" to be a ground for the dismissal of an action, the following requisites must concur:
(a) identity of parties or at least such as to represent the same interest in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded on the same acts; and (c) the identity in
the two (2) cases should be such that the judgment, which may be rendered in one would, regardless
of which party is successful, amount to res judicata in the other. xxx
A close perusal of the herein complaint denominated as "Sum of Money" and the criminal case for
violation of BP Blg. 22 would readily show that the parties are not only identical but also the cause of
action being asserted, which is the recovery of the value of Landbank Check No. 0007280 in the
amount of P336,000.00. In both civil and criminal cases, the rights asserted and relief prayed for, the
reliefs being founded on the same facts, are identical.
Plaintiffs claim that there is an effective implied waiver of his right to pursue this civil case owing to
the fact that there was no allegation of damages in BP Blg. 22 case and that there was no private
prosecutor during the presentation of prosecution evidence is unmeritorious. It is basic that when a
complaint or criminal Information is filed, even without any allegation of damages and the intention to
prove and claim them, the offended party has the right to prove and claim for them, unless a waiver or
reservation is made or unless in the meantime, the offended party has instituted a separate civil
action. xxx The over-all import of the said provision conveys that the waiver which includes indemnity
under the Revised Penal Code, and damages arising under Articles 32, 33, and 34 of the Civil Code
must be both clear and express. And this must be logically so as the primordial objective of the Rule
is to prevent the offended party from recovering damages twice for the same act or omission of the
accused.
Indeed, the evidence discloses that the plaintiff did not waive or made a reservation as to his right to
pursue the civil branch of the criminal case for violation of BP Blg. 22 against the defendant herein.
To the considered view of this court, the filing of the instant complaint for sum of money is indeed
legally barred. The right to institute a separate civil action shall be made before the prosecution starts
to present its evidence and under circumstances affording the offended party a reasonable
opportunity to make such reservation. xxx
Even assuming the correctness of the plaintiffs submission that the herein case for sum of money is
one based on fraud and hence falling under Article 33 of the Civil Code, still prior reservation is
required by the Rules, to wit:
"In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code of the Philippines, an
independent civil action entirely separate and distinct from the criminal action, may be brought by the
injured party during the pendency of criminal case provided the right is reserved as required in the
preceding section. Such civil action shall proceed independently of the criminal prosecution, and shall
require only a preponderance of evidence."
xxx
WHEREFORE, premises considered, the court resolves to:
1. Dismiss the instant complaint on the ground of "litis pendentia";
2. Dissolve/Lift the Writ of Attachment issued by this court on August 14, 2000;
3. Charge the plaintiffs bond the amount of P336,000.00 in favor of the defendant for the
damages sustained by the latter by virtue of the implementation of the writ of attachment;
4. Direct the Branch Sheriff of this Court to RESTORE with utmost dispatch to the defendants
physical possession the vehicle seized from him on August 16, 2000; and
5. Direct the plaintiff to pay the defendant the sum of P5,000.00 by way of attorneys fees.
SO ORDERED.
Chans motion for reconsideration was denied on December 20, 2000,
8
viz:
Considering that the plaintiffs arguments appear to be a mere repetition of his previous submissions,
and which submissions this court have already passed upon; and taking into account the
inapplicability of the ratio decidendi in the Tactaquin vs. Palileo case which the plaintiff cited as clearly
in that case, the plaintiff therein expressly made a reservation to file a separate civil action, the Motion
for Reconsideration is DENIED for lack of merit.
SO ORDERED.
On July 31, 2001, the Regional Trial Court (RTC) in Pasay City upheld the dismissal of Chans
complaint, disposing:
9

WHEREFORE, finding no error in the appealed decision, the same is hereby AFFIRMED in toto.
SO ORDERED.
On September 26, 2001, Chan appealed to the Court of Appeals (CA) by petition for
review,
10
challenging the propriety of the dismissal of his complaint on the ground of litis pendentia.
In his comment,
11
Simon countered that Chan was guilty of bad faith and malice in prosecuting his
alleged civil claim twice in a manner that caused him (Simon) utter embarrassment and emotional
sufferings; and that the dismissal of the civil case because of the valid ground of litis pendentia based
on Section 1 (e), Rule 16 of the 1997 Rules of Civil Procedure was warranted.
On June 25, 2002, the CA promulgated its assailed decision,
12
overturning the RTC, viz:
xxx
As a general rule, an offense causes two (2) classes of injuries. The first is the social injury produced
by the criminal act which is sought to be repaired through the imposition of the corresponding penalty,
and the second is the personal injury caused to the victim of the crime which injury is sought to be
compensated through indemnity which is also civil in nature. Thus, "every person criminally liable for
a felony is also civilly liable."
The offended party may prove the civil liability of an accused arising from the commission of the
offense in the criminal case since the civil action is either deemed instituted with the criminal action or
is separately instituted.
Rule 111, Section 1 of the Revised Rules of Criminal Procedure, which became effective on
December 1, 2000, provides that:
(a) When a criminal action is instituted, the civil action for the recovery of civil liability arising from the
offense charged shall be deemed instituted with the criminal action unless the offended party waives
the civil action, reserves the right to institute it separately or institute the civil action prior to the
criminal action.
Rule 111, Section 2 further states:
After the criminal action has been commenced, the separate civil action arising therefrom cannot be
instituted until final judgment has been entered in the criminal action.
However, with respect to civil actions for recovery of civil liability under Articles 32, 33, 34 and 2176 of
the Civil Code arising from the same act or omission, the rule has been changed.
In DMPI Employees Credit Association vs. Velez, the Supreme Court pronounced that only the civil
liability arising from the offense charged is deemed instituted with the criminal action unless the
offended party waives the civil action, reserves his right to institute it separately, or institutes the civil
action prior to the criminal action. Speaking through Justice Pardo, the Supreme Court held:
"There is no more need for a reservation of the right to file the independent civil action under Articles
32, 33, 34 and 2176 of the Civil Code of the Philippines. The reservation and waiver referred to refers
only to the civil action for the recovery of the civil liability arising from the offense charged. This does
not include recovery of civil liability under Articles 32, 33, 34, and 2176 of the Civil Code of the
Philippines arising from the same act or omission which may be prosecuted separately without a
reservation".
Rule 111, Section 3 reads:
Sec. 3. When civil action may proceed independently. In the cases provided in Articles 32, 33, 34,
and 2176 of the Civil Code of the Philippines, the independent civil action may be brought by the
offended party. It shall proceed independently of the criminal action and shall require only a
preponderance of evidence. In no case, however, may the offended party recover damages twice for
the same act or omission charged in the criminal action.
The changes in the Revised Rules on Criminal Procedure pertaining to independent civil actions
which became effective on December 1, 2000 are applicable to this case.
Procedural laws may be given retroactive effect to actions pending and undetermined at the time of
their passage. There are no vested rights in the rules of procedure. xxx
Thus, Civil Case No. CV-94-124, an independent civil action for damages on account of the fraud
committed against respondent Villegas under Article 33 of the Civil Code, may proceed independently
even if there was no reservation as to its filing."
It must be pointed that the abovecited case is similar with the instant suit. The complaint was also
brought on allegation of fraud under Article 33 of the Civil Code and committed by the respondent in
the issuance of the check which later bounced. It was filed before the trial court, despite the pendency
of the criminal case for violation of BP 22 against the respondent. While it may be true that the
changes in the Revised Rules on Criminal Procedure pertaining to independent civil action became
effective on December 1, 2000, the same may be given retroactive application and may be made to
apply to the case at bench, since procedural rules may be given retroactive application. There are no
vested rights in the rules of procedure.
In view of the ruling on the first assigned error, it is therefore an error to adjudge damages in favor of
the petitioner.
WHEREFORE, the petition is hereby GRANTED. The Decision dated July 13, 2001 rendered by the
Regional Trial Court of Pasay City, Branch 108 affirming the dismissal of the complaint filed by
petitioner is hereby REVERSED and SET ASIDE. The case is hereby REMANDED to the trial court
for further proceedings.
SO ORDERED.
On March 14, 2003, the CA denied Simons motion for reconsideration.
13

Hence, this appeal, in which the petitioners submit that the CA erroneously premised its decision on
the assessment that the civil case was an independent civil action under Articles 32, 33, 34, and 2176
of the Civil Code; that the CAs reliance on the ruling in DMPI Employees Credit Cooperative Inc. v.
Velez
14
stretched the meaning and intent of the ruling, and was contrary to Sections 1 and 2 of Rule
111 of the Rules of Criminal Procedure; that this case was a simple collection suit for a sum of
money, precluding the application of Section 3 of Rule 111 of the Rules of Criminal Procedure.
15

In his comment,
16
Chan counters that the petition for review should be denied because the petitioners
used the wrong mode of appeal; that his cause of action, being based on fraud, was an independent
civil action; and that the appearance of a private prosecutor in the criminal case did not preclude the
filing of his separate civil action.
Issue
The lone issue is whether or not Chans civil action to recover the amount of the unfunded check
(Civil Case No. 915-00) was an independent civil action.
Ruling
The petition is meritorious.
A
Applicable Law and Jurisprudence on the
Propriety of filing a separate civil action based on BP 22
The Supreme Court has settled the issue of whether or not a violation of BP 22 can give rise to civil
liability in Banal v. Judge Tadeo, Jr.,
17
holding:
xxx
Article 20 of the New Civil Code provides:
Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify
the latter for the same.
Regardless, therefore, of whether or not a special law so provides, indemnification of the offended
party may be had on account of the damage, loss or injury directly suffered as a consequence of the
wrongful act of another. The indemnity which a person is sentenced to pay forms an integral part of
the penalty imposed by law for the commission of a crime (Quemel v. Court of Appeals, 22 SCRA 44,
citing Bagtas v. Director of Prisons, 84 Phil 692). Every crime gives rise to a penal or criminal action
for the punishment of the guilty party, and also to civil action for the restitution of the thing, repair of
the damage, and indemnification for the losses (United States v. Bernardo, 19 Phil 265).
xxx
Civil liability to the offended party cannot thus be denied. The payee of the check is entitled to receive
the payment of money for which the worthless check was issued. Having been caused the damage,
she is entitled to recompense.
Surely, it could not have been the intendment of the framers of Batas Pambansa Blg. 22 to leave the
offended private party defrauded and empty-handed by excluding the civil liability of the offender,
giving her only the remedy, which in many cases results in a Pyrrhic victory, of having to file a
separate civil suit. To do so may leave the offended party unable to recover even the face value of
the check due her, thereby unjustly enriching the errant drawer at the expense of the payee. The
protection which the law seeks to provide would, therefore, be brought to naught.
xxx
However, there is no independent civil action to recover the value of a bouncing check issued in
contravention of BP 22. This is clear from Rule 111 of the Rules of Court, effective December 1,
2000, which relevantly provides:
Section 1. Institution of criminal and civil actions. - (a) When a criminal action is instituted, the civil
action for the recovery of civil liability arising from the offense charged shall be deemed instituted with
the criminal action unless the offended party waives the civil action, reserves the right to institute it
separately or institutes the civil action prior to the criminal action.
The reservation of the right to institute separately the civil action shall be made before the prosecution
starts presenting its evidence and under circumstances affording the offended party a reasonable
opportunity to make such reservation.
When the offended party seeks to enforce civil liability against the accused by way of moral, nominal,
temperate, or exemplary damages without specifying the amount thereof in the complaint or
information, the filing fees therefor shall constitute a first lien on the judgment awarding such
damages.
Where the amount of damages, other than actual, is specified in the complaint or information, the
corresponding filing fees shall be paid by the offended party upon the filing thereof in court.
Except as otherwise provided in these Rules, no filing fees shall be required for actual damages.
No counterclaim, cross-claim or third-party complaint may be filed by the accused in the criminal
case, but any cause of action which could have been the subject thereof may be litigated in a
separate civil action. (1a)
(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the
corresponding civil action. No reservation to file such civil action separately shall be allowed.
18

Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the filing
fees based on the amount of the check involved, which shall be considered as the actual damages
claimed. Where the complaint or information also seeks to recover liquidated, moral, nominal,
temperate or exemplary damages, the offended party shall pay the filing fees based on the amounts
alleged therein. If the amounts are not so alleged but any of these damages are subsequently
awarded by the court, the filing fees based on the amount awarded shall constitute a first lien on the
judgment.
Where the civil action has been filed separately and trial thereof has not yet commenced, it may be
consolidated with the criminal action upon application with the court trying the latter case. If the
application is granted, the trial of both actions shall proceed in accordance with section 2 of the Rule
governing consolidation of the civil and criminal actions.
Section 3. When civil action may proceed independently. In the cases provided in Articles 32, 33,
34 and 2176 of the Civil Code of the Philippines, the independent civil action may be brought by the
offended party. It shall proceed independently of the criminal action and shall require only a
preponderance of evidence. In no case, however, may the offended party recover damages twice for
the same act or omission charged in the criminal action.
The aforequoted provisions of the Rules of Court, even if not yet in effect when Chan commenced
Civil Case No. 915-00 on August 3, 2000, are nonetheless applicable. It is axiomatic that the
retroactive application of procedural laws does not violate any right of a person who may feel
adversely affected, nor is it constitutionally objectionable. The reason is simply that, as a general rule,
no vested right may attach to, or arise from, procedural laws.
19
Any new rules may validly be made to
apply to cases pending at the time of their promulgation, considering that no party to an action has a
vested right in the rules of procedure,
20
except that in criminal cases, the changes do not retroactively
apply if they permit or require a lesser quantum of evidence to convict than what is required at the
time of the commission of the offenses, because such retroactivity would be unconstitutional for
being ex post facto under the Constitution.
21

Moreover, the application of the rule would not be precluded by the violation of any assumed vested
right, because the new rule was adopted from Supreme Court Circular 57-97 that took effect on
November 1, 1997.
Supreme Court Circular 57-97 states:
Any provision of law or Rules of Court to the contrary notwithstanding, the following rules and
guidelines shall henceforth be observed in the filing and prosecution of all criminal cases under Batas
Pambansa Blg. 22 which penalizes the making or drawing and issuance of a check without funds or
credit:
1. The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to necessarily
include the corresponding civil action, and no reservation to file such civil action separately
shall be allowed or recognized.
22

2. Upon the filing of the aforesaid joint criminal and civil actions, the offended party shall pay in
full the filing fees based upon the amount of the check involved which shall be considered as
the actual damages claimed, in accordance with the schedule of fees in Section 7 (a) and
Section 8 (a), Rule 141 of the Rules of Court as last amended by Administrative Circular No.
11-94 effective August 1, 1994. Where the offended party further seeks to enforce against the
accused civil liability by way of liquidated, moral, nominal, temperate or exemplary damages,
he shall pay the corresponding filing fees therefor based on the amounts thereof as alleged
either in the complaint or information. If not so alleged but any of these damages are
subsequently awarded by the court, the amount of such fees shall constitute a first lien on the
judgment.
3. Where the civil action has heretofore been filed separately and trial thereof has not yet
commenced, it may be consolidated with the criminal action upon application with the court
trying the latter case. If the application is granted, the trial of both actions shall proceed in
accordance with the pertinent procedure outlined in Section 2 (a) of Rule 111 governing the
proceedings in the actions as thus consolidated.
4. This Circular shall be published in two (2) newspapers of general circulation and shall take
effect on November 1, 1997.
The reasons for issuing Circular 57-97 were amply explained in Hyatt Industrial Manufacturing
Corporation v. Asia Dynamic Electrix Corporation,
23
thus:
xxx
We agree with the ruling of the Court of Appeals that upon filing of the criminal cases for violation of
B.P. 22, the civil action for the recovery of the amount of the checks was also impliedly instituted
under Section 1(b) of Rule 111 of the 2000 Rules on Criminal Procedure. Under the present revised
Rules, the criminal action for violation of B.P. 22 shall be deemed to include the corresponding civil
action. The reservation to file a separate civil action is no longer needed. The Rules provide:
Section 1. Institution of criminal and civil actions.
(a) x x x
(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the
corresponding civil action. No reservation to file such civil action separately shall be allowed.
Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the filing
fees based on the amount of the check involved, which shall be considered as the actual damages
claimed. Where the complaint or information also seeks to recover liquidated, moral, nominal,
temperate or exemplary damages, the offended party shall pay additional filing fees based on the
amounts alleged therein. If the amounts are not so alleged but any of these damages are
subsequently awarded by the court, the filing fees based on the amount awarded shall constitute a
first lien on the judgment.
Where the civil action has been filed separately and trial thereof has not yet commenced, it may be
consolidated with the criminal action upon application with the court trying the latter case. If the
application is granted, the trial of both actions shall proceed in accordance with section 2 of this Rule
governing consolidation of the civil and criminal actions.1avvphi1
The foregoing rule was adopted from Circular No. 57-97 of this Court. It specifically states that the
criminal action for violation of B.P. 22 shall be deemed to include the corresponding civil action. It
also requires the complainant to pay in full the filing fees based on the amount of the check involved.
Generally, no filing fees are required for criminal cases, but because of the inclusion of the civil action
in complaints for violation of B.P. 22, the Rules require the payment of docket fees upon the filing of
the complaint. This rule was enacted to help declog court dockets which are filled with B.P. 22 cases
as creditors actually use the courts as collectors. Because ordinarily no filing fee is charged in
criminal cases for actual damages, the payee uses the intimidating effect of a criminal charge to
collect his credit gratis and sometimes, upon being paid, the trial court is not even informed thereof.
The inclusion of the civil action in the criminal case is expected to significantly lower the number of
cases filed before the courts for collection based on dishonored checks. It is also expected to
expedite the disposition of these cases. Instead of instituting two separate cases, one for criminal and
another for civil, only a single suit shall be filed and tried. It should be stressed that the policy laid
down by the Rules is to discourage the separate filing of the civil action. The Rules even prohibit the
reservation of a separate civil action, which means that one can no longer file a separate civil case
after the criminal complaint is filed in court. The only instance when separate proceedings are allowed
is when the civil action is filed ahead of the criminal case. Even then, the Rules encourage the
consolidation of the civil and criminal cases. We have previously observed that a separate civil action
for the purpose of recovering the amount of the dishonored checks would only prove to be costly,
burdensome and time-consuming for both parties and would further delay the final disposition of the
case. This multiplicity of suits must be avoided. Where petitioners rights may be fully adjudicated in
the proceedings before the trial court, resort to a separate action to recover civil liability is clearly
unwarranted. In view of this special rule governing actions for violation of B.P. 22, Article 31 of the
Civil Code cited by the trial court will not apply to the case at bar.
24

The CAs reliance on DMPI Employees Credit Association v. Velez
25
to give due course to the civil
action of Chan independently and separately of Criminal Case No. 275381 was unwarranted. DMPI
Employees, which involved a prosecution for estafa, is not on all fours with this case, which is a
prosecution for a violation of BP 22. Although the Court has ruled that the issuance of a bouncing
check may result in two separate and distinct crimes of estafa and violation of BP 22,
26
the
procedures for the recovery of the civil liabilities arising from these two distinct crimes are different
and non-interchangeable. In prosecutions of estafa, the offended party may opt to reserve his right to
file a separate civil action, or may institute an independent action based on fraud pursuant to Article
33 of the Civil Code,
27
as DMPI Employees has allowed. In prosecutions of violations of BP 22,
however, the Court has adopted a policy to prohibit the reservation or institution of a separate civil
action to claim the civil liability arising from the issuance of the bouncing check upon the reasons
delineated in Hyatt Industrial Manufacturing Corporation, supra.
To repeat, Chans separate civil action to recover the amount of the check involved in the prosecution
for the violation of BP 22 could not be independently maintained under both Supreme Court Circular
57-97 and the aforequoted provisions of Rule 111 of the Rules of Court, notwithstanding the
allegations of fraud and deceit.
B
Aptness of the dismissal of the civil action
on the ground of litis pendentia
Did the pendency of the civil action in the MeTC in Manila (as the civil aspect in Criminal Case No.
275381) bar the filing of Civil Case No. 915-00 in the MeTC in Pasay City on the ground of litis
pendentia?
For litis pendentia to be successfully invoked as a bar to an action, the concurrence of the following
requisites is necessary, namely: (a) there must be identity of parties or at least such as represent the
same interest in both actions; (b) there must be identity of rights asserted and reliefs prayed for, the
reliefs being founded on the same facts; and, (c) the identity in the two cases should be such that the
judgment that may be rendered in one would, regardless of which party is successful, amount to res
judicata in respect of the other. Absent the first two requisites, the possibility of the existence of the
third becomes nil.
28

A perusal of Civil Case No. 01-0033 and Criminal Case No. 275381 ineluctably shows that all the
elements of litis pendentia are attendant. First of all, the parties in the civil action involved in Criminal
Case No. 275381 and in Civil Case No. 915-00, that is, Chan and Simon, are the same. Secondly,
the information in Criminal Case No. 275381 and the complaint in Civil Case No. 915-00 both alleged
that Simon had issued Landbank Check No. 0007280 worth P336,000.00 payable to "cash," thereby
indicating that the rights asserted and the reliefs prayed for, as well as the facts upon which the reliefs
sought were founded, were identical in all respects. And, thirdly, any judgment rendered in one case
would necessarily bar the other by res judicata; otherwise, Chan would be recovering twice upon the
same claim.
It is clear, therefore, that the MeTC in Pasay City properly dismissed Civil Case No. 915-00 on the
ground of litis pendentia through its decision dated October 23, 2000; and that the RTC in Pasay City
did not err in affirming the MeTC.
Wherefore, we grant the petition for review on certiorari, and, accordingly, we reverse and set aside
the decision promulgated by the Court of Appeals on June 25, 2002. We reinstate the decision
rendered on October 23, 2000 by the Metropolitan Trial Court, Branch 45, in Pasay City.
Costs of suit to be paid by the respondent.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
ARTURO D. BRION
**

Associate Justice
Acting Chairperson
ROBERTO A. ABAD
***

Associate Justice
MARTIN S. VILLARAMA, JR.
Associate Justice
MARIA LOURDES P. A. SERENO
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
ARTURO D. BRION
Associate Justice
Acting Chairperson
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Chief Justice


Footnotes
*
Misspelled as Elven in the caption of the petition and in the rollo.
**
Acting Chairperson in lieu of Justice Conchita Carpio Morales who is on leave per Special
Order No. 925 dated January 24, 2011.
***
Additional member per Special Order No. 926 dated January 24, 2011.
1
Rollo, p. 31.
2
Id., pp. 35-37.
3
Id., pp. 35-36.
4
Id., p. 24.
5
Id., pp. 38-46.
6
Id., pp. 47-49.
7
Id., pp. 50-54.
8
Id., p. 56.
9
Id., pp. 76-79.
10
Id., pp. 80-88.
11
Id., pp. 89-97.
12
Id., pp. 23-27; penned by Associate Justice Perlita J. Tria Tirona (retired), and concurred in
by Associate Justice Rodrigo V. Cosico (retired) and Associate Justice Mario L. Guaria.
13
Id., pp. 29-30.
14
G.R. No. 129282, November 29, 2001, 371 SCRA 72.
15
See note 19, p.16.
16
Rollo, pp. 105-109.
17
G.R. No. L-78911, December 11, 1987, 156 SCRA 325.
18
Bold emphasis supplied.
19
Cheng v.Sy, G.R. No. 174238, July 7, 2009, 592 SCRA 155, 164-165.
20
Aldeguer v. Hoskyn, 2 Phil. 502; Ayala de Roxas v. Case, 8 Phil. 197.
21
Sec. 22, Art. III, 1987 Constitution; Cooleys Principle of Constitutional Law, p. 313.
22
Bold emphasis supplied.
23
G.R. No. 163597, July 29, 2005, 465 SCRA 454, 459-461.
24
Bold emphasis supplied.
25
Supra, note 14.
26
E.g., Rodriguez v. Ponferrada, G.R. Nos.155531-34, July 29, 2005, 465 SCRA 338, 343.
27
Article 33. In cases of defamation, fraud, and physical injuries a civil action for damages,
entirely separate and distinct from the criminal action, may be brought by the injured party.
Such civil action shall proceed independently of the criminal prosecution, and shall require only
a preponderance of evidence.
28
Taningco v. Taningco, G.R. No. 153481, August 10, 2007, 529 SCRA 735.

SECOND DIVISION

G.R. No. 108017 April 3, 1995
MARIA BENITA A. DULAY, in her own behalf and in behalf of the minor children KRIZTEEN
ELIZABETH, BEVERLY MARIE and NAPOLEON II, all surnamed DULAY, petitioners,
vs.
THE COURT OF APPEALS, Former Eighth Division, HON. TEODORO P. REGINO, in his
capacity as Presiding Judge of the Regional Trial Court National Capital Region, Quezon City,
Br. 84, SAFEGUARD INVESTIGATION AND SECURITY CO., INC., and SUPERGUARD
SECURITY CORPORATION, respondents.

BIDIN, J .:
This petition for certiorari prays for the reversal of the decision of the Court of Appeals dated October
29, 1991 in CA-G.R. CV No. 24646 which affirmed the order of the Regional Trial Court dismissing
Civil Case No. Q-89-1751, and its resolution dated November 17, 1991 denying herein, petitioner's
motion for reconsideration.
The antecedent facts of the case are as follows:
On December 7, 1988, an altercation between Benigno Torzuela and Atty. Napoleon Dulay occurred
at the "Big Bang Sa Alabang," Alabang Village, Muntinlupa as a result of which Benigno Torzuela, the
security guard on duty at the said carnival, shot and killed Atty. Napoleon Dulay.
Herein petitioner Maria Benita A. Dulay, widow of the deceased Napoleon Dulay, in her own behalf
and in behalf of her minor children, filed on February 8, 1989 an action for damages against Benigno
Torzuela and herein private respondents Safeguard Investigation and Security Co., Inc.,
("SAFEGUARD") and/or Superguard Security Corp. ("SUPERGUARD"), alleged employers of
defendant Torzuela. The complaint, docketed as Civil Case No. Q-89-1751 among others alleges the
following:
1. . . .
Defendants SAFEGUARD INVESTIGATION AND SECURITY CO., INC., (Defendant
Safeguard) and SUPERGUARD SECURITY CORPORATION (Defendant Superguard)
are corporations duly organized and existing in accordance with Philippine laws, with
offices at 10th Floor, Manufacturers Building, Inc., Plaza Santa Cruz, Manila. They are
impleaded as alternative defendants for, while the former appears to be the employer of
defendant BENIGNO TORZUELA (defendant TORZUELA), the latter impliedly
acknowledged responsibility for the acts of defendant TORZUELA by extending its
sympathies to plaintiffs.
Defendant BENIGNO TORZUELA is of legal age, an employee of defendant
SAFEGUARD and/or defendant SUPERGUARD and, at the time of the incident
complained of, was under their control and supervision. . . .
3. On December 7, 1988 at around 8:00 a.m., defendant TORZUELA, while he was on
duty as security guard at the "Big Bang sa Alabang," Alabang Village, Muntinlupa, Metro
Manila shot and killed NAPOLEON V. DULAY with a .38 caliber revolver belonging to
defendant SAFEGUARD, and/or SUPERGUARD (per Police Report dated January 7,
1989, copy attached as Annex A);
4. The incident resulting in the death of NAPOLEON V. DULAY was due to the
concurring negligence of the defendants. Defendant TORZUELA'S wanton and reckless
discharge of the firearm issued to him by defendant SAFEGUARD and/or
SUPERGUARD was the immediate and proximate cause of the injury, while the
negligence of defendant SAFEGUARD and/or SUPERGUARD consists in its having
failed to exercise the diligence of a good father of a family in the supervision and control
of its employee to avoid the injury.
xxx xxx xxx
(Rollo, pp. 117-118)
Petitioners prayed for actual, compensatory, moral and exemplary damages, and attorney's fees. The
said Civil Case No. Q-89-1751 was raffled to Branch 84 of the Regional Trial Court of Quezon City,
presided by respondent Judge Teodoro Regino.
On March 2, 1989, private respondent SUPERGUARD filed a Motion to Dismiss on the ground that
the complaint does not state a valid cause of action. SUPERGUARD claimed that Torzuela's act of
shooting Dulay was beyond the scope of his duties, and that since the alleged act of shooting was
committed with deliberate intent (dolo), the civil liability therefor is governed by Article 100 of the
Revised Penal Code, which states:
Art. 100. Civil liability of a person guilty of a felony. Every person criminally liable for
a felony is also civilly liable.
Respondent SUPERGUARD further alleged that a complaint for damages based on negligence under
Article 2176 of the New Civil Code, such as the one filed by petitioners, cannot lie, since the civil
liability under Article 2176 applies only to quasi-offenses under Article 365 of the Revised Penal
Code. In addition, the private respondent argued that petitioners' filing of the complaint is premature
considering that the conviction of Torzuela in a criminal case is a condition sine qua non for the
employer's subsidiary liability (Rollo, p. 55-59).
Respondent SAFEGUARD also filed a motion praying that it be excluded as defendant on the ground
that defendant Torzuela is not one of its employees (Rollo, p. 96).
Petitioners opposed both motions, stating that their cause of action against the private respondents is
based on their liability under Article 2180 of the New Civil Code, which provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only for one's own
acts or omissions, but also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or an industry.
xxx xxx xxx
(Emphasis supplied)
Petitioners contended that a suit against alternative defendants is allowed under Rule 3, Section 13 of
the Rules of Court. Therefore, the inclusion of private respondents as alternative defendants in the
complaint is justified by the following: the Initial Investigation Report prepared by Pat. Mario Tubon
showing that Torzuela is an employee of SAFEGUARD; and through overt acts, SUPERGUARD
extended its sympathies to petitioners (Rollo, pp. 64 and 98).
Meanwhile, an Information dated March 21, 1989 charging Benigno Torzuela with homicide was filed
before the Regional Trial Court of Makati and was docketed as Criminal Case No. 89-1896.
On April 13, 1989, respondent Judge Regino issued an order granting SUPERGUARD'S motion to
dismiss and SAFEGUARD'S motion for exclusion as defendant. The respondent judge held that the
complaint did not state facts necessary or sufficient to constitute a quasi-delict since it does not
mention any negligence on the part of Torzuela in shooting Napoleon Dulay or that the same was
done in the performance of his duties. Respondent judge ruled that mere allegations of the concurring
negligence of the defendants (private respondents herein) without stating the facts showing such
negligence are mere conclusions of law (Rollo, p. 106). Respondent judge also declared that the
complaint was one for damages founded on crimes punishable under Articles 100 and 103 of the
Revised Penal Code as distinguished from those arising from, quasi-delict. The dispositive portion of
the order dated April 13, 1989 states:
WHEREFORE, this Court holds that in view of the material and ultimate facts alleged in
the verified complaint and in accordance with the applicable law on the matter as well
as precedents laid down by the Supreme Court, the complaint against the alternative
defendants Superguard Security Corporation and Safeguard Investigation and Security
Co., Inc., must be and (sic) it is hereby dismissed. (Rollo, p. 110)
The above order was affirmed by the respondent court and petitioners' motion for reconsideration
thereof was denied.
Petitioners take exception to the assailed decision and insist that quasi-delicts are not limited to acts
of negligence but also cover acts that are intentional and voluntary, citing Andamo v. IAC (191 SCRA
195 [1990]). Thus, petitioners insist that Torzuela' s act of shooting Napoleon Dulay constitutes a
quasi-delict actionable under Article 2176 of the New Civil Code.
Petitioners further contend that under Article 2180 of the New Civil Code, private respondents are
primarily liable for their negligence either in the selection or supervision of their employees. This
liability is independent of the employee's own liability for fault or negligence and is distinct from the
subsidiary civil liability under Article 103 of the Revised Penal Code. The civil action against the
employer may therefore proceed independently of the criminal action pursuant to Rule 111 Section 3
of the Rules of Court. Petitioners submit that the question of whether Torzuela is an employee of
respondent SUPERGUARD or SAFEGUARD would be better resolved after trial.
Moreover, petitioners argue that Torzuela's act of shooting Dulay is also actionable under Article 33 of
the New Civil Code, to wit:
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages,
entirely separate and distinct from the criminal action, may be brought by the injured
party. Such civil action shall proceed independently of the criminal prosecution, and
shall require only a preponderance of evidence. (Emphasis supplied)
In the same vein, petitioners cite Section 3, Rule 111 of the Rules of Court which provides:
Rule 111. . . . .
Sec. 3. When civil action may proceed independently In the cases provided for in
Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil
action which has been reserved may be brought by the offended party, shall proceed
independently of the criminal action, and shall require only a preponderance of
evidence. (Emphasis supplied)
The term "physical injuries" under Article 33 has been held to include consummated, frustrated and
attempted homicide. Thus, petitioners maintain that Torzuela's prior conviction is unnecessary since
the civil action can proceed independently of the criminal action. On the other hand, it is the private
respondents' argument that since the act was not committed with negligence, the petitioners have no
cause of action under Articles 2116 and 2177 of the New Civil Code. The civil action contemplated in
Article 2177 is not applicable to acts committed with deliberate intent, but only applies to quasi-
offenses under Article 365 of the Revised Penal Code. Torzuela's act of shooting Atty. Dulay to death,
aside from being purely personal, was done with deliberate intent and could not have been part of his
duties as security guard. And since Article 2180 of the New Civil Code covers only: acts done within
the scope of the employee's assigned tasks, the private respondents cannot be held liable for
damages.
We find for petitioners.
It is undisputed that Benigno Torzuela is being prosecuted for homicide for the fatal shooting of
Napoleon Dulay. Rule 111 of the Rules on Criminal Procedure provides:
Sec. 1. Institution of criminal and civil actions. When a criminal action is instituted, the
civil action for the recovery of civil liability is impliedly instituted with the criminal
action, unless the offended party waives the civil action , reserves his right to institute it
separately or institutes the civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the Revised Penal Code, and
damages under Articles 32, 33, 34, and 2176 of the Civil Code of the Philippines arising
from the same act or omission of the accused. (Emphasis supplied)
It is well-settled that the filing of an independent civil action before the prosecution in the criminal
action presents evidence is even far better than a compliance with the requirement of express
reservation (Yakult Philippines v. Court of Appeals, 190 SCRA 357 [1990]). This is precisely what the
petitioners opted to do in this case. However, the private respondents opposed the civil action on the
ground that the same is founded on a delict and not on a quasi-delict as the shooting was not
attended by negligence. What is in dispute therefore is the nature of the petitioner's cause of action.
The nature of a cause of action is determined by the facts alleged in the complaint as constituting the
cause of action (Republic v. Estenzo, 158 SCRA 282 [1988]). The purpose of an action or suit and
the law to govern it is to be determined not by the claim of the party filing the action, made in his
argument or brief, but rather by the complaint itself, its allegations and prayer for relief. (De Tavera v.
Philippine Tuberculosis Society, 112 SCRA 243 [1982]). An examination of the complaint in the
present case would show that the plaintiffs, petitioners herein, are invoking their right to recover
damages against the private respondents for their vicarious responsibility for the injury caused by
Benigno Torzuela's act of shooting and killing Napoleon Dulay, as stated in paragraphs 1 and 2 of the
complaint.
Article 2176 of the New Civil Code provides:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is
no pre-existing contractual relation between the parties is called a quasi-delict and is
governed by the provisions of this Chapter.
Contrary to the theory of private respondents, there is no justification for limiting the scope of Article
2176 of the Civil Code to acts or omissions resulting from negligence. Well-entrenched is the doctrine
that article 2176 covers not only acts committed with negligence, but also acts which are voluntary
and intentional. As far back as the definitive case of Elcano v. Hill (77 SCRA 98 [1977]), this Court
already held that:
. . . Article 2176, where it refers to "fault or negligence," covers not only acts "not
punishable by law" but also acts criminal in character; whether intentional and voluntary
or negligent. Consequently, a separate civil action against the offender in a criminal act,
whether or not he is criminally prosecuted and found guilty or acquitted, provided that
the offended party is not allowed, if he is actually charged also criminally, to recover
damages on both scores, and would be entitled in such eventuality only to the bigger
award of the two, assuming the awards made in the two cases vary. In other words, the
extinction of civil liability referred to in Par. (e) of Section 3, Rule 111, refers exclusively
to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil
liability for the same act considered as quasi-delict only and not as a crime is not
extinguished even by a declaration in the criminal case that the criminal act charged has
not happened or has not been committed by the accused. Briefly stated, We here hold,
in reiteration of Garcia, that culpa aquiliana includes voluntary and negligent acts which
may be punishable by law. (Emphasis supplied)
The same doctrine was echoed in the case of Andamo v. Intermediate Appellate Court (191 SCRA
195 [1990]), wherein the Court held:
Article 2176, whenever it refers to "fault or negligence," covers not only acts criminal in
character, whether intentional and voluntary or negligent. Consequently, a civil action
lies against the offender in a criminal act, whether or not he is prosecuted or found guilty
or acquitted, provided that the offended party is not allowed, (if the tortfeasor is actually
also charged criminally), to recover damages on both scores, and would be entitled in
such eventuality only to the bigger award of the two, assuming the awards made in the
two cases vary. [citing Virata v. Ochoa, 81 SCRA 472] (Emphasis supplied)
Private respondents submit that the word "intentional" in the Andamo case is inaccurate obiter, and
should be read as "voluntary" since intent cannot be coupled with negligence as defined by Article
365 of the Revised Penal Code. In the absence of more substantial reasons, this Court will not disturb
the above doctrine on the coverage of Article 2176.
Private respondents further aver that Article 33 of the New Civil Code applies only to injuries
intentionally committed pursuant to the ruling in Marcia v. CA (120 SCRA 193 [1983]), and that the
actions for damages allowed thereunder are ex-delicto. However, the term "physical injuries" in Article
33 has already been construed to include bodily injuries causing death (Capuno v. Pepsi-Cola
Bottling Co. of the Philippines, 121 Phil. 638 [1965); Carandang v. Santiago, 97 Phil. 94 [1955]). It is
not the crime of physical injuries defined in the Revised Penal Code. It includes not only physical
injuries but also consummated, frustrated, and attempted homicide (Madeja v. Caro, 126 SCRA 293
[1983]). Although in the Marcia case (supra), it was held that no independent civil action may be filed
under Article 33 where the crime is the result of criminal negligence, it must be noted however, that
Torzuela, the accused in the case at bar, is charged with homicide, not with reckless imprudence,
whereas the defendant in Marcia was charged with reckless imprudence. Therefore, in this case, a
civil action based on Article 33 lies.
Private respondents also contend that their liability is subsidiary under the Revised Penal Code; and
that they are not liable for Torzuela's act which is beyond the scope of his duties as a security guard.
It having been established that the instant action is not ex-delicto, petitioners may proceed directly
against Torzuela and the private respondents. Under Article 2180 of the New Civil Code as
aforequoted, when an injury is caused by the negligence of the employee, there instantly arises a
presumption of law that there was negligence on the part of the master or employer either in the
selection of the servant or employee, or in supervision over him after selection or both (Layugan v.
Intermediate Appellate Court, 167 SCRA 363 [1988]). The liability of the employer under Article 2180
is direct and immediate; it is not conditioned upon prior recourse against the negligent employee and
a prior showing of the insolvency of such employee (Kapalaran Bus Lines v. Coronado, 176 SCRA
792 [1989]). Therefore, it is incumbent upon the private respondents to prove that they exercised the
diligence of a good father of a family in the selection and supervision of their employee.
Since Article 2176 covers not only acts of negligence but also acts which are intentional and
voluntary, it was therefore erroneous on the part of the trial court to dismiss petitioner's complaint
simply because it failed to make allegations of attendant negligence attributable to private
respondents.
With respect to the issue of whether the complaint at hand states a sufficient cause of action, the
general rule is that the allegations in a complaint are sufficient to constitute a cause of action against
the defendants if, admitting the facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer therein. A cause of action exist if the following elements are present,
namely: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to respect or not to violate such right;
and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the latter may maintain
an action for recovery of damages (Del Bros Hotel Corporation v. CA, 210 SCRA 33 [1992]);
Development Bank of the Philippines v. Pundogar, 218 SCRA 118 [1993])
This Court finds, under the foregoing premises, that the complaint sufficiently alleged an actionable
breach on the part of the defendant Torzuela and respondents SUPERGUARD and/or SAFEGUARD.
It is enough that the complaint alleged that Benigno Torzuela shot Napoleon Dulay resulting in the
latter's death; that the shooting occurred while Torzuela was on duty; and that either SUPERGUARD
and/or SAFEGUARD was Torzuela's employer and responsible for his acts. This does not operate
however, to establish that the defendants below are liable. Whether or not the shooting was actually
reckless and wanton or attended by negligence and whether it was actually done within the scope of
Torzuela's duties; whether the private respondents SUPERGUARD and/or SAFEGUARD failed to
exercise the diligence of a good father of a family; and whether the defendants are actually liable, are
questions which can be better resolved after trial on the merits where each party can present
evidence to prove their respective allegations and defenses. In determining whether the allegations of
a complaint are sufficient to support a cause of action, it must be borne in mind that the complaint
does not have to establish or allege the facts proving the existence of a cause of action at the outset;
this will have to be done at the trial on the merits of the case (Del Bros Hotel Corporation v.
CA, supra). If the allegations in a complaint can furnish a sufficient basis by which the complaint can
be maintained, the same should not be dismissed regardless of the defenses that may be assessed
by the defendants (Rava Dev't. Corp. v. CA, 211 SCRA 152 [1992] citing Consolidated Bank & Trust
Corporation v. Court of Appeals, 197 SCRA 663 [1991]). To sustain a motion to dismiss for lack of
cause of action, the complaint must show that the claim for relief does not exist rather than that a
claim has been defectively stated, is ambiguous, indefinite or uncertain (Azur v. Provincial Board, 27
SCRA 50 [1969]). Since the petitioners clearly sustained an injury to their rights under the law, it
would be more just to allow them to present evidence of such injury.
WHEREFORE, premises considered, the petition for review is hereby GRANTED. The decision of the
Court of Appeals as well as the Order of the Regional Trial Court dated April 13, 1989 are hereby
REVERSED and SET ASIDE. Civil Case No. Q-89-1751 is remanded to the Regional Trial Court for
trial on the merits. This decision is immediately executory.
SO ORDERED.
Narvasa, C.J., Regalado, Puno and Mendoza, JJ., concur.

FIRST DIVISION
G.R. No. 146726 June 16, 2006
MULTI-REALTY DEVELOPMENT CORPORATION, Petitioner,
vs.
CONDOMINIUM CORPORATION, Respondent.
D E C I S I O N
CALLEJO, SR., J.:
Before this Court is a petition for review on certiorari of the Decision
1
of the Court of Appeals in CA-
G.R. CV No. 44696 dismissing the appeal of Multi-Realty Development Corporation on the ground of
prescription.
Multi-Realty is a domestic corporation engaged in the real estate business, and the construction and
development of condominiums. It developed, among others, the Ritz Towers Condominium, and the
former Galeria de Magallanes, both built in the Municipality (now city) of Makati.
In the 1970s, Multi-Realty constructed a 26-storey condominium at the corner of Ayala Avenue and
Fonda Street in Makati City, known as the Makati Tuscany Condominium Building (Makati Tuscany,
for short). The building was one of the Philippines first condominium projects, making it necessary for
Multi-Realty and the government agencies concerned with the project, to improve and formulate rules
and regulations governing the project as construction progressed.
Makati Tuscany consisted of 160 condominium units, with 156 units from the 2nd to the 25th floors,
and 4 penthouse units in the 26th floor. Two hundred seventy (270) parking slots were built therein for
apportionment among its unit owners. One hundred sixty-four (164) of the parking slots were so
allotted, with each unit at the 2nd to the 25th floors being allotted one (1) parking slot each, and each
penthouse unit with two slots. Eight (8) other parking slots, found on the ground floor of the Makati
Tuscany were designated as guest parking slots, while the remaining 98 were to be retained by Multi-
Realty for sale to unit owners who would want to have additional slots.
According to Multi-Realty, the intention to allocate only 8 parking slots to the Makati Tuscanys
common areas was reflected in its color-coded ground floor plan, upper basement plan and lower
basement plan prepared by its architect, C.D. Arguelles and Associates. These plans, which depict
common areas as yellow zones and areas reserved for unit owners as red zones, clearly show that,
of the 270 parkings slots, 262 were designated red zones, and only 8 first-floor parking slots were
designated yellow zones or common areas.
Pursuant to Republic Act No. 4726, otherwise known as the Condominium Act, the Makati Tuscany
Condominium Corporation (MATUSCO) was organized and established to manage the condominium
units.
In 1975, Multi-Realty executed a Master Deed and Declaration of Restrictions
2
(Master Deed, for
short) of the Makati Tuscany. Sections 5 and 7 provide:
SEC. 5. Accessories to Units. To be considered as part of each unit and reserved for the exclusive
use of its owner are the balconies adjacent thereto and the parking lot or lots which are to be
assigned to each unit.
x x x x
SEC. 7. The Common Areas. The common elements or areas of the Makati Tuscany shall comprise
of all the parts of the project other than the units, including without limitation the following:
x x x x
(d) All driveways, playgrounds, garden areas and PARKING AREAS OTHER THAN THOSE
ASSIGNED TO EACH UNIT UNDER SEC. 5 ABOVE;
3

The Master Deed was filed with the Register of Deeds in 1977. Multi-Realty executed a Deed of
Transfer in favor of MATUSCO over these common areas. However, the Master Deed and the Deed
of Transfer did not reflect or specify the ownership of the 98 parking slots. Nevertheless, Multi-Realty
sold 26 of them in 1977 to 1986 to condominium unit buyers who needed additional parking slots.
MATUSCO did not object, and certificates of title were later issued by the Register of Deeds in favor
of the buyers. MATUSCO issued Certificates of Management covering the condominium units and
parking slots which Multi-Realty had sold.
At a meeting of MATUSCOs Board of Directors on March 13, 1979, a resolution was approved,
authorizing its President, Jovencio Cinco, to negotiate terms under which MATUSCO would buy 36 of
the unallocated parking slots from Multi-Realty. During another meeting of the Board of Directors on
June 14, 1979, Cinco informed the Board members of Multi-Realtys proposal to sell all of the
unassigned parking lots at a discounted price ofP15,000.00 per lot, or some 50% lower than the then
prevailing price of P33,000.00 each. The Board agreed to hold in abeyance any decision on the
matter to enable all its members to ponder upon the matter.
In the meantime, the fair market value of the unallocated parking slots reached P250,000.00 each, or
a total ofP18,000,000.00 for the 72 slots.
In September 1989, Multi-Realty, through its President, Henry Sy, who was also a member of the
Board of Directors of MATUSCO, requested that two Multi-Realty executives be allowed to park their
cars in two of Makati Tuscanys remaining 72 unallocated parking slots. In a letter, through its
counsel, MATUSCO denied the request, asserting, for the first time, that the remaining unallocated
parking slots were common areas owned by it. In another letter, MATUSCO offered, by way of
goodwill gesture, to allow Multi-Realty to use two unallocated parking slots, which offer was rejected
by the latter.
On April 26, 1990, Multi-Realty, as plaintiff, filed a complaint, docketed as Civil Case No. 90-1110,
against MATUSCO, as defendant, for Damages and/or Reformation of Instrument with prayer for
temporary restraining order and/or preliminary injunction. The case was raffled to Branch 59 of the
Makati RTC.
Multi-Realty alleged therein that it had retained ownership of the 98 unassigned parking slots.
Considering, however, that Makati Tuscany was one of its first condominium projects in the
Philippines, this was not specified in Section 7(d) of the Master Deed since the documentation and
the terms and conditions therein were all of first impression. It was further alleged that the mistake
was discovered for the first time when MATUSCO rejected its request to allow its (Multi-Realtys)
executives to park their cars in two of the unassigned parking lots.
In its Answer with counterclaim, MATUSCO alleged that Multi-Realty had no cause of action against it
for reformation of their contract. By its own admission, Multi-Realty sold various parking slots to third
parties despite its knowledge that the parking areas, other than those mentioned in Sec. 5 of the
Master Deed, belonged to MATUSCO. MATUSCO prayed that judgment be rendered in its favor
dismissing the complaint; and, on its counterclaim, to order the plaintiff to render an accounting of the
proceeds of the sale of the parking slots other than those described in Sec. 5 of the Master Deed; to
pay actual damages equivalent to the present market value of the parking areas other than those
described in Sec. 5 of the Master Deed, amounting to no less thanP250,000.00 per slot plus
reasonable rentals thereon at no less than P400.00 per slot per month from date of sale until payment
by plaintiff to defendant of the market value of these parking areas.
After trial, the RTC rendered a decision, the dispositive portion of which reads:
Premises considered, this case is dismissed. Defendants counterclaim is, likewise, dismissed, the
same not being compulsory and no filing fee having been paid. Plaintiff is, however, ordered to pay
defendant attorneys fees in the amount of P50,000.00.
Cost against plaintiff.
SO ORDERED.
4

The trial court ruled that Multi-Realty failed to prove any ground for the reformation of its agreement
with MATUSCO relative to the ownership of the common areas. There is no evidence on record to
prove that the defendant acted fraudulently or inequitably to the prejudice of the plaintiff, and the latter
was estopped, by deed, from claiming that it owned the common areas. It also held that the
defendant was not estopped from assailing plaintiffs ownership over the disputed parking slots.
Multi-Realty appealed the decision to the CA via a petition under Rule 41 of the Rules of Court,
contending that:
THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT AND DISALLOWING THE
PLAINTIFF-APPELLANT FROM REFORMING THE MASTER DEED BECAUSE:
I
THERE IS VALID GROUND FOR REFORMATION OF THE MASTER DEED SINCE THE MASTER
DEED DID NOT REFLECT THE TRUE INTENTION OF THE PARTIES REGARDING THE
OWNERSHIP OF THE EXTRA NINETY-EIGHT PARKING [SLOTS] DUE TO MISTAKE.
II
THE REGISTRATION OF THE MASTER DEED WITH THE REGISTER OF DEEDS DID NOT MAKE
PLAINTIFF-APPELLANT GUILTY OF ESTOPPEL BY DEED.
III
THE TRIAL COURT ERRED IN FINDING THAT DEFENDANT-APPELLEE IS NOT ESTOPPED
FROM QUESTIONING THE OWNERSHIP OF PLAINTIFF-APPELLANT OVER THE DISPUTED
PARKING LOTS.
5

In support of its appeal, Multi-Realty reiterated its contentions in the trial court, insisting that it had
adduced evidence to prove all the requisites for the reformation of Section 7(d) of the Master Deed
under Article 1359 of the New Civil Code. It was never its intention to designate the 98 unassigned
parking slots as common areas, and, as shown by the evidence on record, this was known to
MATUSCO. Under Article 1364 of the New Civil Code, an instrument may be reformed if, due to lack
of skill on the part of the drafter, the deed fails to express the true agreement or intention of the
parties therein. Since MATUSCO knew that it (Multi-Realty) owned the 98 parking slots when the
Master Deed was executed, its registration did not make Multi-Realty guilty of estoppel by deed. In
fact, MATUSCO failed to object to the sale of some of the parking slots to third parties. It was also
pointed out that Multi-Realty remained in possession thereof.
Multi-Realty further claimed that the trial court erred in not declaring that MATUSCO was estopped
from assailing the ownership over the parking slots, as it not only conformed to the sale of some of
the unassigned parking slots but likewise failed to assail the ownership thereon for a period of 11
years. It insisted that the sale of the said parking slots was made in accord with law, morals and
public order, and that MATUSCOs claim of ownership of the unassigned parking slots was merely an
afterthought.
MATUSCO, for its part, appealed the trial courts dismissal of its counterclaim.
On Multi-Realtys appeal, MATUSCO countered that the 270 parking slots were to be apportioned as
follows:
1 parking lot for each ordinary unit - 156
2
parking lots for each of the 4 Penthouse
Apartment Units - 8

of the remaining 106 parking lots, 34
parking lots were designated and allocated
as part of "common areas" which would be
allocated purely for visitors, while the
remaining 72 units would become part of the
Condominium Corporations income-earning
"common areas" - 106

- - - -
270
6

====
It was further averred that Multi-Realty, through Henry Sy, executed the Master Deed in July 1975
and the Deed of Transfer in 1977, in which the ownership of the common areas was unconditionally
transferred to MATUSCO; Multi-Realty sold 26 of the 34 parking slots in bad faith, which had been
allocated purposely for visitors of unit owners, amounting to millions of pesos; the action for
reformation has no legal basis because the transfer of the 106 unassigned parking slots which form
part of the common areas is contrary to Section 16
7
of the Condominium Act.
MATUSCO further pointed out that the unassigned parking slots could be transferred only by the
affirmative votes of all the members of Multi-Realty, and that the Master Deed and the Deed of
Transfer were prepared by the latter with the assistance of its renowned lawyers. If there was a
mistake in the drafting of the Master Deed in 1975, the deed should have been corrected in 1977
upon the execution of the Deed of Transfer. With the social and economic status of Henry Sy, Multi-
Realtys President, it is incredible that the Master Deed and the Deed of Transfer failed to reflect the
true agreement of the parties. MATUSCO went on to state that Multi-Realty failed to adduce a
preponderance of evidence to prove the essential requirements for reformation of the questioned
documents. Even if there was a mistake in drafting the deeds, reformation could not be given due
course absent evidence that defendant-appellee acted fraudulently or inequitably.
On its claim of ownership over the unassigned parking slots, MATUSCO averred that it is not
estopped to do so because the sales thereof were illegal, and it had no knowledge that Multi-Realty
had been selling the same. Having acted fraudulently and illegally, Multi-Realty cannot invoke
estoppel against it.
On the RTC decision dismissing its counterclaim, MATUSCO averred that said decision is erroneous,
as it had adduced evidence to prove its entitlement to said counterclaim.
In reply, Multi-Realty averred that MATUSCOs counterclaim had already prescribed because it was
filed only in 1990, long after the period therefor had elapsed in 1981.
On August 21, 2000, the CA rendered its decision dismissing Multi-Realtys appeal on the ground that
its action below had already prescribed. The dispositive portion of the decision reads:
WHEREFORE, foregoing premises considered, the appeal having no merit in fact and in law, is
hereby ORDERED DISMISSED, and the judgment of the trial court is MODIFIED by deleting the
award of attorneys fees not having been justified but AFFIRMED as to its Order dismissing both the
main complaint of plaintiff-appellant and the counterclaim of defendant-appellant. With costs against
both parties.
8

The appellate court ruled that it was justified in dismissing Multi-Realtys appeal on the ground of
prescription as it was clothed with ample authority to review the lower courts rulings even those not
assigned as errors on appeal, especially if the consideration of the matter is necessary to arrive at a
just decision of the case, and to avoid dispensing "piecemeal justice." The CA cited the rulings of this
Court in Servicewide Specialists, Inc. v. Court of Appeals,
9
and Dinio v. Laguesma.
10

Multi-Realty filed a motion for reconsideration of the decision, contending that:
THIS HONORABLE COURT VIOLATED SECTION 8 OF RULE 51 OF THE RULES OF COURT TO
MRDCS SUBSTANTIAL AND UNFAIR PREJUDICE BY RESOLVING MRDCS APPEAL ON THE
GROUND OF PRESCRIPTION, EVEN THOUGH NEITHER PARTY HAD ASSIGNED OR ARGUED
AS AN ERROR THE TRIAL COURTS FAILURE TO DISMISS THE ACTION FILED BY MRDC
BELOW AS PRESCRIBED.
THIS HONORABLE COURT ERRED IN COUNTING THE RUNNING OF THE PRESCRIPTIVE
PERIOD FROM THE DATE OF EXECUTION OF THE MASTER DEED IN 1975, BECAUSE UNDER
ARTICLE 1150 OF THE CIVIL CODE, AND THE SUPREME COURTS DECISIONS IN TORMON
VS. CUTANDA, AND VELUZ VS. VELUZ, MRDCS PERIOD TO FILE A SUIT FOR REFORMATION
ONLY BEGAN RUNNING IN 1989, AFTER DEFENDANT-APPELLANT MAKATI TUSCANY
CONDOMINIUM CORPORATIONS REPUDIATION OF THE PARTIES TRUE AGREEMENT GAVE
RISE TO MRDCS RIGHT OF ACTION.
11

Multi-Realty further averred that the appellate court misapplied Rule 51, Section 8 of the 1997 Rules
of Court as well as the ruling of this Court in the Servicewide Specialists case. It pointed out that,
when it filed its Brief, as appellee, Rule 51, Section 7 of the 1964 Rules of Court was still in effect,
under which an error which does not affect the jurisdiction over the subject matter will not be
considered unless stated in the assignment of error and properly assigned in the Brief, as the court
may pass upon plain and clerical errors only. Multi-Realty insisted that the parties did not raise the
issue of whether its action had already prescribed when it filed its complaint in their pleadings below
and in the respondents Brief. It claimed that it was deprived of its right to due process when the
appellate court denied its appeal based on a ruling of this Court under the 1997 Rules of Civil
Procedure. It insisted that the ruling of this Court in Servicewide Specialist, Inc. was promulgated
when the 1997 Rules of Civil Procedure was in effect.
On January 18, 2001, the CA issued a Resolution denying Multi-Realtys motion for reconsideration.
The appellate court cited the ruling of this Court in Rosello-Bentir v. Hon. Leanda,
12
to support its
ruling that the action of petitioner had already prescribed when it was filed with the RTC. Multi-Realty
received its copy of said Order of denial on January 29, 2001.
Multi-Realty, now petitioner, filed the instant petition for review on certiorari, alleging that:
THE HONORABLE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A
MANNER INCONSISTENT WITH LAW, AND DEPARTED WITH UNFAIRLY PREJUDICIAL EFFECT
FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS LAID DOWN IN SECTION 8 OF RULE
51 OF THE RULES OF COURT WHEN IT DISMISSED MULTI-REALTYS "APPEAL" ON THE BASIS
OF PRESCRIPTION, EVEN THOUGH NEITHER PARTY RAISED [NOR] DISCUSSED THE TRIAL
COURTS FAILURE TO ENFORCE THE ALLEGEDLY APPLICABLE TIME BAR AS AN ERROR IN
THEIR BRIEFS.
THE HONORABLE COURT OF APPEALS DECIDED A MATTER OF SUBSTANCE IN A MANNER
PROBABLY NOT IN ACCORD WITH ARTICLE 1150 OF THE CIVIL CODE, WHEN IT
DISREGARDED THIS HONORABLE COURTS RULINGS IN TORMON V. CUTANDA AND VELUZ
V. VELUZ, AND RULED THAT THE PRESCRIPTIVE PERIOD APPLICABLE TO AN ACTION FOR
REFORMATION BEGINS TO RUN FROM THE DATE THE INSTRUMENT TO BE REFORMED IS
EXECUTED, RATHER THAN FROM THE DATE ON WHICH THE TRUE AGREEMENT THE
REFORMATION IS MEANT TO EXPRESS IS VIOLATED.
THE HONORABLE COURT OF APPEALS OVERLOOKED RELEVANT FACTS SUSTAINING A
DECISION ALLOWING REFORMATION OF THE MASTER DEED WHEN IT FAILED TO REVERSE
THE TRIAL COURTS DECISION AND FIND THAT MATUSCOS CONSISTENT RECOGNITION
OF, AND PARTICIPATION IN, THE SALES OF UNALLOCATED PARKING SLOTS MADE BY
MULTI-REALTY, AND ITS EFFORTS TO BUY THE UNALLOCATED PARKING SLOTS FROM
MULTI-REALTY, ESTOP IT FROM ASSERTING TITLE TO THE UNALLOCATED PARKING
SLOTS.
13

The Court is to resolve two issues: (1) whether the CA erred in dismissing petitioners appeal on the
ground of prescription; and (2) whether petitioners action had already prescribed when it was filed in
1990.
On the issue of prescription, petitioner asserts that under Article 1150 in relation to Article 1144 of the
New Civil Code, its action for reformation of the Master Deed accrued only in 1989, when respondent,
by overt acts, made known its intention not to abide by their true agreement; since the complaint
below was filed in 1990, the action was filed within the prescriptive period therefor. Petitioner cites the
rulings of this Court in Tormon v. Cutanda,
14
Veluz v. Veluz,
15
and Espaol v. Chairman, Philippine
Veterans Administration
16
to bolster its claim.
In its comment on the petition, respondent avers that, as held by this Court in Rosello-Bentir v. Hon.
Leanda,
17
the prescriptive period for the petitioner to file its complaint commenced in 1975, upon the
execution of the Master Deed in its favor. Considering that the action was filed only in 1990, the
same, by then, had already prescribed.
On the first issue, we sustain petitioners contention that the CA erred in dismissing its appeal solely
on its finding that when petitioner filed its complaint below in 1990, the action had already prescribed.
It bears stressing that in respondents answer to petitioners complaint, prescription was not alleged
as an affirmative defense. Respondent did not raise the issue throughout the proceedings in the RTC.
Indeed, the trial court did not base its ruling on the prescription of petitioners action; neither was this
matter assigned by respondent as an error of the RTC in its brief as defendant-appellant in the CA.
Settled is the rule that no questions will be entertained on appeal unless they have been raised
below. Points of law, theories, issues and arguments not adequately brought to the attention of the
lower court need not be considered by the reviewing court as they cannot be raised for the first time
on appeal. Basic considerations of due process impel this rule.
18

Truly, under Section 7, Rule 51 of the 1964 Rules of Court, no error which does not affect the
jurisdiction over the subject matter will be considered unless stated in the assignment of errors and
properly argued in the brief, save as the Court, at its option, may pass upon plain errors not specified,
and clerical errors. Even at that time, the appellate court was clothed with ample authority to review
matters even if not assigned as errors in their appeal if it finds that their consideration is necessary in
arriving at a just decision of the case.
19
It had ample authority to review and resolve matters not
assigned and specified as errors by either of the parties on appeal if it found that the matter was
essential and indispensable in order to arrive at a just decision of the case. It has broad discretionary
power, in the resolution of a controversy, to take into consideration matters on record unless the
parties fail to submit to the court specific questions for determination. Where the issues already raised
also rest on other issues not specifically presented, as long as the latter issues bear relevance and
close relation to the former and as long as they arise from matters on record, the appellate court has
authority to include them in its discussion of the controversy as well as to pass upon them. In brief, in
those cases wherein questions not particularly raised by the parties surface as necessary for the
complete adjudication of the rights and obligations of the parties and such questions fall within the
issues already framed by the parties, the interests of justice dictate that the court consider and
resolve them.
20

When the appeals of the petitioner and that of the respondent were submitted to the CA for decision,
the 1997 Rules of Civil Procedure was already in effect. Section 8, Rule 51 of said Rules, reads:
SEC. 8. Questions that may be decided. No error which does not affect the jurisdiction over the
subject matter or the validity of the judgment appealed from or the proceedings therein will be
considered unless stated in the assignment of errors, or closely related to or dependent on an
assigned error and properly argued in the brief, save as the court may pass upon plain errors and
clerical errors.
This provision was taken from the former rule with the addition of errors affecting the validity of the
judgment or closely related to or dependent on an assigned error.
21
The authority of the appellate
court to resolve issues not raised in the briefs of the parties is even broader.
Nevertheless, given the factual backdrop of the case, it was inappropriate for the CA, motu proprio, to
delve into and resolve the issue of whether petitioners action had already prescribed. The appellate
court should have proceeded to resolve petitioners appeal on its merits instead of dismissing the
same on a ground not raised by the parties in the RTC and even in their pleadings in the CA.
Even if we sustain the ruling of the CA that it acted in accordance with the Rules of Court in
considering prescription in denying petitioners appeal, we find and so rule that it erred in holding that
petitioners action had already prescribed when it was filed in the RTC on April 26, 1990.
Prescription is rightly regarded as a statute of repose whose object is to suppress fraudulent and
stale claims from springing up at great distances of time and surprising the parties or their
representatives when the facts have become obscure from the lapse of time or the defective memory
or death or removal of witnesses. The essence of the statute of limitations is to prevent fraudulent
claims arising from unwarranted length of time and not to defeat actions asserted on the honest belief
that they were sufficiently submitted for judicial determination.
22
Our laws do not favor property rights
hanging in the air, uncertain, over a long span of time.
23

Article 1144 of the New Civil Code provides that an action upon a written contract must be brought
within ten (10) years from the time the right of action accrues:
Art. 1144. The following actions must be brought within ten years from the time the right of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
In relation thereto, Article 1150 of the New Civil Code provides that the time for prescription of all
actions, when there is no special provision which ordains otherwise, shall be counted from the day
they may be brought. It is the legal possibility of bringing the action that determines the starting point
for the computation of the period of prescription.
24

The term "right of action" is the right to commence and maintain an action. In the law of pleadings,
right of action is distinguished from a cause of action in that the former is a remedial right belonging to
some persons while the latter is a formal statement of the operational facts that give rise to such
remedial right. The former is a matter of right and depends on the substantive law while the latter is a
matter of statute and is governed by the law of procedure. The right of action springs from the cause
of action, but does not accrue until all the facts which constitute the cause of action have occurred.
25

A cause of action must always consist of two elements: (1) the plaintiffs primary right and the
defendants corresponding primary duty, whatever may be the subject to which they relate person,
character, property or contract; and (2) the delict or wrongful act or omission of the defendant, by
which the primary right and duty have been violated.
26

To determine when all the facts which constitute a cause of action for reformation of an instrument
may be brought and when the right of the petitioner to file such action accrues, the second paragraph
of Section 1, Rule 63, must be considered because an action for the reformation of an instrument
may be brought under said Rule:
SECTION 1. Who may file petition. Any person interested under a deed, will, contract or other
written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or
any other governmental regulation may, before breach or violation thereof, bring an action in the
appropriate Regional Trial Court to determine any question of construction or validity arising, and for
a declaration of his rights or duties, thereunder.
An action for the reformation of an instrument, to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be brought under
this Rule (emphasis supplied).
Such a petition is a special civil action determinative of the rights of the parties to the case. It is
permitted on the theory that courts should be allowed to act, not only when harm is actually done and
rights jeopardized by physical wrongs or physical attack upon existing legal relations, but also when
challenge, refusal, dispute or denial thereof is made amounting to a live controversy. The uncertainty
and insecurity which may thereby be avoided may hamper or disturb the freedom of the parties to
transact business or to make improvements on their property rights. A situation is thus created when
a judicial declaration may serve to prevent a dispute from ripening into violence or destruction.
27

The concept and meaning of the term cause of action in proceedings for declaratory relief, vis--vis
an ordinary civil action, is broadened. It is not, as in ordinary civil action, the wrong or delict by which
the plaintiffs rights are violated, but it is extended to a mere denial, refusal or challenge raising at
least an uncertainty or insecurity which is injurious to plaintiffs rights.
28

For a petition for declaratory relief to prosper, the following conditions sine qua non must concur: (1)
there must be a justiciable controversy; (2) the controversy must be between persons whose interests
are adverse; (3) the party seeking declaratory relief must have a legal interest in the controversy; and
(4) the issue involved must be ripe for judicial determination.
29

To controvert is to dispute; to deny, to oppose or contest; to take issue on.
30
The controversy must be
definite and concrete, touching on the legal relations of the parties having adverse legal interests. It
must be a real and substantial controversy admitting of specific relief through a decree of a
conclusive character as distinguished from an opinion advising what the law would be upon a
hypothetical state of facts.
31

The fact that the plaintiffs desires are thwarted by its own doubts, or by the fears of others, does not
confer a cause of action. No defendant has wronged the plaintiff or has threatened to do
so.
32
However, the doubt becomes a justiciable controversy when it is translated into a claim of right
which is actually contested.
33
As explained by this Court, a dispute between the parties is justiciable
when there is an active antagonistic assertion of a legal right on one side and a denial thereof on the
other, concerning a real, not merely a theoretical question or issue.
34

In sum, one has a right of action to file a complaint/petition for reformation of an instrument when his
legal right is denied, challenged or refused by another; or when there is an antagonistic assertion of
his legal right and the denial thereof by another concerning a real question or issue; when there is a
real, definitive and substantive controversy between the parties touching on their legal relations
having adverse legal interests. This may occur shortly after the execution of the instrument or much
later.
35

A party to an instrument is under no obligation to seek a reformation of an instrument while he is
unaware that any opposition will be made to carry out the actual agreement.
36
The statute of
limitations does not begin to run against an equitable cause of action for the reformation of an
instrument because of mistake until the mistake has been discovered or ought to have been
discovered.
37
The mere recording of a deed does not charge the grantor with constructive notice of a
mistake therein, but is to be considered with other facts and circumstances in determining whether
the grantor be charged with notice actual or constructive.
38

In State ex rel. Pierce County v. King County,
39
the appellate court ruled that:
In equitable actions for reformation on the ground of mistake the rule on the question of when the
period of limitation or laches commences to run is as stated by this Court in State v. Lorenz, 22
Wash. 289, 60 P. 644, 647:
* * * that the statute did not begin to run against the right of appellant to reform the deed [because of
a mistake therein] until the assertion on the part of respondents of their adverse claim.
In Chebalgoity v. Branum, 16 Wash.2d 251, 133 P.2d 288, 290, we said:
Nor is his right to maintain it [an action for reformation grounded on mistake] impaired by lapse of
time, for the bar of the statue of limitations does not begin to run until the assertion of an adverse
claim against the party seeking reformation.
The rule is also stated in 53 C.J. 1003, reformation of instruments, as follows:
[ 155] C. Time for Bringing Action. An action to reform an instrument may be brought as soon as the
cause of action accrues. * * * On the other hand, a party to an instrument is under no obligation to
seek its correction before his cause of action is finally vested or while he is unaware that any
opposition will be made in carrying out the actual agreement, where for a long time the rights and
duties of the parties are the same under the writing and under the terms which it is alleged were
intended, and the failure to take any action toward reformation until his right vests or opposition is
manifest does not prejudice his suit.
40

In this case, before petitioner became aware of respondents denial of its right under their true
contract, petitioner could not be expected to file an action for the reformation of the Master Deed. As
Justice Jose BL Reyes, ratiocinated in Tormon v. Cutanda:
41

It follows that appellants cause of action arose only when the appellees made known their intention,
by overt acts, not to abide by the true agreement; and the allegations of the complaint establish that
this happened when the appellees executed the affidavit of consolidation of the title allegedly
acquired by appellees under the fictitious pacto de retro sale. It was then, and only then, that the
appellants cause of action arose to enforce the true contract and have the apparent one reformed or
disregarded, and the period of extinctive prescription began to run against her. Since the
consolidation affidavit was allegedly made only in September 1960, and the complaint was filed in
Court the following November 1960, just two months afterward, the action of appellant had not
prescribed.
42

The Courts ruling in the Tormon case was reiterated in Veluz v. Veluz.
43

In the more recent case of Naga Telephone Co., Inc. v. Court of Appeals,
44
the Court made the
following declaration:
Article 1144 of the New Civil Code provides, inter alia, that an action upon a written contract must be
brought within ten (10) years from the time the right of action accrues. Clearly, the ten (10) years
period is to be reckoned from the time the right of action accrues which is not necessarily the date of
execution of the contract. As correctly ruled by respondent court, private respondents right of action
arose "sometime during the latter part of 1982 or in 1983 when according to Atty. Luis General, Jr. x x
x, he was asked by (private respondents) Board of Directors to study said contract as it already
appeared disadvantageous to (private respondent) (p. 31, tsn, May 8, 1989). Private respondents
cause of action to ask for reformation of said contract should thus be considered to have arisen only
in 1982 or 1983, and from 1982 to January 2, 1989 when the complaint in this case was filed, ten (10)
years had not yet elapsed.
45

This ruling was reiterated in Pilipinas Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo,
Inc.,
46
where the Court declared that the cause of action of respondent therein arose upon its
discovery of the short deliveries with certainty, since prior thereto, it had no indication that it was not
getting what it was paying for. The Court declared that before then, there was yet no issue to speak
of, and as such, respondent could not have brought an action against petitioner. It was stressed that
"it was only after the discovery of the short deliveries that respondent got into position to bring an
action for specific performance." Thus, the Court declared that the action was brought within the
prescriptive period.
47

In the present case, petitioner executed the Master Deed in 1975. However, petitioner had no doubt
about its ownership of the unassigned parking lots, and even sold some of them. Respondent did not
even object to these sales, and even offered to buy some of the parking slots. Respondent assailed
petitioners ownership only in 1989 and claimed ownership of the unassigned parking slots, and it was
then that petitioner discovered the error in the Master Deed; the dispute over the ownership of the
parking slots thereafter ensued. It was only then that petitioners cause of action for a reformation of
the Master Deed accrued. Since petitioner filed its complaint in 1990, the prescriptive period had not
yet elapsed.
The CA erred in relying on the ruling of this Court in Rosello-Bentir v. Hon. Leanda.
48
In that case, the
Leyte Gulf Traders, Inc. leased a parcel of land owned by Yolando Rosello-Bentir. The lease
agreement was entered into on May 5, 1968 and was for a period of 20 years. The parties therein
agreed, inter alia, that:
"4. IMPROVEMENT. The lessee shall have the right to erect on the leased premises any building or
structure that it may desire without the consent or approval of the Lessor x x x provided that any
improvements existing at the termination of the lease shall remain as the property of the Lessor
without right to reimbursement to the Lessee of the cost or value thereof."
49

On May 5, 1989, the lessor Rosello-Bentir sold the property and the corporation questioned the sale,
alleging that they had a verbal agreement that the lessor has the right to equal the offers of
prospective buyers of the property. It insisted, however, that the said agreement was inadvertently
omitted in the contract. On May 15, 1992, the corporation filed a complaint for reformation of
instrument, specific performance, annulment of conditional sale and damages with a prayer for a writ
of preliminary injunction, alleging that the contract of lease failed to reflect the true agreement of the
parties.
In his answer to the complaint, the lessor alleged that the corporation was guilty of laches for not
bringing the case for reformation of the lease contract within the prescriptive period of 10 years from
its execution. On December 15, 1995, the trial court issued an Order dismissing the complaint on the
ground that the action had already prescribed. Plaintiff filed a motion for the reconsideration of the
Order and, on May 10, 1996, the trial court granted the motion and set aside its Order, this time,
declaring that its Order dated December 15, 1995 dismissing the complaint was "premature and
precipitate" and denied the corporation its right to due process. The trial court declared that, aside
from plaintiffs cause of action for reformation of lease contract, plaintiff had other causes of action
such as specific performance, annulment of conditional sale and damages, which must first be
resolved before the trial on the merits of its case.
On appeal to the CA, the lessor alleged that the RTC committed grave abuse of discretion amounting
to excess or lack of jurisdiction in setting aside the December 15, 1995 Order of the RTC. For its part,
the CA rendered judgment dismissing the petition for certiorari on its finding that the complaint had
not yet prescribed when it was filed in the court below. The CA declared that the prescriptive period
for the action for reformation of the lease contract should be reckoned not from the execution of the
contract of lease in 1968, but from the date of the four-year extension of the lease contract after it
expired in 1988. According to the CA, the extended period of the lease was an "implied new lease"
within the contemplation of Article 1670 of the New Civil Code under which provision, the other terms
of the original contract were deemed revived in the implied new lease.
However, we reversed this CA decision and declared that the action for reformation of the lease
contract was inappropriate because petitioner had already breached the deed.
50
Even supposing that
the four-year extended lease could be considered as an implied new lease under Article 1670 of the
New Civil Code, the "other terms" contemplated therein were only those terms which are germane to
the lessees right of continued enjoyment of the leased property. We concluded that the prescriptive
period of 10 years, as provided for in Article 1144 of the Civil Code, applies by operation of law and
not by the will of the parties, and that, therefore, the right of action for reformation accrues from the
date of the execution of the contract of lease in 1968.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 44696 is SET ASIDE. The Court of Appeals is directed to resolve
petitioners appeal with reasonable dispatch. No costs.
ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
CONSUELO YNARES-SANTIAGO
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ
Asscociate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above decision were reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.
ARTEMIO V. PANGANIBAN
Chief Justice


Footnotes
1
Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Ramon Mabutas, Jr.
(retired) and Martin S. Villarama, Jr., concurring; rollo, pp. 93-100.
2
Records, pp. 55-61.
3
Rollo, p. 174.
4
Records, p. 544.
5
CA rollo, pp. 52-53.
6
Rollo, p. 174.
7
Section 16. A condominium corporation shall not, during its existence, sell, exchange, lease,
or otherwise dispose of the common areas owned or held by or in the condominium project
unless authorized by the affirmative vote of a simple majority of the registered owners:
Provided, That prior notifications to all registered owners are done: and Provided, further, That
the condominium corporation may expand or integrate the project with another upon the
affirmative vote of a simple majority of the registered owners, subject only to the final approval
of the Housing and Land Use Regulatory Board.
8
Rollo, p. 17.
9
327 Phil. 431, 443 (1996).
10
339 Phil. 309 (1997).
11
Rollo, p. 198.
12
386 Phil. 802, 812 (2000).
13
Rollo, pp. 64-65.
14
119 Phil. 84 (1963).
15
133 Phil 459 (1968).
16
G.R. No. L-44616, June 29, 1985, 137 SCRA 314 (1985).
17
Supra note 12.
18
Mendoza v. Court of Appeals, G.R. No. 116216, June 20, 1997, 274 SCRA 527, 538-539.
19
Korean Air Lines, Co. Ltd. v. Court of Appeals, G.R. No. 114061, August 3, 1994, 234 SCRA
717, 725, citing Vda. de Javellana v. CA, 123 SCRA 799 (1983).
20
Insular Life Assurance Co. Ltd. Employees Association-NATU v. InsularLife Assurance Co.,
Ltd., No. L-25291, March 10, 1977, 76 SCRA 50, 61-62.
21
J.Y. Feria, 1997 rules of civil procedure, annotated (1997 ed.,) 209.
22
Yuchengco v. Republic of the Philippines, 388 Phil. 1039, 1061 (2000).
23
Ochagabia v. Court of Appeals, G.R. No. 125590, March 11, 1999, 304 SCRA 587, 593.
24
Tolentino v. Court of Appeals, L-41427, June 10, 1988, 162 SCRA 66, 72.
25
De Guzman, Jr. v. Court of Appeals, G.R. Nos. 92029-30, December 20, 1990, 192 SCRA
507, 508.
26
Consolidated Dairy Products, Co. v. Court of Appeals, G.R. No. 100401, August 24, 1992,
212 SCRA 810, 818.
27
Moran, comments on the rules of court, vol 3. (1970 ed.), 149.
28
Id. at 144.
29
Caltex (Philippines), Inc. v. Palomar, 124 Phil. 763, 770 (1966).
30
In Re Pittsburghs City Charter, 297 Pa. 502, 147 A. 525 (1929).
31
Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 57 S.Ct. 461 (1937).
32
Willing v. Chicago Auditorium Association, 277 U.S. 274, 48 S.Ct. 507 (1928).
33
Tolentino v. Board of Accountancy, 90 Phil. 83, 88 (1951).
34
Caltex (Philippines), Inc. v. Palomar, supra note 29, at 771-772.
35
See Banco Filipino Savings and Mortgage Bank v. Court of Appeals, 388 Phil. 27 (2000).
36
Stewart v. Warren, 153 S.W. 2d 545, 202 Ark. 873 (1941).
37
See Johnson v. U.S., 340 F.3d 1219 (2003).
38
American Mining Co. v. Basin & Bay State Mining Co., 39 Mont. 476, 104 P. 525 (1909).
39
29 Wash. 2d 37, 185 P.2d 134 (1947).
40
29 Wash.2d 37, 44, 185 P.2d 134, 137.
41
Supra note 14.
42
Id. at 87-88.
43
Supra note 15.
44
G.R. No. 107112, February 24, 1994, 230 SCRA 351.
45
Id. at 369.
46
Pilipinas Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., G.R. No. 159831,
October 14, 2005, 473 SCRA 151.
47
Id. at 171.
48
Supra note 12.
49
Id. at 809.
50
Id. at 813.