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Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-62082 February 26, 1992


PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE HON. TEODORO N. FLORENDO, Judge of the Court of
Agrarian Relations, 12th Regional Disctrict, Branch IV, Dumaguete
City, VIVIENNE B. VILORIA, SOCORRO MISA, GERMELIN
ESTORCO, PABLO BENDOLO, REWEL CABUAL, BONIFACIO
VALEROSO, ET. AL., respondents.
Juan J. Diaz, Benjamin C. Del Rosarion and Pedro L. Lazo for petitioner.
Maria Corazon C. Locsin and Edwin E. Torres for private respondents.

BIDIN, J.:
This is a petition for certiorari with preliminary injunction seeking to annul
and set aside the: (a) order of the respondent judge dated May 21, 1982
admitting private respondents' "First Amended Complaint" in CAR Case No.
532 entitled "Vivienne B. Viloria, et al. vs. Philippine National Bank, et al."
for declaration of nullity of the foreclosure proceedings in violation of P.D.
Nos. 27 and 946; (b) order dated June 3, 1982 denying PNB's opposition to
the first amended complaint; and (c) order dated June 28, 1982 denying
PNB's motion for reconsideration.
The undisputed facts are as follows:

Plaintiffs are tenants of four (4) parcels of land located in the municipality of
Mabinay, Negros Oriental, whose previous owner Ricardo Valeroso,
mortgaged the same to the Philippine National Bank (PNB, for short). In
1971, said parcels of land were bought by spouses Agripino and Soledad
Viloria who assumed the mortgage with PNB (Rollo, Comment, p. 90).
In 1974, defendant PNB requested defendant Provincial Sheriff of Negros
Oriental to foreclose the mortgage on the aforesaid parcels of land after the
failure of the owners thereof to pay certain amortization and the same was
sold at public auction to the defendant bank as the highest bidder (Rollo,
Brief for Private Respondents, p. 147; Annex "2", p. 3). Notwithstanding the
fact that said lands were already brought under the Land Reform Program of
the government, the PNB caused the titles to said parcels of land transferred
in its name to the prejudice of plaintiffs (Rollo, Ibid.).
On September 8, 1981, plaintiffs Vivienne B. Viloria, et al. filed a complaint
for "Declaration of Nullity of the Foreclosure Proceedings in Violation of
P.D. Nos. 27 and 946" against the defendants PNB, et al. in the Court of
Agrarian Relations, 12th Judicial District, Branch IV, Dumaguete City.
On October 7, 1981, defendant PNB answered the complaint with
counterclaim for damages. Plaintiffs, in turn, filed their reply to the
counterclaim dated October 10, 1981. Defendant PNB then moved for leave
of court to file third party complaint dated October 20, 1981 against the
registered owners-mortgagors of the subject parcels of land.
Plaintiffs Vivienne Viloria, et al. moved for the amendment of their
complaint to implead the heirs of the deceased plaintiff-Agripino Viloria
which respondent Judge admitted in an order dated February 26, 1982.
On May 28, 1982, private respondents Vivienne Viloria, et al. moved to
further amend their amended complaint. Notable amendment introduced in
the First Amended Complaint is the inclusion of another parcel of land as
subject matter thereof, described as follows:
E Transfer Certificate of Title No. 42836, a parcel of land
(Lot 787-B-2-A of the subdivision plan, Psd-54375, being a
portion of Lot 7887-B-2 described on plan Psd-956, L.R.C.
1

Record No. 9465), with all improvements thereon situated at


Cebu City. Bounded on NE., along line 1-2 by lot 785, Cebu
Cadastre; on the SE., along line 2-3, by lot 787-A, Cebu
Cadastre; on the SW., along line 3-4, by Lot 787-B-2-B of
the subdivision plan; and on the NW., along line 4-1 by lots
788-A-1 and 788-A-2 of plan Psd-17436. Containing an area
of TWO HUNDRED NINETY-FOUR square meters (294)
more or less.
Said property belongs to the spouses Agripino and Soledad Viloria and
mortgaged also with PNB. It is further alleged that:
While letter "E" is the property located in Cebu City and
mortgaged with defendant Bank should be considered as one
and indivisible with the mortgage executed upon the four (4)
parcels of land situated at Mabinay (Negros Oriental) and
were put under Land Reform by virtue of the real estate
mortgage executed and signed by the spouses land owner
Agripino and Soledad Viloria which portion of the Real
Estate Mortgage document specifically paragraph No. 2
which states "That for and in consideration of certain loans,
overdrafts and other credit accommodations obtained from
the mortgage, which is hereby fixed at P115,449.61
Philippine Currency, and to secure the payment of the same
and those others that the mortgage may extend to the
mortgagor including interest and expenses and other
obligations owing by the mortgagor to the mortgagee
whether direct or indirect or secondary. . . (Rollo, Petition, p.
5).
PNB opposed the admission of the aforesaid private respondent's First
Amended Complaint on the grounds that there was no proper notice of
hearing as required by the Uniform CAR Rules of procedure, the impropriety
of including TCT No. 42836 a residential land situated in Cebu City as
subject matter of the complaint, and the failure of private respondents to
attach a copy of the real estate mortgage contract upon which the action was
based (Rollo, Annex "I", pp. 37-38).

In an order dated May 31, 1982, respondent Judge Florendo granted private
respondents' Viloria, et al. motion and thus, admitted the First Amended
Complaint. Said order states among others:
Acting on the "Motion to Amend Amended Complaint"
dated May 28, 1982, filed by Ma. Corazon C. Locsin,
counsel for plaintiffs, wherein the First Amended Complaint
(pp. 285 to 290 inclusive) of the records, was attached
thereto, and it appearing that Atty. Norberto Denura, counsel
for the defendant PNB, has received a copy of aforestated
motion and also a copy of the First Amended Complaint
thereto attached, the "Motion To Amend Amended
Complaint" is hereby GRANTED and the First Amended
Complaint is likewise hereby ADMITTED.
Petitioner PNB's motion for reconsideration of the above order was denied
by respondent Judge Florendo in an order dated June 28, 1981.
Hence, the petition.
As prayed for in the petition, a temporary restraining order was issued by this
Court pursuant to its resolution dated October 25, 1982 enjoining the
respondent Judge from proceeding with the hearing of the case.
The First Division of this Court resolved to give due course to the petition in
the resolution of March 16, 1983.
The principal issue in the instant case is whether or not the respondent Judge
exceeded his jurisdiction in admitting the First Amended Complaint which
adds another parcel of land not within the coverage of Operation Land
Transfer pursuant to P.D. 27.
The petition is impressed with merit.
Upon the abolition of the Court of Agrarian Relations by BP 129 enacted on
August 10, 1981 and fully implemented on February 14, 1983, jurisdiction
over agrarian disputes is now vested in the appropriate Regional Trial Court
pursuant to the provisions of Sec. 19(7) of the said law (Locsin v. Valenzuela,
2

173 SCRA 454 [1989]; Enrique v. Fortuna Mariculture Corporation, 158


SCRA 651 [1988]);
In view of such supervening event, it is now the appropriate Branch of the
Regional Trial Court of Negros Oriental that has jurisdiction over the case.
Be that as it may, the same law provides that whenever a Regional Trial
Court takes cognizance of agrarian cases, the special rules of procedures
applicable under the present laws to such cases shall continue to be applied,
unless amended by law or by rules of court promulgated by the Supreme
Court (Sec. 24, BP 129).
Coming back to the case at bar, petitioner contends that Lot No. 787-B-2-A
(formerly covered by TCT No. 42836, now TCT No. 75805-PNB) being a
residential/commercial and non-agricultural land situated at Cebu City is not
within the coverage of the Operation Land Transfer, thus not within the
jurisdiction of the Court of Agrarian Relations.
Jurisdiction, in general, is either one over the nature of the action, over the
subject matter, over the person of the defendants or over the issue framed in
the pleadings (Balais v. Balais, 159 SCRA 37 [1988]). Jurisdiction over the
subject matter, on the other hand, is conferred by law and does not depend on
the consent or objection or the acts or omissions of the parties or any one of
them (Republic v. Sangalang, 159 SCRA 515 [1988]). The law which
conferred jurisdiction on the Court of Agrarian Relations, now transferred to
the appropriate Branch of the Regional Trial Court, concerning agricultural
lands, is P.D. 946 which provides, among others:
Sec. 12. Jurisdiction Over Subject Matter The Court of
Agrarian Relations shall have original and exclusive
jurisdiction over:
a) Cases involving the rights and obligations
of persons in the cultivation and use of
agricultural land . . .;
b) Questions involving rights granted and
obligations imposed by laws, presidential
decrees, Orders, Instructions, Rules and
Regulations issued and promulgated in
relation to the agrarian reform program;

xxx xxx xxx


e) Cases involving the sale, alienation,
mortgage, foreclosure, pre-emption and
redemption of tenanted agricultural
land; . . . (emphasis supplied)
xxx xxx xxx
Accordingly, the Court of Agrarian Relations (now RTC sitting as an agrarian
court) could only entertain disputes over lands that are the subject of agrarian
cases. Corollarily, lands that are not the subject of agrarian disputes should
not be brought before it as an agrarian court. It has been the legislative policy
to confine to the CAR exclusive jurisdiction over agrarian cases as well as
their incidents (Depositario v. Hervias, 121 SCRA 756 [1983]).
The following factors indisputably established questioned land is beyond
CAR's jurisdiction:
First, private respondents Viloria, et al. admission in their Comment dated
November 19, 1982 (Rollo, pp. 90-97) that Lot No. 787-B-2-A is a
residential lot located at Cebu City.
Second, the certification by the Agrarian Reform Team No. 215 to the effect
that subject lot is not within the coverage of the Operation Land Transfer
pursuant to P.D. 27 (Annex Rollo, p. 54). Such ''official certification can be
considered as correct, if only because of the presumption of regularity that is
stamped on it as an official document" (San Mauricio Mining Co. v. Ancheta,
105 SCRA 371 [1981]).
Indeed, amendments to pleadings are generally favored and should be
liberally construed (PNB v. CA, 159 SCRA 433 [1988]), however, where the
court has no jurisdiction over the subject matter of the case (Lot 387-B-2-A
being a residential lot not covered by Operation Land Transfer under PD 27),
it is evident that the amendment of the complaint could not be allowed so as
to confer jurisdiction upon the court over said property.
It being apparent that the Court of Agrarian Relations has no jurisdiction over
Lot No. 787-B-2-A aside from the fact that said court has already been
3

abolished by BP 129, the issue as to its territorial jurisdiction has become


moot and academic.

the lower court were issued either in excess of or without jurisdiction


(Aguilar v. Tan, supra).

The propriety of the petition for certiorari is beyond question.

WHEREFORE, the petition for certiorari is GRANTED and the orders dated
May 31, June 3, and June 28, 1982 are hereby ANNULLED and SET
ASIDE. The trial of CAR Case No. 532 on the merits is hereby ordered to be
conducted in the appropriate Branch of the Regional Trial Court of Negros
Oriental in view of the abolition of the Court of Agrarian Relations by BP
129 and the temporary restraining order issued by this Court dated October
25, 1982 enjoining the hearing of CAR Case No. 532 with respect to Lot No.
787-B-2-A (formerly covered by T.C.T. No. 43836 covering a parcel of land
situated in Cebu City ) is made PERMANENT.

The order of the respondent Judge admitting the First Amended Complaint
including therein said questioned Lot 787-B-2-A which is a residential lot not
falling within the ambit of PD 27, hence, beyond CAR's jurisdiction, was
issued in excess of jurisdiction. The term excess of jurisdiction signifies that
the court, board or officer has jurisdiction over a case but oversteps such
jurisdiction while acting thereon (Alhambra Cigar and Cigarette
Manufacturing Co., Inc. v. Caleda., et al., 122 Phil. 355 [1965]). Verily, the
writ of certiorari is granted "to keep an inferior court within the bounds of its
jurisdiction . . ." (Aguilar v. Tan, 31 SCRA 205.[1970]. It is the proper
remedy "where it clearly appears that the trial court is proceeding in excess
or outside of its jurisdiction . . ." (Baloria v. Abalos, 32 SCRA 368 [1970];
Time, Inc. v. Reyes, 39 SCRA 303 [1971]; Ablan, Sr. v. Madarang, 41 SCRA
213 [1971]). Since the "office of the writ of certiorari has been reduced to
the correction of defects of jurisdiction solely and cannot be legally used for
any other purpose" (Albert v. CFI of Manila, Br. VI, 23 SCRA 948 [1968]),
said remedy is available in the instant case to keep the trial court from
proceeding in the case in excess of its jurisdiction.

SO ORDERED.
Gutierrez, Jr., Feliciano, Davide, Jr. and Romero, JJ., concur.

The private respondents Viloria, et al.'s contention that the petition for
certiorari is premature since the order of the respondent judge could have
simply been assigned as an error in the appeal by the petitioner in case of
adverse judgment is not persuasive. Even when appeal is available and is the
proper remedy, this court has allowed a writ of certiorari when the orders of
Republic of the Philippines
SUPREME COURT
Manila

FABIANA C. VDA. DE SALAZAR, petitioner,


vs.
COURT OF APPEALS, PRIMITIVO NEPOMUCENO and
EMERENCIANA NEPOMUCENO, respondents.

FIRST DIVISION

HERMOSISIMA, JR., J.:


G.R. No. 121510 November 23, 1995
4

Where the defendant in an ejectment case dies before the rendition by the
trial court of its decision therein, does the trial court's failure to effectuate a
substitution of heirs before its rendition of judgment render such judgment
jurisdictionally infirm?
On July 23, 1970, both private respondents Primitive Nepomuceno and
Emerenciana Nepomuceno filed separate complaints 1 with the then Court of
Agrarian Relations of Malolos, Bulacan, for ejectment on the ground of
personal cultivation and conversion of land for useful non-agricultural
purposes against petitioner's deceased husband, Benjamin Salazar. After
protracted proceedings in the agrarian court and then the Regional Trial
Court 2 spanning from 1970 to 1993, the trial court rendered its joint decision
3
in favor of private respondents. An appeal 4 therefrom was interposed in the
name of petitioner's deceased husband on the ground that private respondents
herein failed to satisfy the requirements pertaining to personal cultivation and
conversion of the landholdings into non-agricultural uses. The Court of
Appeals rejected such contention upon finding that the record was replete
with evidence justifying private respondents' assertion of their right of
cultivation and conversion of their landholdings. 5
Almost a year after the termination of that appeal, the same trial court
decision subject thereof was once again assailed before the Court of Appeals
through a petition 6 for annulment of judgment. Herein petitioner assailed the
same trial court decision as having been rendered by a court that did not have
jurisdiction over her and the other heirs of her deceased husband because
notwithstanding the fact that her husband had already died on October 3,
1991, the trial court still proceeded to render its decision on August 23, 1993
without effecting the substitution of heirs in accordance with Section 17,
Rule 3, of the Rules of Court thereby depriving her of her day in court.
Petitioner, not having asserted the matter of fraud or collusion in her petition
for annulment of judgment, the Court of Appeals decided the same on the
basis of the sole issue of non-jurisdiction resulting from the alleged
deprivation of petitioner's right to due process and ruled in favor of the
validity of the challenged decision. 7 Petitioner filed a motion for

reconsideration of the decision of the appellate court reiterating the trial


court's lack of jurisdiction over the heirs of petitioner's deceased husband as a
consequence of the failure of the trial court to effectuate a valid substitution
of heirs. Said motion was denied in a resolution promulgated on August 14,
1995. Hence this petition.
The petition is bereft of merit.
The need for substitution of heirs is based on the right to due process
accruing to every party in any proceeding. 8 The rationale underlying this
requirement in case a party dies during the pendency of proceedings of a
nature not extinguished by such death, is that
. . . the exercise of judicial power to hear and determine a
cause implicitly presupposes in the trial court, amongst other
essentials, jurisdiction over the persons of the parties. That
jurisdiction was inevitably impaired upon the death of the
protestee pending the proceedings below such that unless
and until a legal representative is for him duly named and
within the jurisdiction of the trial court, no adjudication in
the cause could have been accorded any validity or binding
effect upon any party, in representation of the deceased,
without trenching upon the fundamental right to a day in
court which is the very essence of the constitutionally
enshrined guarantee of due process. 9
We are not unaware of several cases 10 where we have ruled that a
party having died in an action that survives, the trial held by the
court without appearance of the deceased's legal representative or
substitution of heirs and the judgment rendered after such trial, are
null and void because the court acquired no jurisdiction over the
persons of the legal representatives or of the heirs upon whom the
trial and the judgment would be binding. This general rule
notwithstanding, in denying petitioner's motion for reconsideration,
the Court of Appeals correctly ruled that formal substitution of heirs
5

is not necessary when the heirs themselves voluntarily appeared,


participated in the case and presented evidence in defense of
deceased defendant. Attending the case at bench, after all, are these
particular circumstances which negate petitioner's belated and
seemingly ostensible claim of violation of her rights to due process.
We should not lose sight of the principle underlying the general rule
that formal substitution of heirs must be effectuated for them to be
bound by a subsequent judgment. Such had been the general rule
established not because the rule on substitution of heirs and that on
appointment of a legal representative are jurisdictional requirements
per se but because non-compliance therewith results in the
undeniable violation of the right to due process of those who, though
not duly notified of the proceedings, are substantially affected by the
decision rendered therein. Viewing the rule on substitution of heirs in
this light, the Court of Appeals, in the resolution denying petitioner's
motion for reconsideration, thus expounded:
Although the jurisprudential rule is that failure to make the
substitution is a jurisdictional defect, it should be noted that
the purpose of this procedural rule is to comply with due
process requirements. The original party having died, he
could not continue to defend himself in court despite the fact
that the action survived him. For the case to continue, the
real party in interest must be substituted for the deceased.
The real party in interest is the one who would be affected by
the judgment. It could be the administrator or executor or the
heirs. In the instant case, the heirs are the proper substitutes.
Substitution gives them the opportunity to continue the
defense for the deceased. Substitution is important because
such opportunity to defend is a requirement to comply with
due process. Such substitution consists of making the proper
changes in the caption of the case which may be called the
formal aspect of it. Such substitution also includes the
process of letting the substitutes know that they shall be
bound by any judgment in the case and that they should

therefore actively participate in the defense of the deceased.


This part may be called the substantive aspect. This is the
heart of the procedural rule because this substantive aspect is
the one that truly embodies and gives effect to the purpose of
the rule. It is this court's view that compliance with the
substantive aspect of the rule despite failure to comply with
the formal aspect may be considered substantial compliance.
Such is the situation in the case at bench because the only
inference that could be deduced from the following facts was
that there was active participation of the heirs in the defense
of the deceased after his death:
1. The original lawyer did not stop representing the
deceased. It would be absurd to think that the lawyer would
continue to represent somebody if nobody is paying him his
fees. The lawyer continued to represent him in the litigation
before the trial court which lasted for about two more years.
A dead party cannot pay him any fee. With or without
payment of fees, the fact remains that the said counsel was
allowed by the petitioner who was well aware of the instant
litigation to continue appearing as counsel until August 23,
1993 when the challenged decision was rendered;
2. After the death of the defendant, his wife, who is the
petitioner in the instant case, even testified in the court and
declared that her husband is already deceased. She knew
therefore that there was a litigation against her husband and
that somehow her interest and those of her children were
involved;
3. This petition for annulment of judgment was filed only
after the appeal was decided against the defendant on April
3, 1995, more than one and a half year (sic) after the
decision was rendered (even if we were to give credence to
6

petitioner's manifestation that she was not aware that an


appeal had been made);
4. The Supreme Court has already established that there is
such a thing as jurisdiction by estoppel. This principle was
established even in cases where jurisdiction over the subject
matter was being questioned. In the instant case, only
jurisdiction over the person of the heirs is in issue.
Jurisdiction over the person may be acquired by the court
more easily than jurisdiction over the subject matter.
Jurisdiction over the person may be acquired by the simple
appearance of the person in court as did herein petitioner
appear;
5. The case cited by the herein petitioner (Ferreria et al. vs.
Manuela Ibarra vda. de Gonzales, et al.) cannot be availed of
to support the said petitioner's contention relative to nonacquisition of jurisdiction by the court. In that case, Manolita
Gonzales was not served notice and, more importantly, she
never appeared in court, unlike herein petitioner who
appeared and even testified regarding the death of her
husband. 11
Consequently, we rule that, as in the case at bench, the defendant in
an ejectment case having died before the rendition by the trial court
of its decision therein, its failure to effectuate a formal substitution of
heirs before its rendition of judgment, does not invalidate such
judgment where the heirs themselves appeared before the trial court,
participated in the proceedings therein, and presented evidence in
defense of deceased defendant, it undeniably being evident that the
heirs themselves sought their day in court and exercised their right to
due process.

Respondent Court of Appeals also correctly ruled that ejectment, being an


action involving recovery of real property, is a real action which as such, is
not extinguished by the defendant's death.
. . . The question as to whether an action survives or not
depends on the nature of the action and the damage sued for.
In the causes of action which survive, the wrong complained
affects primarily and principally property and property
rights, the injuries to the person being merely incidental,
while in the causes of action which do not survive, the injury
complained of is to the person, the property and rights of
property affected being incidental. 12
There is no dispute that an ejectment case survives the death of a
party, which death did not extinguish the deceased's civil personality.
13
More significantly, a judgment in an ejectment case is conclusive
between the parties and their successors in interest by title
subsequent to the commencement of the action. 14 Thus, we have held
that:
. . . In such a case and considering that the supervening death
of appellant did not extinguish her civil personality, the
appellate court was well within its jurisdiction to proceed as
it did with the case. There is no showing that the appellate
court's proceedings in the case were tainted with
irregularities.
It appears that petitioners are heirs of Adela Salindon. In
fact, it was because of this relationship that the petitioners
were able to transfer the title of Adela Salindon over the
subject lot to their names. . . . Considering all this, the
appellate decision is binding and enforceable against the
petitioners as successors-in-interest by title subsequent to the
commencement of the action (Section 49 [b] Rule 39, Rules
of Court). Furthermore, . . . judgment in an ejectment case
7

may be enforced not only against defendants therein but also


against the members of their family, their relatives, or privies
who derive their right of possession from the defendants
(Ariem v. De los Angeles, 49 SCRA 343). Under the
circumstances of this case, the same rule should apply to the
successors-in-interest . . . . 15
While it is true that a decision in an action for ejectment is enforceable not
only against the defendant himself but also against members of his family,
his relatives, and his privies who derived their right of possession from the
defendant and his successors-in-interest, 16 it had been established that

petitioner had, by her own acts, submitted to the jurisdiction of the trial court.
She is now estopped to deny that she had been heard in defense of her
deceased husband in the proceedings therein. As such, this petition evidently
has no leg to stand on.
WHEREFORE, the instant petition is dismissed for lack of merit. Costs
against petitioner.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

STER SANTIAGO, PRISCILLA SANTIAGO, SUSAN SANTIAGO, JOSE


SANTIAGO, JR., ERLINDA SANTIAGO, MA. VICTORIA SANTIAGO,
APOLINARIO SANTIAGO and CARMENCITA SANTIAGO, petitioners,
vs. HON. COURT OF APPEALS, HON. CAMILO O. MONTESA, JR.,
Presiding Judge, Branch 19, Regional Trial Court, Malolos, Bulacan, and
AUREA G. SANTIAGO, respondents.

On May 17, 1994, the said administratrix filed an action for quieting of title
and for partition of a parcel of land against Ester, Priscilla, Susan, Jose, Jr.,
Erlinda, Carmencita, Ma. Victoria and Apolinario, all surnamed Santiago, the
provincial assessor of Bulacan, Felimon, Erasmo, Gerardo and Ana Marie, all
surnamed Mendoza before the Regional Trial Court of Malolos, Bulacan,
Branch 17 docketed as Civil Case No. 462-M-94.iv[4]

DECISION

The Mendozas filed their answer and likewise prayed for partition of the
property in question.v[5]

MARTINEZ, J.:
This is a petition for review by way of certiorari filed by petitioner Ester
Santiago, et al., assailing the decision of the Court of Appeals dated July 25,
l995 in CA GR SP No. 37130, dismissing their petition on the ground of
laches and that the issue raised therein has been rendered moot and
academic.i[1] The motion for reconsideration was likewise denied in an order
dated September 8, l995.ii[2]
The facts which spawned this petition are as follows:
On September 13, l993, in special proceeding No. Q-93-15854 of the
Regional Trial Court of Quezon City, Branch 76, the holographic will of Juan
G. Santiago was admitted to probate. Aurea G. Santiago, his surviving
spouse, was appointed as administratrix of the testate estate of the said Juan
G. Santiago who died childless on September 21, l992.iii[3]

On the other hand, the Santiagos, filed a Motion to Dismiss on June 27, l994
asserting that the complaint states no cause of action against the defendants
since the late Juan G. Santiago executed a waiver relinquishing his share in
the property in question in favor of his brother Jose, the predecessor of
petitioners.vi[6]
The administratrix filed an opposition to aforesaid motion contending in the
main that the ground raised therein is a matter of defense that can only be
appreciated after trial on the merits.vii[7]
The lower court sustained the motion to dismiss by issuing an order dated
August 2, l994 dismissing the complaint for lack of sufficient cause of
action, the dispositive portion of which reads, to wit;
WHEREFORE, the above-entitled case is hereby DISMISSED for lack of
sufficient cause of action against the defendants.
8

SO ORDERED. viii[8]
A motion for reconsideration was seasonably filed by Administratrix Aurea
G. Santiago.ix[9] On September 20, l994, the lower court reconsidered and set
aside the order of dismissal which had the effect of denying the said motion
to dismiss.x[10]
The defendants-Santiagos then filed their answer with compulsory
counterclaim.xi[11] On January 19, l995, they filed another motion to
Suspend/Defer Hearingxii[12] before said lower court claiming that they have
a pending motion in the Probate Court (SP No. Q-93-15854, RTC, Q.C.) to
set aside the order dated September 13, l993 admitting to probate the
holographic will of the testator Juan Santiago and appointing his wife as
administratrix of the testators estate.xiii[13]
On February 10, l993, the trial court denied the Motion to Suspend/Defer
Hearing, the dispositive portion of said order reads; xiv[14]
WHEREFORE, the Motion to Suspend/Defer Proceedings filed by
defendant Aurea Santiago is hereby denied. Set the hearing of this case to
February 20, l995 at 8:30 a.m.. Atty. Eustaquio Evangelista is hereby ordered
to appear on said assignment and his failure to comply thereto would
constitute an action for contempt of court.
On February 28, l995, petitioners filed a motion for reconsideration xv[15]
which was likewise denied on March 27, l995.xvi[16]
The defendants-Santiagos then filed a petition for annulment, certiorari,
prohibition and mandamus with prayer for preliminary mandatory and
prohibitory injunctions with temporary restraining order before the
respondent court bringing to the fore the impropriety of the orders denying
their motion to dismiss and motion to suspend/defer proceedings, claiming
that the said orders were tainted with grave abuse of discretion amounting to
lack or in excess of jurisdiction.xvii[17]
While the petition was pending, the herein private respondent informed the
respondent court by way of supplement to its comment that the probate court
had already denied petitioners motion to set aside the order of September 13,
1993.xviii[18]

On July 25, l995, the respondent court issued the assailed order, hence, this
petition.
A careful perusal of the petition filed by herein petitioners show its lack of
substance due to the ambiguous allegations therein. Moreover, petitioners
arguments dwell into the merits of the case pending before the trial court and
are not directed to the validity of the decision of the respondent court. After
a careful scrutiny of the petition, the court is of the view that the petition
must be dismissed considering the factual circumstances obtaining in the
case .
To begin with, the petition filed before the respondent court assailed in the
main, the two (2) orders issued by the lower court, i.e., the order denying the
motion to dismiss dated September 20, l994; and the order denying the
motion to suspend/defer the proceedings issued on February 10, l995. The
petition was filed only on May 3, l995.
Anent the denial of the motion to dismiss, the respondent court was correct in
ruling that the petitioners are guilty of laches. For, a period of almost eight
(8) months had elapsed before petitioners decided to question the order of
September 20, l994. The petition failed to explain or adduced reasons for the
belated recourse to the respondent court. Time and again, this Court has
ruled that a special civil action under Rule 65 of the Rules of Court, may be
filed within a reasonable period from the time the petitioners received notice
of the denial of their motion for reconsideration and a period of three (3)
months is considered reasonablexix[19] In fact, this Court has categorically
ruled that a petition for certiorari should be filed within a reasonable period
of three (3) months from notice of the decision or order. xx[20]
Then, after the denial of the motion to dismiss, petitioners filed their answer,
took part in the proceedings. By their subsequent actions, the petitioners are
now estopped from questioning the denial of the motion to dismiss. In fact,
in Zamboanga City Electric Cooperative, Inc. vs. Buat,xxi[21] the court ruled
that;
We agree with the public respondents contention that; x x x petitioner
cannot anymore raised the issue of jurisdiction, under the principle of
estoppel. Petitioner participated in the proceedings from start to finish. It
filed its position paper with the Labor Arbiter. When the decision of the
Labor Arbiter decided in its favor, petitioner said nothing about jurisdiction.
9

It was only when the Resolution of the NLRC was adverse to the petitioner
that it raised the issue of jurisdiction.
It is settled that an action is considered moot when it no longer presents a
justiciable controversy because the issues involved have become academic or
dead or when the matter in dispute has already been resolved and hence, one
is not entitled to judicial intervention unless the issue is likely to be raised
again between the parties. In the case at bar, the motion filed by petitioners
before the probate court to set aside the order admitting the holographic will
of Juan G. Santiago and designating his wife as the administratrix has been
denied in the order of June 20, l995. Considering that petitioners anchored
their motion to suspend/defer the proceedings of the partition case on the
pendency of aforesaid motion, the denial of the latter will necessarily render
the issues moot and academic. Simply stated, there is nothing for the
respondent court to resolve as the determination thereof has been overtaken
by subsequent events.

This Court further takes into consideration the fact that petitioners had
brought the propriety of the Order of June 20, l995 before the respondent
court and then to this Court in GR No. 122718. The respondent court
dismissed the petition for certiorari filed by petitioners for lack of merit.
The petition for review filed by petitioners was likewise dismissed by this
Court in a Resolution dated February 6, l996 and the motion to set aside the
said order was denied with finality on June 3, l996.
Concededly, in the light of the foregoing circumstances, this petition must be
denied.
WHEREFORE , in view of the foregoing, finding no reversible error in the
decision of the Court of Appeals the petition is hereby DENIED for lack of
merit.

10

iiAugusto Benedicto Santos III vs. Northwest Orient AirlinesG.R. No. 101538 June 23, 1992
Facts
The petitioner, a minor and a resident of the Philippines, purchased from private respondent Northwest
Orient Airlines (NOA), a foreign corporation with principal office in Minnesota, U.S.A. and licensed to do
business and maintain a branch office in the Philippines, a round-trip ticket in San Francisco. U.S.A., for his
flight from San Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was
December 20, 1986 and no date was specified for his return to San Francisco.
Petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departure to
Manila. However, despite a previous confirmation and re-confirmation, he was informed that he had no
reservation for his flight from Tokyo to Manila. He therefore had to be wait-listed.
Petitioner then sued NOA for damages in the Regional Trial Court of Makati. NOA moved to dismiss the
complaint on the ground of lack of jurisdiction invoking Article 28 (1) of the Warsaw Convention.
Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in
the territory of one of the High Contracting Parties, either before the court of the
domicile of the carrier or of his principal place of business, or where he has a
place of business through which the contract has been made, or before the court
at the place of destination.

Respondent contended that the Philippines was not its domicile nor was this its principal place of
business. Neither was the petitioner's ticket issued in this country nor was his destination Manila but San
Francisco in the United States.
The lower court granted the motion and dismissed the case. However, the petitioner appealed to the
Court of Appeals, which affirmed the decision of the lower court. Petitioner filed a motion for reconsideration,
but the same was denied. Petitioner then came to Supreme Court, raising the same issues it submitted in the
Court of Appeals.
Issue
Whether or not Article 28 (1) of the Warsaw Convention is constitutional?
Held
Yes, Article 28 (1) of the Warsaw Convention is constitutional
The Warsaw Convention is a treaty commitment voluntarily assumed by the Philippine government and,
as such, has the force and effect of law in this country.
According to the Supreme Court, The treaty which is the subject matter of this petition was a joint legislativeexecutive act. The presumption is that it was first carefully studied and determined to be constitutional
before it was adopted and given the force of law in this country.
The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the
Convention considered the four places designated in Article 28 the most convenient forums for the litigation of
any claim that may arise between the airline and its passenger, as distinguished from all other places. At any
rate, we agree with the respondent court that this case can be decided on other grounds without the
necessity of resolving the constitutional issue.
More over, It is well-settled that courts will assume jurisdiction over a constitutional question only if it
is shown that the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must
be an actual case or controversy involving a conflict of legal rights susceptible of judicial determination; the
constitutional question must have been opportunely raised by the proper party; and the resolution of the question
is unavoidably necessary to the decision of the case itself.
Courts generally avoid having to decide a constitutional question. This attitude is based on the
doctrine of separation of powers, which enjoins upon the departments of the government a becoming
respect for each other's acts.

iii

iv

vi

vii

viii

ix

xi

xii

xiii

xiv

xv

xvi

xviiG.R. No. 46631, Perkins v. Dizon, Perkins and Benguet Consolidated Mining Company Republic of the
Philippines
SUPREME COURT
Manila
EN BANC
November 16, 1939
G.R. No. 46631
IDONAH SLADE PERKINS, petitioner,
vs.
ARSENIO P. DIZON, Judge of First Instance of Manila, EUGENE ARTHUR PERKINS, and BENGUET
CONSOLIDATED MINING COMPANY, respondents.
Alva J. Hill for petitioner.
Ross, Lawrence, Selph & Carrascoso for respondent Judge and Benguet Consolidated Mining Company.
DeWitt, Perkins & Ponce Enrile for respondent Perkins.
MORAN, J.:
On July 6, 1938, respondent, Eugene Arthur Perkins, instituted an action in the Court of First Instance of Manila
against the Benguet Consolidated Mining Company for dividends amounting to P71,379.90 on 52,874 shares of
stock registered in his name, payment of which was being withheld by the company; and, for the recognition of
his right to the control and disposal of said shares, to the exclusion of all others. To the complaint, the company
filed its answer alleging, by way of defense, that the withholding of such dividends and the non-recognition of
plaintiff's right to the disposal and control of the shares were due to certain demands made with respect to said
shares by the petitioner herein, Idonah Slade Perkins, and by one George H. Engelhard. The answer prays that
the adverse claimants be made parties to the action and served with notice thereof by publication, and that
thereafter all such parties be required to interplead and settle the rights among themselves. On September 5,
1938, the trial court ordered respondent Eugene Arthur Perkins to include in his complaint as parties defendant
petitioner, Idonah Slade Perkins, and George H. Engelhard. The complaint was accordingly amended and in
addition to the relief prayed for in the original complaint, respondent Perkins prayed that petitioner Idonah Slade
Perkins and George Engelhard be adjudged without interest in the shares of stock in question and excluded from
any claim they assert thereon. Thereafter, summons by publication were served upon the non-resident
defendants, Idonah Slade Perkins and George H. Engelhard, pursuant to the order of the trial court. On
December 9, 1938, Engelhard filed his answer to the amended complaint, and on December 10, 1938, petitioner
Idonah Slade Perkins, through counsel, filed her pleading entitled "objection to venue, motion to quash, and
demurrer to jurisdiction" wherein she challenged the jurisdiction of the lower court over her person. Petitioner's
objection, motion and demurrer having been overruled as well as her motion for reconsideration of the order of
denial, she now brought the present petition for certiorari, praying that the summons by publication issued
against her be declared null and void, and that, with respect to her, respondent Judge be permanently prohibited
from taking any action on the case.
The controlling issue here involved is whether or not the Court of First Instance of Manila has acquired
jurisdiction over the person of the present petitioner as a non-resident defendant, or, notwithstanding the want of
such jurisdiction, whether or not said court may validly try the case. The parties have filed lengthy

memorandums relying on numerous authorities, but the principles governing the question are well settled in this
jurisdiction.
Section 398 of our Code of Civil Procedure provides that when a non-resident defendant is sued in the Philippine
courts and it appears, by the complaint or by affidavits, that the action relates to real or personal property within
the Philippines in which said defendant has or claims a lien or interest, actual or contingent, or in which the
relief demanded consists, wholly or in part, in excluding such person from any interest therein, service of
summons maybe made by publication.
We have fully explained the meaning of this provision in El Banco Espaol Filipino vs. Palanca, 37 Phil., 921,
wherein we laid down the following rules:
(1) In order that the court may validly try a case, it must have jurisdiction over the subject-matter and over the
persons of the parties. Jurisdiction over the subject-matter is acquired by concession of the sovereign authority
which organizes a court and determines the nature and extent of its powers in general and thus fixes its
jurisdiction with reference to actions which it may entertain and the relief it may grant. Jurisdiction over the
persons of the parties is acquired by their voluntary appearance in court and their submission to its authority, or
by the coercive power of legal process exerted over their persons.
(2) When the defendant is a non-resident and refuses to appear voluntary, the court cannot acquire jurisdiction
over his person even if the summons be served by publication, for he is beyond the reach of judicial process. No
tribunal established by one State can extend its process beyond its territory so as to subject to its decisions either
persons or property located in another State. "There are many expressions in the American reports from which it
might be inferred that the court acquires personal jurisdiction over the person of the defendant by publication
and notice; but such is not the case. In truth, the proposition that jurisdiction over the person of a non-resident
cannot be acquired by publication and notice was never clearly understood even in the American courts until
after the decision had been rendered by the Supreme Court of the United States in the leading case of Pennoyer
v. Neff (95 U.S., 714; 24 Law. ed., 565). In the light of that decisions which have subsequently been rendered in
that and other courts, the proposition that jurisdiction over the person cannot be thus acquired by publication and
notice is no longer open to question; and it is now fully established that a personal judgment upon constructive
or substituted service against a non-resident who does not appear is wholly invalid. This doctrine applies to all
kinds of constructive or substituted process, including service by publication and personal service outside of the
jurisdiction in which the judgment is rendered; and the only exception seems to be found in the case where the
non-resident defendant has expressly or impliedly consented to the mode of service. (Note to Raher vs. Raher, 35
L. R. A. [N. S.], 292; see also L.R.A. 585; 35 L.R.A. [N.S.], 312.)
(3) The general rule, therefore, is that a suit against a non-resident cannot be entertained by a Philippine court.
Where, however, the action is in rem or quasi in rem in connection with property located in the Philippines, the
court acquires jurisdiction over the res, and its jurisdiction over the person of the non-resident is non-essential.
In order that the court may exercise power over the res, it is not necessary that the court should take actual
custody of the property, potential custody thereof being sufficient. There is potential custody when, from the
nature of the action brought, the power of the court over the property is impliedly recognized by law. "An
illustration of what we term potential jurisdiction over the res, is found in the proceeding to register the title of
land under our system for the registration of land. Here the court, without taking actual physical control over the
property , assumes, at the instance of some person claiming to be owner, to exercise a jurisdiction in rem over
the property and to adjudicate the title in favor of the petitioner against all the world."
(4) As before stated, in an action in rem or quasi in rem against a non-resident defendant, jurisdiction over his
person is non-essential, and if the law requires in such case that the summons upon the defendant be served by
publication, it is merely to satisfy the constitutional requirement of due process. If any be said, in this
connection, that "may reported cases can be cited in which it is assumed that the question of the sufficiency of

publication or notice in the case of this kind is a question affecting the jurisdiction of the court, and the court is
sometimes said to acquire jurisdiction by virtue of the publication. This phraseology was undoubtedly originally
adopted by the court because of the analogy between service by publication and personal service of process upon
the defendant; and, as has already been suggested, prior to the decision of Pennoyer v. Neff (supra), the
difference between the legal effects of the two forms of service was obscure. It is accordingly not surprising that
the modes of expression which had already been moulded into legal tradition before that case was decided have
been brought down to the present day. But it is clear that the legal principle here involved is not affected by the
peculiar languages in which the courts have expounded their ideas."
The reason for the rule that Philippine courts cannot acquire jurisdiction over the person of a non-resident, as
laid down by the Supreme Court of the United States in Pennoyer v. Neff, supra, may be found in a recognized
principle of public law to the effect that "no State can exercise direct jurisdiction and authority over persons or
property without its territory. Story, Confl. L., ch. 2; Wheat, Int. L., pt. 2, ch. 2. The several States are of equal
dignity and authority, and the independence of one implies the exclusion of power from all others. And so it is
laid down by jurists, as an elementary principle, that the laws of one State have no operation outside of its
territory, except so far as is allowed by comity; and that no tribunal established by it can extend its process
beyond that territory so as to subject either persons or property to its decisions. "Any exertion of authority of this
sort beyond this limit," says Story, "is a mere nullity, and incapable of binding such persons or property in any
other tribunals." Story, Confl. L., sec. 539." (Pennoyer v. Neff, 95 U.S., 714; 24 Law. ed., 565, 568-569.).
When, however, the action relates to property located in the Philippines, the Philippine courts may validly try the
case, upon the principle that a "State, through its tribunals, may subject property situated within its limits owned
by non-residents to the payment of the demand of its own citizens against them; and the exercise of this
jurisdiction in no respect infringes upon the sovereignty of the State where the owners are domiciled. Every
State owes protection to its citizens; and, when non-residents deal with them, it is a legitimate and just exercise
of authority to hold and appropriate any property owned by such non-residents to satisfy the claims of its
citizens. It is in virtue of the State's jurisdiction over the property of the non-resident situated within its limits
that its tribunals can inquire into the non-resident's obligations to its own citizens, and the inquiry can then be
carried only to the extent necessary to control the disposition of the property. If the non-resident has no property
in the State, there is nothing upon which the tribunals can adjudicate." (Pennoyer v. Neff, supra.)
In the instant case, there can be no question that the action brought by Eugene Arthur Perkins in his amended
complaint against the petitioner, Idonah Slade Perkins, seeks to exclude her from any interest in a property
located in the Philippines. That property consists in certain shares of stocks of the Benguet Consolidated Mining
Company, a sociedad anonima, organized in the Philippines under the provisions of the Spanish Code of
Commerce, with its principal office in the City of Manila and which conducts its mining activities therein. The
situs of the shares is in the jurisdiction where the corporation is created, whether the certificated evidencing the
ownership of those shares are within or without that jurisdiction. (Fletcher Cyclopedia Corporations, Permanent
ed. Vol. 11, p. 95). Under these circumstances, we hold that the action thus brought is quasi in rem, for while the
judgement that may be rendered therein is not strictly a judgment in rem, "it fixes and settles the title to the
property in controversy and to that extent partakes of the nature of the judgment in rem." (50 C.J., p 503). As
held by the Supreme Court of the United States in Pennoyer v. Neff (supra);
It is true that, in a strict sense, a proceeding in rem is one taken directly against property, and has for its object
the disposition of the property, without reference to the title of individual claimants; but , in a large and more
general sense, the terms are applied to actions between parties, where the direct object is to reach and dispose of
property owned by them, or of some interest therein.
The action being in quasi in rem, The Court of First Instance of Manila has jurisdiction over the person of the
non-resident. In order to satisfy the constitutional requirement of due process, summons has been served upon
her by publication. There is no question as to the adequacy of publication made nor as to the mailing of the order

of publication to the petitioner's last known place of residence in the United States. But, of course, the action
being quasi in rem and notice having be made by publication, the relief that may be granted by the Philippine
court must be confined to the res, it having no jurisdiction to render a personal judgment against the nonresident. In the amended complaint filed by Eugene Arthur Perkins, no money judgment or other relief in
personam is prayed for against the petitioner. The only relief sought therein is that she be declared to be without
any interest in the shares in controversy and that she be excluded from any claim thereto.
Petitioner contends that the proceeding instituted against her is one of interpleading and is therefore an action in
personam. Section 120 of our Code of Civil Procedure provides that whenever conflicting claims are or may be
made upon a person for or relating to personal property, or the performance of an obligation or any portion
thereof, so that he may be made subject to several actions by different persons, such person may bring an action
against the conflicting claimants, disclaiming personal interest in the controversy, and the court may order them
to interplead with one another and litigate their several claims among themselves, there upon proceed to
determine their several claims. Here, The Benguet Consolidated Mining Company, in its answer to the complaint
filed by Eugene Arthur Perkins, averred that in connection with the shares of stock in question, conflicting
claims were being made upon it by said plaintiff, Eugene Arthur Perkins, his wife Idonah Slade Perkins, and one
named George H. Engelhard, and prayed that these last two be made parties to the action and served with
summons by publication, so that the three claimants may litigate their conflicting claims and settle their rights
among themselves. The court has not issued an order compelling the conflicting claimants to interplead with one
another and litigate their several claims among themselves, but instead ordered the plaintiff to amend his
complaint including the other two claimants as parties defendant. The plaintiff did so, praying that the new
defendants thus joined be excluded fro any interest in the shares in question, and it is upon this amended
complaint that the court ordered the service of the summons by publication. It is therefore, clear that the
publication of the summons was ordered not in virtue of an interpleading, but upon the filing of the amended
complaint wherein an action quasi in rem is alleged.
Had not the complaint been amended, including the herein petitioner as an additional defendant, and had the
court, upon the filing of the answer of the Benguet Consolidated Mining Company, issued an order under section
120 of the Code of Civil Procedure, calling the conflicting claimants into court and compelling them to
interplead with one another, such order could not perhaps have validly been served by publication or otherwise,
upon the non-resident Idonah Slade Perkins, for then the proceeding would be purely one of interpleading. Such
proceeding is a personal action, for it merely seeks to call conflicting claimants into court so that they may
interplead and litigate their several claims among themselves, and no specific relief is prayed for against them, as
the interpleader have appeared in court, one of them pleads ownership of the personal property located in the
Philippines and seeks to exclude a non-resident claimant from any interest therein, is a question which we do not
decide not. Suffice it to say that here the service of the summons by publication was ordered by the lower court
by virtue of an action quasi in rem against the non-resident defendant.
Respondents contend that, as the petitioner in the lower court has pleaded over the subject-matter, she has
submitted herself to its jurisdiction. We have noticed, however, that these pleas have been made not as
independent grounds for relief, but merely as additional arguments in support of her contention that the lower
court had no jurisdiction over the person. In other words, she claimed that the lower court had no jurisdiction
over her person not only because she is a non-resident, but also because the court had no jurisdiction over the
subject-matter of the action and that the issues therein involved have already been decided by the New York
court and are being relitigated in the California court. Although this argument is obviously erroneous, as neither
jurisdiction over the subject-matter nor res adjudicata nor lis pendens has anything to do with the question of
jurisdiction over her person, we believe and so hold that the petitioner has not, by such erroneous argument,
submitted herself to the jurisdiction of the court. Voluntary appearance cannot be implied from either a mistaken
or superflous reasoning but from the nature of the relief prayed for.

xviii

xix

xx

xxi

Petition denied.

THIRD DIVISION

[G.R. No. 115849. January 24, 1996]


FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and
MERCURIO RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in substitution of
DEMETRIO DEMETRIA, and JOSE JANOLO, respondents.
DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of letters
and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over 101 hectares of
land in Sta. Rosa, Laguna? Does the doctrine of apparent authority apply in this case? If so, may the Central
Bank-appointed conservator of Producers Bank (now First Philippine International Bank) repudiate such
apparent authority after said contract has been deemed perfected? During the pendency of a suit for specific
performance, does the filing of a derivative suit by the majority shareholders and directors of the distressed
bank to prevent the enforcement or implementation of the sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant Petition for review on
certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated January 14, 1994 of the
respondent Court of Appeals[1] in CA-G.R. CV No. 35756 and the Resolution promulgated June 14, 1994
denying the motion for reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages awarded under
paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in paragraph 5 thereof to
P75,000.00, to be assessed against defendant bank. In all other aspects, said decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and
hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial courts[2] decision dated July 10, 1991, on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated at Don
Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in Transfer
Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, between the plaintiffs
as buyers and the defendant Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00)
Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt from the
plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute sale over the
aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the owners copies of T.C.T.

Nos. T-106932 to T-106937, inclusive, for purposes of registration of the same deed and transfer of the six (6)
titles in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio Demetria the
sums of P 200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P 100,000.00 as exemplary
damages;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for and by
way of attorneys fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in the
amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the petition was
given due course in a Resolution dated January 18, 1995. Thence, the parties filed their respective memoranda
and reply memoranda. The First Division transferred this case to the Third Division per resolution dated October
23, 1995. After carefully deliberating on the aforesaid submissions, the Court assigned the case to the
undersigned ponente for the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner Bank, for
brevity) is a banking institution organized and existing under the laws of the Republic of the Philippines.
Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this
case, Head Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of original
plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set aside
through this petition.
The Facts
The facts of this case are summarized in the respondent Courts Decision,[3] as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels
of land with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna, and covered by Transfer
Certificates of Title Nos. T-106932 to T-106937. The property used to be owned by BYME Investment and
Development Corporation which had them mortgaged with the bank as collateral fora loan. The original
plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations
for that purpose.

(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME Investments legal counsel,
Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the
defendant bank. The meeting was held pursuant to plaintiffs plan to buy the property (TSN of Jan. 16, 1990, pp.
7-10). After the meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal purchase
offer to the bank through a letter dated August 30, 1987 (Exh. B), as follows:
August 30, 1987
The Producers Bank of the Philippines
Makati, Metro Manila
Attn. Mr. Mercurio Q. Rivera
Manager, Property Management Dept.
Gentlemen:
I have the honor to submit my formal offer to purchase your properties covered by titles listed hereunder located
at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.
TCT NO.

AREA

T-106932

113,580 sq.m.

T-106933

70,899 sq.m.

T-106934

52,246 sq.m.

T-106935

96,768 sq.m.

T-106936

187,114 sq.m.

T-106937

481,481 sq.m.

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in cash.
Kindly contact me at Telephone Number 921-1344.
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which is
hereunder quoted (Exh. C):
September 1, 1987
J-P

M-P GUTIERREZ ENTERPRISES

142 Charisma St., Doa Andres II


Rosario, Pasig, Metro Manila
Attention:

JOSE O. JANOLO Dear Sir:

Dear Sir:
Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna (formerly owned
by Byme industrial Corp.). Please be informed however that the banks counter-offer is at P5.5 million for more
than 101 hectares on lot basis.
We shall be very glad to hear your position on the matter.
Best regards.
(4)On September 17, 1987, plaintiff Janolo, responding to Riveras aforequoted reply, wrote (Exh.
September 17, 1987
Producers Bank
Paseo de Roxas
Makati, Metro Manila
Attention:

Mr. Mercurio Rivera

Gentlemen:
In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa Laguna, I
would like to amend my previous offer and I now propose to buy the said lot at P4.250 million in CASH.
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolos foregoing letter of September 17, 1987. What took place was a meeting on
September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as
well as Fajardo, the BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, plaintiff
Janolo sent to the bank, through Rivera, the following letter (Exh. E):
The Producers Bank of the Philippines
Paseo de Roxas, Makati
Metro Manila

Attention:

Mr. Mercurio Rivera


Re: 101 Hectares of Land in Sta. Rosa, Laguna

Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting your
offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme In-vestment, for a total
price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which has been placed under conservatorship by the
Central Bank since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T.
Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. F):
Attention:

Atty. Demetrio Demetria

Dear Sir:
Your proposal to buy the properties the bank foreclosed from Byme Investment Corp. located at Sta. Rosa,
Laguna is under study yet as of this time by the newly created committee for submission to the newly designated
Acting Conservator of the bank.
For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank with what
plaintiff considered as a perfected contract of sale, which demands were in one form or another refused by the
bank. As detailed by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to defendant
Rivera (Exhibit G) tendered payment of the amount of P5.5 million pursuant to (our) perfected sale
agreement. Defendants refused to receive both the payment and the letter. Instead, the parcels of land involved
in the transaction were advertised by the bank for sale to any interested buyer (Exhs. H and H-1). Plaintiffs
demanded the execution by the bank of the documents on what was considered as a perfected agreement.
Thus:
Mr. Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:

This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot located in
Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same lot in the
amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and was received by
you on October 5, 1987.
In view of the above circumstances, we believe that an agreement has been perfected. We were also informed
that despite repeated follow-up to consummate the purchase, you now refuse to honor your commitment. Instead,
you have advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you to consummate and execute the
necessary actions/documentation within three (3) days from your receipt hereof We are ready to remit the agreed
amount of P5.5 million at your advice. Otherwise, we shall be constrained to file the necessary court action to
protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated, in its
communication of December 2, 1987 (Exh. I), that said letter has been referred x x x to the office of our
Conservator for proper disposition. However, no response came from the Acting Conservator. On December 14,
1987, the plaintiffs made a second tender of payment (Exhs. L and L-1), this time through the Acting
Conservator, defendant Encarnacion. Plaintiffs letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.:

Atty. NIDA ENCARNACION Central Bank Conservator


Gentlemen:

We are sending you herewith, in-behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387 in the
amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos. 106932,
106933, 106934, 106935, 106936 and 106937 and registered under Producers Bank.
This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the purchase
price of the said lots. Please inform us of the date of documentation of the sale immediately.
Kindly acknowledge receipt of our payment.

(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988, plaintiff, through
counsel, made a final demand for compliance by the bank with its obligations under the considered perfected
contract of sale (Exhibit N). As recounted by the trial court (Original Record, p. 656), in a reply letter dated
May 12, 1988 (Annex 4 of defendants answer to amended complaint), the defendants through Acting
Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with the
plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that basis, the defendants
justified the refusal of the tenders of payment and the non-compliance with the obligations under what the
plaintiffs considered to be a perfected contract of sale.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against the bank, its
Manager Rivera and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the
bank resulted in a perfected contract of sale. The defendants took the position that there was no such perfected
sale because the defendant Rivera is not authorized to sell the property, and that there was no meeting of the
minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez and
Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner of 80% of the Banks outstanding
shares of stock, he had a substantial interest in resisting the complaint. On July 8, 1991, the trial court issued an
order denying the motion to intervene on the ground that it was filed after trial had already been concluded. It
also denied a motion for reconsideration filed thereafter. From the trial courts decision, the Bank, petitioner
Rivera and conservator Encarnacion appealed to the Court of Appeals which subsequently affirmed with
modification the said judgment. Henry Co did not appeal the denial of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of
Demetria and Janolo, in view of the assignment of the latters rights in the matter in litigation to said private
respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and several other
stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz, filed an action
(hereafter, the Second Case) -purportedly a derivative suit - with the Regional Trial Court of Makati, Branch
134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo to declare any perfected
sale of the property as unenforceable and to stop Ejercito from enforcing or implementing the sale.[4] In his
answer, Janolo argued that the Second Case was barred by litis pendentia by virtue of the case then pending in
the Court of Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a Motion for Leave of
Court to Dismiss the Case Without Prejudice. Private respondent opposed this motion on the ground, among
others, that plaintiffs act of forum shopping justifies the dismissal of both cases, with prejudice.[5] Private
respondent, in his memorandum, averred that this motion is still pending in the Makati RTC.
In their Petition[6] and Memorandum,[7] petitioners summarized their position as follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in substitution
of Demetria and Janolo) and the bank.
II.

The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the power to overrule or revoke acts
of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the evidence on record.
On the other hand, private respondents prayed for dismissal of the instant suit on the ground[8] that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the evidence on record and may
no longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo
(substituted by respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being estopped from repudiating the
agency and the contract, has no authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers and/or to
revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?

The First Issue: Was There Forum-Shopping?


In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated Revised
Circular No. 28-91 requiring that a party must certify under oath x x x [that] (a) he has not (t)heretofore
commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is
pending in said courts or agencies. A violation of the said circular entails sanctions that include the summary
dismissal of the multiple petitions or complaints. To be sure, petitioners have included a
VERIFICATION/CERTIFICATION in their Petition stating for the record(,) the pendency of Civil Case No.
92-1606 before the Regional Trial Court of Makati, Branch 134, involving a derivative suit filed by stockholders
of petitioner Bank against the conservator and other defendants but which is the subject of a pending Motion to
Dismiss Without Prejudice.[9]
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of actual
forum shopping because the instant petition pending before this Court involves identical parties or interests
represented, rights asserted and reliefs sought (as that) currently pending before the Regional Trial Court, Makati
Branch 134 in the Second Case. In fact, the issues in the two cases are so intertwined that a judgment or
resolution in either case will constitute res judicata in the other.[10]
On the other hand, petitioners explain[11] that there is no forum-shopping because:
1) In the earlier or First Case from which this proceeding arose, the Bank was impleaded as a defendant,
whereas in the Second Case (assuming the Bank is the real party in interest in a derivative suit), it was the
plaintiff;
2) The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances;
3)
Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached to
the Petition identifies the action as a derivative suit, it does not mean that it is one and (t)hat is a legal
question for the courts to decide;
4)
Petitioners did not hide the Second Case as they mentioned it in the said
VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law,[12] where non-resident
litigants are given the option to choose the forum or place wherein to bring their suit for various reasons or
excuses, including to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded
dockets, or to select a more friendly venue. To combat these less than honorable excuses, the principle of forum
non conveniens was developed whereby a court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most convenient or available forum and the parties are not precluded from
seeking remedies elsewhere.
In this light, Blacks Law Dictionary[13] says that forum-shopping occurs when a party attempts to have his
action tried in a particular court or jurisdiction where he feels he will receive the most favorable judgment or

verdict. Hence, according to Words and Phrases,[14] a litigant is open to the charge of forum shopping
whenever he chooses a forum with slight connection to factual circumstances surrounding his suit, and litigants
should be encouraged to attempt to settle their differences without imposing undue expense and vexatious
situations on the courts.
In the Philippines, forum-shopping has acquired a connotation encompassing not only a choice of venues, as it
was originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of venues),
the Rules of Court, for example, allow a plaintiff to commence personal actions where the defendant or any of
the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of
the plaintiff (Rule 4, Sec. 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of pursuing
civil liabilities independently of the criminal, arising from the same set of facts. A passenger of a public utility
vehicle involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal - each
remedy being available independently of the others - although he cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a forum of his
action. This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their actions, litigants, through the
encouragement of their lawyers, file their actions in all available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic) conflicting adjudications among different courts and
consequent confusion enimical (sic) to an orderly administration of justice. It had created extreme inconvenience
to some of the parties to the action.
Thus, forum-shopping had acquired a different concept - which is unethical professional legal practice. And
this necessitated or had given rise to the formulation of rules and canons discouraging or altogether prohibiting
the practice.[15]
What therefore originally started both in conflicts of laws and in our domestic law as a legitimate device for
solving problems has been abused and misused to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already mentioned,
promulgated Circular 28-91. And even before that, the Court had proscribed it in the Interim Rules and
Guidelines issued on January 11, 1983 and had struck down in several cases[16] the inveterate use of this
insidious malpractice. Forum-shopping as the filing of repetitious suits in different courts has been condemned
by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al. vs. Heirs of Orval
Hughes, et al., as a reprehensible manipulation of court processes and proceedings x x x.[17] When does
forum-shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable
opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in
the courts but also in connection with litigations commenced in the courts while an administrative proceeding is
pending, as in this case, in order to defeat administrative processes and in anticipation of an unfavorable
administrative ruling and a favorable court ruling. This is specially so, as in this case, where the court in which
the second suit was brought, has no jurisdiction [18]

The test for determining whether a party violated the rule against forum-shopping has been laid down in the
1986 case of Buan vs. Lopez,[19] also by Chief Justice Narvasa, and that is, forum-shopping exists where the
elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the
other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties, or at
least such parties as represent the same interests in both actions, as well as identity of rights asserted and relief
prayed for, the relief being founded on the same facts, and the identity on the two preceding particulars is such
that any judgment rendered in the other action, will, regardless of which party is successful, amount to res
adjudicata in the action under consideration: all the requisites, in fine, of auter action pendant.
xxx

xxx

xxx

As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as regards
parties, or interests represented, rights asserted and relief sought, as well as basis thereof, to a degree sufficient to
give rise to the ground for dismissal known as auter action pendant or lis pendens. That same identity puts into
operation the sanction of twin dismissals just mentioned. The application of this sanction will prevent any further
delay in the settlement of the controversy which might ensue from attempts to seek reconsideration of or to
appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563 promulgated on July 15, 1986,
which dismissed the petition upon grounds which appear persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the same party against
whom another action or actions for the alleged violation of the same right and the enforcement of the same relief
is/are still pending, the defense of litis pendencia in one case is a bar to the others; and, a final judgment in one
would constitute res judicata and thus would cause the dismissal of the rest. In either case, forum shopping could
be cited by the other party as a ground to ask for summary dismissal of the two[20] (or more) complaints or
petitions, and for the imposition of the other sanctions, which are direct contempt of court, criminal prosecution,
and disciplinary action against the erring lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second Case, it is obvious that
there exist identity of parties or interests represented, identity of rights or causes and identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by
the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein petitioners) to
enforce the alleged perfected sale of real estate. On the other hand, the complaint[21] in the Second Case seeks
to declare such purported sale involving the same real property as unenforceable as against the Bank, which is
the petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the
Bank, are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief,
the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner
Bank to escape from the obligation to sell the property to respondent. In Danville Maritime, Inc. vs. Commission
on Audit,[22] this Court ruled that the filing by a party of two apparently different actions, but with the same
objective, constituted forum shopping:
In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein
- PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to
be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated

October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by and
between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin the
PNOC from conducting a rebidding and from selling to other parties the vessel T/T Andres Bonifacio, and for
an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. One
can see that although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in
both actions is the same, that is, the approval of the sale of vessel in favor of petitioner, and to overturn the
letter-directive of the COA of October 10, 1988 disapproving the sale. (italics supplied)
In an earlier case,[23] but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action for certiorari and prohibition in
this Court despite the pendency of their action in the Makati Regional Trial Court, is a species of forumshopping. Both actions unquestionably involve the same transactions, the same essential facts and
circumstances. The petitioners claim of absence of identity simply because the PCGG had not been impleaded
in the RTC suit, and the suit did not involve certain acts which transpired after its commencement, is specious. In
the RTC action, as in the action before this Court, the validity of the contract to purchase and sell of September
1, 1986, i.e., whether or not it had been efficaciously rescinded, and the propriety of implementing the same (by
paying the pledgee banks the amount of their loans, obtaining the release of the pledged shares, etc.) were the
basic issues. So, too, the relief was the same: the prevention of such implementation and/or the restoration of the
status quo ante. When the acts sought to be restrained took place anyway despite the issuance by the Trial Court
of a temporary restraining order, the RTC suit did not become functus oflcio. It remained an effective vehicle for
obtention of relief; and petitioners remedy in the premises was plain and patent: the filing of an amended and
supplemental pleading in the RTC suit, so as to include the PCGG as defendant and seek nullification of the acts
sought to be enjoined but nonetheless done. The remedy was certainly not the institution of another action in
another forum based on essentially the same facts. The adoption of this latter recourse renders the petitioners
amenable to disciplinary action and both their actions, in this Court as well as in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests represented. Although the
plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same
interest and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the matter in
controversy. They are not principally or even subsidiarily liable; much less are they direct parties in the assailed
contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a
derivative suit. In the caption itself, petitioners claim to have brought suit for and in behalf of the Producers
Bank of the Philippines.[24] Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he
holds stock in order to protect or vindicate corporate rights, whenever the officials of the corporation refuse to
sue, or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is
regarded as a nominal party, with the corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA
40, 47 [1979]; italics supplied).

In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite strangely,
sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not by the minority
shareholders, but by Henry Co et al., who not only own, hold or control over 80% of the outstanding capital
stock, but also constitute the majority in the Board of Directors of petitioner Bank. That being so, then they
really represent the Bank. So, whether they sued derivatively or directly, there is undeniably an identity of
interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate and distinct
from its shareholders. But the rulings of this Court are consistent: When the fiction is urged as a means of
perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention
of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the
veil with which the law covers and isolates the corporation from the members or stockholders who compose it
will be lifted to allow for its consideration merely as an aggregation of individuals.[25]
In addition to the many cases[26] where the corporate fiction has been disregarded, we now add the instant case,
and declare herewith that the corporate veil cannot be used to shield an otherwise blatant violation of the
prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the
minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case,
the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using
and applying remedies available to it. To rule otherwise would be to encourage corporate litigants to use their
shareholders as fronts to circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that there is
identity of parties, causes of action and reliefs sought, because it (the Bank) was the defendant in the (first) case
while it was the plaintiff in the other (Second Case), citing as authority Victronics Computers, Inc. vs. Regional
Trial Court, Branch 63, Makati, etc. et al.,[27] where the Court held:
The rule has not been extended to a defendant who, for reasons known only to him, commences a new action
against the plaintiff - instead of filing a responsive pleading in the other case - setting forth therein, as causes of
action, specific denials, special and affirmative defenses or even counterclaims. Thus, Velhagens and Kings
motion to dismiss Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not
exist in the first place. (italics supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not have chosen the
forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting between Victronics and the
present suit. In the former, as underscored in the above-quoted Court ruling, the defendants did not file any
responsive pleading in the first case. In other words, they did not make any denial or raise any defense or
counter-claim therein. In the case before us however, petitioners filed a responsive pleading to the complaint - as
a result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings, the
petitioners became plaintiffs themselves in the original case, giving unto themselves the very remedies they
repeated in the Second Case.

Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is the
vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative
agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the
process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue.
In this case, this is exactly the problem: a decision recognizing the perfection and directing the enforcement of
the contract of sale will directly conflict with a possible decision in the Second Case barring the parties from
enforcing or implementing the said sale. Indeed, a final decision in one would constitute res judicata in the other.
[28]
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction possible
now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed because petitioners
present counsel entered their appearance only during the proceedings in this Court, and the Petitions
VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency of the Second Case to
show good faith in observing Circular 28-91. The lawyers who filed the Second Case are not before us; thus the
rudiments of due process prevent us from motu propio imposing disciplinary measures against them in this
Decision. However, petitioners themselves (and particularly Henry Co, et al.) as litigants are admonished to
strictly follow the rules against forum-shopping and not to trifle with court proceedings and processes. They are
warned that a repetition of the same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely because of forumshopping but also because of the substantive issues raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the basis of the facts
established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has been established,
respondent Court stated:
There is no dispute that the object of the transaction is that property owned by the defendant bank as acquired
assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of Title Nos. T106932 to T-106937. It is likewise beyond cavil that the bank intended to sell the property. As testified to by the
Banks Deputy Conservator, Jose Entereso, the bank was looking for buyers of the property. It is definite that the
plaintiffs wanted to purchase the property and it was precisely for this purpose that they met with defendant
Rivera, Manager of the Property Management Department of the defendant bank, in early August 1987. The
procedure in the sale of acquired assets as well as the nature and scope of the authority of Rivera on the matter is
clearly delineated in the testimony of Rivera himself, which testimony was relied upon by both the bank and by
Rivera in their appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A:
The procedure runs this way: Acquired assets was turned over to me and then I published it in the form
of an inter-office memorandum distributed to all branches that these are acquired assets for sale. I was instructed
to advertise acquired assets for sale so on that basis, I have to entertain offer; to accept offer, formal offer and
upon having been offered, I present it to the Committee. I provide the Committee with necessary information
about the property such as original loan of the borrower, bid price during the foreclosure, total claim of the bank,
the appraised value at the time the property is being offered for sale and then the information which are relative
to the evaluation of the bank to buy which the Committee considers and it is the Committee that evaluate as
against the exposure of the bank and it is also the Committee that submit to the Conservator for final approval

and once approved, we have to execute the deed of sale and it is the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property, dealt
with and talked to the right person. Necessarily, the agenda was the price of the property, and plaintiffs were
dealing with the bank official authorized to entertain offers, to accept offers and to present the offer to the
Committee before which the said official is authorized to discuss information relative to price determination.
Necessarily, too, it being inherent in his authority, Rivera is the officer from whom official information regarding
the price, as determined by the Committee and approved by the Conservator, can be had. And Rivera confirmed
his authority when he talked with the plaintiff in August 1987. The testimony of plaintiff Demetria is clear on
this point (TSN of May 31, 1990, pp. 27-28):
Q:
When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him pointblank his authority to sell any property?
A:
No, sir. Not point blank although it came from him. (W)hen I asked him how long it would take because
he was saying that the matter of pricing will be passed upon by the committee. And when I asked him how long
it will take for the committee to decide and he said the committee meets every week. If I am not mistaken
Wednesday and in about two weeks (sic) time, in effect what he was saying he was not the one who was to
decide. But he would refer it to the committee and he would relay the decision of the committee to me.
Q:

Please answer the question.

A:
He did not say that he had the authority(.) But he said he would refer the matter to the committee and he
would relay the decision to me and he did just like that.
Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the Head, with
Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the authority and the duties of
Rivera and the banks internal procedure in the matter of the sale of banks assets. As advised by Rivera, the
plaintiffs made a formal offer by a letter dated August 20, 1987 stating that they would buy at the price of P3.5
Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and accept such
offers. Considering an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffsbuyers with their proposed buying price on one hand, and the bank Committee, the Conservator and ultimately
the bank itself with the set price on the other, and considering further the discussion of price at the meeting of
August resulting in a formal offer of P3.5 Million in cash, there can be no other logical conclusion than that
when, on September 1, 1987, Rivera informed plaintiffs by letter that the banks counter-offer is at P5.5 Million
for more than 101 hectares on lot basis, such counter-offer price had been determined by the Past Due
Committee and approved by the Conservator after Rivera had duly presented plaintiffs offer for discussion by
the Committee of such matters as original loan of borrower, bid price during foreclosure, total claim of the bank,
and market value. Tersely put, under the established facts, the price of P5.5 Million was, as clearly worded in
Riveras letter (Exh. E), the official and definitive price at which the bank was selling the property.
There were averments by defendants below, as well as before this Court, that the P5.5 Million price was not
discussed by the Committee and that it was merely quoted to start negotiations regarding the price. As correctly
characterized by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this point

are at best equivocal and considering the gratuitous and self-serving character of these declarations, the banks
submission on this point does not inspire belief. Both Co and Entereso, as members of the Past Due Committee
of the bank, claim that the offer of the plaintiff was never discussed by the Committee. In the same vein, both Co
and Entereso openly admit that they seldom attend the meetings of the Committee. It is important to note that
negotiations on the price had started in early August and the plaintiffs had already offered an amount as purchase
price, having been made to understand by Rivera, the official in charge of the negotiation, that the price will be
submitted for approval by the bank and that the banks decision will be relayed to plaintiffs. From the facts, the
amount of P5.5 Million has a definite significance. It is the official bank price. At any rate, the bank placed its
official, Rivera, in a position of authority to accept offers to buy and negotiate the sale by having the offer
officially acted upon by the bank. The bank cannot turn around and later say, as it now does, that what Rivera
states as the banks action on the matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible
authority, that if a corporation knowingly permits one of its officers, or any other agent, to do acts within the
scope of an apparent authority, and thus holds him out to the public as possessing power to do those acts, the
corporation will, as against any one who has in good faith dealt with the corporation through such agent, he
estopped from denying his authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94
SCRA 357, 369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June 14, 1993).[29]
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows: (1)
Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3)
Cause
of the obligation which is established.
There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6) parcels of land
in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and covered by Transfer
Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first and third requisites.
Petitioners allege that there is no counter-offer made by the Bank, and any supposed counter-offer which Rivera
(or Co) may have made is unauthorized. Since there was no counter-offer by the Bank, there was nothing for
Ejercito (in substitution of Demetria and Janolo) to accept.[30] They disputed the factual basis of the
respondent Courts findings that there was an offer made by Janolo for P3.5 million, to which the Bank counteroffered P5.5 million. We have perused the evidence but cannot find fault with the said Courts findings of fact.
Verily, in a petition under Rule 45 such as this, errors of fact -if there be any - are, as a rule, not reviewable. The
mere fact that respondent Court (and the trial court as well) chose to believe the evidence presented by
respondent more than that presented by petitioners is not by itself a reversible error. in fact, such findings merit
serious consideration by this Court, particularly where, as in this case, said courts carefully and meticulously
discussed their findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review the
question of Riveras authority to act and petitioners allegations that the P5.5 million counter-offer was
extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which could be drawn
from the factual findings of the respondent Court. They also delve into the contractual elements of consent and
cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of
apparent authority, with special reference to banks, was laid out in Prudential Bank vs. Court of Appeals,[31]
where it was held that:

Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by
the agent. The agents apparent representation yields to the principals true representation and the contract is
considered as entered into between the principal and the third person (citing National Food Authority vs.
Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of
the officers in their representative capacity but not for acts outside the scope of their authority (9 C.J.S., p. 417).
A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds
they may thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to
shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d,
p. 114). Accordingly, a banking corporation is liable to innocent third persons where the representation is made
in the course of its business by an agent acting within the general scope of his authority even though, in the
particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal
or some other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40
ALR 1021).
Application of these principles is especially necessary because banks have a fiduciary relationship with the
public and their stability depends on the confidence of the people in their honesty and efficiency. Such faith will
be eroded where banks do not exercise strict care in the selection and supervision of its employees, resulting in
prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or implied
authority to act for the Bank in the matter of selling its acquired assets. This evidence includes the following:
(a) The petition itself in par. II-1 (p. 3) states that Rivera was at all times material to this case, Manager of the
Property Management Department of the Bank. By his own admission, Rivera was already the person in charge
of the Banks acquired assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the initial
meeting between the buyers and Rivera, the latter suggested that the buyers offer should be no less than P3.3
million (TSN, April 26, 1990, pp. 16-17);
(c) Rivera received the buyers letter dated August 30, 1987 offering P3.5 million (TSN, 30 July 1990, p. 11);
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5 million (TSN, July 30,
p. 11);
(e) Rivera received the letter dated September 17, 1987 containing the buyers proposal to buy the property for
P4.25 million (TSN, July 30, 1990, p. 12);
(f)
Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank
(TSN, January 16, 1990, p. 18);
(g)
Rivera arranged the meeting between the buyers and Luis Co on September 28, 1987, during which the
Banks offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a
major shareholder and officer of the Bank, confirmed Riveras statement as to the finality of the Banks counter-

offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);
(h)
In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer acting for
the Bank in relation to parties interested in buying assets owned/acquired by the Bank. In fact, Rivera was the
officer mentioned in the Banks advertisements offering for sale the property in question (cf. Exhs. S and SI).
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et al.,[32] the Court, through
Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent authority of the
officer of the Bank of P.I. in charge of acquired assets is borne out by similar circumstances surrounding his
dealings with buyers.
To be sure, petitioners attempted to repudiate Riveras apparent authority through documents and testimony
which seek to establish Riveras actual authority. These pieces of evidence, however, are inherently weak as they
consist of Riveras self-serving testimony and various inter-office memoranda that purport to show his limited
actual authority, of which private respondent cannot be charged with knowledge. In any event, since the issue is
apparent authority, the existence of which is borne out by the respondent Courts findings, the evidence of actual
authority is immaterial insofar as the liability of a corporation is concerned.[33]
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their law firm had once
acted for the Bank in three criminal cases, they should be charged with actual knowledge of Riveras limited
authority. But the Court of Appeals in its Decision (p. 12) had already made a factual finding that the buyers had
no notice of Riveras actual authority prior to the sale. In fact, the Bank has not shown that they acted as its
counsel in respect to any acquired assets; on the other hand, respondent has proven that Demetria and Janolo
merely associated with a loose aggrupation of lawyers (not a professional partnership), one of whose members
(Atty. Susana Parker) acted in said criminal cases.
Petitioners also alleged that Demetrias and Janolos P4.25 million counter-offer in the letter dated September 17,
1987 extinguished the Banks offer of P5.5 million.[34] They disputed the respondent Courts finding that there
was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex L (letter dated
September 30, 1987) accepted Riveras counter offer of P5.5 million under Annex J (letter dated September
17, 1987), citing the late Justice Paras,[35] Art. 1319 of the Civil Code[36] and related Supreme Court rulings
starting with Beaumont vs. Prieto.[37]
However, the above-cited authorities and precedents cannot apply in the instant case because, as found by the
respondent Court which reviewed the testimonies on this point, what was accepted by Janolo in his letter dated
September 30, 1987 was the Banks offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose
Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the said letter of September 30,
1987 begins with (p)ursuant to our discussion last 28 September 1987 x x x.
Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that the
September 28, 1987 meeting was meant to have the offerors improve on their position of P5.5 million.[38]
However, both the trial court and the Court of Appeals found petitioners testimonial evidence not credible,
and we find no basis for changing this finding of fact.

Indeed, we see no reason to disturb the lower courts (both the RTC and the CA) common finding that private
respondents evidence is more in keeping with truth and logic - that during the meeting on September 28, 1987,
Luis Co and Rivera confirmed that the P5.5 million price has been passed upon by the Committee and could no
longer be lowered (TSN of April 27, 1990, pp. 34-35).[39] Hence, assuming arguendo that the counter-offer of
P4.25 million extinguished the offer of P5.5 million, Luis Cos reiteration of the said P5.5 million price during
the September 28, 1987 meeting revived the said offer. And by virtue of the September 30, 1987 letter accepting
this revived offer, there was a meeting of the minds, as the acceptance in said letter was absolute and unqualified.
We note that the Banks repudiation, through Conservator Encarnacion, of Riveras authority and action,
particularly the latters counter-offer of P5.5 million, as being unauthorized and illegal came only on May 12,
1988 or more than seven (7) months after Janolos acceptance. Such delay, and the absence of any circumstance
which might have justifiably prevented the Bank from acting earlier, clearly characterizes the repudiation as
nothing more than a last-minute attempt on the Banks part to get out of a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied admission on the part of the
petitioners that the written offer made on September 1, 1987 was carried through during the meeting of
September 28, 1987. This is the conclusion consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Banks offer of P5.5 million was raised for the first
time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that points of law, theories, issues of fact
and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be,
considered by a reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC, No.
74243, November 14, 1986, 145 SCRA 592).[40]
xxx It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the
trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of
fair play, justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434
[1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70
[1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).[41]
Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not given an
opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is a matter of due
process. But we passed upon the issue anyway, if only to avoid deciding the case on purely procedural grounds,
and we repeat that, on the basis of the evidence already in the record and as appreciated by the lower courts, the
inevitable conclusion is simply that there was a perfected contract of sale.
The Third Issue:

Is the Contract Enforceable?

The petition alleged:[42]


Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting of 28
September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of 30 September
1987, the contract produced thereby would be unenforceable by action - there being no note, memorandum or
writing subscribed by the Bank to evidence such contract. (Please see Article 1403[2], Civil Code.)

Upon the other hand, the respondent Court in its Decision (p. 14) stated:
x x x Of course, the banks letter of September 1, 1987 on the official price and the plaintiffs acceptance of the
price on September 30, 1987, are not, in themselves, formal contracts of sale. They are however clear
embodiments of the fact that a contract of sale was perfected between the parties, such contract being binding in
whatever form it may have been entered into (case citations omitted). Stated simply, the banks letter of
September 1, 1987, taken together with plaintiffs letter dated September 30, 1987, constitute in law a sufficient
memorandum of a perfected contract of sale.
The respondent Court could have added that the written communications commenced not only from September
1, 1987 but from Janolos August 20, 1987 letter. We agree that, taken together, these letters constitute sufficient
memoranda - since they include the names of the parties, the terms and conditions of the contract, the price and a
description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did constitute a
new offer which was accepted by Janolo on September 30, 1987. Still, the statute of frauds will not apply by
reason of the failure of petitioners to object to oral testimony proving petitioner Banks counter-offer of P5.5
million. Hence, petitioners - by such utter failure to object - are deemed to have waived any defects of the
contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified by the
failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under
them.
As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the counter-offer
of P5.5 million is aplenty -and the silence of petitioners all throughout the presentation makes the evidence
binding on them thus:
AYes, sir. I think it was September 28, 1987 and I was again present because Atty. Demetria told me to
accompany him and we were able to meet Luis Co at the Bank.
xxx

xxx

xxx

Q-

Now, what transpired during this meeting with Luis Co of the Producers Bank?

A-

Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.

Q-

What price?

AThe 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the final
price and that is the price they intends (sic) to have, sir.
Q-

What do you mean?

A-

That is the amount they want, sir.

QWhat is the reaction of the plaintiff Demetria to Luis Cos statment (sic) that the defendant Riveras
counter-offer of 5.5 million was the defendants bank (sic) final offer?
A-

He said in a day or two, he will make final acceptance, sir.

Q-

What is the response of Mr. Luis Co?

A-

He said he will wait for the position of Atty. Demetria, sir.

[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
----0---Q-

What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?

AWe went straight to the point because he being a busy person, I told him if the amount of P5.5 million
could still be reduced and he said that was already passed upon by the committee. What the bank expects which
was contrary to what Mr. Rivera stated. And he told me that is the final offer of the bank P5.5 million and we
should indicate our position as soon as possible.
Q-

What was your response to the answer of Mr. Luis Co?

AI said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo and I
and Mr. Mercurio [Rivera] was with us at the time at his office.
QFor the record, your Honor please, will you tell this Court who was with Mr. Co in his Office in
Producers Bank Building during this meeting?
A-

Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.

Q-

By Mr. Co you are referring to?

A-

Mr. Luis Co.

QAfter this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by the
bank?
AYes, sir, we did. Two days thereafter we sent our acceptance to the bank which offer we accepted, the
offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
---- 0 ---QAccording to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee and it
is not within his power to reduce this amount. What can you say to that statement that the amount of P5.5 million

was reached by the Committee?


AIt was not discussed by the Committee but it was discussed initially by Luis Co and the group of Atty.
Demetrio Demetria and Atty. Pajardo (sic), in that September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract?
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines
during the time that the negotiation and perfection of the contract of sale took place. Petitioners energetically
contended that the conservator has the power to revoke or overrule actions of the management or the board of
directors of a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the Central Bank Act) as
follows:
Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the
Monetary Board finds that a bank or a non-bank financial intermediary performing quasi - banking functions is
in a state of continuing inability or unwillingness to maintain a state of liquidity deemed adequate to protect the
interest of depositors and creditors, the Monetary Board may appoint a conservator to take charge of the assets,
liabilities, and the management of that institution, collect all monies and debts due said institution and exercise
all powers necessary to preserve the assets of the institution, reorganize the management thereof, and restore its
viability. He shall have the power to overrule or revoke the actions of the previous management and board of
directors of the bank or non-bank financial intermediary performing quasi-banking functions, any provision of
law to the contrary notwithstanding, and such other powers as the Monetary Board shall deem necessary.
In the first place, this issue of the Conservators alleged authority to revoke or repudiate the perfected contract of
sale was raised for the first time in this Petition - as this was not litigated in the trial court or Court of Appeals.
As already stated earlier, issues not raised and/or ventilated in the trial court, let alone in the Court of Appeals,
cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and
due process.[43]
In the second place, there is absolutely no evidence that the Conservator, at the time the contract was perfected,
actually repudiated or overruled said contract of sale. The Banks acting conservator at the time, Rodolfo Romey,
never objected to the sale of the property to Demetria and Janolo. What petitioners are really referring to is the
letter of Conservator Encarnacion, who took over from Romey after the sale was perfected on September 30,
1987 (Annex V, petition) which unilaterally repudiated - not the contract - but the authority of Rivera to make a
binding offer - and which unarguably came months after the perfection of the contract. Said letter dated May 12,
1988 is reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.

Suite 323 Rufino Building


Ayala Avenue, Makati, Metro Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the six (6)
parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a
contract to sell and buy with any of them for the following reasons.
In the Inter-Office Memorandum dated April 25, 1986 addressed to and approved by former Acting
Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the functions of
Property Management Department (PMD) staff and officers (Annex A), you will immediately read that Manager
Mr. Mercurio Rivera or any of his subordinates has no authority, power or right to make any alleged counteroffer. In short, your lawyer-clients did not deal with the authorized officers of the bank.
Moreover, under Secs. 23 and 36 of the Corporation Code of the Philippines (Batas Pambansa Blg. 68) and Sec.
28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of Directors/Conservator may
authorize the sale of any property of the corporation/bank.
Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank conservators
(starting January, 1984) to sell the aforesaid property to any of your clients. Apparently, what took place were
just preliminary discussions/ consultations between him and your clients, which everyone knows cannot bind the
Banks Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently violative
of corporate and banking laws. We believe that this is more than sufficient legal justification for refusing said
alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are official, legal and in
accordance with law. We also have no personal interest in any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. ENCARNACION
Acting Conservator

In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the conservator
of a bank, it must be pointed out that such powers must be related to the (preservation of) the assets of the bank,
(the reorganization of) the management thereof and (the restoration of) its viability. Such powers, enormous and
extensive as they are, cannot extend to the post-facto repudiation of perfected transactions, otherwise they would
infringe against the non-impairment clause of the Constitution.[44] If the legislature itself cannot revoke an
existing valid contract, how can it delegate such non-existent powers to the conservator under Section 28-A of
said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are, under
existing law, deemed to be defective - i.e., void, voidable, unenforceable or rescissible. Hence, the conservator
merely takes the place of a banks board of directors. What the said board cannot do - such as repudiating a
contract validly entered into under the doctrine of implied authority - the conservator cannot do either.
Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations of the Bank. His
authority would be only to bring court actions to assail such contracts - as he has already done so in the instant
case. A contrary understanding of the law would simply not be permitted by the Constitution. Neither by
common sense. To rule otherwise would be to enable a failing bank to become solvent, at the expense of third
parties, by simply getting the conservator to unilaterally revoke all previous dealings which had one way or
another come to be considered unfavorable to the Bank, yielding nothing to perfected contractual rights nor
vested interests of the third parties who had dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Fact?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by the
Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover & Trust
Corporation,[45] we held:
x x x. The rule regarding questions of fact being raised with this Court in a petition for certiorari under Rule 45
of the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158
SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari under Rule 45
of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from the Court of
Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of the fact being
conclusive [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line
of decisions]. This Court has emphatically declared that it is not the function of the Supreme Court to analyze
or weigh such evidence all over again, its jurisdiction being limited to reviewing errors of law that might have
been committed by the lower court (Tiongco v. De la Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89;
Corona vs. Court of Appeals, G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals,
G.R. No. L-47531, February 20, 1984, 127 SCRA 596). Barring, therefore, a showing that the findings
complained of are totally devoid of support in the record, or that they are so glaringly erroneous as to constitute
serious abuse of discretion, such findings must stand, for this Court is not expected or required to examine or
contrast the oral and documentary evidence submitted by the parties [Santa Ana, Jr. vs. Hernandez, G.R. No.
L-16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals,[46] we held:

The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the sufficiency of
evidence and the credibility of witnesses presented. This Court so held that it is not the function of the Supreme
Court to analyze or weigh such evidence all over again. The Supreme Courts jurisdiction is limited to reviewing
errors of law that may have been committed by the lower court. The Supreme Court is not a trier of facts. x x x
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and Development
Corp.:[47]
The Court has consistently held that the factual findings of the trial court, as well as the Court of Appeals, are
final and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a
reassessment of facts found by the lower courts is allowed are when the conclusion is a finding grounded
entirely on speculation, surmises or conjectures; when the inference made is manifestly absurd, mistaken or
impossible; when there is grave abuse of discretion in the appreciation of facts; when the judgment is premised
on a misapprehension of facts; when the findings went beyond the issues of the case and the same are contrary to
the admissions of both appellant and appellee. After a careful study of the case at bench, we find none of the
above grounds present to justify the re-evaluation of the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance Company, Inc. vs.
Hon. Court of Appeals, et al.[48] is equally applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the function of
this Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the
parties, particularly where, such as here, the findings of both the trial court and the appellate court on the matter
coincide. (italics supplied)
Petitioners, however, assailed the respondent Courts Decision as fraught with findings and conclusions which
were not only contrary to the evidence on record but have no bases at all, specifically the findings that (1) the
Banks counter-offer price of P5.5 million had been determined by the past due committee and approved by
conservator Romey, after Rivera presented the same for discussion and (2) the meeting with Co was not to
scale down the price and start negotiations anew, but a meeting on the already determined price of P5.5 million.
Hence, citing Philippine National Bank vs. Court of Appeals,[49] petitioners are asking us to review and reverse
such factual findings.
The first point was clearly passed upon by the Court of Appeals,[50] thus:
There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed plaintiffs by
letter that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot basis, such counter-offer
price had been determined by the Past Due Committee and approved by the Conservator after Rivera had duly
presented plaintiffs offer for discussion by the Committee x x x. Tersely put, under the established fact, the price
of P5.5 Million was, as clearly worded in Riveras letter (Exh. E), the official and definitive price at which the
bank was selling the property. (p. 11, CA Decision)
xxx

xxx

xxx

xxx. The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of September
28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank, where the topic was

the possible lowering of the price, the bank official refused it and confirmed that the P5.5 Million price had been
passed upon by the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA
Decision).
The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as not
credible and at best equivocal, and considering the gratuitous and self-serving character of these declarations,
the banks submissions on this point do not inspire belief.
To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo Romey to
testify on their behalf, as he would have been in the best position to establish their thesis. Under the rules on
evidence,[51] such suppression gives rise to the presumption that his testimony would have been adverse, if
produced.
The second point was squarely raised in the Court of Appeals, but petitioners evidence was deemed insufficient
by both the trial court and the respondent Court, and instead, it was respondents submissions that were believed
and became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower courts are
valid and correct. But the petitioners are now asking this Court to disturb these findings to fit the conclusion they
are espousing. This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the Court of
Appeals.[52] We have studied both the records and the CA Decision and we find no such exceptions in this case.
On the contrary, the findings of the said Court are supported by a preponderance of competent and credible
evidence. The inferences and conclusions are reasonably based on evidence duly identified in the Decision.
Indeed, the appellate court patiently traversed and dissected the issues presented before it, lending credibility and
dependability to its findings. The best that can be said in favor of petitioners on this point is that the factual
findings of respondent Court did not correspond to petitioners claims, but were closer to the evidence as
presented in the trial court by private respondent. But this alone is no reason to reverse or ignore such factual
findings, particularly where, as in this case, the trial court and the appellate court were in common agreement
thereon. Indeed, conclusions of fact of a trial judge - as affirmed by the Court of Appeals - are conclusive upon
this Court, absent any serious abuse or evident lack of basis or capriciousness of any kind, because the trial court
is in a better position to observe the demeanor of the witnesses and their courtroom manner as well as to
examine the real evidence presented.
Epilogue
In summary, there are two procedural issues involved - forum-shopping and the raising of issues for the first time
on appeal [viz., the extinguishment of the Banks offer of P5.5 million and the conservators powers to repudiate
contracts entered into by the Banks officers] - which per se could justify the dismissal of the present case. We
did not limit ourselves thereto, but delved as well into the substantive issues - the perfection of the contract of
sale and its enforceability, which required the determination of questions of fact. While the Supreme Court is not
a trier of facts and as a rule we are not required to look into the factual bases of respondent Courts decisions and
resolutions, we did so just the same, if only to find out whether there is reason to disturb any of its factual
findings, for we are only too aware of the depth, magnitude and vigor by which the parties, through their
respective eloquent counsel, argued their positions before this Court.

We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a governmentappointed conservator and there is need to rehabilitate the Bank in order to get it back on its feet x x x as many
people depend on (it) for investments, deposits and well as employment. As of June 1987, the Banks overdraft
with the Central Bank had already reached P1.023 billion x x x and there were (other) offers to buy the subject
properties for a substantial amount of money.[53]
While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot emotionally
close its eyes to overriding considerations of substantive and procedural law, like respect for perfected contracts,
non-impairment of obligations and sanctions against forum-shopping, which must be upheld under the rule of
law and blind justice.
This Court cannot just gloss over private respondents submission that, while the subject properties may
currently command a much higher price, it is equally true that at the time of the transaction in 1987, the price
agreed upon of P5.5 million was reasonable, considering that the Bank acquired these properties at a foreclosure
sale for no more than P 3.5 million.[54] That the Bank procrastinated and refused to honor its commitment to sell
cannot now be used by it to promote its own advantage, to enable it to escape its binding obligation and to reap
the benefits of the increase in land values. To rule in favor of the Bank simply because the property in question
has algebraically accelerated in price during the long period of litigation is to reward lawlessness and delays in
the fulfillment of binding contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous
proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court hereby
DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for
engaging in forum-shopping and WARNED that a repetition of the same or similar acts will be dealt with more
severely. Costs against petitioners.
SO ORDERED.
Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

roducers Bank (now called First Philippine International Bank), which has been under conservatorship since
1984, is the owner of 6 parcels of land. The Bank had an agreement with Demetrio Demetria and Jose Janolo for
the two to purchase the parcels of land for a purchase price of P5.5 million pesos. The said agreement was made
by Demetria and Janolo with the Banks manager, Mercurio Rivera. Later however, the Bank, through its

conservator, Leonida Encarnacion, sought the repudiation of the agreement as it alleged that Rivera was not
authorized to enter into such an agreement, hence there was no valid contract of sale. Subsequently, Demetria
and Janolo sued Producers Bank. The regional trial court ruled in favor of Demetria et al. The Bank filed an
appeal with the Court of Appeals.
Meanwhile, Henry Co, who holds 80% shares of stocks with the said Bank, filed a motion for intervention with
the trial court. The trial court denied the motion since the trial has been concluded already and the case is now
pending appeal. Subsequently, Co, assisted by ACCRA law office, filed a separate civil case against Demetria
and Janolo seeking to have the purported contract of sale be declared unenforceable against the Bank. Demetria
et al argued that the second case constitutes forum shopping.
ISSUES:
1. Whether or not there is forum shopping.
2. Whether or not there is a perfected contract of sale.
HELD:
1. Yes. There is forum shopping because there is identity of interest and parties between the first case and
the second case. There is identity of interest because both cases sought to have the agreement, which
involves the same property, be declared unenforceable as against the Bank. There is identity of parties
even though the first case is in the name of the bank as defendant, and the second case is in the name of
Henry Co as plaintiff. There is still forum shopping here because Henry Co essentially represents the
bank. Both cases aim to have the bank escape liability from the agreement it entered into with Demetria
et al. The Supreme Court did not lay down any disciplinary action against the ACCRA lawyers but they
were warned that a repetition will be dealt with more severely.
2. Yes. There is a perfected contract of sale because the bank manager, Rivera, entered into the agreement
with apparent authority. This apparent authority has been duly proved by the evidence presented which
showed that in all the dealings and transactions, Rivera participated actively without the opposition of
the conservator. In fact, in the advertisements and announcements of the bank, Rivera was designated as
the go-to guy in relation to the disposition of the Banks assets.

PHILSEC VS. CA
PHILSEC INVESTMENT et al vs.CA et al
G.R. No. 103493
June 19, 1997
FACTS: Private respondent Ducat obtained separate loans from petitioners Ayala International Finance Limited
(AYALA) and Philsec Investment Corp (PHILSEC), secured by shares of stock owned by Ducat.
In order to facilitate the payment of the loans, private respondent 1488, Inc., through its president, private
respondent Daic, assumed Ducats obligation under an Agreement, whereby 1488, Inc. executed a Warranty
Deed with Vendors Lien by which it sold to petitioner Athona Holdings, N.V. (ATHONA) a parcel of land in
Texas, U.S.A., while PHILSEC and AYALA extended a loan to ATHONA as initial payment of the purchase
price. The balance was to be paid by means of a promissory note executed by ATHONA in favor of 1488, Inc.
Subsequently, upon their receipt of the money from 1488, Inc., PHILSEC and AYALA released Ducat from his
indebtedness and delivered to 1488, Inc. all the shares of stock in their possession belonging to Ducat.
As ATHONA failed to pay the interest on the balance, the entire amount covered by the note became due and
demandable. Accordingly, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in
the United States for payment of the balance and for damages for breach of contract and for fraud allegedly
perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to 1488, Inc.
under the Agreement.
While the Civil Case was pending in the United States, petitioners filed a complaint For Sum of Money with
Damages and Writ of Preliminary Attachment against private respondents in the RTC Makati. The complaint
reiterated the allegation of petitioners in their respective counterclaims in the Civil Action in the United States
District Court of Southern Texas that private respondents committed fraud by selling the property at a price 400
percent more than its true value.
Ducat moved to dismiss the Civil Case in the RTC-Makati on the grounds of (1) litis pendentia, vis-a-vis the
Civil Action in the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state
a cause of action.
The trial court granted Ducats MTD, stating that the evidentiary requirements of the controversy may be more
suitably tried before the forum of the litis pendentia in the U.S., under the principle in private international law
of forum non conveniens, even as it noted that Ducat was not a party in the U.S. case.
Petitioners appealed to the CA, arguing that the trial court erred in applying the principle of litis pendentia and
forum non conveniens.
The CA affirmed the dismissal of Civil Case against Ducat, 1488, Inc., and Daic on the ground of litis pendentia.

ISSUE: is the Civil Case in the RTC-Makati barred by the judgment of the U.S. court?
HELD: CA reversed. Case remanded to RTC-Makati
NO
While this Court has given the effect of res judicata to foreign judgments in several cases, it was after the parties
opposed to the judgment had been given ample opportunity to repel them on grounds allowed under the law.
This is because in this jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a
foreign judgment merely constitutes prima facie evidence of the justness of the claim of a party and, as such, is
subject to proof to the contrary. Rule 39, 50 provides:
Sec. 50. Effect of foreign judgments. The effect of a judgment of a tribunal of a foreign country, having
jurisdiction to pronounce the judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the
parties and their successors in interest by a subsequent title; but the judgment may be repelled by evidence of a
want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.
In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the judgment of the
U.S. court as basis for declaring it res judicata or conclusive of the rights of private respondents. The
proceedings in the trial court were summary. Neither the trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence presented thereat, to assure a proper
determination of whether the issues then being litigated in the U.S. court were exactly the issues raised in this
case such that the judgment that might be rendered would constitute res judicata.
Second. Nor is the trial courts refusal to take cognizance of the case justifiable under the principle of forum non
conveniens:
First, a MTD is limited to the grounds under Rule 16, sec.1, which does not include forum non conveniens. The
propriety of dismissing a case based on this principle requires a factual determination, hence, it is more properly
considered a matter of defense.
Second, while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it
should do so only after vital facts are established, to determine whether special circumstances require the
courts desistance.

MHC AND MHICL vs. NLRC et al


G.R. No. 120077
October 13, 2000
FACTS: private respondent Santos was an overseas worker employed as a printer at the Mazoon
Printing Press, Sultanate of Oman. Subsequently he was directly hired by the Palace Hotel, Beijing,
Peoples Republic of China and later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (MHC) and the Manila Hotel International Company,
Limited (MHICL).
When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly
organized and existing under the laws of the Philippines. MHICL is a corporation duly organized and
existing under the laws of Hong Kong. MHC is an incorporator of MHICL, owning 50% of its
capital stock.
By virtue of a management agreement with the Palace Hotel, MHICL trained the personnel and staff
of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press, respondent Santos received a letter from Mr.
Shmidt, General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that
he was recommended by one Buenio, a friend of his. Mr. Shmidt offered respondent Santos the same
position as printer, but with a higher monthly salary and increased benefits. Respondent Santos wrote to
Mr. Shmidt and signified his acceptance of the offer.
The Palace Hotel Manager, Mr. Henk mailed a ready to sign employment contract to respondent
Santos. Santos resigned from the Mazoon Printing Press. Santos wrote the Palace Hotel and
acknowledged Mr. Henks letter. The employment contract stated that his employment would be for a
period of two years. He then started to work at the Palace Hotel.
Subsequently, respondent Santos signed an amended employment agreement with the Palace Hotel.
In the contract, Mr. Shmidt represented the Palace Hotel. The Vice President (Operations and
Development) of petitioner MHICL Cergueda signed the employment agreement under the word
noted.
After working in the Palace hotel for less than 1 year, the Palace Hotel informed respondent Santos by
letter signed by Mr. Shmidt that his employment at the Palace Hotel print shop would be terminated

due to business reverses brought about by the political upheaval in China. The Palace Hotel terminated
the employment of Santos and paid all benefits due him, including his plane fare back to the
Philippines. Santos was repatriated to the Philippines.
Santos filed a complaint for illegal dismissal with the Arbitration Branch, NCR, NLRC. He prayed for
an award of AD, ED and AF for. The complaint named MHC, MHICL, the Palace Hotel and Mr.
Shmidt as respondents. The Palace Hotel and Mr. Shmidt were not served with summons and neither
participated in the proceedings before the LA.
The LA decided the case against petitioners. Petitioners appealed to the NLRC, arguing that the POEA,
not the NLRC had jurisdiction over the case. The NLRC promulgated a resolution, stating that the
appealed Decision be declared null and void for want of jurisdiction
Santos moved for reconsideration of the afore-quoted resolution. He argued that the case was not
cognizable by the POEA as he was not an overseas contract worker. The NLRC granted the motion
and reversed itself. The NLRC directed another LA to hear the case on the question of whether private
respondent was retrenched or dismissed. The La found that Santos was illegally dismissed from
employment and recommended that he be paid actual damages equivalent to his salaries for the
unexpired portion of his contract. The NLRC ruled in favor of private respondent. Petitioners filed an
MR arguing that the LAs recommendation had no basis in law and in fact, however it was denied.
Hence, this petition.
ISSUE: Is the NLRC a proper forum to decide this case?
HELD: petition granted; the orders and resolutions of the NLRC are annulled.
NO
Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves
purely foreign elements. The only link that the Philippines has with the case is that Santos is a Filipino
citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases involving our citizens can
be tried here.
The employment contract. Respondent Santos was hired directly by the Palace Hotel, a foreign
employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was then
employed. He was hired without the intervention of the POEA or any authorized recruitment agency of
the government.
Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the
case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may
conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as to
the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its
decision. The conditions are unavailing in the case at bar.

Not Convenient. We fail to see how the NLRC is a convenient forum given that all the incidents of
the case from the time of recruitment, to employment to dismissal occurred outside the Philippines.
The inconvenience is compounded by the fact that the proper defendants, the Palace Hotel and MHICL
are not nationals of the Philippines. Neither .are they doing business in the Philippines. Likewise, the
main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines.
No power to determine applicable law. Neither can an intelligent decision be made as to the law
governing the employment contract as such was perfected in foreign soil. This calls to fore the
application of the principle of lex loci contractus (the law of the place where the contract was made).
The employment contract was not perfected in the Philippines. Santos signified his acceptance by
writing a letter while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the
Peoples Republic of China.
No power to determine the facts. Neither can the NLRC determine the facts surrounding the alleged
illegal dismissal as all acts complained of took place in Beijing, Peoples Republic of China. The
NLRC was not in a position to determine whether the Tiannamen Square incident truly adversely
affected operations of the Palace Hotel as to justify Santos retrenchment.
Principle of effectiveness, no power to execute decision. Even assuming that a proper decision could
be reached by the NLRC, such would not have any binding effect against the employer, the Palace
Hotel. The Palace Hotel is a corporation incorporated under the laws of China and was not even served
with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to solve controversies involving
foreign employers. Neither are we saying that we do not have power over an employment contract
executed in a foreign country. If Santos were an overseas contract worker, a Philippine forum,
specifically the POEA, not the NLRC, would protect him. He is not an overseas contract worker a
fact which he admits with conviction.
__
Even assuming that the NLRC was the proper forum, even on the merits, the NLRCs decision cannot
be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL
was liable for Santos retrenchment, still MHC, as a separate and distinct juridical entity cannot be held
liable.
True, MHC is an incorporator of MHICL and owns 50% of its capital stock. However, this is not
enough to pierce the veil of corporate fiction between MHICL and MHC. In Traders Royal Bank v. CA,
we held that the mere ownership by a single stockholder or by another corporation of all or nearly all
of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of
separate corporate personalities.

It is basic that a corporation has a personality separate and distinct from those composing it as well as
from that of any other legal entity to which it may be related. Clear and convincing evidence is needed
to pierce the veil of corporate fiction. In this case, we find no evidence to show that MHICL and MHC
are one and the same entity.
III. MHICL not Liable
Santos predicates MHICLs liability on the fact that MHICL signed his employment contract with the
Palace Hotel. This fact fails to persuade us.
First, we note that the Vice President (Operations and Development) of MHICL, Cergueda signed the
employment contract as a mere witness. He merely signed under the word noted.
When one notes a contract, one is not expressing his agreement or approval, as a party would. In
Sichangco v. Board of Commissioners of Immigration, the Court recognized that the term noted
means that the person so noting has merely taken cognizance of the existence of an act or declaration,
without exercising a judicious deliberation or rendering a decision on the matter.
Second, and more importantly, there was no existing employer-employee relationship between Santos
and MHICL. In determining the existence of an employer-employee relationship, the following
elements are considered:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power to dismiss; and
(4) the power to control employees conduct.
MHICL did not have and did not exercise any of the aforementioned powers. It did not select
respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his
friend, Buenio. MHICL did not engage respondent Santos to work. The terms of employment were
negotiated and finalized through correspondence between Santos, Mr. Schmidt and Mr. Henk, who
were officers and representatives of the Palace Hotel and not MHICL. Neither did Santos adduce any
proof that MHICL had the power to control his conduct. Finally, it was the Palace Hotel, through Mr.
Schmidt and not MHICL that terminated respondent Santos services.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity.
The fact that the Palace Hotel is a member of the Manila Hotel Group is not enough to pierce the
corporate veil between MHICL and the Palace Hotel.
Considering that the NLRC was forum non-conveniens and considering further that no employeremployee relationship existed between MHICL, MHC and Santos, the LA clearly had no jurisdiction
over respondents claim in the NLRC case. In all the cases under the exclusive and original jurisdiction
of the LA, an employer-employee relationship is an indispensable jurisdictional requirement.

Diaz vs. Adiong, March 5, 1993 Facts:


1. On July 6, 1991, the Mindanao Kris, published in Cotabato City, published a news article entitled
Toll of Corruption which exposed alleged
anomalies by key officials in the Regional Office of DENR; 2. Public officials alluded instituted a separate civil
and criminal actions arising from libel before City Prosecutor Office and Regional Trial Court in Marawi City
against petitioner; 3.
The City Prosecutors Office dismissed the
criminal case complaint for lack of jurisdiction since the said complaint should be filed in Cotabato City; 4. As
for the civil complaint it was docketed in the RTC of Marawi City, and that the defendant had filed their
respective answers w/ counterclaim; 5. Diaz moved for the dismissal of the case on the ground of lack of
jurisdiction, it was their contention that the case should be filed in RTC of Cotabato since it is where the private
1.
respondents who are all public officers held their office, similarly the libelous publication was published in that
place
Issue:
WON, RTC Marawi City has jurisdiction over the said case
Held: No,
not one of the respondents held office in Marawi City 1. An offended party who is at the same time a public
official can only institute an action arising from libel in 2 venues: the place where he holds office and place
where the alleged libelous articles were published; 2. The venue is improperly laid.
However
, unless and until the defendant objects to the venue in a motion to dismiss prior to a responsive pleading, the
venue cannot be truly be said to have been improperly laid, since the venue though technically wrong may yet be
considered acceptable to the parties for whose convenience the rules on venue had been devised; 3. In this case,
Diaz, should have timely challenged the venue in Marawi City in a motion to dismiss, pursuant to Sec 4, Rule 4
of the Rules of Court.
Unfortunately,
petitioner had already submitted himself to the jurisdiction of the TC when he filed his Answer to the Complaint
with Counterclaim. His motion to dismiss was therefore belatedly filed and could no longer deprive the trial
court of jurisdiction to hear and decide the said case; 4. While objections to venue in civil actions arising from
libel can be waived; it does not after all, involve a question of jurisdiction. Indeed, the laying of venue is
procedural rather than substantive. Venue relates to trial and not to jurisdiction

Republic of the Philippines


SUPREME COURT
Manila
EN BANC

G.R. No. L-28882 May 31, 1971


TIME, INC., petitioner,
vs.
HON. ANDRES REYES, as Judge of the Court of First Instance of Rizal, ELISEO S. ZARI, as Deputy
Clerk of Court, Branch VI, Court of First Instance of Rizal, ANTONIO J. VILLEGAS and JUAN
PONCE ENRILE, respondents.
Sycip, Salazar, Luna, Manalo & Feliciano for petitioner.
Angel C. Cruz Law Office for respondents.

REYES, J.B.L., J.:


Petition for certiorari and prohibition, with preliminary injunction, to annul certain orders of the respondent
Court of First Instance of Rizal, issued in its Civil Case No. 10403, entitled "Antonio J. Villegas and Juan Ponce
Enrile vs. Time, Inc., and Time-Life International, Publisher of 'Time' Magazine (Asia Edition)", and to prohibit
the said court from further proceeding with the said civil case.
Upon petitioner's posting a bond of P1,000.00, this Court, as prayed for, ordered, on 15 April 1968, the issuance
of a writ of preliminary injunction.
The petition alleges that petitioner Time, Inc., 1 is an American corporation with principal offices at Rocketfeller
Center, New York City, N. Y., and is the publisher of "Time", a weekly news magazine; the petition, however,
does not allege the petitioner's legal capacity to sue in the courts of the Philippine. 2
In the aforesaid Civil Case No. 10403, therein plaintiffs (herein respondents) Antonio J. Villegas and Juan Ponce
Enrile seek to recover from the herein petitioner damages upon an alleged libel arising from a publication of
Time (Asia Edition) magazine, in its issue of 18 August 1967, of an essay, entitled "Corruption in Asia", which,
in part, reads, as follows:
The problem of Manila's mayor, ANTONIO VILLEGAS, is a case in point. When it was
discovered last year that the mayor's coffers contained far more pesos than seemed reasonable in
the light of his income, an investigation was launched. Witnesses who had helped him out under
curious circumstance were asked to explain in court. One government official admitted lending
Villegas P30,000 pesos ($7,700) without interest because he was the mayor's compadre. An
assistant declared he had given Villegas loans without collateral because he regarded the boss as
my own son. A wealthy Manila businessman testified that he had lent Villegas' wife 15,000
pesos because the mayor was like a brother to me. With that, Villegas denounced the
investigation as an invasion of his family's privacy. The case was dismissed on a technicality,
and Villegas is still mayor. 3
More specifically, the plaintiffs' complaint alleges, inter alia that:
(4) Defendants, conspiring and confederating, published a libelous article, publicly, falsely and
maliciously imputing to Plaintiffs the commission of the crimes of graft, corruption and
nepotism; that said publication particularly referred to Plaintiff Mayor Antonio J. Villegas as a
case in point in connection with graft, corruption and nepotism in Asia; that said publication
without any doubt referred to co-plaintiff Juan Ponce Enrile as the high government official who
helped under curious circumstances Plaintiff Mayor Antonio J. Villegas in lending the latter
approximately P30,000.00 ($7,700.00) without interest because he was the Mayor's compadre;
that the purpose of said Publications is to cause the dishonor, discredit and put in public
contempt the Plaintiffs, particularly Plaintiff Mayor Antonio J. Villegas.
On motion of the respondents-plaintiffs, the respondent judge, on 25 November 1967, granted them leave to take
the depositions "of Mr. Anthony Gonzales, Time-Life international", and "Mr. Cesar B. Enriquez, Muller &
Phipps (Manila) Ltd.", in connection with the activities and operations in the Philippines of the petitioner, and,
on 27 November 1967, issued a writ of attachment on the real and personal estate of Time, Inc.
Petitioner received the summons and a copy of the complaint at its offices in New York on 13 December 1967
and, on 27 December 1967, it filed a motion to dismiss the complaint for lack of jurisdiction and improper
venue, relying upon the provisions of Republic Act 4363. Private respondents opposed the motion.

In an order dated 26 February 1968, respondent court deferred the determination of the motion to dismiss until
after trial of the case on the merits, the court having considered that the grounds relied upon in the motion do not
appear to be indubitable.
Petitioner moved for reconsideration of the deferment private respondents again opposed.
On 30 March 1968, respondent judge issued an order re-affirming the previous order of deferment for the reason
that "the rule laid down under Republic Act. No. 4363, amending Article 360 of the Revised Penal Code, is not
applicable to actions against non-resident defendants, and because questions involving harassment and
inconvenience, as well as disruption of public service do not appear indubitable. ..."
Failing in its efforts to discontinue the taking of the depositions, previously adverted to, and to have action taken,
before trial, on its motion to dismiss, petitioner filed the instant petition for certiorari and prohibition.
The orders for the taking of the said depositions, for deferring determination of the motion to dismiss, and for
reaffirming the deferment, and the writ of attachment are sought to be annulled in the petition..
There is no dispute that at the time of the publication of the allegedly offending essay, private respondents
Antonio Villegas and Juan Ponce Enrile were the Mayor Of the City of Manila and Undersecretary of Finance
and concurrently Acting Commissioner of Customs, respectively, with offices in the City of Manila. The issues
in this case are:
1. Whether or not, under the provisions of Republic Act No. 4363 the respondent Court of First Instance of Rizal
has jurisdiction to take cognizance of the civil suit for damages arising from an allegedly libelous publication,
considering that the action was instituted by public officers whose offices were in the City of Manila at the time
of the publication; if it has no jurisdiction, whether or not its erroneous assumption of jurisdiction may be
challenged by a foreign corporation by writ of certiorari or prohibition; and
2. Whether or not Republic Act 4363 is applicable to action against a foreign corporation or non-resident
defendant.
Provisions of Republic Act No. 4363, which are relevant to the resolution of the foregoing issues, read, as
follows:
Section 1. Article three hundred sixty of the Revised Penal Code, as amended by Republic Act
Numbered Twelve hundred and eighty-nine, is further amended to read as follows:
'ART. 360. Persons responsible. Any person who shall publish, exhibit, or
cause the publication or exhibition of any defamation in writing or by similar
means, shall be responsible for the same.
The author or editor of a book or pamphlet, or the editor or business manager of a daily
newspaper, magazine or serial publication, shall be responsible for the defamations contained
therein to the extent as if he were the author thereof.
The criminal and civil action for damages in cases of written defamations as provided for in this
chapter, shall be filed simultaneously or separately with the court of first instance of the
province or city where the libelous article is printed and first published or where any of the
offended parties actually resides at the time of the commission of the offense; Provided,
however, That where one of the offended parties is a public officer whose office is in the City of

Manila at the time of the commission of the offense, the action shall be filed in the Court of First
Instance of the City of Manila or of the city or province where the libelous article is printed and
first published, and in case such public officer does not hold office in the City of Manila, the
action shall be filed in the Court of First Instance of the province or city where he held office at
the time of the commission of the offense or where the libelous article is printed and first
published and in case one of the offended parties is a private individual, the action shall be filed
in the Court of First Instance of the province or city where he actually resides at the time of the
commission of the offense or where the libelous matter is printed and first published; Provided,
further, That the civil action shall be filed in the same court where the criminal action is filed
and vice versa; Provided, furthermore, That the court where the criminal action or civil action
for damages is first filed, shall acquire jurisdiction to the exclusion of other courts; And
provided finally, That this amendment shall not apply to cases of written defamations, the civil
and/or criminal actions which have been filed in court at the time of the effectivity of the law
xxx xxx xxx
xxx xxx xxx
Sec. 3. This Act shall take effect only if and when, within thirty days from its approval, the
newspapermen in the Philippines shall organize, and elect the members of, a Philippine Press
Council, a private agency of the said newspapermen, whose function shall be to promulgate a
Code of Ethics for them and the Philippine press investigate violations thereof, and censure any
newspaperman or newspaper guilty of any violation of the said Code, and the fact that such
Philippine Press Council has been organized and its members have been duly elected in
accordance herewith shall be ascertained and proclaimed by the President of the Philippines.
Under the first proviso in section 1, the venue of a civil action for damages in cases of written defamations is
localized upon the basis of, first, whether the offended party or plaintiff is a public officer or a private individual;
and second, if he is a public officer, whether his office is in Manila or not in Manila, at the time of the
commission of the offense. If the offended party is a public officer in the office in the City of Manila, the proviso
limits him to two (2) choices of venue, namely, in the Court of First instance of the City of Manila or in the city
or province where the libelous article is printed and first published ..."
The complaint lodged in the court of Rizal by respondents does not allege that the libelous article was printed
and first published in the province of Rizal and, since the respondents-plaintiffs are public officers with offices
in Manila at the time of the commission of the alleged offense, it is clear that the only place left for them
wherein to file their action, is the Court of First Instance of Manila.
The limitation of the choices of venue, as introduced into the Penal Code through its amendments by Republic
Act 4363, was intended "to minimize or limit the filing of out-of-town libel suits" to protect an alleged offender
from "hardships, inconveniences and harassments" and, furthermore, to protect "the interest of the public
service" where one of the offended parties is a public officer." 4 The intent, of the law is clear: a libeled public
official might sue in the court of the locality where he holds office, in order that the prosecution of the action
should interfere as little as possible with the discharge of his official duties and labors. The only alternative
allowed him by law is to prosecute those responsible for the libel in the place where the offending article was
printed and first published. Here, the law tolerates the interference with the libeled officer's duties only for the
sake of avoiding unnecessary harassment of the accused. Since the offending publication was not printed in the
Philippines, the alternative venue was not open to respondent Mayor Villegas of Manila and Undersecretary of
Finance Enrile, who were the offended parties.

But respondents-plaintiffs argue that Republic Act No. 4363 is not applicable where the action is against nonexistent defendant, as petitioner Time, Inc., for several reasons. They urge that, in enacting Republic Act No.
4363, Congress did not intend to protect non-resident defendants as shown by Section 3, which provides for the
effectivity of the statute only if and when the "newspapermen in the Philippines" have organized a "Philippine
Press Council" whose function shall be to promulgate a Code of Ethics for "them" and "the Philippine press";
and since a non-resident defendant is not in a position to comply with the conditions imposed for the effectivity
of the statute, such defendant may not invoke its provisions; that a foreign corporation is not inconvenienced by
an out-of-town libel suit; that it would be absurd and incongruous, in the absence of an extradition treaty, for the
law to give to public officers with office in Manila the second option of filing a criminal case in the court of the
place where the libelous article is printed and first published if the defendant is a foreign corporation and that,
under the "single publication" rule which originated in the United States and imported into the Philippines, the
rule was understood to mean that publications in another state are not covered by venue statutes of the forum.
The implication of respondents' argument is that the law would not take effect as to non-resident defendants or
accused. We see nothing in the text of the law that would sustain such unequal protection to some of those who
may be charged with libel. The official proclamation that a Philippine Press Council has been organized is made
a pre-condition to the effectivity of the entire Republic Act No. 4363, and no terms are employed therein to
indicate that the law can or will be effective only as to some, but not all, of those that may be charged with
libeling our public officers.
The assertion that a foreign corporation or a non-resident defendant is not inconvenienced by an out-of-town suit
is irrelevant and untenable, for venue and jurisdiction are not dependent upon convenience or inconvenience to a
party; and moreover, venue was fixed under Republic Act No. 4363, pursuant to the basic policy of the law that
is, as previously stated, to protect the interest of the public service when the offended party is a public officer, by
minimizing as much as possible any interference with the discharge of his duties.
That respondents-plaintiffs could not file a criminal case for libel against a non-resident defendant does not make
Republic Act No. 4363 incongruous of absurd, for such inability to file a criminal case against a non-resident
natural person equally exists in crimes other than libel. It is a fundamental rule of international jurisdiction that
no state can by its laws, and no court which is only a creature of the state, can by its judgments or decrees,
directly bind or affect property or persons beyond the limits of the state. 5 Not only this, but if the accused is a
corporation, no criminal action can lie against it, 6 whether such corporation or resident or non-resident. At any
rate, the case filed by respondents-plaintiffs is case for damages.
50 Am. Jur. 2d 659 differentiates the "multiple publication" and "single publication" rules (invoked by private
respondents) to be as follows:
The common law as to causes of action for tort arising out of a single publication was to the
effect that each communication of written or printed matter was a distinct and separate
publication of a libel contained therein, giving rise to a separate cause of action. This rule
('multiple publication' rule) is still followed in several American jurisdictions, and seems to be
favored by the American Law Institute. Other jurisdictions have adopted the 'single publication'
rule which originated in New York, under which any single integrated publication, such as one
edition of a newspaper, book, or magazine, or one broadcast, is treated as a unit, giving rise to
only one cause of action, regardless of the number of times it is exposed to different people. ...
These rules are not pertinent in the present scheme because the number of causes of action that may be available
to the respondents-plaintiffs is not here in issue. We are here confronted by a specific venue statute, conferring
jurisdiction in cases of libel against Public officials to specified courts, and no other. The rule is that where a
statute creates a right and provides a remedy for its enforcement, the remedy is exclusive; and where it confers
jurisdiction upon a particular court, that jurisdiction is likewise exclusive, unless otherwise provided. Hence, the

venue provisions of Republic Act No. 4363 should be deemed mandatory for the party bringing the action,
unless the question of venue should be waived by the defendant, which was not the case here. Only thus can the
policy of the Act be upheld and maintained. Nor is there any reason why the inapplicability of one alternative
venue should result in rendering the other alternative, also inapplicable.
The dismissal of the present petition is asked on the ground that the petitioner foreign corporation failed to allege
its capacity to sue in the courts of the Philippines. Respondents rely on section 69 of the Corporation law, which
provides:
SEC. 69. No foreign corporation or corporations formed, organized, or existing under any laws
other than those of the Philippines shall be permitted to ... maintain by itself or assignee any suit
for the recovery of any debt, claim, or demand whatever, unless it shall have the license
prescribed in the section immediately preceding. ..." ...;
They also invoke the ruling in Marshall-Wells Co. vs. Elser & Co., Inc. 7 that no foreign corporation may be
permitted to maintain any suit in the local courts unless it shall have the license required by the law, and the
ruling in Atlantic Mutual Ins. Co., Inc. vs. Cebu Stevedoring Co., Inc. 8 that "where ... the law denies to a foreign
corporation the right to maintain suit unless it has previously complied with a certain requirement, then such
compliance or the fact that the suing corporation is exempt therefrom, becomes a necessary averment in the
complaint." We fail to see how these doctrines can be a propos in the case at bar, since the petitioner is not
"maintaining any suit" but is merely defending one against itself; it did not file any complaint but only a
corollary defensive petition to prohibit the lower court from further proceeding with a suit that it had no
jurisdiction to entertain.
Petitioner's failure to aver its legal capacity to institute the present petition is not fatal, for ...
A foreign corporation may, by writ of prohibition, seek relief against the wrongful assumption of
jurisdiction. And a foreign corporation seeking a writ of prohibition against further maintenance
of a suit, on the ground of want of jurisdiction in which jurisdiction is not bound by the ruling of
the court in which the suit was brought, on a motion to quash service of summons, that it has
jurisdiction. 9
It is also advanced that the present petition is premature, since respondent court has not definitely ruled on the
motion to dismiss, nor held that it has jurisdiction, but only argument is untenable. The motion to dismiss was
predicated on the respondent court's lack of jurisdiction to entertain the action; and the rulings of this Court are
that writs of certiorari or prohibition, or both, may issue in case of a denial or deferment of action on such a
motion to dismiss for lack of jurisdiction.
If the question of jurisdiction were not the main ground for this petition for review by certiorari,
it would be premature because it seeks to have a review of an interlocutory order. But as it
would be useless and futile to go ahead with the proceedings if the court below had no
jurisdiction this petition was given due course.' (San Beda vs. CIR, 51 O.G. 5636, 5638).
'While it is true that action on a motion to dismiss may be deferred until the trial and an order to
that effect is interlocutory, still where it clearly appears that the trial judge or court is proceeding
in excess or outside of its jurisdiction, the remedy of prohibition would lie since it would be
useless and a waste of time to go ahead with the proceedings. (Philippine International Fair, Inc.,
et al. vs. Ibaez, et al., 50 Off. Gaz. 1036; Enrique v. Macadaeg, et al., 47 Off. Gaz. 1207; see
also San Beda College vs. CIR, 51 Off. Gaz. 5636.)' (University of Sto. Tomas v. Villanueva, L13748, 30 October 1959.).

Similarly, in Edward J. Nell Co. vs. Cubacub, L-20843, 23 June 1965, 14 SCRA 419, this Court held:
'.......................................................... It is a settledrule that the jurisdiction of a court over the
subject-matter is determined by the allegations in the complaint; and when a motion to dismiss
is filed for lack of jurisdiction those allegations are deemed admitted for purposes of such
motion, so that it may be resolved without waiting for the trial. Thus it has been held that the
consideration thereof may not be postponed in the hope that the evidence may yield other
qualifying or concurring data which would bring the case under the court's jurisdiction.'
To the same effect are the rulings in: Ruperto vs. Fernando, 83 Phil. 943; Administrator of Hacienda Luisita
Estate vs. Alberto, L-12133, 21 October 1958.
Summing up, We hold:
(1) The under Article 360 of the Revised Penal Code, as amended by Republic Act No. 4363, actions for
damages by public officials for libelous publications against them can only be filed in the courts of first instance
ofthe city or province where the offended functionary held office at the time ofthe commission of the offense, in
case the libelous article was first printed or published outside the Philippines.
(2) That the action of a court in refusing to rule, or deferring its ruling, on a motion to dismiss for lack of
jurisdiction over the subject matter, or for improper venue, is in excess of jurisdiction and correctable by writ of
prohibition or certiorari sued out in the appellate Court, even before trial on the merits is had.
WHEREFORE, the writs applied for are granted: the respondent Court of First Instance of Rizal is declared
without jurisdiction to take cognizance of its Civil Case No. 10403; and its orders issued in connection therewith
are hereby annulled and set aside,. Respondent court is further commanded to desist from further proceedings in
Civil case No. 10403 aforesaid. Costs against private respondents, Antonio J. Villegas and Juan Ponce Enrile.
The writ of preliminary injunction heretofore issued by this Supreme Court is made permanent.

Young Auto Supply Co. vs. Court of Appeals


Facts: 1. Young Auto Supply Co Inc. (YASCO) represented by Nemesio Garcia, its president, Nelson Garcia and
Vicente Sy, sold all of their shares of stock in Consolidated Marketing & Development Corporation (CMDC) to
Roxas. Purchase Price: 8M; Downpayment: 4M; Balance: 4M in four postdated checks of 1M each. 2. After the
execution of the agreement, Roxas took full control of the four markets of CMDC. However, the vendors held on
to the stock certificates of CMDC as security pending full payment of the balance of the purchase price. 3. The
first check representing the downpayment was honored by the drawee bank but the four other checks
representing the balance of 4M was dishonored. In the meantime, Roxas sold one of the markets to a third party
for the amount of 600K, leaving a balance of 3.4M. 4. Nelson Garcia and Vicente Sy assigned all their rights and
title to the proceeds of the sale of CMDC shares to Nemesio Garcia. 5. Petitioners filed a complaint against
Roxas in the RTC praying that Roxas be ordered to pay petitioners the sum of 3.4M or that full control of the
three markets be turned over to YASCO and Garcia.
The complaint also prayed for the forfeiture of the partial payment of P4,600,000.00 and the payment of
attorney's fees and costs.
6.
Failing to submit his answer, the trial court declared Roxas in default. The order of default was, however, lifted
upon motion of Roxas.
7.
Roxas filed a motion to dismiss. After a hearing, wherein testimonial and documentary evidence were presented
by both parties, the trial court
denied
Roxas' motion to dismiss.
8.
After receiving said order, Roxas filed another motion for extension of time to submit his answer. He also filed a
motion for reconsideration, which the trial court denied for being pro-forma.
9.
Roxas was again declared in default, on the ground that his motion for reconsideration did not toll the running of
the period to file his answer.
10.

On 3 May 1991, Roxas filed an unverified Motion to Lift the Order of Default which was not accompanied with
the required affidavit of merit. But without waiting for the resolution of the motion, he filed a petition for
certiorari with the Court of Appeals. The Court of Appeals dismissal of the complaint on the ground of improper
venue.
11.
A subsequent motion for reconsideration by YASCO was to no avail. YASCO and Garcia filed the petition.
Issue:
Whether the venue for the case against YASCO and Garcia in Cebu City was improperly laid.
Held:
A corporation has no residence in the same sense in which this term is applied to a natural person. But for
practical purposes, a corporation is in a metaphysical sense a resident of the place where its principal office is
located as stated in the articles of incorporation. The Corporation Code precisely requires each corporation to
specify in its articles of incorporation the "place where the principal office of the corporation is to be located
which must be within the Philippines." The purpose of this requirement is to fix the residence of a corporation in
a definite place, instead of allowing it to be ambulatory. Actions cannot be filed against a corporation in any
place where the corporation maintains its branch offices. The Court ruled that to allow an action to be instituted
in any place where the corporation has branch offices, would create confusion and work untold inconvenience to
said entity. By the same token, a corporation cannot be allowed to file personal actions in a place other than its
principal place of business unless such a place is also the residence of a co-plaintiff or a defendant. With the
finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal place of business
is located, it becomes unnecessary to decide whether Garcia is also a resident of Cebu City and whether Roxas
was in estoppel from questioning the choice of Cebu City as the venue. The decision of the Court of Appeals was
set aside.

Sy vs. Tyson Ent. Inc., G.R. No. L-56763 December 15, 1982
FACTS:
In 1979, Tyson Enterprises, Inc. filed a collection suit against Universal Parts Supply Corporation and its
president John Sy. The suit was filed in Pasig, Rizal. John Sy filed a motion to file for a bill of particulars which
was denied. Subsequently, Sy filed a motion to dismiss on the ground of improper venue. Sy alleged that Tyson
Enterprises should have filed the case either in Bacolod City (business address of Universal Parts) or in Manila
(business address of Tyson Enterprises). Sy alleged that it is improper for
Tyson Enterprises to file the case in Pasig even if it is the residence of Tysons president and general
manager, Dominador Ti. The trial court as well as th
e Court of Appeals denied Sys motion on the ground that he waived the
defense of improper venue when he filed his motion to file for a bill of particulars; that the prior motion placed
Sy under the jurisdiction of the trial court.
ISSUE:
Whether or not a plaintiff-corporation may file a civil case not in its business address nor the business
address/residence of the defendant but in the place of residence of its incorporators/officers.
HELD:
No. A corporation has a separate and distinct personality from its incorporators. Its place of business is its
residence and not the residence of its president or any other officer. Hence, venue is improperly laid in this case.
The trial court of Pasig has no jurisdiction. Anent the issue that there was a waiver, as a rule, the defense of

improper venue is waived if it is not alleged in a motion to dismiss. In the case at bar, Sy was able to file his
motion to dismiss in a timely manner. It is of no moment that there was a prior motion for a bill of particulars
that was filed. There is nothing in the rule that states that no other motion should have been filed prior to filing a
motion to dismiss before a motion to dismiss grounded on improper venue may be allowed