CASE # 1-`4

CASE #1
Rule 1 Section 4
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS) and WINSTON F. GARCIA, in his
capacity as PRESIDENT and GENERAL MANAGER of the GSIS,
Petitioners,
- versus
DINNAH VILLAVIZA, ELIZABETH DUQUE,
ADRONICO A. ECHAVEZ,
RODEL RUBIO, ROWENA THERESE B. GRACIA, PILAR LAYCO, and ANTONIO JOSE
LEGARDA,
Respondents.
G.R. No. 180291
Present:
CORONA, C.J., CARPIO, CARPIO MORALES, VELASCO, JR., NACHURA, LEONARDO-DE
CASTRO, BRION, PERALTA, BERSAMIN, DEL CASTILLO, ABAD, VILLARAMA, JR., PEREZ,
and MENDOZA, JJ
Promulgated:
July 27, 2010
x -------------------------------------------------------------------------------------------------------x
DECISION
MENDOZA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the August 31, 2007 Decision[1] of the Court of Appeals (CA), in CA-G.R.
SP No. 98952, dismissing the petition for certiorari of Government Service Insurance System
(GSIS) assailing the Civil Service Commissions Resolution No. 062177.
THE FACTS:
Petitioner Winston Garcia (PGM Garcia), as President and General Manager of the GSIS, filed
separate formal charges against respondents Dinnah Villaviza, Elizabeth Duque, Adronico A.
Echavez, Rodel Rubio, Rowena Therese B. Gracia, Pilar Layco, and Antonio Jose Legarda for
Grave Misconduct and/or Conduct Prejudicial to the Best Interest of the Service pursuant to the
Rules of Procedure in Administrative Investigation (RPAI) of GSIS Employees and Officials, III,
D, (1, c, f) in relation to Section 52A (3), (20), Rule IV, of the Uniform Rules on Administrative
Cases in the Civil Service (URACCS), in accordance with Book V of the Administrative Code of
1987, committed as follows:
That on 27 May 2005, respondent, wearing red shirt together with some employees, marched to
or appeared simultaneously at or just outside the office of the Investigation Unit in a mass
demonstration/rally of protest and support for Messrs. Mario Molina and Albert Velasco, the
latter having surreptitiously entered the GSIS premises;
xxxxxxxxx

That some of these employees badmouthed the security guards and the GSIS management
and defiantly raised clenched fists led by Atty. Velasco who was barred by Hearing Officer
Marvin R. Gatpayat in an Order dated 24 May 2005 from appearing as counsel for Atty. Molina
pursuant to Section 7 (b) (2) of R.A. 6713 otherwise known as the Code of Conduct and Ethical
Standards for Public Officials and Employees;
That respondent, together with other employees in utter contempt of CSC Resolution No.
021316, dated 11 October 2002, otherwise known as Omnibus Rules on Prohibited Concerted
Mass Actions in the Public Sector caused alarm and heightened some employees and disrupted
the work at the Investigation Unit during office hours.[2]
This episode was earlier reported to PGM Garcia, through an office memorandum dated May
31, 2005, by the Manager of the GSIS Security Department (GSIS-SD), Dennis Nagtalon. On
the same day, the Manager of the GSIS Investigation Unit (GSIS-IU), Atty. Lutgardo Barbo,
issued a memorandum to each of the seven (7) respondents requiring them to explain in writing
and under oath within three (3) days why they should not be administratively dealt with.[3]
Respondents Duque, Echavez, Rubio, Gracia, Layco, and Legarda, together with two others,
submitted a letter-explanation to Atty. Barbo dated June 6, 2005. Denying that there was a
planned mass action, the respondents explained that their act of going to the office of the GSISIU was a spontaneous reaction after learning that their former union president was there. Aside
from some of them wanting to show their support, they were interested in that hearing as it
might also affect them. For her part, respondent Villaviza submitted a separate letter explaining
that she had a scheduled pre-hearing at the GSIS-IU that day and that she had informed her
immediate supervisor about it, attaching a copy of the order of pre-hearing. These letters were
not under oath.[4]
PGM Garcia then filed the above-mentioned formal charges for Grave Misconduct and/or
Conduct Prejudicial to the Best Interest of the Service against each of the respondents, all dated
June 4, 2005. Respondents were again directed to submit their written answers under oath
within three (3) days from receipt thereof.[5] None was filed.
On June 29, 2005, PGM Garcia issued separate but similarly worded decisions finding all seven
(7) respondents guilty of the charges and meting out the penalty of one (1) year suspension plus
the accessory penalties appurtenant thereto.
On appeal, the Civil Service Commission (CSC) found the respondents guilty of the lesser
offense of Violation of Reasonable Office Rules and Regulations and reduced the penalty to
reprimand. The CSC ruled that respondents were not denied their right to due process but there
was no substantial evidence to hold them guilty of Conduct Prejudicial to the Best Interest of the
Service.Instead,
x x x. The actuation of the appellants in going to the IU, wearing red shirts, to witness a public
hearing cannot be considered as constitutive of such offense. Appellants (respondents herein)
assembly at the said office to express support to Velasco, their Union President, who pledged to
defend them against any oppression by the GSIS management, can be considered as an
exercise of their freedom of expression, a constitutionally guaranteed right.[6] x x x
PGM Garcia sought reconsideration but was denied. Thus, PGM Garcia went to the Court of
Appeals via a Petition for Review under Rule 43 of the Rules on Civil Procedure.[7] The CA
upheld the CSC in this wise:

The Civil Service Commission is correct when it found that the act sought to be punished hardly
falls within the definition of a prohibited concerted activity or mass action. The petitioners failed
to prove that the supposed concerted activity of the respondents resulted in work stoppage and
caused prejudice to the public service. Only about twenty (20) out of more than a hundred
employees at the main office, joined the activity sought to be punished. These employees, now
respondents in this case, were assigned at different offices of the petitioner GSIS. Hence,
despite the belated claim of the petitioners that the act complained of had created substantial
disturbance inside the petitioner GSIS premises during office hours, there is nothing in the
record that could support the claim that the operational capacity of petitioner GSIS was affected
or reduced to substantial percentage when respondents gathered at the Investigation Unit.
Despite the hazy claim of the petitioners that the gathering was intended to force the
Investigation Unit and petitioner GSIS to be lenient in the handling of Atty. Molinas case and
allow Atty. Velasco to represent Atty. Molina in his administrative case before petitioner GSIS,
there is likewise no concrete and convincing evidence to prove that the gathering was made to
demand or force concessions, economic or otherwise from the GSIS management or from the
government. In fact, in the separate formal charges filed against the respondents, petitioners
clearly alleged that respondents marched to or appeared simultaneously at or just outside the
office of the Investigation Unit in a mass demonstration/rally of protest and support for Mssrs.
Mario Molina and Albert Velasco, the latter surreptitiously entered the GSIS premises. Thus,
petitioners are aware at the outset that the only apparent intention of the respondents in going
to the IU was to show support to Atty. Mario Molina and Albert Velasco, their union officers. The
belated assertion that the intention of the respondents in going to the IU was to disrupt the
operation and pressure the GSIS administration to be lenient with Atty. Mario Molina and Albert
Velasco, is only an afterthought.[8]
Not in conformity, PGM Garcia is now before us via this Petition for Review presenting the
following:
STATEMENT OF THE ISSUES
I
WHETHER AN ADMINISTRATIVE TRIBUNAL MAY APPLY SUPPLETORILY
PROVISIONS OF THE RULES OF COURT ON THE EFFECT OF FAILURE TO DENY
ALLEGATIONS IN THE COMPLAINT AND FAILURE TO FILE ANSWER, WHERE
RESPONDENTS IN THE ADMINISTRATIVE PROCEEDINGS DID NOT FILE
RESPONSIVE PLEADING TO THE FORMAL CHARGES AGAINST THEM.

THE
THE
THE
ANY

II
WHETHER THE RULE THAT ADMINISTRATIVE DUE PROCESS CANNOT BE EQUATED
WITH DUE PROCESS IN JUDICIAL SENSE AUTHORIZES AN ADMINISTRATIVE TRIBUNAL
TO CONSIDER IN EVIDENCE AND GIVE FULL PROBATIVE VALUE TO UNNOTARIZED
LETTERS THAT DID NOT FORM PART OF THE CASE RECORD.
III

WHETHER A DECISION THAT MAKES CONCLUSIONS OF FACTS BASED ON EVIDENCE

ON RECORD BUT MAKES A CONCLUSION OF LAW BASED ON THE ALLEGATIONS OF A
DOCUMENT THAT NEVER FORMED PART OF THE CASE RECORDS IS VALID.
IV
WHETHER FURTHER PROOF OF SUSBTANTIAL REDUCTION OF THE OPERATIONAL
CAPACITY OF AN AGENCY, DUE TO UNRULY MASS GATHERING OF GOVERNMENT
EMPLOYEES INSIDE OFFICE PREMISES AND WITHIN OFFICE HOURS, IS REQUIRED TO
HOLD THE SAID EMPLOYEES LIABLE FOR CONDUCT PREJUDICIAL TO THE BEST
INTEREST OF THE SERVICE PURSUANT TO CSC RESOLUTION NO. 021316.
V
WHETHER AN UNRULY MASS GATHERING OF TWENTY EMPLOYEES, LASTING FOR
MORE THAN AN HOUR DURING OFFICE HOURS, INSIDE OFFICE PREMISES AND WITHIN
A UNIT TASKED TO HEAR AN ADMINISTRATIVE CASE, TO PROTEST THE PROHIBITION
AGAINST THE APPEARANCE OF THEIR LEADER AS COUNSEL IN THE SAID
ADMINISTRATIVE CASE, FALLS WITHIN THE PURVIEW OF THE CONSTITUTIONAL
GUARANTEE TO FREEDOM OF EXPRESSION AND PEACEFUL ASSEMBLY.
VI
WHETHER THE CONCERTED ABANDONMENT OF EMPLOYEES OF THEIR POSTS FOR
MORE THAN AN HOUR TO HOLD AN UNRULY PROTEST INSIDE OFFICE PREMISES ONLY
CONSTITUTES THE ADMINISTRATIVE OFFENSE OF VIOLATION OF REASONABLE
OFFICE RULES AND REGULATIONS.[9]
The Court finds no merit in the petition.
Petitioners primarily question the probative value accorded to respondents letters of explanation
in response to the memorandum of the GSIS-IU Manager. The respondents never filed their
answers to the formal charges. The petitioners argue that there being no answers, the
allegations in the formal charges that they filed should have been deemed admitted pursuant to
Section 11, Rule 8 of the Rules of Court which provides:
SECTION 11. Allegations not specifically denied deemed admitted. Material averment in the
complaint, other than those as to the amount of liquidated damages, shall be deemed admitted
when not specifically denied. Allegations of usury in a complaint to recover usurious interest are
deemed admitted if not denied specifically and under oath.
According to the petitioners, this rule is applicable to the case at bench pursuant to Rule 1,
Section 4 of the Rules of Court which reads:
SECTION 4. In what cases not applicable. These Rules shall not apply to election cases, land
registration, cadastral, naturalization and insolvency proceedings, and other cases not herein
provided for, except by analogy or in a suppletory character and whenever practicable and
convenient. (underscoring supplied)

The Court does not subscribe to the argument of the petitioners. Petitioners own rules, Rule XI,
Section 4 of the GSIS Amended Policy and Procedural Guidelines No. 178-04, specifically
provides:
If the respondent fails to file his Answer within five (5) working days from receipt of the Formal
Charge for the supporting evidence, when requested, he shall be considered to have waived his
right to file an answer and the PGM or the Board of Trustees, in proper cases, shall render
judgment, as may be warranted by the facts and evidence submitted by the prosecution.
A perusal of said section readily discloses that the failure of a respondent to file an answer
merely translates to a waiver of his right to file an answer. There is nothing in the rule that says
that the charges are deemed admitted. It has not done away with the burden of the complainant
to prove the charges with clear and convincing evidence.
It is true that Section 4 of the Rules of Court provides that the rules can be applied in a
suppletory character. Suppletory is defined as supplying deficiencies.[10] It means that the
provisions in the Rules of Court will be made to apply only where there is an insufficiency in the
applicable rule. There is, however, no such deficiency as the rules of the GSIS are explicit in
case of failure to file the required answer. What is clearly stated there is that GSIS may render
judgment as may be warranted by the facts and evidence submitted by the prosecution.
Even granting that Rule 8, Section 11 of the Rules of Court finds application in this case,
petitioners must remember that there remain averments that are not deemed admitted by the
failure to deny the same. Among them are immaterial allegations and incorrect conclusions
drawn from facts set out in the complaint.[11] Thus, even if respondents failed to file their
answer, it does not mean that all averments found in the complaint will be considered as true
and correct in their entirety, and that the forthcoming decision will be rendered in favor of the
petitioners. We must not forget that even in administrative proceedings, it is still the
complainant, or in this case the petitioners, who have the burden of proving, with substantial
evidence, the allegations in the complaint or in the formal charges.[12]
A perusal of the decisions of the CA and of the CSC will reveal that the case was resolved
against petitioners based, not on the absence of respondents evidence, but on the weakness of
that of the petitioners. Thus, the CA wrote:
Petitioners correctly submitted the administrative cases for resolution without the respondents
respective answer to the separate formal charges in accordance with Section 4, Rule XI of the
RPAI. Being in full control of the administrative proceeding and having effectively prevented
respondents from further submitting their responsive answer and evidence for the defense,
petitioners were in the most advantageous position to prove the merit of their allegations in the
formal charges.When petitioner Winston Garcia issued those similarly worded decisions in the
administrative cases against the respondents, it is presumed that all evidence in their favor were
duly submitted and justly considered independent of the weakness of respondents evidence in
view of the principle that the burden of proof belongs to the one who alleges and not the one
who denies.[13]
On the merits, what needs to be resolved in the case at bench is the question of whether or not
there was a violation of Section 5 of CSC Resolution No. 02-1316. Stated differently, whether or
not respondents actions on May 27, 2005 amounted to a prohibited concerted activity or mass
action. Pertinently, the said provision states:

Section 5. As used in this Omnibus Rules, the phrase prohibited concerted activity or mass
action shall be understood to refer to any collective activity undertaken by government
employees, by themselves or through their employees organizations,with intent of effecting work
stoppage or service disruption in order to realize their demands of force concession, economic
or otherwise, from their respective agencies or the government. It shall include mass leaves,
walkouts, pickets and acts of similar nature. (underscoring supplied)
In this case, CSC found that the acts of respondents in going to the GSIS-IU office wearing red
shirts to witness a public hearing do not amount to a concerted activity or mass action
proscribed above. CSC even added that their actuations can be deemed an exercise of their
constitutional right to freedom of expression. The CA found no cogent reason to deviate
therefrom.
As defined in Section 5 of CSC Resolution No. 02-1316 which serves to regulate the political
rights of those in the government service, the concerted activity or mass action proscribed must
be coupled with the intent of effecting work stoppage or service disruption in order to realize
their demands of force concession. Wearing similarly colored shirts, attending a public hearing
at the GSIS-IU office, bringing with them recording gadgets, clenching their fists, some even
badmouthing the guards and PGM Garcia, are acts not constitutive of an (i) intent to effect work
stoppage or service disruption and (ii) for the purpose of realizing their demands of force
concession.
Precisely, the limitations or qualifications found in Section 5 of CSC Resolution No. 02-1316 are
there to temper and focus the application of such prohibition. Not all collective activity or mass
undertaking of government employees is prohibited. Otherwise, we would be totally depriving
our brothers and sisters in the government service of their constitutional right to freedom of
expression.
Government workers, whatever their ranks, have as much right as any person in the land to
voice out their protests against what they believe to be a violation of their rights and interests.
Civil Service does not deprive them of their freedom of expression. It would be unfair to hold
that by joining the government service, the members thereof have renounced or waived this
basic liberty. This freedom can be reasonably regulated only but can never be taken away.
A review of PGM Garcias formal charges against the respondents reveals that he himself was
not even certain whether the respondents and the rest of the twenty or so GSIS employees who
were at the GSIS-IU office that fateful day marched there or just simply appeared there
simultaneously.[14] Thus, the petitioners were not even sure if the spontaneous act of each of
the twenty or so GSIS employees on May 27, 2005 was a concerted one. The report of
Manager Nagtalon of the GSIS-SD which was the basis for PGM Garcias formal charges
reflected such uncertainty. Thus,
Of these red shirt protesters, only Mr. Molina has official business at the Investigation Unit
during this time. The rest abandoned their post and duties for the duration of this incident which
lasted until 10:55 A.M. It was also observed that the protesters, some of whom raised their
clenched left fists, carefully planned this illegal action as evident in their behavior of arrogance,
defiance and provocation, the presence of various recording gadgets such as VCRs, voice
recorders and digital cameras, the bad mouthing of the security guards and the PGM, the
uniformity in their attire and the collusion regarding the anomalous entry of Mr. Albert Velasco to
the premises as reported earlier.[15]

The said report of Nagtalon contained only bare facts. It did not show respondents unified intent
to effect disruption or stoppage in their work. It also failed to show that their purpose was to
demand a force concession.
In the recent case of GSIS v. Kapisanan ng mga Manggagawa sa GSIS,[16] the Court upheld
the position of petitioner GSIS because its employees, numbering between 300 and 800 each
day, staged a walkout and participated in a mass protest or demonstration outside the GSIS for
four straight days. We cannot say the same for the 20 or so employees in this case. To equate
their wearing of red shirts and going to the GSIS-IU office for just over an hour with that four-day
mass action in Kapisanan ng mga Manggagawa sa GSIS case and to punish them in the same
manner would most certainly be unfair and unjust.
Recent analogous decisions in the United States, while recognizing the governments right as an
employer to lay down certain standards of conduct, tend to lean towards a broad definition of
public concern speech which is protected by their First Amendment. One such case is that of
Scott v. Meters.[17] In said case, the New York Transit Authority (NYTA), responsible for
operation ofNew York Citys mass transit service, issued a rule prohibiting employees from
wearing badges or buttons on their uniforms. A number of union members wore union buttons
promoting their opposition to a collective bargaining agreement. Consequently, the NYTA tried to
enforce its rule and threatened to subject these union members to discipline. The court, though
recognizing the governments right to impose reasonable restrictions, held that the NYTAs rule
was unconstitutionally overboard.
In another case, Communication Workers of America v. Ector County Hospital District,[18] it was
held that,
A county hospital employees wearing of a Union Yes lapel pin during a union organization drive
constituted speech on a matter of public concern, and the countys proffered interest in enforcing
the anti-adornment provision of its dress code was outweighed by the employees interest in
exercising his First Amendment speech and associational rights by wearing a pro-union lapel
button.[19]
Thus, respondents freedom of speech and of expression remains intact, and CSCs Resolution
No. 02-1316 defining what a prohibited concerted activity or mass action has only tempered or
regulated these rights. Measured against that definition, respondents actuations did not amount
to a prohibited concerted activity or mass action. The CSC and the CA were both correct in
arriving at said conclusion.
WHEREFORE, the assailed August 31, 2007 Decision of the Court of Appeals as well as its
October 16, 2007 Resolution in CA G.R. SP No. 98952 are hereby AFFIRMED.
SO ORDERED.

Case #2
Rule 1 Section 6
MEDISERV, INC.,
Petitioner,

- versus -

G.R. No. 161368

COURT OF APPEALS (Special Former 13th Division) and LANDHEIGHTS DEVELOPMENT

CORPORATION,
Respondents.
Promulgated:April 5, 2010
Present: PUNO, C.J., Chairperson,
BERSAMIN, and VILLARAMA, JR., JJ.

CARPIO

MORALES,

LEONARDO-DE

CASTRO,

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
Before the Court is a petition for certiorari to nullify the September 16, 2003 Resolution[1] of the
Court of Appeals reinstating the Petition for Review of private respondent Landheights
Development Corporation and the November 7, 2003 Resolution[2] denying the motion for
reconsideration thereof.
The facts are as follows:
On September 20, 1994, petitioner Mediserv, Inc. executed a real estate mortgage in favor of
China Banking Corporation as security for a loan. The mortgage was constituted on a 500square meter lot with improvements located at 926 A.H. Lacson Street, Sampaloc, Manila and
covered by Transfer Certificate of Title (TCT) No. 205824 of the Registry of Deeds for the City of
Manila.Mediserv defaulted on its obligation with Chinabank and the real estate mortgage was
foreclosed. At the public auction sale, private respondent Landheights Development Corporation
emerged as the highest bidder with a bid price of P17,617,960.00 for the subject property.
Sometime in April 1998, Landheights filed with the Regional Trial Court (RTC) of Manila an
Application for Possession of Real Estate Property Purchased at an Auction Sale under Act No.
3135.[3] On September 21, 1999, the title of the property was consolidated in favor of
Landheights and the Register of Deeds for the City of Manila issued TCT No. 242202 in its
favor. OnMarch 13, 2000, Landheights, seeking to recover possession of the subject property,
filed a verified complaint for ejectment against Mediserv before the Metropolitan Trial Court of
Manila (MeTC). The case was docketed as Civil Case No. 166637.
On October 12, 2000, the MeTC of Manila, Branch 15, rendered a decision[4] in favor of
Landheights, the decretal portion of which states:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby entered in favor of plaintiff and
against the defendant ordering the latter and all persons claiming rights under said entity to
VACATE the premises situated at 926 A.H. Lacson Street, Sampaloc, Manila; and to PAY
plaintiff the sum of P25,000.00 as attorneys fees.

Costs against defendant.

SO ORDERED.
Aggrieved, Mediserv appealed[5] the decision to the RTC of Manila docketed as Civil Case No.
00-99395. On June 14, 2002 the RTC rendered a Decision,[6] the fallo of which reads:
WHEREFORE, the Judgment of the Honorable Metropolitan Trial Court, Branch 15, Manila,
dated October 26, 2000, is hereby reversed and set aside; and the Complaint for Ejectment is
hereby ordered to be dismissed.
Further, on the Counterclaims, the plaintiff-appellee is hereby directed to pay the defendantappellant, the sum of Php 50,000.00 for actual damages and another sum of Php 50,000.00 for
and as attorneys fees.
With costs against plaintiff-appellee.
SO ORDERED.
On September 16, 2002, Landheights motion for reconsideration[7] was likewise denied. [8]
Accordingly, Landheights filed a Petition for Review[9] with the Court of Appeals, which however
dismissed the petition in a Resolution[10] dated December 12, 2002, to wit:
It appearing that the written authority of Dickson Tan to sign the verification and certification on
non-forum shopping, as well as the copies of the complaint and answer, are not attached to the
petition, the petition is DISMISSED.
SO ORDERED.
Landheights seasonably filed a motion for reconsideration[11] on December 26, 2002 and
subsequently submitted a Secretarys Certificate[12] dated January 13, 2003 executed by its
Corporate Secretary, Ms. Polly S. Tiu, stating that the Board of Directors affirms the authority of
Mr. Dickson Tan to file the Petition for Review.
On March 19, 2003, the Court of Appeals issued a Resolution[13] granting Landheights a new
period of ten (10) days within which to correct and rectify the deficiencies in the petition. On April
1, 2003, Mediserv filed a motion for reconsideration[14] praying that the March 19, 2003
Resolution be set aside and the December 12, 2002 Resolution, which dismissed the petition,
be reinstated. On even date, Landheights filed its Manifestation of Compliance.[15]
On September 16, 2003, the appellate court issued the first assailed resolution reinstating the
petition for review, the pertinent portion of which reads as follows:
With the subsequent compliance of the petitioner with the requirement of the rules and in the
interest of substantial justice, We now consider the petition reinstated.
Respondent is hereby directed to file its comment on the petition within ten (10) days from
notice and petitioner may file its reply within five (5) days from receipt of the comment.
SO ORDERED.
Mediserv filed a motion for reconsideration[16] on October 3, 2003, while Landheights filed its
comment[17] thereto on October 14, 2003.
On November 7, 2003, the Court of Appeals issued the second assailed resolution, the
significant portion of which states:

However, again, in the interest of justice, we shall consider the belatedly filed Secretarys
Certificate as a subsequent compliance of ourMarch 19, 2003 Resolution.
WHEREFORE, this Courts Resolution dated September 16, 2003 is hereby REITERATED. The
petition is hereby REINSTATED and the respondent is directed to file its Comment on the
petition within ten (10) days from notice.
SO ORDERED.
Its motion for reconsideration having been denied by the appellate court, petitioner is now
before us via the present recourse. Petitioner faults the appellate court as follows:
THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION AND ACTED WITHOUT
AND/ OR IN EXCESS OF JURISDICTION IN REINSTATING THE PETITION DESPITE THE
CLEAR MANDATE OF THE RULES AS WELL AS THE JURISPRUDENCE AS LAID DOWN BY
THIS HONORABLE COURT CALLING FOR THE DISMISSAL OF THE SAID PETITION.[18]
Petitioner argues that from the beginning, the Court of Appeals found the petition filed before it
to be defective for failure to comply with the rules. It points out that there is no showing that the
respondent corporation, through its board of directors, had authorized Mr. Dickson Tan to file the
petition for review in its behalf and to sign the verification and certification against forumshopping.However, instead of upholding the dismissal of the petition, the Court of Appeals
allowed private respondent to rectify its deficiency, which is contrary to jurisprudence.
Petitioner also cites Section 5, Rule 7 of the 1997 Rules of Civil Procedure, as amended, which
provides that failure to comply with the requirements on certification against forum shopping
shall not be curable by mere amendment of the complaint or other initiatory pleading but shall
be cause for dismissal of the case. Petitioner thus asserts that the appellate court acted with
grave abuse of discretion amounting to lack or in excess of jurisdiction in reinstating the petition
for review filed by respondent corporation.
We are not persuaded.
Under Rule 46, Section 3, paragraph 3 of the 1997 Rules of Civil Procedure, as amended,
petitions for certiorari must be verified and accompanied by a sworn certification of non-forum
shopping.[19] A pleading is verified by an affidavit that the affiant has read the pleading and that
the allegations therein are true and correct of his personal knowledge or based on authentic
records.[20] The party need not sign the verification. A partys representative, lawyer or any
person who personally knows the truth of the facts alleged in the pleading may sign the
verification.[21]
On the other hand, a certification of non-forum shopping is a certification under oath by the
plaintiff or principal party in the complaint or other initiatory pleading asserting a claim for relief
or in a sworn certification annexed thereto and simultaneously filed therewith, (a) that he has not
theretofore commenced any action or filed any claim involving the same issues in any court,
tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim
is pending therein; (b) if there is such other pending action or claim, a complete statement of the
present status thereof; and (c) if he should thereafter learn that the same or similar action or
claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the
court wherein his aforesaid complaint or initiatory pleading has been filed.[22]
The requirement that a petitioner or principal party should sign the certificate of non-forum
shopping applies even to corporations, considering that the mandatory directives of the Rules of
Court make no distinction between natural and juridical persons.[23] A corporation, however,
exercises its powers through its board of directors and/or its duly authorized officers and agents.
Physical acts, like the signing of documents, can be performed only by natural persons duly
authorized for the purpose by corporate by-laws or by a specific act of the board of directors.[24]

In the case of Digital Microwave Corp. v. Court of Appeals,[25] the certification of non-forum
shopping was signed by the petitioner corporations counsel; hence, the appellate court
dismissed the petition for failure to comply with Revised Supreme Court Circular No. 28-91, as
amended.[26] Petitioner corporations motion for reconsideration was denied by the appellate
court absent any compelling reason for petitioners failure to comply, at the first instance, with
[the circular] .... On appeal, this Court denied the petition in this wise:
In this case, petitioner has not adequately explained its failure to have the certification against
forum shopping signed by one of its officers. Neither has it shown any compelling reason for us
to disregard strict compliance with the rules.[27] (Emphasis supplied.)
In Shipside Incorporated v. Court of Appeals,[28] petitioner Shipside Incorporated filed a petition
for certiorari and prohibition with the Court of Appeals, which was, however, dismissed for failure
to attach proof that the one (1) who signed the verification and certification of non-forum
shopping, its Manager Lorenzo Balbin, Jr., was authorized to institute the petition in petitioners
behalf. Shipside Incorporated filed a motion for reconsideration to which it attached a certificate
issued by its board secretary stating that ten (10) days before the filing of the petition, its board
of directors authorized Balbin, Jr. to file it. The Court of Appeals denied the motion for
reconsideration, so the petitioner sought relief from this Court. In granting the petition, this Court
explained:
It is undisputed that on October 21, 1999, the time petitioners Resident Manager Balbin filed the
petition, there was no proof attached thereto that Balbin was authorized to sign the verification
and non-forum shopping certification therein, as a consequence of which the petition was
dismissed by the Court of Appeals. However, subsequent to such dismissal, petitioner filed a
motion for reconsideration, attaching to said motion a certificate issued by its board secretary
stating that on October 11, 1999, or ten days prior to the filing of the petition, Balbin had been
authorized by petitioners board of directors to file said petition.
The Court has consistently held that the requirement regarding verification of a pleading is
formal, not jurisdictional (Uy v. LandBank,G.R. No. 136100, July 24, 2000, 336 SCRA 419).
Such requirement is simply a condition affecting the form of the pleading, non-compliance with
which does not necessarily render the pleading fatally defective. Verification is simply intended
to secure an assurance that the allegations in the pleading are true and correct and not the
product of the imagination or a matter of speculation, and that the pleading is filed in good faith.
The court may order the correction of the pleading if verification is lacking or act on the pleading
although it is not verified, if the attending circumstances are such that strict compliance with the
rules may be dispensed with in order that the ends of justice may thereby be served.
On the other hand, the lack of certification against forum shopping is generally not curable by
the submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of
Civil Procedure provides that the failure of the petitioner to submit the required documents that
should accompany the petition, including the certification against forum shopping, shall be
sufficient ground for the dismissal thereof. The same rule applies to certifications against forum
shopping signed by a person on behalf of a corporation which are unaccompanied by proof that
said signatory is authorized to file a petition on behalf of the corporation.
In certain exceptional circumstances, however, the Court has allowed the belated filing of the
certification. In Loyola v. Court of Appeals, et al. (245 SCRA 477 [1995]), the Court considered
the filing of the certification one day after the filing of an election protest as substantial
compliance with the requirement. In Roadway Express, Inc. v. Court of Appeals, et al. (264
SCRA 696 [1996]), the Court allowed the filing of the certification 14 days before the dismissal
of the petition. In Uy v. LandBank, supra, the Court had dismissed Uys petition for lack of
verification and certification against non-forum shopping. However, it subsequently reinstated
the petition after Uy submitted a motion to admit certification and non-forum shopping
certification. In all these cases, there were special circumstances or compelling reasons that
justified the relaxation of the rule requiring verification and certification on non-forum shopping.

In the instant case, the merits of petitioners case should be considered special circumstances or
compelling reasons that justify tempering the requirement in regard to the certificate of nonforum shopping. Moreover, in Loyola, Roadway, and Uy, the Court excusednon-compliance with
the requirement as to the certificate of non-forum shopping. With more reason should we allow
the instant petition since petitioner herein did submit a certification on non-forum shopping,
failing only to show proof that the signatory was authorized to do so. That petitioner
subsequently submitted a secretarys certificate attesting that Balbin was authorized to file an
action on behalf of petitioner likewise mitigates this oversight.
It must also be kept in mind that while the requirement of the certificate of non-forum shopping
is mandatory, nonetheless therequirements must not be interpreted too literally and thus defeat
the objective of preventing the undesirable practice of forum-shopping(Bernardo v. NLRC, 255
SCRA 108 [1996]). Lastly, technical rules of procedure should be used to promote, not frustrate
justice. While the swift unclogging of court dockets is a laudable objective, the granting of
substantial justice is an even more urgent ideal.[29] (Italics in the original; emphasis and
underscoring supplied.)
Unquestionably, there is sufficient jurisprudential basis to hold that Landheights has
substantially complied with the verification and certification requirements. We have held in a
catena of cases[30] with similar factual circumstances that there is substantial compliance with
the Rules of Court when there is a belated submission or filing of the secretarys certificate
through a motion for reconsideration of the Court of Appeals decision dismissing the petition for
certiorari.
In Ateneo de Naga University v. Manalo,[31] this Court acknowledged that it has relaxed, under
justifiable circumstances, the rule requiring the submission of these certifications and has
applied the rule of substantial compliance under justifiable circumstances with respect to the
contents of the certification. It also conceded that if this Court has allowed the belated filing of
the certification against forum shopping for compelling reasons in previous rulings, with more
reason should it sanction the timely submission of such certification though the proof of the
signatorys authority was submitted thereafter.
The Court is aware of the necessity for a certification of non-forum shopping in filing petitions for
certiorari as this is required under Section 1, Rule 65, in relation to Section 3, Rule 46 of the
Rules of Civil Procedure, as amended. When the petitioner is a corporation, the certification
should obviously be executed by a natural person to whom the power to execute such
certification has been validly conferred by the corporate board of directors and/or duly
authorized officers and agents. Generally, the petition is subject to dismissal if a certification was
submitted unaccompanied by proof of the signatorys authority.[32]
However, we must make a distinction between non-compliance with the requirements for
certificate of non-forum shopping and verification and substantial compliance with the
requirements as provided in the Rules of Court. The Court has allowed the belated filing of the
certification on the justification that such act constitutes substantial compliance. In Roadway
Express, Inc. v. CA,[33] the Court allowed the filing of the certification fourteen (14) days before
the dismissal of the petition. In Uy v. Land Bank of the Philippines,[34] the Court reinstated a
petition on the ground of substantial compliance even though the verification and certification
were submitted only after the petition had already been originally dismissed. In Havtor
Management Phils. Inc. v. NLRC,[35] we acknowledged substantial compliance when the
lacking secretarys certificate was submitted by the petitioners as an attachment to the motion
for reconsideration seeking reversal of the original decision dismissing the petition for its earlier
failure to submit such requirement.
In the present case, Landheights rectified its failure to submit proof of Mr. Dickson Tans
authority to sign the verification/certification on non-forum shopping on its behalf when the
required document was subsequently submitted to the Court of Appeals. The admission of
these documents, and consequently, the reinstatement of the petition itself, is in line with the

cases we have cited. In such circumstances, we deem it more in accord with substantive justice
that the case be decided on the merits.
It is settled that liberal construction of the rules may be invoked in situations where there may be
some excusable formal deficiency or error in a pleading, provided that the same does not
subvert the essence of the proceeding and connotes at least a reasonable attempt at
compliance with the rules. After all, rules of procedure are not to be applied in a very rigid,
technical sense; they are used only to help secure substantial justice.[36]
Finally, we note that the instant petition was filed under Rule 65 of the 1997 Rules of Civil
Procedure, as amended, which requires the existence of grave abuse of discretion. Grave
abuse of discretion exists where an act of a court or tribunal is performed with a capricious or
whimsical exercise of judgment equivalent to lack of jurisdiction. The abuse of discretion must
be so patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to
perform a duty enjoined by law, or to act at all in contemplation of law, as where the power is
exercised in an arbitrary and despotic manner by reason of passion or personal hostility.[37] No
such grave abuse of discretion exists in this case to warrant issuance of the extraordinary writ of
certiorari.
WHEREFORE, the petition is DISMISSED. The September 16, 2003 and November 7, 2003
Resolutions of the Court of Appeals are AFFIRMED.
Let the records of this case be REMANDED to the Court of Appeals which is hereby DIRECTED
to take appropriate action thereon in light of the foregoing discussion with DISPATCH.
With costs against the petitioner.
SO ORDERED.

Case #3
Rule 1 Section 6
SPS. HEBER & CHARLITA EDILLO,
Petitioners,

G.R. No. 188360

Present:
CARPIO, J., Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

- versus -

SPS. NORBERTO & DESIDERIA DULPINA, Promulgated:

Respondents.
January 21, 2010

x ---------------------------------------------------------------------------------------- x
DECISION
BRION, J.:

We resolve in this Decision the Petition for Review on Certiorari[1] filed by defendantspetitioners Spouses Heber and Charlita Edillo (defendants-petitioners) who seek to reverse and
set aside the Resolutions dated January 28, 2009 [2] and June 11, 2009[3] of the Special Former
Special Division of Five of the Court of Appeals (CA) in CA-G.R. SP No. 02436-MIN. The first
assailed CA Resolution dismissed outright the defendants-petitioners Petition for Review for
failure to state the factual background of the case; the second assailed CA Resolution denied
the defendants-petitioners Motion for Reconsideration.

FACTUAL BACKGROUND

The facts of the case, gathered from the parties pleadings and annexes, are briefly
summarized below.
On February 21, 2006, plaintiffs-respondents Spouses Norberto and Desideria Dulpina
(plaintiffs-respondents) filed a Complaint for Forcible Entry against the defendants-petitioners
with the Municipal Circuit Trial Court of Del Carmen-San Isidro-San Benito, Surigao del Norte
(MCTC).[4]
The plaintiffs-respondents alleged that they purchased from Wencelito Camingue a 235square meter residential lot and house located in Poblacion, San Isidro, Surigao del Norte,
through a Deed of Sale[5] dated May 14, 1990. On August 8, 2005, defendant-petitioner Heber
Edillo, without their consent and against their express prohibition, suddenly fenced off and
occupied a 50-square meter portion of the western part of the disputed property while uttering
threats against plaintiffs-respondents. On January 26, 2006, they sent the defendantspetitioners a notice to vacate the disputed property, but the defendants-petitioners refused to
comply.[6]
In their Answer dated March 1, 2006, the defendants-petitioners countered that the
Complaint states no cause of action because the plaintiffs-respondents failed to allege that they
were in prior physical possession of the disputed property.[7] They also alleged that they
acquired the disputed property through three (3) separate Deeds of Absolute Sale [8] from
Apolinar Saragoza,[9] Felomino Forcadilla,[10] and Wenceslao Caunzad.[11]
THE MCTC RULING
On May 23, 2007, the MCTC rendered judgment dismissing the Complaint. It ordered
the plaintiffs-respondents to pay the defendants-petitioners P10,000.00 as actual damages and
another P10,000.00 as attorneys fees.[12] The plaintiffs-respondents counsel received a copy of
the MCTC Judgment on May 31, 2007.[13]
On June 5, 2007, the plaintiffs-respondents filed a Motion for Reconsideration [14] which
the MCTC denied in its Resolution of June 8, 2007.[15]
On July 30, 2007, the plaintiffs-respondents filed a Notice of Appeal with the MCTC,
which the latter granted.

On August 15, 2007, the plaintiffs-respondents filed their Appeal Memorandum with the
Regional Trial Court, Branch 31, Dapa, Surigao del Norte (RTC).[16]
THE RTC RULING
The RTC decided the appeal on November 7, 2007. It set aside the MCTC judgment and
ordered the defendants-petitioners to vacate the subject property and to restore the plaintiffsrespondents to their possession. It likewise ordered the payment of P10,000.00 as attorneys
fees and the cost of suit.[17]
After the RTC denied[18] their Motion for Reconsideration,[19] the defendants-petitioners
elevated the case to the CA through a Petition for Review under Rule 42 of the Rules of Court.
[20]

They argued that the plaintiffs-respondents appeal with the RTC was filed out of time since

the Revised Rules of Summary Procedure (RRSP) prohibits the filing of a motion for
reconsideration.
THE CA RULING
The CA dismissed the Petition in its Resolution of January 28, 2009[21] on the ground that
it does not contain a statement of the factual background of the case, in violation of Sections 2
and 3 of Rule 42 of the Rules of Court. A special division of five (5) justices, with Associate
Justice Ruben C. Ayson dissenting,[22] rendered the resolution.
The defendants-petitioners moved to reconsider the dismissal, to amend the petition,
and to admit their First Amended Petition.[23] The CA denied the motions in its Resolution of June
11, 2009, noting that the amended petition did not correct the infirmity of the original petition.[24]
Faced with this development, the defendants-petitioners filed the present Petition for
Review on Certiorari under Rule 45 of the Rules of Court.
THE PETITION
The defendants-petitioners argue that the CAs outright dismissal of the petition was
unwarranted since the Petition for Review and the Amended Petition (filed with the Motion for
Reconsideration of the Dismissal of the Original Petition) sufficiently recited the factual

background of the case. They submit that the annexes to the original and amended petitions,
consisting of the Complaint, the Answer, the other pleadings, and the MCTC and RTC
Decisions, also contain this factual background. They point out that a relaxation of technical
rules is justified by the merits of the case the RTC had no jurisdiction to entertain the plaintiffsrespondents appeal because the MCTC Decision had become final and executory; the Motion
for Reconsideration the plaintiffs-respondents filed is a prohibited pleading in summary
proceedings and did not stop the running of the period for the decisions finality.
For their part, the plaintiffs-respondents submit that the requirements set forth in Section
2 of Rule 42 of the Revised Rules of Court are mandatory and the defendants-petitioners have
no discretion but to comply, citing Galang v. Court of Appeals[25] and Tan v. Court of Appeals.[26]
OUR RULING
We find for the defendants-petitioners.
Procedure on Appeal; Liberal
Construction of Rules
An appeal to the CA from an RTC Decision rendered in the exercise of its appellate
jurisdiction is via a Petition for Review under Rule 42 of the Revised Rules of Court. Section 2 of
Rule 42 prescribes the following requirements:
SEC. 2. Form and contents. The petition shall be filed in seven (7) legible
copies, with the original copy intended for the court being indicated as such by
the petitioner, and shall (a) state the full names of the parties to the case, without
impleading the lower courts or judges thereof either as petitioners or
respondents; (b) indicate the specific material dates showing that it was filed on
time; (c) set forth concisely a statement of the matters involved, the issues
raised, the specification of errors of fact or law, or both, allegedly
committed by the Regional Trial Court, and the reasons or arguments relied
upon for the allowance of the appeal; (d) be accompanied by clearly legible
duplicate originals or true copies of the judgments or final orders of both lower
courts, certified correct by the clerk of court of the Regional Trial Court, the
requisite number of plain copies thereof and of the pleadings and other material
portions of the record as would support the allegations of the petition.
The petitioner shall also submit together with the petition a certification
under oath that he has not theretofore commenced any other action involving the
same issues in the Supreme Court, the Court of Appeals or different divisions
thereof, or any other tribunal or agency; if there is such other action or
proceeding, he must state the status of the same; and if he should thereafter

learn that a similar action or proceeding has been filed or is pending before the
Supreme Court, the Court of Appeals, or different divisions thereof, or any other
tribunal or agency, he undertakes to promptly inform the aforesaid courts and
other tribunal or agency thereof within five (5) days therefrom. (Emphasis
supplied.)
Non-compliance with these requirements is sufficient ground for the dismissal of the
Petition, pursuant to Section 3 of the same Rule, which reads:
SEC. 3. Effect of failure to comply with requirements. The failure of the
petitioner to comply with any of the foregoing requirements regarding the
payment of the docket and other lawful fees, the deposit for costs, proof of
service of the petition, and the contents of and the documents which should
accompany the petition shall be sufficient ground for the dismissal thereof.
In not a few cases, we have ruled that the right to appeal is neither a natural right nor a
part of due process; it is a mere statutory privilege that may be exercised only in the manner
and strictly in accordance with the provisions of law allowing the appeal. [27] The party who seeks
to appeal must comply with the requirements of the law and the rules; failure to comply leads to
the dismissal and the loss of the right to appeal.[28]
But while we have so ruled, we recognize nonetheless that the right to appeal is an
essential part of our system of judicial processes, and courts should proceed with caution in
order not to deprive a party of the right to appeal. We invariably made this recognition due to our
overriding concern that every party-litigant be given the amplest opportunity to ventilate and
secure the resolution of his cause, free from the constraints of technicalities. [29] This line of
rulings is based, no less, on the Rules of Court which itself calls for a liberal construction of its
provisions, with the objective of securing for the parties a just, speedy and inexpensive
disposition of every action and proceeding.[30] In this line of rulings, we have repeatedly stressed
that litigation is not merely a game of technicalities. The law and jurisprudence grant to courts in
the exercise of their discretion along the lines laid down by this Court the prerogative to relax
compliance with procedural rules of even the most mandatory character, mindful of the duty to
reconcile both the need to put an end to litigation speedily and the parties right to an opportunity
to be heard.[31]
We are aware of the plaintiffs-respondents cited cases of Galang v. Court of
Appeals[32] and Tan v. Court of Appeals,[33] but these rulings are not fully applicable to the
present case as they are not squarely in point.

Galang involved the dismissal of a petition with the CA for nonpayment of costs within
three (3) days from notice of the order. It involved a direct failure to comply with a CA directive a
matter vastly different from, and greater than, the question of sufficiency posed in this
case. Tan, on the other hand, involved a motion for reconsideration that was considered a mere
scrap of paper for lack of a notice of hearing. This is a matter that, at its core, is a due process
concern the failure to afford the opposing party the opportunity to respond to the motion in a
duly scheduled hearing.
A commonality and the weightier reason (although not so given this characterization)
behind our rulings in these cited cases is the lack of merit of the respective petitioners
underlying cases. In both cases, we took into account the relative merits of the parties cases
and found that a liberal interpretation, applied to the interlocutory issues before us, would be for
naught because the petitioners underlying cases clearly lacked merit. As we ruled then, so do
we rule now. We assess, albeit preliminarily, if the appeal is meritorious on its face and relax the
applicable rule of procedure only after a prima facie finding of merit.[34]
That there was substantial compliance with the Rules because the background facts can
be found within the four corners of the petition and its incorporated annexes, is not a novel
ruling for this Court. In the case of Deloso v. Marapao[35] (involving the same deficiency for lack
of a specific and separate statement of facts outlining the factual background relied upon), we
said:
An examination of the petition filed with the Court of Appeals reveals that
while it does not contain a separate section on statement of facts, the facts of the
case are, in fact, integrated in the petition particularly in the discussion/argument
portion. Moreover, the decision of the DARAB which contains the facts of the
case was attached to the petition and was even quoted by the appellate
court. The petition also sufficiently discusses the errors committed by the
DARAB in its assailed decision.
There was, therefore, substantial compliance with Sec. 6, Rule 43 of the
Rules of Court. It is settled that liberal construction of the Rules may be invoked
in situations where there may be some excusable formal deficiency or error in a
pleading, provided that the same does not subvert the essence of the proceeding
and connotes at least a reasonable attempt at compliance with the Rules. After
all, rules of procedure are not to be applied in a very rigid, technical sense; they
are used only to help secure substantial justice.[36]
Given this precedent, it only remains for us to determine if we can apply a liberal construction of
the Rules because a meaningful litigation of the case can ensue given the Petitions prima
facie merit.

The defendants-petitioners
meritorious case; a motion for
reconsideration is a prohibited
pleading in summary procedure.
Our examination of the defendants-petitioners petition preliminarily tells us that it is not
without merit, which merit would remain unventilated unless we relax our application of the
technical requirements applicable to their appeal. The question, too, that the defendantspetitioners pose is not a minor one as it involves a very basic question of law whether the RTC
has jurisdiction to entertain an appeal from a final and executory MCTC decision. According to
the defendants-petitioners, the plaintiffs-respondents filing of a motion for reconsideration of the
MCTC judgment did not stop the running of the period for appeal since a motion for
reconsideration is a prohibited pleading under the RRSP.
We agree with the defendants-petitioners.
Jurisdiction over forcible entry and unlawful detainer cases belongs to the Metropolitan
Trial Courts, the Municipal Trial Courts in Cities, the Municipal Trial Courts, and the Municipal
Circuit Trial Courts.[37] The RRSP applies to prevent undue delays in the disposition of cases; to
achieve this end, the filing of certain pleadings a motion for reconsideration, among others is
prohibited.[38]
Specifically, Section 19(c) of the Rules of Summary Procedure and Section 13(c) of Rule
70 of the Rules of Court consider a motion for reconsideration of a judgment a prohibited
pleading.[39] Thus, when the plaintiffs-respondents filed on June 5, 2007 a Motion for
Reconsideration of the MCTC Judgment, the motion did not stop the running of the period for
appeal. With the continuous running of this period, the May 23, 2007 MCTC judgment (which
the plaintiffs-respondents received through counsel on May 31, 2007) had long lapsed to finality
when the plaintiffs-respondents filed their Notice of Appeal on July 30, 2007.
The Doctrine of Immutability
A judgment that has become final and executory is immutable and unalterable;[40] the
judgment may no longer be modified in any respect, even if the modification is meant to correct
what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the
modification is attempted to be made by the court rendering it or by the highest Court of the
land.[41] While there are recognized exceptions e.g., the correction of clerical errors, the so-

called nunc pro tunc entries which cause no prejudice to any party, void judgments, and
whenever circumstances transpire after the finality of the decision rendering its execution unjust
and inequitable[42] none of these exceptions apply to the present case.
Litigation must at some time end, even at the risk of occasional errors. Public policy
dictates that once a judgment becomes final, executory and unappealable, the prevailing party
should not be denied the fruits of his victory by some subterfuge devised by the losing party.
Unjustified delay in the enforcement of a judgment sets at naught the role and purpose of the
courts to resolve justiciable controversies with finality.[43]
In the present case, the lapse of the period for appeal rendered the RTC without any
jurisdiction to entertain, much less grant, the plaintiffs-respondents appeal from the final and
immutable MCTC judgment. This very basic legal reality would forever be lost if we allow the CA
to dismiss the defendants-petitioners appeal outright on the basis of a technicality that, after all,
has been substantially complied with.
WHEREFORE,

in

light

of

all

the

foregoing,

we

hereby REVERSE and SET ASIDE the Resolutions dated January 28, 2009 and June 11, 2009
of the Special Former Special Division of Five of the Court of Appeals in CA-G.R. SP No.
02436-MIN. The Decision dated November 7, 2007 and Order dated July 1, 2008 of the
Regional Trial Court, Branch 31, Dapa, Surigao del Norte are ANNULLED. The Judgment
dated May 23, 2007 of the Municipal Circuit Trial Court, Del Carmen-San Isidro-San Benito,
Surigao del Norte is REINSTATED. Costs against the plaintiffs-respondents.

SO ORDERED.

Case#4
Rule 2 section 1
PHILIP TURNER and ELNORA TURNER,
Petitioners,

-versus -

LORENZO SHIPPING
CORPORATION,
Respondent. G.R. No. 157479
Present:
CARPIO MORALES, Chairperson,
BRION,
BERSAMIN,
VILLARAMA, JR., and
ARANAL-SERENO, JJ.
Promulgated: November 24, 2010
x-----------------------------------------------------------------------------------------x
DECISION
BERSAMIN, J.:
This case concerns the right of dissenting stockholders to demand payment of the value of their
shareholdings.
In the stockholders suit to recover the value of their shareholdings from the corporation, the
Regional Trial Court (RTC) upheld the dissenting stockholders, herein petitioners, and ordered
the corporation, herein respondent, to pay. Execution was partially carried out against the
respondent. On the respondents petition for certiorari, however, the Court of Appeals (CA)
corrected the RTC and dismissed the petitioners suit on the ground that their cause of action for
collection had not yet accrued due to the lack of unrestricted retained earnings in the books of
the respondent.

Thus, the petitioners are now before the Court to challenge the CAs decision promulgated on
March 4, 2003 in C.A.-G.R. SP No. 74156 entitled Lorenzo Shipping Corporation v. Hon.
Artemio S. Tipon, in his capacity as Presiding Judge of Branch 46 of the Regional Trial Court of
Manila, et al.[1]
Antecedents
The petitioners held 1,010,000 shares of stock of the respondent, a domestic corporation
engaged primarily in cargo shipping activities. In June 1999, the respondent decided to amend
its articles of incorporation to remove the stockholders pre-emptive rights to newly issued
shares of stock. Feeling that the corporate move would be prejudicial to their interest as
stockholders, the petitioners voted against the amendment and demanded payment of their
shares at the rate of P2.276/share based on the book value of the shares, or a total of
P2,298,760.00.
The respondent found the fair value of the shares demanded by the petitioners unacceptable. It
insisted that the market value on the date before the action to remove the pre-emptive right was
taken should be the value, or P0.41/share (or a total of P414,100.00), considering that its
shares were listed in the Philippine Stock Exchange, and that the payment could be made only
if the respondent had unrestricted retained earnings in its books to cover the value of the
shares, which was not the case.
The disagreement on the valuation of the shares led the parties to constitute an appraisal
committee pursuant to Section 82 of theCorporation Code, each of them nominating a
representative, who together then nominated the third member who would be chairman of the
appraisal committee. Thus, the appraisal committee came to be made up of Reynaldo Yatco,
the petitioners nominee; Atty. Antonio Acyatan, the respondents nominee; and Leo Anoche of
the Asian Appraisal Company, Inc., the third member/chairman.
On October 27, 2000, the appraisal committee reported its valuation of P2.54/share, for an
aggregate value of P2,565,400.00 for the petitioners.[2]
Subsequently, the petitioners demanded payment based on the valuation of the appraisal
committee, plus 2%/month penalty from the date of their original demand for payment, as well
as the reimbursement of the amounts advanced as professional fees to the appraisers.[3]
In its letter to the petitioners dated January 2, 2001,[4] the respondent refused the petitioners
demand, explaining that pursuant to the Corporation Code, the dissenting stockholders
exercising their appraisal rights could be paid only when the corporation had unrestricted
retained earnings to cover the fair value of the shares, but that it had no retained earnings at the
time of the petitioners demand, as borne out by its Financial Statements for Fiscal Year 1999
showing a deficit of P72,973,114.00 as of December 31, 1999.
Upon the respondents refusal to pay, the petitioners sued the respondent for collection and
damages in the RTC in Makati City onJanuary 22, 2001. The case, docketed as Civil Case No.
01-086, was initially assigned to Branch 132.[5]
On June 26, 2002, the petitioners filed their motion for partial summary judgment, claiming that:
7) xxx the defendant has an accumulated unrestricted retained earnings of ELEVEN MILLION
NINE HUNDRED SEVENTY FIVE THOUSAND FOUR HUNDRED NINETY (P11,975,490.00)
PESOS, Philippine Currency, evidenced by its Financial Statement as of the Quarter Ending
March 31, 2002; xxx

8) xxx the fair value of the shares of the petitioners as fixed by the Appraisal Committee is final,
that the same cannot be disputed xxx
9) xxx there is no genuine issue to material fact and therefore, the plaintiffs are entitled, as a
matter of right, to a summary judgment. xxx [6]
The respondent opposed the motion for partial summary judgment, stating that the
determination of the unrestricted retained earnings should be made at the end of the fiscal year
of the respondent, and that the petitioners did not have a cause of action against the
respondent.
During the pendency of the motion for partial summary judgment, however, the Presiding Judge
of Branch 133 transmitted the records to the Clerk of Court for re-raffling to any of the RTCs
special commercial courts in Makati City due to the case being an intra-corporate dispute.
Hence, Civil Case No. 01-086 was re-raffled to Branch 142.
Nevertheless, because the principal office of the respondent was in Manila, Civil Case No. 01086 was ultimately transferred to Branch 46 of the RTC in Manila, presided by Judge Artemio
Tipon,[7] pursuant to the Interim Rules of Procedure on Intra-Corporate Controversies (Interim
Rules) requiring intra-corporate cases to be brought in the RTC exercising jurisdiction over the
place where the principal office of the corporation was found.
After the conference in Civil Case No. 01-086 set on October 23, 2002, which the petitioners
counsel did not attend, Judge Tipon issued an order,[8] granting the petitioners motion for partial
summary judgment, stating:
As to the motion for partial summary judgment, there is no question that the 3-man committee
mandated to appraise the shareholdings of plaintiff submitted its recommendation on October
27, 2000 fixing the fair value of the shares of stocks of the plaintiff at P2.54 per share. Under
Section 82 of the Corporation Code:
The findings of the majority of the appraisers shall be final, and the award shall be paid by the
corporation within thirty (30) days after the award is made.
The only restriction imposed by the Corporation Code is
That no payment shall be made to any dissenting stockholder unless the corporation has
unrestricted retained earning in its books to cover such payment.
The evidence submitted by plaintiffs shows that in its quarterly financial statement it submitted
to the Securities and Exchange Commission, the defendant has retained earnings of
P11,975,490 as of March 21, 2002. This is not disputed by the defendant. Its only argument
against paying is that there must be unrestricted retained earning at the time the demand for
payment is made.
This certainly is a very narrow concept of the appraisal right of a stockholder. The law does not
say that the unrestricted retained earnings must exist at the time of the demand. Even if there
are no retained earnings at the time the demand is made if there are retained earnings later, the
fair value of such stocks must be paid. The only restriction is that there must be sufficient funds
to cover the creditors after the dissenting stockholder is paid. No such allegations have been
made by the defendant.[9]

On November 12, 2002, the respondent filed a motion for reconsideration.

On the scheduled hearing of the motion for reconsideration on November 22, 2002, the
petitioners filed a motion for immediate execution and a motion to strike out motion for
reconsideration. In the latter motion, they pointed out that the motion for reconsideration was
prohibited by Section 8 of the Interim Rules. Thus, also on November 22, 2002, Judge Tipon
denied the motion for reconsideration and granted the petitioners motion for immediate
execution.[10]
Subsequently, on November 28, 2002, the RTC issued a writ of execution.[11]
Aggrieved, the respondent commenced a special civil action for certiorari in the CA to challenge
the two aforecited orders of Judge Tipon, claiming that:
A.
JUDGE TIPON GRAVELY ABUSED HIS DISCRETION IN GRANTING SUMMARY JUDGMENT
TO THE SPOUSES TURNER, BECAUSE AT THE TIME THE COMPLAINT WAS FILED, LSC
HAD NO RETAINED EARNINGS, AND THUS WAS COMPLYING WITH THE LAW, AND NOT
VIOLATING ANY RIGHTS OF THE SPOUSES TURNER, WHEN IT REFUSED TO PAY THEM
THE VALUE OF THEIR LSC SHARES. ANY RETAINED EARNINGS MADE A YEAR AFTER
THE COMPLAINT WAS FILED ARE IRRELEVANT TO THE SPOUSES TURNERS RIGHT TO
RECOVER UNDER THE COMPLAINT, BECAUSE THE WELL-SETTLED RULE, REPEATEDLY
BROUGHT TO JUDGE TIPONS ATTENTION, IS IF NO RIGHT EXISTED AT THE TIME (T)HE
ACTION WAS COMMENCED THE SUIT CANNOT BE MAINTAINED, ALTHOUGH SUCH
RIGHT OF ACTION MAY HAVE ACCRUED THEREAFTER.
B.
JUDGE TIPON IGNORED CONTROLLING CASE LAW, AND THUS GRAVELY ABUSED HIS
DISCRETION, WHEN HE GRANTED AND ISSUED THE QUESTIONED WRIT OF
EXECUTION DIRECTING THE EXECUTION OF HIS PARTIAL SUMMARY JUDGMENT IN
FAVOR OF THE SPOUSES TURNER, BECAUSE THAT JUDGMENT IS NOT A FINAL
JUDGMENT UNDER SECTION 1 OF RULE 39 OF THE RULES OF COURT AND
THEREFORE CANNOT BE SUBJECT OF EXECUTION UNDER THE SUPREME COURTS
CATEGORICAL HOLDING IN PROVINCE OF PANGASINAN VS. COURT OF APPEALS.
Upon the respondents application, the CA issued a temporary restraining order (TRO), enjoining
the petitioners, and their agents and representatives from enforcing the writ of execution. By
then, however, the writ of execution had been partially enforced.
The TRO lapsed without the CA issuing a writ of preliminary injunction to prevent the execution.
Thereupon, the sheriff resumed the enforcement of the writ of execution.
The CA promulgated its assailed decision on March 4, 2003,[12] pertinently holding:
However, it is clear from the foregoing that the Turners appraisal right is subject to the legal
condition that no payment shall be made to any dissenting stockholder unless the corporation
has unrestricted retained earnings in its books to cover such payment. Thus, the Supreme Court
held that:

The requirement of unrestricted retained earnings to cover the shares is based on the trust fund
doctrine which means that the capital stock, property and other assets of a corporation are
regarded as equity in trust for the payment of corporate creditors. The reason is that creditors of
a corporation are preferred over the stockholders in the distribution of corporate assets.There
can be no distribution of assets among the stockholders without first paying corporate creditors.
Hence, any disposition of corporate funds to the prejudice of creditors is null and void. Creditors
of a corporation have the right to assume that so long as there are outstanding debts and
liabilities, the board of directors will not use the assets of the corporation to purchase its own
stock.
In the instant case, it was established that there were no unrestricted retained earnings when
the Turners filed their Complaint. In a letter dated 20 August 2000, petitioner informed the
Turners that payment of their shares could only be made if it had unrestricted earnings in its
books to cover the same. Petitioner reiterated this in a letter dated 2 January 2001 which further
informed the Turners that its Financial Statement for fiscal year 1999 shows that its retained
earnings ending December 31, 1999 was at a deficit in the amount ofP72,973,114.00, a matter
which has not been disputed by private respondents. Hence, in accordance with the second
paragraph of sec. 82, BP 68 supra, the Turners right to payment had not yet accrued when they
filed their Complaint on January 22, 2001, albeit their appraisal right already existed.
In Philippine American General Insurance Co. Inc. vs. Sweet Lines, Inc., the Supreme Court
declared that:
Now, before an action can properly be commenced all the essential elements of the cause of
action must be in existence, that is, the cause of action must be complete. All valid conditions
precedent to the institution of the particular action, whether prescribed by statute, fixed by
agreement of the parties or implied by law must be performed or complied with before
commencing the action, unless the conduct of the adverse party has been such as to prevent or
waive performance or excuse non-performance of the condition.
It bears restating that a right of action is the right to presently enforce a cause of action, while a
cause of action consists of the operative facts which give rise to such right of action. The right of
action does not arise until the performance of all conditions precedent to the action and may be
taken away by the running of the statute of limitations, through estoppel, or by other
circumstances which do not affect the cause of action. Performance or fulfillment of all
conditions precedent upon which a right of action depends must be sufficiently alleged,
considering that the burden of proof to show that a party has a right of action is upon the person
initiating the suit.
The Turners right of action arose only when petitioner had already retained earnings in the
amount of P11,975,490.00 on March 21, 2002; such right of action was inexistent on January
22, 2001 when they filed the Complaint.
In the doctrinal case of Surigao Mine Exploration Co. Inc., vs. Harris, the Supreme Court ruled:
Subject to certain qualifications, and except as otherwise provided by law, an action
commenced before the cause of action has accrued is prematurely brought and should be
dismissed. The fact that the cause of action accrues after the action is commenced and while it
is pending is of no moment. It is a rule of law to which there is, perhaps, no exception, either at
law or in equity, that to recover at all there must be some cause of action at the commencement
of the suit. There are reasons of public policy why there should be no needless haste in bringing
up litigation, and why people who are in no default and against whom there is as yet no cause of

action should not be summoned before the public tribunals to answer complaints which are
groundless. An action prematurely brought is a groundless suit. Unless the plaintiff has a valid
and subsisting cause of action at the time his action is commenced, the defect cannot be cured
or remedied by the acquisition or accrual of one while the action is pending, and a supplemental
complaint or an amendment setting up such after-accrued cause of action is not permissible.

The afore-quoted ruling was reiterated in Young vs Court of Appeals and Lao vs. Court of
Appeals.
The Turners apprehension that their claim for payment may prescribe if they wait for the
petitioner to have unrestricted retained earnings is misplaced. It is the legal possibility of
bringing the action that determines the starting point for the computation of the period of
prescription. Stated otherwise, the prescriptive period is to be reckoned from the accrual of their
right of action.
Accordingly, We hold that public respondent exceeded its jurisdiction when it entertained the
herein Complaint and issued the assailed Orders. Excess of jurisdiction is the state of being
beyond or outside the limits of jurisdiction, and as distinguished from the entire absence of
jurisdiction, means that the act although within the general power of the judge, is not authorized
and therefore void, with respect to the particular case, because the conditions which authorize
the exercise of his general power in that particular case are wanting, and hence, the judicial
power is not in fact lawfully invoked.
We find no necessity to discuss the second ground raised in this petition.
WHEREFORE, upon the premises, the petition is GRANTED. The assailed Orders and the
corresponding Writs of Garnishment areNULLIFIED. Civil Case No. 02-104692 is hereby
ordered DISMISSED without prejudice to refiling by the private respondents of the action for
enforcement of their right to payment as withdrawing stockholders.
SO ORDERED.
The petitioners now come to the Court for a review on certiorari of the CAs decision, submitting
that:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT GRANTED
THE PETITION FOR CERTIORARI WHEN THE REGIONAL TRIAL COURT OF MANILA DID
NOT ACT BEYOND ITS JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN
GRANTING THE MOTION FOR PARTIAL SUMMARY JUDGMENT AND IN GRANTING THE
MOTION FOR IMMEDIATE EXECUTION OF JUDGMENT;
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT ORDERED
THE DISMISSAL OF THE CASE, WHEN THE PETITION FOR CERTIORARI MERELY
SOUGHT THE ANNULMENT OF THE ORDER GRANTING THE MOTION FOR PARTIAL
SUMMARY JUDGMENT AND OF THE ORDER GRANTING THE MOTION FOR IMMEDIATE
EXECUTION OF THE JUDGMENT;

III.
THE HONORABLE COURT OF APPEALS HAS DECIDED QUESTIONS OF SUBSTANCE NOT
THEREFORE DETERMINED BY THIS HONORABLE COURT AND/OR DECIDED IT IN A WAY
NOT IN ACCORD WITH LAW OR WITH JURISPRUDENCE.
Ruling
The petition fails.
The CA correctly concluded that the RTC had exceeded its jurisdiction in entertaining the
petitioners complaint in Civil Case No. 01-086, and in rendering the summary judgment and
issuing writ of execution.
A.
Stockholders Right of Appraisal, In General
A stockholder who dissents from certain corporate actions has the right to demand payment of
the fair value of his or her shares. This right, known as the right of appraisal, is expressly
recognized in Section 81 of the Corporation Code, to wit:
Section 81. Instances of appraisal right. - Any stockholder of a corporation shall have the right to
dissent and demand payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of incorporation has the effect of changing or
restricting the rights of any stockholder or class of shares, or of authorizing preferences in any
respect superior to those of outstanding shares of any class, or of extending or shortening the
term of corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets as provided in the Code; and
3. In case of merger or consolidation. (n)
Clearly, the right of appraisal may be exercised when there is a fundamental change in the
charter or articles of incorporation substantially prejudicing the rights of the stockholders. It does
not vest unless objectionable corporate action is taken.[13] It serves the purpose of enabling the
dissenting stockholder to have his interests purchased and to retire from the corporation.[14]
Under the common law, there were originally conflicting views on whether a corporation had the
power to acquire or purchase its own stocks. In England, it was held invalid for a corporation to
purchase its issued stocks because such purchase was an indirect method of reducing capital
(which was statutorily restricted), aside from being inconsistent with the privilege of limited
liability to creditors.[15] Only a few American jurisdictions adopted by decision or statute the
strict English rule forbidding a corporation from purchasing its own shares. In some American
states where the English rule used to be adopted, statutes granting authority to purchase out of
surplus funds were enacted, while in others, shares might be purchased even out of capital
provided the rights of creditors were not prejudiced.[16] The reason underlying the limitation of
share purchases sprang from the necessity of imposing safeguards against the depletion by a

corporation of its assets and against the impairment of its capital needed for the protection of
creditors.[17]
Now, however, a corporation can purchase its own shares, provided payment is made out of
surplus profits and the acquisition is for a legitimate corporate purpose.[18] In the Philippines,
this new rule is embodied in Section 41 of the Corporation Code, to wit:
Section 41. Power to acquire own shares. - A stock corporation shall have the power to
purchase or acquire its own shares for a legitimate corporate purpose or purposes, including but
not limited to the following cases: Provided, That the corporation has unrestricted retained
earnings in its books to cover the shares to be purchased or acquired:
1.

To eliminate fractional shares arising out of stock dividends;

2. To collect or compromise an indebtedness to the corporation, arising out of unpaid

subscription, in a delinquency sale, and to purchase delinquent shares sold during said sale;
and
3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under the
provisions of this Code. (n)
The Corporation Code defines how the right of appraisal is exercised, as well as the implications
of the right of appraisal, as follows:
1.
The appraisal right is exercised by any stockholder who has voted against the proposed
corporate action by making a written demand on the corporation within 30 days after the date on
which the vote was taken for the payment of the fair value of his shares. The failure to make the
demand within the period is deemed a waiver of the appraisal right.[19]
2.
If the withdrawing stockholder and the corporation cannot agree on the fair value of the
shares within a period of 60 days from the date the stockholders approved the corporate action,
the fair value shall be determined and appraised by three disinterested persons, one of whom
shall be named by the stockholder, another by the corporation, and the third by the two thus
chosen. The findings and award of the majority of the appraisers shall be final, and the
corporation shall pay their award within 30 days after the award is made. Upon payment by the
corporation of the agreed or awarded price, the stockholder shall forthwith transfer his or her
shares to the corporation.[20]
3.
All rights accruing to the withdrawing stockholders shares, including voting and dividend
rights, shall be suspended from the time of demand for the payment of the fair value of the
shares until either the abandonment of the corporate action involved or the purchase of the
shares by the corporation, except the right of such stockholder to receive payment of the fair
value of the shares.[21]
4.
Within 10 days after demanding payment for his or her shares, a dissenting stockholder
shall submit to the corporation the certificates of stock representing his shares for notation
thereon that such shares are dissenting shares. A failure to do so shall, at the option of the
corporation, terminate his rights under this Title X of theCorporation Code. If shares represented
by the certificates bearing such notation are transferred, and the certificates are consequently
canceled, the rights of the transferor as a dissenting stockholder under this Title shall cease and

the transferee shall have all the rights of a regular stockholder; and all dividend distributions that
would have accrued on such shares shall be paid to the transferee.[22]
5.
If the proposed corporate action is implemented or effected, the corporation shall pay to
such stockholder, upon the surrender of the certificates of stock representing his shares, the fair
value thereof as of the day prior to the date on which the vote was taken, excluding any
appreciation or depreciation in anticipation of such corporate action.[23]
Notwithstanding the foregoing, no payment shall be made to any dissenting stockholder unless
the corporation has unrestricted retained earnings in its books to cover the payment. In case the
corporation has no available unrestricted retained earnings in its books, Section 83 of the
Corporation Code provides that if the dissenting stockholder is not paid the value of his shares
within 30 days after the award, his voting and dividend rights shall immediately be restored.
The trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the
payment of the shares of stocks of the withdrawing stockholders. Under the doctrine, the capital
stock, property, and other assets of a corporation are regarded as equity in trust for the payment
of corporate creditors, who are preferred in the distribution of corporate assets.[24] The
creditors of a corporation have the right to assume that the board of directors will not use the
assets of the corporation to purchase its own stock for as long as the corporation has
outstanding debts and liabilities.[25] There can be no distribution of assets among the
stockholders without first paying corporate debts. Thus, any disposition of corporate funds and
assets to the prejudice of creditors is null and void.[26]
B.
Petitioners cause of action was premature
That the respondent had indisputably no unrestricted retained earnings in its books at the time
the petitioners commenced Civil Case No. 01-086 on January 22, 2001 proved that the
respondents legal obligation to pay the value of the petitioners shares did not yet arise. Thus,
the CA did not err in holding that the petitioners had no cause of action, and in ruling that the
RTC did not validly render the partial summary judgment.
A cause of action is the act or omission by which a party violates a right of another.[27] The
essential elements of a cause of action are: (a) the existence of a legal right in favor of the
plaintiff; (b) a correlative legal duty of the defendant to respect such right; and (c) an act or
omission by such defendant in violation of the right of the plaintiff with a resulting injury or
damage to the plaintiff for which the latter may maintain an action for the recovery of relief from
the defendant.[28] Although the first two elements may exist, a cause of action arises only upon
the occurrence of the last element, giving the plaintiff the right to maintain an action in court for
recovery of damages or other appropriate relief.[29]
Section 1, Rule 2, of the Rules of Court requires that every ordinary civil action must be based
on a cause of action. Accordingly,Civil Case No. 01-086 was dismissible from the beginning for
being without any cause of action.
The RTC concluded that the respondents obligation to pay had accrued by its having the
unrestricted retained earnings after the making of the demand by the petitioners. It based its
conclusion on the fact that the Corporation Code did not provide that the unrestricted retained
earnings must already exist at the time of the demand.

The RTCs construal of the Corporation Code was unsustainable, because it did not take into
account the petitioners lack of a cause of action against the respondent. In order to give rise to
any obligation to pay on the part of the respondent, the petitioners should first make a valid
demand that the respondent refused to pay despite having unrestricted retained earnings.
Otherwise, the respondent could not be said to be guilty of any actionable omission that could
sustain their action to collect.
Neither did the subsequent existence of unrestricted retained earnings after the filing of the
complaint cure the lack of cause of action in Civil Case No. 01-086. The petitioners right of
action could only spring from an existing cause of action. Thus, a complaint whose cause of
action has not yet accrued cannot be cured by an amended or supplemental pleading alleging
the existence or accrual of a cause of action during the pendency of the action.[30] For, only
when there is an invasion of primary rights, not before, does the adjective or remedial law
become operative.[31] Verily, a premature invocation of the courts intervention renders the
complaint without a cause of action and dismissible on such ground.[32] In short, Civil Case No.
01-086, being a groundless suit, should be dismissed.
Even the fact that the respondent already had unrestricted retained earnings more than
sufficient to cover the petitioners claims on June 26, 2002 (when they filed their motion for
partial summary judgment) did not rectify the absence of the cause of action at the time of the
commencement of Civil Case No. 01-086. The motion for partial summary judgment, being a
mere application for relief other than by a pleading,[33] was not the same as the complaint in
Civil Case No. 01-086. Thereby, the petitioners did not meet the requirement of the Rules of
Court that a cause of action must exist at the commencement of an action, which is commenced
by the filing of the original complaint in court.[34]
The petitioners claim that the respondents petition for certiorari sought only the annulment of the
assailed orders of the RTC (i.e., granting the motion for partial summary judgment and the
motion for immediate execution); hence, the CA had no right to direct the dismissal of Civil Case
No. 01-086.
The claim of the petitioners cannot stand.
Although the respondents petition for certiorari targeted only the RTCs orders granting the
motion for partial summary judgmentand the motion for immediate execution, the CAs directive
for the dismissal of Civil Case No. 01-086 was not an abuse of discretion, least of all grave,
because such dismissal was the only proper thing to be done under the circumstances.
According toSurigao Mine Exploration Co., Inc. v. Harris:[35]
Subject to certain qualification, and except as otherwise provided by law, an action commenced
before the cause of action has accrued is prematurely brought and should be dismissed. The
fact that the cause of action accrues after the action is commenced and while the case is
pending is of no moment. It is a rule of law to which there is, perhaps no exception, either in law
or in equity, that to recover at all there must be some cause of action at the commencement of
the suit. There are reasons of public policy why there should be no needless haste in bringing
up litigation, and why people who are in no default and against whom there is as yet no cause of
action should not be summoned before the public tribunals to answer complaints which are
groundless. An action prematurely brought is a groundless suit.Unless the plaintiff has a valid
and subsisting cause of action at the time his action is commenced, the defect cannot be cured
or remedied by the acquisition or accrual of one while the action is pending, and a supplemental
complaint or an amendment setting up such after-accrued cause of action is not permissible.

Lastly, the petitioners argue that the respondents recourse of a special action for certiorari was
the wrong remedy, in view of the fact that the granting of the motion for partial summary
judgment constituted only an error of law correctible by appeal, not of jurisdiction.
The argument of the petitioners is baseless. The RTC was guilty of an error of jurisdiction, for it
exceeded its jurisdiction by taking cognizance of the complaint that was not based on an
existing cause of action.
WHEREFORE, the petition for review on certiorari is denied for lack of merit.
We affirm the decision promulgated on March 4, 2003 in C.A.-G.R. SP No. 74156 entitled
Lorenzo Shipping Corporation v. Hon. Artemio S. Tipon, in his capacity as Presiding Judge of
Branch 46 of the Regional Trial Court of Manila, et al.
Costs of suit to be paid by the petitioners.
SO ORDERED.