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GENERAL PROVISIONS

1. NILO H. RAYMUNDO, Petitioner,


v. HON. COURT OF APPEALS, Sixteenth Division, Hon. Judge, RTC,
Br. 133, Makati, Metro Manila and GALLERIA DE MAGALLANES
ASSOCIATION, INC., Respondents.
[G.R. No. 97805. September 2, 1992.]
The Barristers Law Office for Petitioner.
Leo M. Caubang for Respondents.
SYLLABUS
1.
REMEDIAL LAW; REGIONAL TRIAL COURT; JURISDICTION IN CIVIL
CASES NOT CAPABLE OF PECUNIARY ESTIMATION. Private respondents
complaint is an action to compel the petitioner to remove the illegal and
unauthorized installation of glasses at Unit AB-122 of the condominium
which is not capable of pecuniary estimation and falls under the exclusive
jurisdiction of the Regional Trial Court Section 33 of Batas Pambansa
Bilang 129 is not applicable in the instant case, but paragraph (1), Section
19 and paragraph (1), Section 21.
2.
ID; ID.; ID.; CRITERION IN DETERMINING WHETHER AN ACTION IS
ONE THE SUBJECT MATTER OF WHICH IS NOT CAPABLE OF PECUNIARY
ESTIMATION. A civil action in which the subject of the litigation is
incapable of pecuniary estimation has invariably been held to be within
the exclusive original jurisdiction of the Regional Trial Courts. "In
determining whether an action is one the subject matter of which is not
capable of pecuniary estimation this Court has adopted the criterion of
first ascertaining the nature of the principal action or remedy sought. If it
is primarily for the recovery of a sum of money, the claim is considered
capable of pecuniary estimation, and whether jurisdiction is in the
municipal courts [now municipal trial courts] or in the courts of first
instance [now regional trial courts] would depend on the amount of the
claim. However, where the basic issue is something other than the right to
recover a sum of money, or where the money claim is purely incidental to,
or a consequence of, the principal relief sought, this Court has considered
such actions as cases where the subject of the litigation may not be
estimated in terms of money, and are cognizable exclusively by courts of
first instance [now regional trial courts]."
3.
ID.; PROVISIONAL REMEDIES; WRIT OF MANDATORY INJUNCTION;
WHEN AVAILABLE. A writ for mandatory injunction is a provisional

remedy. It is provisional because it constitutes a temporary measure


availed of during the pendency of the main action and it is ancillary
because it is a mere incident in and is dependent upon the result of the
main action.
DECISION
NOCON, J.:
This is a petition for certiorari and prohibition with restraining order and
preliminary injunction to annul and set aside the decision of the Court of
Appeals dated March 11, 1991 1 dismissing petitioners petition for
certiorari and prohibition which assailed the Orders 2 dated June 1, 1990 3
and June 29, 1990 4 of the trial court.
It appears on record that on July 5, 1989, the administrator of the Galleria
de Magallanes Condominium discovered that petitioner Nilo Raymundo,
who was an owner/occupant of Unit AB-122 of said condominium, made
an unauthorized installation of glasses at the balcony of his unit in
violation of Article IV, Section 3 paragraph (d) of the Master Deed and
Declaration of Restrictions of the Association, which states that:
"d.
Nothing shall be done or placed in any unit or in the common areas
which is beyond or will impair the structural strength of the buildings or
alter the original architecture, appearance and specifications of the
building, including the external facade thereof."
Thereafter, the administrator of said condominium reported said violation
to the Board of Directors of the private respondent Galleria de Magallanes
Association, Inc. in a special meeting held on July 8, 1989 and the former
sent a letter dated July 12, 1989 6 to the petitioner demanding the latter
to remove the illegal and unauthorized installation of glasses at his unit.
Petitioner refused, consequently, private respondent filed a complaint for
mandatory injunction against petitioner on February 21, 1990 with the
Regional Trial Court of Makati, Branch 133 in Civil Case No. 90-490.
On March 12, 1990, petitioner filed a Motion for extension of time to file
an Answer 7 as well as a Motion for production of document 8 which were
granted in an Order dated March 16, 1990.
However, on March 23, 1990, instead of an Answer, petitioner filed a
Motion to Dismiss with the trial court on the ground that said court has no
jurisdiction over the present case since a complaint for mandatory
injunction is within the exclusive original jurisdiction of the Metropolitan
Trial Court.

The Motion to Dismiss was denied in the Order of June 1, 1990, the
pertinent portion of which reads:
"This is a suit for mandatory injunction. Under Sec. 21 of BP 129, as
amended, it is the Regional Trial Court which has the legal competence to
issue the same. Corollarily, the second ground must be denied. The action
is essentially one which falls within the jurisdiction of the Regional Trial
Court.
"WHEREFORE, the Motion to Dismiss is hereby denied, for lack of merit."
Likewise, petitioners Motion for Reconsideration was denied in the Order
of June 29, 1990 which We quote, to wit:
"As denominated in the complaint itself, this is a suit for mandatory
injunction, and the nature of the action as designated by the plaintiff is
substantiated by the allegations of the complaint itself. Such being the
case, Sec. 21 of BP 129 governs. The claims for attorneys fees is
incidental to the nature of the complaint as one of mandatory injunction
which is also attested by the prayer in the complaint "to remove the illegal
and unauthorized installation of glasses at Unit AB-122 of the
Condominium within five (5) days from receipt of the order . . ." and,
therefore, does not affect the legal competence of the Court to act on the
complaint."
On elevation to the appellate court in a petition for certiorari and
prohibition with restraining order and preliminary injunction, the petition
was again dismissed on March 11, 1991.
Hence, this petition alleging want of jurisdiction of the trial court to hear
and decide private respondents complaint for mandatory injunction
considering that private respondents sole pecuniary claim of P10,000.00
as attorneys fees in Civil Case No. 90-490 is within the original and
exclusive jurisdiction of the Metropolitan Trial Court as provided for under
Section 33 of B.P. 129.
We do not agree.
The contention of the petitioner is devoid of merit because private
respondents complaint is an action to compel the petitioner to remove
the illegal and unauthorized installation of glasses at Unit AB-122 of the
condominium which is not capable of pecuniary estimation and falls under
the exclusive jurisdiction of the Regional Trial Court Section 33 of Batas
Pambansa Bilang 129 is not applicable in the instant case, but paragraph
(1), Section 19 and paragraph (1), Section 21 of said law which provide:

"Sec. 19.
Jurisdiction in civil cases. Regional Trial Courts shall exercise
exclusive original jurisdiction:
(1)
In all civil actions in which the subject of the litigation is incapable of
pecuniary estimation;"
x

"Sec. 21.
Original jurisdiction in other cases. Regional Trial Courts
shall exercise original jurisdiction:
(1)
In the issuance of writs of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction which may be enforced in any
part of their respective regions;"
A civil action in which the subject of the litigation is incapable of pecuniary
estimation has invariably been held to be within the exclusive original
jurisdiction of the Regional Trial Courts.
"In determining whether an action is one the subject matter of which is
not capable of pecuniary estimation this Court has adopted the criterion of
first ascertaining the nature of the principal action or remedy sought. If it
is primarily for the recovery of a sum of money, the claim is considered
capable of pecuniary estimation, and whether jurisdiction is in the
municipal courts [now municipal trial courts] or in the courts of first
instance [now regional trial courts] would depend on the amount of the
claim. However, where the basic issue is something other than the right to
recover a sum of money, or where the money claim is purely incidental to,
or a consequence of, the principal relief sought, this Court has considered
such actions as cases where the subject of the litigation may not be
estimated in terms of money, and are cognizable exclusively by courts of
first instance [now regional trial courts]."
As correctly stated by the Court of Appeals, the question for resolution is
whether or not the petitioner violated the provisions of the Master Deed
and Declaration of Restriction of the corporation, and if so, to remove the
illegal and unauthorized installation of glasses at Unit AB-122 of the
Condominium. Clearly, the issue is incapable of pecuniary estimation.
In the instant case. the claim of attorneys fees by the private respondent
in the amount of P10,000.00 is only incidental to its principal cause of
action which is for the removal of the illegal and unauthorized installation
of the glasses made by the petitioner and therefore, said amount is not
determinative of the jurisdiction of the court.

Note should be taken. however, that the trial court had erroneously
considered the complaint as one for mandatory injunction, misled perhaps
by the caption of the complaint.
A writ for mandatory injunction is a provisional remedy. It is provisional
because it constitutes a temporary measure availed of during the
pendency of the main action and it is ancillary because it is a mere
incident in and is dependent upon the result of the main action.
WHEREFORE, the petition for certiorari and prohibition with restraining
order and preliminary injunction is hereby DISMISSED for lack of merit and
the decision of the Court of Appeals promulgated on March 11, 1991 is
hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Melo, JJ., concur.

2. ORTIGAS & COMPANY, LIMITED PARTNERSHIP, petitioner, vs.


JUDGE JOSE B. HERRERA, respondent. G.R. No. L-36098
January
21, 1983
RESOLUTION
PER CURIAM:
G.R. No. L-36098 (Ortigas & Company, Limited Partnership vs. Judge Jose
B. Herrera, City Court of Manila, Branch II, and Emiliano Samson). On
August 14, 1969, petitioner and private respondent entered into an
agreement thereby for and in consideration of P55,430.00, the former
agreed to sell to the latter a parcel of land with a special condition that
should private respondent as purchaser complete the construction
including the painting of his residential house on said lot within two (2)
years from August 14, 1969, petitioner, as owner, has agreed to refund to
private respondent the amount of P10.00 per square meter. When the
aforesaid special condition was fulfilled, private respondent, on May 17,
1971 accordingly notified in writing the petitioner of the same and
requested for his refund amounting to P4,820.00.
Upon failure of petitioner to pay his obligation, private respondent on May
6, 1972 filed a complaint for sum of money and damages with the City
Court of Manila, Branch II, against petitioner docketed as Civil Case No.
211673. A motion to dismiss was filed by petitioner on grounds of lack of
jurisdiction, failure of the complaint to state a cause of action and
improper avenue. City Court Judge Jose B. Herrera in his order dated June

27, 1972 held in abeyance the resolution on the motion until after the trial
of the case on the merits.
A reconsideration of the said order having been denied, petitioner on
October 12, 1972 filed with the Court of First Instance of Manila Branch
XXVII, a special civil action for certiorari and prohibition with preliminary
injunction docketed as Civil Case No. 88510. A motion to dismiss was filed
by private respondent, and on November 17, 1972, the petition was
dismissed on the ground that the claim of private respondent in his
complaint, being less than P10,000.00, is within the exclusive jurisdiction
of the city court.
Petitioner thus filed the present petition and argues among others that:
(a) as determined from the allegations of the complaint, the action is for
specific performance of contract; and (b) actions in which the subject of
litigation is not capable of pecuniary estimation such as complaints for
specific performance of contract are exclusively cognizable by the Court of
First Instance. Hence, the decisive question to be resolved in this present
petition is whether or not the City Court of Manila, Branch II, has
jurisdiction over the complaint.
The action involved in this case is one for specific performance and not for
a sum of money and wherefore incapable of pecuniary estimation because
what private respondent seeks is the performance of petitioner's
obligation under a written contract to make a refund but under certain
specific conditions still to be proven or established. In a case for the
recovery of a sum of money, as the collection of a debt, the claim is
considered capable of pecuniary estimation (Lapitan vs. Scandia Inc., 24
SCRA 479) because the obligation to pay the debt is not conditioned upon
any specific fact or matter. But when a party to a contract has agreed to
refund to the other party a sum of money upon compliance by the latter of
certain conditions and only upon compliance therewith may what is legally
due him under the written contract be demanded, the action is one not
capable of pecuniary estimation. The payment of a sum of money is only
incidental which can only be ordered after a determination of certain acts
the performance of which being the more basic issue to be inquired into.
Although private respondent's complaint in the court a quo is designated
as one for a sum of money and damages, an analysis of all the factual
allegations of the complaint patently shows that what private respondent
seeks is the performance of petitioner's obligation under the written
contract to make the refund of the rate of P10.00 per square meter or in
the total amount of P4,820.00, but only after proof of having himself

fulfilled the conditions that will give rise to petitioner's obligation, a matter
clearly incapable of pecuniary estimation.
In view of the foregoing, the Court RESOLVED to reverse the order
appealed from and the complaint filed with the City Court of Manila,
Branch II, docketed as Civil Case No. 211673 is hereby ordered dismissed
for lack of jurisdiction.

3. G.R. No. 72644 December 14, 1987


ALFREDO
F.
PRIMERO, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DM TRANSIT, respondents.

NARVASA, J.:
The question on which the petitioner's success in the instant appeal depends, and to
which he would have us give an affirmative answer, is whether or not, having
recovered separation pay by judgment of the Labor Arbiter which held that he had
been fired by respondent DM Transit Corporation without just cause he may
subsequently recover moral damages by action in a regular court, upon the theory
that the manner of his dismissal from employment was tortious and therefore his
cause of action was intrinsically civil in nature.
Petitioner Primero was discharged from his employment as bus driver of DM Transit
Corporation (hereafter, simply DM) in August, 1974 after having been employed
therein for over 6 years. The circumstances attendant upon that dismissal are
recounted by the Court of Appeals 1 as follows:
Undisputably, since August 1, 1974, appellee's bus dispatcher did not
assign any bus to be driven by appellant Primero. No reason or cause
was given by the dispatcher to appellant for not assigning a bus to the
latter for 23 days (pp. 6-14, 21-22, tsn, May 15, 1979).
Also, for 23 days, appellant was given a run-around from one
management official to another, pleading that he be allowed to work as
his family was in dire need of money and at the same time inquiring
(why) he was not allowed to work or drive a bus of the company. Poor
appellant did not only get negative results but was given cold
treatment, oftentimes evaded and given confusing information, or

ridiculed, humiliated, or sometimes made to wait in the offices of some


management personnel of the appellee (pp. 2-29, tsn, May 15, 1979).
(The) General Manager and (the) Vice-President and Treasurer ...
wilfully and maliciously made said appellant ... seesaw or ... go back
and forth between them for not less than ten (10) times within a period
of 23 days ... but (he) got negative results from both corporate officials.
Worse, on the 23rd day of his ordeal appellant was suddenly told by
General Manager Briones to seek employment with other bus
companies because he was already dismissed from his job with
appellee (without having been) told of the cause of his hasty and
capricious dismissal ... (pp. 8, 11-13, 25, tsn, May 15, 1979).
Impelled to face the harsh necessities of life as a jobless person and
worried by his immediate need for money, appellant pleaded with
Corporate President Demetrio Munoz, Jr. for his reinstatement and also
asked P300.00 as financial assistance, but the latter told the former
that he (Munoz, Jr.) will not give him even one centavo and that should
appellant sue him in court, then that will be the time President Munoz,
Jr. will pay him, if Munoz, Jr. loses the case x x (pp. 21-22, tsn, May 15,
1979).
Appellant also advised (the) President of the oppressive, anti-social
and inhumane acts of subordinate officers ... (but) Munoz, Jr. did
nothing to resolve appellant's predicament and ... just told the latter to
go back ... to ... Briones, who insisted that appellant seek employment
with other bus firms in Metro Manila ... (but) admitted that the appellant
has not violated any company rule or regulation ... (pp. 23-26, tsn, May
15, 1979).
... In pursuance (of) defendant's determination to oppress plaintiff and
cause further loss, irreparable injury, prejudice and damage, (D.M.
Transit) in bad faith and with malice persuaded other firms (California
Transit, Pascual Lines, De Dios Transit, Negrita Corporation, and MD
Transit) not to employ (appellant) in any capacity after he was already
unjustly dismissed by said defendant ... (paragraph 8 of plaintiff's
complaint).
These companies with whom appellant applied for a job called up the
D.M. Transit Office (which) ... told them ... that they should not accept
(appellant) because (he) was dismissed from that Office.
Primero instituted proceedings against DM with the Labor Arbiters of the Department
of Labor, for illegal dismissal, and for recovery of back wages and reinstatement. It is

not clear from the record whether these proceedings consisted of one or two actions
separately filed. What is certain is that he withdrew his claims for back wages and
reinstatement, "with the end in view of filing a damage suit" "in a civil court which has
exclusive jurisdiction over his complaint for damages on causes of action founded on
tortious acts, breach of employment contract ... and consequent effects (thereof ). 2
In any case, after due investigation, the Labor Arbiter rendered judgment dated
January 24, 1977 ordering DM to pay complainant Primero P2,000.00 as separation
pay in accordance with the Termination Pay Law. 3 The judgment was affirmed by the
National Labor Relations Commission and later by the Secretary of Labor, the case
having been concluded at this level on March 3, 1978. 4
Under the provisions of the Labor Code in force at that time, Labor Arbiters had
jurisdiction inter alia over
1) claims involving non-payment or underpayment of wages, overtime
compensation, social security and medicare benefits, and
2) all other cases or matters arising from employer-employee relations,
unless otherwise expressly excluded. 5
And we have since held that under these "broad and comprehensive" terms of the
law, Labor Arbiters possessed original jurisdiction over claims for moral and other
forms of damages in labor disputes. 6
The jurisdiction of Labor Arbiters over such claims was however removed by PD
1367, effective May 1, 1978, which explicitly provided that "Regional Directors shall
not indorse and Labor Arbiters shall not entertain claims for moral or other forms of
damages." 7
Some three months afterwards, Primero brought suit against DM in the Court of First
Instance of Rizal seeking recovery of damages caused not only by the breach of his
employment contract, but also by the oppressive and inhuman, and consequently
tortious, acts of his employer and its officers antecedent and subsequent to his
dismissal from employment without just cause. 8
While this action was pending in the CFI, the law governing the Labor Arbiters'
jurisdiction was once again revised. The amending act was PD 1691, effective May
1, 1980. It eliminated the restrictive clause placed by PD 1367, that Regional
Directors shall not indorse and Labor Arbiters entertain claims for moral or other
forms of damages. And, as we have had occasion to declare in several cases, it
restored the principle that "exclusive and original jurisdiction for damages would
once again be vested in labor arbiters;" eliminated "the rather thorny question as to
where in labor matters the dividing line is to be drawn between the power lodged in
an administrative body and a court;' " and, "in the interest of greater promptness in

the disposition of labor matters, ... spared (courts of) the often onerous task of
determining what essentially is a factual matter, namely, the damages that may be
incurred by either labor or management as a result of disputes or controversies
arising from employer-employee relations." 9 Parenthetically, there was still another
amendment of the provision in question which, however, has no application to the
case at bar. The amendment was embodied in B.P. Blg. 227, effective June 1,
1982. 10
On August 11, 1980 the Trial Court rendered judgment dismissing the complaint on
the ground of lack of jurisdiction, for the reason that at the time that the complaint
was filed. on August 17, 1978, the law the Labor Code as amended by PD 1367,
eff. May 1, 1978 conferred exclusive, original jurisdiction over claims for moral or
other damages, not on ordinary courts, but on Labor Arbiters.
This judgment was affirmed by the Intermediate Appellate Court, by Decision
rendered on June 29, 1984. This is the judgment now subject of the present petition
for review on certiorari. The decision was reached by a vote of 3 to 2. The
dissenters, placing reliance on certain of our pronouncements, opined that Primero's
causes of action were cognizable by the courts, that existence of employment
relations was not alone decisive of the issue of jurisdiction, and that such relations
may indeed give rise to "civil" as distinguished from purely labor disputes, as where
an employer's right to dismiss his employee is exercised tortiously, in a manner
oppressive to labor, contrary to morals, good customs or public policy. 11
Primero has appealed to us from this judgment of the IAC praying that we overturn
the majority view and sustain the dissent.
Going by the literal terms of the law, it would seem clear that at the time that Primero
filed his complaints for illegal dismissal and recovery of backwages, etc. with the
Labor Arbiter, the latter possessed original and exclusive jurisdiction also over claims
for moral and other forms of damages; this, in virtue of Article 265 12 of PD 442,
otherwise known as the Labor Code, effective from May 1, 1974. In other words, in
the proceedings before the Labor Arbiter, Primero plainly had the right to plead and
prosecute a claim not only for the reliefs specified by the Labor Code itself for
unlawful termination of employment, but also for moral or other damages under
the Civil Code arising from or connected with that termination of employment. And
this was the state of the law when he moved for the dismissal of his claims before
the Labor Arbiter, for reinstatement and recovery of back wages, so that he might
later file a damage suit "in a civil court which has exclusive jurisdiction over his
complaint ... founded on tortious acts, breach of employment contract ... and
consequent effects (thereof)." 13
The legislative intent appears clear to allow recovery in proceedings before Labor
Arbiters of moral and other forms of damages, in all cases or matters arising from

employer-employee relations. This would no doubt include, particularly, instances


where an employee has been unlawfully dismissed. In such a case the Labor Arbiter
has jurisdiction to award to the dismissed employee not only the reliefs specifically
provided by labor laws, but also moral and other forms of damages governed by
the Civil Code. Moral damages would be recoverable, for example, where the
dismissal of the employee was not only effected without authorized cause and/or due
process for which relief is granted by the Labor Code but was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy 14 for which the obtainable
relief is determined by the Civil Code 15 (not the Labor Code). Stated otherwise, if
the evidence adduced by the employee before the Labor Arbiter should establish that
the employer did indeed terminate the employee's services without just cause or
without according him due process, the Labor Arbiter's judgment shall be for the
employer to reinstate the employee and pay him his back wages or, exceptionally, for
the employee simply to receive separation pay. These are reliefs explicitly prescribed
by the Labor Code. 16 But any award of moral damages by the Labor Arbiter
obviously cannot be based on the Labor Code but should be grounded on the Civil
Code. Such an award cannot be justified solely upon the premise (otherwise
sufficient for redress under the Labor Code) that the employer fired his employee
without just cause or due process. Additional facts must be pleaded and proven to
warrant the grant of moral damages under the Civil Code, these being, to repeat,
that the act of dismissal was attended by bad faith or fraud, or was oppressive to
labor, or done in a manner contrary to morals, good customs, or public policy; and, of
course, that social humiliation, wounded feelings, grave anxiety, etc., resulted
therefrom. 17
It is clear that the question of the legality of the act of dismissal is intimately related
to the issue of the legality of the manner by which that act of dismissal was
performed. But while the Labor Code treats of the nature of, and the remedy
available as regards the first the employee's separation from employment it
does not at all deal with the second the manner of that separation which is
governed exclusively by the Civil Code. In addressing the first issue, the Labor
Arbiter applies the Labor Code; in addressing the second, the Civil Code. And this
appears to be the plain and patent intendment of the law. For apart from the reliefs
expressly set out in the Labor Code flowing from illegal dismissal from employment,
no other damages may be awarded to an illegally dismissed employee other than
those specified by the Civil Code. Hence, the fact that the issue-of whether or not
moral or other damages were suffered by an employee and in the affirmative, the
amount that should properly be awarded to him in the circumstances-is determined
under the provisions of the Civil Code and not the Labor Code, obviously was not
meant to create a cause of action independent of that for illegal dismissal and thus
place the matter beyond the Labor Arbiter's jurisdiction.

Thus, an employee who has been illegally dismissed (i.e., discharged without just
cause or being accorded due process), in such a manner as to cause him to suffer
moral damages (as determined by the Civil Code), has a cause of action for
reinstatement and recovery of back wages and damages. When he institutes
proceedings before the Labor Arbiter, he should make a claim for all said reliefs. He
cannot, to be sure, be permitted to prosecute his claims piecemeal. He cannot
institute proceedings separately and contemporaneously in a court of justice upon
the same cause of action or a part thereof. He cannot and should not be allowed to
sue in two forums: one, before the Labor Arbiter for reinstatement and recovery of
back wages, or for separation pay, upon the theory that his dismissal was illegal; and
two, before a court of justice for recovery of moral and other damages, upon the
theory that the manner of his dismissal was unduly injurious, or tortious. This is what
in procedural law is known as splitting causes of action, engendering multiplicity of
actions. It is against such mischiefs that the Labor Code amendments just discussed
are evidently directed, and it is such duplicity which the Rules of Court regard as
ground for abatement or dismissal of actions, constituting either litis pendentia (auter
action pendant) or res adjudicata, as the case may be. 18 But this was precisely
what Primero's counsel did. He split Primero's cause of action; and he made one of
the split parts the subject of a cause of action before a court of justice. Consequently,
the judgment of the Labor Arbiter granting Primero separation pay operated as a bar
to his subsequent action for the recovery of damages before the Court of First
Instance under the doctrine of res judicata, The rule is that the prior "judgment or
order is, with respect to the matter directly adjudged or as to any other matter that
could have been raised in relation thereto, conclusive between the parties and their
successors in interest by title subsequent to the commencement of the action or
special proceeding, litigating for the same thing and under the same title and in the
same capacity. 19
We are not unmindful of our previous rulings on the matter cited in the dissent to the
decision of the Court of Appeals subject of the instant petition, 20 notably, Quisaba v.
Sta Ines-Melale Veneer & Plywood Inc., where a distinction was drawn between the
right of the employer to dismiss an employee, which was declared to be within the
competence of labor agencies to pass upon, and the "manner in which the right was
exercised and the effects flowing therefrom," declared to be a matter cognizable only
by the regular courts because "intrinsically civil." 21 We opine that it is this very
distinction which the law has sought to eradicate as being so tenuous and so difficult
to observe, 22 and, of course, as herein pointed out, as giving rise to split jurisdiction,
or to multiplicity of actions, "a situation obnoxious to the orderly administration of
justice. 23 Actually we merely reiterate in this decision the doctrine already laid down
in other cases (Garcia v. Martinez, 84 SCRA 577; Ebon v. de Guzman, 13 SCRA 52;
Bengzon v. Inciong, 91 SCRA 248; Pepsi-Cola Bottling Co. v. Martinez, 112 SCRA
578; Aguda v. Vallejos, 113 SCRA 69; Getz v. C.A., 116 SCRA 86; Cardinal Industries
v. Vallejos, 114 SCRA 471; Sagmit v. Sibulo, 133 SCRA 359) to the effect that the
grant of jurisdiction to the Labor Arbiter by Article 217 of the Labor Code is

sufficiently comprehensive to include claims for moral and exemplary damages


sought to be recovered from an employer by an employee upon the theory of his
illegal dismissal. Rulings to the contrary are deemed abandoned or modified
accordingly.
WHEREFORE, the petition is DISMISSED, without pronouncement as to costs.

4. G.R. No. L-71959 November 28, 1985


TRADE UNIONS OF THE PHILIPPINES & ALLIED SERVICES LOCAL
CHAPTER NO. 1158 (SUPER GARMENTS MANUFACTURING
CORPORATION WORKERS UNION), Petitioner, vs. HON. JOSE L.
COSCOLLUELA JR., PRESIDING JUDGE OF BRANCH CXLVI REGIONAL
TRIAL
COURT
OF
MAKATI
AND
RUSTAN
COMMERCIAL
CORPORATION, Respondents.
RESOLUTION
ABAD SANTOS, J.:
The petition seeks to enjoin the public respondent from further proceeding
in Civil Case No. 10905 of the Regional Trial Court of Makati, Metro Manila.
Upon the filing of the petition this Court issued a temporary restraining
order and required the private respondent to comment.

Petitioner union filed a notice of strike with the Ministry of Labor and
Employmnt against Super Garments Manufacturing Corporation on May
12, 1985. The strike commenced on June 8, 1985 and is said to be still on.
Super Garments and Rustan Commercial Corporation have separate
compartments in the same building at Malugay and streets It is called the
Yupangco building.
It is alleged by the petitioner union that goods of Super Garments were
spirited out of its strike-bound premises thru Rustan's warehouse.
Whereupon, the union picketed not only Super Garments but also Rustan.
As a result Rustan filed Civil Case No. 10905 before the respondent judge
for injunction and damages thru the PECABAR law office and petition No.
971 with the National Labor Relations Commission also to enjoin the union
from picketing its premises. The petition was filed by another counsel,
Atty. Armando B. Ampil.

In Civil Case No. 10905, the respondent judge issued an order on June 21,
1985 setting "the hearing of theapplication for a writ of preliminary
injuction on June 27, 1985 at 2:00 o'clock in the afternoon." On July 15,
1985, the respondent judge issued the writ after finding no employeremployee relationship between the parties. This order prompted the
petitioner union to come to this Court for the purpose aforesaid.
In the meantime, petitioner union on July 12, 1985, filed a complaint for
unfair labor practice against both Super Garments and Rustan alleging
that the former is but the manufacturing arm of the latter.
Petitioner union claims that respondent judge has no jurisdiction to issue
an injunction because the case is a labor dispute; that the prerogative
belongs to the Minister of Labor and Employment. Upon the other hand,
private respondent Rustan says that the respondent judge has jurisdiction
because there is no labor dispute between it and the union even as it
went to the National Labor Relation Commission to seek Identical relief.
At this stage there appears to be no labor dispute between the petitioner
and the private respondent for which reason the latter was justified in
seeking relief in respondent judge's court. ihe unfair labor complaint filed
by petitioner union on Page 304 July 12, 1985 does not prove a labor
relationship. By the same token it was improper for the private respondent
to have filed Case No. 971 with the National Labor Relations Commission.
In the light of the foregoing, the petition is dismissed for lack of merit and
the temporary restraining order issued on September 23, 1985 is hereby
lifted. However, private respondent Rustan Commercial Corporation is
directed to withdraw its case before the National Labor Relations
Commission. No costs.
SO ORDERED,
Concepcion, Jr. (Chairman), Escolin Cuevas and Alampay, JJ., concur.

5. G.R. No. 101041 November 13, 1991


HON.
JUDGE
ADRIANO
R.
VILLAMOR, petitioner,
vs.
HON. JUDGE BERNARDO LL. SALAS and GEORGE CARLOS, respondents.

G.R. No. 101296 November 13, 1991


HON.
JUDGE
ADRIANO
R.
VILLAMOR, petitioner,
vs.
ANTONIO T. GUERRERO and HON. PEARY G. ALEONAR, Presiding Judge of
RTC, Branch 21, Region VII, Cebu City, respondents.
Ramon Ve Salazar for petitioner.
Antonio T. Guerrero for private respondent.
Henry R. Savellon for respondent.
GRIO-AQUINO, J.:p
In 1977, Civil Case No. B-398 (Gloria Naval vs. George Carlos) for recovery of
ownership of a parcel of coconut land was filed and subsequently raffled to the sala
of the petitioner, Judge Adriano Villamor. While the civil case was pending there,
respondent Carlos filed Criminal Cases Nos. N-989, N-990, N-991, N-992 and N-993
for qualified theft against Gloria Naval and her helpers. The criminal cases were also
assigned to the sala of Judge Villamor.
Due to the pendency of Civil Case No. B-398, the criminal cases were temporarily
archived.
After trial in Civil Case No. B-398, a decision was rendered in favor of Naval who
was declared the lawful owner and possessor of the disputed land. Carlos was
ordered to vacate the land.
Thereafter, respondent Carlos, through counsel, moved to activate the archived
criminal cases. Having declared Naval the lawful owner and possessor of the
contested land in Civil Case No. B-398, Judge Villamor dismissed the criminal cases
against her and her co-accused.
Judge Villamor likewise granted execution pending appeal of his decision in Civil
Case No. B-398. This order was challenged by Carlos in the Court of Appeals and in
this Court, both without success.
Afterwards, Carlos filed an administrative case, A.M. No. RTJ-87-105, against Judge
Villamor, charging him with having issued illegal orders and an unjust decision in
Civil Case No. B-398. On November 21, 1988, this Court, in an En Banc resolution,
summarily dismissed the administrative case.
Dissatisfied with the outcome of the administrative case, respondent Carlos filed a
civil action for damages (Civil Case No. CEB-6478) against Judge Villamor for

knowingly rendering an unjust judgment when he dismissed the five (5) criminal
cases against Naval, et al.
The summons in Civil Case No. CEB-6478 was served upon Judge Villamor on
December 10, 1987. The next day (December 11, 1987), instead of answering the
complaint, Judge Villamor issued in Criminal Cases Nos. N-0989 to 0993 an order of
direct contempt against Carlos and his lawyer. Attorney Antonio T. Guerrero, "for
degrading the respect and dignity of the court through the use of derogatory and
contemptous language before the court," and sentenced each of them to suffer the
penalty of imprisonment for five (5) days and to pay a fine of P500.
Carlos immediately filed in this Court a petition for certiorari with a prayer for the
issuance of a writ of preliminary injunction against the Judge (G.R. Nos. 82238-42).
We promptly restrained Judge Villamor from enforcing his Order of Contempt against
Carlos and Attorney Guerrero. On November 13, 1989, we annulled the contempt
order. (See pp. 26-34, Rollo of G.R. No. 101041.)
Back to Civil Case No. CEB-6478; Judge Villamor filed a motion to dismiss the
complaint for lack of jurisdiction. The trial court granted the motion. The order of
dismissal was affirmed by the Court of Appeals (CA-G.R. CV No. 20657, June 26,
1990). Carlos appealed to this Court which also denied the petition. (p. 125, Rollo of
G.R. No. 101296.)
Unfazed by these setbacks, Carlos and his counsel, Attorney Antonio Guerrero, filed
separate complaints for damages against Judge Villamor for knowingly rendering an
unjust order of contempt.
Attorney Guerrero's complaint for damages (Civil Case No. CEB-8802) was raffled to
Branch 21, Regional Trial Court, Cebu City, presided over by Judge Peary G.
Aleonar. Carlos' complaint for damages was docketed as Civil Case No. CEB-8823
and raffled to Branch 8, Regional Trial Court of Cebu City presided over by Judge
Bernardo LL. Salas.
On March 30, 1990, Judge Villamor filed a motion to dismiss Civil Case No. CEB8802 but it was denied by Judge Aleonar (p. 33, Rollo of G.R. No. 101296).
Hence, this petition for certiorari and prohibition with restraining order docketed as
G.R. No. 101296.
On September 19, 1991, this Court issued a temporary restraining order against
Judge Aleonar to stop him from proceeding in Civil Case No. CEB-8802 (pp. 4546, Rollo of G.R. No. 101296).

On May 20, 1991, a Manifestation was filed by Judge Villamor praying Judge Salas
to dismiss Civil Case No. CEB-8823 but the motion was denied by respondent Judge
on July 2, 1991 (pp. 13-16, Rollo of G.R. No. 101041).
Hence, this second petition for certiorari and prohibition with restraining order (G.R.
No. 101041).
On August 21, 1991, a Resolution was issued by this Court: 1) temporarily
restraining Judge Salas from further proceeding in Civil Case No. CEB-8823; and 2)
granting the petitioner's prayer that this case be consolidated with G.R. No. 101296
(pp. 37-39, Rollo of G.R. No. 101041).
The sole issue here is: whether or not Judges Aleonar and Salas may take
cognizance of the actions for damages against Judge Villamor for allegedly having
rendered an unjust order of direct contempt against Carlos and Attorney Guerrero
which this Court subsequently annulled.
The answer is no.
As very aptly held by this Court in a Resolution it issued in connection with a
previous case filed by respondent Carlos against Judge Villamor, over a similar
action for "Damages and Attorney's Fees Arising From Rendering an Unjust
Judgment," in dismissing the five (5) criminal cases for qualified theft which he
(respondent Carlos) had filed against Gloria P. Naval and others
Indeed, no Regional Trial Court can pass upon and scrutinize, and
much less declare as unjust a judgment of another Regional Trial Court
and sentence the judge thereof liable for damages without running
afoul with the principle that only the higher appellate courts, namely,
the Court of Appeals and the Supreme Court, are vested with authority
to review and correct errors of the trial courts. (George D. Carlos vs.
CA, G.R. No. 95560, November 5, 1990; p. 125, Rollo of G.R No.
101296.)
To allow respondent Judges Aleonar and Salas to proceed with the trial of the
actions for damages against the petitioner, a co-equal judge of a co-equal court,
would in effect permit a court to review and interfere with the judgment of a co-equal
court over which it has no appellate jurisdiction or power of review. The various
branches of a Court of First Instance (now the Regional Trial Court) being co-equal,
may not interfere with each other's cases, judgments and orders (Parco vs. Court of
Appeals, 111 SCRA 262).
This Court has already ruled that only after the Appellate Court, in a final judgment,
has found that a trial judge's errors were committed deliberately and in bad faith may
a charge of knowingly rendering an unjust decision be levelled against the latter

(Garcia vs. Alconcel, 111 SCRA 178; Sta. Maria vs. Ubay, 87 SCRA 179; Gahol vs.
Riodique, 64 SCRA 494).
Nowhere in this Court's decision annulling Judge Villamor's order of direct contempt
(G.R. Nos. 82238-42, November 13, 1989) can there be found a declaration that the
erroneous order was rendered maliciously or with conscious and deliberate intent to
commit an injustice. In fact, a previous order of direct contempt issued by Judge
Villamor against Carlos' former counsel was sustained by this Court (Jaynes C.
Abarrientos, et al. vs. Judge Villamor, G.R. No. 82237, June 1, 1988).
At most, the order of direct contempt which we nullified may only be considered an
error of judgment for which Judge Villamor may not be held criminally or civilly liable
to the respondents.
A judge is not liable for an erroneous decision in the absence of malice or wrongful
conduct in rendering it (Barroso vs. Arche, 67 SCRA 161).
WHEREFORE, the consolidated petitions for certiorari are GRANTED, Civil Cases
Nos. CEB-8802 and CEB-8823, respectively, pending in the salas of respondents
Judge Peary G. Aleonar and Judge Bernardo LL. Salas, are hereby dismissed. The
temporary restraining orders issued by this Court in these cases are hereby made
permanent. No costs.
SO ORDERED.

6. G.R. No. L-17299

July 31, 1963

JOSEFINA
POTESTAS
CABRERA
OMULON, plaintiffs-appellees,
vs.
MARIANO T. TIANO, defendant-appellant.
Pablito
C.
Pielago
Prud. V. Villafuerte for defendant-appellant.

and

CRESENCIA

for

POTESTAS

plaintiffs-appellees.

PAREDES, J.:
Ciriaco Potestas and Gregoria Blanco, were parents of five children, Isabelo,
Lourdes, Clemente, Josefina, and Cresencia. Gregoria died before the second world
war, together with Clemente, single. During their lifetime, the spouses acquired
properties, among which was a parcel of agricultural land, of about seven (7)
hectares, located at barrio Manga, municipality of Tangub, Misamis Occidental,

planted to coconuts and fruit-bearing trees. On July 2, 1947, Ciriaco, the surviving
husband and three (3) children (Isabelo, Lourdes and Cresencia), purportedly sold
the above mentioned parcel to herein defendant Mariano T. Tiano, for P3,500.00. At
the time of the sale, Cresencia was a minor, and the other child, Josefina, did not
sign the deed of sale, and did not know about the transaction.
Under date of June 20, 1957, in action for "Partition and Recovery of Real Estate,
with Damages" was filed by Josefina and Cresencia against Tiano. In the complaint,
it was alleged that they were entitled to a portion of the land, since Josefina did not
sign the sale and Crescencia was a minor; that defendant Tiano had usurped the
portions belonging to them, to their damage and prejudice in the amount of
P7,000.00, which consisted of their share in the produce of the property, during the
period of defendant's possession.
In answer, defendant claimed that the plaintiffs herein knew of the sale and that he
was not aware of any defect in the title of his vendors. As a Special Defense,
defendant alleged that he was the absolute owner of the land by acquisitive
prescription of ten (10) years, from the date of purchase. Before the trial, the parties
agreed to a stipulation of facts, parts of which recite
xxx

xxx

xxx

3. That at the time of the sale, appearing in Doc. No. 54, Page 81, Book No.
7, S. 1947, in the book of Notary Public Basilio Binaoro of Tangub, Mis. Occ.,
Cresencia was a minor being only 16 years old, while Josefina who was long
married and of legal age did not know about the sale and/or did not give her
consent to the same;
4. That the plaintiffs commenced this case against the defendant on June 20,
1957 and the judicial summons was issued by the Clerk of Court on June 21,
1957, but defendant received the same on July 2, 1957.
After the hearing, the court a quo rendered the following judgment
WHEREFORE, premises considered, the court hereby renders judgment
declaring that the plaintiffs are entitled each to 1/8 of the property in question
and therefore Judgment is hereby ordered declaring them entitled to partition
the property in question in proportion of 1/8 each of them, plus damages for
both of them in the amount of P1,000.00 and attorney's fees in the amount of
P200.00.
The trial court in the same decision, commissioned the Deputy Provincial Sheriff, to
partition the property in question and render a report within 30 days. Defendant
moved for a reconsideration of the decision, contending that prescription had already
set in, and his (defendant's) title, had become irrevocable, and that the award of

damages had no factual and legal basis. The motion for reconsideration was denied
on March 5, 1960. The Commissioner's report, partitioning the property was
submitted on April 11, 1960. Defendant perfected his appeal on May 9, 1960, and on
May 14, 1960, the same was given due course and elevated to this Court.
In claiming that prescription had taken place, appellant insists that the period should
be counted from the date the summons was served on him, which was on July 2,
1957. It was agreed, however, that the complaint for the recovery of the land in
question was presented on June 20, 1957, and the summons was sent out the
following day. The Civil Code, provides that
The prescription of actions is interrupted when they are filed before the court,
when there is a written extra-judicial demand by the creditors, and when there
is any written acknowledgment of the debt of the debtor. (Art. 1155)
Since the sale of the property took place on July 2, 1947, the ten (10) year period
within which to file the action had not yet elapsed on June 20, 1957, when the
complaint was presented. While it is true that the sale in question had taken place
before the effectivity of the new Civil Code and the law then on matter of prescription
was Act No. 190, said law, however, contained no specific provision on the
interruption of the prescriptive period; and the established rule then, as it is the rule
now, is that the commencement of the suit prior to the expiration of the applicable
limitation period, interrupts the running of the statute, as to all parties to the action
(34 Am. Jur., Sec. 247, pp. 202-203; Peralta, et al. v. Alipio, G. R. No. L-8273, Oct.
24, 1955). The fact that summons was only served on defendant on July 2, 1957,
which incidentally and/or coincidentally was the end of the ten (10) year period, is of
no moment, since civil actions are deemed commenced from date of the filing and
docketing of the complaint with the Clerk of Court, without taking into account the
issuance and service of summons (Sotelo v. Dizon, et al., 67 Phil. 573). The
contention that the period was not interrupted, until after defendant received the
summons is, therefore, without legal basis.
Defendant-appellant claims that he had already acquired full ownership of the
property in question because the judicial summons, which could civilly interrupt his
possession (Art. 1123, N.C.C.), was received by him only on July 2, 1957.
Conceding, for the purposes of argument, that the article cited is applicable, still
appellant cannot avail himself of acquisitive prescription, for the simple reason that
no finding was made by the trial court that his possession from the time of the sale
(July 2, 1947), was with just title, in good faith, in the concept of an owner, public,
peaceful, adverse and uninterrupted (Arts. 1117 & 1118, N.C.C.). Good faith is a
question of fact which must be proved (Art. 1127, N.C.C.). For the purposes of
acquisitive prescription, just title must also be proved, it is never presumed (Art.
1131, N.C.C.). The factual requisite of adverse possession do not appear in the
stipulation of facts and the trial court did not make findings to this effect. These

circumstances could and/or should have been ventilated, had the appeal been taken
to the Court of Appeals. Defendant, however, having chosen to appeal the decision
directly to this Court, he is deemed to have waived questions of fact and raised only
questions of law. There being no factual finding by the lower court of the presence of
the requisites of acquisitive prescription this Court has to reject, as did the trial court,
said defense. Moreover, on July 2, 1957, when the summons was received, the ten
(10) years necessary for acquisitive prescription had not yet elapsed. In fact, said
period terminated on that very day.1wph1.t
As to the award of damages, We find Ourselves devoid of ample authority to review
the same, since it involves appreciation of facts. It cannot be denied, as found by the
lower court, that plaintiffs herein are entitled to a share in the land. Verily, they should
also share in the produce, which, admittedly, was enjoyed by the defendantappellant herein.
WHEREFORE, the decision appealed from should be, as it is hereby affirmed. Costs
against appellant in both instances.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Barrera, Dizon, Regala and
Makalintal, JJ., concur.

7. G.R. Nos. 79937-38 February 13, 1989


SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and D.J.
WARBY, petitioners,
vs.
HON. MAXIMIANO C. ASUNCION, Presiding Judge, Branch 104, Regional Trial
Court, Quezon City and MANUEL CHUA UY PO TIONG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for
petitioners. Tanjuatco, Oreta, Tanjuatco, Berenguer & Sanvicente Law Offices for
private respondent.

GANCAYCO, J.:
Again the Court is asked to resolve the issue of whether or not a court acquires
jurisdiction over a case when the correct and proper docket fee has not been paid.
On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed a
complaint with the Regional Trial Court of Makati, Metro Manila for the consignation
of a premium refund on a fire insurance policy with a prayer for the judicial

declaration of its nullity against private respondent Manuel Uy Po Tiong. Private


respondent as declared in default for failure to file the required answer within the
reglementary period.
On the other hand, on March 28, 1984, private respondent filed a complaint in the
Regional Trial Court of Quezon City for the refund of premiums and the issuance of a
writ of preliminary attachment which was docketed as Civil Case No. Q-41177,
initially against petitioner SIOL, and thereafter including E.B. Philipps and D.J. Warby
as additional defendants. The complaint sought, among others, the payment of
actual, compensatory, moral, exemplary and liquidated damages, attorney's fees,
expenses of litigation and costs of the suit. Although the prayer in the complaint did
not quantify the amount of damages sought said amount may be inferred from the
body of the complaint to be about Fifty Million Pesos (P50,000,000.00).
Only the amount of P210.00 was paid by private respondent as docket fee which
prompted petitioners' counsel to raise his objection. Said objection was disregarded
by respondent Judge Jose P. Castro who was then presiding over said case. Upon
the order of this Court, the records of said case together with twenty-two other cases
assigned to different branches of the Regional Trial Court of Quezon City which were
under investigation for under-assessment of docket fees were transmitted to this
Court. The Court thereafter returned the said records to the trial court with the
directive that they be re-raffled to the other judges in Quezon City, to the exclusion of
Judge Castro. Civil Case No. Q-41177 was re-raffled to Branch 104, a sala which
was then vacant.
On October 15, 1985, the Court en banc issued a Resolution in Administrative Case
No. 85-10-8752-RTC directing the judges in said cases to reassess the docket fees
and that in case of deficiency, to order its payment. The Resolution also requires all
clerks of court to issue certificates of re-assessment of docket fees. All litigants were
likewise required to specify in their pleadings the amount sought to be recovered in
their complaints.
On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q41177 was temporarily assigned, issuedan order to the Clerk of Court instructing him
to issue a certificate of assessment of the docket fee paid by private respondent and,
in case of deficiency, to include the same in said certificate.
On January 7, 1984, to forestall a default, a cautionary answer was filed by
petitioners. On August 30,1984, an amended complaint was filed by private
respondent including the two additional defendants aforestated.
Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter
assigned, after his assumption into office on January 16, 1986, issued a
Supplemental Order requiring the parties in the case to comment on the Clerk of

Court's letter-report signifying her difficulty in complying with the Resolution of this
Court of October 15, 1985 since the pleadings filed by private respondent did not
indicate the exact amount sought to be recovered. On January 23, 1986, private
respondent filed a "Compliance" and a "Re-Amended Complaint" stating therein a
claim of "not less than Pl0,000,000. 00 as actual compensatory damages" in the
prayer. In the body of the said second amended complaint however, private
respondent alleges actual and compensatory damages and attorney's fees in the
total amount of about P44,601,623.70.
On January 24, 1986, Judge Asuncion issued another Order admitting the second
amended complaint and stating therein that the same constituted proper compliance
with the Resolution of this Court and that a copy thereof should be furnished the
Clerk of Court for the reassessment of the docket fees. The reassessment by the
Clerk of Court based on private respondent's claim of "not less than P10,000,000.00
as actual and compensatory damages" amounted to P39,786.00 as docket fee. This
was subsequently paid by private respondent.
Petitioners then filed a petition for certiorari with the Court of Appeals questioning the
said order of Judie Asuncion dated January 24, 1986.
On April 24, 1986, private respondent filed a supplemental complaint alleging an
additional claim of P20,000,000.00 as d.qmages so the total claim amounts to about
P64,601,623.70. On October 16, 1986, or some seven months after filing the
supplemental complaint, the private respondent paid the additional docket fee of
P80,396.00. 1
On August 13, 1987, the Court of Appeals rendered a decision ruling, among others,
as follows:
WHEREFORE, judgment is hereby rendered:
1. Denying due course to the petition in CA-G.R. SP No. 1, 09715
insofar as it seeks annulment of the order
(a) denying petitioners' motion to dismiss the complaint, as amended,
and
(b) granting the writ of preliminary attachment, but giving due course to
the portion thereof questioning the reassessment of the docketing fee,
and requiring the Honorable respondent Court to reassess the
docketing fee to be paid by private respondent on the basis of the
amount of P25,401,707.00. 2
Hence, the instant petition.

During the pendency of this petition and in conformity with the said judgment of
respondent court, private respondent paid the additional docket fee of P62,432.90 on
April 28, 1988. 3
The main thrust of the petition is that the Court of Appeals erred in not finding that
the lower court did not acquire jurisdiction over Civil Case No. Q-41177 on the
ground of nonpayment of the correct and proper docket fee. Petitioners allege that
while it may be true that private respondent had paid the amount of P182,824.90 as
docket fee as herein-above related, and considering that the total amount sought to
be recovered in the amended and supplemental complaint is P64,601,623.70 the
docket fee that should be paid by private respondent is P257,810.49, more or less.
Not having paid the same, petitioners contend that the complaint should be
dismissed and all incidents arising therefrom should be annulled. In support of their
theory, petitioners cite the latest ruling of the Court in Manchester Development
Corporation vs. CA, 4 as follows:
The Court acquires jurisdiction over any case only upon the payment of
the prescribed docket fee. An amendment of the complaint or similar
pleading will not thereby vest jurisdiction in the Court, much less the
payment of the docket fee based on the amounts sought in the
amended pleading. The ruling in the Magaspi Case in so far as it is
inconsistent with this pronouncement is overturned and reversed.
On the other hand, private respondent claims that the ruling in Manchester cannot
apply retroactively to Civil Case No. Q41177 for at the time said civil case was filed
in court there was no such Manchester ruling as yet. Further, private respondent
avers that what is applicable is the ruling of this Court in Magaspi v.
Ramolete, 5wherein this Court held that the trial court acquired jurisdiction over the
case even if the docket fee paid was insufficient.
The contention that Manchester cannot apply retroactively to this case is untenable.
Statutes regulating the procedure of the courts will be construed as applicable to
actions pending and undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent. 6
In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full
amount of the docket fee is an indispensable step for the perfection of an appeal. In
a forcible entry and detainer case before the justice of the peace court of Manaoag,
Pangasinan, after notice of a judgment dismissing the case, the plaintiff filed a notice
of appeal with said court but he deposited only P8.00 for the docket fee, instead of
P16.00 as required, within the reglementary period of appeal of five (5) days after
receiving notice of judgment. Plaintiff deposited the additional P8.00 to complete the
amount of the docket fee only fourteen (14) days later. On the basis of these facts,

this court held that the Court of First Instance did notacquire jurisdiction to hear and
determine the appeal as the appeal was not thereby perfected.
In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to become
a Filipino citizen by sending it through registered mail to the Office of the Solicitor
General in 1953 but the required filing fee was paid only in 1956, barely 5V2 months
prior to the filing of the petition for citizenship. This Court ruled that the declaration
was not filed in accordance with the legal requirement that such declaration should
be filed at least one year before the filing of the petition for citizenship. Citing Lazaro,
this Court concluded that the filing of petitioner's declaration of intention on October
23, 1953 produced no legal effect until the required filing fee was paid on May 23,
1956.
In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were
applied. It was an original petition for quo warranto contesting the right to office of
proclaimed candidates which was mailed, addressed to the clerk of the Court of First
Instance, within the one-week period after the proclamation as provided therefor by
law. 10 However, the required docket fees were paid only after the expiration of said
period. Consequently, this Court held that the date of such payment must be deemed
to be the real date of filing of aforesaid petition and not the date when it was mailed.
Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee must
be paid before a court will act on a petition or complaint. However, we also held that
said rule is not applicable when petitioner seeks the probate of several wills of the
same decedent as he is not required to file a separate action for each will but instead
he may have other wills probated in the same special proceeding then pending
before the same court.
Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is
deemed filed only upon payment of the docket fee regardless of the actual date of its
filing in court. Said case involved a complaint for recovery of ownership and
possession of a parcel of land with damages filed in the Court of First Instance of
Cebu. Upon the payment of P60.00 for the docket fee and P10.00 for the sheriffs
fee, the complaint was docketed as Civil Case No. R-11882. The prayer of the
complaint sought that the Transfer Certificate of Title issued in the name of the
defendant be declared as null and void. It was also prayed that plaintiff be declared
as owner thereof to whom the proper title should be issued, and that defendant be
made to pay monthly rentals of P3,500.00 from June 2, 1948 up to the time the
property is delivered to plaintiff, P500,000.00 as moral damages, attorney's fees in
the amount of P250,000.00, the costs of the action and exemplary damages in the
amount of P500,000.00.
The defendant then filed a motion to compel the plaintiff to pay the correct amount of
the docket fee to which an opposition was filed by the plaintiff alleging that the action

was for the recovery of a parcel of land so the docket fee must be based on its
assessed value and that the amount of P60.00 was the correct docketing fee. The
trial court ordered the plaintiff to pay P3,104.00 as filing fee.
The plaintiff then filed a motion to admit the amended complaint to include the
Republic as the defendant. In the prayer of the amended complaint the exemplary
damages earlier sought was eliminated. The amended prayer merely sought moral
damages as the court may determine, attorney's fees of P100,000.00 and the costs
of the action. The defendant filed an opposition to the amended complaint. The
opposition notwithstanding, the amended complaint was admitted by the trial court.
The trial court reiterated its order for the payment of the additional docket fee which
plaintiff assailed and then challenged before this Court. Plaintiff alleged that he paid
the total docket fee in the amount of P60.00 and that if he has to pay the additional
fee it must be based on the amended complaint.
The question posed, therefore, was whether or not the plaintiff may be considered to
have filed the case even if the docketing fee paid was not sufficient. In Magaspi, We
reiterated the rule that the case was deemed filed only upon the payment of the
correct amount for the docket fee regardless of the actual date of the filing of the
complaint; that there was an honest difference of opinion as to the correct amount to
be paid as docket fee in that as the action appears to be one for the recovery of
property the docket fee of P60.00 was correct; and that as the action is also one, for
damages, We upheld the assessment of the additional docket fee based on the
damages alleged in the amended complaint as against the assessment of the trial
court which was based on the damages alleged in the original complaint.
However,
as
aforecited,
this
Court
overturned Magaspi in Manchester. Manchester involves an action for torts and
damages and specific performance with a prayer for the issuance of a temporary
restraining order, etc. The prayer in said case is for the issuance of a writ of
preliminary prohibitory injunction during the pendency of the action against the
defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the
property in question, the attachment of such property of defendants that may be
sufficient to satisfy any judgment that may be rendered, and, after hearing, the
issuance of an order requiring defendants to execute a contract of purchase and sale
of the subject property and annul defendants' illegal forfeiture of the money of
plaintiff. It was also prayed that the defendants be made to pay the plaintiff jointly
and severally, actual, compensatory and exemplary damages as well as 25% of said
amounts as may be proved during the trial for attorney's fees. The plaintiff also
asked the trial court to declare the tender of payment of the purchase price of plaintiff
valid and sufficient for purposes of payment, and to make the injunction permanent.
The amount of damages sought is not specified in the prayer although the body of
the complaint alleges the total amount of over P78 Millon allegedly suffered by
plaintiff.

Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for the
docket fee based on the nature of the action for specific performance where the
amount involved is not capable of pecuniary estimation. However, it was obvious
from the allegations of the complaint as well as its designation that the action was
one for damages and specific performance. Thus, this court held the plaintiff must be
assessed the correct docket fee computed against the amount of damages of about
P78 Million, although the same was not spelled out in the prayer of the complaint.
Meanwhile, plaintiff through another counsel, with leave of court, filed an amended
complaint on September 12, 1985 by the inclusion of another co-plaintiff and
eliminating any mention of the amount of damages in the body of the complaint. The
prayer in the original complaint was maintained.
On October 15, 1985, this Court ordered the re-assessment of the docket fee in the
said case and other cases that were investigated. On November 12, 1985, the trial
court directed the plaintiff to rectify the amended complaint by stating the amounts
which they were asking for. This plaintiff did as instructed. In the body of the
complaint the amount of damages alleged was reduced to P10,000,000.00 but still
no amount of damages was specified in the prayer. Said amended complaint was
admitted.
Applying the principle in Magaspi that "the case is deemed filed only upon payment
of the docket fee regardless of the actual date of filing in court," this Court held that
the trial court did not acquire jurisdiction over the case by payment of only P410.00
for the docket fee. Neither can the amendment of the complaint thereby vest
jurisdiction upon the Court. For all legal purposes there was no such original
complaint duly filed which could be amended. Consequently, the order admitting the
amended complaint and all subsequent proceedings and actions taken by the trial
court were declared null and void. 13
The present case, as above discussed, is among the several cases of underassessment of docket fee which were investigated by this Court together
with Manchester. The facts and circumstances of this case are similar
to Manchester. In the body of the original complaint, the total amount of damages
sought amounted to about P50 Million. In the prayer, the amount of damages asked
for was not stated. The action was for the refund of the premium and the issuance of
the writ of preliminary attachment with damages. The amount of only P210.00 was
paid for the docket fee. On January 23, 1986, private respondent filed an amended
complaint wherein in the prayer it is asked that he be awarded no less than
P10,000,000.00 as actual and exemplary damages but in the body of the complaint
the amount of his pecuniary claim is approximately P44,601,623.70. Said amended
complaint was admitted and the private respondent was reassessed the additional
docket fee of P39,786.00 based on his prayer of not less than P10,000,000.00 in
damages, which he paid.

On April 24, 1986, private respondent filed a supplemental complaint alleging an


additional claim of P20,000,000.00 in damages so that his total claim is
approximately P64,601,620.70. On October 16, 1986, private respondent paid an
additional docket fee of P80,396.00. After the promulgation of the decision of the
respondent court on August 31, 1987 wherein private respondent was ordered to be
reassessed for additional docket fee, and during the pendency of this petition, and
after the promulgation of Manchester, on April 28, 1988, private respondent paid an
additional docket fee of P62,132.92. Although private respondent appears to have
paid a total amount of P182,824.90 for the docket fee considering the total amount of
his claim in the amended and supplemental complaint amounting to about
P64,601,620.70, petitioner insists that private respondent must pay a docket fee of
P257,810.49.
The principle in Manchester could very well be applied in the present case. The
pattern and the intent to defraud the government of the docket fee due it is obvious
not only in the filing of the original complaint but also in the filing of the second
amended complaint.
However, in Manchester, petitioner did not pay any additional docket fee until] the
case was decided by this Court on May 7, 1987. Thus, in Manchester, due to the
fraud committed on the government, this Court held that the court a quo did not
acquire jurisdiction over the case and that the amended complaint could not have
been admitted inasmuch as the original complaint was null and void.
In the present case, a more liberal interpretation of the rules is called for considering
that, unlike Manchester, private respondent demonstrated his willingness to abide by
the rules by paying the additional docket fees as required. The promulgation of the
decision in Manchester must have had that sobering influence on private respondent
who thus paid the additional docket fee as ordered by the respondent court. It
triggered his change of stance by manifesting his willingness to pay such additional
docket fee as may be ordered.
Nevertheless, petitioners contend that the docket fee that was paid is still insufficient
considering the total amount of the claim. This is a matter which the clerk of court of
the lower court and/or his duly authorized docket clerk or clerk in-charge should
determine and, thereafter, if any amount is found due, he must require the private
respondent to pay the same.
Thus, the Court rules as follows:
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the
payment of the prescribed docket fee, that vests a trial court with jurisdiction over the
subject matter or nature of the action. Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow payment of the fee

within a reasonable time but in no case beyond the applicable prescriptive or


reglementary period.
2. The same rule applies to permissive counterclaims, third party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee
prescribed therefor is paid. The court may also allow payment of said fee within a
reasonable time but also in no case beyond its applicable prescriptive or
reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but, subsequently, the
judgment awards a claim not specified in the pleading, or if specified the same has
been left for determination by the court, the additional filing fee therefor shall
constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or
his duly authorized deputy to enforce said lien and assess and collect the additional
fee.
WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of the
court a quo is hereby instructed to reassess and determine the additional filing fee
that should be paid by private respondent considering the total amount of the claim
sought in the original complaint and the supplemental complaint as may be gleaned
from the allegations and the prayer thereof and to require private respondent to pay
the deficiency, if any, without pronouncement as to costs.
SO ORDERED.
Fernan (C.J), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano,
Padilla, Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ.,
concur.

8. G.R. No. 87617

April 6, 1990

JOE
HODGES, petitioner,
vs.
COURT OF APPEALS, HEIRS OF LEON P. GELLADA, plaintiff-appellee in Civil
Case No. 6512, ROMEO MEDIODIA, plaintiff-appellant in Civil Case No. 6513,
and HEIRS OF FERNANDO MIRASOL, plaintiff-appellee in Civil Case No.
6516, respondents.
Tivol
Efrain

&

Tivol
Trenas

Law
for

Office
for
Romeo

petitioner.
Mediodia.

Villa
and
Partners
Norberto Posecion for Heirs of Gellada.

for

private

respondents.

GANCAYCO, J.:
What is the legal effect of the non-payment of the docket fees even before the
promulgation of Manchester Development Corporation vs. Court of appeals? 1 This is
the decisive issue in this petition.
On April 7, 1964 Leon P. Gellada, a practicing lawyer, filed an action for damages
against Joe Hodges in the Court of First Instance of Iloilo City, wherein plaintiff
claimed damages against defendant for some alleged defamatory statements of
defendant against plaintiff and his associates thus entitling him to moral damages of
P400,000.00, damage to his law practice of P30,000.00, attorney's fees of
P30,000.00, and exemplary damages as well as temperate damages. A special
appearance questioning the jurisdiction of the court on the subject matter and the
mode of extrajudicial service of summons dated June 24, 1964 was filed by
defendant. The defendant pointed out that the court cannot acquire jurisdiction over
the case unless the corresponding docket fee is paid. The defendant maintained that
considering the amount of damages claimed by the plaintiff, the docket fee to be paid
should be no less than P770.00 which is way beyond the P32.00 docket fee paid by
plaintiff.
An answer, amended answer and a reply thereto were filed. The amended answer
was admitted.
On March 31, 1964, Romeo H. Mediodia, also a practicing lawyer, filed in the same
court a similar action for damages against Joe Hodges for alleged defamatory
statements of defendant against plaintiff, wherein plaintiff claimed for moral damages
of not less than P300,000.00, damage to his law practice of not less than
P20,000.00, attorney's fee of P40,000.00 and exemplary damages as well as
temperate damages. A special appearance questioning the jurisdiction over the
subject matter and the mode of extrajudicial service of summons dated June 25,
1964 was also filed by defendant pointing that the court cannot acquire jurisdiction
over the case when plaintiff claimed damages of P360,000.00 and he paid a docket
fee of only P32.00 when it should not be less than P570.00. After an answer,
amended answer, and a reply thereto were filed, the amended answer was admitted
by the trial court.
On April 8, 1964, another complaint for damages was filed by Fernando P. Mirasol,
another practicing lawyer, against Joe Hodges, for alleged defamatory statements of
defendant against plaintiff, wherein plaintiff claimed moral damages of not less than
P350,000.00, damage to his law practice of not less than P25,000.00, attorney's fees
of P35,000.00, and exemplary damages as well as temperate damages. A similar
special appearance for the defendant questioning the jurisdiction on the subject
matter of the court and the mode of extrajudicial service of summons dated June 25,
1964 and pointing out that the court cannot acquire jurisdiction over the case as the

plaintiff claimed damages of P410,000.00 but he paid a docket fee of only P32.00
when it should not be less than P670.00. After an answer, an amended answer and a
reply thereto was filed, the amended answer were admitted by the trial court.
On August 31, 1972, these three cases were ordered consolidated by the trial court.
On the same date another order was issued directing the plaintiffs to pay the docket
fee commensurate to their respective demands. This was reiterated in another order
dated March 11, 1982.
On March 16, 1982 plaintiff Gellada paid the amount of P168.00 bringing his total
payment of docket fees to P200.00. On September 5, 1972 plaintiff Mediodia paid
P168.00 so he had paid a total of P200.00 for docket fees. Plaintiff Mirasol failed to
comply with the said orders.
Plaintiff Gellada died on February 4, 1974 so an order was issued for the substitution
of his heirs. Plaintiff Mirasol also died on March 29, 1979, so another order was
issued by the trial court for the substitution of his heirs.
After trial on the merits, a judgment was rendered by the trial court on February 18,
1988, the dispositive part of which reads as follows:
WHEREFORE, judgment is hereby rendered ordering the defendant Joe
Hodges
In Civil Case No. 6512, to pay the heirs of plaintiff Leon Gellada, the sums of
P50,000.00 and P10,000.00 as moral and exemplary damages, respectively;
P20,000.00 for and as attorney's fees and P10,000.00 as expenses of
litigation, plus costs;
In Civil Case No. 6513, to pay the plaintiff Romeo Mediodia the sums of
P50,000.00 and P10,000.00 as moral and exemplary damages, respectively;
P20,000.00 for and as attorney's fees and P10,000.00 as expenses of
litigation, plus costs; and
In Civil Case No. 6516, to pay the heirs of plaintiff Fernando Mirasol, with the
exception of Ferdinand Mirasol, the sums of P50,000.00 and P10,000.00 as
moral and exemplary damages, respectively; P20,000.00 for and as attorney's
fees and P10,000.00 as expenses of litigation, plus costs. 2
Not satisfied therewith, petitioner appealed to the Court of Appeals, wherein in due
course a decision was rendered on October 28, 1988 affirming the decision
appealed from, with costs against petitioner.3
A motion for reconsideration of the said decision having been denied in a resolution
of March 8, 1989, the instant petition was then filed in this Court, wherein nine (9)
errors are alleged to have been committed by the appellate court. The Court finds it
necessary to dispose of the first assigned error on the question of non-payment of
docket fees.

As early as Lazaro vs. Endencia, 4 this Court held that an appeal is not deemed
perfected if the appellate court docket fee is not fully paid. In Lee vs. Republic, 5 this
Court ruled that a declaration of intention to be a Filipino citizen produced no legal
effect until the required filing fee is paid. In Malimit vs. Degamo, 6 We held that the
date of payment of the docket fee must be considered the real date of filing of a
petition for quo warranto and not the date it was mailed. In Magaspi
vs. Ramolete, 7 the well-settled rule was reiterated that a case is deemed filed only
upon payment of the docket fee regardless of the actual date of its filing in court. 8
At the time, therefore, that the three (3) cases subject of the herein petition were
filed, the rule was already clear that the court does not acquire jurisdiction over a
case until after the prescribed docket is paid.
In Manchester, this rule was emphasized when this Court stated "The court acquires
jurisdiction over any case only upon the payment of the prescribed docket fee. An
amendment of the complaint or similar pleading will not thereby vest jurisdiction in
the court, much less the payment of the docket fee based on the amount sought in
the amended pleading. 9
The rule in Manchester was relaxed in Sun Insurance vs. Hon. Maximiano
Asuncion, 10 whereby this Court declared that the trial court may allow payment of
the fee within a reasonable time but in no case beyond the applicable prescriptive or
reglementary period. Nevertheless, in Sun Insurance, this Court reiterated the rule
that it is the payment of the prescribed docket fee that vests the court with
Jurisdiction over the subject matter of nature of the case. 11
In the present petition, it appellants that in the case of Gellada vs. Hodges the total
amount of the claim for damages is about P460,000.00, the estimated docket fee
due is P770.00 but what was paid only was P32.00. Despite the order of the trial
court on August 31, 1972 and another order ten years later, that is on March 11,
1982, requiring plaintiff to pay the correct docket fee, Gellada paid the amount of
P168.00 Thus his total payment amounts to just P200.00, which is still much less
than the amount of P770.00 due.
Similarly in Mediodia vs. Hodges where the claim is approximately P360,000.00 and
the appropriate filing fee would be about P570.00, the plaintiff paid only P32.00 upon
filing the complaint. After the two aforesaid order of the trial court were issued,
Mediodia paid on September 5, 1982 the amount of P168.00 bringing his payment to
a total of P200.00 which is also much less than the amount of P570.00 due for
docket fee.
In the case of Mirasol vs. Hodges, the total claim is for P410,000.00 and the amount
of filing fee due is P670.00. Mirasol paid only P32.00 upon filing the complaint. He
did not pay any additional sum even after the two orders of the court had been
issued.
No doubt, the trial court did not acquire jurisdiction over the subject matter in said
three (3) cases due to the failure to pay in full the prescribed docket fee. Thus, the
entire proceedings undertaken in said cases are null and void. The plaintiffs in said
cases are practicing lawyers who are expected to know this mandatory requirement

in the filing of any complaint or similar pleading. Their non-payment of the prescribed
docket fee was deliberate and inexcusable.
WHEREFORE, the petition is GRANTED. The appealed decision of the Court of
Appeals dated October 28, 1988 and its resolution dated February 8, 1989 are
hereby reversed and set aside and another judgment is hereby rendered dismissing
the complaints in said three (3) cases. No pronouncement as to costs.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

9. [G.R. No. 104796. March 6, 1998]


SPOUSES ROSALINA S. DE LEON and ALEJANDRO L. DE LEON, petitioners,
vs. THE COURT OF APPEALS, GLICERIO MA. ELAYDA II, FEDERICO
ELAYDA and DANILO ELAYDA, respondents.
DECISION
MENDOZA, J.:
The question for decision is whether in assessing the docket fees to be paid for
the filing of an action for annulment or rescission of a contract of sale, the value of
the real property, subject matter of the contract, should be used as basis, or whether
the action should be considered as one which is not capable of pecuniary estimation
and therefore the fee charged should be a flat rate of P400.00 as provided in Rule
141, 7(b)(1) of the Rules of Court. The trial court held the fees should be based on
the value of the property, but the Court of Appeals reversed and held that the flat rate
should be charged. Hence this petition for review on certiorari.
The facts are as follows:
On August 8, 1991, private respondents filed in the Regional Trial Court of Quezon
City a complaint for annulment or rescission of a contract of sale of two (2) parcels of
land against petitioners, praying for the following reliefs:
1. Ordering the nullification or rescission of the Contract of Conditional Sale
(Supplementary Agreement) for having violated the rights of plaintiffs (private
respondents) guaranteed to them under Article 886 of the Civil Code and/or violation
of the terms and conditions of the said contract.
2. Declaring void ab initio the Deed of Absolute Sale for being absolutely simulated;
and

3. Ordering defendants (petitioners) to pay plaintiffs (private respondents) attorneys


fees in the amount of P100,000.00.
Other reliefs and remedies as are just and equitable in the premises are also prayed
for.[1]
Upon the filing of the complaint, the clerk of court required private respondents to
pay docket and legal fees in the total amount of P610.00, broken down as follows:
P450.00 - Docket fee for the Judicial Development Fund under Official Receipt No.
1877773
150.00 - Docket fee for the General Fund under Official Receipt No. 6834215
10.00 - for the Legal Research Fund under Official Receipt No. 6834450. [2]
On September 26, 1991, petitioners moved for the dismissal of the complaint on
the ground that the trial court did not acquire jurisdiction over the case by reason of
private respondents nonpayment of the correct amount of docket fees. Petitioners
contended that in addition to the fees already paid based on the claim
for P100,000.00 for attorneys fees, private respondents should have paid docket
fees in the amount of P21,640.00, based on the alleged value of the two (2) parcels
of land subject matter of the contract of sale sought to be annulled. [3]
On September 30, 1991, private respondents filed opposition to the motion to
dismiss, arguing that outright dismissal of their complaint was not warranted on the
basis of the alleged nonpayment of the correct amount of docket fees, considering
that the amount paid by them was that assessed by the clerk of court. [4] On October
9, 1991, petitioners filed a reply to which private respondents filed, on October 17,
1991, a rejoinder.
On October 21, 1991, the trial court [5] denied petitioners motion to dismiss but
required private respondents to pay the amount of docket fees based on the
estimated value of the parcels of land in litigation as stated in the complaint.
Private respondents filed a motion for reconsideration but their motion was
denied by the trial court. They therefore, brought the matter to the Court of Appeals
which, on February 26, 1992, rendered a decision [6] annulling the orders of the trial
court. The appellate court held that an action for rescission or annulment of contract
is not susceptible of pecuniary estimation and, therefore, the docket fees should not
be based on the value of the real property, subject matter of the contract sought to
be annulled or rescinded. Petitioners moved for reconsideration, but their motion was
denied in a resolution dated March 25, 1992 of the appellate court. Hence, this
petition for review on certiorari.

Rule 141 of the Rules of Court provides:


SEC. 7. Clerks of Regional Trial Courts. - (a) For filing an action or a permissive
counter-claim or money claim against an estate not based on judgment, or for filing
with leave of court a third-party, fourth-party, etc. complaint, or a complaint in
intervention, and for all clerical services in the same, if the total-sum claimed,
exclusive of interest, or the stated value of the property in litigation, is:
1. Not more than P20,000.00 .............P120.00
2. More than P20,000.00 but less than
P40,000.00 ......................... 150.00
3. P40,000.00 or more but less than
P60,000.00 ......................... 200.00
4. P60,000.00 or more but less than
P80,000.00 ... ...................... 250.00
5. P80,000.00 or more but less than
P100,000.00 ........................... 400.00
6. P100,000.00 or more but less than
P150,000.00 ........................... 600.00
7. For each P1,000.00 in excess of
P150,000.00 ............................. 5.00
(b) For filing:
1. Actions where the value of the subject
matter cannot be estimated ............. P400.00
2. Special civil actions except judicial
foreclosure of mortgage which shall be
governed by paragraph (a) above .... 400.00

3. All other actions not involving


property........................... 400.00
In a real action, the assessed value of the property, or if there is none, the estimated
value thereof shall be alleged by the claimant and shall be the basis in computing the
fees. (emphasis added)
Petitioners argue that an action for annulment or rescission of a contract of sale
of real property is a real action and, therefore, the amount of the docket fees to be
paid by private respondent should be based either on the assessed value of the
property, subject matter of the action, or its estimated value as alleged in the
complaint, pursuant to the last paragraph of 7(b) of Rule 141, as amended by the
Resolution of the Court dated September 12, 1990. Since private respondents
alleged that the land, in which they claimed an interest as heirs, had been sold
for P4,378,000.00 to petitioners, this amount should be considered the estimated
value of the land for the purpose of determining the docket fees.
On the other hand, private respondents counter that an action for annulment or
rescission of a contract of sale of real property is incapable of pecuniary estimation
and, so, the docket fees should be the fixed amount of P400.00 in Rule 141, 7(b)(1).
In support of their argument, they cite the cases of Lapitan v. Scandia, Inc.
[7]
and Bautista v. Lim.[8] In Lapitan this Court, in an opinion by Justice J.B.L. Reyes,
held:
A review of the jurisprudence of this Court indicates that in determining whether an
action is one the subject matter of which is not capable of pecuniary estimation, this
Court has adopted the criterion of first ascertaining the nature of the principal action
or remedy sought. If it is primarily for the recovery of a sum of money, the claim is
considered capable of pecuniary estimation, and whether jurisdiction is in the
municipal courts or in the courts of first instance would depend on the amount of the
claim. However, where the basic issue is something other than the right to recover a
sum of money, or where the money claim is purely incidental to, or a consequence
of, the principal relief sought, like in suits to have the defendant perform his part of
the contract (specific performance) and in actions for support, or for annulment of a
judgment or to foreclose a mortgage, this Court has considered such actions as
cases where the subject of the litigation may not be estimated in terms of money,
and are cognizable exclusively by courts of first instance. The rationale of the rule is
plainly that the second class cases, besides the determination of damages, demand
an inquiry into other factors which the law has deemed to be more within the
competence of courts of first instance, which were the lowest courts of record at the
time that the first organic laws of the Judiciary were enacted allocating jurisdiction
(Act 136 of the Philippine Commission of June 11, 1901).

Actions for specific performance of contracts have been expressly pronounced to be


exclusively cognizable by courts of first instance: De Jesus vs. Judge Garcia, L26816, February 28, 1967; Manufacturers Distributors, Inc. vs. Yu Siu Liong, L21285, April 29, 1966. And no cogent reason appears, and none is here advanced
by the parties, why an action for rescission (or resolution) should be differently
treated, a rescission being a counterpart, so to speak, of specific performance. In
both cases, the court would certainly have to undertake an investigation into facts
that would justify one act or the other. No award for damages may be had in an
action for rescission without first conducting an inquiry into matters which would
justify the setting aside of a contract, in the same manner that courts of first instance
would have to make findings of fact and law in actions not capable of pecuniary
estimation expressly held to be so by this Court, arising from issues like those raised
in Arroz v. Alojado, et al., L-22153, March 31, 1967 (the legality or illegality of the
conveyance sought for and the determination of the validity of the money deposit
made); De Ursua v. Pelayo, L-13285, April 18, 1950 (validity of a judgment);
Bunayog v. Tunas, L-12707, December 23, 1959 (validity of a mortgage); Baito v.
Sarmiento, L-13105, August 25, 1960 (the relations of the parties, the right to support
created by the relation, etc., in actions for support); De Rivera, et al. v. Halili, L15159, September 30, 1963 (the validity or nullity of documents upon which claims
are predicated).Issues of the same nature may be raised by a party against whom an
action for rescission has been brought, or by the plaintiff himself. It is, therefore,
difficult to see why a prayer for damages in an action for rescission should be taken
as the basis for concluding such action as one capable of pecuniary estimation a
prayer which must be included in the main action if plaintiff is to be compensated for
what he may have suffered as a result of the breach committed by defendant, and
not later on precluded from recovering damages by the rule against splitting a cause
of action and discouraging multiplicity of suits.
Conformably with this discussion of actions where the value of the case cannot
be estimated, the Court in Bautista v. Lim, held that an action for rescission of
contract is one which cannot be estimated and therefore the docket fee for its filing
should be the flat amount of P200.00 as then fixed in the former Rule 141,
5(10). Said this Court:
We hold that Judge Dalisay did not err in considering Civil Case No. V-144 as
basically one for rescission or annulment of contract which is not susceptible of
pecuniary estimation (1 Morans Comments on the Rules of Court, 1970 Ed, p. 55;
Lapitan vs. Scandia, Inc., L-24668, July 31, 1968, 24 SCRA 479, 481-483).
Consequently, the fee for docketing it is P200, an amount already paid by plaintiff,
now respondent Matilda Lim. (She should pay also the two pesos legal research
fund fee, if she has not paid it, as required in Section 4 of Republic Act No. 3870, the
charter of the U.P. Law Center).

Thus, although eventually the result may be the recovery of land, it is the nature
of the action as one for rescission of contract which is controlling. The Court of
Appeals correctly applied these cases to the present one. As it said:
We would like to add the observations that since the action of petitioners [private
respondents] against private respondents [petitioners] is solely for annulment or
rescission which is not susceptible of pecuniary estimation, the action should not be
confused and equated with the value of the property subject of the transaction; that
by the very nature of the case, the allegations, and specific prayer in the complaint,
sans any prayer for recovery of money and/or value of the transaction, or for actual
or compensatory damages, the assessment and collection of the legal fees should
not be intertwined with the merits of the case and/or what may be its end result; and
that to sustain private respondents [petitioners] position on what the respondent
court may decide after all, then the assessment should be deferred and finally
assessed only after the court had finally decided the case, which cannot be done
because the rules require that filing fees should be based on what is alleged and
prayed for in the face of the complaint and paid upon the filing of the complaint.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Regalado (Chairman), Melo, Puno and Martinez, JJ., concur.

10. [G.R. No. 115683. July 26, 1996]


DELIA MANUEL, petitioner, vs. JUDGE DAVID ALFECHE, JR., in his capacity as
then Presiding Judge of RTC, Region Six, Branch 15, Roxas City, FELIPE
CELINO, DANNY FAJARDO and LEMUEL FERNANDEZ, respondents.
RESOLUTION
PANGANIBAN, J.:
In criminal prosecutions, the civil action is deemed impliedly instituted unless the
complainant waives it, or reserves the right to institute it separately or files it prior to
the criminal. Where the trial court renders a judgment finding the accused guilty of
libel, but motu proprio dismisses complainant's claims for, inter alia, moral and
exemplary damages on the ground of complainant's failure to pay the filing fees
therefor, may the complainant raise the matter via a petition for review
on certiorari directly before this Court, while the judgment of conviction is on appeal

before the Court of Appeals?This is the main question brought before this Court in
this petition to set aside a portion of the Decision [1] of the respondent judge dated
April 21, 1994 in Criminal Case No. 3539 as well as the Order [2]of the same court
dated May 27, 1994 denying the motion for reconsideration.
The Facts
On January 9, 1992, the City Prosecutor of the City of Roxas filed with the
Regional Trial Court, 6th Judicial Region, Branch 15, Roxas City an Information [3]for
libel worded as follows:
That on or about the period September 20-22, 1991, in the City of Roxas, Philippines, and
within the jurisdiction of this Honorable Court, the said accused, FELIPE CELINO, being
then the writer/author; DANNY FAJARDO, Editor-in-Chief, LEMUEL T. FERNANDEZ,
Associate Editor; and JOHN PAUL TIA, Assistant Editor of a regional newspaper known as
Panay News which has considerable circulation in Panay Island and throughout Western
Visayas, including Roxas City and Capiz Province, conspiring, confederating together and
mutually helping one another, did then and there, willfully, unlawfully and feloniously, and
with malicious intent of impeaching the integrity, credibility, honor, and reputation of DELIA
MANUEL, and with the further malicious intent (to expose) DELIA MANUEL to public
hatred, contempt, disrespect and ridicule, prepare, write, arrange, and publish, or cause to be
prepared, written, arranged and published in the regular issue of the said Panay News for the
period September 20-22, 1991, as Article in the front page and/or headline entitled LOCAL
SHABU PEDDLER NOW A MILLIONAIREthe text of which is quoted hereunder:
LOCAL SHABU PEDDLER NOW A MILLIONAIRE
BY: FELIPE V. CELINO
ROXAS CITY - A middle-aged woman here has joined the ranks of millionaires after several
years of selling shabu in the island of Panay.
Named by Narcom agents as "Delia" this woman is the alleged "shabu Queen" in Western
Visayas and has been (raking) in millions of pesos since she started peddling shabu,
marijuana and other prohibited drugs in this part of the country.
According to reliable sources, Delia has been transporting about 750 grams of shabu weekly
from Manila to Panay. A gram of this poor man's Cocaine has a street value of P1,000 more
or less.
What makes her business prosper almost unscathed and very productive is the protection
provided her by a top ranking military officer in Manila, they said.

At present, the (sources) said, the shabu Queen is residing near one of the private schools in
this City. She has three brand new cars. Her house's outside walls are made of bamboo but it
is fully air-conditioned and complete with luxurious household appliances, PN sources added.
In Iloilo, Delia is known as "Madam-Ex". She doesn't deal with small time users. "She
specializes in deals with scions of rich businessmen and even local politicians."
The Narcom has allegedly been monitoring the activities of the shabu queen but has not
nailed her down yet because of lack of cooperation from the public.
which newspaper issues containing the abovequoted article were sent and circulated to, or
caused to be sent or circulated to, and actually read by subscribers and other readers,
especially those in the City of Roxas and Province of Capiz.
That said accused intended to convey, as in fact (have) actually conveyed in said article, false
imputations and malicious insinuations against the said DELIA MANUEL, that is, that said
Delia Manuel is the alleged "SHABU QUEEN" in Western Visayas and has been raking in
millions of pesos since she started peddling shabu, marijuana and other prohibited drugs in
this part of the country, with no good intention or justifiable motives, thereby (unjustly) and
unlawfully besmirching the good name, character, and reputation of said Delia Manuel as a
private person and as a businesswoman.
That as a direct consequence of the publication of the said article, said Delia Manuel
suffered actual, moral and exemplary damages in the amount of TEN MILLION PESOS
(P10, 000,000.00). (Italics supplied)
After trial, the respondent judge rendered the assailed Decision finding three of
the accused guilty and acquitting a fourth. However, "(t)he civil indemnity by way of
moral damages (was) dismissed for lack of jurisdiction" on the ground that petitioner
did not pay the filing fees therefor. In the words of the respondent court:
x x x, close scrutiny of the record disclose that while the offended party seeks to enforce civil
liability against the accused by way of moral damages in the amount of P10,000,000.00
which is alleged in the information, there was no payment of the filing fees corresponding
thereto at the time of the filing of the information on January 9, 1992. For failing on this
requisite, the court did not acquire jurisdiction on the civil indemnity thus claimed. Hence,
the claim for recovery of moral damages by the offended party is dismissed."
The respondent court cited General vs. Claravall[4] in support of its action.
Reconsideration having been denied, petitioner sought to overturn the above
dismissal via the instant petition for review on certiorari under Rule 45.
The Issues

Petitioner argues that "under the new Rules on Criminal Procedure x x x the
filing fees, when moral, nominal, temperate or exemplary damages are claimed in
the criminal case, shall constitute a first lien in the judgment, and thus need not be
paid upon the filing of the information, (and therefore) the filing fees herein was (sic)
not assessed by the Clerk of Court, nor paid by herein petitioner at the time of the
filing of the information." Petitioner further insists that "it is only when the amount
of damages other than actual, has been specified in the information that
the filing fees is (sic) required to be paid upon the filing of the information, x x x and
that since in (this) case the amount of damages stated in the information partakes
firstly of actual damages and is not entirely other than actual, then this case does not
fall under the last par. of Sec. 1, Rule 111" of the 1988 Rules on Criminal Procedure.
In their comment and subsequently in their memorandum, private respondents
counter that the present petition is erroneously filed. As the questioned Decision is a
final judgment, the appropriate remedy would have been ordinary appeal, not appeal
by certiorari. They also argue that "(t)he present petition is pre-mature because the
questioned decision is pending appeal with the Honorable Court of Appeals. x x x (I)f
the questioned decision be reversed ahead by the Court of Appeals x x x (there)
would then be no more basis for the present petition." The accused - herein private
respondents - had gone to the Court of Appeals seeking a reversal of the judgment
of conviction.
The Court's Ruling
The petition is devoid of merit.
While petitioner may be correct in asserting that a direct petition may, under
appropriate circumstances, be taken to this Court from the final judgment of the
Regional Trial Court on pure questions of law in the form and manner provided for in
the Revised Rules of Court, [5] nevertheless, in view of the factual environment of this
case, particularly that private respondents herein had already taken an appeal to the
Court of Appeals to question the trial court's judgment of conviction, the proper
remedy for petitioner is simply ordinary appeal to the said tribunal.
This is so because the award of moral and exemplary damages by the trial court
is inextricably linked to and necessarily dependent upon the factual finding of basis
therefor, viz., the existence of the crime of libel. Inasmuch as the very same Decision
herein assailed is already pending review by the Court of Appeals, there is a distinct
possibility that said court may, if the facts and the law warrant, reverse the trial court
and acquit the accused. In such event, the appellate court's action could collide with
a ruling finding merit in petitioner's contentions before this Court. Such a situation
would lead to absurdity and confusion in the ultimate disposition of the
case. Obviously, this possibility must be avoided at all cost. This is (at least partly)

the raison d'etre for the rule against forum-shopping. [6] Clearly, then, petitioner ought
to have brought her challenge in the Court of Appeals.
In connection with the foregoing discussion, we note petitioner's vehement
insistence that Art. 33 of the Civil Code allows an independent civil action for
damages in cases of defamation, fraud, and physical injuries to be instituted
separately and independently from the criminal. She then concludes that the civil
aspect of the case is not dependent on the criminal, but rather, may proceed
independently thereof, and that therefore, the review of the civil aspect by this Court
may take place simultaneously with and separately from the review of the criminal
aspect by the Court of Appeals.
Such reasoning is misplaced. Sec. 1 of Rule 111 provides that the civil action for
recovery of civil liability is impliedly instituted with the criminal action unless the
offended party waives the civil action prior to the criminal action. In the present case,
the civil action had been actually (not just impliedly) instituted with the criminal
prosecution, as shown by the fact that petitioner took an active part in the
prosecution of the criminal case. As admitted in the petition, "the private prosecutor,
counsel for x x x the petitioner herein" was allowed "upon prior authority and under
the supervision of the City Prosecutor, to handle the prosecution, by presenting all
the
prosecution's
evidence"
and
even
filing
the
Prosecution's
Memorandum. Obviously then, there can no longer be any independentcivil action to
speak of, as the civil aspect had previously been included in the criminal. And
petitioner, by attempting to have recourse to this Court with the criminal aspect still
pending with the Court of Appeals, was effectively trying to split a single cause of
action. This we cannot allow.
Petitioner also posits the non-necessity of paying the filing and docket fees by
reason of the non-specification of the amounts of moral and exemplary damages
being claimed by her, purportedly on the authority of this Court's ruling in General vs.
Claravall (supra). For the sake of clarity, we quote from General:
"This Court's plain intent - to make the Manchester doctrine, requiring payment of filing fees
at the time of the commencement of an action applicable to impliedly instituted civil actions
under Section 1, Rule 111 only when 'the amount of damages, other than actual, is alleged in
the complaint or information' - has thus been made manifest by the language of the
amendatory provisions (adopted by this Court with effect on October 1, 1988).
In any event, the Court now makes that intent plainer, and in the interests of clarity and
certainty, categorically declares for the guidance of all concerned that when a civil action is
deemed impliedly instituted with the criminal in accordance with Section 1, Rule 111 of the
Rules of Court - because the offended party has NOT waived the civil action, or reserved the
right to institute it separately, or instituted the civil action prior to the criminal action -the rule
is as follows:

1) when the 'amount of damages, other than actual, is alleged in the complaint or information'
filed in court, then 'the corresponding filing fees shall be paid by the offended party upon the
filing thereof in Court for trial;
2) in any other case, however - i.e., when the amount of damages is not so alleged in the
complaint or information filed in court, the corresponding filing fees need not be paid and
shall simply 'constitute a first lien on the judgment, except in an award for actual damages.
We hold that said General ruling, especially the last subparagraph abovequoted, was actually intended to apply to a situation wherein either (i) the judgment
awards a claim not specified in the pleading, or (ii) the complainant expressly claims
moral, exemplary, temperate and/or nominal damages but has not specified ANY
amount at all, leaving the quantification thereof entirely to the trial court's discretion,
[7]
and NOT to a situation where the litigant specifies some amounts or parameters
for the awards being sought, even though the different types of damages sought be
not separately or individually quantified. Were we to hold otherwise, the result would
be to permit litigants to continue availing of one more loophole in the rule on
payment of filing fees, and would not serve to attain the purpose of the revised Sec.
1 of Rule 111, which is "to discourage the 'gimmick of libel complainants of using the
fiscal's office to include in the criminal information their claim for astronomical
damages in multiple millions of pesos without paying any filing fees. [8]
WHEREFORE, for utter lack of merit, the instant petition is DISMISSED.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

CAUSE OF ACTION
1. [G.R. No. L-32170. March 31, 1971.]
CITIZENS SURETY & INSURANCE COMPANY, INC., Petitioner,
v. HON. JUDGE A. MELENCIO-HERRERA, SANTIAGO
DACANAY, and JOSEFINA DACANAY, Respondents.
Dayos, Tesoro & Gloria, Jr. for Petitioner.
Respondent Judge for and in his own behalf.

SYLLABUS
1. REMEDIAL LAW; JURISDICTION; ACTION IN PERSONAM; PERSONAL
SERVICE OF SUMMONS REQUIRED. We agree with respondent Judge
that the action of plaintiff petitioner, being in personam, the Court could
not validly acquire jurisdiction on a non-appearing defendant, absent a
personal service of summons within the forum. We have explicitly so ruled
in Pantaleon v. Asuncion, 105 Phil. 765, pointing out without such
personal service, any judgment on a non-appearing defendant would be
violative of due process. In the aforecited case this Court, through Justice
Roberto Concepcion, now Chief Justice, ruled as follows: . . . "It is a wellsettled principle of Constitutional Law that, in an action strictly in
personam, like the one at bar, personal service of summons, within the
forum, is essential to the acquisition of jurisdiction over the person of the
defendant, who does not voluntary submit himself to the authority of the
court. In other words, summons by publication cannot consistently with
the due process clause in the Bill of Rights confer upon the court
jurisdiction over said defendants.Due process of law requires personal
service to support a personal judgment, and, when the proceeding is
strictly in personam brought to determine the personal rights and
obligations of the parties, personal service within the state or a voluntary
appearance in the case is essential to the acquisition of jurisdiction so as
to constitute compliance with the constitutional requirement of due
process. . . .Although a state legislature has more control over the form
of service on its own residents than nonresidents, it has been held that in
actions in personam . . . service by publication on resident defendants
who are personally within the state and can be found therein is not "due
process of law," and statute allowing it is unconstitutional. (16A C.J.S.,
pp. 786, 789; Emphasis our)"
2. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CREDITORS; REMEDY
AGAINST ABSCONDING DEBTORS. The proper recourse for a creditor in
the same situation as petitioner is to locate properties, real or personal, of
the resident defendant debtor with unknown address and cause them to
be attached under Rule 57, Sec. l(f), in which case, the enactment
converts the action into a proceeding in rem or quasi in rem and the
summons by publication may then accordingly be deemed valid and
effective But because debtors who abscond and conceal themselves are
also quite adept at concealing their properties, the dismissal of the case
below by respondent Judge should be set aside and the case held pending
in the courts archives, until petitioner as plaintiff succeed in determining
the whereabouts of the defendants person or properties and causes valid
summons to be served personally or by publication as the case may be.
In this manner, the tolling of the period of prescription for as long as the
debtor remains in hiding would properly be a matter of court record, and

he can not emerge after a sufficient lapse of time from the dismissal of
the case to profit from his own misdeed and claim prescription of his just
debt.
DECISION
REYES, J.B.L., J.:
Petitioner Citizens Surety & Insurance Company, Inc. seeks review of an
order of respondent Judge in Civil Case No. 77134 of the Court of First
Instance of Manila, Branch XVII, entitled "Citizens Surety & Insurance
Co., Inc. v. Santiago Dacanay and Josefina Dacanay," dismissing the
complaint for lack of proper service of summons upon defendants.
The record is to the effect that petitioner had filed its complaint in the
Court below, alleging that at request of defendant Santiago Dacanay, the
plaintiff Surety Company had issued its Surety Bonds Nos. 4942 and
4944, the first, in favor of Gregorio Fajardo to guarantee payment of a
P5,000-promissory note executed by said Dacanay, and the second, in
favor of Manufacturers Bank & Trust Co., to guarantee payment of another
promissory note in like amount; that in consideration of said bonds,
Santiago and Josefina Dacanay executed Indemnity Agreements, binding
themselves jointly and severally to indemnify plaintiff for any losses, costs
and expenses which it might sustain in connection with the issuance of
the bonds aforesaid, with interest at 12% per annum; that as additional
security, the Dacanays mortgaged to plaintiff a parcel of land in Baguio
City, covered by Certificate of Title No. T-8116, the mortgage having been
duly recorded; that the promissory notes were not paid .and as a result,
plaintiff Surety was compelled to pay P5,000.00 to Gregorio Fajardo and
P4,081.69 to the Manufacturers Bank; that the Dacanays failed to
reimburse the Surety for such payments, whereupon the Surety caused
the extrajudicial foreclosure of the mortgage to pay its claim of
P12,941.69 representing its payments, interest and stipulated liquidated
damages: that at the foreclosure sale, the land mortgaged was sold to
plaintiff, as highest bidder, for the sum of P2,000.00 leaving an
unsatisfied balance of P10,491.69, that plaintiff sought to recover from
defendants Dacanay, plus 10% thereof as attorneys fees, and the costs.
At petitioners request, respondent Judge caused summons to be made by
publication in the newspaper Philippines Herald. But despite the
publication and deposit of a prepaid copy of the complaint at the Manila
post office, defendants did not appear within the period of 60 days from
last publication, as required by the summons.
Plaintiff then asked that defendants be declared in default; but :instead,

the Judge, by order of May 16, 1970, asked it to show cause why the
action should not be dismissed, the suit being in personam and
defendants not having appeared. Then, on May 29, 1970, respondent
Judge dismissed the case, despite plaintiff Suretys argument that the
summons by publication was sufficient and valid under section 16 of Rule
14 of the Revised Rules of Court.
We agree with respondent Judge that the action of plaintiff petitioner,
being in personam, the Court could not validly acquire jurisdiction on a
non-appearing defendant, absent a personal service of summons within
the forum. We have explicitly so ruled in Pantaleon v. Asuncin, 105 Phil.
765, pointing out without such personal service, any judgment on a nonappearing defendant would be violative of due process. In the aforecited
case this Court, through Justice Roberto Concepcin, now Chief Justice,
ruled as follows:jgc:chanrobles.com.ph
"Apart from the foregoing, it is well-settled principle of Constitutional Law
that, in an action strictly in personam, like the one at bar, personal
service of summons, within the forum. is essential to the acquisition of
jurisdiction over the person of the defendant, who does not voluntarily
submit himself to the authority of the court. In other words, summons by
publication cannot consistently with the due process clause in the Bill of
Rights confer upon the court jurisdiction over said defendants.
Due process of law requires personal service to support a personal
judgment, and. when the proceeding is strictly in personam brought to
determine the personal rights and obligations of the parties, personal
service within the state or a voluntary appearance in the case is essential
to the acquisition of jurisdiction so as to constitute compliance with the
constitutional requirement of due process. . . .
Although a state legislature has more control over the form of service on
its own residents than nonresidents, it has been held that in actions in
personam . . . service by publication on resident defendants, who are
personally within the state and can be found therein is not "due process of
law," and a statute allowing it is unconstitutional. (16A C.J.S., pp. 786,
789; Emphasis ours.)"
The proper recourse for a creditor in the same situation as petitioner is to
locate properties, real or personal, of the resident defendant debtor with
unknown address and cause them to be attached under Rule 57, section
1(f), in which case, the attachment converts the action into a proceeding
in rem or quasi in rem and the summons by publication may then
accordingly be deemed valid and effective.
But because debtors who abscond and conceal themselves are also quite
adept at concealing their properties, the dismissal of the case below by

respondent Judge should be set aside and the case held pending in the
courts archives, until petitioner as plaintiff succeeds in determining the
whereabouts of the defendants person or properties and causes valid
summons to be served personally or by publication as the case may be.
In this manner, the tolling of the period of prescription for as long as the
debtor remains in hiding would properly be a matter of court records and
he can not emerge after a sufficient lapse of time from the dismissal of
the case to profit from his own misdeed and claim prescription of his just
debt.
WHEREFORE, the order of dismissal of the case issued by the Court below
is hereby set aside, and in the interest of justice, the proceedings are
ordered suspended, to be held pending until the plaintiff petitioner
succeeds in ascertaining the whereabouts of the defendants and/or
locating properties of the same, to enable proper summons to be issued
conformably to this Opinion. No costs.
Concepcion, C.J., Makalintal, Zaldivar, Fernando, Teehankee, Barredo,
Villamor and Makasiar, JJ., concur.
Dizon and Castro, JJ., reserve their votes.

2. G.R. No. L-45350

May 29, 1939

BACHRACH MOTOR CO., INC., plaintiff-appellant,


vs.
ESTEBAN ICARAGAL and ORIENTAL COMMERCIAL CO., INC., defendants-appellees.
B. Francisco for appellant.
Matias P. Perez for appellees.
MORAN, J.:
On June 11 , 1930, defendant herein, Esteban Icaragal, with one Jacinto Figueroa, for value
received, executed in favor of the plaintiff, Bachrach Motor Co., Inc., a promissory note for one
thousand six hundred fourteen pesos (P1,614), and in security for its payment, said Esteban
Icaragal executed a real estate mortgage on a parcel of land in Pagil, Laguna, which was duly
registered on August 5, 1931, in the registry of deeds of the Province of Laguna. Thereafter,
promissors defaulted in the payment of the agreed monthly installments; wherefore, plaintiff
instituted in the Court of First Instance of Manila an action for the collection of the amount due on
the note. Judgment was there rendered for the plaintiff. A writ of execution was subsequently
issued and, in pursuance thereof, the provincial sheriff of Laguna, at the indication of the plaintiff,
levied on the properties of the defendants, including that which has been mortgaged by Esteban
Icaragal in favor of the plaintiff. The other defendant herein, Oriental Commercial Co., Inc.,
interposed a third-party claim, alleging that by virtue of a writ of execution issued in civil case No.
88253 of the municipal court of the City of Manila, the property which was the subject of the

mortgage and which has been levied upon by the sheriff, had already been acquired by it at the
public auction on May 12, 1933. By reason of this third-party claim, the sheriff desisted from the
sale of the property and, in consequence thereof, the judgment rendered in favor of the plaintiff
remained unsatisfied. Whereupon, plaintiff instituted an action to foreclose the mortgage. The
trial court dismissed the complaint and, from the judgment thus rendered plaintiff took the present
appeal.
The sole question before us is whether or not plaintiff-appellant is barred from foreclosing the
real estate mortgage after it has elected to sue and obtain a personal judgment against the
defendant-appellee on the promissory note for the payment of which the mortgage was
constituted as a security.
In Hijos de I. de la Rama vs. Sajo (45 Phil., 703), the mortgage creditor, instead of instituting
proceedings for the foreclosure of his mortgage, filed a personal action for the recovery of the
debt. The mortgage debtor objected to the action, alleging that, if it be allowed, he would be
subjected to two suits, one personal and another for the foreclosure of the mortgage. We
answered this objection, laying down the rule that "in the absence of statutory provisions, the
mortgagee may waive the right to foreclose his mortgage and maintain a personal action for the
recovery of the indebtedness." And we emphasized the doctrine in the later part of our decision
by saying that "the rule is well established that the creditor may waive whatever security he has
and maintain a personal action, in the absence of statutory provisions to the contrary." (P. 705.)
It is true that Matienzo vs. San Jose (G.R. No. 39510, June 16, 1934), a decision of three justices
of this court ruled that "apart from special proceedings regulated by statute, an unsatisfied
personal judgment for a debt is no bar to an action to enforce a mortgage or other lien given as
security for such debt." But this decision cannot be made to prevail over a decision given by this
court in banc. Besides, the rule laid down in the De la Rama case is more in harmony with the
principles underlying our procedural system.
Most of the provisions of our Code of Civil Procedure are taken from that of California, and in that
jurisdiction the rule has always been, and still is, that a party who sues and obtains a personal
judgment against a defendant upon a note, waives thereby his right to foreclose the mortgage
securing it. (Ould vs. Stoddard, 54 Cal., 613; Felton vs. West, 102 Cal., 266;
Craiglow vs. Williams, 514 Cal. App., 45; 188 Pac., 76, following doctrine in Biddel vs. Brizzolara,
64 Cal., 354; 30 Pac., 609; Brown vs. Willis, 67 Cal., 235; 7 Pac., 682; Barbieri vs. Ramelli, 84
Cal., 134; 23 Pac., 1086; Toby vs. Oregon Pac. R. Co., 98 Cal., 490; 33 Pac., 550;
McKean vs. German-American Sav. Bank., 118 Cal., 334; 50 Pac., 656; Woodward vs. Brown,
119 Cal., 283; 63Am. St. Rep., 108; 51 Pac., 2, 542; Meyer vs. Weber, 133 Cal., 681; 65 Pac.,
1110; Crisman vs. Lanterman, 149 Cal., 647, 651; 117 Am. St. Rep., 167;87 Pac., 89;
Gnarin vs. Swiss American Bank, 162 Cal., 181; 121 Pac., 726.) The same rule obtains in the
states of Idaho, Montana, Nevada and Utah. (See Johns on Mortgages, 986, 1015, 1019, 1046.)
It is true that this rule is founded on express statutory provisions to that effect. We have here,
however, section 708 of our Code of Civil Procedure which provides that a creditor holding a
claim against the deceased, secured by a mortgage or other collateral security, has to elect
between enforcing such security or abandoning it by presenting his claim before the committee
and share it in the general assets of the estate. Under this provision, It has been uniformly held
by this court that, if the plaintiff elects one of the two remedies thus provided, he waives the
other, and if he fails, he fails utterly. (Veloso vs. Heredia, 33 Phil., 306; Cf. Osorio vs. San
Agustin, 25 Phil., 404.) The same rule applies under the Insolvency Law. (Sec. 59, Act No. 1956;
Unson and Lacson vs. Central Capiz, 47 Phil., 42; Chartered Bank of India, Australia and

China vs. Imperial, 48 Phil., 931; O'Brien vs. Del Rosario and Bank of the Philippine Islands, 49
Phil., 657.) There is indeed no valid reason for not following the same principle of procedure in
ordinary civil actions. With the substitution of the administrator or executor in place of the
deceased, or of the assignee or receiver in place of the insolvent debtor, the position of the
parties plaintiff and defendant in the litigation is exactly the same in special or insolvency
proceedings as in ordinary civil actions.
But, even if we have no such section 708 of our Code of Civil Procedure, or section 59 of the
Insolvency Law, we have still the rule against splitting a single cause of action. This rule, though
not contained in any statutory provision, has been applied by this court in all appropriate cases.
Thus, in Santos vs. Moir (36 Phil., 350, 359), we said: "It is well recognized that a party cannot
split a single cause of action into parts and sue on each part separately. A complaint for the
recovery of personal property with damages for detention states a single cause of action which
cannot be divided into an action for possession and one for damages; and if suit is brought for
possession only a subsequent action cannot be maintained to recover the damages resulting
from the unlawful detention." In Rubio de Larena vs. Villanueva (53 Phil., 923, 927), we reiterated
the rule by stating that" . . . a party will not be permitted to split up a single cause of action and
make it the basis of several suits" and that when a lease provides for the payment of the rent in
separate installments, each installment constitutes an independent cause of action, but when, at
the time of the complaint is filed, there are several installments due, all of them constitute a
single cause of action and should be included in a single complaint, and if some of them are not
included, they are barred. The same doctrine is stated in Lavarro vs. Labitoria (54 Phil., 788),
wherein we said that "a party will not be permitted to split up a single cause of action and make it
a basis for several suits" and that a claim for partition of real property as well as improvements
constitutes a single cause of action, and a complaint for partition alone bars a subsequent
complaint for the improvements. And in Blossom & Co. vs. Manila Gas Corporation (55 Phil.,
226, 240), we held that "as a general rule a contract to do several things at several times is
divisible in its nature, so as to authorize successive actions; and a judgment recovered for a
single breach of a continuing contract or covenant is no bar to a suit for a subsequent breach
thereof. But where the covenant or contract is entire, and the breach total, there can be only one
action, and plaintiff must therein recover all his damages."
The rule against splitting a single cause of action is intended "to prevent repeated litigation
between the same parties in regard to the same subject of controversy; to protect defendant from
unnecessary vexation; and to avoid the costs and expenses incident to numerous suits." (1 C.J.,
1107) It comes from that old maxim nemo bedet bis vexare pro una et eadem cause (no man
shall be twice vexed for one and the same cause). (Ex parteLange, 18 Wall., 163, 168; 21 Law.
ed., 872; also U.S. vs. Throckmorton, 98 U.S., 61; 25 Law. ed., 93.) And it developed, certainly
not as an original legal right of the defendant, but as an interposition of courts upon principles of
public policy to prevent inconvenience and hardship incident to repeated and unnecessary
litigations (1 C.J., 1107.)
For non-payment of a note secured by mortgage, the creditor has a single cause of action
against the debtor. This single cause of action consists in the recovery of the credit with
execution of the security. In other words, the creditor in his action may make two demands, the
payment of the debt and the foreclosure of his mortgage. But both demands arise from the same
cause, the non-payment of the debt, and, for that reason, they constitute a single cause of
action. Though the debt and the mortgage constitute separate agreements, the latter is
subsidiary to the former, and both refer to one and the same obligation. Consequently, there
exists only one cause of action for a single breach of that obligation. Plaintiff, then, by applying

the rule above stated, cannot split up his single cause of action by filing a complaint for payment
of the debt, and thereafter another complaint for foreclosure of the mortgage. If he does so, the
filing of the first complaint will bar the subsequent complaint. By allowing the creditor to file two
separate complaints simultaneously or successively, one to recover his credit and another to
foreclose his mortgage, we will, in effect, be authorizing him plural redress for a single breach of
contract at so much cost to the courts and with so much vexation and oppression to the debtor.
We hold, therefore, that, in the absence of express statutory provisions, a mortgage creditor may
institute against the mortgage debtor either a personal action for debt or real action to foreclose
the mortgage. In other words, he may pursue either of the two remedies, but not both. By such
election, his cause of action can by no means be impaired, for each of the two remedies is
complete in itself. Thus, an election to bring personal action will leave open to him all the
properties of the debtor for attachment and execution, even including the mortgaged property
itself. And, if he waives such personal action and pursues his remedy against the mortgaged
property, an unsatisfied judgment thereon would still give him the right to sue for a deficiency
judgment, in which case, all the properties of the defendant, other than the mortgaged property,
are again open to him for the satisfaction of the deficiency. In either case, his remedy is
complete, his cause of action undiminished, and any advantages attendant to the pursuit of one
or the other remedy are purely accidental and are all under his right of election. On the other
hand, a rule that would authorize the plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the mortgaged property, would result not
only in multiplicity of suits so offensive to justice (Soriano vs. Enriquez, 24 Phil., 584) and
obnoxious to law and equity (Osorio vs.San Agustin, 25 Phil., 404), but also in subjecting the
defendant to the vexation of being sued in the place of his residence of the plaintiff, and then
again in the place where the property lies.
In arriving at the foregoing conclusion, we are not unaware of the rule prevailing in certain States
of the American Union, to the effect that, in cases like the one at bar, the creditor can pursue his
remedies against the note and against the security concurrently or successively. The reason
given for the rule seems to be that the causes of action in the two instances are not the same,
one being personal and the other, real. But, as we have heretofore stated, the creditor's cause of
action is not only single but indivisible, although the agreements of the parties, evidenced by the
note and the deed of mortgage, may give rise to different remedies. (Frost vs. Witter, 132 Cal.,
421.) The cause of action should not be confused with the remedy created for its enforcement.
And considering, as we have shown, that one of the two remedies available to the creditor is as
complete as the other, he cannot be allowed to pursue both in violation of those principles of
procedure intended to secure simple, speedy and unexpensive administration of justice.
Judgment is affirmed, with costs against the appellant.
Avancea, C.J., Villa-Real, and Concepcion, JJ., concur.

3. G.R. No. L-35453 September 15, 1989


INDUSTRIAL FINANCE CORPORATION, petitioner,
vs.

HON. SERGIO A.F. APOSTOL, Judge of the Court of First Instance of Rizal, Branch XVI,
Quezon City, JUAN DELMENDO and HONORATA DELMENDO and JOAQUIN PADILLA and
SOCORRO PADILLA,respondents.
Santos S. Carlos for petitioner.
Elizardo Delmendo for private respondents.

FERNAN, C.J.:
The present petition is a direct appeal from the summary judgment dated March 15, 1972 of the
then Court of First Instance of Rizal, Branch 16 (Quezon City) in Civil Case No. Q-15942 entitled
"Juan A. Delmendo and Honorata Delmendo v. Joaquin Padilla and Socorro Padilla and
Industrial Finance Corporation" as well as the order of said court dated July 7, 1972 denying
petitioner's motion for reconsideration of said judgment.
As gathered from the records, the facts are as follows:
In 1968, spouses Joaquin Padilla and Socorro Padilla bought on credit three units of Isuzu trucks
from the Industrial Transport and Equipment, Inc. They executed a promissory note for
P159,600, the balance of the purchase price, securing payment thereof by a chattel mortgage of
said trucks and, as additional collateral, a real estate mortgage on their property covered by
Transfer Certificate of Title No. T-133625 in favor of the seller. 1Subsequently, Industrial Transport
and Equipment, Inc. indorsed the note and assigned the real estate mortgage to petitioner Industrial
Finance Corporation (IFC), which assignment was duly registered in the Registry of Deeds of Quezon
City and annotated on the title of the mortgaged realty.
On May 15, 1970, in view of the failure of the Padillas to pay several installments on the note, the
assignee IFC sued Joaquin Padilla in the Court of First Instance of Rizal (Quezon City) for the
recovery of the unpaid balance on the note including attorney's fees. 2 In due time, decision was
rendered on April 16, 1975, the dispositive portion of which reads :
WHEREFORE, premises considered judgment is hereby rendered in favor of
plaintiff (IFC) and against defendant (Joaquin Padilla) to pay plaintiff.
A. the sum of P82,996.75 with twelve (12 %) percent interest per annum from the
date of the filing of the complaint until fully paid;
B. to pay attomey's fees in the amount of P20,749.93 equivalent to 25% of the
whole amount due; and
C. to pay the costs of this suit. 3
On appeal to the Court of Appeals, the trial court was sustained except for the modification that
the attorney's fees were reduced to 12 % of the balance . 4 As no appeal was brought by either of
the parties, the appellate court decision became final and executory.

Meanwhile, on September 9, 1971, private respondents Juan Delmendo and Honorata


Delmendo filed a complaint against petitioner IFC, as principal party, and the Padilla spouses, as
formal parties, in respondent Court of First Instance (Civil Case No. Q-15942). The Delmendos
alleged that they were the transferees of the real property covered by Transfer Certificate of Title
No. T-133625 of the Quezon City Register of Deeds which was mortgaged earlier by the Padillas
to the Industrial Transport and Equipment, Inc. to secure the payment of a promissory note in the
sum of P 159,600 and then assigned to petitioner IFC. The Delmendos prayed for the
cancellation of the mortgage lien annotated on Transfer Certificate of Title No. T-133625 and the
delivery to them by petitioner of the owner's copy of said title with damages and attorney's fees,
considering that petitioner IFC had waived its rights over the mortgage when it instituted a
personal action against the Padillas in Civil Case No. Q-14417 for collection of a sum of money.
Petitioner IFC moved for the dismissal of the complaint, contending that it had not waived its right
over the mortgage lien.
The Delmendos filed a motion for summary judgment which respondent trial court granted. Thus:
WHEREFORE, for being meritorious, the same is hereby granted. Judgment is
rendered, as prayed for in the Complaint.
a) declaring the real estate mortgage in favor of the Industrial Transport and
Equipment Corporation and the assignment thereof in favor of the Industrial
Finance Corporation forfeited, waived and abandoned, and therefore released
pursuant to law and jurisprudence;
b) ordering the Register of Deeds of Quezon City to remove and cancel from
Transfer Certificate of Title No. 133625, Book T-672, Page 25, the annotations of
the real estate mortgage (PE-8612/T- 133625 and of the assignment of mortgage
(PE- 8768/T-133265);
c) ordering the defendant Industrial Finance Corporation to surrender to the
Register of Deeds of Quezon City the owner's copy of TCT No. T-133626 upon
receipt of this order; and
d) with costs against the defendants.
SO ORDERED. 5
Upon denial of its motion for reconsideration, petitioner IFC came to this Court raising the issue
of whether, by filing a personal action for the recovery of a debt secured by a real estate
mortgage, petitioner is deemed to have abandoned, ipso jure, its mortgage lien on the property in
question.
The above question is certainly far from novel. In a host of decided cases, the most recent of
which is Danao v. Court of Appeals, 6 this Court has resolved this issue in the affirmative In Manila
Trading and Supply Co. v. Co Kim and So Tek, 7 we declared:
The rule is now settled that a mortgage creditor may elect to waive his security
and bring, instead, an ordinary action to recover the indebtedness with the right
to execute a judgment thereon on all the properties of the debtor, including the

subject- matter of the mortgage, subject to the qualification that if he fails in the
remedy by him elected, he cannot pursue further the remedy he has waived.
The case of Bachrach Motor Co., Inc. v. Icarangal and Oriental Commercial Co., Inc., 8 which
similarly involves a promissory note secured by a real estate mortgage, gives us an extensive
discussion on the rule, to wit:
For non-payment of a note secured by mortgage, the creditor has a single cause
of action against the debtor. This single cause of action consists in the recovery
of the credit with execution of the security. In other words, the creditor in his
action may make two demands, the payment of the debt and the foreclosure of
his mortgage. But both demands arise from the same cause, the non-payment of
the debt, and, for that reason, they constitute a single cause of action. Though
the debt and the mortgage constitute separate agreements, the latter is
subsidiary to the former, and both refer to one and the same obligation.
Consequently, there exists only one cause of action for a single breach of that
obligation. Plaintiff, then, by applying the rule above stated, cannot split up his
single cause of action by filing a complaint for foreclosure of the mortgage. If he
does so, the filing of the first complaint will bar the subsequent complaint. By
allowing the creditor to file two separate complaints simultaneously or
successively, one to recover his credit and another to foreclose his mortgage, we
will, in effect, be authorizing him plural redress for a single breach of contract at
so much cost to the courts and with so much vexation and oppression to the
debtor.
We hold, therefore, that, in the absence of express statutory provisions, a
mortgage creditor may institute against the mortgage debtor either a personal
action for debt or a real action to foreclose the mortgage. In other words, he may
pursue either of the two remedies, but not both. By such election, his cause of
action can by no means be impaired, for each of the two remedies is complete in
itself. Thus, an election to bring a personal action will leave open to him all the
properties of the debtor for attachment and execution, even including the
mortgaged property itself. And, if he waives such personal action and pursues his
remedy against the mortgaged property, an unsatisfied judgment thereon would
still give him the right to sue for a deficiency judgment, in which case, all the
properties of the defendant, other than the mortgaged property, are again open to
him for the satisfaction of the deficiency. In either case, his remedy is complete,
his cause of action undiminished, and any advantages attendant to the pursuit of
one or the other remedy are purely accidental and are all under his right of
election.
We likewise held in Movido v. RFC and the Provincial Sheriff of Samar, 9 that "a mortgagee who
sues and obtains a personal judgment against a mortgagor upon his credit waives thereby his right to
enforce the mortgage securing it."
Therefore, by instituting Civil Case No. Q-14417 in the Court of First Instance of Rizal (Quezon
City) to recover the unpaid balance on the promissory note from the Padilla spouses and by
subsequently obtaining a judgment in its favor, petitioner IFC is considered to have abandoned
its mortgage lien on the subject property covered by Transfer Certificate of Title No. T-133625.

The end result is the discharge of the real estate mortgage and the Delmendos, having
purchased the mortgaged property, automatically step into the shoes of the original mortgagors
with every right to have the title delivered to them free from said encumbrance.
WHEREFORE, finding no error in the summary judgment under appeal, the same is hereby
affirmed in toto.
Considering the length of time that this case has been pending, this decision is declared
immediately executory.
SO ORDERED.

4. G.R. No. L-46000 March 18, 1985


GLICERIO AGUSTIN (Deceased) as Administrator of the Intestate Estate of Susana
Agustin, petitioner-plaintiff-appellant,
vs.
LAUREANO BACALAN and the PROVINCIAL SHERIFF OF CEBU, respondents-defendantsappellees.

GUTIERREZ, JR., J.:


The precursor of this case was a complaint for ejectment with damages filed by plaintiff-appellant
Agustin, as adininistrator of the Intestate Estate of Susana Agustin, against defendant-appellee
Bacalan, before the City Court of Cebu.
Bacalan is a lessee of a one-door ground floor space in a building owned by the late Susana
Agustin. Due to nonpayment of rentals despite repeated demands an action to eject him was
filed.
In his complaint, the plaintiff-appellant prayed that the defendant-appellee be ordered to
immediately vacate the place in question, to pay plaintiff-appellant the sum of P2,300.00
representing arrearages in rentals plus the corresponding rentals until he actually vacates the
place, attorney's fees, expenses, and costs.
In his answer, the defendant-appellee included a counter-claim alleging that the present action
was "clearly unfounded and devoid of merits, as it is tainted with malice and bad faith on the part
of the plaintiff for the obvious reason that plaintiff pretty well knows that defendant does not have
any rentals in arrears due to the estate of Susana Agustin, but notwithstanding this knowledge,
plaintiff filed the present action merely to annoy, vex, embarrass and inconvenience the
defendant." He stated, "That by virtue of the unwarranted and malicious filing of this action by the
plaintiff against the defendant, the latter suffered, and will continue to suffer, actual and moral
damages in the amount of no less than P50,000.00; P10,000.00 in concept of exemplary
damages. In addition, defendant has been compelled to retain the services of undersigned

counsel to resist plaintiffs' reckless, malicious and frivolous claim and to protect and enforce his
rights for which he obligated himself to pay the further sum of P3,500.00 as attorney's fees."
The City Court of Cebu subsequently rendered judgment dismissing the counterclaim and
ordering the defendant to vacate the premises in question and to pay the plaintiff the sum of
P3,887.10 as unpaid back rentals and the sum of P150.00 as attorney's fees' From this decision,
the defendant filed an appeal with Branch Ill of the Court of First Instance of Cebu. The case was
designated as Civil Case No. R-12430.
Availing of Republic Act 6031 which does away with trials de novo in appeals before it, the Court
of First Instance rendered a decision, the dispositive portion of which reads:
WHEREFORE, based on all the foregoing considerations, the appealed judgment
is hereby set aside. Judgment is hereby required in favor of the defendant
1. Ordering the plaintiff to pay.
a) P10,000.00 as moral damages;
b) P5,000.00 as exemplary damages;
c) P1,000.00 as attorney's fees; and
2. With costs against plaintiff.
JUDGMENT REVERSED.
No appeal was taken by the plaintiff-appellant. The decision lapsed into finality and became
executory. A writ of execution was issued by virtue of which a notice to sell at public auction real
properties belonging to the estate of Susana Agustin was issued by the Deputy Sheriff to satisfy
judgment in the case. Plaintiff's counsel filed a motion for reconsideration, confessing his fault
and giving the reason why he failed to perfect the appeal on time. The motion was denied.
Thereafter, with the aid of new counsel, the plaintiff-appellant filed a complaint with Branch V,
Court of First Instance of Cebu, against the defendant and the Deputy Sheriff of Cebu for the
declaration of the nullity of the above-cited decision of Branch III, Court of First Instance of Cebu
in the ejectment case on the ground that the exercise of its appellate jurisdiction was null and
void from the beginning for the following reasons:
(a) It grants relief in the total sum of P16,000.00 (exclusive of costs) distributed
thus:
P10,000.00 as moral damages
P5,000.00 as exemplary damages
P1,000.00 as attorney's fees
which is clearly beyond the jurisdiction of the City Court of Cebu; Section 88 of
the Judiciary Act of 1948, as amended by Rep. Acts Nos. 2613 and 3828, limits

the jurisdiction of the city courts in civil cases to P10,000.00 as the maximum
amount of the demand (exclusive of interest and costs);
(b) Moreover, said Decision (Annex "G") grants moral damages to the defendant
in the sum of P10,000.00 which constitutes a grave abuse of discretion
amounting to lack of jurisdiction, there being no evidence to support it and the
subject matter of the suit in Civil Case No. R-13504 being purely contractual
where moral damages are not recoverable.
A motion to dismiss was filed by the defendant on the grounds that the plaintiff has no cause of
action and that the court lacks jurisdiction to declare the nullity of a decision of another branch of
the Court of First Instance of Cebu.
While rejecting the second ground for the motion to dismiss, the court sustained the defendant
and ruled:
Clearly from a reading of the complaint, the plaintiff seeks the annulment of the
decision rendered by the Third Branch of this Court because the award exceeded
the jurisdiction amount cognizable by the City Court of Cebu and the said Branch
III of this Court has no jurisdiction to award the defendants herein (plaintiff in Civil
Case No. 12430) an amount more than P10,000.00;
It is the considered opinion of this Court that this allegation of the herein plaintiff
cannot be availed of as a ground for annulment of a judgment. It may perhaps, or
at most, be a ground for a petition for certiorari. But then, the remedy should be
availed of within the reglementary period to appeal. Nevertheless, even if the
plaintiff did take his cause by certiorari, just the same, it would have been futile....
xxx xxx xxx
In fine, this Court believes that the present complaint fails to allege a valid cause
of action as the same is only a clear attempt at utilizing the remedy for the
annulment of the judgment rendered by this Court in Civil Case No. 12430 to
offset the adverse effects of failure to appeal.
Plaintiff-appellant's motion for reconsideration was denied, prompting him to file an appeal before
the Court of Appeals, which, in a resolution, certified the same to us on the ground that it involves
pure questions of law.
We ruled in Macabingkil v. People's Homesite and Housing Corporation (72 SCRA 326, citing
Reyes v. Barretto-Datu, 94 Phil. 446, 448-449)Under our rules of procedure, the validity of a judgment or order of the court,
which has become final and executory, may he attacked only by a direct action or
proceeding to annul the same, or by motion in another case if, in the latter case,
the court had no jurisdiction to enter the order or pronounce the judgment
(section 44, Rule 39 of the Rules of Court). The first proceeding is a direct attack
against the order or judgment, because it is not incidental to, but is the main
object of, the proceeding. The other one is the collateral attack, in which the
purpose of the proceedings is to obtain some relief, other than the vacation or

setting aside of the judgment, and the attack is only an incident. (I Freeman on
Judgments, sec. 306, pages 607-608.) A third manner is by a petition for relief
from the judgment order as authorized by the statutes or by the rules, such as
those expressly provided in Rule 38 of the Rules of Court, but in this case it is to
be noted that the relief is granted by express statutory authority in the same
action or proceeding in which the judgment or order was entered ...
The question is thus poised, whether or not the present action for the annulment of the judgment
in the ejectment case is the proper remedy after it has become final and executory.
To this procedural dilemma, the solution lies in the determination of the validity of the judgment
sought to be annulled, for against a void judgment, plaintiff-appellant's recourse would be proper.
There is no question as to the validity of the court's decision with respect to the issue of physical
possession of property, the defendant-appellee's right to the same having been upheld. However,
the plaintiff-appellant assails the money judgment handed down by the court which granted
damages to the defendant-appellee. By reason thereof, he seeks the declaration of the nullity of
the entire judgment.
It is the plaintiff-appellant's contention that moral damages may not properly be awarded in
ejectment cases, the only recoverable damages therein being the reasonable compensation for
use and occupancy of the premises and the legal measure of damages being the fair rental value
of the property.
Plaintiff-appellant loses sight of the fact that the money judgment was awarded the defendantappellee in the concept of a counterclaim. A defending party may set up a claim for money or any
other relief which he may have against the opposing party in a counterclaim (Section 6, Rule 6,
Revised Rules of Court). And the court may, if warranted, grant actual, moral, or exemplary
damages as prayed for. The grant of moral damages, in the case at bar, as a counterclaim, and
not as damages for the unlawful detention of property must be upheld. However, the amount
thereof is another matter.
Plaintiff-appellant raises the issue of whether or not the Court of First Instance may, in an appeal,
award the defendant-appellee's counterclaim in an amount exceeding or beyond the jurisdiction
of the court of origin.
It is well-settled that a court has no jurisdiction to hear and determine a set-off or counterclaim in
excess of its jurisdiction (Section 5, Rule 5, Revised Rules of Court; Ago v. Buslon, 10 SCRA
202). A counterclaim beyond the court's jurisdiction may only be pleaded by way of defense, the
purpose of which, however, is only to defeat or weaken plaintiff's claim, but not to obtain
affirmative relief (Section 5, Rule 5, Revised Rules of Court). Nevertheless, the defendantappellee, in the case at bar, set up his claim in excess of the jurisdiction of the city court as a
compulsory counterclaim. What is the legal effect of such a move?
Pertinent to our disposition of this question is our pronouncement in the case of Hyson Tan, et al.
v. Filipinas Compania de Seguros, et al., (G.R. No. L-10096, March 23, 1956) later adopted
in Pindangan Agricultural Co., Inc. v. Dans (6 SCRA 14) and the later case of One Heart Club,
Inc. v. Court of Appeals (108 SCRA 416) to wit:
xxx xxx xxx

... An appellant who files his brief and submits his case to the Court of Appeals for
decision, without questioning the latter's jurisdiction until decision is rendered
therein, should be considered as having voluntarily waives so much of his claim
as would exceed the jurisdiction of said Appellate Court; for the reason that a
contrary rule would encourage the undesirable practice of appellants submitting
their cases for decision to the Court of Appeals in expectation of favorable
judgment, but with intent of attacking its jurisdiction should the decision be
unfavorable. ...
Thus, by presenting his claim voluntarily before the City Court of Cebu, the defendant-appellee
submitted the same to the jurisdiction of the court. He became bound thereby. The amount of
P10,000.00 being the jurisdictional amount assigned the City Court of Cebu, whose jurisdiction
the defendant-appellee has invoked, he is thereby deemed to have waived the excess of his
claim beyond P10,000.00. It is as though the defendant-appellee had set up a counterclaim in
the amount of P10,000.00 only. May the Court of First Instance then, on appeal, award
defendant-appellee's counterclaim beyond that amount?
The rule is that a counterclaim not presented in the inferior court cannot be entertained in the
Court of First Instance on appeal (Francisco, The Revised Rules of Court in the Philippines, Vol.
III, p. 26, citing the cases of Bernardo v. Genato, 11 Phil. 603 and Yu Lay v. Galmes, 40 Phil.
651). As explained in Yu Lay v. Galmes "Upon an appeal to a court of first instance from the
judgment of a justice of the peace, it is not possible, without changing the purpose of the appeal,
to alter the nature of the question raised by the complaint and the answer in the original action.
There can be no doubt, therefore, of the scope of the doctrine laid down in the several decisions
of the Court. Consequently, We hold that, upon an appeal to the Court of First Instance, the
plaintiff as well as the defendant cannot file any pleading or allegation which raises a question
essentially distinct from that raised and decided in the justice of the peace court. "This rule was
reiterated in cases from Ng Cho Cio v. Ng Diong (1 SCRA 275) to Development Bank of the
Philippines v. Court of Appeals (116 SCRA 636).
Thus, the defendant-appellee's counterclaim beyond P10,000.00, the jurisdictional amount of the
city Court of Cebu, should be treated as having been deemed waived. It is as though it has never
been brought before trial court. It may not be entertained on appeal.
The amount of judgment, therefore, obtained by the defendant-appellee on appeal, cannot
exceed the jurisdiction of the court in which the action began. Since the trial court did not acquire
jurisdiction over the defendant's counterclaim in excess of the jurisdictional amount, the appellate
court, likewise, acquired no jurisdiction over the same by its decisions or otherwise. Appellate
jurisdiction being not only a continuation of the exercise of the same judicial power which has
been executed in the court of original jurisdiction, also presupposes that the original and
appellate courts are capable of participating in the exercise of the same judicial power (See 2
Am. Jur. 850; Stacey Cheese Company v. R.E. Pipkin, Appt. 155 NC 394, 71 S.E. 442, 37 LRA
606) It is the essential criterion of appellate jurisdiction that it revises and corrects the
proceedings in a cause already instituted, and does not create that cause (See 2 Am. Jur 850
citing Marbury v. Madison, 1 Cranch US, 137, 2 L. ed. 60).
It is, of course, a well-settled rule that when court transcends the limits prescribed for it by law
and assumes to act where it has no jurisdiction, its adjudications will be utterly void and of no
effect either as an estoppel or otherwise (Planas v. Collector of Internal Revenue, 3 SCRA 395;
Parades v. Moya, 61 SCRA 526). The Court of First Instance, in the case at bar, having awarded

judgment in favor of the defendant-appellee in excess of its appellate jurisdiction to the extent of
P6,000.00 over the maximum allowable award of P10,000.00, the excess is null and void and of
no effect. Such being the case, an action to declare the nullity of the award as brought by the
plaintiff-appellant before the Court of First Instance of Cebu, Branch V is a proper remedy.
The nullity of such portion of the decision in question, however, is not such as to affect the
conclusions reached by the court in the main case for ejectment. As held in Vda. de Pamintuan
v. Tiglao (53 Phil. 1) where the amount set up by the defendant was not proper as a defense and
it exceeded the inferior court's jurisdiction, it cannot be entertained therein, but the court's
jurisdiction over the main action will remain unaffected. Consequently, the decision over the main
action, in the case at bar, must stand, best remembering that a counter-claim, by its very nature,
is a cause of action separate and independent from the plaintiff's claim against the defendant.
WHEREFORE, the decision of the Court of First Instance of Cebu, Branch III in Civil Case No. R12430 for ejectment is hereby DECLARED NULL AND VOID insofar as it awards damages on
the defendant-appellee's counterclaim in excess of P6,000.00 beyond its appellate jurisdiction.
The decision in all other respects is AFFIRMED. The order of the Court of First Instance of Cebu,
Branch V dismissing Civil Case No. R-13462 for declaration of nullity of judgment with
preliminary injunction is hereby MODIFIED, Civil Case No. R-13462 is ordered DISMISSED
insofar as the decision sought to be annulled upholds the defendant's right to possession of the
disputed property. The defendant's counterclaim for damages is GRANTED to the extent of TEN
THOUSAND (P10,000.00) PESOS. The grant of SIX THOUSAND (P6,000.00) PESOS in excess
of such amount is hereby declared NULL and VOID, for having been awarded beyond the
jurisdiction of the court.
SO ORDERED.

5. G.R. No. 83545 August 11, 1989


ADELFO MACEDA, petitioner,
vs.
HON. COURT OF APPEALS AND CEMENT CENTER, INC., respondents.
Charles S. Anastacio for petitioner.
F.M. Carpio & Associates for private respondent.

GRI;O-AQUINO, J.:
The issue raised in this case is the jurisdiction of the metropolitan trial court, in an ejectment
case, over the lessee's counterclaim for the value of improvements exceeding the court's
jurisdictional limit of P20,000. The Court of Appeals dismissed the counterclaim for lack of
jurisdiction, hence, this petition for review by the lessee, Adelfo Maceda.
The leased property originally belonged to the spouses Arturo Victoria and Maxima Monserrat, a
maternal aunt of the petitioner. After the spouses emigrated to the U.S. in 1970, they leased their
house and lot in San Juan, Metro Manila, to the petitioner for P200 per month in 1970. As the

house was old and run down, petitioner proposed to have it repaired and renovated subject to
reimbursement of his expenses. The lessors allowed him to do so (Exh. 3) and requested him to
send them pictures of the work accomplished (Exh. 3-a). He made extensive repairs, tearing
down rotten parts of the house, rebuilding and extending it up to the garage which he converted
into a dining room. He also moved the bathrooms around. The remodelling job cost P40,000. His
aunt and uncle were pleased with the pictures of the remodelled house and made plans to
reimburse him for his expenditures. But Maceda did not stop there. In what appears to be an
orgy of building, he introduced more improvements. He constructed a new driveway, a basketball
court and raised the ground level near the creek, elevated the fence, remodelled the gate, and
landscaped the lawn.
In 1972, Arturo Victoria passed away in the United States. In 1973, his aunt's attorney-in-fact,
Atty. Rustico Zapata, Sr., promised to sell the property to him for P125,000 after the title should
have been transferred to his widowed aunt. On February 12, 1974, Atty. Zapata and a Mr. Gomez
visited the place and informed him that his aunt had sold the property to Mrs. Gomez so he
should vacate it. He refused to leave. As a result, Atty. Zapata filed an ejectment case against
him on April 4, 1974, in the Municipal Court of San Juan, Rizal (Civil Case No. 3773). It was
dismissed on the plaintiffs own motion.
lwph1.t

In November 1974, Atty. Zapata informed the petitioner that the property had been sold to Pablo
Zubiri for P145,000. He was asked to vacate it. Again, he refused. Zubiri filed an ejectment case
against am (Civil Case No. 37781) in the Municipal Court of San Juan, Rizal. Petitioner insisted
that he was entitled to retain possession of the premises until his expenses were duly reimbursed
to him. The complaint was dismissed for failure to prosecute.
In 1978 Maxima Monserrat died in the United States.
On December 4, 1981, the property was sold by Zubiri to Cement Center, Inc. which obtained
TCT Nos. 30844 to 30845 for the property. The president of the company inspected the
premises. Maceda was asked to vacate the property because the company would build a
housing project on it for its employees. Maceda insisted on being reimbursed for his
improvements as the original owners had promised to do. Formal demands to vacate and for
payment of P4,000 monthly rental from April 15, 1982 were sent to him by the company. On
January 17, 1984, another ejectment suit was filed against him in the Metropolitan Trial Court of
San Juan, Metro Manila.
In his answer to the complaint, Maceda set up a counterclaim for P240,000, the alleged value of
his improvements.
In its decision, the Metropolitan Trial Court ordered him to vacate the premises and pay the
plaintiff P2,000 per month as reasonable compensation for his use of the premises until he
actually vacates, and P5,000 as attorney's fees. It ordered the plaintiff to pay the defendant
P158,000 as the value of his improvements and repairs, less his accrued rentals of P64,000 as
of December 1985 and the sum of P12,000 which he had earlier received as partial
reimbursement.
Both parties appealed to the Regional Trial Court. The Regional Trial Court set aside the inferior
court's decision. On May 19, 1987, it dismissed the ejectment complaint, and ordered Cement
Center to pay Maceda P182,000 for as necessary and useful improvements (pp. 31-49, Rollo of
CA-G.R. No. 12536).
Cement Center filed a petition for review in the Court of Appeals (CA-G.R. SP No. 12536). On
February 17, 1988, the Court of Appeals rendered a decision, modifying the appealed decision,
the dispositive part of which leads thus:

PREMISES CONSIDERED, the decision appealed from is hereby AFFIRMED


insofar as it dismissed the complaint for ejectment filed by petitioner against
private respondent. However, the, portions of the decision declaring petitioner
(plaintiff) under obligation to pay private respondent the sum of P182,200.00
corresponding to the value of the supposed necessary and useful improvement
as well as the pronouncement therein regarding private respondent's right of
retention hereby SET ASIDE. With costs against petitioner. (p. 35, Rollo.)
The reason for the Court of Appeals' denial of Maceda's claim for reimbursement of the cost of
his improvements was that the MTC lacked jurisdiction over the claim which exceeds P20,000.
The Court of Appeals said:
The Regional Trial Court, however, erred in declaring that petitioner is under
obligation to pay private respondents the sum of P182,200.00 supposedly
corresponding to the value of the necessary and useful improvements he had
introduced on the leased premises, with the right of retention until he shall have
been fully reimbursed therefor. The claim for reimbursement in the total amount of
P240,000.00 was alleged by private respondent by way of counterclaim in his
answer (pp. 40-41, Records). It is clear that the amount of counterclaim, is
beyond the jurisdiction of the Metropolitan Trial Court. Under Section 33, B.P. Blg.
129, the Metropolitan Trial Court shall have exclusive original jurisdiction over
civil actions where the amount of the demand does not exceed P20,000.00
exclusive of interest and costs but inclusive of damages of whatever kind. It goes
without saying that the Regional Trial Court has no authority to entertain the
counterclaim because it took cognizance of the case by virtue of its appellate
jurisdiction.
Considering that the Metropolitan Trial Court did not have jurisdiction to
adjudicate the counterclaim, the decision of the Regional Trial Court on appeal
giving private respondent the right of retention is without legal basis. Besides, the
right of retention applies only to a possessor in good faith under Article 546 of the
Civil Code. In lease, the lessee knows that his occupancy of the premises
continues only during the lifetime of the lease contract. If he introduces
improvements thereon, he does so at his own risk (Imperial Insurance vs. Simon,
14 SCRA 855). The rights of a lessee in good faith, which do not include the right
of retention, are defined in Article 1678, . . . (pp. 34-35, Rollo.)
lwph1.t

In his petition for review of that decision in this Court, Maceda assails the setting aside of the
money judgment or award for his improvements in the sum of P182,200, and the rejection of his
claim to a right of retention over the leased premises.
Maceda's petition for review (G.R. No. 83545) has no merit. The Court of Appeals correctly ruled
that the municipal trial court did not have original jurisdiction over his counterclaim as it exceeds
P20,000. Correspondingly, the regional trial court did not have appellate jurisdiction over the
claim. The decision of the Municipal Trial Court of San Juan awarding him P158,000 on his
counterclaim, and that of the Regional Trial Court raising the award to P182,200, were invalid for
lack of jurisdiction. The jurisdiction of the Metropolitan Trial Court in a civil action for sum of
money (Maceda's counterclaim for the value of his improvements is one such action) is limited to
a demand that "does not exceed twenty thousand pesos exclusive of interest and costs but
inclusive of damages of whatever kind." (Sec. 33, subpar. 1, B.P. Blg. 129.) A counterclaim in the
municipal or city court beyond that jurisdictional limit may be pleaded only by way of defense to
weaken the plaintiffs claim, but not to obtain affirmative relief. (Agustin vs. Bacalan, 135 SCRA
340).
Maceda was not a possessor in good faith, i.e., one who possesses in concept of an owner,
hence he had no right to retain possession of the leased premises pending reimbursement of his

improvements thereon. No mere lessee can claim to be a possessor in good faith. (Art. 546, Civil
Code; Eusebio vs. IAC, 144 SCRA 154; Laureano vs. Adil, 72 SCRA 148.)
The promise of the now deceased spouses Arturo Victoria and Maxima Monserrat, to reimburse
Maceda for his improvements was limited only to the initial remodelling job which cost P40,000,
pictures of which he sent to the Victorias and which they approved and promised to reimburse.
No similar promise to pay may be implied with regard to the additional improvements which he
made without their approval and which were evidently intended to improve them out of their
property.
In any event, since the undertaking of the Victorias to reimburse Maceda for the P40,000 worth
of improvements which he introduced on their property was not recorded on their title, that
promise did not encumber the property nor bind the purchaser thereof or the successor-ininterest of the Victorias (Mun. of Victorias vs. CA, 149 SCRA 32).
lwph1.t

While it is true that under B.P. Blg. 877 a lessee may not be ejected on account of the sale or
mortgage of the leased premises, the new owner's need of the premises for the construction of
dwellings for its employees, coupled with the lessee's failure to pay the rentals since December
1981, are, to our mind, a legitimate ground for the judicial ejectment of the lessee.
Maceda's original rental of P200 per month could not be increased by the new owner, Cement
Center, when it acquired the property on December 5, 1981 until B.P. Blg. 25 allowed a
cumulative and compounded 10% yearly increase effective April 15,1982, and a 20% increase
effective April 15, 1985, pursuant to B.P. Blg. 867 and 887 and R.A. 6643. Based on those
guidelines, the rentals due from Maceda from December 4, 1981 were as follows:

Per Month

Total

December 4, 1981 to April 14, 1982

P 200.00

P 900.00

+10%- April 15, 1982 to April 14, 1983

220.00

2,640.00

April 15, 1983 to April 14, 1984

242.00

2,904.00

Per Month

Total

April 15, 1984 to April 14, 1985

P 266.20

P 3,194.40

+20%- April 15, 1985 to April 14, 1986

319.44

3,833.28

April 15, 1986 to April 14, 1987

383.32

4,599.84

April 15, 1987 to April 14, 1988

459.98

5,519.75

April 15, 1988 to April 14, 1989

551.97

6,623.64

April 15, 1989 to August 14, 1989

662.36

2,649.44

P32,864.36

WHEREFORE, the petition for review is granted with respect to the computation of the rentals
due from the petitioner. He is ordered to pay the unpaid rentals of P32,864.36 for his occupancy
of the private respondent's property from December 1981 to August 14, 1989 plus P662.36
monthly thereafter until he vacates the premises. The dismissal of his counterclaim for the value
of his improvements is affirmed. No pronouncement as to costs.
SO ORDERED.

6. G.R. No. L-53564 February 27, 1987


JUAN BAYANG, petitioner,
vs.
HON. COURT OF APPEALS and BENIGNO BIONG, respondents.
Rodrigo Matutina for petitioner.
Luceniano E. Lancin for private respondent.

CRUZ, J.:
Sometime in November 1969, Juan Bayang filed a complaint for quieting of title with damages
against Benigno Biong in the Court of First Instance of Surigao del Norte, Branch 1, docketed as
Civil Case No. 1892. 1 In 1970, while the case was pending, Biong succeeded in dispossessing the
plaintiff of the land in question and remained there until January 25, 1978. 2 On February 21, 1972, the
case was decided in favor of Biong, but the Court of Appeals on December 8, 1977, reversed the trial
court, declaring in the dispositive portion of its decision:

WHEREFORE, the judgment appealed from is reversed and appellants are


hereby declared owner of the property in litigation, and defendant-appellee are
(sic) hereby ordered to pay appellant the sum of P56.40 as the latter's share in
the proceeds from the sale of the copra derived from the third harvest of coconuts
from the same land, and P1,000.00 as attorney's fees, and costs of Litigation. 3
This decision became final on February 2, 1978.
On February 6, 1978, Bayang filed a second case, docketed as Civil Case No. 2589, with the CFI
of Surigao del Norte, Branch II, seeking to recover from Biong the incomes earned from the
same land from 1970 up to the quarterly incomes from 1978 until the said land was delivered to
the plaintiff. 4 At the pre-trial conference held on July 10, 1978, the counsel for Bayang admitted that
as of January 25, 1978, Biong had already surrendered possession of the land in question to
Bayang. 5 On August 16, 1978, Biong filed a motion for summary judgment, reiterating the affirmative
defense of res judicata raised in his answer dated April 12, 1978, insofar as it related to the incidents
concerning the case prior to January 25, 1978. 6 An opposition to this motion was duly filed by
Bayang. 7
The trial court, after considering the arguments of the parties, granted the motion and rendered a
summary judgment on October 30, 1978. 8 The said decision was sustained by the Court of
Appeals, and Bayang is now before us in this petition for review by certiorari under Rule 45 of the
Rules of Court.
His assignment of errors raises two basic submissions, to wit:
1. Civil Case No. 2589 should not have been decided by summary judgment.
2. The judgment in CA-G.R. No. 54720-R (appeal from judgment in Civil Case No. 1892) did not
constitute res judicata as to bar Civil Case No. 2589.
Both contentions are incorrect. We rule for the respondents.
In its decision, the Court of Appeals quoted the following excerpt from Singleton v. Philippine
Trust Co. 9 on the nature and functions of the summary judgment:
Summary judgment is one of the methods sanctioned in the present Rules of
Court for a prompt disposition of civil actions wherein there exists no serious
controversy. The procedure may be availed of not only by claimants, but also by
defending parties who may be the object of unfounded claims. A motion for
summary judgment assumes that scrutinizing of the facts will disclose that the
issues presented by the pleadings need not be tried because they are so patently
unsubstantial as not to be genuine issues, or that there is no genuine issue as to
any material facts or where the facts appear undisputed and certain from the
pleadings, depositions, admissions and affidavits.
We hold that there was no genuine or triable issue of fact raised by the parties, in view
particularly of the affirmative defense of res judicata invoked by the private respondent. That
defense is sustained.

A long line of decisions has consistently held that for res judicata to apply: a) the former judgment
must be final; b) it must have been rendered by a court having jurisdiction over the subject matter
and the parties; c) it must be a judgment on the merits; and d) there must be between the first
case and the second case identity of parties, identity of subject matter and Identity of cause of
action. 10
The decision in Civil Case No. 1892 became final and executory on February 2, 1978. There is
no dispute that the trial court which rendered that decision had jurisdiction over the subjectmatter and the parties to the proceeding. The case was tried on the merits. The parties to Civil
Case No. 1892 and the subsequent Civil Case No. 2589 are the same petitioner and private
respondent now before us.
The petitioner would draw a distinction between the land in dispute in Civil Case No. 1892 and
the income from that land being claimed in Civil Case No. 2589. But that is in our view splitting
hairs to split a cause of action. The subject-matter is essentially the same in both cases as the
income is only a consequence or accessory of the disputed property. We cannot agree that there
are involved here two causes of action calling for two separate cases. The claim for the income
from the land was incidental to, and should have been raised by Bayang in his earlier claim for,
ownership of the land.
We note that while the first case was pending, the private respondent, by the petitioner's own
account, "succeeded in dispossessing" him of the disputed land 11 and that at the pretrial
conference on Civil Case No. 2589, Bayang's counsel admitted that Biong had vacated the said
property as of January 25, 1978. 12 This means that from 1970 to the date the respondent surrendered
the property in 1978, Biong was presumably collecting and enjoying the income therefrom to the
exclusion of the petitioner.
Civil Case No. 1892 was commenced in November 1969 and was finally decided only on
February 2, 1978. The private respondent entered the disputed property in 1970 and left it only in
1978. For about seven years, therefore, the petitioner made no move at all to amend his
complaint to include a claim for the income supposedly received by the private respondent during
that period.
Under Rule 10, Section 6, of the Rules of Court.
Sec. 6. Matters subject of supplemental pleadings. Upon motion of a party the
court may, upon reasonable notice and upon such terms as are just, permit him to
serve a supplemental pleading setting forth transactions, occurrence or events
which have happened since the date of the pleading sought to be supplemented.
If the court deems it advisable that the adverse party should plead thereto, it shall
so order, specifying the time therefor.
In the case of Jalandoni v. Martin-Guanzon, 13 this Court declared through Justice J.B.L. Reyes:
As to the value of the plaintiff's share in the products of the land during the time
that the former action was pending (which are the damages claimed under the
second cause of action), their recovery is now barred by the previous judgment.
These damages are but the result of the original cause of action, viz., the
continuing refusal by defendants in 1941 to recognize the plaintiff's right to an
interest in the property. In the same way that plaintiffs claimed for their share of

the produce from 1941 to 1947, these later damages could have been claimed in
the first action, either in the original camplaint (for their existence could be
anticipated when the first complaint was filed) or else by supplemental pleading.
To allow them to be recovered by subsequent suit would be a violation of the rule
against multiplicity of suits, and specifically of sections 3 and 4 of Rules 2 of the
Rules of Court, against the splitting of causes of action, since these damages
spring from the same cause of action that was pleading (sic) in the former case
No. 573 between the same parties (Blossom & Co., Inc. v. Manila Gas
Corporation, 55 Phil. 226; Santos v. Moir, 36 Phil. 350; Pascua v. Sideco 24 Phil.
26; Bachrach Motor Co. v. Icarangal 68 Phil. 287).
And in another case, 14 the same jurist declared:
Urtula, as defendant in the expropriation case, could have raised the matter of
interest before the trial court even if there had been no actual taking yet by the
Republic and the said court could have included the payment of interest in its
judgment but conditioned upon the actual taking, because the rate of interest
upon the amount of just compensation (6%) is a known factor, and it can
reasonably be expected that at some future time, the expropriator would take
possession of the property, though the date be not fixed. In this way, multiple
suits would be avoided. Moreover, nothing prevented appellee from calling the
attention of the appellate courts (even by motion to reconsider before judgment
became final) to the subsequent taking of possession by the condemnor, and
asking for allowance of interest on the indemnity since that followed the taking as
a matter of course, and raised no issue requiring remand of the records to the
Court of origin.
As the issue of interest could have been raised in the former case but was not
raised, res judicatablocks the recovery of interest in the present case. (Tejedor
vs. Palet, 61 Phil. 494; Phil. Engineering Corp., et al. vs. Ceniza, etc., et al., L17834, 29 Sept. 1962). It is settled that a former judgment constitutes a bar, as
between the parties, not only as to matters expressly adjudged, but all matters
that could have been adjudged at the time (Rule 39, sec. 49; Corda vs. Maglinti
L-17476, November 30, 1961; Rodriguez vs. Tan, 48 Off. Gaz. 3330).
Clearly, then, Civil Case No. 2589 is barred by the previous judgment in Civil Case No. 1892.
This being so, it should follow that the trial judge committed no grave abuse of discretion in
deciding the latter case by summary judgment.
We are not unmindful of the argument that affirmance of the challenged decision of the
respondent court will result in the unjust enrichment of Biong at the expense of Bayang. This
assumes, of course, that the petitioner could have proved his right to the income he now claims
belatedly. The point is that he did not make the proper claim at the proper time and in the proper
proceedings, and he cannot do it now. Whatever right he might have had is now deemed waived
because of his neglect.
Nemo debet bis vexare pro una et eadem causa. This has to be so if litigants are to be spared
the annoyance, anxiety and expense that could otherwise be inflicted upon them endlessly by
capricious, malicious or vindictive suitors.

WHEREFORE, the petition is dismiss and the appealed decision is affirmed. Costs against the
petitioner.
SO ORDERED.

PARTIES
1. Juasing Hardware v CA
G.R. No. L-55687 July 30, 1982
JUASING HARDWARE, petitioner,
vs.
THE HONORABLE RAFAEL T. MENDOZA, Judge of the Court of First Instance of Cebu,
and PILAR DOLLA, respondents.
Luis V. Diones, Paulito Y. Cabrera and Victor C. Laborte for petitioner.
Amadeo D. Seno for respondents.

GUERRERO, J.:
In this special civil action for certiorari, petitioner Juasing Hardware seeks to annul the Orders of
respondent Judge dated September 5, 1980 and October 21, 1980 issued in Civil Case No. R18386.
Records show the pertinent factual and procedural antecedents of the instant Petition to be as
follows:
On August 17, 1979, Juasing Hardware, alleging to be a single proprietorship duly organized and
existing under and by virtue of the laws of the Philippines and represented by its manager Ong
Bon Yong, filed a complaint for the collection of a sum of money against Pilar Dolla. 1 The
complaint charged that defendant Dolla failed and refused to pay, despite repeated demands, the
purchase price of items, materials and merchandise which she bought from the plaintiff. 2 In her
Answer, defendant stated, among others, that she "has no knowledge about plaintiff's legal
personality and capacity to sue as alleged in ... the complaint." 3 The case proceeded to pre-trial and
trial. After plaintiff had completed the presentation of its evidence and rested its case, defendant filed
a Motion for Dismissal of Action (Demurrer to Evidence) 4praying that the action be dismissed for
plaintiff's lack of legal capacity to sue. Defendant in said Motion contended that plaintiff Juasing
Hardware is a single proprietorship, not a corporation or a partnership duly registered in accordance
with law, and therefore is not a juridical person with legal capacity to bring an action in court. Plaintiff
filed an Opposition and moved for the admission of an Amended Complaint. 5
Resolving the foregoing controversy, respondent Judge issued the Order dated September 5,
1980 dismissing the case and denying admission of the Amended Complaint. Pertinent portions
of said Order follow:

The Answer of the defendant to the complaint alleged the lack of legal capacity to
sue of the plaintiff as contained in its affirmative defense. inspite of the allegation
that plaintiff has no legal capacity to sue, the plaintiff insisted in proceeding to trial
instead of amending the Complaint. During the trial, it was found out that the
affirmative defense of defendant of plaintiff's lack of legal capacity to sue is very
evident for plaintiff Juasing Hardware is a single proprietorship which is neither a
partnership nor a corporation. The amendment therefore ' is now too late it being
substantial.
In view of all the foregoing, this case is hereby DISMISSED with costs de oficio. 6
Plaintiff's Motion for Reconsideration of the above Order was denied in another Order issued by
respondent Judge on October 21, 1980. 7
The sole issue in this case is whether or not the lower court committed a grave abuse of
discretion when it dismissed the case below and refused to admit the Amended Complaint filed
by therein plaintiff, now herein petitioner, Juasing Hardware.
Rule 3 of the Revised Rules of Court provides as follows:
Sec. 1. Who may be parties.-Only natural or juridical persons or entities
authorized by law may be parties in a civil action.
Petitioner is definitely not a natural person; nor is it a juridical person as defined in the New Civil
Code of the Philippines thus:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose,
created by law; their personality begins as soon as they have been constituted
according to law;
(3) Corporations, partnerships and associations for private interest or purpose to
which the law grants a juridical personality, separate and distinct from that of
each shareholder, partner or member.
Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The
law merely recognizes the existence of a sole proprietorship as a form of business organization
conducted for profit by a single individual, and requires the proprietor or owner thereof to secure
licenses and permits, register the business name, and pay taxes to the national government. It
does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or
defend an action in court.
Thus, the complaint in the court below should have been filed in the name of the owner of
Juasing Hardware. The allegations in the body of the complaint would show that the suit is
brought by such person AS proprietor or owner of the business conducted under the name and
style Juasing Hardware". The descriptive words "doing business as Juasing Hardware' " may be
added in the title of the case, as is customarily done.

Be that as it may, petitioner's contention that respondent Judge erred in not allowing the
amendment of the complaint to correct the designation of the party plaintiff in the lower court, is
impressed with merit. Such an amendment is authorized by Rule 10 of the Revised Rules of
Court which provides thus:
Sec. 4. Formal Amendments. A defect in the designation of the parties may be
summarily corrected at any stage of the action provided no prejudice is caused
thereby to the adverse party. (Emphasis supplied.)
Contrary to the ruling of respondent Judge, the defect of the complaint in the instant case is
merely formal, not substantial. Substitution of the party plaintiff would not constitute a change in
the Identity of the parties. No unfairness or surprise to private respondent Dolla, defendant in the
court a quo, would result by allowing the amendment, the purpose of which is merely to conform
to procedural rules or to correct a technical error.
In point is the case of Alonzo vs. Villamor, et al. 8 which applied Sec. 110 of the Code of Civil
Procedure authorizing the court "in furtherance of justice ... (to) allow a party to amend any pleading
or proceeding and at any stage of the action, in either the Court of First Instance or the Supreme
Court, by adding or striking out the name of any party, either plaintiff or defendant, or by correcting a
mistake in the name of a party ..." In the Alonzo case, Fr. Eladio Alonzo, a priest of the Roman
Catholic Church, brought an action to recover from therein defendants the value of certain properties
taken from the Church. The defendants contended that Fr. Alonzo was not the real party in interest.
This Court, speaking through Justice Moreland, ordered the substitution of the Roman Catholic
Apostolic Church in the place and stead of Eladio Alonzo as party plaintiff, and aptly held in this wise:
... Defect in form cannot possibly prejudice so long as the substantial is clearly
evident. ...
No one has been misled by the error in the name of the party plaintiff. If we
should by reason of this error send this case back for amendment and new trial,
there would be on the retrial the same complaint, the same answer, the same
defense, the same interests, the same witnesses, and the same evidence. The
name of the plaintiff would constitute the only difference between the old trial and
the new. In our judgment there is not enough in a name to justify such action.
There is nothing sacred about processes or pleadings, their forms or contents.
Their sole purpose is to facilitate the application of justice to the rival claims of
contending parties. They were created, not to hinder and delay, but to facilitate
and promote, the administration of justice. They do not constitute the thing itself,
which courts are always striving to secure to litigants. They are designed as the
means best adapted to obtain that thing. In other words, they are a means to an
end. When they lose the character of the one and become the other, the
administration of justice is at fault and courts are correspondingly remiss in the
performance of their obvious duty.
The error in this case is purely technical. To take advantage of it for other
purposes than to cure it, does not appeal to a fair sense of justice. Its
presentation as fatal to the plaintiff's case smacks of skill rather than right. A
litigation is not a game of technicalities in which one, more deeply schooled and
skilled in the subtle art of movement and position, entraps and destroys the other.

It is, rather, a contest in which each contending party fully and fairly lays before
the court the facts in issue and then, brushing aside as wholly trivial and
indecisive all imperfections of form and technicalities of procedure, asks that
justice be done upon the merits. Lawsuits, unlike duels, are not to be won by a
rapier's thrust. Technicality, when it deserts its proper office as an aid to justice
and becomes its great hindrance and chief enemy, deserves scant consideration
from courts. There should be no vested rights in technicalities. No litigant should
be permitted to challenge a record of a court ... for defect of form when his
substantial rights have not been prejudiced thereby. 9
We reiterate what this Court had stated in the more recent case of Shaffer vs. Palma 10 that "(t)he
courts should be liberal in allowing amendments to pleadings to avoid multiplicity of suits and in order
that t he real controversies between the parties are presented and the case decided on the merits
without unnecessary delay." 11 This rule applies with more reason and with greater force when, as in
the case at bar, the amendment sought to be made refers to a mere matter of form and no substantial
rights are prejudiced. 12
WHEREFORE, the Petition is hereby granted. The Orders dated September 5, 1980 and
October 21, 1980 are hereby annulled and the lower court is hereby ordered to admit the
Amended Complaint in conformity with the pronouncements in this Decision. No costs.
SO ORDERED.

2. G.R. No. L-58028 April 18, 1989


CHIANG KAI SHEK SCHOOL, petitioner,
vs.
COURT OF APPEALS and FAUSTINA FRANCO OH, respondents.

CRUZ, J.:
An unpleasant surprise awaited Fausta F. Oh when she reported for work at the Chiang Kai Shek
School in Sorsogon on the first week of July, 1968. She was told she had no assignment for the
next semester. Oh was shocked. She had been teaching in the school since 1932 for a
continuous period of almost 33 years. And now, out of the blue, and for no apparent or given
reason, this abrupt dismissal.
Oh sued. She demanded separation pay, social security benefits, salary differentials, maternity
benefits and moral and exemplary damages. 1 The original defendant was the Chiang Kai Shek School but when it
filed a motion to dismiss on the ground that it could not be sued, the complaint was amended. 2 Certain officials of the school were also
impleaded to make them solidarily liable with the school.

The Court of First Instance of Sorsogon dismissed the complaint.

3 On appeal, its decision was set aside by


the respondent court, which held the school suable and liable while absolving the other defendants. 4 The motion for reconsideration
having been denied, 5 the school then came to this Court in this petition for review on certiorari.

The issues raised in the petition are:

1. Whether or not a school that has not been incorporated may be sued by reason alone of its
long continued existence and recognition by the government,
2. Whether or not a complaint filed against persons associated under a common name will justify
a judgment against the association itself and not its individual members.
3. Whether or not the collection of tuition fees and book rentals will make a school profit-making
and not charitable.
4. Whether or not the Termination Pay Law then in force was available to the private respondent
who was employed on a year-to-year basis.
5. Whether or not the awards made by the respondent court were warranted.
We hold against the petitioner on the first question. It is true that Rule 3, Section 1, of the Rules
of Court clearly provides that "only natural or juridical persons may be parties in a civil action." It
is also not denied that the school has not been incorporated. However, this omission should not
prejudice the private respondent in the assertion of her claims against the school.
As a school, the petitioner was governed by Act No. 2706 as amended by C.A. No. 180, which
provided as follows:
Unless exempted for special reasons by the Secretary of Public Instruction, any
private school or college recognized by the government shall be incorporated
under the provisions of Act No. 1459 known as the Corporation Law, within 90
days after the date of recognition, and shall file with the Secretary of Public
Instruction a copy of its incorporation papers and by-laws.
Having been recognized by the government, it was under obligation to incorporate under the
Corporation Law within 90 days from such recognition. It appears that it had not done so at the
time the complaint was filed notwithstanding that it had been in existence even earlier than 1932.
The petitioner cannot now invoke its own non-compliance with the law to immunize it from the
private respondent's complaint.
There should also be no question that having contracted with the private respondent every year
for thirty two years and thus represented itself as possessed of juridical personality to do so, the
petitioner is now estopped from denying such personality to defeat her claim against it. According
to Article 1431 of the Civil Code, "through estoppel an admission or representation is rendered
conclusive upon the person making it and cannot be denied or disproved as against the person
relying on it."
As the school itself may be sued in its own name, there is no need to apply Rule 3, Section 15,
under which the persons joined in an association without any juridical personality may be sued
with such association. Besides, it has been shown that the individual members of the board of
trustees are not liable, having been appointed only after the private respondent's dismissal. 6
It is clear now that a charitable institution is covered by the labor laws

7 although the question was still


unsettled when this case arose in 1968. At any rate, there was no law even then exempting such institutions from the operation of the
labor laws (although they were exempted by the Constitution from ad valorem taxes). Hence, even assuming that the petitioner was a
charitable institution as it claims, the private respondent was nonetheless still entitled to the protection of the Termination Pay Law,
which was then in force.

While it may be that the petitioner was engaged in charitable works, it would not necessarily
follow that those in its employ were as generously motivated. Obviously, most of them would not
have the means for such charity. The private respondent herself was only a humble school
teacher receiving a meager salary of Pl80. 00 per month.
At that, it has not been established that the petitioner is a charitable institution, considering
especially that it charges tuition fees and collects book rentals from its students. 8 While this alone may
not indicate that it is profit-making, it does weaken its claim that it is a non-profit entity.

The petitioner says the private respondent had not been illegally dismissed because her teaching
contract was on a yearly basis and the school was not required to rehire her in 1968. The
argument is that her services were terminable at the end of each year at the discretion of the
school. Significantly, no explanation was given by the petitioner, and no advance notice either, of
her relief after teaching year in and year out for all of thirty-two years, the private respondent was
simply told she could not teach any more.
The Court holds, after considering the particular circumstance of Oh's employment, that she had
become a permanent employee of the school and entitled to security of tenure at the time of her
dismissal. Since no cause was shown and established at an appropriate hearing, and the notice
then required by law had not been given, such dismissal was invalid.
The private respondent's position is no different from that of the rank-and-file employees involved
in Gregorio Araneta University Foundation v. NLRC, 9 of whom the Court had the following to say:
Undoubtedly, the private respondents' positions as deans and department heads
of the petitioner university are necessary in its usual business. Moreover, all the
private respondents have been serving the university from 18 to 28 years. All of
them rose from the ranks starting as instructors until they became deans and
department heads of the university. A person who has served the University for
28 years and who occupies a high administrative position in addition to teaching
duties could not possibly be a temporary employee or a casual.
The applicable law is the Termination Pay Law, which provided:
SECTION 1. In cases of employment, without a definite period, in a commercial,
industrial, or agricultural establishment or enterprise, the employer or the
employee may terminate at any time the employment with just cause; or without
just cause in the case of an employee by serving written notice on the employer
at least one month in advance, or in the case of an employer, by serving such
notice to the employee at least one month in advance or one-half month for every
year of service of the employee, whichever, is longer, a fraction of at least six
months being considered as one whole year.
The employer, upon whom no such notice was served in case of termination of
employment without just cause may hold the employee liable for damages.
The employee, upon whom no such notice was served in case of termination of
employment without just cause shall be entitled to compensation from the date of
termination of his employment in an I amount equivalent to his salaries or wages
correspond to the required period of notice. ... .

The respondent court erred, however, in awarding her one month pay instead of only one-half
month salary for every year of service. The law is quite clear on this matter. Accordingly, the
separation pay should be computed at P90.00 times 32 months, for a total of P2,880.00.
Parenthetically, R.A. No. 4670, otherwise known as the Magna Carta for Public School Teachers,
confers security of tenure on the teacher upon appointment as long as he possesses the
required qualification. 10 And under the present policy of the Department of Education, Culture and Sports, a teacher becomes
permanent and automatically acquires security of tenure upon completion of three years in the service. 11

While admittedly not applicable to the case at bar, these I rules nevertheless reflect the attitude
of the government on the protection of the worker's security of tenure, which is now guaranteed
by no less than the Constitution itself. 12
We find that the private respondent was arbitrarily treated by the petitioner, which has shown no
cause for her removal nor had it given her the notice required by the Termination Pay Law. As the
respondent court said, the contention that she could not report one week before the start of
classes is a flimsy justification for replacing her. 13 She had been in its employ for all of thirty-two years. Her record
was apparently unblemished. There is no showing of any previous strained relations between her and the petitioner. Oh had every
reason to assume, as she had done in previous years, that she would continue teaching as usual.

It is easy to imagine the astonishment and hurt she felt when she was flatly and without warning
told she was dismissed. There was not even the amenity of a formal notice of her replacement,
with perhaps a graceful expression of thanks for her past services. She was simply informed she
was no longer in the teaching staff. To put it bluntly, she was fired.
For the wrongful act of the petitioner, the private respondent is entitled to moral damages.

14 As a
proximate result of her illegal dismissal, she suffered mental anguish, serious anxiety, wounded feelings and even besmirched
reputation as an experienced teacher for more than three decades. We also find that the respondent court did not err in awarding her
exemplary damages because the petitioner acted in a wanton and oppressive manner when it dismissed her. 15

The Court takes this opportunity to pay a sincere tribute to the grade school teachers, who are
always at the forefront in the battle against illiteracy and ignorance. If only because it is they who
open the minds of their pupils to an unexplored world awash with the magic of letters and
numbers, which is an extraordinary feat indeed, these humble mentors deserve all our respect
and appreciation.
WHEREFORE, the petition is DENIED. The appealed decision is AFFIRMED except for the
award of separation pay, which is reduced to P2,880.00. All the other awards are approved.
Costs against the petitioner.
This decision is immediately executory.
SO ORDERED.

3. G.R. No. 73722 February 26, 1990


THE COMMISSIONER OF CUSTOMS, petitioner,
vs.

K.M.K. GANI, INDRAPAL & CO., and the HONORABLE COURT OF TAX
APPEALS, respondents.
Armando S. Padilla for private respondent.

SARMIENTO, J.:
This is a review of the decision of the Court of Tax Appeals disposing as follows:
WHEREFORE. the subject ten (10) cartons of articles are hereby released to the
carrying airline for immediate transshipment to the country of destination under
the terms of the contract of carriage. No costs.
SO ORDERED. 1
The pertinent facts may be summarized thus:
On September 11, 1982, two (2,) containers loaded with 103 cartons of merchandise covered by
eleven (11) airway bills of several supposedly Singapore-based consignees arrived at the Manila
International Airport on board Philippine Air Lines (PAL) Flight PR 311 from Hongkong. The
cargoes were consigned to these different entities: K.M.K. Gani (hereafter referred to as K.M.K.)
and Indrapal and Company (hereafter referred to as INDRAPAL), the private respondents in the
petition before us; and Sin Hong Lee Trading Co., Ltd., AAR TEE Enterprises, and C. Ratilal all
purportedly based in Singapore.
While the cargoes were at the Manila International Airport, a "reliable source" tipped off the
Bureau of customs that the said cargoes were going to be unloaded in Manila. Forthwith, the
Bureau's agency on such matters, the Suspected Cargo and Anti-Narcotics (SCAN), dispatched
an agent to verify the information. Upon arriving at the airport, the SCAN agent saw an empty
PAL van parked directly alongside the plane's belly from which cargoes were being unloaded.
When the SCAN agent asked the van's driver why he was at the site, the driver drove away in his
vehicle. The SCAN agent then sequestered the unloaded cargoes.
The seized cargoes consisted of 103 cartons "containing Mogadon and Mandrax tablets, Sony
T.V. sets 1546R/176R kw, Sony Betamax SL5800, and SL5000, Cassette Stereos with
Headphone (ala walkman), Casio Calculators, Pioneer Car Stereos, Yamaha Watches, Eyeglass
Frames, Sunglasses, Plastic Utility Bags, Perfumes, etc." These goods were transferred to the
International Cargo Terminal under Warrant of Seizure and Detention and thereafter subjected to
Seizure and Forfeiture proceedings for "technical smuggling."
At the hearing, Atty. Armando S. Padilla entered his appearance for the consignees K.M.K. and
INDRAPAL. The records of the case do not show any appearance of the consignees in person.
Atty. Padilla moved for the transshipment of the cargoes consigned to his clients. On the other
hand, the Solicitor General avers that K.M.K. and INDRAPAL did not present any testimonial or
documentary evidence. The, collector of Customs at the then Manila International Airport (MIA),
now Ninoy Aquino International Airport (NAIA), ruled for the forfeiture of all the cargoes in the
said containers (Seizure Identification No. 4993-82, dated July 14, 1983). Consequently, Atty.

Padilla, ostensibly on behalf of his two clients, K.M.K. and INDRAPAL, appealed the order to the
Commissioner. of Customs. 2
The Commissioner of Customs affirmed the finding of the Collector of Customs (Customs Case
No. 83-85, January, 1984), of the presence of the intention to import the said goods in violation of
the Dangerous Drugs Act 3and Central Bank Circular No. 808 in relation to the Tariff and Customs
Code. 4
The Commissioner added the following findings of fact:

1. There is a direct flight from Hongkong to Singapore, thus making the transit
through Manila more expensive, tedious, and circuitous.
2. The articles were grossly misdeclared, considering that Singapore is a free
port.
3. The television sets and betamax units seized were of the American standard
which is popularly used in Manila, and not of the European standard which is
used in Singapore.
4. One of the shippers is a Filipino national with no business connection with her
alleged consignee in Singapore.
5. The alleged consignee of the prohibited drugs confiscated has no authority to
import Mogadon or Mandrax.
Upon these findings, the Commissioner concluded that there was an "intent to unlade" in Manila,
thus, an attempt to smuggle goods into the country.
Taking exception to these findings, Atty. Armando S. Padilla, again as counsel of the consignees
K.M.K. and Indrapal, appealed to the respondent Court of Tax Appeals (CTA). He argued in the
CTA that K.M.K. and INDRAPAL were "entitled to the release of their cargoes for transshipment
to Singapore so manifested and covered by the Airway bills as in transit, ... contending that the
goods were never intended importations into the Philippines and the same suffer none of any
affiliating breaches allegedly found attributable to the other shipments under the Customs and
related laws." 6
The CTA reversed the decision of the Commissioner of Customs. Hence this petition.
The petitioner raises the following errors:
1. THE COURT OF TAX APPEALS ERRED IN ENTERTAINING
THE PETITION FOR REVIEW NOTWITHSTANDING HEREIN
PRIVATE RESPONDENTS' FAILURE TO ESTABLISH THEIR
PERSONALITY TO SUE IN A REPRESENTATIVE CAPACITY.
2. THE COURT OF TAX APPEALS ERRED IN RULING THAT
THE SUBJECT GOODS WERE IMPORTATIONS NOT
INTENDED FOR THE PHILIPPINES BUT FOR SINGAPORE,

THUS, NOT VIOLATING THE LAW ON TECHNICAL


SMUGGLING UNDER THE TARIFF AND CUSTOMS CODE.
The issues before us are therefore: (1) whether or not the private respondents failed to establish
their personality to sue in a representative capacity, hence making their action dismissable, and
(2) whether or not the subject goods were importations intended for the Philippines in violation of
the Tariff and Customs Code.
We answer both questions in the affirmative.
The law is clear: "No foreign corporation transacting business in the Philippines without a license,
or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines; but such corporation may be
sued or proceeded against before Philippine courts or administrative tribunals on any valid cause
of action recognized under Philippine laws." 7
However, the Court in a long line of cases has held that a foreign corporation not engaged in
business in the Philippines may not be denied the right to file an action in the Philippine courts for
an isolated transaction. 8
Therefore, the issue on whether or not a foreign corporation which does not have a license to
engage in business in this country can seek redress in Philippine courts boils down as to whether
it is doing business or merely entered into an isolated transaction in the Philippines.
The fact that a foreign corporation is not doing business in the Philippines must be disclosed if it
desires to sue in Philippine courts under the "isolated transaction rule." Without this disclosure,
the court may choose to deny it the right to sue. 9
In the case at bar, the private respondents K.M.K. and INDRAPAL aver that they are "suing upon
a singular and isolated transaction." But they failed to prove their legal existence or juridical
personality as foreign corporations. Their unverified petition before the respondent Court of Tax
Appeals merely stated:
1. That petitioner "K.M.K. Gani" is a single proprietorship doing
business in accordance with the laws of Singapore with address
at 99 Greenfield Drive, Singapore, Rep. of Singapore, while
Petitioner INDRAPAL and COMPANY" is a firm doing business in
accordance with the laws of Singapore with office address at 97
High Street, Singapore 0641, Republic of Singapore, and
summons as well as other Court process may be served to the
undersigned lawyer;
2. That the Petitioner's (sic) are sueing (sic) upon a singular and
isolated transaction. 10
We are cognizant of the fact that under the "isolated transaction rule," only foreign corporations
and not just any business organization or entity can avail themselves of the privilege of suing
before Philippine courts even without a license. Counsel Armando S. Padilla stated before the
respondent Court of Tax Appeals that his clients are "suing upon a singular and isolated
transaction." But there is no proof to show that K.M.K. and INDRAPAL are indeed what they are

represented to be. It has been simply stated by Attorney Padilla that K.M.K. Gani is "a single
proprietorship," while INDRAPAL is "a firm," and both are "doing business in accordance with the
laws of Singapore ... ," with specified addresses in Singapore. In cases of this nature, these
allegations are not sufficient to clothe a claimant of suspected smuggled goods of juridical
personality and existence. The "isolated transaction rule" refers only to foreign corporations.
Here the petitioners are not foreign corporations. They do not even pretend to be so. The first
paragraph of their petition before the Court, containing the allegation of their identities, does not
even aver their corporate character. On the contrary, K.M.K. alleges that it is a "single
proprietorship" while INDRAPAL hides under the vague identification as a "firm," although both
describe themselves with the phrase "doing business in accordance with the laws of Singapore."
Absent such proof that the private respondents are corporations (foreign or not), the respondent
Court of Tax Appeals should have barred their invocation of the right to sue within Philippine
jurisdiction under the "isolated transaction rule" since they do not qualify for the availment of such
right.
As we had stated before:
But merely to say that a foreign corporation not doing business in the Philippines
does not need a license in order to sue in our courts does not completely resolve
the issue in the present case. The proposition as stated, refers to the right to sue;
the question here refers to pleading and procedure. It should be noted that
insofar as the allegations in the complaint have a bearing on appellant's capacity
to sue, all that is averred is that they are both foreign corporations existing under
the laws of the United States. This averment conjures two alternative possibilities:
either they are engaged in business in the Philippines or they are not so
engaged. If the first, they must have been duly licensed in order to maintain this
suit; if the second, if (sic) the transaction sued upon is singular and isolated, no
such license is required. In either case, the qualifying circumstance is an
essential part of the element of plaintiffs capacity to sue and must be affirmatively
pleaded. 11
In this connection, we note also a fatal defect in the pleadings of the private respondents. There
is no allegation as to who is the duly authorized representative or resident agent in our
jurisdiction. All we have on record are the pleadings filed by Attorney Armando S. Padilla who
represents himself as the counsel for the private respondents.
xxx xxx xxx
It is incumbent on plaintiff to allege sufficient facts to show that he is concerned
with the cause of action averred, and is the party who has suffered injury by
reason of the acts of defendant; in other words, it is not enough that he alleges a
cause of action existing in favor of someone, but he must show that it exists in
favor of himself. The burden should not be placed on defendant to show that
plaintiff is not the aggrieved person and that he has sustained no damages. It is
also necessary for plaintiff to allege facts showing that the causes of action
alleged accrued to him in the capacity in which he sues, and for this purpose it is
necessary for someone for one who sues otherwise than in his individual capacity
to allege his authority.

xxx xxx xxx


The plaintiff must show, in his pleading, his right and interest in the subject matter
of the suit; and a complaint which does not show that plaintiff has the requisite
interest to enable him to maintain his action should be dismissed for
insufficiency ... 12
xxx xxx xxx

The appearance of Atty, Armando S. Padilla as counsel for the two claimants would not suffice.
Generally, a "lawyer is presumed to be properly authorized to represent any cause in which he
appears, and no written power of attorney is required to authorize him to appear in court for his
client." 13 Nevertheless, although the authority of an attorney to appear for and on behalf of a party
may be assumed, it can still be questioned or challenged by the adverse party concerned. 14
The presumption established under the provision of Section 21, Rule 138 of the Revised Rules of
Court is disputable. 15 The requirement for the production of authority is essential because the client
will be bound by his acquiescence resulting from his knowledge that he was being represented by
said attorney. 16
The Solicitor General, representing the petitioner-appellant, not only questions the authority of
Atty. Armando S. Padilla to represent the private respondents but also the latter's capacity to sue:
... While it is alleged that the summons and court processes may be served to
herein private respondents' counsel who filed the unverified petition before the
Court of Tax Appeals, the allegation would be insufficient for the purpose of
binding foreign corporations as in the instant case. To be sure, the admitted
absence of special power of attorney in favor of their counsel, the relationship
with the latter, if at all, is merely that of a lawyer-client relationship and definitely
not one of a principal agent. Such being the case, said counsel cannot bind nor
compromise the interest of private respondents as it is possible that the latter
may disown the former's representation to avoid civil or criminal liability. In this
respect, the Court cannot assume jurisdiction over the person of private
respondents, notwithstanding the filing of the unverified petition in question.
Apart from the foregoing, Section 4, Rule 8, Revised Rules of Court mandates
that facts showing the capacity of a party to sue or be sued; or the authority of a
party to sue or be sued in a representative capacity; or the legal existence of an
organized association of person (sic) that is made a party, must be averred. In
like manner, the rule is settled that in case where the law denies a foreign
corporation to maintain a suit unless it has previously complied with certain
requirements, then such compliance or exemption therefrom, becomes a
necessary averment in the complaint (Atlantic Mutual Inc. Co. v. Cebu
Stevedoring Co., Inc. 17 SCRA 1037; vide; Sec. 4, Rule 8, Revised Rules of
Court). In the case at bar, apart from merely alleging that private respondents are
foreign corporation (sic) and that summons may be served to their counsel, their
petition in the Court of Tax Appeals is bereft of any other factual allegation to
show their capacity to sue or be sued in a representative capacity in his
jurisdiction. 17

The representation and the extent of the authority of Atty. Padilla have thus been expressly
challenged. But he ignored such challenge which leads us to the only conclusion that he has no
authority to appear for such clients if they exist, which we even doubt. In cases like this, it is the
duty of the government officials concerned to require competent proof of the representation and
authority of any claimant of any goods coming from abroad and seized by our customs
authorities or otherwise appearing to be illegally imported. This desired meticulousness,
strictness if you may, should extend to their representatives and counsel. Our government has
lost considerable sums of money due to such dubious claims or claimants.
Apropos the second issue, suffice it to state that we agree with the findings, already enumerated
and discussed at the outset, made by the Collector of Customs in his decision, dated July 14,
1983, which was affirmed and amplified by the decision of the Commissioner of Customs, that
those constitute sufficient evidence to support the conclusion that there was an intention to
unlade the seized goods in the Philippines instead of its supposed destination, Singapore. There
is no need of belaboring them anymore.
WHEREFORE, the petition is GRANTED; the decision of the Court of Tax Appeals is SET ASIDE,
and the decision of the petitioner is hereby REINSTATED.
No costs.
SO ORDERED.

4. G.R. No. 97816 July 24, 1992


MERRILL LYNCH FUTURES, INC., petitioner,
vs.
HON. COURT OF APPEALS, and the SPOUSES PEDRO M. LARA and ELISA G.
LARA, respondents.

NARVASA, C.J.:
The capacity of a foreign corporation to maintain an action in the Philippines against residents
thereof, is the principal question in the appellate proceedings at bar. The issue arises from the
undisputed facts now to be briefly narrated.
On November 23, 1987, Merrill Lynch Futures, Inc. (hereafter, simply ML FUTURES) filed a
complaint with the Regional Trial Court at Quezon City against the Spouses Pedro M. Lara and
Elisa G. Lara for the recovery of a debt and interest thereon, damages, and attorney's fees. 1 In
its complaint ML FUTURES described itself as
a) a non-resident foreign corporation, not doing business in the Philippines, duly
organized and existing under and by virtue of the laws of the state of Delaware,
U.S.A.;" as well as

b) a "futures commission merchant" duly licensed to act as such in the futures


markets and exchanges in the United States, . . essentially functioning as a
broker . . (executing) orders to buy and sell futures contracts received from its
customers on U.S. futures exchanges.
It also defined a "futures contract" as a "contractual commitment to buy and sell a standardized
quantity of a particular item at a specified future settlement date and at a price agreed upon, with
the purchase or sale being executed on a regulated futures exchange."
In its complaint ML FUTURES alleged the following:
1) that on September 28, 1983 it entered into a Futures Customer Agreement with the defendant
spouses (Account No. 138-12161), in virtue of which it agreed to act as the latter's broker for the
purchase and sale of futures contracts in the U.S.;
2) that pursuant to the contract, orders to buy and sell futures contracts were transmitted to ML
FUTURES by the Lara Spouses "through the facilities of Merrill Lynch Philippines, Inc., a
Philippine corporation and a company servicing plaintiffs customers; 2
3) that from the outset, the Lara Spouses "knew and were duly advised that Merrill Lynch
Philippines, Inc. was not a broker in futures contracts," and that it "did not have a license from the
Securities and Exchange Commission to operate as a commodity trading advisor (i.e., 'an entity
which, not being a broker, furnishes advice on commodity futures to persons who trade in futures
contracts');
4) that in line with the above mentioned agreement and through said Merrill Lynch Philippines,
Inc., the Lara Spouses actively traded in futures contracts, including "stock index futures" for four
years or so, i.e., from 1983 to October, 1987, 3 there being more or less regular accounting and
corresponding remittances of money (or crediting or debiting) made between the spouses and ML
FUTURES;
5) that because of a loss amounting to US$160,749.69 incurred in respect of three (3)
transactions involving "index futures," and after setting this off against an amount of
US$75,913.42 then owing by ML FUTURES to the Lara Spouses, said spouses became
indebted to ML FUTURES for the ensuing balance of US$84,836.27, which the latter asked them
to pay;
6) that the Lara Spouses however refused to pay this balance, "alleging that the transactions
were null and void because Merrill Lynch Philippines, Inc., the Philippine company servicing
accounts of plaintiff, . . had no license to operate as a 'commodity and/or financial futures
broker.'"
On the foregoing essential facts, ML FUTURES prayed (1) for a preliminary attachment against
defendant spouses' properties "up to the value of at least P2,267,139.50," and (2) for judgment,
after trial, sentencing the spouses to pay ML FUTURES:
a) the Philippine peso equivalent of $84,836.27 at the applicable exchanged rate
on date of payment, with legal interest from date of demand until full payment;
b) exemplary damages in the sum of at least P500,000.00; and

c) attorney's fees and expenses of litigation as may be proven at the trial.


Preliminary attachment issued ex parte on December 2, 1987, and the defendant spouses were
duly served with summons.
They then filed a motion to dismiss dated December 18, 1987 on the grounds that:
(1) plaintiff ML FUTURES had "no legal capacity to sue" and
(2) its "complaint states no cause of action since . . (it) is not the real party in
interest."
In that motion to dismiss, the defendant spouses averred that:
a) although not licensed to do so, ML FUTURES had been doing business in the Philippines "at
least for the last four (4) years," this being clear from the very allegations of the complaint;
consequently, ML FUTURES is prohibited by law "to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines;" and
b) they had never been informed that Merrill Lynch Philippines, Inc. was not licensed to do
business in this country; and contrary to the allegations of the complaint, all their transactions
had actually been with MERRILL LYNCH PIERCE FENNER & SMITH, INC., and not with ML
FUTURES (Merrill Lynch Futures, Inc.), in proof of which they attached to their motion to dismiss
copies of eight (8) agreements, receipts or reminders, etc., executed on standard printed forms
of said Merrill Lynch Pierce Fenner & Smith Inc. 4
ML FUTURES filed an OPPOSITION to the defendant spouses' motion to dismiss. In that motion

a) it drew attention to paragraph 4 of its complaint, admitted by defendants, that the latter "have
been actively trading in futures contracts . . . in U.S. futures exchanges from 1983 to 1987," and
ask, "If the trading . . . (was) made in U.S., how could plaintiff be doing business in the
Philippines?"
b) it also drew attention to a printed form of "Merrill Lynch Futures, Inc." filled out and signed by
defendant spouses when they opened an account with ML Futures, in order to supply information
about themselves, including their bank's name
(1) in which appear the following epigraph: "Account introduced
by Merrill Lynch International, Inc.," and the following statements,
to wit:
This Commodity Trading Advisor (Merrill Lynch, Pierce, Fenner & Smith
Philippines, Inc.) is prohibited by the Philippine Securities and Exchange
Commission from accepting funds in the trading advisor's name from a client of
Merrill Lynch Futures, Inc. for trading commodity interests. All funds in this trading
program must be placed with Merrill Lynch Futures, Inc.;
and

. . . It is agreed between MERRILL LYNCH, PIERCE, FENNER & SMITH INC.,


and other account carrying MERRILL LYNCH entities and their customers that all
legal relationships between them will be governed by applicable laws in countries
outside the Philippines where sale and purchase transactions take place.
c) and it argued that
(1) it is not permitted for defendant spouses to present "evidence" in connection
with a motion to dismiss based on failure of the complaint to state a cause of
action;
(2) even if the documents appended to the motion to dismiss be considered as
admissible "evidence," the same would be immaterial since the documents refer
to a different account number: 138-12136, the defendants' account number with
ML FUTURES being 138-12161;
(3) it is a lie for the defendant spouses to assert that they were never informed
that Merrill Lynch Philippines, Inc. had not been licensed to do business in the
Philippines; and
(4) defendant spouses should not be allowed to "invoke the aid of the court with
unclean hands.
The defendant spouses filed a REPLY reaffirming their lack of awareness that Merrill Lynch
Philippines, Inc. (formerly registered as Merrill Lynch, Pierce, Fenner & Smith Philippines,
Inc.) 5 did not have a license, claiming that they learned of this only from inquiries with the Securities
and Exchange Commission which elicited the information that it had denied said corporation's
application to operate as a commodity futures trading advisor a denial subsequently affirmed by the
Court of Appeals (Merrill Lynch Philippines, Inc. v. Securities & Exchange Commission, CAG.R. No. 10821-SP, Nov. 19, 1987). The spouses also submitted additional documents (Annexes J to
R) involving transactions with Merrill Lynch Pierce Fenner & Smith, Inc., dating back to 1980,
stressing that all but one of the documents "refer to Account No. 138-12161 which is the very account
that is involved in the instant complaint."
ML FUTURES filed a Rejoinder alleging it had given the spouses a disclosure statement by
which the latter were made aware that the transactions they were agreeing on would take place
outside of the Philippines, and that "all funds in the trading program must be placed with Merrill
Lynch Futures, Inc."
On January 12, 1988, the Trial Court promulgated an Order sustaining the motion to dismiss,
directing the dismissal of the case and discharging the writ of preliminary attachment. It later
denied ML FUTURES's motion for reconsideration, by Order dated February 29, 1988. ML
FUTURES appealed to the Court of Appeals. 6
In its own decision promulgated on November 27, 1990, 7 the Court of Appeals affirmed the Trial
Court's judgment. It declared that the Trial Court had seen "through the charade in the representation
of MLPI and the plaintiff that MLPI is only a trading advisor and in fact it is a conduit in the plaintiff's
business transactions in the Philippines as a basis for invoking the provisions of Section 133 of the
Corporation Code," 8 viz.:

Sec. 133. Doing business without a license. No foreign corporation transacting


business in the Philippines without a license, or its successors or assigns, shall
be permitted to maintain or intervene in any action, suit or proceeding in any
court or administrative agency in the Philippines; but such corporation may be
sued or proceeded against before Philippine courts or administrative tribunals on
any valid cause of action recognized under Philippine laws.
It also declared that the evidence established that plaintiff had in fact been "doing
business" in this country in legal contemplation, adverting to Mentholatum
v. Mangaliman, 72 Phil. 524, 528-530, and Section 1 of Republic Act No. 5455 reading as
follows: 9
Sec. 1. Definition and scope of this ACT . (1) As used in this Act, the term
"investment" shall mean equity participation in any enterprise formed, organized, or
existing under the laws of the Philippines; and the phrase "doing business" shall
INCLUDE soliciting orders, purchases, service contracts, opening offices, whether
called "liaison" offices or branches; appointing representatives or distributors who are
domiciled in the Philippines or who in any calendar year stay in the Philippines for a
period or periods totalling one hundred eighty days or more; participating in the
management, supervision or control of any domestic business firm, entity or
corporation in the Philippines; AND ANY OTHER ACT OR ACTS THAT IMPLY A
CONTINUITY OF COMMERCIAL DEALINGS OR ARRANGEMENTS AND
CONTEMPLATE TO THAT EXTENT THE PERFORMANCE OF ACTS OR WORKS,
OR THE EXERCISE OF SOME FUNCTIONS NORMALLY INCIDENT TO, AND IN
PROGRESSIVE PROSECUTION OF COMMERCIAL GAIN OR OF THE PURPOSE
AND OBJECT OF THE BUSINESS ORGANIZATION.

As regards the claim that it was error for the Trial Court to place reliance on the decision of the
Court of Appeals in CA-G.R. No. 10821-SP sustaining the finding of the Securities &
Exchange Commission that ML FUTURES was doing business in the Philippines since that
judgment was not yet final and ML FUTURES was not a party to that proceeding, the Court of
Appeals ruled that there was no need to belabor the point considering that there was, in any
event, "adequate proof of the activities of MLPI . . . which manifestly show that the plaintiff (ML
FUTURES) performed a series of business acts, consummated contracts and undertook
transactions for the period from 1983 to October 1987," "and because ML FUTURES had done
so without license, it consequently had "no legal personality to bring suit in Philippine courts."
Its motion for reconsideration having been denied, 10 ML FUTURES has appealed to this Court
on certiorari. Here, it submits the following issues for resolution:
(a) Whether or not the annexes appended by the Laras to their Motion to Dismiss
and Reply filed with the Regional Trial Court, but never authenticated or offered,
constitute admissible evidence.
(b) Whether or not in the proceedings below, ML FUTURES has been accorded
procedural due process.
(c) Whether or not the annexes, assuming them to be admissible, established
that ML FUTURES was doing business in the Philippines without a license.

As just stated, the Lara Spouse's motion to dismiss was founded on two (2) grounds: (a) that the
plaintiff has no legal capacity to sue, and (b) that the complaint states no cause of action (Sec. 1
[d], and [g], Rule 16, Rules of Court).
As regards the second ground, i.e., that the complaint states no cause of action, the settled
doctrine of course is that said ground must appear on the face of the complaint, and its existence
may be determined only by the allegations of the complaint, consideration of other facts being
proscribed, and any attempt to prove extraneous circumstances not being allowed. 11 The test of
the sufficiency of the facts alleged in a complaint as constituting a cause of action is whether or not,
admitting the facts alleged, the court might render a valid judgment upon the same in accordance with
the prayer of the complaint. 12 Indeed, it is error for a judge to conduct a preliminary hearing and
receive evidence on the affirmative defense of failure of the complaint to state a cause of action. 13
The other ground for dismissal relied upon, i.e., that the plaintiff has no legal capacity to sue
may be understood in two senses: one, that the plaintiff is prohibited or otherwise incapacitated
by law to institute suit in Philippine Courts, 14 or two, although not otherwise incapacitated in the
sense just stated, that it is not a real party in interest. 15 Now, the Lara Spouses contend that ML
Futures has no capacity to sue them because the transactions subject of the complaint were had by
them, not with the plaintiff ML FUTURES, but with Merrill Lynch Pierce Fenner & Smith, Inc. Evidence
is quite obviously needed in this situation, for it is not to be expected that said ground, or any facts
from which its existence may be inferred, will be found in the averments of the complaint. When such
a ground is asserted in a motion to dismiss, the general rule governing evidence on motions applies.
The rule is embodied in Section 7, Rule 133 of the Rules of Court.
Sec. 7. Evidence on motion. When a motion is based on facts not appearing of
record the court may hear the matter on affidavits or depositions presented by the
respective parties, but the court may direct that the matter be heard wholly or
partly on oral testimony or depositions.
There was, to be sure, no affidavit or deposition attached to the Lara Spouses' motion to dismiss
or thereafter proffered in proof of the averments of their motion. The motion itself was not
verified. What the spouses did do was to refer in their motion to documents which purported to
establish that it was not with ML FUTURES that they had theretofore been dealing, but another,
distinct entity, Merrill Lynch, Pierce, Fenner & Smith, Inc., copies of which documents were
attached to the motion. It is significant that ML FUTURES raised no issue relative to the
authenticity of the documents thus annexed to the Laras' motion. In fact, its arguments
subsumed the genuineness thereof and even adverted to one or two of them. Its objection was
centered on the propriety of taking account of those documents as evidence, considering the
established principle that no evidence should be received in the resolution of a motion to dismiss
based on an alleged failure of the complaint to state a cause of action.
There being otherwise no question respecting the genuineness of the documents, nor of their
relevance to at least one of the grounds for dismissal i.e., the prohibition on suits in Philippine
Courts by foreign corporations doing business in the country without license it would have
been a superfluity for the Court to require prior proof of their authenticity, and no error may be
ascribed to the Trial Court in taking account of them in the determination of the motion on the
ground, not that the complaint fails to state a cause of action as regards which evidence is
improper and impermissible but that the plaintiff has no legal capacity to sue respecting
which proof may and should be presented.

Neither may ML FUTURES argue with any degree of tenability that it had been denied due
process in the premises. As just pointed out, it was very clear from the outset that the claim of
lack of its capacity to sue was being made to rest squarely on the documents annexed thereto,
and ML FUTURES had more than ample opportunity to impugn those documents and require
their authentication, but did not do so. To sustain its theory that there should have been
identification and authentication, and formal offer, of those documents in the Trial Court pursuant
to the rules of evidence would be to give unwarranted importance to technicality and make it
prevail over the substance of the issue.
The first question then, is, as ML FUTURES formulates it, whether or not the annexes, assuming
them to be admissible, establish that (a) ML FUTURES is prohibited from suing in Philippine
Courts because doing business in the country without a license, and that (b) it is not a real party
in interest since the Lara Spouses had not been doing business with it, but with another
corporation, Merrill Lynch, Pierce, Fenner & Smith, Inc.
The Court is satisfied that the facts on record adequately establish that ML FUTURES, operating
in the United States, had indeed done business with the Lara Spouses in the Philippines over
several years, had done so at all times through Merrill Lynch Philippines, Inc. (MLPI), a
corporation organized in this country, and had executed all these transactions without ML
FUTURES being licensed to so transact business here, and without MLPI being authorized to
operate as a commodity futures trading advisor. These are the factual findings of both the Trial
Court and the Court of Appeals. These, too, are the conclusions of the Securities & Exchange
Commission which denied MLPI's application to operate as a commodity futures trading advisor,
a denial subsequently affirmed by the Court of Appeals. Prescinding from the proposition that
factual findings of the Court of Appeals are generally conclusive this Court has been cited to no
circumstance of substance to warrant reversal of said Appellate Court's findings or conclusions in
this case.
The Court is satisfied, too, that the Laras did transact business with ML FUTURES through its
agent corporation organized in the Philippines, it being unnecessary to determine whether this
domestic firm was MLPI (Merrill Lynch Philippines, Inc.) or Merrill Lynch Pierce Fenner & Smith
(MLPI's alleged predecessor). The fact is that ML FUTURES did deal with futures contracts in
exchanges in the United States in behalf and for the account of the Lara Spouses, and that on
several occasions the latter received account documents and money in connection with those
transactions.
Given these facts, if indeed the last transaction executed by ML FUTURES in the Laras's behalf
had resulted in a loss amounting to US $160,749.69; that in relation to this loss, ML FUTURES
had credited the Laras with the amount of US$75,913.42 which it (ML FUTURES) then
admittedly owed the spouses and thereafter sought to collect the balance, US$84,836.27, but
the Laras had refused to pay (for the reasons already above stated), the crucial question is
whether or not ML FUTURES may sue in Philippine Courts to establish and enforce its rights
against said spouses, in light of the undeniable fact that it had transacted business in this country
without being licensed to do so. In other words, if it be true that during all the time that they were
transacting with ML FUTURES, the Laras were fully aware of its lack of license to do business in
the Philippines, and in relation to those transactions had made payments to, and received money
from it for several years, the question is whether or not the Lara Spouses are now estopped to
impugn ML FUTURES' capacity to sue them in the courts of the forum.

The rule is that a party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. 16 And the "doctrine of estoppel to deny
corporate existence applies to foreign as well as to domestic corporations;" 17 "one who has dealt with
a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and
capacity." 18 The principle "will be applied to prevent a person contracting with a foreign corporation
from later taking advantage of its noncompliance with the statutes, chiefly in cases where such person
has received the benefits of the contract (Sherwood v. Alvis, 83 Ala 115, 3 So 307, limited and
distinguished in Dudley v. Collier, 87 Ala 431, 6 So 304; Spinney v. Miller, 114 Iowa 210, 86 NW 317),
where such person has acted as agent for the corporation and has violated his fiduciary obligations as
such, and where the statute does not provide that the contract shall be void, but merely fixes a special
penalty for violation of the statute. . . ." 19
The doctrine was adopted by this Court as early as 1924 in Asia Banking Corporation
v. Standard Products Co., 20 in which the following pronouncement was made: 21
The general rule that in the absence of fraud of person who has contracted or
otherwise dealt with an association in such a way as to recognize and in effect
admit its legal existence as a corporate body is thereby estopped to deny its
corporate existence in any action leading out of or involving such contract or
dealing, unless its existence is attacked for causes which have arisen since
making the contract or other dealing relied on as an estoppel and this applies to
foreign as well as domestic corporations. (14 C.J .7; Chinese Chamber of
Commerce vs. Pua Te Ching, 14 Phil. 222).
There would seem to be no question that the Laras received benefits generated by their
business relations with ML FUTURES. Those business relations, according to the Laras
themselves, spanned a period of seven (7) years; and they evidently found those relations to be
of such profitability as warranted their maintaining them for that not insignificant period of time;
otherwise, it is reasonably certain that they would have terminated their dealings with ML
FUTURES much, much earlier. In fact, even as regards their last transaction, in which the Laras
allegedly suffered a loss in the sum of US$160,749.69, the Laras nonetheless still received some
monetary advantage, for ML FUTURES credited them with the amount of US$75,913.42 then
due to them, thus reducing their debt to US$84,836.27. Given these facts, and assuming that the
Lara Spouses were aware from the outset that ML FUTURES had no license to do business in
this country and MLPI, no authority to act as broker for it, it would appear quite inequitable for the
Laras to evade payment of an otherwise legitimate indebtedness due and owing to ML
FUTURES upon the plea that it should not have done business in this country in the first place,
or that its agent in this country, MLPI, had no license either to operate as a "commodity and/or
financial futures broker."
Considerations of equity dictate that, at the very least, the issue of whether the Laras are in truth
liable to ML FUTURES and if so in what amount, and whether they were so far aware of the
absence of the requisite licenses on the part of ML FUTURES and its Philippine correspondent,
MLPI, as to be estopped from alleging that fact as defense to such liability, should be ventilated
and adjudicated on the merits by the proper trial court.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 16478 dated November
27, 1990 and its Resolution of March 7, 1991 are REVERSED and SET ASIDE, and the Regional
Trial Court at Quezon City, Branch 84, is ORDERED to reinstate Civil Case No. Q-52360 and

forthwith conduct a hearing to adjudicate the issues set out in the preceding paragraph on the
merits.
SO ORDERED.

5. G.R. No. 79253 March 1, 1993


UNITED STATES OF AMERICA and MAXINE BRADFORD, petitioners,
vs.
HON. LUIS R. REYES, as Presiding Judge of Branch 22, Regional Trial Court of Cavite, and
NELIA T. MONTOYA, respondents.
Luna, Sison & Manas for petitioners.
Evelyn R. Dominguez for private respondent.

DAVIDE, JR., J.:


This is a petition for certiorari and prohibition under Rule 65 of the Rules of Court. Petitioners
would have Us annul and set aside, for having been issued with grave abuse of discretion
amounting to lack of jurisdiction, the Resolution of 17 July 1987 of Branch 22 of the Regional
Trial Court (RTC) of Cavite in Civil Case No. 224-87. The said resolution denied, for lack of merit,
petitioners' motion to dismiss the said case and granted the private respondent's motion for the
issuance of a writ of preliminary attachment. Likewise sought to be set aside is the writ of
attachment subsequently issued by the RTC on 28 July 1987.
The doctrine of state immunity is at the core of this controversy.
The readings disclose the following material operative facts:
Private respondent, hereinafter referred to as Montoya, is an American citizen who, at the time
material to this case, was employed as an identification (I.D.) checker at the U.S. Navy Exchange
(NEX) at the Joint United States Military Assistance Group (JUSMAG) headquarters in Quezon
City. She is married to one Edgardo H. Montoya, a Filipino-American serviceman employed by
the U.S. Navy and stationed in San Francisco, California. Petitioner Maxine Bradford, hereinafter
referred to as Bradford, is likewise an American citizen who was the activity exchange manager
at the said JUSMAG Headquarters.
As a consequence of an incident which occurred on 22 January 1987 whereby her body and
belongings were searched after she had bought some items from the retail store of the NEX
JUSMAG, where she had purchasing privileges, and while she was already at the parking area,
Montoya filed on
7 May 1987 a complaint 1 with the Regional Trial Court of her place of residence Cavite against
Bradford for damages due to the oppressive and discriminatory acts committed by the latter in excess
of her authority as store manager of the NEX JUSMAG. The complaint, docketed as Civil Case No.

224-87 and subsequently raffled off to Branch 22 at Imus, Cavite, alleges the following, material
operative facts:

xxx xxx xxx


3. That on January 22, 1987, after working as the duty ID checker from 7:45 to
11:45 a.m., plaintiff went shopping and left the store at l2:00 noon of that day;
4. That on the way to her car while already outside the store, Mrs. Yong Kennedy,
also an ID checker, upon the instruction of the store manager, Ms. Maxine
Bradford, approached plaintiff and informed her that she needed to search her
bags;
5. That plaintiff went to defendant, who was then outside the store talking to some
men, to protest the search but she was informed by the defendant that the search
is to be made on all Jusmag employees that day;
6. That the search was thereafter made on the person, car and bags of the
plaintiff by Mrs. Yong Kennedy in the presence of the defendant and numerous
curious onlookers;
7. That having found nothing irregular on her person and belongings, plaintiff was
allowed to leave the premises;
8. That feeling aggrieved, plaintiff checked the records and discovered that she
was the only one whose person and belonging was (sic) searched that day
contrary to defendant's allegation as set forth in par. 5 hereof and as evidenced
by the memorandum dated January 30, 1987 made by other Filipino Jusmag
employees, a photocopy of which is hereto attached as ANNEX "A" and made
integral (sic) part hereof:
9. That moreover, a check with Navy Exchange Security Manager, R.L. Roynon
on January 27, 1987 was made and she was informed by Mr. Roynon that it is a
matter of policy that customers and employees of NEX Jusmag are not searched
outside the store unless there is a very strong evidence of a wrongdoing;
10. That plaintiff knows of no circumstances sufficient to trigger suspicion of a
wrongdoing on her part but on the other hand, is aware of the propensity of
defendant to lay suspicion on Filipinos for theft and/or shoplifting;
11. That plaintiff formally protested the illegal search on February 14, 1987 in a
letter addressed to Mr. R.L. Roynon, a photocopy of which is hereto attached as
ANNEX "B" and made integral (sic) part hereof; but no action was undertaken by
the said officer;
12. That the illegal search on the person and belongings of the plaintiff in front of
many people has subjected the plaintiff to speculations of theft, shoplifting and
such other wrongdoings and has exposed her to contempt and ridicule which was
caused her undue embarrassment and indignity;

13. That since the act could not have been motivated by other (sic) reason than
racial discrimination in our own land, the act constitute (sic) a blow to our national
pride and dignity which has caused the plaintiff a feeling of anger for which she
suffers sleepless nights and wounded feelings;
14. That considering the above, plaintiff is entitled to be compensated by way of
moral damages in the amount of P500,000.00;
15. That to serve as a deterrent to those inclined to follow the oppressive act of
the defendant, exemplary damages in the amount of P100,000.00 should also be
awarded. 2
She then prayed for judgment ordering Bradford to pay her P500,000.00 as moral damages,
P100,000.00 as exemplary damages and reasonable attorney's fees plus the costs of the suit. 3
Summons and a copy of the complaint were served on Bradford on 13 May 1987. In response
thereto, she filed two (2) motions for extension of time to file her Answer which were both granted
by the trial court. The first was filed through Atty. Miguel Famularcano, Jr., who asked for a 20day extension from 28 May 1987. The second, filed through the law firm of Luna, Sison and
Manas, sought a 15-day extension from 17 June 1987. 4 Thus, Bradford had up to 1 July 1987 to
file her Answer. Instead of doing so, however, she, together with the government of the United States
of America (hereinafter referred to as the public petitioner), filed on 25 June 1987, also through the
law firm of Luna, Sison and Manas, a Motion to Dismiss 5 based on the following grounds:
1) (This) action is in effect a suit against the United States of America, a foreign
sovereign immune from suit without its consent for the cause of action pleaded in
the complaint; and
2) Defendant, Maxine Bradford, as manager of the US Navy Exchange Branch at
JUSMAG, Quezon City, is immune from suit for act(s) done by her in the
performance of her official functions under the Philippines-United States Military
Assistance Agreement of 1947 and Military Bases Agreement of 1947, as
amended. 6
In support of the motion, the petitioners claimed that JUSMAG, composed of an Army, Navy and
Air Group, had been established under the Philippine-United States Military Assistance
Agreement entered into on 21 March 1947 to implement the United States' program of rendering
military assistance to the Philippines. Its headquarters in Quezon City is considered a temporary
installation under the provisions of Article XXI of the Military Bases Agreement of 1947.
Thereunder, "it is mutually agreed that the United States shall have the rights, power and
authority within the bases which are necessary for the establishment, use and operation and
defense thereof or appropriate for the control thereof." The 1979 amendment of the Military
Bases Agreement made it clear that the United States shall have "the use of certain facilities and
areas within the bases and shall have effective command and control over such facilities and
over United States personnel, employees, equipment and material." JUSMAG maintains, at its
Quezon City headquarters, a Navy Exchange referred to as the NEX-JUSMAG. Checking of
purchases at the NEX is a routine procedure observed at base retail outlets to protect and
safeguard merchandise, cash and equipment pursuant to paragraphs 2 and 4(b) of
NAVRESALEACT SUBIC INST. 5500.1. 7Thus, Bradford's order to have purchases of all employees

checked on 22 January 1987 was made in the exercise of her duties as Manager of the NEXJUSMAG.

They further claimed that the Navy Exchange (NAVEX), an instrumentality of the U.S.
Government, is considered essential for the performance of governmental functions. Its mission
is to provide a convenient and reliable source, at the lowest practicable cost, of articles and
services required for the well-being of Navy personnel, and of funds to be used for the latter's
welfare and recreation. Montoya's complaint, relating as it does to the mission, functions and
responsibilities of a unit of the United States Navy, cannot then be allowed. To do so would
constitute a violation of the military bases agreement. Moreover, the rights, powers and authority
granted by the Philippine government to the United States within the U.S. installations would be
illusory and academic unless the latter has effective command and control over such facilities
and over American personnel, employees, equipment and material. Such rights, power and
authority within the bases can only be exercised by the United States through the officers and
officials of its armed forces, such as Bradford. Baer vs. Tizon 8 and United States of America vs.
Ruiz 9 were invoked to support these claims.
On 6 July 1987, Montoya filed a motion for preliminary attachment 10 on the ground that Bradford
was about to depart from the country and was in the process of removing and/or disposing of her
properties with intent to defraud her creditors. On 14 July 1987, Montoya filed her opposition to the
motion to dismiss 11 alleging therein that the grounds proffered in the latter are bereft of merit because
(a) Bradford, in ordering the search upon her person and belongings outside the NEX JUSMAG store
in the presence of onlookers, had committed an improper, unlawful and highly discriminatory act
against a Filipino employee and had exceeded the scope of her authority; (b) having exceeded her
authority, Bradford cannot rely on the sovereign immunity of the public petitioner because her liability
is personal; (c) Philippine courts are vested with jurisdiction over the case because Bradford is a
civilian employee who had committed the challenged act outside the U.S. Military Bases; such act is
not one of those exempted from the jurisdiction of Philippine courts; and (d) Philippine courts can
inquire into the factual circumstances of the case to determine whether or not Bradford had acted
within or outside the scope of her authority.
On 16 July 1987, public petitioner and Bradford filed a reply to Montoya's opposition and an
opposition to the motion for preliminary attachment. 12
On 17 July 1987, 13 the trial court 14 resolved both the motion to dismiss and the motion for
preliminary attachment in this wise:
On the motion to dismiss, the grounds and arguments interposed for the
dismissal of this case are determined to be not indubitable. Hence, the motion is
denied for lack of merit.
The motion for preliminary attachment is granted in the interest of justice, upon
the plaintiff's filing of a bond in the sum of P50,000.00.
Upon Montoya's filing of the required bond, the trial court issued on 28 July 1987 an
Order 15 decreeing the issuance of a writ of attachment and directing the sheriff to serve the writ
immediately at the expense of the private respondent. The writ of attachment was issued on that
same date. 16
Instead of filing a motion to reconsider the last two (2) orders, or an answer insofar as
Bradford is concerned both the latter and the public petitioner filed on 6 August 1987 the

instant petition to annul and set aside the above Resolution of 17 July 1987 and the writ of
attachment issued pursuant thereto. As grounds therefor, they allege that:
10. The respondent judge committed a grave abuse of discretion amounting to
lack of jurisdiction in denying the motion to dismiss the complaint in Civil Case
No. 224-87 "for lack of merit." For the action was in effect a suit against the
United States of America, a foreign sovereign immune from suit without its
consent for the cause of action pleaded in the complaint, while its co-petitioner
was immune from suit for act(s) done by her in the performance of her official
functions as manager of the US Navy Exchange Branch at the Headquarters of
JUSMAG, under the Philippines-United States Military Assistance Agreement of
1947 and Military Bases Agreement of 1947, as amended. 17
On 5 August 1987, the trial court set Civil Case No. 224-87 for pre-trial and trial on 27 August
1987 at 9:30 a.m. 18
On 12 August 1987, this Court resolved to require the respondents to comment on the petition.

19

On 19 August 1987, petitioners filed with the trial court a Motion


to Suspend Proceedings 20 which the latter denied in its Order of 21 August 1987. 21
In the meantime, however, for failure to file an answer, Bradford was declared in default in Civil
Case No. 224-87 and Montoya was allowed to present her evidence ex-parte. 22 She thus took the
witness stand and presented Mrs. Nam Thi Moore and Mrs. Miss Yu as her witnesses.
On 10 September 1987, the trial court rendered its decision
dispositive portion of which reads:

23

in Civil Case No. 224-87, the

Prescinding from the foregoing, it is hereby determined that the unreasonable


search on the plaintiff's person and bag caused (sic) done recklessly and
oppressively by the defendant, violated, impaired and undermined the plaintiff's
liberty guaranteed by the Constitution, entitling her to moral and exemplary
damages against the defendant. The search has unduly subjected the plaintiff to
intense humiliation and indignities and had consequently ridiculed and
embarrassed publicly said plaintiff so gravely and immeasurably.
WHEREFORE, judgment is hereby rendered for the plaintiff and against the
defendant Maxine Bradford assessing the latter to pay unto the former the sums
of P300,000.00 for moral damages, P100,000.00 for exemplary damages and
P50,000.00 for actual expenses and attorney's fees.
No costs.
SO ORDERED. 24
Bradford received a copy of the decision on 21 September 1987. On that same date, she and the
public petitioner filed with this Court a Petition for Restraining Order 25 which sought to have the
trial court's decision vacated and to prevent the execution of the same; it was also prayed that the trial
court be enjoined from continuing with Civil Case No. 224-87. We noted this pleading in the
Resolution of 23 September 1987. 26

In the meantime, since no motion for reconsideration or appeal had been interposed by Bradford
challenging the 10 September 1987 Decision which she had received on 21 September 1987,
respondent Judge issued on 14 October 1987 an order directing that an entry of final judgment
be made. A copy thereof was received by Bradford on 21 October, 1987. 27
Also on 14 October 1987, Montoya filed her Comment with Opposition to the Petition for
Restraining Order. 28Respondent Judge had earlier filed his own Comment to the petition on 14
September 1987. 29
On 27 October 1987, Montoya filed before the trial court a motion for the execution of the
Decision of 10 September 1987 which petitioners opposed on the ground that although this Court
had not yet issued in this case a temporary restraining order, it had nevertheless resolved to
require the respondents to comment on the petition. It was further averred that execution thereof
would cause Bradford grave injury; moreover, enforcement of a writ of execution may lead to
regrettable incidents and unnecessarily complicate the situation in view of the public petitioner's
position on the issue of the immunity of its employees. In its Resolution of 11 November 1987,
the trial court directed the issuance of a writ of execution. 30
Consequently, the petitioners filed on 4 December 1987, a Manifestation and Motion reciting the
foregoing incidents obtaining before the trial court and praying that their petition for a restraining
order be resolved. 31
On 7 December 1987, this Court issued a Temporary Restraining Order "ENJOINING the
respondents and the Provincial Sheriff of Pasig, Metro Manila, from enforcing the Decision dated
September 10, 1987, and the Writs of Attachment and Execution issued in Civil Case No. 22487." 32
On 28 November 1988, after the private respondent filed a Rejoinder to the Consolidated Reply
to the Comments filed by the petitioners, this Court gave due course to the petition and required
the parties to submit their respective memoranda-Petitioners filed their Memorandum on 8
February
1989 33 while private respondent filed her Memorandum on 14 November
1990. 34
The kernel issue presented in this case is whether or not the trial court committed grave abuse of
discretion in denying the motion to dismiss based on the following grounds: (a) the complaint in
Civil Case No. 224-87 is in effect a suit against the public petitioner, a foreign sovereign immune
from suit which has not given consent to such suit and (b) Bradford is immune from suit for acts
done by her in the performance of her official functions as manager of the U.S. Navy Exchange
of JUSMAG pursuant to the Philippines-United States Military Assistance Agreement of 1947 and
the Military Bases Agreement of 1947, as amended.
Aside from maintaining the affirmative view, the public petitioner and Bradford even go further by
asserting that even if the latter's act were ultra vires she would still be immune from suit for the
rule that public officers or employees may be sued in their personal capacity for ultra vires and
tortious acts is "domestic law" and not applicable in International Law. It is claimed that the
application of the immunity doctrine does not turn upon the lawlessness of the act or omission
attributable to the foreign national for if this were the case, the concept of immunity would be
meaningless as inquiry into the lawlessness or illegality of the act or omission would first have to

be made before considering the question of immunity; in other words, immunity will lie only if
such act or omission is found to be lawful.
On the other hand, Montoya submits that Bradford is not covered by the protective mantle of the
doctrine of sovereign immunity from suit as the latter is a mere civilian employee of JUSMAG
performing non-governmental and proprietary functions. And even assuming arguendo that
Bradford is performing governmental functions, she would still remain outside the coverage of
the doctrine of state immunity since the act complained of is ultra viresor outside the scope of her
authority. What is being questioned is not the fact of search alone, but also the manner in which
the same was conducted as well as the fact of discrimination against Filipino employees.
Bradford's authority to order a search, it is asserted, should have been exercised with restraint
and should have been in accordance with the guidelines and procedures laid down by the cited
"NAVRESALEACT, Subic Inst." Moreover, ultra vires acts of a public officer or employee,
especially tortious and criminal acts, are his private acts and may not be considered as acts of
the State. Such officer or employee alone is answerable for any liability arising therefrom and
may thus be proceeded against in his personal capacity.
Montoya further argues that both the acts and person of Bradford are not exempt from the
Philippine courts' jurisdiction because (a) the search was conducted in a parking lot at Scout
Borromeo, Quezon City, outside the JUSMAG store and, therefore, outside the territorial control
of the U.S. Military Bases in the Philippines; (b) Bradford does not possess diplomatic immunity
under Article 16(b) of the 1953 Military Assistance Agreement creating the JUSMAG which
provides that only the Chief of the Military Advisory Group and not more than six (6) other senior
members thereof designated by him will be accorded diplomatic immunity; 35 and (c) the acts
complained of do not fall under those offenses where the U.S. has been given the right to exercise its
jurisdiction (per Article 13 of the 1947 Military Bases Agreement, as amended by the, Mendez-Blair
Notes of 10 August 1965). 36
Finally, Montoya maintains that at the very least, Philippine courts may inquire into the factual
circumstances of the case to determine whether petitioner Bradford is immune from suit or
exempt from Philippine jurisdiction. To rule otherwise would render the Philippine courts
powerless as they may be easily divested of their jurisdiction upon the mere invocation of this
principle of immunity from suit.
A careful review of the records of this case and a judicious scrutiny of the arguments of both
parties yield nothing but the weakness of the petitioners' stand. While this can be easily
demonstrated, We shall first consider some procedural matters.
Despite the fact that public petitioner was not impleaded as a defendant in Civil Case No. 22487, it nevertheless joined Bradford in the motion to dismiss on the theory that the suit was in
effect against it without, however, first having obtained leave of court to intervene therein. This
was a procedural lapse, if not a downright improper legal tack. Since it was not impleaded as an
original party, the public petitioner could, on its own volition, join in the case only by intervening
therein; such intervention, the grant of which is discretionary upon the court, 37 may be allowed
only upon a prior motion for leave with notice to all the parties in the action. Of course, Montoya could
have also impleaded the public petitioner as an additional defendant by amending the complaint if she
so believed that the latter is an indispensible or necessary party.
Since the trial court entertained the motion to dismiss and the subsequent pleadings filed by the
public petitioner and Bradford, it may be deemed to have allowed the public petitioner to

intervene. Corollarily, because of its voluntary appearance, the public petitioner must be deemed
to have submitted itself to the jurisdiction of the trial court.
Moreover, the said motion does not specify any of the grounds for a motion to dismiss
enumerated in Section 1, Rule 16 of the Rules of Court. It merely recites state immunity on the
part of the public petitioner and immunity on the part of Bradford for the reason that the act
imputed to her was done in the performance of her official functions. The upshot of this
contention is actually lack of cause of action a specific ground for dismissal under the
aforesaid Rule because assuming arguendo that Montoya's rights had been violated by the
public petitioner and Bradford, resulting in damage or injury to the former, both would not be
liable therefor, and no action may be maintained thereon, because of the principle of state
immunity.
The test of the sufficiency of the facts to constitute a cause of action is whether or not, admitting
the facts alleged in the complaint, the court could render a valid judgment upon the same, in
accordance with the prayer in the complaint. 38
A motion to dismiss on the ground of failure to state a cause of action hypothetically admits the
truth of the allegations in the complaint.
In deciding a motion to dismiss, a court may grant, deny, allow amendments to the pleadings or
defer the hearing and determination of the same if the ground alleged does not appear to be
indubitable. 39 In the instant case, while the trial court concluded that "the grounds and arguments
interposed for the dismissal" are not "indubitable," it denied the motion for lack of merit. What the trial
court should have done was to defer there solution on the motion instead of denying it for lack of
merit.
In any event, whatever may or should have been done, the public petitioner and Bradford were
not expected to accept the verdict, making their recourse to this Court via the instant petition
inevitable. Thus, whether the trial court should have deferred resolution on or denied outright the
motion to dismiss for lack of merit is no longer pertinent or relevant.
The complaint in Civil Case No. 224-87 is for damages arising from what Montoya describes as
an "illegal search" on her "person and belongings" conducted outside the JUSMAG premises in
front of many people and upon the orders of Bradford, who has the propensity for laying
suspicion on Filipinos for theft or shoplifting. It is averred that the said search was directed only
against Montoya.
Howsoever viewed, it is beyond doubt that Montoya's cause of action is premised on the theory
that the acts complained of were committed by Bradford not only outside the scope of her
authority or more specifically, in her private capacity but also outside the territory where she
exercises such authority, that is, outside the NEX-JUSMAG particularly, at the parking area
which has not been shown to form part of the facility of which she was the manager. By their
motion to dismiss, public petitioner and Bradford are deemed to have hypothetically admitted the
truth of the allegation in the complaint which support this theory.
The doctrine of state immunity and the exceptions thereto are summarized in Shauf vs. Court of
Appeals, 40 thus:

I. The rule that a state may not be sued without its consent, now expressed in
Article XVI Section 3, of the 1987 Constitution, is one of the generally accepted
principles of international law that we have adopted as part of the law of our land
under Article II, Section 2. This latter provision merely reiterates a policy earlier
embodied in the 1935 and 1973 Constitutions and also intended to manifest our
resolve to abide by the rules of the international community. 41
While the doctrine appears to prohibit only suits against the state without its consent,
it is also applicable to complaints filed against officials of the state for acts allegedly
performed by them in the discharge of their duties. The rule is that if the judgment
against such officials will require the state itself to perform an affirmative act to satisfy
the same, such as the appropriation of the amount needed to pay the damages
awarded against them, the suit must be regarded as against the state itself although it
has not been formally impleaded. 42 It must be noted, however, that the rule is not so
all-encompassing as to be applicable under all circumstances.

It is a different matter where the public official is made to account in his capacity
as such for acts contrary to law and injurious to the rights of plaintiff. As was
clearly set forth by Justice Zaldivar in Director of the Bureau of
Telecommunications, et al. vs. Aligaen, etc., et al. 43 "Inasmuch as the State
authorizes only legal acts by its officers, unauthorized acts of government officials or
officers are not acts of the State, and an action against the officials or officers by one
whose rights have been invaded or violated by such acts, for the protection of his
rights, is not a suit against the State within the rule of immunity of the State from suit.
In the same tenor, it has been said that an action at law or suit in equity against a
State officer or the director of a State department on the ground that, while claiming to
act or the State, he violates or invades the personal and property rights of the plaintiff,
under an unconstitutional act or under an assumption of authority which he does not
have, is not a suit against the State within
the constitutional provision that the State may not be sued without its consent." 44 The
rationale for this ruling is that the doctrinaire of state immunity cannot be used as an
instrument for perpetrating an injustice. 45
In the case of Baer, etc. vs. Tizon, etc., et al., 46 it was ruled that:
There should be no misinterpretation of the scope of the decision
reached by this Court. Petitioner, as the Commander of the United
States Naval Base in Olongapo, does not possess diplomatic
immunity. He may therefore be proceeded against in his personal
capacity, or when the action taken by him cannot be imputed to
the government which he represents.
Also, in Animos, et al. vs. Philippine Veterans Affairs Office, et al.,

47

we held that:

. . . it is equally well-settled that where a litigation may have


adverse consequences on the public treasury, whether in the
disbursements of funds or loss of property, the public official
proceeded against not being liable in his personal capacity, then
the doctrine of non-suability may appropriately be invoked. It has
no application, however, where the suit against such a functionary
had to be instituted because of his failure to comply with the duty

imposed by statute appropriating public funds for the benefit of


plaintiff or petitioner. . . . .
The aforecited authorities are clear on the matter. They state that the doctrine of
immunity from suit will not apply and may not be invoked where the public official
is being sued in his private and personal capacity as an ordinary citizen. The
cloak of protection afforded the officers and agents of the government is removed
the moment they are sued in their individual capacity. This situation usually arises
where the public official acts without authority or in excess of the powers vested
in him. It is a well-settled principle of law that a public official may be liable in his
personal private capacity for whatever damage he may have caused by his act
done
with malice and in bad faith, or beyond the scope of his authority or jurisdiction. 48
The agents and officials of the United States armed forces stationed in Clark Air Base
are no exception to this rule. In the case of United States of America, et al. vs. Guinto,
etc., et al., ante, 49 we declared:

It bears stressing at this point that the above observations do not


confer on the United States of America Blanket immunity for all
acts done by it or its agents in the Philippines. Neither may the
other petitioners claim that they are also insulated from suit in this
country merely because they have acted as agents of the United
States in the discharge of their official functions.
Since it is apparent from the complaint that Bradford was sued in her private or personal capacity
for acts allegedly done beyond the scope and even beyond her place of official functions, said
complaint is not then vulnerable to a motion to dismiss based on the grounds relied upon by the
petitioners because as a consequence of the hypothetical admission of the truth of the
allegations therein, the case falls within the exception to the doctrine of state immunity.
In the recent cases of Williams vs. Rarang 50 and Minucher vs. Court of Appeals, 51 this Court
reiterated this exception. In the former, this Court observed:
There is no question, therefore, that the two (2) petitioners actively participated in
screening the features and articles in the POD as part of their official functions.
Under the rule that U.S. officials in the performance of their official functions are
immune from suit, then it should follow that petitioners may not be held liable for
the questioned publication.
It is to be noted, however, that the petitioners were sued in their personal
capacities for their alleged tortious acts in publishing a libelous article.
The question, therefore, arises are American naval officers who commit a
crime or tortious act while discharging official functions still covered by the
principle of state immunity from suit? Pursuing the question further, does the
grant of rights, power, and authority to the United States under the RP-US Bases
Treaty cover immunity of its officers from crimes and torts? Our answer is No.

In the latter, even on the claim of diplomatic immunity which Bradford does not in fact pretend
to have in the instant case as she is not among those granted diplomatic immunity under Article
16(b) of the 1953 Military Assistance Agreement creating the JUSMAG 52 this Court ruled:
Even Article 31 of the Vienna Convention on Diplomatic Relations admits of
exceptions. It reads:
1. A diplomatic agent shall enjoy immunity from the criminal
jurisdiction of the receiving State. He shall also enjoy immunity
from its civil and administrative jurisdiction except in the case of:
xxx xxx xxx
(c) an action relating to any professional or
commercial activity exercised by the diplomatic
agent in the receiving State outside his official
functions(Emphasis supplied).
There can be no doubt that on the basis of the allegations in the complaint, Montoya has a
sufficient and viable cause of action. Bradford's purported non-suability on the ground of state
immunity is then a defense which may be pleaded in the answer and proven at the trial.
Since Bradford did not file her Answer within the reglementary period, the trial court correctly
declared her in default upon motion of the private respondent. The judgment then rendered
against her on 10 September 1987 after the ex parte reception of the evidence for the private
respondent and before this Court issued the Temporary Restraining Order on 7 December 1987
cannot be impugned. The filing of the instant petition and the knowledge thereof by the trial court
did not prevent the latter from proceeding with Civil Case No.
224-87. "It is elementary that the mere pendency of a special civil action for certiorari,
commenced in relation to a case pending before a lower Court, does not interrupt the course of
the latter when there is no writ of injunction restraining it." 53
WHEREFORE, the instant petition is DENIED for lack of merit. The Temporary Restraining Order
of 7 December 1987 is hereby LIFTED.
Costs against petitioner Bradford.
SO ORDERED.

6. G.R. No. L-66620 September 24, 1986


REMEDIO V. FLORES, petitioner,
vs.
HON. JUDGE HEILIA S. MALLARE-PHILLIPPS, IGNACIO BINONGCAL & FERNANDO
CALION, respondents.

Lucio A. Dixon for respondent F. Calion.

FERIA, J.:
The Court rules that the application of the totality rule under Section 33(l) of Batas Pambansa
Blg. 129 and Section 11 of the Interim Rules is subject to the requirements for the permissive
joinder of parties under Section 6 of Rule 3 which provides as follows:
Permissive joinder of parties.-All persons in whom or against whom any right to
relief in respect to or arising out of the same transaction or series of transactions
is alleged to exist, whether jointly, severally, or in the alternative, may, except as
otherwise provided in these rules, join as plaintiffs or be joined as defendants in
one complaint, where any question of law or fact common to all such plaintiffs or
to all such defendants may arise in the action; but the court may make such
orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he
may have no interest.
Petitioner has appealed by certiorari from the order of Judge Heilia S. Mallare-Phillipps of the
Regional Trial Court of Baguio City and Benguet Province which dismissed his complaint for lack
of jurisdiction. Petitioner did not attach to his petition a copy of his complaint in the erroneous
belief that the entire original record of the case shall be transmitted to this Court pursuant to the
second paragraph of Section 39 of BP129. This provision applies only to ordinary appeals from
the regional trial court to the Court of Appeals (Section 20 of the Interim Rules). Appeals to this
Court by petition for review on certiorari are governed by Rule 45 of the Rules of Court (Section
25 of the Interim Rules).
However, the order appealed from states that the first cause of action alleged in the complaint
was against respondent Ignacio Binongcal for refusing to pay the amount of P11,643.00
representing cost of truck tires which he purchased on credit from petitioner on various occasions
from August to October, 1981; and the second cause of action was against respondent Fernando
Calion for allegedly refusing to pay the amount of P10,212.00 representing cost of truck tires
which he purchased on credit from petitioner on several occasions from March, 1981 to January,
1982.
On December 15, 1983, counsel for respondent Binongcal filed a Motion to Dismiss on the
ground of lack of jurisdiction since the amount of the demand against said respondent was only
P11,643.00, and under Section 19(8) of BP129 the regional trial court shall exercise exclusive
original jurisdiction if the amount of the demand is more than twenty thousand pesos
(P20,000.00). It was further averred in said motion that although another person, Fernando
Calion, was allegedly indebted to petitioner in the amount of P10,212.00, his obligation was
separate and distinct from that of the other respondent. At the hearing of said Motion to Dismiss,
counsel for respondent Calion joined in moving for the dismissal of the complaint on the ground
of lack of jurisdiction. Counsel for petitioner opposed the Motion to Dismiss. As above stated, the
trial court dismissed the complaint for lack of jurisdiction.
Petitioner maintains that the lower court has jurisdiction over the case following the "novel"
totality rule introduced in Section 33(l) of BP129 and Section 11 of the Interim Rules.

The pertinent portion of Section 33(l) of BP129 reads as follows:


... Provided,That where there are several claims or causes of action between the
same or different parties, embodied in the same complaint, the amount of the
demand shall be the totality of the claims in all the causes of action, irrespective
of whether the causes of action arose out of the same or different transactions. ...
Section 11 of the Interim Rules provides thus:
Application of the totality rule.-In actions where the jurisdiction of the court is
dependent on the amount involved, the test of jurisdiction shall be the aggregate
sum of all the money demands, exclusive only of interest and costs, irrespective
of whether or not the separate claims are owned by or due to different parties. If
any demand is for damages in a civil action, the amount thereof must be
specifically alleged.
Petitioner compares the above-quoted provisions with the pertinent portion of the former rule
under Section 88 of the Judiciary Act of 1948 as amended which reads as follows:
... Where there are several claims or causes of action between the same parties
embodied in the same complaint, the amount of the demand shall be the totality
of the demand in all the causes of action, irrespective of whether the causes of
action arose out of the same or different transactions; but where the claims or
causes of action joined in a single complaint are separately owned by or due to
different parties, each separate claim shall furnish the jurisdictional test. ...
and argues that with the deletion of the proviso in the former rule, the totality rule was reduced to
clarity and brevity and the jurisdictional test is the totality of the claims in all, not in each, of the
causes of action, irrespective of whether the causes of action arose out of the same or different
transactions.
This argument is partly correct. There is no difference between the former and present rules in
cases where a plaintiff sues a defendant on two or more separate causes of action. In such
cases, the amount of the demand shall be the totality of the claims in all the causes of action
irrespective of whether the causes of action arose out of the same or different transactions. If the
total demand exceeds twenty thousand pesos, then the regional trial court has jurisdiction.
Needless to state, if the causes of action are separate and independent, their joinder in one
complaint is permissive and not mandatory, and any cause of action where the amount of the
demand is twenty thousand pesos or less may be the subject of a separate complaint filed with a
metropolitan or municipal trial court.
On the other hand, there is a difference between the former and present rules in cases where
two or more plaintiffs having separate causes of action against a defendant join in a single
complaint. Under the former rule, "where the claims or causes of action joined in a single
complaint are separately owned by or due to different parties, each separate claim shall furnish
the jurisdictional test" (Section 88 of the Judiciary Act of 1948 as amended, supra). This was
based on the ruling in the case of Vda. de Rosario vs. Justice of the Peace, 99 Phil. 693. As
worded, the former rule applied only to cases of permissive joinder of parties plaintiff. However, it
was also applicable to cases of permissive joinder of parties defendant, as may be deduced from
the ruling in the case of Brillo vs. Buklatan, thus:

Furthermore, the first cause of action is composed of separate claims against


several defendants of different amounts each of which is not more than P2,000
and falls under the jurisdiction of the justice of the peace court under section 88
of Republic Act No, 296. The several claims do not seem to arise from the same
transaction or series of transactions and there seem to be no questions of law or
of fact common to all the defendants as may warrant their joinder under Rule 3,
section 6. Therefore, if new complaints are to be filed in the name of the real
party in interest they should be filed in the justice of the peace court. (87 Phil.
519, 520, reiterated in Gacula vs. Martinez, 88 Phil. 142, 146)
Under the present law, the totality rule is applied also to cases where two or more plaintiffs
having separate causes of action against a defendant join in a single complaint, as well as to
cases where a plaintiff has separate causes of action against two or more defendants joined in a
single complaint. However, the causes of action in favor of the two or more plaintiffs or against
the two or more defendants should arise out of the same transaction or series of transactions
and there should be a common question of law or fact, as provided in Section 6 of Rule 3.
The difference between the former and present rules in cases of permissive joinder of parties
may be illustrated by the two cases which were cited in the case of Vda. de Rosario vs. Justice of
the Peace (supra) as exceptions to the totality rule. In the case of Soriano y Cia vs. Jose (86 Phil.
523), where twenty-nine dismissed employees joined in a complaint against the defendant to
collect their respective claims, each of which was within the jurisdiction of the municipal court
although the total exceeded the jurisdictional amount, this Court held that under the law then the
municipal court had jurisdiction. In said case, although the plaintiffs' demands were separate,
distinct and independent of one another, their joint suit was authorized under Section 6 of Rule 3
and each separate claim furnished the jurisdictional test. In the case of International Colleges,
Inc. vs. Argonza (90 Phil. 470), where twenty-five dismissed teachers jointly sued the defendant
for unpaid salaries, this Court also held that the municipal court had jurisdiction because the
amount of each claim was within, although the total exceeded, its jurisdiction and it was a case of
permissive joinder of parties plaintiff under Section 6 of Rule 3.
Under the present law, the two cases above cited (assuming they do not fall under the Labor
Code) would be under the jurisdiction of the regional trial court. Similarly, in the abovecited cases
of Brillo vs. Buklatan and Gacula vs. Martinez (supra), if the separate claims against the several
defendants arose out of the same transaction or series of transactions and there is a common
question of law or fact, they would now be under the jurisdiction of the regional trial court.
In other words, in cases of permissive joinder of parties, whether as plaintiffs or as defendants,
under Section 6 of Rule 3, the total of all the claims shall now furnish the jurisdictional test.
Needless to state also, if instead of joining or being joined in one complaint separate actions are
filed by or against the parties, the amount demanded in each complaint shall furnish the
jurisdictional test.
In the case at bar, the lower court correctly held that the jurisdictional test is subject to the rules
on joinder of parties pursuant to Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Court
and that, after a careful scrutiny of the complaint, it appears that there is a misjoinder of parties
for the reason that the claims against respondents Binongcal and Calion are separate and
distinct and neither of which falls within its jurisdiction.
WHEREFORE, the order appealed from is affirmed, without pronouncement as to costs.

SO ORDERED.

7. G.R. No. 78646 July 23, 1991


PABLO RALLA, substituted by his wife and co-defendant CARMEN MUOZ-RALLA, and
his legal heirs, HILDA RALLA-ALMINE, BELISTA, RENE RALLA-BELISTA and GERARDO
M. RALLA, petitioners,
vs.
PEDRO RALLA, substituted by his legal heirs, LEONI, PETER, and MARINELA all
surnamed RALLA, and COURT OF APPEALS, respondents.
Rafael Triunfante and Teodorico C. Almine, Jr. for petitioners.
Ruben R. Basa for private respondents.

CRUZ, J.:p
Rosendo Ralla had two sons, Pablo and Pedro. The father apparently loved the former but not
the latter, Pablo and his family lived with Rosendo, who took care of all the household expenses.
Pablo administered part of the family properties and received a monthly salary of P250.00 plus
part of the produce of the land. Pedro lived with his mother, Paz Escarella, in another town. He
was not on good terms with his father.
Paz Escarella died in 1957 and the two brothers partitioned 63 parcels of land she left as her
paraphernalia property. The partition was sustained by this Court in G.R. Nos. 63253-54 on April
27, 1989. 1 Meanwhile, on December 22, 1958, Rosendo executed a will disinheriting Pedro and
leaving everything he owned to Pablo, to whom he said he had earlier sold a part of his property for
P10,000.00. Rosendo himself filed for the probate of the will but pendente lite died on October 1,
1960.
On November 3, 1966, the probate judge converted SP 564 into an intestate proceeding. On
February 28, 1978, a creditor of the deceased filed a petition for the probate of Rosendo's will in
SP 1106, which was heard jointly with SP 564. On August 3, 1979, the order of November 3,
1966, was set aside.
The last will and testament of Rosendo Ralla was allowed on June 7, 1982 2 but on October 20,
1982, the disinheritance of Pedro was disapproved. 3 This order was elevated to the Court of Appeals
in AC-G.R. Nos. 00472, 00489.
In a decision dated July 25, 1986, the Court of Appeals 4 reversed the trial court and reinstated the
disinheritance clause after finding that the requisites of a valid disinheritance had been complied with
in the will. The appellate court noted that Pedro had threatened to kill his father, who was afraid of him
and had earlier sued him for slander and grave oral defamation.
The decision was assailed before this Court in G.R. Nos. 76657-58, which was dismissed in our
resolution of August 26, 1987, reading as follows:

. . . Assuming that, as claimed, the petitioners' counsel received a copy of the


questioned decision only on August 15, 1986 (although it should have been
earlier because it was mailed to him at his address of record on July 28, 1986),
they had 15 days, or until August 30, 1986, within which to move for its
reconsideration or appeal therefrom by certiorari to this Court. Instead, they filed
on August 28, 1986, a motion for extension of time to file a motion for
reconsideration, which was not allowed under our ruling in Habaluyas
Enterprises, Inc. v. Japson, 142 SCRA 208, and so did not interrupt the running of
the reglementary period. Indeed, even if the period were to be counted from
October 7, 1986, when notice of the denial of the motion for extension was
received by the petitioners, the petition would still be 30 days late, having been
filed on December 8, 1986. Moreover, the petitioners have not shown that the
questioned decision is tainted with grave abuse of discretion or that it is not in
accord with law and jurisprudence. For these reasons, the Court Resolved to
DISMISS the petition.
The motion for reconsideration was denied with finality in the following resolution dated October
26, 1987:
. . . The Court, after deliberation, Resolved to DENY with finality the motion for
reconsideration, wherein the petitioners pray that they be relieved from the effects
of our ruling in Habaluyas Enterprises, Inc. v. Japson, 142 SCRA 208, under
which the petition was denied for tardiness. Counsel are expected to be abreast
of current developments in law and jurisprudence and cannot plead ignorance
thereof as an excuse for non-compliance with the same. As earlier observed, the
petition was filed extremely late, and, moreover, it was inadequate even on the
merits, same having failed to show that the questioned decision was tainted with
grave abuse of discretion or reversible error.
What is involved in the present petition is the correctness of the decision of the respondent court
annulling the deed of sale executed by Rosendo Ralla in favor of Pablo over 149 parcels of land.
Pedro had filed on May 19, 1972, a complaint to annul the transaction on the ground that it was
simulated. 5 The original decision of the trial court declared the sale null and void. 6 In the resolution of
the motion for reconsideration, however, Judge Jose F. Madara completely reversed himself and held
the deed of sale to be valid. 7 This order was in turn set aside by the respondent court, which
reinstated the original decision invalidating the deed of sale.
It is indeed intriguing that the trial judge should, in resolving the motion for reconsideration, make
a complete turnabout on the basis of the same evidence and jurisprudence that he considered in
rendering the original decision. It is no less noteworthy that the respondent court, after studying
the two conclusions reached by him, saw fit to sustain his original findings as the correct
appreciation of the evidence and the applicable law.
But we find that, regardless of these curious resolutions, the petition must nevertheless be
sustained albeit not on the ground that the deed of sale was indeed valid. The Court is inclined to
support the findings of the respondent court. However, we do not and cannot make any decision
on this matter because of one insuperable obstacle. That obstacle is the proper party personality
of Pedro Ralla to question the transaction.

The decision of the Court of Appeals in AC-G.R. Nos. 00472, 00489 approved the disinheritance
of Pedro Ralla. That decision was appealed to this Court, but the petition for review was
dismissed as above related. The decision has long since become final. Since then, Pedro Ralla
no longer had the legal standing to question the validity of the sale executed by Rosendo in favor
of his other son Pablo.
The real party-in-interest is the party who stands to be benefited or injured by the judgment or
the party entitled to the avails of the suit. "Interest" within the meaning of the rule means material
interest, an interest in issue and to be affected by the decree, as distinguished from mere interest
in the question involved, or a mere incidental interest. As a general rule, one having no right or
interest to protect cannot invoke the jurisdiction of the court as a party-plaintiff in an action.
As the sole heir, Pablo Ralla had the right to inherit the totality of his father's estate after payment
of all its debts. Even if it be assumed that the deed of sale was indeed invalid, the subject-matter
thereof nevertheless devolved upon Pablo as the universal successor of his father Rosendo. In
his wig, Rosendo claimed the 149 parcels as "part of my property" as distinguished from the
conjugal estate which he had earlier sold to Pablo. Significantly, Pedro did not deny this
description of the property in his Comment to the present petition, confining himself to assailing
the validity of the sale.
The Court must note the lackadaisical attitude of the heirs of Pedro Ralla, who substituted him
upon his death. They seem to have lost interest in this litigation, probably because of the
approval of their father's disinheritance by the respondent court. When the parties were required
to submit their respective memoranda after we gave due course to this petition, the petitioners
did but not the private respondents. Although the period to do so had already expired, the Court
relaxed its rules to give the private respondents another opportunity to comply with the
requirement. When the resolution of August 22, 1990, could not be served upon the private
respondents' counsel, we directed that it be served on the private respondents themselves. 9 On
January 18, 1991, the heirs of Pedro Ralla informed the Court that they were retaining another
counsel and asked that they be furnished a copy of the petition and given 30 days within which to file
their memorandum. 10 This motion was granted. The records show that they received a copy of the
petition on February 26, 1991, but their memorandum was never filed. On May 29, 1991, the Court,
noting this omission, finally resolved to dispense with the memorandum and to decide this case on the
basis of the available records.
Our decision is that as a validly disinherited heir, and not claiming to be a creditor of his
deceased father, Pedro Ralla had no legal personality to question the deed of sale dated
November 29, 1957, between Rosendo Ralla and his son Pablo. Legally speaking, Pedro Ralla
was a stranger to the transaction as he did not stand to benefit from its annulment. His
disinheritance had rendered him hors de combat.
WHEREFORE, the decision of the respondent court dated January 23, 1987, is set aside and
another judgment is hereby rendered dismissing Civil Case 194 (originally Civil Case 4624) in
this Regional Trial Court of Ligao, Albay, Branch 5.
SO ORDERED.

8. G.R. No. 94713 November 23, 1995

MANSION BISCUIT CORPORATION, represented by its president, ANG CHO


HONG, petitioner,
vs.
COURT OF APPEALS, TY TECK SUAN substituted by his heirs, ROSENDA TY, ELIZABETH
TY KOH, EDWARD TY, EDMUND TY, EDGAR TY, EVELYN T. LIM, EDWIN TY and EDISON
TY, and SIY GUI, respondents.

KAPUNAN, J.:
The instant petition for review seeks the reversal of the decision of the Court of Appeals dated
May 8, 1990 dismissing petitioner's appeal of the civil aspect of Criminal Cases Nos. 5598-V-83
entitled "People of the Philippines v. Ty Teck Suan" and 5599-V-83 entitled "People of the
Philippines v. Ty Teck Suan and Siy Gui", both for violation of Batas Pambansa Bilang 22,
otherwise known as the Bouncing Checks Law.
The established facts are as follows:
Sometime in 1981, Ty Teck Suan, as president of Edward Ty Brothers Corporation, ordered
numerous cartons of nutri-wafer biscuits from Mansion Biscuit Corporation. Before the delivery of
the goods on November 12, 1981, Ty Teck Suan issued to Ang Cho Hong, president of Mansion,
four (4) postdated checks totaling P404,980.00 as payment for the nutri-wafer biscuits. 1 Four (4)
other postdated checks in the amount of P100,000.00 each, 2 were issued by Ty Teck Suan with Siy
Gui as co-signor in December of the same year.
Accordingly, Mansion Biscuit Corporation delivered the goods from November 12, 1981 to
January 7, 1982, inclusive. 3
When the first four checks dated December 24, 1981, January 2, 1982, January 9, 1982 and
January 16, 1982 were deposited, they were all dishonored due to insufficiency of funds. 4 Ang
Cho Hong informed Ty Teck Suan of the dishonor and requested him to replace the checks with cash
or good checks. Ty Teck Suan failed to heed said request. 5
Subsequently, Ty Teck Suan delivered a total of 1,150 sacks of Australian flour to Mansion Biscuit
on February 11, 1982, February 22, 1982 and March 8, 1982. Said deliveries plus cash
advanced by Ty Teck Suan in December 1981 amounted to P162,500.00. 6 The same amount was
applied by Mansion Biscuit as payment for the first postdated check issued by Ty Teck Suan in the
amount of P104,980.00. (This resulted in the exclusion of the first check from the information which
was later filed against Ty Teck Suan. 7)
On March 1, 1982, Ang Cho Hong sent Ty Teck Suan a formal demand letter 8 requesting that the
latter make good the value of the dishonored checks within five (5) days from receipt
thereof. 9 Thereafter, the second batch of checks issued by Ty Teck Suan and Siy Gui dated March 20,
1982, April 10, 1982, May 1, 1982 and May 22, 1982 all became due and payable but on deposit, they
were all dishonored again. 10 On August 3, 1982, Mansion Biscuit, through its counsel, sent a final
demand letter 11 informing Ty Teck Suan that it would be constrained to file an action against him
should he continuously refuse to pay.

Ty Teck Suan having failed to meet his obligation, an information for violation of Batas Pambansa
Blg. 22 (Bouncing Checks Law) was filed against him before the Regional Trial Court, Branch
172 in Valenzuela, Metro Manila on February 16, 1983. Docketed as Criminal Case No. 5598-V83, the same reads:
That on or about and during the month of January, 1982, in the municipality of
Valenzuela, Metro Manila, Philippines, and within the jurisdiction of this
Honorable Court, the said accused Ty Teck Suan, knowing fully well that he has
no sufficient funds with the Rizal Commercial Banking Corporation, Quezon
Avenue Branch, did then and there wilfully, unlawfully and feloniously prepare,
issue and make out, for value check No. 034847 dated January 2, 1982, in the
amount of P100,000.00, check No. 034848 dated January 9, 1982, in the amount
of P100,000.00, and check No. 034849 dated January 16, 1982, in the amount of
P100,000.00 drawn against the said bank in payment of cartons of Nutri-Wafer
biscuits purchased from the Mansion Biscuit Corporation, represented by Ang
Cho Hong, President thereof, by the Edward Ty Brothers Corporation thru said
accused Ty Tech Suan, but the said checks upon presentation with the said bank
for deposit and verification of sufficiency of funds was (sic) dishonored and
refused payment on the ground of "insufficient funds", and despite repeated
demands to make good said checks or redeem the same within five (5) banking
days from demands, said accused failed and refused to do so, to the damage
and prejudice of the said Mansion Biscuit Corporation, in the total amount of
P300,000.00.
Contrary to law. 12 (Emphasis ours)
An identical information for violation of B.P. Blg. 22, docketed as Criminal Case No. 5599-V-83,
was likewise filed against Ty Teck Suan and Siy Gui, the treasurer of the Edward Ty Brothers
Corporation, for their having issued checks Nos. 10698023, 10698024, 10698025 and 10698026
drawn against the Equitable Banking Corporation and respectively dated March 20, 1982, April
10, 1982, May 1, 1982 and May 22, 1982 for the amount of P100,000.00 each or in the total sum
of P400,000.00. The checks were allegedly issued in payment for cartons of nutri-wafer biscuits
purchased from Mansion Biscuit but were refused payment for insufficiency of funds upon
presentment at the said bank. 13
Ty Teck Suan and Siy Gui pleaded not guilty to the charges. In the course of the trial,
complainant Ang Cho Hong filed a verified motion for the issuance of a writ of attachment. Even
as the accused filed a bond in the amount of P700,000.00, the court issued an order of
attachment on some of his real properties on November 26, 1984. 14
After the prosecution rested its case, Ty Teck Suan filed a motion to dismiss by way of demurrer
to evidence, which Siy Gui likewise adopted as his own. The motion to dismiss was based on the
following grounds: (a) the subject checks were issued merely to guarantee or secure fulfillment of
the agreement with the complainant; (b) the four Equitable Banking Corporation checks were
issued by the accused only as replacement for the four Rizal Banking Corporation checks issued
by Ty Teck Suan alone, and (c) the trial court had no jurisdiction over the offense. 15
On October 12, 1987, after the prosecution filed an opposition to the motion to dismiss, the trial
court, presided by then Judge Teresita Dizon-Capulong, 16 issued an order granting the motion to
dismiss, stating that:

On issuance of checks prior to August 8, 1984 when the Ministry of Justice ruled
otherwise, the defense of issuance of checks to guarantee the payment of an
obligation was still a valid defense. The transaction between the accused Ty Teck
Suan and the complaining witness occurred in the months of March, April and
May 1982 in Criminal Case No. 5599-V-83; and during the month of January
1982 in Criminal Case No. 5598-V-83. The jurisprudence in connection with the
issuance of checks which were dishonored after issuance but which checks were
issued to guarantee payment (sic) an obligation are still applicable to both
accused. Supreme Court rulings where issuance of bouncing check is neither
estafa nor violation of BP 22 are enunciated in Virginia Montano vs. Josefino
Galvez, June 19, 1981; Alice Quizon vs. Lydia Calingo, October 23,
1981; Alfredo Guido vs. Miguel A. Mateo, et al., November 17, 1981; Zenaida
Lazarao vs. Maria Aquino, August 7, 1981. The stare decisis in these cases is
where the check is issued as part of an arrangement to guarantee or secure the
payment of an obligation, whether pre-existing or not the drawer is not criminally
liable for either Estafa or Violation of BP Blg. 22.
xxx xxx xxx
Therefore, the Court concludes that the issuance of the above-mentioned checks
by the accused subject of these two criminal cases, and their subsequent
dishonor cannot be considered in Violation of BP 22 because one important
element of the offense is missing; that the check is made or drawn and issued to
apply on account or for value and because these were issued to guarantee the
fulfillment of an agreement to deliver biscuits by complainant when accused Ty
Teck Suan would place orders. 17
In the same order of dismissal, Judge Capulong found that accused Siy Gui's liability had not
been established by the prosecution as it appeared that he had no personal transactions with the
complainant although he was a co-signatory in the second batch of four checks. 18 The dispositive'
portion of the above-mentioned order reads:
WHEREFORE, the Court finds merit in the Motion to Dismiss based on Demurrer
to Evidence. Both accused are hereby declared not guilty of the offense charged
in the Information in both cases. The bail bonds posted for their provisional liberty
are ordered CANCELLED.
Consequently, the Order of Attachment issued in this case is hereby set aside.
SO ORDERED. 19
The prosecution then filed a motion for reconsideration and for clarification as to the civil aspect
of the criminal actions which were deemed impliedly instituted therein. 20 The defense opposed the
motion.
On October 30, 1987, the lower court denied the motion on the ground that:
. . . no civil liability can be enunciated and enforced in this (sic) criminal cases
due to the acquittal of both accused. Above-cited liability of both accused if any,

can be ventilated and enforced only in a separate action on the agreement


guaranteed by the checks. . . . 21
Thus, on November 11, 1987, the petitioner filed a special civil action of certiorari and
injunction with the Court of Appeals, docketed as CA-G.R. SP No. 13264, questioning
only the propriety of the trial court's order setting aside the order of attachment. 22
On February 22, 1988, the Court of Appeals rendered a decision 23 annulling and setting aside the
questioned portion of the order dated October 17, 1987 which set aside the writ of attachment.
Meanwhile, petitioner Mansion Biscuit Corporation filed another appeal to the Court of Appeals,
docketed as CA-G.R. CV No. 16580, this time assailing the trial court's ruling absolving
defendants from civil liability in the criminal cases. Petitioner contended that the acquittal of the
accused in the criminal cases did not necessarily extinguish their civil liability, citing Padilla
v. Court of Appeals, 24 People v. Jalandoni, 25 Maximo v. Gerochi, Jr. 26 and People v. Relova. 27
On January 10, 1989, while the appeal was pending with the Court of Appeals, Ty Teck Suan
died. A motion to dismiss the appeal concerning him pursuant to Section 21, Rule 3 of the Rules
of Court was filed by his counsel. This was opposed by petitioner. 28 In the resolution of January 8,
1990, the Court of Appeals denied the motion to dismiss for lack of merit and granted the substitution
of appellee Ty Teck Suan by his children named Rosenda Ty, Elizabeth Ty Koh, Edward Ty, Edmund
Ty, Edgar Ty, Evelyn T. Lim, Edwin Ty and Edison Ty. 29
On May 8, 1990, the Court of Appeals rendered a decision 30 dismissing the appeal for lack of merit.
It held that the civil liability sought to be enforced by the complainant was not the personal obligation
of Ty Teck Suan but a contractual liability of Edward Ty Brothers Corporation of which Ty Teck Suan
was the president. The civil liability of Edward Ty Brothers Corporation to Mansion Biscuit was not
litigated and resolved in the criminal cases because Edward Ty Brothers Corporation was not a party
thereto. Accordingly, the appellate court held that a separate civil action should be instituted by
petitioner against Edward Ty Brothers Corporation.
Their motion for reconsideration having been denied, petitioner came to this Court by way of the
instant petition for review alleging that respondent Court of Appeals erred in: (a) limiting its
appeal to civil liability arising from contract; (b) refusing to acknowledge the quasi-delict or tort
committed by Ty Teck Suan; (c) insisting that the contractual liability could not be enforced
against Ty Teck Suan; (d) not ruling that Ty Teck Suan, by his actuations, had personally
assumed liability, and (e) disregarding the conclusive findings of the Court of Appeals in CA-G.R.
No. SP No. 13264. 31
Petitioner contends that "when Ty Teck Suan committed the illegal act of insuring and delivering
worthless checks as advance payment, thus successfully inducing Ang Cho Hong, president of
Mansion, to deliver several hundred cartons of nutri-van biscuits, two (2) civil liabilities arose,
namely: (1) the civil liability arising from crime under Article 100 of the Revised Penal Code, and
(2) the civil liability arising from tort or quasi-delict." 32 Petitioner further alleges that when Ty Teck
Suan and Siy Gui were acquitted in the criminal cases, "only the civil liability arising from crime was
extinguished" pursuant to Article 100 of the Revised Penal Code, but their civil liability based
on quasi-delict remained.
Private respondents, on the other hand, asseverate that Ty Teck Suan and Siy Gui could not be
held liable for a contractual liability of the corporation which they represented. They maintain the

view that petitioner must file a separate civil action against Edward Ty Brothers Corporation
inasmuch as the latter is the real party in interest and was not a party to the criminal cases filed
against them which are subject of the present petition for review.
We are thus confronted with the issue of whether or not the petitioner can enforce the civil liability
for non-payment of the nutri-wafer biscuits in question against private respondents
notwithstanding the fact that the latter contracted the agreement in behalf of Edward Ty Brothers
Corporation.
We rule in the negative.
The civil liability for non-payment of the nutri-wafer biscuits delivered by petitioner to the Edward
Ty Brothers Corporation cannot be enforced against the private respondents because the said
civil liability was not the personal liability of Ty Teck Suan to Mansion Biscuit Corporation, rather,
it was the contractual liability of Edward Ty Brothers Corporation, of which Ty Teck Suan was
president, to Mansion Biscuit Corporation. This is borne out by the records of the case. The
information in Criminal Cases Nos. 5598-V-83 and 5599-V-83 filed against Ty Teck Suan and Siy
Gui reveal that the checks were issued "in payment of the cartons of nutri-wafer biscuits
purchased from the Mansion Biscuit Corporation, represented by Ana Cho Hong, president
thereof, by Edward Ty Brothers Corporation thru said accused Ty Teck Suan." 33 Moreover,
petitioner itself admitted that the contract was executed by and between Edward Ty Brothers
Corporation, represented by its president, Ty Teck Suan, and Mansion Biscuit Corporation, 34 likewise
represented by its president, Ang Cho Hong. This was correctly observed by respondent Court of
Appeals in its assailed decision and we quote:
The civil liability which the complainant seeks to enforce is the unpaid value of
the nutri-van biscuits which were allegedly ordered by Ty Teck Suan from
complainant and delivered by the latter between 12 November 1981 and the first
week of January 1982. It is apparent from the record, however, that this civil
liability is not the personal liability of Ty Teck Suan to private complainant Ang
Cho Hong. It is the contractual liability of Edward Ty Brothers Corporation of
which Ty Teck Suan was president, to Mansion Biscuit Corporation, of which Ang
Cho Hong was president. This is clear from the Statement of Facts in plaintiffsappellant brief, the relevant and pertinent portions of which read:
Sometime in 1981, Teck Suan, as president of Edward Ty Brothers Corporation
ordered numerous cartons of nutri-van biscuits from Mansion Biscuit Corporation.
As payment for these goods, Ty Teck Suan issued four (4) postdated checks
amounting P404,980.00. These checks were delivered to Mr.Ang Cho Hong,
President of Mansion biscuit corporation sometime during the first week of
November, 1981 (p. 17, tsn of March 14, 1984). (at p. 10 of Brief, Emphasis
ours.)
xxx xxx xxx
These goods were received by Ty Teck Suan, through Edward Ty
Brothers Corporation as its Consignees, and this was evidenced
by the different receipts that have been issued by Edward Ty
Brothers Corporation and its Consignees . . ., as well as by the
"authority to deliver" documents issued by Edward Ty Brothers

Corporation . . . and signed by one Elizabeth Ty Kho, the


daughter of Ty Teck Suan (p. 24, tsn of June 13, 1984). (at pp. 1112, ibid) Likewise, the informations uniformly state that the checks
were "in payment of cartons of Nutri-Wafers biscuit purchased
from the Mansion Biscuit Corporation, represented by Ang Cho
Hong, President thereof, by the Edward Ty Brothers Corporation
thru said accused Ty Teck Suan . . .
It is quite obvious from the foregoing that Ty Teck Suan did not purchase the
biscuits for himself but for Edward Ty Brothers Corporation in his capacity as its
president. Neither did Ang Cho Hong sell and deliver the biscuits in his personal
capacity but for and in behalf of Mansion Biscuits Corporation of which he was
president. The issue of the civil liability of Edward Ty Brothers Corporation to
Mansion Biscuits Corporation arising from the contract of purchase and sale
between them could not have been and was not litigated and resolved in the
criminal case inasmuch as they were not parties therein. A separate civil action
must be instituted by Mansion Biscuits Corporation against Edward Ty Brothers
Corporation to enforce the contract between them. 35
With respect to the issue of tortious liability, the respondent court had this to say:
Another telling circumstance against plaintiff-appellant's posture is his statement
of the sole issue to be resolved in this appeal, to wit:
Statement of Issues
Whether or not plaintiff-appellant has established his right to the
payment of the goods he delivered to defendants-appellees.
It is quite clear from the foregoing that plaintiff-appellant is enforcing a
contractual, not a tortious, liability.
Assuming that plaintiff-appellant has basis for his quasi-delict claim, the same
must be addressed still against Edward Ty Brothers Corporation for the
established facts show that the post-dated checks were issued by accusedappellee not in payment of his personal obligations but of the corporation's.
Moreover the fraud allegedly committed by accused-appellee was merely
incidental to the contractual obligation, not an independent act which could serve
as a source of obligation. The cases cited by plaintiff-appellant, to illustrate that
the existence of a contract does not preclude an action on quasi-delict where the
act that breaks the contract constitutes a quasi-delict, have no application
because the acts complained of therein were performed to break an existing
contract, whereas the alleged fraud herein was committed at the time of the
creation of the contractual relationship and as an incident thereof. 36
Necessarily, any claim for tortious liability must be ventilated in a separate action against the
proper party.

As a sidelight, we would like to reiterate our ruling in People v.


Bayotas, 37 where we summarized the rules with respect to recovery of civil liability arising from crime
and other sources, to wit:
1. Death of the accused pending appeal of his conviction extinguishes his
criminal liability as well as the civil liability based solely thereon.
2. Corollarily, the claim for civil liability survives notwithstanding the death of
accused, if the same may also be predicated on a source of obligation other than
delict. Article 1157 of the Civil Code enumerates these other sources of obligation
from which the civil liability may arise as a result of the same act or omission:
a) Law
b) Contracts
c) Quasi-contracts
d) . . .
e) Quasi-delicts.
3. Where the civil liability survives, as explained in Number 2 above, an action for
recovery therefor may be pursued but only by way of filing a separate civil action
and subject to Section 1, Rule III of the 1984 Rules on Criminal Procedures as
amended. This separate civil action may be enforced either against the
executor/administrator or the estate of the accused, depending on the source of
obligation upon which the same is based as explained above.
4. Finally, the private offended party need not fear a forfeiture of his right to file
this separate civil action by prescription, in cases where during the prosecution of
the criminal action and prior to its extinction, the private-offended party instituted
together therewith the civil action. In such case, the statute of limitations on the
civil liability is deemed interrupted during the pendency of the criminal case,
conformably with provisions of Article 1155 of the Civil Code, that should thereby
avoid any apprehension on a possible privation of right by prescription. 38
In the case at bench, the acquittal of Ty Teck Suan and Siy Gui extinguished both their criminal
and civil liability as it is clear from the order acquitting them that the issuance of the checks in
question did not constitute a violation of B.P. Blg. 22. Consequently, no civil liability arising from
the alleged delict may be awarded.
WHEREFORE, premises considered, the judgment appealed from is hereby AFFIRMED in toto.
SO ORDERED.

9. G.R. No. 94005. April 6, 1993.

LUISA LYON NUAL, herein represented by ALBERT NUAL, and ANITA NUAL HORMIGOS,
petitioners,
vs.
THE COURT OF APPEALS and EMMA LYON DE LEON in her behalf and as guardian ad litem
of the minors HELEN SABARRE and KENNY SABARRE, EDUARDO GUZMAN, MERCEDEZ
LYON TAUPAN, WILFREDO GUZMAN, MALLY LYON ENCARNACION and DORA LYON
DELAS PEAS, respondents.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; ONCE IT BECOMES FINAL, MAY NO
LONGER BE MODIFIED IN ANY RESPECT; EXCEPTIONS. In the case of Manning
International Corporation v. NLRC, (195 SCRA 155, 161 [1991]) We held that ". . ., nothing is
more settled in the law than that when a final judgment becomes executory, it thereby becomes
immutable and unalterable. 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 land. The only recognized exceptions are the correction of clerical errors
or the making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of
course, where the judgment is void." Furthermore, "(a)ny amendment or alteration which
substantially affects a final and executory judgment is null and void for lack of jurisdiction,
including the entire proceedings held for that purpose."
2. ID.; ID.; ID.; ID.; REMEDY OF AGGRIEVED PARTY. In the case at bar, the decision of the
trial court in Civil Case No. 872 has become final and executory. Thus, upon its finality, the trial
judge lost his jurisdiction over the case. Consequently, any modification that he would make, as
in this case, the inclusion of Mary Lyon Martin would be in excess of his authority. The remedy of
Mary Lyon Martin is to file an independent suit against the parties in Civil Case No. 872 and all
other heirs for her share in the subject property, in order that all the parties in interest can prove
their respective claims.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** dated February 22, 1990 of the Court
of Appeals in CA-G.R. CV No. 14889 entitled "Emma Lyon de Leon, et al., plaintiffs-appellees
versus Luisa Lyon Nual, now deceased herein represented by Albert Nual, et al., defendants
appellants," dismissing petitioners' appeal and affirming the trial court's order *** dated January
9, 1987 for the inclusion of Mary Lyon Martin as one of the heirs who shall benefit from the
partition.
The facts as culled from the records of the case are as follows.
This case originated from a suit docketed as Civil Case No. 872 filed by Emma Lyon de Leon in
her behalf and as guardian ad litem of the minors Helen Sabarre and Kenny Sabarre, Eduardo
Guzman, Mercedes Lyon Taupan, Wilfredo Guzman, Mally Lyon Encarnacion and Dona Lyon de
las Peas, (herein private respondents) against Luisa Lyon Nual, now deceased and herein
represented by her heirs, Albert Nual and Anita Nual Hormigos (herein petitioners), for partition
and accounting of a parcel of land located in Isabela, Basilan City. Subject parcel of land was

formerly owned by Frank C. Lyon and May Ekstrom Lyon, deceased parents of Helen, Dona,
Luisa, Mary, Frank and William James. Private respondents claimed that said parcel of land,
formerly covered by Transfer Certificate of Title No. 3141 in the name of Frank C. Lyon, has been
in possession of petitioner Luisa Lyon Nual since 1946 and that she made no accounting of the
income derived therefrom, despite demands made by private respondents for the partition and
delivery of their shares.
On December 17, 1974, after trial and hearing, the then Court of First Instance (now Regional
Trial court) rendered its judgment in favor of private respondents and ordered the partition of the
property but dismissing private respondents' complaint for accounting. The dispositive portion of
the judgment reads as follows:
"WHEREFORE, judgment is hereby rendered ordering the partition of the land covered by
Transfer Certificate of Title No. 3141 among the plaintiffs and defendant. The parties shall make
partition among themselves by proper instruments of conveyance, subject to the Court's
confirmation, should the parties be unable to agree on the partition, the court shall appoint
commissioners to make the partition, commanding them to set off to such party in interest such
part and proportion of the property as the Court shall direct. Defendant is further ordered to pay
plaintiffs attorney's fees in the sum of P2,000.00." 1
On July 30, 1982, the order of partition was affirmed in toto by the Court of Appeals in CA-G.R.
No. 57265-R. The case was remanded to the court of origin for the ordered partition. 2
On May 17, 1984, an order for the issuance of the writ of execution was issued by the court a
quo. 3
On July 17, 1984, Mary Lyon Martin, daughter of the late Frank C. Lyon and Mary Ekstrom Lyon,
assisted by her counsel filed a motion to quash the order of execution with preliminary injunction.
In her motion, she contends that not being a party to the above-entitled case her rights, interests,
ownership and participation over the land should not be affected by a judgment in the said case;
that the order of execution is unenforceable insofar as her share, right, ownership and
participation is concerned, said share not having been brought within the Jurisdiction of the court
a quo. She further invokes Section 12, Rule 69 of the Rules of Court. 4
On June 26, 1985, the trial court issued an order revoking the appointment of the three
commissioners and in lieu thereof, ordered the issuance of a writ of execution. 5
On February 4, 1986, the said court issued an order appointing a Board of Commissioners to
effect the partition of the contested property. 6
On May 28, 1986, the trial court dismissed the motion to quash order of execution with
preliminary injunction filed by Mary Lyon Martin and directed the partition of the property among
the original party plaintiffs and defendants. 7
On September 24, 1986, the Commissioners manifested to the trial court that in view of the fact
that the name of Mary Lyon Martin also appears in the Transfer Certificate of Title, she could
therefore be construed as one of the heirs. A ruling from the trial court was then sought. 8

On September 29, 1986, the lower court issued an order directing the counsel of Emma Lyon de
Leon to furnish the court within five days from receipt thereof all the names the of heirs entitled to
share in the partition of the subject property. 9
On October 1, 1986, the petitioners filed a manifestation praying that the court issue an order
directing the partition of the property in consonance the decision dated December 17, 1974 of
the trial court the order of said court dated May 28, 1986. 10
Without ruling on the manifestation, the lower court issued an order directing the Board of
Commissioners to immediately partition the said property. 11
On January 3, 1987, the private respondents filed motion for clarification as to whether the
partition of property is to be confined merely among the party plaintiffs and defendants, to the
exclusion of Mary Lyon Martin. 12
On January 9, 1987, the lower court issued the assailed order directing the inclusion of Mary
Lyon Martin as co-owner with a share in the partition of the property, to wit:
"After a perusal of the decision of the Court of Appeals CA-G.R. No. 57265-R, where this case
was appealed by the unsatisfied parties, there is a finding that Mary now Mary Lyon Martin is one
of the legitimate children of Frank C. Lyon and Mary Ekstrom. (Page 3 of the decision).
In view of this finding, it would be unfair and unjust if she would be left out in the partition of this
property now undertaking (sic) by the said court appointed commissioners.
WHEREFORE, premises considered, the court appointed commissioners is hereby directed to
include Mary Lyon Martin as co-owner in the said property subject of partition with the
corresponding shares adjudicated to her.
SO ORDERED." 13
Petitioners' motion for reconsideration 14 of the aforesaid order was denied by the trial court. 15
On February 22, 1990 the Court of Appeals rendered its decision dismissing petitioners' appeal,
the dispositive portion of which reads as follows:
"WHEREFORE, premises considered, there being no legal impediment to the inclusion of Mary
Lyon Martin by the court-appointed Board of Commissioners as one of the heirs who shall benefit
from the partition, the instant appeal is DISMISSED for lack of merit.
NO COSTS.
SO ORDERED." 16
Petitioners' motion for reconsideration was denied on June 6, 1990. 17
Petitioners filed this petition for review alleging that the Court of Appeals has decided questions
of substance contrary to law and the applicable decisions of this Court, for the following reasons:

"1.) BY SUSTAINING THE ORDER OF THE REGIONAL TRIAL COURT DIRECTING THE
COURT APPOINTED BOARD OF COMMISSIONERS TO INCLUDE MARY L. MARTIN TO
SHARE IN THE PARTITION OF THE PROPERTY IN LITIGATION DESPITE THE FACT, OVER
WHICH THERE IS NO DISPUTE, THAT SHE HAS NOT LITIGATED EITHER AS A PARTY
PLAINTIFF OR DEFENDANT IN CIVIL CASE NO. 872, IT HAS REFUSED TO RECOGNIZE
THAT THE REGIONAL TRIAL COURT HAS NO JURISDICTION TO AMEND OR MODIFY THE
JUDGMENT IN CIVIL CASE NO. 872 AND THE REGIONAL TRIAL COURT'S ORDER DATED
28 MAY 1986 WHICH HAS BECOME FINAL AND EXECUTORY.
2.) WHEN THE COURT OF APPEALS HAS CATEGORICALLY STATED THAT MARY L.
MARTIN "NEVER LITIGATED AS ONE OF THE PLAINTIFFS IN SAID CASE," AND HER ONLY
PARTICIPATION THEREIN WAS SIMPLY CONFINED "AS A WITNESS FOR DEFENDANTSISTER LUISA LY ON NUAL," AND TO ALLOW HER TO SHARE IN THE PARTITION THIS
LATE WITHOUT REQUIRING A PROCEEDING WHERE THE PARTIES COULD PROVE THEIR
RESPECTIVE CLAIMS, IS TANTAMOUNT TO DENYING THE NUALS OF THEIR RIGHT TO
DUE PROCESS. 18
The crux of this case is whether of not the trial court may order the inclusion of Mary L. Martin as
co-heir entitled to participate in the partition of the property considering that she was neither a
party plaintiff nor a party defendant in Civil Case No. 872 for partition and accounting of the
aforesaid property and that the decision rendered in said case has long become final and
executory.
Petitioners contend that the trial court's decision dated December 14, 1974 in Civil Case No. 872
ordering the partition of the parcel of land covered by Transfer Certificate of Title No. 3141
among plaintiffs and defendants has long become final and executory. Hence the trial court has
no jurisdiction to issue the questioned Order dated January 9, 1987 ordering the Board of
Commissioners to include Mary Lyon Martin to share in the partition of said property despite the
fact that she was not a party to the said case. Said Order, therefore, resulted in an amendment or
modification of its decision rendered in Civil Case No. 872.
We find merit in the instant petition.
In the ease of Manning International Corporation v. NLRC, 19 We held that ". . ., nothing is more
settled in the law than that when a final judgment becomes executory, it thereby becomes
immutable and unalterable. 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 land. The only recognized exceptions are the correction of clerical errors
or the making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of
course, where the judgment is void."
Furthermore, "(a)ny amendment. or alteration which substantially affects a final and executory
judgment is null and void for lack of jurisdiction, including the entire proceedings held for that
purpose." 20
In the case at bar, the decision of the trial court in Civil Case No. 872 has become final and
executory. Thus, upon its finality, the trial judge lost his jurisdiction over the case. Consequently,
any modification that he would make, as in this case, the inclusion of Mary Lyon Martin would be
in excess of his authority.

The remedy of Mary Lyon Martin is to file an independent suit against the parties in Civil Case
No. 872 and all other heirs for her share in the subject property, in order that all the parties in
interest can prove their respective claims.
WHEREFORE, the petition is GRANTED. The Order dated January 9, 1987 of the trial Court as
affirmed by the Court of Appeals is hereby REVERSED and SET ASIDE. The decision of the trial
court dated December 17, 1974 in Civil Case No. 872 is hereby REINSTATED.
SO ORDERED.

10. G.R. No. 106436 December 3, 1994


VIRGILIO D. IMSON, petitioner,
vs.
HON. COURT OF APPEALS, HOLIDAY HILLS STOCK AND BREEDING FARM
CORPORATION, FNCB FINANCE CORPORATION, respondents.
Polotan Law Office for petitioner.
Felix R. Solomon for private respondents.

PUNO, J.:
The case at bench arose from a vehicular collision on December 11, 1983, involving petitioner's
Toyota Corolla and a Hino diesel truck registered under the names of private respondents FNCB
Finance Corporation and Holiday Hills Stock and Breeding Farm Corporation. The collision
seriously injured petitioner and totally wrecked his car.
On January 6, 1984, petitioner filed with the RTC Baguio City 1 a Complaint for Damages 2 Sued
were private respondents as registered owners of the truck; truck driver Felix B. Calip, Jr.; the
beneficial owners of the truck, Gorgonio Co Adarme, Felisa T. Co (also known as Felisa Tan), and
Cirilia Chua Siok Bieng, and the truck insurer, Western Guaranty Corporation.
The Complaint prayed that defendants be ordered to pay, jointly and severally, two hundred
seventy thousand pesos (P270,000.00) as compensatory damages, fifty thousand pesos
(P50,000.00) each as moral and exemplary damages, and attorney's fees, litigation expenses,
and cost of suit. 8
Defendants driver and beneficial owners failed to answer and were declared in default. 4 On May
29, 1987, however, petitioner and defendant insurer, entered into a compromise agreement which
provided, inter alia:
1. Defendant Western Guaranty Corporation (Western Guaranty for short) admits
that its total liability under the laws and the insurance contract sued upon is
P70,000.00;

2. In full settlement of its liability under the laws and the said insurance contract,
defendant Western Guaranty shall pay plaintiff (herein petitioner) the amount of
P70,000.00 upon the signing of this compromise agreement;
3. This compromise agreement shall in no way waive nor prejudice plaintiffs
(herein petitioner's) rights to proceed against the other defendants with respect
the remainder of his claims;
4. This compromise agreement shall be a full and final settlement of the issues
between plaintiff (herein petitioner) and defendant Western Guaranty in their
complaint and answer and, from now on, they shall have no more right against
one another except the enforcement of this compromise agreement.
In consequence of the compromise agreement, the trial court dismissed the Complaint for
Damages against Western Guaranty Corporation on June 16, 1987. 8 A copy of the Order of
dismissal was received by private respondent Holiday Hills Stock and Breeding Farm Corporation on
July 13, 1987. Nearly eighteen (18) months later, said private respondent moved to dismiss the case
against all the other defendants. It argued that since they are all indispensable parties under a
common cause of action, the dismissal of the case against defendant insurer must result in the
dismissal of the suit against all of them. The trial court denied the motion.
Private respondent Holiday Hills Stock and Breeding Farm Corporation assailed the denial order
through a Petition for Certiorari, Prohibition and Mandamus With Restraining Order filed with
respondent Court of Appeals. The Petition was docketed as CA-G.R. SP No. 17651. On July 10,
1992, the Court of Appeals, 7 through its Special Sixth Division, 8 reversed the trial court, as it ruled:
The petitioner (herein private respondent Holiday Hills Stock and Breeding Farm Corporation)
cites the doctrine laid down in Lim Tanhu v. Hon. Ramolete, 66 SCRA 425, as applied later in Co
v. Acosta, 134 SCRA 185, to support its averment that the court a quo gravely abused its
discretion in refusing to dismiss the case.
Essentially, the doctrine adverted to essays that in a common cause of action where all the
defendants are indispensable parties, the court's power to act is integral and cannot be split,
such that it cannot relieve any of them and at the same time render judgment against the rest.
We find applicability of the doctrine to the case at bar.
A cursory reading of the complaint . . . reveals that the cause of action was the alleged bad faith
and gross negligence of the defendants resulting in the injuries complained of and for which the
action for damages was filed. The inclusion of Western Guaranty Corporation was vital to the
claim, it being the insurer of the diesel truck without which, the claim could be set for naught.
Stated otherwise, it is an indispensable party as the petitioner (herein private respondent stock
and breeding farm corporation) . . . . Private respondent's (herein petitioner's argument that the
said insurance company was sued on a different cause of action, i.e., its bounden duty under the
insurance law to pay or settle claims arising under its policy coverage, is untenable, for the cited
law perceives the existence of a just cause, and according to the answer filed by the Western
Guaranty Corporation . . . the proximate cause of the accident was the fault of the plaintiff (herein
petitioner), hence it was not liable for damages. There is in fact a congruence of affirmative
defense among the answering defendants.

Moreover, it is undisputed that the injury caused is covered by the insurance company
concerned. Thus, when the said insurer settled its liability with the private respondent (petitioner
herein) . . . , the other defendants, as the insured and indispensable parties to a common cause
of action, necessarily benefited from such settlement including the defaulted defendants, for as
stated in the aforecited cases, it is deemed that anything done by or for the answering defendant
is done by or for the ones in default since it is implicit in the rule that default is in essence a mere
formality that deprives them of no more than to take part in the trial, but if the complaint is
dismissed as to the answering defendant, it should also be dismissed as to them. 9 (Citations
omitted.)
Petitioner now comes to this Court with the following assignments of error:
A.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
RULING THAT THE DEFENDANTS IN CIVIL CASE NO. 248-R ARE
INDISPENSABLE PARTIES;
B.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
RULING THAT IN CIVIL CASE NO. 248-R THERE IS A COMMON CAUSE OF
ACTION AGAINST THE DEFENDANTS THEREIN;
C.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
RULING THAT IN CIVIL CASE NO. 248-R THE RULING OF THIS HONORABLE
COURT IN LIM TAN HU VS. RAMOLETE IS APPLICABLE;
D.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
RULING THAT THE DOCTRINE OF ESTOPPEL AND LACHES ON MATTERS
OF JURISDICTION IS NOT APPLICABLE IN CIVIL CASE NO. 248-R.
There is merit to the petition,.
In the case of Lim Tanhu v. Ramolete, 66 SCRA 425, 458-459 (1975) this court held that:
. . . (I)n all instances where a common cause of action is alleged against several
defendants, some of whom answer and the others do not, the latter or those in
default acquire a vested right not only to own the defense interposed in the
answer of their co-defendant or co-defendants not in default but also to expect a
result of the litigation totally common with them in kind and in amount whether
favorable or unfavorable. The substantive unity of the plaintiffs cause against all
the defendants is carried through to its adjective phase as ineluctably demanded
by the homogeneity and indivisibility of justice itself. . . . The integrity of the
common cause of action against all the defendants and the indispensability of all
of them in the proceedings do not permit any possibility of waiver of the plaintiffs

right only as to one or some of them, without including all of them, and so, as a
rule, withdrawal must be deemed to be a confession of weakness as to all. . . . .
Where all the defendants are indispensable parties, for which reason the
absence of any of them in the case would result in the court losing its
competency to act validly, any compromise that the plaintiff might wish to make
with any of them must, as a matter of correct procedure, have to await until after
the rendition of the judgment, at which stage the plaintiff may then treat the
matter of its execution and the satisfaction of his claim as variably as he might
please. Accordingly, in the case now before Us together with the dismissal of the
complaint against the non-defaulted defendants, the court should have ordered
also the dismissal thereof as to petitioner (referring to the defaulting defendants
in the case).
In sum, Lim Tanhu states that where a complaint alleges a common cause of action against
defendants who are all indispensable parties to the case, its dismissal against any of them by
virtue of a compromise agreement with the plaintiff necessarily results in the dismissal of the
case against the other defendants, including those in default. The ruling is rooted on the rationale
that the court's power to act in a case involving a common cause of action against indispensable
parties "is integral and cannot be split such that it cannot relieve any of them and at the same
time render judgment against the rest. 10
For Lim Tanhu to apply to the case at bench, it must be established that: (1) petitioner has
common cause of action against private respondents and the other defendants in Civil Case No.
248-R; and (2) all the defendants are indispensable parties to the case.
Cause of action has a fixed meaning in this jurisdiction. It is the delict or wrong by which the right
of the plaintiff is violated by the defendant. 11 The question as to whether a plaintiff has a cause of
action is determined by the averments in the pleadings pertaining to the acts of the defendant.
Whether such acts give him a right of action is determined by substantive law. 12
In the case at bench, it is clear that petitioner has different and separate causes of action against
the defendants in the case. The allegations in the Complaint show that petitioner seeks to
recover from the truck driver for his wrong which caused injury to petitioner and his car. The
cause of action against him is based on quasi-delict under Article 2176 of the New Civil Code.
Quasi-delict, too, is the basis of the cause of action against defendants beneficial and registered
owners. But in their case, it is Article 2180 of the same Code which governs the rights of the
parties.
However, with respect to defendant Western Guaranty Corporation, petitioner's cause of action is
based on contract. He seeks to recover from the insurer on the basis of the third party liability
clause of its insurance contract with the owners of the truck. This is acknowledged by the second
paragraph of the compromise agreement between petitioner and defendant insurer, thus:
2. In full settlement of its liability under the laws and the said insurance contract,
defendant Western Guaranty shall pay plaintiff (herein petitioner) the amount of
P70,000.00 upon the signing of this compromise agreement.
Quite clearly then, Lim Tanhu will not apply to the case at bench for there is no showing
that petitioner has a common cause of action against the defendants in Civil Case No.
248-R.

But this is not all. Defendants in Civil Case No. 248-R are not all indispensable parties. An
indispensable party is one whose interest will be affected by the court's action in the litigation,
and without whom no final determination of the case can be had. The party's interest in the
subject matter of the suit and in the relief sought are so inextricably intertwined with the other
parties' that his legal presence as a party to the proceeding is an absolute necessity. 13 In his
absence there cannot be a resolution of the dispute of the parties before the court which is effective,
complete, or equitable. 14
Conversely, a party is not indispensable to the suit if his interest in the controversy or subject
matter is distinct and divisible from the interest of the other parties and will not necessarily be
prejudiced by a judgment which does complete justice to the parties in court. 15 He is not
indispensable if his presence would merely permit complete relief between him and those already
parties to the action, or will simply avoid multiple litigation. 16
It is true that all of petitioner's claims in Civil Case No. 248-R is premised on the wrong
committed by defendant truck driver. Concededly, the truck driver is an indispensable party to the
suit. The other defendants, however, cannot be categorized as indispensable parties. They are
merely proper parties to the case. Proper parties have been described as parties whose
presence is necessary in order to adjudicate the whole controversy, but whose interests are so
far separable that a final decree can be made in their absence without affecting them. 17 It is easy
to see that if any of them had not been impleaded as defendant, the case would still proceed without
prejudicing the party not impleaded. Thus, if petitioner did not sue Western Guaranty Corporation, the
omission would not cause the dismissal of the suit against the other defendants. Even without the
insurer, the trial court would not lose its competency to act completely and validly on the damage suit.
The insurer, clearly, is not an indispensable party in Civil Case No. 248-R.
IN VIEW WHEREOF, the instant petition is GRANTED. The Decision, dated July 10, 1992, of the
Court of Appeals in CA-G.R. SP No. 17651 is REVERSED AND SET ASIDE. The Complaint in
Civil Case No. 248-R is REINSTATED and REMANDED to the trial court for further proceedings.
No costs.
SO ORDERED.

11. G.R. No. L-18707

February 28, 1967

AGUSTIN O. CASEAS, plaintiff-appellant,


vs.
CONCEPCION SANCHEZ VDA. DE ROSALES (Substituted by her heirs), ROMEO S.
ROSALES, ET AL.,defendants-appellees.
Juan L. Pastrana for plaintiff-appellant.
Francisco Ro. Cupin and Wenceslao B. Resales for defendants-appellees.
REGALA, J.:
This is an appeal from the order of dismissal entered by the Court of First Instance of Agusan in
Civil Case No. 780, entitled Agustin Caseas vs. Concepcion Sanchez Vda. de Rosales, et al.

On August 21, 1952, Rodolfo Araas and Agustin O. Caseas filed with the Court of First
Instance of Agusan, under Civil Case No. 261, a complaint for specific performance and
enforcement of their alleged right under a certain deed of sale, and damages against the
spouses Jose A. Rosales and Concepcion Sanchez. They alleged that sometime in 1939,
Agustin O. Caseas acquired from Rodolfo Araas under a deed of assignment, the latter's rights
and interest over a parcel of land covering an area of more or less than 2,273 square meters and
designated as Lot No. 445-A of the Butuan Cadastre No. 84 (Psd. 4943); that Rodolfo Araas in
turn, acquired the said property from the spouses Jose A. Rosales and Concepcion Sanchez
under a deed of sale executed on March 18, 1939 under the terms of which, however, the actual
transfer of the aforesaid land unto the vendee would be made only on or before February 18,
1941; and that despite the above documented transactions, and despite the arrival of the
stipulated period for the execution of the final deed of transfer, the vendors spouses refused to
fulfill their obligation to effect such transfer of the said lot to the vendee, Rodolfo Araas or his
assignee, the herein appellant, Agustin O. Caseas. Thus, the principal relief prayed for in the
above complaint was for an order directing the defendants-spouses to "execute a deed of
absolute sale of the property described in the complaint in favor of the assignee, plaintiff Agustin
O. Caseas.
After the defendants-spouses had filed their answer to the above complaint, but before trial, the
counsel for the plaintiffs gave notice to the trial court that plaintiff Rodolfo Araas and defendant
Jose A. Rosales had both died. In view of the said manifestation, the lower court, in an order
dated April 27, 1956, directed, the surviving plaintiff, Agustin O. Caseas, to amend the complaint
to effect the necessary substitution of parties thereon. The said surviving plaintiff, however, failed
altogether to comply with the aforementioned order of April 27, 1956 to the end that on July 18,
1957, the lower court issued the following order:
Until this date no amended complaint was filed by the attorney for the plaintiffs. This
shows abandonment and lack of interest on the part of the plaintiffs. This being an old
case, for failure on the part of the counsel for the plaintiffs to comply with the order of this
Court the same is hereby dismissed without pronouncement as to costs.
As no appeal was taken from the above order of dismissal, the same, in due time, became final.
On April 18, 1960, Agustin O. Caseas, the same plaintiff Caseas in civil Case No. 261, filed
with the same Court of First Instance of Agusan, under Civil Case No. 780, another complaint
against the widow and heirs of the late Jose A. Rosales "to quiet, and for reconveyance of, title to
real property, with damages." This suit referred itself to the very same property litigated under
Civil Case No. 261 and asserted exactly the same allegations as those made in the former
complaint, to wit: "that the plaintiff (Agustin O. Caseas) has acquired the above-described
property by purchase from its previous owner, Rodolfo Araas now deceased, ...; and said
Rodolfo Aranas had in turn acquired the same property by virtue of another deed of sale
executed by Jose A. Rosales, now also deceased;" (Par. 3, Complaint) "that under the terms and
stipulations of paragraph 2 of the deed of sale (between Rosales and Araas) ... Jose A. Rosales
was to hold title to the land in question in favor of Rodolfo Araas or the latter's signs and
successors in interest for a period of (5) years from February 19, 1936, at the expiration of which
said Jose A. Rosales was to execute a document conveying absolutely the title to the land in
question in favor of the aforementioned Rodolfo Araas or his assigns and successors in
interest" (Par. 9, Complaint) ; "despite which obligation the defendants refused, even after the
expiration of the stipulated period to "convey title to the land in question and to execute the
corresponding document covering the same." (Par. 12, Complaint) In the premises, the plaintiff

prayed for judgment "quieting the title of the plaintiff to the land in question and ordering the
defendants to execute a deed of conveyance of the same in favor of the said plaintiff" plus costs
and damages.
To the above complaint, the defendants filed a motion to dismiss on several grounds,
namely: res judicata, prescription, lack of cause of action, failure to include indispensable parties,
and that the contract subject of the complaint was void ab initio. After the plaintiff had filed his
opposition to the above motion, the lower court issued the order under appeal dismissing the
complaint. Of the above grounds, though, the lower court relied alone on the defendants' plea
of res judicata, lack of cause of action and prescription. The material portion of this order of
dismissal reads:
The Court, however, believes that this action is barred by prior judgment. The order of
dismissal in Civil Case No. 261 was already final and has the effect of an adjudication
upon the merits. The parties in Civil Case No. 261 and in this case are substantially the
same; the subject matter is the same and there is identity of cause of action. All the
elements of res judicata are therefore present.
1wph1.t

Moreover, the complaint states no cause of action if its purpose is to quiet title, because
the plaintiff has as yet no title to the land in question. Precisely, this action is brought in
order to acquire or secure title by compelling the defendants to execute a deed of sale in
favor of the plaintiff. However, this action for specific performance cannot also prosper
because being based upon an agreement in writing it is already barred by prescription as
the period of ten years has long expired when the present complaint was filed.
The appeal at bar assails the above determination that Civil Case No. 780 is barred by a prior
judgment and by prescription and that the same states no cause of action. It is on these issues,
therefore, that this Court shall dispose of this appeal.
We find for the appellant.
When certain of the parties to Civil Case No. 261 died and due notice thereof was given to the
trial court, it devolved on the said court to order, not the amendment of the complaint, but the
appearance of the legal representatives of the deceased in accordance with the procedure and
manner outlined in Rule 3, Section 17 of the Rules of Court, which provides:
SEC. 17. Death of Party. After a party dies and the claim is not thereby extinguished,
the court shall order, upon proper notice, the legal representative of the deceased to
appear and to be substituted for the deceased, within a period of thirty (30) days, or
within such time as may be granted. If the legal representative fails to appear within said
time, the court may order the opposing party to procure the appointment of a legal
representative of the deceased within a time to be specified by the court, and the
representative shall immediately appear for and on behalf of the interest of the deceased.
The court charges involved in procuring such appointment, if defrayed by the opposing
party, may be recovered as costs. The heirs of the deceased may be allowed to be
substituted for the deceased, without requiring the appointment of an executor or
administrator and the court may appoint guardian ad litem for the minor heirs.
In the case of Barrameda vs. Barbara, 90 Phil. 718, this court held that an order to amend the
complaint, before the proper substitution of parties as directed by the aforequoted rule has been

effected, is void and imposes upon the plaintiff no duty to comply therewith to the end that an
order dismissing the said complaint, for such non-compliance, would similarly be void. In a
subsequent case, Ferriera et al. vs. Gonzalez, et al., G.R. No. L-11567, July 17, 1958, this court
affirmed a similar conclusion on the determination that the continuance of a proceedings during
the pendency of which a party thereto dies, without such party having been validly substituted in
accordance with the rules, amounts to a "lack of jurisdiction."
The facts of this case fit four squares into the Barrameda case abovecited, save for the minor
variance that in the former two of the litigants died while only one predeceased the case in
Barrameda. Here, as in Barrameda, during the pendency of civil case, notice was given to the
trial court of the deaths of one of the plaintiffs and one of the defendants in it. Instead of ordering
the substitution of the deceased's legal representatives in accordance with Rule 3, section 17 of
the Rules of Court, the trial court directed the surviving plaintiff to amend the complaint and when
the latter failed to comply therewith, the said court dismissed the complaint for such noncompliance. We must hold, therefore, as We did in Barrameda that inasmuch as there was no
obligation on the part of the plaintiff-appellant herein to amend his complaint in Civil Case No.
261, any such imposition being void, his failure to comply with such an order did not justify the
dismissal of his complaint. Grounded as it was upon a void order, the dismissal was itself void.
Consequently, as the dismissal of Civil Case No. 261 was void, it clearly may not be asserted to
bar the subsequent prosecution of the same or identical claim.
Finally, We find ourselves unable to share the appellees' view that the appellant's complaint
under Civil Case No. 780 failed to state a sufficient cause of action. A cause of action is an act or
omission of one party in violation of the legal right or rights of the other (Ma-ao Sugar Central vs.
Barrios, 79 Phil. 666) and both these elements were clearly alleged in the aforesaid complaint.
Insofar as the issue of prescription is concerned, this Court is of the view that it should defer
resolution on it until after Civil Case No. 780 shall have been tried on the merits, considering that
one of the defenses set up by the appellant against the said issue is the existence of a trust
relationship over the property in dispute.
In view of all the foregoing, the order dated January 20, 1961 dismissing Civil Case No. 780 is
hereby set aside and the said case is ordered remanded to the court of origin for trial on the
merits. Costs against the appellees.