xxxxxBOSTON EQUITY VS CAxxxxxx

xxxxxGSIS VS VILLAVIZAxxxxx

SPOUSES MARASIGAN VS CHEVRON

FACTS:

Records disclose Spouses Marasigan were operators of a gasoline station in Montalban, Rizal, while Chevron
is a corporation engaged in the business of refining, manufacturing, storing, distributing, and marketing of fuels,
lubricants and other petroleum products. Spouses Marasigan and Chevron entered into a dealership and
distributorship agreement wherein the former can purchase petroleum products from the latter on credit. To complete
said agreement, Spouses Marasigan executed deeds of real estate mortgage over their properties, as collateral, in
favor of Chevron.

Records further show that by September 30, 1993, Spouses Marasigan exceeded their credit line and owed
Chevron the amount of 12,075,261.02. Spouses Marasigan failed to pay the obligation despite oral and written
demands from Chevron. Chevron, through ACCRALAW, was able to foreclose all the real estate mortgages on
Spouses Marasigans subject properties. Chevron, however, was only able to recover the total amount of
4,925,000.00 from the public auction sales of the mortgaged properties including the sale of the 167.1597 hectare
coconut farm property located in Mulanay, Quezon, which was sold for 130,000.00 to the only bidder, ACCRA
Investments,Corp. (ACCRAIN).

Chevron filed a complaint against Spouses Marasigan before the RTC, Branch 136, Makati City to recover
the deficiency in the amount of 7,667,188.10. Chevron basically alleged therein that Spouses Marasigans
outstanding obligation as of October 15, 1995 was 7,667,188.10 and that said obligation remained unpaid.

In their Answer, Spouses Marasigan mainly alleged that they were greatly prejudiced because the
foreclosure sales on the subject mortgaged properties were illegal and that the bid price of the Mulanay property in
particular was shockingly low.

Spouses Marasigan filed a complaint against Chevron, ACCRAIN and ACCRALAW and Sheriff Romeo
Villafranca before the RTC-Gumaca. Spouses Marasigan principally alleged therein that the bid price was grossly
inadequate and shockingly low which rendered the foreclosure sale fatally defective and the foreclosure proceedings
invalid and illegal. Chevron, ACCRAIN and ACCRALAW filed a motion to dismiss citing as ground Spouses
Marasigans failure to disclose in their certification against forum shopping the pending case filed before the RTC-
Makati and the consequent violation of the rule on litis pendentia.

Chevron, ACCRAIN and ACCRALAW then filed their Answer with Compulsory Counterclaim alleging,
among others, that the foreclosure sale was conducted in accordance with law and that the complaint in Civil Case
No. 2448-G violated the rule on forum shopping and litis pendentia.

On January 4, 2005, the RTC-Gumaca rendered a decision in favor of Spouses Marasigan and against
Chevron, ACCRAIN and ACCRALAW

Chevron, ACCRAIN and ACCRALAW appealed to the CA and it ruled in their favor. The CA ruled that
Spouses Marasigan committed forum shopping and that all the elements of litis pendentia are present. Accordingly,
Civil Case No. 2448-G, filed by Spouses Marasigan in the RTC-Gumaca was dismissible on the grounds of forum
shopping and litis pendentia. The CA ruled as follows:

ISSUE:
Whether or not litis pendentia exist.

SC RULING:
Yes, Litis pendentia exists.

The essence of forum shopping is the filing by a party against whom an adverse judgment has been
rendered in one forum, seeking another and possibly favorable opinion in another suit other than by appeal or special
civil action for certiorari. It is the act of filing of multiple suits involving the same parties for the same cause of action,
either simultaneously or successively for the purpose of obtaining a favorable judgment. Forum shopping exists
where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in
[5]
the action under consideration.
 Litis pendentia is a Latin term, which literally means "a pending suit" and is variously referred to in some
decisions as lis pendens and auter action pendant. As a ground for the dismissal of a civil action, it refers to the
situation where two actions are pending between the same parties for the same cause of action, so that one of them
[6]
becomes unnecessary and vexatious. It is based on the policy against multiplicity of suits.

Litis pendentia requires the concurrence of the following requisites: (1) identity of parties, or at least such
parties as those representing the same interests in both actions; (2) identity of rights asserted and reliefs prayed for,
the reliefs being founded on the same facts; and (3) identity with respect to the two preceding particulars in the two
cases, such that any judgment that may be rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other case.

What is pivotal in determining whether forum shopping exists or not is the vexation caused to the courts and
parties-litigants by a party who asks different courts and/or administrative agencies to rule on the same or related
cases and/or grant the same or substantially the same reliefs, in the process creating the possibility of conflicting
[7]
decisions being rendered by the different courts and/or administrative agencies upon the same issues.

In the case at bench, all the requisites of litis pendentia are present. The first element, identity of parties, or
at least representing the same interest in both actions, exists. The Court agrees with the ruling of the CA that
Chevron and Spouses Marasigan are the same parties in the RTC-Makati Case and the RTC-Gumaca Case.
Unquestionably, the plaintiff and the defendants in the RTC-Makati Case are Chevron and Spouses Marasigan as
well as Mareal Co., Inc., respectively. On the other hand, the plaintiffs in the RTC-Gumaca Case are the Spouses
Marasigan and the defendants therein are Chevron, ACCRAIN and ACCRALAW. The absence of ACCRAIN and
ACCRALAW as party plaintiffs in the RTC-Makati case and their additional presence as party defendants in the RTC-
Gumaca case would not unfavorably affect the respondents because the rule does not require absolute identity of
parties. A substantial identity of parties is enough to qualify under the first requisite. What is important here is that the
principal parties Chevron and Spouses Marasigan are the same in both cases.

In this case, the first requisite, identity of parties or at least such as represent the same interest in both
actions, is present. The Court of Appeals correctly ruled that the fact that there is no absolute identity of
parties in both cases will not preclude the application of the rule of litis pendentia, since only substantial
and not absolute identity of parties is required for litis pendentia to lie.

The second element, identity of rights asserted and reliefs prayed for, the reliefs being founded on the same
facts, likewise subsists here. It cannot be denied that the complaint filed in the RTC-Makati was for a Sum of Money
while that filed in the RTC-Gumaca was for Declaration of Nullity and/or Annulment of Foreclosure with Damages.
Although both cases differ in form or nature, the same facts would be alleged and the same evidence would be
presented considering that the resolution of both cases would be based on the validity and enforceability of the same
credit lines, real estate mortgages and foreclosure proceedings. Indeed, the true test in determining the identity of
causes of action lies not in the form or nature of the actions but rather in the evidence that would be presented.

The test to determine identity of causes of action is to ascertain whether the same evidence necessary to
sustain the second cause of action is sufficient to authorize a recovery in the first, even if the forms or the
nature of the two (2) actions are different from each other. If the same facts or evidence would sustain both,
the two (2) actions are considered the same within the rule that the judgment in the former is a bar to the
subsequent action; otherwise, it is not. This method has been considered the most accurate test as to
whether a former judgment is a bar in subsequent proceedings between the same parties. It has even been
designated as infallible.

As to subject matter, the rights asserted by both parties are based on the same credit lines and real estate
mortgages. In the Makati RTC case, appellant Chevron has to prove that deliveries of Chevron products were made
pursuant to the credit lines and the real estate mortgages securing the same; and that the subsequent foreclosure are
valid but there is still a deficiency after deducting the proceeds of the foreclosure sale from appellees obligation. In
the instant case, appellees seek to evade or diminish their liability under the credit lines and real estate mortgages by
either having the foreclosure sale of the Mulanay property annulled or by collecting the alleged discrepancy between
the market value of the property and the bid price offered by ACCRAIN. Thus, although the instant case pertains only
to the Mulanay property, the resolution of both cases would require a determination of the validity and enforceability
of the deliveries made by Chevron of the real estate mortgages and foreclosure proceedings. In both cases, the same
evidence would be presented and the same subject matter would be litigated. The difference in the form of actions is
of no moment as the test of identity of causes of action lies not in the form of an action but on whether the same
evidence would support and establish the former and the present causes of action.
Finally, the presence of the third element, that the identity of the two cases should be such that the judgment that
may be rendered in one would, regardless of which party is successful, amount to res judicata in the other, cannot be
disputed either.

Spouses Marasigan do not deny the fact that the affirmative defense that they raised in the RTC-Makati case was the
[10]
illegality of the foreclosure sale of the Mulanay property. They raised the same issue in the RTC-Gumaca
[11]
case. As correctly ruled by the CA, the judgment in the RTC-Makati with regard to the validity of the foreclosure
sale of the Mulanay property will constitute res judicata in the case, and vice versa. The Court also agrees with its
ruling that the RTC-Makati case should be the priority case because it was filed earlier and, therefore, the appropriate
vehicle for litigating all issues in this case.

The Court having ruled that the CA properly dismissed the petitioners complaint due to the presence of litis
pendentia and the violation of the rule on forum shopping, there is no need to rule further on the other issues raised
by the petitioners and the respondents in this case.

QUITO V STOP AND SAVE CORPORATION

FACTS:
6
On March 11, 2005, Dominga Quito filed before the MCTC a complaint for unlawful detainer against Stop & Save
and its sub-lessees/co-respondents Roberto Buan, Henry Co, Angelina Lumotan, Rodel Pineda and Rose Calma.
She alleged that Stop & Save failed to pay the agreed monthly rentals since June 2003 and, despite repeated verbal
and written demands, refused to pay and vacate the leased building, in violation of their April 4, 2002 Lease
Agreement. In its answer to the complaint, Stop & Save denied that it committed a violation of the lease contract, but
merely suspended its payment of rent because of Domingas failure to comply with their subsequent agreement dated
November 15, 2003;

The MCTC ruled in favor of plaintiff.

On appeal, the RTC set aside the MCTCs decision and ordered the dismissal of Domingas unlawful detainer
complaint due to the pending case for annulment of lease contract filed by Stop & Save with the same RTC, docketed
as Civil Case No. 695. It appeared that Stop & Save had earlier filed, on January 13, 2005, a case to annul its April 4,
2002 Lease Agreement with Dominga allegedly due to her misrepresentations on the leased buildings condition and
ownership.

Dominga filed a petition for review with the CA. In its June 30, 2008 decision, the CA dismissed Domingas petition for
review for lack of merit, which, in effect, affirmed the RTCs decision dismissing Domingas unlawful detainer
complaint.

ISSUE:

Whether or not the CA correctly dismissed the subject unlawful detainer case on the ground of litis pendentia.

RULING:

We find that litis pendentia as a ground for the dismissal of a civil action does not apply in the present case.

Litis pendentia refers to the situation where another action is pending between the same parties for the same cause
11
of action so that one of these actions is unnecessary and vexatious. The dismissal of a civil action on the ground of
litis pendentiais based on the policy that a party is not allowed to vex another more than once regarding the same
subject matter and for the same cause of action in order that possible conflicting judgments may be avoided for the
12
sake of the stability of the rights and statuses of persons.

To constitute litis pendentia, the following requisites must be present: (1) identity of the parties in the two actions; (2)
substantial identity in the causes of action and in the reliefs sought by the parties; (3) and the identity between the
two actions should be such that any judgment that may be rendered in one case, regardless of which party is
13
successful, would amount to res judicata in the other.

Indisputably, the requisite identity of parties is met in the present case. The disputed point is whether there is
substantial identity in the causes of action and in the reliefs sought in the cases for annulment of lease contract filed
by Stop and Save and for unlawful detainer filed by Dominga.

We find that no substantial identity exists.

"The test to determine whether the causes of action are identical is to ascertain whether the same evidence will
sustain both actions, or whether there is an identity in the facts essential to the maintenance of the two actions. If the
same facts or evidence would sustain both, the two actions are considered the same, and a judgment in the first case
14
is a bar to the subsequent action."

In the present case, while there is an identity in the facts between the two actions, involving as they do the same
lease contract, the issues and the relief prayed for are different so that the causes of action remain entirely distinct
from each other.

The issue of physical possession in the action for unlawful detainer cannot be identical with the issues of ownership
and validity of contract in the action for annulment. From these essential differences, the lack of required identity in
the causes of action for litis pendentia to exist cannot be denied.

Since the causes of action in the subject case for unlawful detainer and annulment of lease contract are entirely
different, a judgment in one case would not amount to res judicata in the other. "[F]or res judicatato bar the institution
of a subsequent action[,] the following requisites must concur: (1) the former judgment must be final; (2) it must have
been rendered by a court having jurisdiction of the subject matter and the parties; (3) it must be a judgment on the
merits; and (4) there must be[,] between the first and second actions[,] (a) identity of parties; (b) identity of subject
matter; and (c) identity of cause of action.

G.R. No. 173331 December 11, 2013

FLORPINA BENAVIDEZ, Petitioner,

vs.
NESTOR SALVADOR, Respondent.

Facts:

Sometime in February 1998, petitioner Florpina Benavidez (Benavidez) approached and asked respondent
Nestor Salvador (Salvador) for a loan that she would use to repurchase her property in Tanay, Rizal which
was foreclosed by the Farmers Savings and Loan Bank, Inc. (Farmers Savings).
After inspecting the said property, Salvador agreed to lend the money subject to certain conditions.
To secure the loan, Benavidez was required to execute a real estate mortgage, a promissory note and a
deed of sale. She was also required to submit a special power of attorney (SPA) executed and signed by
Benavidezs daughter, Florence B. Baning (Baning), whom she named as the vendee in the deed of
absolute sale of the repurchased property.
Pursuant to the agreement, Salvador issued a managers check in favor of Benavidez in the amount of
P1,000,000.00 and released P500,000.00 in cash. For the loan obtained, Benavidez executed a promissory
note, dated March 11, 1998.
Benavidez, however, failed to deliver the required SPA. defaulted in her obligation under the promissory
note and all postdated checks which she had issued to pay for the interests were dishonored.
This prompted Salvador to send a demand letter.Unfortunately, the demand fell on deaf ears which
constrained Salvador to file a complaint for sum of money with damages with prayer for issuance of
preliminary attachment.
On May 4, 2000, Benavidez filed a motion to dismiss on the ground of litis pendentia. She averred that prior
to the filing of the case before the RTC-Antipolo, she had filed a Complaint for Collection for Sum of Money,
Annulment of Contract and Checks with Prayer for Preliminary Injunction and Temporary Restraining
Order against Salvador; his counsel, Atty. Nepthalie Segarra; Almar Danguilan; and Cris Marcelino, before
 the Regional Trial Court, Branch 80, Morong, Rizal (RTC-Morong). DENIED BY RTC ANTIPOLO ON
JULY 31, 2000
A pre-trial conference was scheduled on May 2, 2001 but she and her counsel failed to appear despite due
notice. Resultantly, upon motion, Salvador was allowed by the trial court to present evidence ex parte.
On June 1, 2001, RTC-Antipolo decided the subject case for Salvador. It found that indeed Benavidez
obtained a loan from Salvador in the amount of P1,500,000.00. It also noted that up to the time of the
rendition of the judgment, she had failed to settle her obligation despite having received oral and written
demands from Salvador. Also, the trial court pointed out that the evidence had shown that as of January 11,
4
2000, Benavidezs obligation had already reached the total amount of P4,810,703.21. MOTION FOR
RECONSIDERTION WAS FILED BY BENAVIDEZ BUT THIS WAS DENIED FOR LACK OF MERIT
Frustrated, Benavidez appealed the June 1, 2001 Decision and the August 10, 2001 Order of RTC-Antipolo
to the CA. She argued, in chief, that early on, the trial court should have dismissed the complaint for
collection of sum of money filed by Salvador on grounds of litis pendentia and erroneous certification against
forum shopping. She claimed that prior to the filing of the said complaint against her, she had already filed a
complaint for the annulment of the promissory note evidencing her obligation against Salvador. According to
her, there was substantial identity in the causes of action and any result of her complaint for annulment
would necessarily affect the complaint for collection of sum of money filed against her. She added that
Salvador never informed RTC-Antipolo about the pending case before RTC-Morong, rendering his
7
certification on forum shopping erroneous. Benavidez also argued that RTC-Antipolo erred in refusing to re-
open the case for pre-trial conference and disallowing her to present evidence. She added that the absence
of her counsel on the scheduled pre-trial conference caused her substantial prejudice. THE CA WAS
12
NOT MOVED AND AFFIRMED IN TOTO THE DECISION OF RTC-ANTIPOLO.
Feeling aggrieved by the affirmance, Benavidez filed a motion for reconsideration on the ground that the
same was contrary to law and jurisprudence; that litis pendentia existed which resultantly made his
certification on non-forum shopping untruthful; and, that her absence during the pre-trial was justified.
On June 08, 2006, the CA issued the Amended Decision, holding that the motion was partly meritorious.
Accordingly, it modified its earlier decision by deleting the award of exemplary damages and attorneys fees
because the award thereof was not supported by any factual, legal and equitable justification.
Still unsatisfied, Benavidez comes before the Court via a petition for review under Rule 45 of the Rules of
14
Court, raising the following issues:

Issue:

Whether or not the present case should have been dismissed on the ground of litis pendentia.

Ruling:

In litis pendentia, there is no

hard and fast rule in
determining which of the two
actions should be abated

Litis pendentia is a Latin term, which literally means "a pending suit" and is variously referred to in some decisions
as lis pendens and auter action pendant. As a ground for the dismissal of a civil action, it refers to the situation where
two actions are pending between the same parties for the same cause of action, so that one of them becomes
19
unnecessary and vexatious. It is based on the policy against multiplicity of suits.

Litis pendentia exists when the following REQUISITES are present: identity of the parties in the two actions;
substantial identity in the causes of action and in the reliefs sought by the parties; and the identity between the two
actions should be such that any judgment that may be rendered in one case, regardless of which party is successful,
20
would amount to res judicata in the other.

On the other hand, forum shopping exists when, as a result of an adverse decision in one forum, or in anticipation
21
thereof, a party seeks a favorable opinion in another forum through means other than appeal or certiorari.

There is forum shopping when the elements of litis pendentia are present or where a final judgment in one case will
22
amount to res judicata in another.
In the present controversy, the Court is of the view that litis pendentia exists. All the elements are present: first,both
Benavidez and Salvador are parties in both cases; second, both complaints are concerned with the same promissory
note; and third, the judgment in either case would be determinative of the other.

With the foregoing, which case then should be dismissed? At first glance, it would seem that Civil Case No. 00-5660
or the complaint filed with RTC-Antipolo should have been dismissed applying the "priority-in-time rule." This rule,
however, is not ironclad. The rule is not applied if the first case was filed merely to pre-empt the later action or to
anticipate its filing and lay the basis for its dismissal. A crucial consideration is the good faith of the parties. In recent
23
rulings, the more appropriate case is preferred and survives. In Spouses Abines v. BPI, it was written:

There is no hard and fast rule in determining which of the actions should be abated on the ground of litis
pendentia, but through time, the Supreme Court has endeavored to lay down certain criteria to guide lower courts
faced with this legal dilemma. As a rule, preference is given to the first action filed to be retained. This is in
accordance with the maxim Qui prior est tempore, potior est jure. There are, however, limitations to this rule.
Hence, the first action may be abated if it was filed merely to pre-empt the later action or to anticipate its filing and lay
the basis for its dismissal. Thus, the bona fides or good faith of the parties is a crucial element. A later case shall not
be abated if not brought to harass or vex; and the first case can be abated if it is merely an anticipatory action or,
more appropriately, an anticipatory defense against an expected suit a clever move to steal the march from the
aggrieved party.

Another exception to the priority in time rule is the criterion of the more appropriate action. Thus, an action,
although filed later, shall not be dismissed if it is the more appropriate vehicle for litigating the issues between the
parties. [Underscoring supplied]

24
In the relatively recent case of Dotmatrix Trading v. Legaspi, the Court had the occasion to extensively discuss
the various rules and consideration in determining which case to dismiss in such situations. It included its analysis
of Abines. Thus:

Early on, we applied the principle of Qui prior est tempore, potior est jure (literally, he who is before in time is better in
right) in dismissing a case on the ground of litis pendentia. This was exemplified in the relatively early case of Del
Rosario v. Jacinto where two complaints for reconveyance and/or recovery of the same parcel of land were filed by
substantially the same parties, with the second case only impleading more party-plaintiffs. The Court held that
"parties who base their contention upon the same rights as the litigants in a previous suit are bound by the judgment
in the latter case." Without expressly saying so in litis pendentia terms, the Court gave priority to the suit filed earlier.

Ago Timber Corporation v. Ruiz offered an insightful reason after both parties had each pleaded the pendency of
another action between the same parties for the same cause. The Court ruled that the second action should be
dismissed, "not only as a matter of comity with a coordinate and co-equal court (Laureta & Nolledo,
Commentaries & Jurisprudence on Injunction, p. 79, citing Harrison v. Littlefield, 57 Tex. Div. A. 617, 619, 124 SW
212), but also to prevent confusion that might seriously hinder the administration of justice. (Cabigao, et al. v.
Del Rosario, et al., 44 Phil. 182)."

In all these cases, we gave preference to the first action filed to be retained. The "priority-in-time rule," however, is
not absolute.

In the 1956 case of Teodoro v. Mirasol, we deviated from the "priority-in-time rule" and applied the "more
appropriate action test" and the "anticipatory test."

The "more appropriate action test" considers the real issue raised by the pleadings and the ultimate
objective of the parties; the more appropriate action is the one where the real issues raised can be fully and
completely settled. In Teodoro, the lessee filed an action for declaratory relief to fix the period of the lease, but the
lessor moved for its dismissal because he had subsequently filed an action for ejectment against the lessee. We
noted that the unlawful detainer suit was the more appropriate action to resolve the real issue between the parties -
whether or not the lessee should be allowed to continue occupying the land under the terms of the lease contract; this
was the subject matter of the second suit for unlawful detainer, and was also the main or principal purpose of the first
suit for declaratory relief.

In the "anticipatory test," the bona fides or good faith of the parties is the critical element.1wphi1 If the first suit is
filed merely to preempt the later action or to anticipate its filing and lay the basis for its dismissal, then the
first suit should be dismissed. In Teodoro, we noted that the first action, declaratory relief, was filed by the lessee
to anticipate the filing of the second action, unlawful detainer, considering the lessor's letter informing the lessee that
the lease contract had expired.

Under the established jurisprudence on litis pendentia, the following considerations predominate in the ascending
order of importance in determining which action should prevail: (1) the date of filing, with preference generally given
to the first action filed to be retained; (2) whether the action sought to be dismissed was filed merely to preempt the
later action or to anticipate its filing and lay the basis for its dismissal; and (3) whether the action is the appropriate
25
vehicle for litigating the issues between the parties.

Considering the nature of the transaction between the parties, the Court believes that the case for collection of sum of
money filed before RTC-Antipolo should be upheld as the more appropriate case because the judgment therein
would eventually settle the issue in the controversy - whether or not Benavidez should be made accountable for the
subject loan. In the complaint that she filed with RTC- Morong, Benavidez never denied that she contracted a loan
with Salvador.

It is clear that there was an amount of money borrowed from Salvador which was used in the repurchase of her
foreclosed property. Whether or not it was Atty. Segarra who arranged the loan is immaterial. The fact stands that
she borrowed from Salvador and she benefited from it. Her insistence that the remaining balance of P450,000.00 of
the money loaned was never handed to her by Atty. Segarra is a matter between the two of them. As far as she and
Salvador are concerned, there is admittedly an obligation. Whether the promissory note was void or not could have
been proven by her during the trial but she forfeited her right to do so when she and her lawyer failed to submit a pre-
trial brief and to appear at the pre-trial as will be discussed hereafter.

At this point, to dismiss Civil Case No. 00-5660 would only result in needless delay in the resolution of the parties'
dispute and bring them back to square one. This consequence will defeat the public policy reasons behind litis
pendentia which, like the rule on forum shopping, aim to prevent the unnecessary burdening of our courts and undue
taxing of the manpower and financial resources of the Judiciary; to avoid the situation where co-equal courts issue
conflicting decisions over the same cause; and to preclude one party from harassing the other party through the filing
27
of an unnecessary or vexatious suit.

WHEREFORE, the petition is DENIED. The November 22, 2005 Decision and the June 8, 2006 Amended Decision of
the Court of Appeals are AFFIRMED with MODIFICATION.

Rule 9, Section 1

HEIRS OF SOTTO V. PALICTE

G.R. NO. 159691, JUNE 13, 2013

FACTS:
Filemon had four children, namely: Marcelo Sotto (Marcelo), Pascuala Sotto-Pahang (Pascuala), Miguel Barcelona
(Miguel), and Matilde. Marcelo was the administrator of the Estate of Sotto. Marcelo and Miguel were the
predecessors-in-interest of petitioners.

In June 1967, Pilar Teves (Pilar) and other heirs of Carmen Rallos (Carmen), the deceased wife of Filemon, filed in
the Court of First Instance (CFI) of Cebu City a complaint against the Estate of Sotto ( Civil Case No. R-10027 )
seeking to recover certain properties that Filemon had inherited from Carmen, and damages. The CFI rendered
judgment awarding to Pilar and other heirs of Carmen damages of P 233,963.65, among other reliefs . To satisfy the
monetary part of the judgment, levy on execution was effected against six parcels of land and two residential houses
belonging to the Estate of Sotto . The levied assets were sold at a public auction . Later on , Matilde redeem ed four
of the parcels of land in her own name (i.e., Lots No. 1049, No. 1051, No. 1052 and No. 2179-C) , while her sister
Pascuala redeem ed one of the two houses because her family was residing there . On July 9, 1980, the Deputy
Provincial Sheriff of Cebu executed a deed of redemption in favor of Matilde, which the Clerk of Court approved.

On July 24, 1980, Matilde filed in Civil Case No. R-10027 a motion to transfer to her name the title to the four
properties. However, the CFI denied her motion, and instead declared the deed of redemption issued in her favor null
and void, holding that Matilde, although declared in Special Proceedings No. 2706-R as one of the heirs of Filemon,
did not qualify as a successor-in-interest with the right to redeem the four properties. Matilde directly appealed the
adverse ruling to the Court via petition for review, and on September 21, 1987, the Court, reversing the CFIs ruling,
granted Matildes petition for review but allowed her co-heirs the opportunity to join Matilde as co-redemptioners for a
period of six months before the probate court (i.e., RTC of Cebu City, Branch 16) would grant her motion to transfer
the title to her name.

The other heirs of Filemon failed to exercise their option granted in the decision of September 21, 1987 to join Matilde
as co-redemptioners within the six-month period. Accordingly, on October 5, 1989, the trial court issued an order in
Civil Case No. R-10027 approving Matildes motion to transfer the title of the four lots to her name, and directing the
Register of Deeds of Cebu to register the deed of redemption and issue new certificates of title covering the four
properties in Matildes name.

It appears that Pascuala, who executed a document on November 25, 1992 expressly waiving her rights in the four
properties covered by the deed of redemption, changed her mind and decided to file on September 23, 1996 in the
RTC in Cebu City a complaint to seek the nullification of her waiver of rights, and to have herself be declared as a co-
redemptioner of the four properties (Civil Case No. CEB-19338). However, the RTC dismissed Civil Case No. CEB-
19338 on the ground of its being barred by laches. Pascuala then assailed the dismissal of Civil Case No. CEB-
19338 in the CA through a petition forcertiorari (C.A.-G.R. SP No. 44660), which the CA dismissed on November 21,
1997. Undeterred, Pascuala appealed the dismissal of her petition for certiorari (G.R. No. 131722), but the Court
denied due course to her petition on February 4, 1998 because of her failure to pay the docket fees and because of
her certification against forum shopping having been signed only by her counsel.

In November 1998, the heirs of Miguel filed a motion for reconsideration in Civil Case No. R-10027 of the RTC of
Cebu City, Branch 16, praying that the order issued on October 5, 1989 be set aside, and that they be included as
Matildes co-redemptioners. After the RTC denied the motion for reconsideration for its lack of merit on April 25, 2000,
they assailed the denial by petition for certiorari and prohibition (C.A.-G.R. SP No. 60225). The CA dismissed the
petition for certiorari and prohibition on January 10, 2002. Thereafter, they elevated the matter to the
Court via petition for certiorari (G.R. No. 154585), which the Court dismissed on September 23, 2002 for being filed
out of time and for lack of merit.

On September 10, 1999, the heirs of Marcelo, specifically: Lolibeth Sotto Noble, Danilo C. Sotto, Cristina C. Sotto,
Emmanuel C. Sotto, Filemon C. Sotto, and Marcela C. Sotto; and the heirs of Miguel, namely: Alberto, Arturo and
Salvacion, all surnamed Barcelona (herein petitioners), instituted the present action for partition against Matilde in the
2
RTC of Cebu City, Branch 20 (Civil Case No. CEB-24293). Alleging in their complaint that despite the redemption of
the four properties having been made in the sole name of Matilde, the four properties still rightfully belonged to the
Estate of Sotto for having furnished the funds used to redeem the properties, they prayed that the RTC declare the
four properties as the assets of the Estate of Sotto, and that the RTC direct their partition among the heirs of Filemon.

It is notable at this juncture that the heirs of Pascuala did not join the action for partition whether as plaintiffs or
defendants.
4
Instead of filing her answer, Matilde moved to dismiss the complaint, stating that: (a) petitioners had no cause of
action for partition because they held no interest in the four properties; (b) the claim was already barred by prior
judgment, estoppel and laches; (c) the court had no jurisdiction over the action; and (d) a similar case entitled Pahang
v. Palicte (Civil Case No. 19338) had been dismissed with finality by Branch 8 of the RTC in Cebu City.
5
On November 15, 1999, the RTC granted Matildes motion to dismiss and dismissed the complaint, holding that Civil
Case No. CEB-24293 was already barred by prior judgment considering that the decision in G.R. No. 55076, the
order dated October 5, 1989 of the RTC in Civil Case No. R-10027, and the decision in G.R. No. 131722 had all
become final, and that the cases had involved the same parties, the same subject matter, the same causes of action,
and the same factual and legal issues. The RTC observed that it was bereft of jurisdiction to annul the rulings of co-
equal courts that had recognized Matildes exclusive ownership of the four properties.
6
Following the denial by the RTC of their motion for reconsideration, petitioners appealed the dismissal of Civil Case
7
No. CEB-24293 to the CA, which promulgated its judgment on November 29, 2002 affirming the dismissal. After the
8
CA denied petitioners motion for reconsideration, they brought this present appeal to the Court.

In the meantime, the Estate of Sotto, through the administrator, moved in the probate court (Special Proceedings No.
2706-R) to require Matilde to account for and turn over the four properties that allegedly belonged to the estate,
presenting documentary evidence showing that Matilde had effected the redemption of the four properties with the
9
funds of the estate in accordance with the express authorization of Marcelo. The probate court granted the motion,
but subsequently reversed itself upon Matildes motion for reconsideration. Hence, the Estate of Sotto appealed (G.R.
No. 158642), but the Court promulgated its decision on September 22, 2008 adversely against the Estate of Sotto.

ISSUE:
Whether or not the present action for partition was already barred by prior judgment.

RULING:

YES. The present action for partition was already barred by prior judgment. Res judicata was applicable to bar
petitioners action for partition of the four properties.

Res judicata exists when as between the action sought to be dismissed and the other action these elements are
present, namely; (1) the former judgment must be final; (2) the former judgment must have been rendered by a court
having jurisdiction of the subject matter and the parties; (3) the former judgment must be a judgment on the merits;
and (4) there must be between the first and subsequent actions (i) identity of parties or at least such as representing
the same interest in both actions; (ii) identity of subject matter, or of the rights asserted and relief prayed for, the relief
being founded on the same facts; and, (iii) identity of causes of action in both actions such that any judgment that
may be rendered in the other action will, regardless of which party is successful, amount to res judicata in the action
under consideration.

The first three elements were present. The decision of the Court in G.R. No. 55076 (the first case), the decision of the
Court in G.R. No. 131722 (the second case), the order dated October 5, 1989 of the RTC in Civil Case No. R-10027
as upheld by the Court in G.R. No. 154585 (the third case), and the decision in G.R. No. 158642 (the fourth case)
all of which dealt with Matildes right to the four properties had upheld Matildes right to the four properties and had
all become final. Such rulings were rendered in the exercise of the respective courts jurisdiction over the subject
matter, and were adjudications on the merits of the cases.

What remains to be determined is whether Civil Case No. CEB-24293 and the previous cases involved the same
parties, the same subject matter, the same causes of action, and the same factual and legal issues.

We find that, indeed, Civil Case No. CEB-24293 was no different from the previous cases as far as parties, subject
matter, causes of action and issues were concerned. In other words, Civil Case No. CEB-24293 was an undisguised
relitigation of the same settled matter concerning Matildes ownership of the four properties.

First of all, petitioners, as plaintiffs in Civil Case No. CEB-24293, were suing in their capacities as the successors-in-
interest of Marcelo and Miguel. Even in such capacities, petitioners identity with the parties in the previous cases
firmly remained. In G.R. No. L-55076 (the first case), in which Matilde was the petitioner while her brother Marcelo,
the administrator of the Estate of Sotto, was one of the respondents, the Court affirmed Matildes redemption of the
four properties notwithstanding that it gave the other heirs of Filemon the opportunity to join as co-redemptioners
within a period of six months. When the other heirs did not ultimately join as Matildes co-redemptioners within the
period allowed by the Court, the trial court in Civil Case No. R-10027 rightly directed the Register of Deeds to issue
new certificates of title covering the properties in Matildes name. In Civil Case No. CEB-19338 (the second case), the
action Pascuala brought against Matilde for the nullification of Pascualas waiver of rights involving the four
properties, the trial court dismissed the complaint upon finding Pascuala barred by laches from asserting her right as
Matildes co-redemptioner. The CA and, later on, the Court itself (G.R. No. 131722) affirmed the dismissal by the trial
court. In Civil Case No. R-10027, the trial court denied the motion of the heirs of Miguel (who are petitioners herein)
to include them as co-redemptioners of the properties on the ground of laches and res judicata. Again, the CA and,
later on, the Court itself (G.R. No. 154585) affirmed the denial. In G.R. No. 158642 (the fourth case), the Court upheld
the ruling of the probate court in Special Proceedings No. 2706-R denying the administrators motion to require
Matilde to turn over the four real properties to the Estate of Sotto.

In all the five cases (Civil Case No. CEB-24293 included), a n identity of parties existed because the parties were the
same, or there was privity among them, or some of the parties were successors-in-interest litigating for the same
15
thing and under the same title and in the same capacity. An absolute identity of the parties was not necessary,
16
because a shared identity of interest sufficed for res judicatato apply. Moreover, mere substantial identity of parties,
or even community of interests between parties in the prior and subsequent cases, even if the latter were not
17
impleaded in the first case, would be sufficient. As such, the fact that a previous case was filed in the name of the
Estate of Sotto only was of no consequence.

Secondly, the subject matter of all the actions (Civil Case No. CEB-24293 included), was the same, that is, Matildes
right to the four properties. On the one hand, Matilde insisted that she had the exclusive right to them, while, on the
other hand, the other declared heirs of Filemon, like petitioners predecessors-in-interest, maintained that the
properties belonged to the Estate of Sotto.

Under the doctrine of res judicata, a final judgment or decree on the merits rendered by a court of competent
jurisdiction is conclusive about the rights of the parties or their privies in all later suits and on all points and matters
determined in the previous suit. The foundation principle upon which the doctrine rests is that the parties ought not to
be permitted to litigate the same issue more than once; that when a right or fact has been judicially tried and
determined by a court of competent jurisdiction, so long as it remains unreversed, it should be conclusive upon the
parties and those in privity with them in law or estate.

Section 47 (b) Rule 39 of the Rules of Court institutionalizes the doctrine of res judicata in the concept of bar by prior
judgment, viz:

Section 47. Effect of judgments and final orders.The effect of a judgment or final order rendered by a court of the
Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

xxxx

(b) In other cases, the judgment or final 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; and

xxxx
The doctrine of res judicata is an old axiom of law, dictated by wisdom and sanctified by age, and founded on the
broad principle that it is to the interest of the public that there should be an end to litigation by the same parties over a
subject once fully and fairly adjudicated. It has been appropriately said that the doctrine is a rule pervading every
well-regulated system of jurisprudence, and is put upon two grounds embodied in various maxims of the common
law: one, public policy and necessity, which makes it to the interest of the State that there should be an end to
litigation interest reipublicae ut sit finis litium; the other, the hardship on the individual that he should be vexed twice
for one and the same cause nemo debet bis vexari pro una et eadem causa. A contrary doctrine would subject the
public peace and quiet to the will and neglect of individuals and prefer the gratification of the litigious disposition on
19
the part of suitors to the preservation of the public tranquillity and happiness. The doctrine is to be applied with
rigidity because:

x x x the maintenance of public order, the repose of society, and the quiet of families require that what has been
definitely determined by competent tribunals shall be accepted as irrefragable legal truth. So deeply is this principle
implanted in xxx jurisprudence that commentators upon it have said, the res judicata renders white that which is black
and straight that which is crooked. Facit excurvo rectum, ex albo nigrum. No other evidence can afford strength to the
20
presumption of truth it creates, and no argument can detract from its legal efficacy. nadc

What we have seen here is a clear demonstration of unmitigated forum shopping on the part of petitioners and their
counsel. It should not be enough for us to just express our alarm at petitioners disregard of the doctrine of res
judicata. We do not justly conclude this decision unless we perform one last unpleasant task, which is to demand
from petitioners counsel, Atty. Makilito B. Mahinay, an explanation of his role in this pernicious attempt to relitigate
the already settled issue regarding Matildes exclusive right in the four properties. He was not unaware of the other
cases in which the issue had been definitely settled considering that his clients were the heirs themselves of Marcelo
and Miguel. Moreover, he had represented the Estate of Sotto in G.R. No. 158642 (The Estate of Don Filemon Y.
Sotto v. Palicte).

Under the circumstances, Atty. Mahinay appears to have engaged in the prejudicial practice of forum shopping as
much as any of his clients had been. If he was guilty, the Court would not tolerate it, and would sanction him. In this
21
regard, forum shopping, according to Ao-as v. Court of Appeals, may be committed as follows:

As the present jurisprudence now stands, forum shopping can be committed in three ways: (1) filing multiple cases
based on the same cause of action and with the same prayer, the previous case not having been resolved yet (litis
pendentia); (2) filing multiple cases based on the same cause of action and the same prayer, the previous case
having been finally resolved (res judicata); and (3) filing multiple cases based on the same cause of action but with
different prayers (splitting of causes of action, where the ground for dismissal is also either litis pendentia or res
judicata). If the forum shopping is not considered willful and deliberate, the subsequent cases shall be
dismissed without prejudice on one of the two grounds mentioned above. However, if the forum shopping is willful
and deliberate, both (or all, if there are more than two) actions shall be dismissed with prejudice.

xxxxxSPS ANTONIO VS SAYMANxxxx

MEDISERV vs CHINABANK

Facts:

China Banking Corporation filed a complaint for a sum of money to recover deficiency judgment in foreclosure
proceedings against petitioners. Yu, the Assistant VP of the bank, signed the certification against forum shopping
.Petitioners filed a Motion for Extension of Time to File Motion to Dismiss/answer, which was granted. They were
given 15 days. However, because their counsel withdrew their appearance, they again filed another motion for
extension for another 15 days. This was again granted by the Judge Makasiar, with a warning that no further
extension would be entertained. Despite the warning, petitioners yet filed another motion, which was denied.10 days
after the last day granted by the Judge for petitioners to file a motion to dismiss, the petitioners filed a motion to
dismiss the complaint on the ground of litis pendentia (pending suit),lack of cause of action and payment of claim.
Private respondents filed a motion to declare petitioners in default, and to strike out the motion to dismiss. Judge
granted the motion .Petitioners filed an Omnibus Motion; (a) to lift the order of default; (b) to dismiss the complaint
with prejudice for violation of the requirement of certification against forum-shopping; and (c) to cite Lydia Yu in
contempt of Court. Judge denied motion in its September1998 Order.

Before the CA, petitioners assailed the trial courts refusal to dismiss the complaint on the ground of non-compliance
with the requirements of a certification of forum-shopping and declaring
the petitioners in default without first resolving this motion to dismiss which was filed ahead of banks motion to
declare them in default.CA ruled that the Omnibus Motion to Lift Order of Default was fatally flawed, as it was filed
beyond the extended periods to file answer granted by the court, was not under oath, and was not accompanied by a
proper affidavit of merit.

Issue: whether or not the court a quos decision was not in accordance with law and SC decisions when it avoided to
rule on the issue of respondent banks failure to comply with the essential requirement of a certification against forum
shopping and instead declared the petitioners in default.

Held: No. Petition is unmeritorious. Court agrees that the Omnibus Motion was fatally flawed although the Omnibus
Motion insofar as it seeks the lifting of the order of default, may have been seasonably filed two months after
petitioners were already declared in default for failure to file motion to dismiss within the extended period granted by
the court. However, the said Omnibus Motion was not under oath as required in Rule 9, Sec. 3 (b), and the Affidavit
of Merit is defective in that it failed to aver any fact which constitutes movants good and substantial defense nor
allege circumstances constituting defendants mistake or excusable negligence as contemplated by the
Rules. Petitioners have conspicuously failed to traverse these factual findings of the court on these defects, whether
in its Petition, its Reply to Comment and Memorandum, and instead seek to focus their attack on respondents
complaint on the ground of alleged violation of the rule on forum shopping. A party declared in default is deprived of
the right to take part in the trial and forfeits his rights as a party litigant except the right to receive notice of
subsequent proceedings. To obtain relief from an order of default, the said party may at any time after notice thereof
and before judgment file a motion under oath to set aside order of default upon proper showing that his failure to
answer was due to fraud, accident, mistake or excusable negligence and that he has a meritorious defense. If not
accompanied by an affidavit of merit, the trial court has no authority to consider the same. Petitioners failed to set
aside the order of default and must suffer the consequences thereof. PETITION DENIED

Rule 9, Sec. 3 (default; declaration of)

Sps. de los Santos v. Hon. Carpio

G.R. No. 153696 , Sept. 11, 2006

Facts:
On January 3, 2001, Metropolitan Bank and Trust Company filed a complaint for sum of money against spouses
delos Santos before the RTC of Davao City Branch 16.
On January 22, 2001, petitioners were served with the summons, together with a copy of the complaint. As
petitioners failed to file an answer within the reglementary period, Metrobank, on February 8, 2001, filed a motion to
declare them in default. The motion was set for hearing on February 16, 2001.

Acting on the motion, the lower court, presided over by Hon. Emmanuel C. Carpio issued an order dated February
12, 2001 declaring petitioners in default and setting the ex-parte presentation of Metrobanks evidence on March 7,
2001.

On February 15, 2001, petitioners filed an opposition to Metrobanks motion to declare them in default, claiming that
upon receipt of the summons, they immediately sought the services of Atty. Philip Pantojan but it was only on
February 12, 2001 that they were able to meet with him.

On the same date, February 15, 2001, petitioners filed a motion to admit answer, as well as the answer. In an order
dated February 16, 2001, respondent judge disregarded petitioners opposition to Metrobanks motion for default and
stood pat on his previous default order.

On February 19, 2001, Metrobank filed an opposition to petitioners motion to admit answer, arguing that said motion
was rendered moot and academic by the February 12, 2001 order. In an order dated February 20, 2001, the motion
to admit answer was denied.

On February 27, 2001, petitioners filed a motion to lift the order of default; Metrobank opposed the motion. In their
motion, petitioners reiterated that, being laymen, they were unaware of the fifteen-day period within which to file the
answer and that their failure to do so was due to the unavailability of Atty. Pantojan who was then always out of
town. They attached to their motion an Affidavit of Merits which restated the contents of the motion.

On March 2, 2001, respondent judge issued an order holding in abeyance the ex-parte reception of evidence pending
resolution of petitioners motion to lift the order of default.

On March 5, 2001, respondent judge issued an order denying petitioners motion to lift the order of default and setting
the reception of Metrobanks evidence on March 7, 2001, as previously scheduled. On that date (March 7, 2001),
Metrobank presented its evidence and the case was submitted for decision. Petitioners moved for reconsideration of
the March 5, 2001 order but their motion was denied on March 21, 2001.

Aggrieved, petitioners filed a Petition for Certiorari with the CA ascribing grave abuse of discretion committed by the
trial court amounting to lack of jurisdiction in issuing the Orders dated February 12 and 16, 2001, declaring them in
default and denying their Opposition to Metrobank's Motion to Declare them in Default, respectively; and the Orders
dated March 5 and 21, 2001 denying their Motion to Lift the Order of Default and their Motion for Reconsideration,
respectively.

On April 30, 2002, the CA denied the petition for lack of merit and accordingly dismissed the same.

Hence,petitioners filed a petition for review on certiorari under Rule 45.

Issue:
Whether or not the CA erred in upholding the Orders of the trial court declaring petitioners in default and denying their
Motion to Lift Order of Default.

Ruling:

The Court ruled in the affirmative.

Section 3, Rule 9 of the Rules of Court provides:

Sec. 3. Default; declaration of If the defending party fails to answer within the time allowed therefor, the court shall,
upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending
party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his
pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such reception of
evidence may be delegated to the clerk of court.

Clearly, there are three requirements which must be complied with by the claiming party before the court may declare
the defending party in default, to wit: (1) the claiming party must file a motion asking the court to declare the
defending party in default; (2) the defending party must be notified of the motion to declare him in default; (3) the
claiming party must prove that the defending party has failed to answer within the period provided by the Rule.

In filing motions, Section 4, Rule 15 of the Rules of Court, specifically provides:

Sec. 4. Hearing of motion. Except for motions which the court may act upon without prejudicing the rights of the
adverse party, every written motion shall be set for hearing by the applicant.

xxxx

Prior to the present rule on default introduced by the 1997 Rules of Civil Procedure, as amended, Section 1 of the
former Rule 18 on default is silent on whether or not there is need for a notice of a motion to declare defendant in
default. The Court then ruled that there is no need. However, the present rule expressly requires that the motion of
the claiming party should be with notice to the defending party. The purpose of a notice of a motion is to avoid
surprises on the opposite party and to give him time to study and meet the arguments. The notice of a motion is
required when the party has the right to resist the relief sought by the motion and principles of natural justice demand
that his right be not affected without an opportunity to be heard.

Therefore, as the present rule on default requires the filing of a motion and notice of such motion to the defending
party, it is not enough that the defendant failed to answer the complaint within the reglementary period to be a
sufficient ground for declaration in default. The motion must also be heard.

In this case, it is not disputed that petitioners were served summons on January 22, 2001. Under Section 1, Rule 11
of the Rules of Court, the defendant shall file his answer to the complaint within 15 days after service of summons,
unless a different period is fixed by the court. Petitioners answer was due on February 6, 2001, but no answer was
filed by petitioners. Thus, Metrobank filed a Motion to declare petitioners in default on February 9, 2001, setting the
hearing thereof on February 16, 2001. However, four days before the scheduled hearing, the trial court issued the
Order datedFebruary 12, 2001, declaring petitioners in default.

We could not see any justifiable reason why the trial court chose not to hear the petitioners on the date and time fixed
inMetrobanks motion, and instead, hastily granted the motion before it could be heard on the ground that it had found
the motion to be impressed with merit. Indeed, in totally disregarding the purpose for which the filing of a motion and
notice to defending party are required by the Rules, the trial court had acted in a despotic manner that is correctly
assailed through a petition for certiorari which petitioners have seasonably filed with the CA.

Again, respondent Judge acted capriciously when he totally ignored petitioners Opposition to Metrobanks Motion to
Declare them in Default and denied their Motion to Admit Answer, both filed on February 15, 2001, a day before the
scheduled hearing, which showed their desire to be heard before the motion to declare them in default is resolved by
the trial court.
A mere perusal of the Answer attached to the Motion to Admit Answer would readily reveal that petitioners raised a
special and affirmative defense the other action pending between the same parties for the same cause. xxxx

Thus, the trial court is deemed to have been apprised of the affirmative defense of litis pendentia. Instead of
unceremoniously discarding petitioners Opposition and Motion to Admit Answer which were filed before the
scheduled date of hearing of the motion to declare petitioners in default, it behooved upon the trial court to delve into
the merits of the Opposition and the Answer.

The trial court then should have been guided by Section 11, Rule 11 of the Rules of Court, to wit:

Sec. 11. Extension of time to plead. - Upon motion and on such terms as may be just, the court may extend the time
to plead provided in these Rules.

The court may also, upon like terms, allow an answer or other pleading to be filed after the time fixed by these Rules.

and Section 1, Rule 9 of the 1997 Rules of Procedure which provides:

Sec. 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a motion to dismiss or
in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the
court has no jurisdiction over the subject matter, that there is another action pending between the same parties for
the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the
claim.

Under Rule 11, it is within the discretion of the trial court to permit the filing of defendants answer even beyond
thereglementary period, provided there is justification for the belated action, and there was no showing that the
defendant intended to delay the case. Petitioners may be considered to have committed excusable negligence when
they waited for the counsel of their choice who was out of town which caused the delay in filing their Answer; and the
Motion to Admit Answer was filed before the scheduled date of hearing on the Motion to Declare Petitioners in
Default, showing that petitioners had no intention to delay the case.

Under Rule 9, the trial court may motu proprio dismiss the claim when it appears from the pleadings or evidence on
the record that there is another cause of action pending between the same parties for the same cause. With the
alleged affirmative defense of litis pendentia, the trial court had justifiable compelling reason to recall its premature
Order declaring petitioners in default.

In a case, we found the trial court to have gravely abused its discretion when it declared defendants in default; that
the answer should be admitted because it had been filed before it was declared in default and no prejudice was
caused to plaintiff; and that the hornbook rule is that default judgments are generally disfavored.

In this case, since the Order dated February 12, 2001 declaring petitioners in default is null and void, the filing of the
Answer may be considered as having been filed before petitioners were declared in default and therefore no
prejudice was caused to Metrobank and there was no undue delay on the part of petitioners.

Basic elementary sense of fairness, liberality and substantial justice so dictate that the premature Order be
considered as null and void. It is the avowed policy of the law to accord both parties every opportunity to pursue and
defend their cases in the open and relegate technicality to the background in the interest of substantial justice.

Since the Order dated February 12, 2001 was null and void, the trial court likewise committed grave abuse of
discretion in issuing the Orders dated March 5, 2001 and March 21, 2001 denying petitioners Motion to Lift Order of
Default and Motion for Reconsideration, respectively.
We reiterate the ruling in Akut v. Court of Appeals, where we found that the trial court committed grave abuse of
discretion in declaring therein petitioners in default and in denying their motion to set aside the order of default, thus:

The controlling principle ignored by respondent court is that it is within sound judicial discretion to set aside an order
of default and to permit a defendant to file his answer and to be heard on the merits even after the reglementary
period for the filing of the answer has expired. This discretion should lean towards giving party-litigants every
opportunity to properly present their conflicting claims on the merits of the controversy without resorting to
technicalities. Courts should be liberal in setting aside orders of default, for default judgments are frowned upon, and
unless it clearly appears that reopening of the case is intended for delay, it is best that the trial courts give both
parties every chance to fight their case fairly and in the open, without resort to technicality. x x x

x x x Moreover, petitioners' answer shows that they have a prima facie meritorious defense. They should, therefore,
be given their day in court to avoid the danger of committing a grave injustice if they were denied an opportunity to
introduce evidence in their behalf.

Our ruling in Mercader v. Bonto and the copious precedents therein cited that "considering that the late filing of
defendants' answer was due to excusable negligence and that they appear to have a meritorious defense; that
defendants filed an answer before they were declared in default; and that the late filing of the answer did not in any
way prejudice or deprive the plaintiff of any substantial right, nor was there intention to unduly delay the case, WE
hold that the respondent judge committed an abuse of discretion in declaring the defendants in default and in refusing
to set aside the order of default" is fully applicable to the case at bar.

[G.R. NO. 160895 : October 30, 2006]

JOSE R. MARTINEZ, Petitioner,

v. REPUBLIC OF THE PHILIPPINES, Respondents.

FACTS:

On 24 February 1999, petitioner Jose R. Martinez (Martinez) filed a petition for the registration in his name
of three (3) parcels of land included in the Cortes, Surigao del Sur Cadastre. (Lot No. 464-A, Lot No. 464-B,
and Lot No. 370, Cad No. 597).
The case was docketed as Land Registration Case No. N-30 and raffled to the Regional Trial Court (RTC) of
Surigao del Sur, Branch 27.
The Office of the Solicitor General (OSG) was furnished a copy of the petition. The trial court set the case for
hearing and directed the publication of the corresponding Notice of Hearing in the Official Gazette.
On 30 September 1999, the OSG, in behalf of the Republic of the Philippines, opposed the petition on
the grounds that appellee's possession was not in accordance with Section 48(b) of Commonwealth Act No.
141; that his muniments of title were insufficient to prove bona-fide acquisition and possession of the subject
parcels; and that the properties formed part of the public domain and thus not susceptible to private
appropriation.
the RTC issued an order of general default, This ensued when during the hearing of even date, no
3
party appeared before the Court to oppose Martinez's petition.
the trial court proceeded to receive Martinez's oral and documentary evidence in support of his petition
4
AND rendered a Decision concluding that Martinez and his predecessors-in-interest had been for over 100
years in possession characterized as continuous, open, public, and in the concept of an owner. The RTC
thus decreed the registration of the three (3) lots in the name of Martinez.
the OSG filed a Notice of Appeal which was approved by the RTC.

8
the Court of Appeals promulgated the assailed Decision, reversing the RTC and instead ordering the
dismissal of the petition for registration concluding that the oral evidence presented by Martinez merely
consisted of general declarations of ownership.
No motion for reconsideration have been filed with the Court of Appeals by Martinez, who instead directly
assailed its Decision before this Court through the present petition.

ISSUE:

WON OSG no longer had personality to oppose the petition, or appeal its allowance by the RTC, following the order
of general default.

RULING:

NO.OSG can still file an appeal.

Lim Toco vs Go Fray ruling (1948)

where a divided Court pronounced that a defendant in default had no right to appeal the judgment rendered by the
trial court, except where a motion to set aside the order of default had been filed

However, Sec. 2, Rule 41 of the 1964 Rules of Court made the Lim Toco ruling as moot. "[a] party who has been
declared in default may likewise appeal from the judgment rendered against him as contrary to the evidence
or to the law, even if no petition for relief to set aside the order of default has been presented by him in
accordance with Rule 38."

In the present rule, the prior warrant that a defaulted defendant had the right to appeal was removed from Section 2,
Rule 41 of the 1997 Rules of Civil Procedure.

Section 3 of Rule 9 of the 1997 Rules incorporated the particular effects on the parties of an order of default:

Sec. 3. Default; declaration of. If the defending party fails to answer within the time allowed therefor, the court shall,
upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending
party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his
pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such reception of
evidence may be delegated to the clerk of court.

(a) Effect of order of default. A party in default shall be entitled to notice of subsequent proceedings but shall not take
part in the trial.

(b) Relief from order of default. A party declared in default may any time after notice thereof and before judgment file
a motion under oath to set aside the order of default upon proper showing that his failure to answer was due to fraud,
accident, mistake or excusable negligence and that he has a meritorious defense. In such case, the order of default
may be set aside on such terms and conditions as the judge may impose in the interest of justice.

(c) Effect of partial default. When a pleading asserting a claim states a common cause of action against several
defending parties, some of whom answer and the others fail to do so, the court shall try the case against all upon the
answers thus filed and render judgment upon the evidence presented.

(d) Extent of relief to be awarded. A judgment rendered against a party in default shall not exceed the amount or be
different in kind from that prayed for nor award unliquidated damages.

xxx

It cannot be escaped that the old provision expressly guaranteeing the right of a defendant declared in
default to appeal the adverse decision was not replicated in the 1997 Rules of Civil Procedure.
However, in Lina v. Court of Appeals (1997), it provides remedies for a party who has been declared in default.

a) The defendant in default may, at any time after discovery thereof and before judgment, file a motion, under oath, to
set aside the order of default on the ground that his failure to answer was due to fraud, accident, mistake or
excusable neglect, and that he has meritorious defenses; (Sec 3, Rule 18)

b) If the judgment has already been rendered when the defendant discovered the default, but before the same has
become final and executory, he may file a motion for new trial under Section 1(a) of Rule 37;

c) If the defendant discovered the default after the judgment has become final and executory, he may file a petition
for relief under Section 2 of Rule 38; andcralawlibrary

d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no
31
petition to set aside the order of default has been presented by him. (Sec. 2, Rule 41)

The fourth remedy, that of appeal, is anchored on Section 2, Rule 41 of the 1964 Rules. Yet even after that
provision's deletion under the 1997 Rules, the Court did not hesitate to expressly rely again on
the Lina doctrine, including the pronouncement that a defaulted defendant may appeal from the judgment
rendered against him.

Former Court of Appeals Justice Herrerra likewise reiterates the Lina doctrine, though with the caveat that an appeal
from an order denying a petition for relief from judgment was no longer appealable under Section 1, Rule 41 of the
37
1997 Rules. Herrera further adds:

Section 2, paragraph [2] of the former Rule 41, which allows an appeal from a denial of a petition for relief, was
deleted from the present Rule, and confined appeals to cases from a final judgment or final order that completely
disposes of the case, or of a particular matter therein, when declared by these rules to be appealable. A judgment
38
by default may be considered as one that completely disposes of the case.

Yet even if it were to assume the doubtful proposition that this contested right of appeal finds no anchor in the 1997
Rules, the doctrine still exists, applying the principle of stare decisis. jurisprudence applying the 1997 Rules
has continued to acknowledge the Lina doctrine which embodies this right to appeal as among the remedies of a
defendant, and no argument in this petition persuades the Court to rule otherwise.

39
In Rural Bank of Sta. Catalina v. Land Bank of the Philippines, the Court, through Justice Callejo, Sr., again
provided a comprehensive restatement of the remedies of the defending party declared in default, which we adopt for
purposes of this decision:

It bears stressing that a defending party declared in default loses his standing in court and his right
to adduce evidence and to present his defense. He, however, has the right to appeal from the
judgment by default and assail said judgment on the ground, inter alia, that the amount of the
judgment is excessive or is different in kind from that prayed for, or that the plaintiff failed to prove
the material allegations of his complaint, or that the decision is contrary to law. Such party declared
in default is proscribed from seeking a modification or reversal of the assailed decision on the basis
of the evidence submitted by him in the Court of Appeals, for if it were otherwise, he would thereby
be allowed to regain his right to adduce evidence, a right which he lost in the trial court when he
was declared in default, and which he failed to have vacated. In this case, the petitioner sought the
modification of the decision of the trial court based on the evidence submitted by it only in the Court
40
of Appeals.

If it cannot be made any clearer, we hold that a defendant party declared in default retains the right to appeal from the
judgment by default on the ground that the plaintiff failed to prove the material allegations of the complaint, or that the
decision is contrary to law, even without need of the prior filing of a motion to set aside the order of default. We
reaffirm that the Lim Toco doctrine, denying such right to appeal unless the order of default has been set
aside, was no longer controlling in this jurisdiction upon the effectivity of the 1964 Rules of Court, and up to
this day.
Petition is DISMISSED.

Heirs of Medrano vs. De Vera

FACTS:
This case concerns a 463-square meter parcel of land covered of Flaviana De Gracia. When Flaviana died intestate
in 1980, leaving her half sisters Hilaria and Elena as her compulsory heirs, Hilaria and Elena, by virtue of a private
document waived all their hereditary rights to Flavianas land in favor of Francisco Medrano in consideration of the
expenses that she incurred for Flavianas medication, hospitalization, wake and burial. Some of their children affirmed
the contents of the private document executed by their deceased mothers. To that end, they executed separate
Deeds of Confirmation of Private Document and Renunciation of rights in favor of Medrano.

Due to the refusal of the other children to sign a similar renunciation, Medrano filed a complaint in 2001 for quieting of
title, reconveyance, reformation of instrument, and/or partition with damages against Pelagia, Faustina, Jesus,
Veranda, and Estrellita before the RTC of Urdaneta, Pangasinan.

On April 2, 2002, respondent De Vera filed an answer with counterclaim presented himself as a real party in interest.
He maintained that the private document in favor of Medrano was null and void for want of consideration. Thus, while
some children affirmed the renunciation of their deceased mothers rights of the lot in favor of Medrano, the other
children renounced their rights in favor of de Vera.

The RTC ruled in favor of the petitioners, allowing an ex parte presentation of evidence. The RTC explained it would
have allowed de Vera to present his evidence in the case had he complied with the courts order to file a pleading-in-
intervention. Upon appeal to the CA, the appellate court agreed with de Vera. The CA pointed out that the trial court
should have exercised its authority to order the substitution of the original defendants instead of requiring de Vera to
file a pleading-in-intervention. This is allowed under Rule 3, Section 19 of the Rules of Court. Since a transferee
pendent lite is a proper party to the case, the court can order its outright substitution for the original defendants. The
petitioners filed a motion for reconsideration, which was denied by the appellate court, hence this petition.

ISSUE:
1. Whether De Vera could participate in the Civil Case without filing a motion to intervene
2. Whether De Vera is bound by the judgment against his transferors

RULING:

The trial courts approach is seriously flawed because De Veras interest is not independent of or severable from the interest of
the named defendants. De Vera is a transferee pendente lite of the named defendants (by virtue of the Deed of Renunciation of
Rights that was executed in his favor during the pendency of Civil Case No. U-7316). His rights were derived from the named
defendants and, as transfereependente lite, he would be bound by any judgment against his transferors under the rules of res
judicata.

It was therefore wrong for the trial court to have tried Medranos case against the named defendants (by allowing Medrano to
present evidence ex parte against them) after it had already admitted De Veras answer. What the trial court should have
done is to treat De Vera as having been joined as a party-defendant, and to try the case on the basis of the answer De Vera
had filed and with De Veras participation. As transferee pendente lite, De Vera may be allowed to join the original
defendants under Rule 3, Section 19.

As there was a transferee pendente lite whose answer had already been admitted, the trial court should have tried the case on the
basis of that answer, based on Rule 9, Section 3(c):

Effect of partial default. When a pleading asserting a claim states a common cause of action
against several defending parties, some of whom answer and the others fail to do so, the court shall try the
case against all upon the answers thus filed and render judgment upon the evidence presented.
 To proceed with the ex parte presentation of evidence against the named defendants after De Veras answer had been
admitted would not only be a violation of Rule 9, Section 3(c), but would also be a gross disregard of De Veras right to due
process. This is because the ex parte presentation of evidence would result in a default judgment which would bind not just
the defaulting defendants, but also De Vera, precisely because he is a transferee pendente lite. This would result in an
anomaly wherein De Vera would be bound by a default judgment even if he had filed an answer and expressed a desire to
participate in the case.

Given the Courts finding that the ex parte presentation of evidence constituted a violation of due process rights, the trial courts
judgment by default cannot bind De Vera. A void judgment cannot attain finality and its execution has no basis in law. The case
should be remanded to the trial court for trial based on De Veras answer and with his participation.

Rule 10-Amended and supplemental pleadings

WALLEM PHILIPPINES SHIPPING, INC. VS S.R. FARMS, INC.

FACTS:

On March 25, 1992, Continental Enterprises, Ltd. loaded on board the vessel M/V Hui Yang, a shipment of
Indian Soya Bean Meal weighing 1,100 metric tons, for transportation and delivery from India to Manila, with SR
Farms as consignee. The vessel is owned and operated by Conti-Feed, with petitioner Wallem as its ship agent. On
April 11, 1992, the said vessel, M/V Hui Yang arrived at the port of Manila and was discharged and transferred into
the custody of the receiving barges. Upon checking the cargo, a shortage in the shipment of 80.467 metric tons was
found.

Petitioner then filed a Complaint for damages against Conti-Feed & Maritime Pvt. Ltd., a foreign corporation
doing business in the Philippines and the owner of M/V Hui Yang; RCS Shipping Agencies, Inc., the ship agent of
Conti-Feed; Ocean Terminal Services, Inc. (OTSI), the arrastre operator at Anchorage No. 7, South Harbor, Manila;
and Cargo Trade, the customs broker.

Respondent filed an Amended Complaint impleading herein petitioner as defendant alleging that the latter,
and not RCS, was the one which, in fact, acted as Conti-Feeds ship agent.

The complaint against Cargo Trade and RCS was dismissed at the instance of respondent on the ground
that it has no cause of action. Meanwhile, defendant OTSI filed its Answer with Counterclaim and Crossclaim. For its
part, petitioner denied the allegations of respondent claiming, among others, that it is not accountable nor responsible
for any alleged shortage sustained by the shipment while in the possession of its co-defendants; the alleged shortage
was due to negligent or faulty loading or unloading of the cargo by the stevedores/shipper/consignee; the shortage, if
any, was due to pre-shipment damage, inherent nature, vice or defect of the cargo for which herein petitioner is not
liable; respondents claim is already barred by laches and/or prescription. Conti-Feed did not file an Answer.

The RTC rendered its Decision dismissing respondents complaint, as well as the opposing parties
counterclaims and crossclaims. Aggrieved by the RTC Decision, respondent filed an appeal with the CA.

The CA rendered its presently assailed Decision REVERSING and SETTING ASIDE and another one
entered ordering defendants-appellees Conti-Feed and Maritime Pvt. Ltd. and Wallem Philippines Shipping, Inc., to
pay the sum representing the value of the 80.467 metric tons of Indian Soya Beans short delivered.

Petitioner filed a Motion for Reconsideration. Respondent filed a Motion for a More Definite Dispositive
Portion.

Petitioner filed its Comment/Opposition to private respondents Motion. On January 15, 2004, the CA issued
a Resolution denying petitioners Motion for Reconsideration and modifying the dispositive portion of its
Decision. Hence, the instant petition.
ISSUE:

1. Whether or not the filing of the Amended Complaint against petitioner should retroact to the date of the
filing of the original complaint.

HELD:

NO.

As the records would show, petitioner was not impleaded as a defendant in the original complaint filed on
March 11, 1993. It was only on June 7, 1993 that the Amended Complaint, impleading petitioner as defendant, was
filed.

Respondent cannot argue that the filing of the Amended Complaint against petitioner should retroact to the
date of the filing of the original complaint.

The settled rule is that the filing of an amended pleading does not retroact to the date of the filing of the
original; hence, the statute of limitation runs until the submission of the amendment. It is true that, as an exception,
this Court has held that an amendment which merely supplements and amplifies facts originally alleged in the
complaint relates back to the date of the commencement of the action and is not barred by the statute of limitations
which expired after the service of the original complaint. The exception, however, would not apply to the
party impleaded for the first time in the amended complaint.

The rule on the non-applicability of the curative and retroactive effect of an amended complaint, insofar as
newly impleaded defendants are concerned, has been established as early as in the case of Aetna Insurance Co. v.
Luzon Stevedoring Corporation.In the said case, the defendant Barber Lines Far East Service was impleaded for the
first time in the amended complaint which was filed after the one-year period of prescription. The order of the lower
court dismissing the amended complaint against the said defendant on ground of prescription was affirmed by this
Court.

In the instant case, petitioner was only impleaded in the amended Complaint of June 7, 1993, or one (1)
year, one (1) month and twenty-three (23) days from April 15, 1992, the date when the subject cargo was fully
unloaded from the vessel. Hence, reckoned from April 15, 1992, the one-year prescriptive period had already lapsed.

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated June 2,
2003 and its Resolution dated January 15, 2004 in CA-G.R. CV No. 65857 are MODIFIED by dismissing the
complaint against petitioner. In all other respects, the challenged Decision and Resolution of the CA are AFFIRMED.
SO ORDERED.

xxxSPS. DIONISIO VS LINSANGANxxx

xxxxxxxxARANETA VS CAxxxxxxxx

IRENE SANTE VS HON. EDILBERTO CLARAVALL

GR 173915

FACTS :
respondent filed before the RTC of Baguio a complaint for damages against the petitioner for alleged malicious
conduct committed by the latter. In said complaint respondent prayed that the petitioner be held liable for damages in
the amount of P300,000, P50,000 as exemplary damages, P50,000 attorney's fees and P20,000. Petitioner filed a
motion to dismiss on the ground that it was the MTC who has the jurisdiction over the said complaint arguing that the
amount for damages claimed for by the respondent was not more than the jurisdictional amount of P300,000 because
the claim for exemplary damages should not be included in the computation. Trial court denied the motion. Petitioner
filed then a petition for certiorari and prohibition before the CA on August 20 2004. Meanwhile respondent filed
amended complaint increasing the claim to P1,000,000. Petitioner filed a motion to dismiss but was denied by the trial
court.
On January 23, 2006 CA as to the petition for certiorari held that RTC committed grave abuse of discretion on the
ground that the case falls under the jurisdiction of the MTCC as the allegation shows that the moral damages claimed
by the respondent was only P300,000 and that the totality rule will not apply in the case at bar.
on January 31 2006 CA in CA gr 87563 affirmed the decision of the RTC Denying the motion to dismiss wherein it
held that the aggregate amount demanded should be the basis for jurisdiction. CA additionally ruled that respondent
can amend her complaint of the ground that the trial court has jurisdiction over the original complaint and respondent
is entitled to amend the same as a matter of right. Hence present petition

ISSUE: WON respondent has the right to amend the original complaint.

RULING:
yes the respondent can amend the same on the ground that the original complaint is within the jurisdiction of RTC.
BP 129 as amended states that the MTC has jurisdiction over cases in which the demand does not exceed P300,000.
however it is provided for under Administrative circular no. 09-94 that in cases where the claim for damages is the
main cause of action, the amount of such claim shall be considered in determining the jurisdiction of the court. In the
instant case it is clear from the allegations of the complaint that the respondent's main cause of action is for
damages. Hence the other form of damages claimed for are not merely incidental to the main cause of action but
constitute primary relief. In Mendoza vs soriano the court ruled that the total amount of monetary claims including the
claims for damages was the basis for determining the jurisdiction. Considering that the total amount of damages
claimed was P420,000 CA was correct in its ruling that RTC has jurisdiction over the case. It is a basic jurisprudential
principle that an amendment cannot be allowed when the court has no jurisdiction over the original complaint. Here
RTC Clearly had jurisdiction over the original complaint hence amendment was then still a matter of right

Rule 10, Sec 3

Tiu vs. PBCom

G.R. No. 151932

Facts:

In June 1993, Asian Water Resources, Inc. (AWRI), represented by herein petitioners, applied for a real estate loan
with the Philippine Bank of Communications (PBCOM) to fund its purified water distribution business.

The loan was guaranteed by collateral over the property covered by Transfer Certificate of Title No. T-13020. The
loan was eventually approved.

In August 1996, AWRI applied for a bigger loan from PBCOM for additional capitalization using the same Board
Resolution, but without any additional real estate collateral. Considering that the proposed additional loan was
unsecured, PBCOM required all the members of the Board of Directors of AWRI to become sureties. Thus, on August
16, 1996, a Surety Agreement was executed.
Thereafter, AWRI informed the bank of its desire to surrender

and/or assign in its favor, all the present properties of the former to apply as dacion en pago for AWRIs existing loan
obligation to the bank. PBCOM sent a reply

denying the request. On May 12, 1999, PBCOM sent a letter to petitioners demanding full payment of its obligation to
the bank.

Its demands having remained unheeded, PBCOM instructed its counsel to file a complaint for collection against
petitioners.

On July 3, 1999, petitioners filed their Answer. In support of their allegations, petitioners attached to their Answer a
certified photocopy of the Surety Agreement issued on March 25, 1999 by the Records Management and Archives
Office in Davao City, showing that the words In his personal capacity were not found at the foot of page two of the
document where their signatures appeared.

Because of this development, PBCOMs counsel searched for and retrieved the file copy of the Surety Agreement.
The notarial copy showed that the words In his personal capacity did not appear on page two of the Surety
Agreement.

PBCOM subsequently discovered that the insertion was ordered by the bank auditor. It alleged that when the Surety
Agreement was inspected by the bank auditor, he called the attention of the loans clerk, Kenneth Cabahug, as to why
the words In his personal capacity were not indicated under the signature of each surety, in accordance with bank
standard operating procedures. The auditor then ordered Mr. Cabahug to type the words In his personal capacity
below the second signatures of petitioners. However, the notary public was

never informed of the insertion.[14] Mr. Cabahug subsequently executed an affidavit attesting to the circumstances
why the insertion was made.

PBCOM then filed a Reply and Answer to Counterclaim with Motion for Leave of Court to Substitute Annex A of the
Complaint, wherein it attached the duplicate original copy retrieved from the file of the notary public.

Issue:

Whether or not PBCom has a right to amend its complaint.

Rulings:

Yes. After petitioners have filed their answer, Section 3, Rule 10 of the Rules of Court specifically allows amendment
by leave of court. The said Section states:
SECTION 3. Amendments by leave of court. Except as provided in the next preceding section, substantial
amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the
motion was made with intent to delay. Orders of the court upon the matters provided in this section shall be made
upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.

This Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure in Valenzuela v.
Court of Appeals, thus:

Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in such manner that
the phrase or that the cause of action or defense is substantially altered was strickenoff and not retained in the new
rules. The clear import of such amendment in Section 3, Rule 10 is that under the new rules, the amendment may
(now) substantially alter the cause of action or defense. This should only be true, however, when despite a
substantial change or alteration in the cause of action or defense, the amendments sought to be made shall serve the
higher interests of substantial justice, and prevent delay and equally promote the laudable objective of the rules which
is to secure a just, speedy and inexpensive disposition of every action and proceeding.

The granting of leave to file amended pleading is a matter particularly addressed to the sound discretion of the trial
court; and that discretion is broad, subject only to the limitations that the amendments should not substantially
change the cause of action or alter the theory of the case, or that it was not made to delay the action. Nevertheless,
as enunciated in Valenzuela, even if the amendment substantially alters the cause of action or defense, such
amendment could still be allowed when it is sought to serve the higher interest of substantial justice; prevent delay;
and secure a just, speedy and inexpensive disposition of actions and proceedings.

The courts should be liberal in allowing amendments to pleadings to avoid a multiplicity of suits and in order that the
real controversies between the parties are presented, their rights determined, and the case decided on the merits
without unnecessary delay.

In the present case, there was no fraudulent intent on the part of PBCOM in submitting the altered surety agreement.
In fact, the bank admitted that it was a mistake on their part to have submitted it in the first place instead of the
original agreement. It also admitted that, through inadvertence, the copy that was attached to the complaint was the
copy wherein the words IN HIS PERSONAL CAPACITY were inserted to conform to the banks standard practice.
This alteration was made without the knowledge of the notary public. PBCOMs counsel had no idea that what it
submitted was the altered document, thereby necessitating the substitution of the surety agreement with the original
thereof, in order that the case would be judiciously resolved.

PHIL. PORTS AUTHORITY VS. WG&A

G.R. No. 158401, Jan. 28, 2008

FACTS:

Private respondent William Gothong & Aboitiz, Inc. (WG&A) entered into a contract of lease with the
Philippine Port Authority (PPA)to lease the Marine Slip Way in the North Harbor which is owned by PPA. The term of
the contract was for 6 months wherein parties to the contract stipulated therein that the lease of the area shall take
effect on Jan. 1, 2001 to Jun. 30, 2001 or until such time that the PPA turns over its operation to the winning
bidder for the North Harbor modernization. The said contract was eventually conformed to and signed by WG&A
through its President. Thereafter, in accordance with the stipulations made in the lease agreement, PPA surrendered
possession of the Marine Slip Way in favor of WG&A.

However, believing that the said contract already expired on Jun. 30, 2001, PPA subsequently sent a letter
to WG&A dated Nov. 12, 2001 directing the latter to vacate the contested premises not later than Nov. 30, 2001. In
response, WG&A wrote to PPA on Nov. 27, 2001 urging the latter to reconsider its decision to eject the former but
said request was denied by PPA.

Thus, on Nov. 28, 2001 WG&A filed an Injunction suit with the RTC of Manila wherein it claims therein that
the PPA unjustly, illegally and prematurely terminated the lease contract. It likewise prayed for the issuance of a TRO
to arrest the evacuation. In its complaint, it also sought recovery of damages for breach of contract and attorneys
fees.

On Dec. 11, 2001, WG&A amended its complaint for the first time. The complaint was still denominated as
one for Injunction with prayer for TRO. In the said pleading, it incorporated statements to the effect that PPA is
already stopped from denying that the correct period of lease is until such time that the North Harbor Modernization
project has been bidded out to and operations turned over to the winning bidder. It likewise included, as its third
cause of action, the additional relief in its prayer, that should it be forced to vacate said facility, it should be
deemed as entitled to be refunded of the value of the improvements it introduced in the leased property.
Following the first amendment in the complaint of WG&A, PPA submitted its answer on Jan. 23, 2001. Meanwhile,
the TRO sought by WG&A was denied by the RTC. Then it moved for reconsideration on Feb. 11, 2002.

Shortly thereafter, it filed a Motion to Admit Attached Second Amended Complaint. This time, however, the
complaint was already captioned as one for Injunction with Prayer for TRO and/or Writ of Preliminary Injunction and
damages and/or for reformation of contract. Also, it included as its fourth cause of action and additional relief in
its prayer, the reformation of the contract as it failed to express or embody the true intent of the contracting
parties. The PPA opposed its admission and argued that the reformation sought for by WG&A constituted
substantial amendment, which if granted, will substantially alter the latters cause of action and theory of the case.

The RTC denied the admission of the second amended complaint, and its motion for reconsideration was
also denied. And so it filed a petition for certiorari with the CA. The CA granted the petition and nullified the order and
directed the RTC to admit the second amended complaint pursuant to Sec. 3, Rule 10 of the 1997 Rules of Civil
Procedure.

ISSUE:

Whether or not the CA erred in ruling that the RTC committed grave abuse of discretion when it denied the
admission of the second amended complaint.

HELD:

No. The CA did no err in finding that the RTC committed grave abuse of discretion in issuing the order
denying the admission of the second amended complaint filed by WG&A.

The RTC applied the old Sec. 3, Rule 10 of the Rules of Court which says that: Sec. 3. Amendments by
leave of Court. after the case is set for hearing, substantial amendments may be made only upon leave of court.
But such leave may be refused if it appears to the court that the motion was made with intent to delay the action or
that the cause of action or defense is substantially altered. Orders of the court upon the matters provided in this
section shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be
heard, instead of the provisions of the 1997 Rules of Civil Procedure, amending Sec. 3, Rule 10, to wit:

Sec. 3. Amendments by leave of court. Except as provided in the next preceding section, substantial amendments
may be made only upon leave of court. But such leave may be refused if it appears to the court that the
motion was made with intent to delay. Orders of the court upon the matters provided in this section shall be made
upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.

The court has emphasized the import of Sec. 3, Rule 10 of the 1997 Rules of Civil Procedure in Valenzuela
vs. CA, thus:

Interestingly, section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in such
manner that the phrase or that the cause of action or defense is substantially altered was stricken-off and not
retained in the new rules. The clear import of such amendment in section 3, Rule 10 is that under the new
rules, the amendment may (now) substantially alter the cause of action or defense. This should only be true,
however, when despite a substantial change or alteration in the cause of action or defense, the amendments sought
to be made shall serve to the higher interests of substantial justice, and prevent delay and equally promote the
laudable objective of the rules which is to secure a just, speedy and inexpensive disposition of every cause of action
and proceding.

The application of the old rules by the RTC almost 5 years after its amendment by the 1997 Rules of Civil
Procedure patently constitutes grave abuse of discretion.

[G. R. No. 138085. November 11, 2004]

AZOLLA FARMS and FRANCISCO R. YUSECO, petitioners, vs. COURT OF APPEALS and SAVINGS BANK OF
MANILA, respondents.

Petitioner Francis R. Yuseco, Jr., is the Chairman, President and Chief Operating Officer of petitioner Azolla
Farms International Philippines (Azolla Farms), a corporation duly organized under existing laws and
engaged in the development, exploitation, production, manufacturing, promotion, marketing, and sale of
natural, organic minerals, including its by-products, with the ultimate objective of utilizing said products for
the promotion of food production.
In 1982, Azolla Farms undertook to participate in the National Azolla Production Program wherein it will
purchase all the Azolla produced by the Azolla beneficiaries in the amount not exceeding the peso value of
all the inputs provided to them.
To finance its participation, petitioners applied for a loan with Credit Manila, Inc., which the latter endorsed to
its sister company, respondent Savings Bank of Manila (Savings Bank).
The Board of Directors of Azolla Farms, passed a board resolution, authorizing Yuseco to borrow from
[3]
Savings Bank in an amount not exceeding P2,200,000.00.
The loan having been approved, Yuseco executed a promissory note, promising to pay Savings Bank the
sum of P1,400,000.00. The net proceeds of P1,225,443.31 was released to FNCB Finance, the mortgagee
of a 548- square meter lot with residential house owned by Yuseco. With the release of the proceeds,
[5]
FNCB Finance released the mortgage, and in turn, the property was mortgaged to Savings Bank as
[6]
collateral for the loan. Yuseco and Francisco Bargas also executed an assignment of their shares of stock
[7]
in Azolla Farms as additional security. Yuseco then executed two other promissory notes on September
[8] [9]
27, 1982 and January 4, 1983, both for the amount of P300,000.00.
However, the Azolla Farms project collapsed.

Filing of the Case

Petitioners Yuseco and Azolla Farms filed with the Regional Trial Court of Manila (Branch 25), a complaint
for damages(blaming savings bank):
o Their complaint alleges that Savings Bank unjustifiably refused to promptly release the
remaining P300,000.00 which impaired the timetable of the project and inevitably affected the
viability of the project resulting in its collapse, and resulted in their failure to pay off the loan. Thus,
[10]
petitioners pray for P1,000,000.00 as actual damages, among others.
Respondent Savings Bank filed its Answer denying the allegations in the complaint.
o It contends that there was evidence that Yuseco was using the loan proceeds for expenses totally
unrelated to the project and they decided to withhold the remaining amount until Yuseco gave the
assurance that the diversion of the funds will be stopped. Respondent bank believed that the 90-
day interval between the two tranches could not have impaired the operation of the project, and
petitioners subsequent receipt of the proceeds confirmed their agreement to the terms of the loan.
Respondent, as defendant, rested its case.
 Petitioners filed a Motion to Admit Amended Complaint alleging that the testimony of defense witness Jesus
[11]
Venturina raised the issue of the invalidity of the promissory notes and the real estate mortgage.
Petitioners sought the amendment of the complaint to conform to the issues and evidence
presented.
In their motion to amend complaint, petitioners allege that:
During the direct examination of defendant banks witness Jesus Venturina, the testimony
of defense witness raised the issue of the invalidity of the promissory notes and the real
estate mortgage and that the pleadings in this case, the complaint, be amended to
conform to the issues raised and the evidence presented;

> The trial court granted the motion and admitted the Amended Complaint.

> The Court of Appeals, however, ruled that the trial court should not have admitted the Amended Complaint because
it altered petitioners cause of action. Apparently, the Court of Appeals treated petitioners amendment of the
complaint as one involving amendments after the case is set for hearing under Section 3, Rule 10 of the Rules of
Court, which is not however applicable to the present case.

Hence, the herein petition filed.

ISSUE:
WON the trial court erred in admitting petitioners amended complaint;
WON the trial court erred in nullifying the promissory notes, the real estate mortgage, and its extrajudicial foreclosure.

RULING:
The trial court cannot be faulted for admitting the amended complaint as it had the discretion to do so.
However, whether the evidence introduced by respondent, indeed, supported the finding that the promissory notes,
the real estate mortgage and the foreclosure sale, are invalid, is a different matter altogether.

The amendment of the complaint was made pursuant to Section 5, Rule 10 of the Rules of Court, governing
amendment of pleadings to conform to evidence, to wit:
SEC. 5. Amendment to conform to or authorize presentation of evidence .When issues not raised by the pleadings
are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised
in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence
and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to
amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it
is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so
freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to
satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon
the merits. The court may grant a continuance to enable the objecting party to meet such evidence.
[21]
In Mercader vs. Development Bank of the Phils. (Cebu Branch),
the Court explained that the foregoing provision envisions two scenarios
first, when evidence is introduced on an issue not alleged in the pleadings and no objection was interjected and
second, when evidence is offered on an issue not alleged in the pleadings but this time an objection was
interpolated.
In cases where an objection is made, the court may nevertheless admit the evidence where the adverse
party fails to satisfy the court that the admission of the evidence would prejudice him in maintaining his
defense upon the merits, and the court may grant him a continuance to enable him to meet the new situation
created by the evidence.
As can be gleaned from the records, it was petitioners belief that respondents evidence justified the
amendment of their complaint. The trial court agreed thereto and admitted the amended complaint. On this
score, it should be noted that courts are given the discretion to allow amendments of pleadings to conform to
the evidence presented during the trial.

In Bank of America, NT and SA vs. American Realty Corporation, the Court stated:
There have been instances where the Court has held that even without the necessary amendment, the amount
proved at the trial may be validly awarded,

In Tuazon v. Bolanos (95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief other than that
asked for, no amendment to the complaint was necessary, especially where defendant had himself raised the
point on which recovery was based.The appellate court could treat the pleading as amended to conform to the
evidence although the pleadings were actually not amended. Amendment is also unnecessary when only clerical
error or non substantial matters are involved, as we held in Bank of the Philippine Islands vs. Laguna (48 Phil. 5). In
Co Tiamco vs. Diaz (75 Phil. 672), we stressed that the rule on amendment need not be applied rigidly, particularly
where no surprise or prejudice is caused the objecting party. And in the recent case of National Power Corporation
vs. Court of Appeals (113 SCRA 556), we held that where there is a variance in the defendants pleadings and the
evidence adduced by it at the trial, the Court may treat the pleading as amended to conform with the evidence.

The Court of Appeals disagreed with the trial court and held that there was no novation, hence, the
promissory notes and the real estate mortgage are valid and binding.

The Supreme Court agree with the appellate court.

Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one
which extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting
[27]
another in place of the debtor, or by subrogating a third person in the rights of the creditor. In order for novation to
[28]
take place, the concurrence of the following requisites is indispensable:
1. there must be a previous valid obligation,
2. there must be an agreement of the parties concerned to a new contract,
3. there must be the extinguishment of the old contract, and
4. there must be the validity of the new contract.

All these requisites are patently lacking in this case.

In the first place, there is no new obligation that supposedly novated the promissory notes or the real estate
mortgage, or a pre-existing obligation that was novated by the promissory notes and the real estate mortgage.

What transpired was an application for loan was filed by plaintiffs with Credit Manila in an amount greater than the P2
million eventually granted. This loan application was endorsed to defendant Savings Bank of Manila, processed by
the latter and eventually approved by it in the amount of P2 million.

Petitioner Yuseco being himself a banker, cannot pretend to have been unaware of banking procedures that normally
recognize a loan application as just that, a mere application. Only upon the banks approval of the loan application
in the amount and under such terms it deems viable and acceptable, that a binding and effective loan agreement
comes into existence. Without any such first or original loan agreement as approved in the amount and under
specified terms by the bank, there can be nothing whatsoever that can be subsequently novated.

The promissory notes signed by Yuseco were respondent Savings Banks promissory notes, and the real estate
mortgage was likewise respondent Savings Banks standard real estate mortgage form. Obviously, this case is an
attempt by petitioners to extricate themselves from their obligations; but they cannot be allowed to have their cake
and eat it, too.

Rule 10, Section 5. Amendment to conform to or authorize presentation of evidence. When issues not raised by
the pleadings are tried with the express or implied consent of the parties they shall be treated in all respects as if they
had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform
to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment;
but failure to amend does not effect the result of the trial of these issues. If evidence is objected to at the trial on the
ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and
shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be
subserved thereby. The court may grant a continuance to enable the amendment to be made.

G.R. No. 172825 October 11, 2012

SPOUSES MINIANO B. DELA CRUZ and LETA L. DELA CRUZ, Petitioners,
vs.
ANA MARIE CONCEPCION, Respondent.

Facts: A petition for review on certiorari under Rule 45 of the Rules of Court was filed by petitioners spouses
Miniano B. Dela Cruz and Leta L. Dela Cruz against respondent Ana Marie Concepcion on the decision of the Court
of Appeals (CA) dated March 31, 2005 and Resolution dated May 24, 2006 in CA-G.R. CV No. 83030.
On March 25, 1996, petitioners (as vendors) entered into a Contract to Sell with respondent (as vendee)
involving a house and lot in Cypress St., Phase I, Town and Country Executive Village, Antipolo City for a
consideration of P2,000,000.00 subject to the following terms and conditions:
a) That an earnest money of P100,000.00 shall be paid immediately;
b) That a full down payment of Four Hundred Thousand Pesos (P400,000.00) shall be paid on February 29,
1996;
c) That Five Hundred Thousand Pesos (P500,000.00) shall be paid on or before May 5, 1996; and
d) That the balance of One Million Pesos (P1,000,000.00) shall be paid on installment with interest of
Eighteen Percent (18%) per annum or One and a half percent (1-1/2 %) interest per month, based on the
diminishing balance, compounded monthly, effective May 6, 1996. The interest shall continue to run until the
whole obligation shall have been fully paid. The whole One Million Pesos shall be paid within three years
from May 6, 1996;
e) That the agreed monthly amortization of Fifty Thousand Pesos (P50,000.00), principal and interest
included, must be paid to the Vendors, without need of prior demand, on or before May 6, 1996, and every
month thereafter. Failure to pay the monthly amortization on time, a penalty equal to Five Percent (5%) of
the amount due shall be imposed, until the account is updated. In addition, a penalty of One Hundred Pesos
per day shall be imposed until the account is updated;
f) That after receipt of the full payment, the Vendors shall execute the necessary Absolute Deed of Sale
covering the house and lot mentioned above x x x
Thereon, Respondent made the following payments, to wit:
(1) P500,000.00 by way of downpayment;
(2) P500,000.00 on May 30, 1996;
(3) P500,000.00 paid on January 22, 1997; and
(4) P500,000.00 bounced check dated June 30, 1997 which was subsequently replaced by
another check of the same amount, dated July 7, 1997.
Respondent was, therefore, able to pay a total of P2,000,000.00.
Before respondent issued the P500,000.00 replacement check, she told petitioners that based on the
computation of her accountant as of July 6, 1997, her unpaid obligation which includes interests and penalties was
only P200,000.00. Petitioners agreed with respondent and said "if P200,000.00 is the correct balance, it is okay with
us."
Meanwhile, the title to the property was transferred to respondent. Petitioners later reminded respondent to
pay P209,000.00 within three months. They claimed that the said amount remained unpaid, despite the transfer of the
title to the property to respondent. Several months later, petitioners made further demands stating the supposed
correct computation of respondents liabilities. Despite repeated demands, petitioners failed to collect the amounts
they claimed from respondent.
Hence, the Complaint for Sum of Money With Damages filed with the Regional Trial Court (RTC) of
Antipolo, Rizal. The case was docketed as Civil Case No. 98-4716.
In her Answer with Compulsory Counterclaim, respondent claimed that her unpaid obligation to petitioners is
only P200,000.00 as earlier confirmed by petitioners and not P487,384.15 as later alleged in the complaint.
Respondent thus prayed for the dismissal of the complaint. By way of counterclaim, respondent prayed for the
payment of moral damages and attorneys fees. During the presentation of the parties evidence, in addition to
documents showing the statement of her paid obligations, respondent presented a receipt purportedly indicating
payment of the remaining balance of P200,000.00 to Adoracion Losloso (Losloso) who allegedly received the same
on behalf of petitioners.
On March 8, 2004, the RTC rendered a Decision in favor of respondent, the dispositive portion of which
reads:
WHEREFORE, premises considered, this case is hereby DISMISSED. The plaintiff is hereby ordered to pay
the defendants counterclaim, amounting to wit:
a) P300,000 as moral damages; and
 b) P100,000 plus P2,000 per court appearance as attorneys fees.
SO ORDERED.
The RTC noted that the evidence formally offered by petitioners have not actually been marked as none of
the markings were recorded. Thus, it found no basis to grant their claims, especially since the amount claimed in the
complaint is different from that testified to. The court, on the other hand, granted respondents counterclaim.
On appeal, the CA affirmed the decision with modification by deleting the award of moral damages and
attorneys fees in favor of respondent. It agreed with the RTC that the evidence presented by petitioners cannot be
given credence in determining the correct liability of respondent. Considering that the purchase price had been fully
paid by respondent ahead of the scheduled date agreed upon by the parties, petitioners were not awarded the
excessive penalties and interests. The CA thus maintained that respondents liability is limited to P200,000.00 as
claimed by respondent and originally admitted by petitioners. This amount, however, had already been paid by
respondent and received by petitioners representative. Finally, the CA pointed out that the RTC did not explain in its
decision why moral damages and attorneys fees were awarded. Considering also that bad faith cannot be attributed
to petitioners when they instituted the collection suit, the CA deleted the grant of their counterclaims.
Aggrieved, petitioners come before the Court in this petition for review on certiorari under Rule 45 of the
Rules of Court.

Issue: WON the failure of a party to amend a pleading to conform to the evidence adduced during trial will preclude
adjudication by the court on the basis of such evidence which may embody new issues not raised in the pleadings.

Ruling: Invoking the rule on judicial admission, petitioners insist that respondent admitted in her Answer with
Compulsory Counterclaim that she had paid only a total amount of P2 million and that her unpaid obligation amounts
to P200,000.00. They thus maintain that the RTC and the CA erred in concluding that said amount had already been
paid by respondent. Petitioners add that respondents total liability as shown in the latters statement of account was
erroneously computed for failure to compound the monthly interest agreed upon. Petitioners also claim that the RTC
and the CA erred in giving credence to the receipt presented by respondent to show that her unpaid obligation had
already been paid having been allegedly given to a person who was not armed with authority to receive payment.
The petition is without merit.
It is undisputed that the parties entered into a contract to sell a house and lot for a total consideration of P2
million. Considering that the property was payable in installment, they likewise agreed on the payment of interest as
well as penalty in case of default. It is likewise settled that respondent was able to pay the total purchase price of P2
million ahead of the agreed term. Afterwhich, they agreed on the remaining balance by way of interest and penalties
which is P200,000.00. Considering that the term of payment was not strictly followed and the purchase price had
already been fully paid by respondent, the latter presented to petitioners her computation of her liabilities for interests
and penalties which was agreed to by petitioners. Petitioners also manifested their conformity to the statement of
account prepared by respondent.
In paragraph (9) of petitioners Complaint, they stated that:
9) That the Plaintiffs answered the Defendant as follows: "if P200,000 is the correct balance, it is okay with us." x x x
But in paragraph (17) thereof, petitioners claimed that defendants outstanding liability as of November 6,
1997 was P487,384.15. Different amounts, however, were claimed in their demand letter and in their testimony in
court.
With the foregoing factual antecedents, petitioners cannot be permitted to assert a different computation of
the correct amount of respondents liability.
It is noteworthy that in answer to petitioners claim of her purported unpaid obligation, respondent admitted in
her Answer with Compulsory Counterclaim that she paid a total amount of P2 million representing the purchase price
of the subject house and lot. She then manifested to petitioners and conformed to by respondent that her only
balance was P200,000.00. Nowhere in her Answer did she allege the defense of payment. However, during the
presentation of her evidence, respondent submitted a receipt to prove that she had already paid the remaining
balance. Both the RTC and the CA concluded that respondent had already paid the remaining balance of
P200,000.00. Petitioners now assail this, insisting that the court should have maintained the judicial admissions of
respondent in her Answer with Compulsory Counterclaim, especially as to their agreed stipulations on interests and
penalties as well as the existence of outstanding obligations.
It is, thus, necessary to discuss the effect of failure of respondent to plead payment of its obligations.
 Section 1, Rule 9 of the Rules of Court states that "defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived." Hence, respondent should have been barred from raising the defense
of payment of the unpaid P200,000.00. However, Section 5, Rule 10 of the Rules of Court allows the amendment
to conform to or authorize presentation of evidence, to wit:
Section 5. Amendment to conform to or authorize presentation of evidence. When issues
not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to
cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any
time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If evidence
is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow
the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the
ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the
amendment to be made.
The foregoing provision envisions two scenarios, namely, when evidence is introduced in an issue not
alleged in the pleadings and no objection was interjected; and when evidence is offered on an issue not alleged in the
pleadings but this time an objection was raised. When the issue is tried without the objection of the parties, it should
be treated in all respects as if it had been raised in the pleadings. On the other hand, when there is an objection, the
evidence may be admitted where its admission will not prejudice him.
Thus, while respondent judicially admitted in her Answer that she only paid P2 million and that she still owed
petitioners P200,000.00, respondent claimed later and, in fact, submitted an evidence to show that she already paid
the whole amount of her unpaid obligation. It is noteworthy that when respondent presented the evidence of payment,
petitioners did not object thereto. When the receipt was formally offered as evidence, petitioners did not manifest their
objection to the admissibility of said document on the ground that payment was not an issue. Apparently, petitioners
only denied receipt of said payment and assailed the authority of Losloso to receive payment. Since there was an
implied consent on the part of petitioners to try the issue of payment, even if no motion was filed and no amendment
of the pleading has been ordered, the RTC cannot be faulted for admitting respondents testimonial and documentary
evidence to prove payment.
As stressed by the Court in Royal Cargo Corporation v. DFS Sports Unlimited, Inc.,
The failure of a party to amend a pleading to conform to the evidence adduced during trial does not preclude
adjudication by the court on the basis of such evidence which may embody new issues not raised in the pleadings. x
x x Although, the pleading may not have been amended to conform to the evidence submitted during trial, judgment
may nonetheless be rendered, not simply on the basis of the issues alleged but also on the issues discussed and the
assertions of fact proved in the course of the trial. The court may treat the pleading as if it had been amended to
conform to the evidence, although it had not been actually amended. x x x Clearly, a court may rule and render
judgment on the basis of the evidence before it even though the relevant pleading had not been previously amended,
so long as no surprise or prejudice is thereby caused to the adverse party. Put a little differently, so long as the basic
requirements of fair play had been met, as where the litigants were given full opportunity to support their respective
contentions and to object to or refute each other's evidence, the court may validly treat the pleadings as if they had
been amended to conform to the evidence and proceed to adjudicate on the basis of all the evidence before it.
To be sure, petitioners were given ample opportunity to refute the fact of and present evidence to prove
payment.
With the evidence presented by the contending parties, the more important question to resolve is whether or
not respondents obligation had already been extinguished by payment.
We rule in the affirmative as aptly held by the RTC and the CA.
Respondents obligation consists of payment of a sum of money. In order to extinguish said obligation,
payment should be made to the proper person as set forth in Article 1240 of the Civil Code, to wit:
Article 1240. Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.
The Court explained in Cambroon v. City of Butuan, cited in Republic v. De Guzman, to whom payment
should be made in order to extinguish an obligation:
Payment made by the debtor to the person of the creditor or to one authorized by him or by the law to
receive it extinguishes the obligation. When payment is made to the wrong party, however, the obligation is not
extinguished as to the creditor who is without fault or negligence even if the debtor acted in utmost good faith and by
mistake as to the person of the creditor or through error induced by fraud of a third person.
In general, a payment in order to be effective to discharge an obligation, must be made to the proper person.
Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the
particular payment. Payment made to one having apparent authority to receive the money will, as a rule, be treated
as though actual authority had been given for its receipt. Likewise, if payment is made to one who by law is
authorized to act for the creditor, it will work a discharge. The receipt of money due on a judgment by an officer
authorized by law to accept it will, therefore, satisfy the debt.
Admittedly, payment of the remaining balance of P200,000.00 was not made to the creditors themselves.
Rather, it was allegedly made to a certain Losloso. Respondent claims that Losloso was the authorized agent of
petitioners, but the latter dispute it.
Loslosos authority to receive payment was embodied in petitioners Letter addressed to respondent, dated
August 7, 1997, where they informed respondent of the amounts they advanced for the payment of the 1997 real
estate taxes. In said letter, petitioners reminded respondent of her remaining balance, together with the amount of
taxes paid. Taking into consideration the busy schedule of respondent, petitioners advised the latter to leave the
payment to a certain "Dori" who admittedly is Losloso, or to her trusted helper. This is an express authority given to
Losloso to receive payment.
Moreover, as correctly held by the CA:
Furthermore, that Adoracion Losloso was indeed an agent of the appellant spouses is borne out by the
following admissions of plaintiff-appellant Atty. Miniano dela Cruz, to wit:
Q: You would agree with me that you have authorized this Doiry Losloso to receive payment of
whatever balance is due you coming from Ana Marie Concepcion, that is correct?
A: In one or two times but not total authority, sir.
Q: Yes, but you have authorized her to receive payment?
A: One or two times, yes
Thus, as shown in the receipt signed by petitioners agent and pursuant to the authority granted by
petitioners to Losloso, payment made to the latter is deemed payment to petitioners. We find no reason to depart
from the RTC and the CA conclusion that payment had already been made and that it extinguished respondent's
obligations.
WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision
dated March 31, 2005 and Resolution dated May 24, 2006 in CA-G.R. CV No. 83030, are AFFIRMED.
SO ORDERED.

Rule 10, Section 5. Amendment to conform to or authorize presentation of evidence. When issues not raised by
the pleadings are tried with the express or implied consent of the parties they shall be treated in all respects as if they
had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform
to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment;
but failure to amend does not effect the result of the trial of these issues. If evidence is objected to at the trial on the
ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and
shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be
subserved thereby. The court may grant a continuance to enable the amendment to be made.

G.R. No. 172825 October 11, 2012

SPOUSES MINIANO B. DELA CRUZ and LETA L. DELA CRUZ, Petitioners,
vs.
ANA MARIE CONCEPCION, Respondent.

Facts: A petition for review on certiorari under Rule 45 of the Rules of Court was filed by petitioners spouses
Miniano B. Dela Cruz and Leta L. Dela Cruz against respondent Ana Marie Concepcion on the decision of the Court
of Appeals (CA) dated March 31, 2005 and Resolution dated May 24, 2006 in CA-G.R. CV No. 83030.
On March 25, 1996, petitioners (as vendors) entered into a Contract to Sell with respondent (as vendee)
involving a house and lot in Cypress St., Phase I, Town and Country Executive Village, Antipolo City for a
consideration of P2,000,000.00 subject to the following terms and conditions:
a) That an earnest money of P100,000.00 shall be paid immediately;
b) That a full down payment of Four Hundred Thousand Pesos (P400,000.00) shall be paid on February 29,
1996;
c) That Five Hundred Thousand Pesos (P500,000.00) shall be paid on or before May 5, 1996; and
d) That the balance of One Million Pesos (P1,000,000.00) shall be paid on installment with interest of
Eighteen Percent (18%) per annum or One and a half percent (1-1/2 %) interest per month, based on the
diminishing balance, compounded monthly, effective May 6, 1996. The interest shall continue to run until the
whole obligation shall have been fully paid. The whole One Million Pesos shall be paid within three years
from May 6, 1996;
e) That the agreed monthly amortization of Fifty Thousand Pesos (P50,000.00), principal and interest
included, must be paid to the Vendors, without need of prior demand, on or before May 6, 1996, and every
month thereafter. Failure to pay the monthly amortization on time, a penalty equal to Five Percent (5%) of
the amount due shall be imposed, until the account is updated. In addition, a penalty of One Hundred Pesos
per day shall be imposed until the account is updated;
f) That after receipt of the full payment, the Vendors shall execute the necessary Absolute Deed of Sale
covering the house and lot mentioned above x x x
Thereon, Respondent made the following payments, to wit:
(1) P500,000.00 by way of downpayment;
(2) P500,000.00 on May 30, 1996;
(3) P500,000.00 paid on January 22, 1997; and
(4) P500,000.00 bounced check dated June 30, 1997 which was subsequently replaced by
another check of the same amount, dated July 7, 1997.
Respondent was, therefore, able to pay a total of P2,000,000.00.
Before respondent issued the P500,000.00 replacement check, she told petitioners that based on the
computation of her accountant as of July 6, 1997, her unpaid obligation which includes interests and penalties was
only P200,000.00. Petitioners agreed with respondent and said "if P200,000.00 is the correct balance, it is okay with
us."
Meanwhile, the title to the property was transferred to respondent. Petitioners later reminded respondent to
pay P209,000.00 within three months. They claimed that the said amount remained unpaid, despite the transfer of the
title to the property to respondent. Several months later, petitioners made further demands stating the supposed
correct computation of respondents liabilities. Despite repeated demands, petitioners failed to collect the amounts
they claimed from respondent.
Hence, the Complaint for Sum of Money With Damages filed with the Regional Trial Court (RTC) of
Antipolo, Rizal. The case was docketed as Civil Case No. 98-4716.
In her Answer with Compulsory Counterclaim, respondent claimed that her unpaid obligation to petitioners is
only P200,000.00 as earlier confirmed by petitioners and not P487,384.15 as later alleged in the complaint.
Respondent thus prayed for the dismissal of the complaint. By way of counterclaim, respondent prayed for the
payment of moral damages and attorneys fees. During the presentation of the parties evidence, in addition to
documents showing the statement of her paid obligations, respondent presented a receipt purportedly indicating
payment of the remaining balance of P200,000.00 to Adoracion Losloso (Losloso) who allegedly received the same
on behalf of petitioners.
On March 8, 2004, the RTC rendered a Decision in favor of respondent, the dispositive portion of which
reads:
WHEREFORE, premises considered, this case is hereby DISMISSED. The plaintiff is hereby ordered to pay
the defendants counterclaim, amounting to wit:
a) P300,000 as moral damages; and
b) P100,000 plus P2,000 per court appearance as attorneys fees.
SO ORDERED.
 The RTC noted that the evidence formally offered by petitioners have not actually been marked as none of
the markings were recorded. Thus, it found no basis to grant their claims, especially since the amount claimed in the
complaint is different from that testified to. The court, on the other hand, granted respondents counterclaim.
On appeal, the CA affirmed the decision with modification by deleting the award of moral damages and
attorneys fees in favor of respondent. It agreed with the RTC that the evidence presented by petitioners cannot be
given credence in determining the correct liability of respondent. Considering that the purchase price had been fully
paid by respondent ahead of the scheduled date agreed upon by the parties, petitioners were not awarded the
excessive penalties and interests. The CA thus maintained that respondents liability is limited to P200,000.00 as
claimed by respondent and originally admitted by petitioners. This amount, however, had already been paid by
respondent and received by petitioners representative. Finally, the CA pointed out that the RTC did not explain in its
decision why moral damages and attorneys fees were awarded. Considering also that bad faith cannot be attributed
to petitioners when they instituted the collection suit, the CA deleted the grant of their counterclaims.
Aggrieved, petitioners come before the Court in this petition for review on certiorari under Rule 45 of the
Rules of Court.

Issue: WON the failure of a party to amend a pleading to conform to the evidence adduced during trial will preclude
adjudication by the court on the basis of such evidence which may embody new issues not raised in the pleadings.

Ruling: Invoking the rule on judicial admission, petitioners insist that respondent admitted in her Answer with
Compulsory Counterclaim that she had paid only a total amount of P2 million and that her unpaid obligation amounts
to P200,000.00. They thus maintain that the RTC and the CA erred in concluding that said amount had already been
paid by respondent. Petitioners add that respondents total liability as shown in the latters statement of account was
erroneously computed for failure to compound the monthly interest agreed upon. Petitioners also claim that the RTC
and the CA erred in giving credence to the receipt presented by respondent to show that her unpaid obligation had
already been paid having been allegedly given to a person who was not armed with authority to receive payment.
The petition is without merit.
It is undisputed that the parties entered into a contract to sell a house and lot for a total consideration of P2
million. Considering that the property was payable in installment, they likewise agreed on the payment of interest as
well as penalty in case of default. It is likewise settled that respondent was able to pay the total purchase price of P2
million ahead of the agreed term. Afterwhich, they agreed on the remaining balance by way of interest and penalties
which is P200,000.00. Considering that the term of payment was not strictly followed and the purchase price had
already been fully paid by respondent, the latter presented to petitioners her computation of her liabilities for interests
and penalties which was agreed to by petitioners. Petitioners also manifested their conformity to the statement of
account prepared by respondent.
In paragraph (9) of petitioners Complaint, they stated that:
9) That the Plaintiffs answered the Defendant as follows: "if P200,000 is the correct balance, it is okay with us." x x x
But in paragraph (17) thereof, petitioners claimed that defendants outstanding liability as of November 6,
1997 was P487,384.15. Different amounts, however, were claimed in their demand letter and in their testimony in
court.
With the foregoing factual antecedents, petitioners cannot be permitted to assert a different computation of
the correct amount of respondents liability.
It is noteworthy that in answer to petitioners claim of her purported unpaid obligation, respondent admitted in
her Answer with Compulsory Counterclaim that she paid a total amount of P2 million representing the purchase price
of the subject house and lot. She then manifested to petitioners and conformed to by respondent that her only
balance was P200,000.00. Nowhere in her Answer did she allege the defense of payment. However, during the
presentation of her evidence, respondent submitted a receipt to prove that she had already paid the remaining
balance. Both the RTC and the CA concluded that respondent had already paid the remaining balance of
P200,000.00. Petitioners now assail this, insisting that the court should have maintained the judicial admissions of
respondent in her Answer with Compulsory Counterclaim, especially as to their agreed stipulations on interests and
penalties as well as the existence of outstanding obligations.
It is, thus, necessary to discuss the effect of failure of respondent to plead payment of its obligations.
Section 1, Rule 9 of the Rules of Court states that "defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived." Hence, respondent should have been barred from raising the defense
of payment of the unpaid P200,000.00. However, Section 5, Rule 10 of the Rules of Court allows the amendment
to conform to or authorize presentation of evidence, to wit:
Section 5. Amendment to conform to or authorize presentation of evidence. When issues
not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to
cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any
time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If evidence
is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow
the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the
ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the
amendment to be made.
The foregoing provision envisions two scenarios, namely, when evidence is introduced in an issue not
alleged in the pleadings and no objection was interjected; and when evidence is offered on an issue not alleged in the
pleadings but this time an objection was raised. When the issue is tried without the objection of the parties, it should
be treated in all respects as if it had been raised in the pleadings. On the other hand, when there is an objection, the
evidence may be admitted where its admission will not prejudice him.
Thus, while respondent judicially admitted in her Answer that she only paid P2 million and that she still owed
petitioners P200,000.00, respondent claimed later and, in fact, submitted an evidence to show that she already paid
the whole amount of her unpaid obligation. It is noteworthy that when respondent presented the evidence of payment,
petitioners did not object thereto. When the receipt was formally offered as evidence, petitioners did not manifest their
objection to the admissibility of said document on the ground that payment was not an issue. Apparently, petitioners
only denied receipt of said payment and assailed the authority of Losloso to receive payment. Since there was an
implied consent on the part of petitioners to try the issue of payment, even if no motion was filed and no amendment
of the pleading has been ordered, the RTC cannot be faulted for admitting respondents testimonial and documentary
evidence to prove payment.
As stressed by the Court in Royal Cargo Corporation v. DFS Sports Unlimited, Inc.,
The failure of a party to amend a pleading to conform to the evidence adduced during trial does not preclude
adjudication by the court on the basis of such evidence which may embody new issues not raised in the pleadings. x
x x Although, the pleading may not have been amended to conform to the evidence submitted during trial, judgment
may nonetheless be rendered, not simply on the basis of the issues alleged but also on the issues discussed and the
assertions of fact proved in the course of the trial. The court may treat the pleading as if it had been amended to
conform to the evidence, although it had not been actually amended. x x x Clearly, a court may rule and render
judgment on the basis of the evidence before it even though the relevant pleading had not been previously amended,
so long as no surprise or prejudice is thereby caused to the adverse party. Put a little differently, so long as the basic
requirements of fair play had been met, as where the litigants were given full opportunity to support their respective
contentions and to object to or refute each other's evidence, the court may validly treat the pleadings as if they had
been amended to conform to the evidence and proceed to adjudicate on the basis of all the evidence before it.
To be sure, petitioners were given ample opportunity to refute the fact of and present evidence to prove
payment.
With the evidence presented by the contending parties, the more important question to resolve is whether or
not respondents obligation had already been extinguished by payment.
We rule in the affirmative as aptly held by the RTC and the CA.
Respondents obligation consists of payment of a sum of money. In order to extinguish said obligation,
payment should be made to the proper person as set forth in Article 1240 of the Civil Code, to wit:
Article 1240. Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.
The Court explained in Cambroon v. City of Butuan, cited in Republic v. De Guzman, to whom payment
should be made in order to extinguish an obligation:
Payment made by the debtor to the person of the creditor or to one authorized by him or by the law to
receive it extinguishes the obligation. When payment is made to the wrong party, however, the obligation is not
extinguished as to the creditor who is without fault or negligence even if the debtor acted in utmost good faith and by
mistake as to the person of the creditor or through error induced by fraud of a third person.
In general, a payment in order to be effective to discharge an obligation, must be made to the proper person.
Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the
particular payment. Payment made to one having apparent authority to receive the money will, as a rule, be treated
as though actual authority had been given for its receipt. Likewise, if payment is made to one who by law is
authorized to act for the creditor, it will work a discharge. The receipt of money due on a judgment by an officer
authorized by law to accept it will, therefore, satisfy the debt.
Admittedly, payment of the remaining balance of P200,000.00 was not made to the creditors themselves.
Rather, it was allegedly made to a certain Losloso. Respondent claims that Losloso was the authorized agent of
petitioners, but the latter dispute it.
Loslosos authority to receive payment was embodied in petitioners Letter addressed to respondent, dated
August 7, 1997, where they informed respondent of the amounts they advanced for the payment of the 1997 real
estate taxes. In said letter, petitioners reminded respondent of her remaining balance, together with the amount of
taxes paid. Taking into consideration the busy schedule of respondent, petitioners advised the latter to leave the
payment to a certain "Dori" who admittedly is Losloso, or to her trusted helper. This is an express authority given to
Losloso to receive payment.
Moreover, as correctly held by the CA:
Furthermore, that Adoracion Losloso was indeed an agent of the appellant spouses is borne out by the
following admissions of plaintiff-appellant Atty. Miniano dela Cruz, to wit:
Q: You would agree with me that you have authorized this Doiry Losloso to receive payment of
whatever balance is due you coming from Ana Marie Concepcion, that is correct?
A: In one or two times but not total authority, sir.
Q: Yes, but you have authorized her to receive payment?
A: One or two times, yes
Thus, as shown in the receipt signed by petitioners agent and pursuant to the authority granted by
petitioners to Losloso, payment made to the latter is deemed payment to petitioners. We find no reason to depart
from the RTC and the CA conclusion that payment had already been made and that it extinguished respondent's
obligations.
WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision
dated March 31, 2005 and Resolution dated May 24, 2006 in CA-G.R. CV No. 83030, are AFFIRMED.
SO ORDERED.

Rule 10 Sec 6 - Supplemental Pleadings

MA. MERCEDES L. BARBA vs LICEO DE CAGA Y AN UNIVERSITY

G .R. No. 193857 11/28/2012

FACTS:
Petitioner Dr. Ma. Mercedes L. Barba was the Dean of the College of Physical Therapy of respondent Liceo de
Cagayan University, Inc., a private educational institution located at Carmen, Cagayan de Oro City.

Petitioner started working for respondent on July 8, 1993 as medical officer/school physician for a period of one
school year or until March 31, 1994. In July 1994, she was chosen by respondent to be the recipient of a scholarship
grant to pursue a three-year residency training in Rehabilitation Medicine at the Veterans Memorial Medical Center
(VMMC).

After completing her residency training, petitioner returned to continue working for respondent. She was appointed as
Acting Dean of the College of Physical Therapy and at the same time designated as Doctor-In-Charge of the
Rehabilitation Clinic of the Rodolfo N. Pelaez Hall, City Memorial Hospital.

On June 19, 2002, petitioners appointment as Doctor-In-Charge of the Rehabilitation Clinic was renewed and she
was appointed as Dean of the College of Physical Therapy by respondents President, Dr. Jose Ma. R. Golez.
Petitioner accepted her appointment and assumed the position of Dean of the College of Physical Therapy. In the
school year 2003 to 2004, the College of Physical Therapy suffered a dramatic decline in the number of enrollees
from a total of 1,121 students in the school year 1995 to 1996 to only 20 students enrolled for school year 2004-2005.

Due to the low number of enrollees, respondent decided to freeze the operation of the College of Physical Therapy
indefinitely. Respondents President Dr. Rafaelita Pelaez-Golez wrote petitioner a letter dated March 16, 2005
informing her that her services as dean of the said college will end at the close of the school year. Thereafter, the
College of Physical Therapy ceased operations on March 31, 2005, and petitioner went on leave without pay starting
on April 9, 2005.

Subsequently, respondents Executive Vice President, Dr. Mariano M. Lerin, through Dr. Glory S. Magdale,
respondents Vice President for Academic Affairs, sent petitioner a letter dated April 27, 2005 instructing petitioner to
return to work on June 1, 2005 and report to Ma. Chona Palomares, the Acting Dean of the College of Nursing, to
receive her teaching load and assignment as a full-time faculty member in that department for the school year 2005-
2006.

In reply, petitioner informed Dr. Lerin that she had not committed to teach in the College of Nursing and that as far as
she can recall, her employment is not dependent on any teaching load. She then requested for the processing of her
separation benefits in view of the closure of the College of Physical Therapy. She did not report to Palomares on
June 1, 2005.

Petitioner filed a complaint with the Labor Arbiter for constructive dismissal. LA found that petitioner was not illegally
dismissed because petitioners assignment as full-time professor in the College of Nursing was not a demotion
tantamount to constructive dismissal.

Petitioner appealed to NLRC, NLRC reversed LAs decision holding the petitioner was illegally dismissed.
Respondent, Liceo de Cagayan, filed a motion for reconsideration but was denied.

Respondent went to the CA on a petition for certiorari alleging that the NLRC committed grave abuse of discretion
when it declared that petitioners transfer to the College of Nursing as full-time professor but without diminution of
salaries and without loss of seniority rights amounted to constructive dismissal because there was a demotion
involved in the transfer and because petitioner was compelled to accept her new assignment.

Respondent also filed a Supplemental Petition raising for the first time the issue of lack of jurisdiction of the Labor
Arbiter and the NLRC over the case. Respondent claimed that a College Dean is a corporate officer under its by-laws
and petitioner was a corporate officer of respondent since her appointment was approved by the board of directors.
Respondent posited that petitioner was a corporate officer since her office was created by the by-laws and her
appointment, compensation, duties and functions were approved by the board of directors. Thus, respondent
maintained that the jurisdiction over the case is with the regular courts and not with the labor tribunals.

In CAs original decision, it set aside the decision of the NLRC but did not find merit in the in respondents assertion in
its Supplemental Petition that the position of petitioner as College Dean was a corporate office.

On the issue of alleged lack of jurisdiction, the CA observed that respondent never raised the issue of jurisdiction
before the Labor Arbiter and the NLRC and respondent even actively participated in the proceedings below. Hence,
respondent is estopped from questioning the jurisdiction of the labor tribunals.

Unsatisfied, both petitioner and respondent sought reconsideration of the CA decision. Petitioner prayed for the
reversal of the ruling that there was no constructive dismissal. Respondent meanwhile maintained that the labor
tribunals have no jurisdiction over the case, petitioner being a corporate officer.
On reconsideration, CA set aside its earlier ruling and held that the position of a College Dean is a corporate office
and therefore the labor tribunals had no jurisdiction over the complaint for constructive dismissal. Petitioner filed a
motion for reconsideration but was denied. Hence this petition.

ISSUE:

Whether petitioner was an employee or a corporate officer of respondent university. Resolution of this issue resolves
the question of whether the appellate court was correct in ruling that the Labor Arbiter and the NLRC had no
jurisdiction over petitioners complaint for constructive dismissal against respondent.

HELD:

As a general rule, only questions of law may be allowed in a petition for review on certiorari. Considering that the CA
reversed its earlier decision and made a complete turnaround from its previous ruling, and consequently set aside
both the findings of the Labor Arbiter and the NLRC for allegedly having been issued without jurisdiction, it is
necessary for the Court to reexamine the records and resolve the conflicting rulings.

After a careful review and examination of the records, we find that the CAs previous ruling that petitioner was
respondents employee and not a corporate officer is supported by the totality of the evidence and more in accord
with law and prevailing jurisprudence.

Corporate officers are elected or appointed by the directors or stockholders, and are those who are given that
character either by the Corporation Code or by the corporations by-laws. Section 25 of the Corporation Code
enumerates corporate officers as the president, the secretary, the treasurer and such other officers as may be
provided for in the by-laws. In Matling Industrial and Commercial Corporation v. Coros, the phrase such other
officers as may be provided for in the by-laws has been clarified.

Undoubtedly, petitioner is not a College Director and she is not a corporate officer but an employee of respondent.
Applying the four-fold test concerning (1) the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; (4) the employers power to control the employee with respect to the means and methods
by which the work is to be accomplished, it is clear that there exists an employer-employee relationship between
petitioner and respondent.

Records show that petitioner was appointed to her position as Dean by Dr. Golez, the university president and was
paid a salary of P32,500 plus transportation allowance. It was evident that respondent had the power of control over
petitioner as one of its deans. It was also the university president who informed petitioner that her services as Dean
of the College of Physical Therapy was terminated effective March 31, 2005 and she was subsequently directed to
report to the Acting Dean of the College of Nursing for assignment of teaching load. Thus, petitioner, being an
employee of respondent, her complaint for illegal/constructive dismissal against respondent was properly within the
jurisdiction of the Labor Arbiter and the NLRC. Article 217 of the Labor Code.

Moreover, we agree with the CAs earlier pronouncement that since respondent actively participated in the
proceedings before the Labor Arbiter and the NLRC, it is already estopped from belatedly raising the issue of lack of
jurisdiction. In this case, respondent filed position papers and other supporting documents to bolster its defense
before the labor tribunals but in all these pleadings, the issue of lack of jurisdiction was never raised. It was only in its
Supplemental Petition filed before the CA that respondent first brought the issue of lack of jurisdiction. We have
consistently held that while jurisdiction may be assailed at any stage, a partys active participation in the proceedings
will estop such party from assailing its jurisdiction. It is an undesirable practice of a party participating in the
proceedings and submitting his case for decision and then accepting the judgment, only if favorable, and attacking it
for lack of jurisdiction, when adverse.
Under Section 6, Rule 10 of the 1997 Rules of Civil Procedure, as
amended, governing supplemental pleadings, the court may admit supplemental pleadings, such as the
supplemental petition filed by respondent before the appellate court, but the admission of these pleadings remains in
the sound discretion of the court. Nevertheless, we have already found no credence in respondents claim that
petitioner is a corporate officer, consequently, the alleged lack of jurisdiction asserted by respondent in the
supplemental petition is bereft of merit.

Petition is granted

AIR ADS INCORPORATED, Petitioner,

vs.
TAGUM AGRICULTURAL DEVELOPMENT CORPORATION (TADECO), Respondent

Facts:

1
Assailed via petition for review on certiorari are the two resolutions promulgated on February 24, 2003 and
2
November 13, 2003, whereby the Court of Appeals (CA) respectively dismissed the petitioners petition for certiorari
and prohibition, and denied the petitioners motion for reconsideration of the dismissal.

This case stemmed from Civil Case No. 27802-2000 of the Regional Trial Court, Branch 15, in Davao City (RTC)
entitled Elva O. Pormento v. Tagum Agricultural Development Corporation and Edwin Yap, an action to recover
damages for the death of the plaintiffs husband and attorneys fees.

On April 6, 2000, respondent Tagum Agricultural Development Corporation (TADECO), as defendant, filed through
counsel ACCRA Law Office an answer with compulsory counterclaims and motion for leave to file third party
3
complaint, impleading petitioner Air Ads, Inc. and Pioneer Insurance and Surety Corporation (Pioneer) as third-party
4
defendants. The RTC admitted TADECOs third party complaint on April 14, 2000. On June 16, 2000, however,
ACCRA Law Office, upon realizing that Pioneer was a client of its Makati Office, filed a notice of dismissal without
5
prejudice to third party complaint only against Pioneer Insurance and Surety Corporation.

Ten days later, TADECO filed through another counsel Dominguez Paderna & Tan Law Offices (Dominguez Law
Office) a motion to withdraw notice of dismissal without prejudice of third party complaint only against Pioneer
6
Insurance & Surety Corporation or motion for reconsideration, alleging that the notice of dismissal without prejudice
etc. filed by ACCRA Law Office had been made without its consent. On June 29, 2000, the RTC granted the notice of
7
dismissal without prejudice etc.

Nearly a month later, the RTC also granted the motion to withdraw notice of dismissal without prejudice of third party
complaint only against Pioneer Insurance & Surety Corporation or motion for reconsideration, and set aside the
dismissal of the third party complaint against Pioneer.

Following the grant of its motion to withdraw the notice of dismissal etc., TADECO, still through Dominguez Law
Office, filed a motion to admit third party complaint in substitution of the third party complaint filed by the third party
8
plaintiffs former counsel, explaining that the substitute third party complaint was being filed to avoid putting ACCRA
Law Office in an awkward situation, and to avoid the appearance that new counsel Dominguez Law Office was
merely adopting the previous third party complaint.

It is noted that the substitute third party complaint contained allegations pertaining only to Pioneer as third party
defendant.

On August 28, 2000, the RTC granted the motion to admit third party complaint in substitution of the third party
complaint filed by the third party plaintiffs former counsel,

11
Air Ads then filed a motion to dismiss against the third party complaint, averring that it had been dropped as third
party defendant under TADECOs substitute third party complaint; and arguing that the filing of the substitute third
party complaint had the effect of entirely superseding the original third party complaint, which should consequently be
stricken out from the records.

13
On July 25, 2002, the RTC denied Air Ads motion to dismiss, holding that the notice of dismissal etc. filed by
ACCRA Law Office did not have the effect of dropping Air Ads as a third party defendant due to the notice of
dismissal etc. being expressly restrictive about the dismissal being only with respect to Pioneer.
14
Air Ads filed a motion for reconsideration, but the RTC denied the motion for reconsideration on September 20,
2002.

16
After receiving the order of denial on October 4, 2002, Air Ads brought a petition for certiorari and prohibition
17
docketed in the CA (C.A.-G.R. SP No. 73418). However, on November 13, 2002, the CA dismissed the petition for
failure to attach the board resolution designating the petitioners duly authorized representative to sign the verification
18
and certification against forum shopping in its behalf.

Instead of filing a motion for reconsideration, Air Ads filed a new petition for certiorari and prohibition on December 2,
19
2002 in the CA (C.A.-G.R. SP No. 74152), already including the proper board certificate.

While C.A.-G.R. SP No. 74152 was pending, the CAs resolution dismissing C.A.-G.R. SP No. 73418 became final
and executory on December 10, 2002

ACCORDINGLY, the petition was DENIED due course and DISMISSED and so was the Motion for Reconsideration.

Issue/s:

1. Whether or not the filing of an identical petition following the dismissal of the first petition on the grounds of
defective and insufficient verification and certification constitute forum shopping.
2. Whether or not a substitute third party complaint have the effect of superseding the original third party
complaint.

Held:

1. No, refilling of the petition for certiorari did not constitute forum shopping or res judicata.

Section 5, Rule 7 of the 1997 Rules of Civil Procedure, defines the effect of the failure to comply with the
requirements for the certification against forum shopping, viz:

Section 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in
the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed
thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any
claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same
or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom
to the court wherein his aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint
or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless
otherwise provided, upon motion and after hearing. The submission of a false certification or non-
compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice
to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly
constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with
prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions. (n)
 The first sentence of the second paragraph expressly provides that the dismissal of a petition due to failure
to comply with the requirements therein is without prejudice unless otherwise provided by the court.
Accordingly, the plaintiff or petitioner is not precluded from filing a similar action in order to rectify the defect
in the certification where the court states in its order that the action is dismissed due to such defect, unless
the court directs that the dismissal is with prejudice, in which case the plaintiff is barred from filing a similar
action by res judicata. In the context of the aforequoted rule, the dismissal of C.A.-G.R. SP No. 73418, being
without any qualification, was a dismissal without prejudice, plainly indicating that Air Ads could not be
barred from filing the second petition.

We have no doubt that it was within the CAs power and prerogative to issue what either resolution decreed
without committing an abuse of discretion amounting to lack of excess of jurisdiction. In the first May 5, 2003
Resolution, the CA correctly dismissed the petition for the deficiency it found in the non-forum shopping
certification. Section 5, Rule 7 of the Revised Rules of Court provides that "Failure to comply with the
foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading
but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion
and after hearing." On the other hand, the requirement specific to petitions filed with the appellate court
simply provides as a penalty that the failure of the petitioner to comply with the listed requirements, among
them the need for a certification against forum shopping, "shall be sufficient ground for the dismissal of the
petition." Thus, the Ninth Division correctly dismissed the petition without prejudice.

Thus, we cannot say that it forum shopped by filing another petition while the first petition was
pending. Insofar as it was concerned, its first petition had been dismissed without prejudice; hence,
there was no bar, either by way of forum shopping, litis pendentia or res adjudicata, to the petition it
re-filed.

2. No, substitute third party complaint did not supersede original third party complaint.

The records indicate that: firstly, both TADECO and Pioneer were clients of ACCRA Law Office; secondly,
TADECO engaged Dominguez Law Office as its counsel in lieu of ACCRA Law Office with respect only to its
third party complaint against Pioneer; thirdly, the RTC dismissed the third party complaint only against
Pioneer upon the notice of withdrawal filed by TADECO through ACCRA Law Office; and fourthly, the RTC
granted the motion to admit the substitute third party complaint only against Pioneer. These rendered it plain
and clear that the substitute third party complaint merely replaced the third party complaint earlier filed
against Pioneer.

The substitution of the third party complaint could not produce the effect that an amendment of an existing
36
pleading produces. Under Section 1, Rule 10 of the Rules of Court, an amendment is done by adding or
striking out an allegation or the name of any party, or by correcting a mistake in the name of a party or a
mistaken or inadequate allegation or description in any other respect. A perusal of the original and the
substitute third party complaints shows that their averments are substantially the same; and that the
substitute third party complaint did not strike out any allegation of the prior one.

It is not the caption of the pleading that determines the nature of the complaint but rather its
37
allegations. Although Air Ads observation that the substitute third party complaint contained allegations
only against Pioneer is correct, sight should not be lost of the fact that Dominguez Law Office represented
TADECO in its third party complaint only against Pioneer, which was precisely why the substitute third party
complaint referred only to Pioneer.

WHEREFORE, we deny the petition for review on certiorari, and affirm the resolutions the Court of Appeals
promulgated on February 24, 2003 and November 13, 2003.