January 13, 2016

G.R. No. 198752

ARTURO C. ALBA, JR., duly represented by his attorneys-in-fact, ARNULFO B. ALBA and
ALEXANDER C. ALBA, Petitioner,
vs.
RAYMUND D. MALAPAJO, RAMIL D. MALAPAJO and the Register of Deeds for the City of
Roxas,Respondents.

DECISION

PERALTA, J.:

Assailed in this petition for review on certiorari are the Resolution1 dated February 28, 2011 and the
Resolution2dated August 31, 2011 issued by the Court of Appeals (CA) Cebu City, in CA-G.R. SP
No. 05594.

The antecedents are as follows:

On October 19, 2009, petitioner Arturo C. Alba, Jr., duly represented by his attorneys-in-fact, Arnulfo
B. Alba and Alexander C. Alba, filed with the Regional Trial Court (RTC) of Roxas City, Branch 15, a
Complaint3 against respondents Raymund D. Malapajo, Ramil D. Malapajo and the Register of
Deeds of Roxas City for recovery of ownership and/or declaration of nullity or cancellation of title and
damages alleging, among others, that he was the previous registered owner of a parcel of land
consisting of 98,146 square meters situated in Bolo, Roxas City, covered by TCT No. T-22345; that
his title was subsequently canceled by virtue of a deed of sale he allegedly executed in favor of
respondents Malapajo for a consideration of Five Hundred Thousand Pesos (P500,000.00); that new
TCT No. T-56840 was issued in the name of respondents Malapajo; that the deed of sale was a
forged document which respondents Malapajo were the co-authors of.

Respondents Malapajo filed their Answer with Counterclaim4 contending that they were innocent
purchasers for value and that the deed was a unilateral document which was presented to them
already prepared and notarized; that before the sale, petitioner had, on separate occasions,
obtained loans from them and their mother which were secured by separate real estate mortgages
covering the subject property; that the two real estate mortgages had never been discharged.
Respondents counterclaimed for damages and for reimbursement of petitioner's loan from them plus
the agreed monthly interest in the event that the deed of sale is declared null and void on the ground
of forgery.

Petitioner filed a Reply to Answer and Answer to (Permissive) Counterclaim5 stating, among others,
that the court had not acquired jurisdiction over the nature of respondents' permissive counterclaim;
and, that assuming without admitting that the two real estate mortgages are valid, the rate of five
percent (5%) per month uniformly stated therein is unconscionable and must be reduced.
Respondents filed their Rejoinder6 thereto.

Petitioner filed a Motion to Set the Case for Preliminary Hearing as if a Motion to Dismiss had been
Filed7 alleging that respondents counterclaims are in the nature of a permissive counterclaim, thus,
there must be payment of docket fees and filing of a certification against forum shopping; and, that
the supposed loan extended by respondents mother to petitioner, must also be dismissed as
respondents are not the real parties-in-interest. Respondents filed their Opposition8 thereto.
On June 4, 2010, the RTC issued an Order9 denying petitioner's motion finding that respondents
counterclaims are compulsory. Petitioners motion for reconsideration was denied in an Order10 dated
September 30, 2010.

Petitioner filed a petition for certiorari with the CA which sought the annulment of the RTC Orders
dated June 4, 2010 and September 30, 2010.

In a Resolution dated February 28, 2011, the CA dismissed the petition for certiorari saying that
there was no proper proof of service of the petition to the respondents, and that only the last page of
the attached copy of the RTC Order was signed and certified as a true copy of the original while the
rest of the pages were mere machine copies.

Petitioner filed a motion for reconsideration which the CA denied in a Resolution dated August 31,
2011 based on the following findings:

Nevertheless, while petitioner filed with the Petition his Affidavit of Service and incorporated the
registry receipts, petitioner still failed to comply with the requirement on proper proof of service. Post
office receipt is not the required proof of service by registered mail. Section 10, Rule 13 of the 1997
Rules of Civil Procedure specifically stated that service by registered mail is complete upon actual
receipt by the addressee, or after five (5) days from the date he received the first notice of the
postmaster, whichever is earlier. Verily, registry receipts cannot be considered sufficient proof of
service; they are merely evidence of the mail matter with the post office of the sender, not the
delivery of said mail matter by the post office to the addressee. Moreover, Section 13, Rule 13 of the
1997 Rules of Civil Procedure specifically stated that the proof of personal service in the form of an
affidavit of the party serving shall contain a full statement of the date, place and manner of service,
which was not true in the instant petition.11

Petitioner filed the instant petition for review raising the following assignment of errors:

I. CONTRARY TO THE ERRONEOUS RULING OF THE COURT A QUO, THE COUNTERCLAIMS

INTERPOSED BY RESPONDENTS MALAPAJO IN THEIR ANSWER WITH COUNTERCLAIM ARE,
BASED ON APPLICABLE LAW AND JURISPRUDENCE, PERMISSIVE IN NATURE, NOT
COMPULSORY, AND THEREFORE, SUCH ANSWER WITH RESPECT TO SUCH
COUNTERCLAIMS IS IN REALITY AN INITIATORY PLEADING WHICH SHOULD HAVE BEEN
ACCOMPANIED BY A CERTIFICATION AGAINST FORUM SHOPPING AND CORRESPONDING
DOCKET FEES, THEREFORE, SHOULD HAVE BEEN PAID, FAILING IN WHICH THE
COUNTERCLAIMS SHOULD HAVE BEEN ORDERED DISMISSED. MOREOVER, AS REGARDS
THE LOAN ALLEGEDLY EXTENDED BY THEIR MOTHER TO PETITIONER, WHICH UP TO NOW
IS SUPPOSEDLY STILL UNPAID, RESPONDENTS MALAPAJO ARE NOT THE REAL PARTIES-
IN-INTEREST AND IS, THEREFORE, DISMISSIBLE ON THIS ADDITIONAL GROUND; and

II. THE HONORABLE COURT OF APPEALS COMMITTED A VERY SERIOUS ERROR WHEN IT
DISMISSED THE PETITION FOR CERTIORARI BASED ON PURE TECHNICALITY, THEREBY
GIVING MORE PREMIUM AND MORE WEIGHT ON TECHNICALITIES RATHER THAN
SUBSTANCE AND DISREGARDING THE MERITS OF THE PETITION.12

We find that the CA erred in denying petitioner's petition for certiorari after the latter had clearly
shown compliance with the proof of service of the petition as required under Section 13 of Rule 13 of
the 1997 Rules of Civil Procedure, which provides:

Sec.13. Proof of service.

Proof of personal service shall consist of a written admission of the party served, or the official return
of the server, or the affidavit of the party serving, containing a full statement of the date, place and
manner of service. If the service is by ordinary mail, proof thereof shall consist of an affidavit of the
person mailing of facts showing compliance with section 7 of this Rule. If service is made by
registered mail, proof shall be made by such affidavit and the registry receipt issued by the mailing
office. The registry return card shall be filed immediately upon its receipt by the sender, or in lieu
thereof the unclaimed letter together with the certified or sworn copy of the notice given by the
postmaster to the addressee.

Clearly, service made through registered mail is proved by the registry receipt issued by the mailing
office and an affidavit of the person mailing of facts showing compliance with the rule. In this case,
Nerissa Apuyo, the secretary of petitioners counsel, had executed an affidavit13 of personal service
and service by registered mail which she attached to the petition marked as original filed with the
CA. She stated under oath that she personally served a copy of the petition to the RTC of Roxas
City on December 6, 2010, as evidenced by a stamp mark of the RTC on the corresponding page of
the petition; that she also served copies of the petition by registered mail to respondents' counsels
on December 6, 2010 as evidenced by registry receipts numbers "PST 188" and "PST 189", both
issued by the Roxas City Post Office. The registry receipts issued by the

post office were attached to the petition filed with the CA. Petitioner had indeed complied with the
rule on proof of service.

Since the case was dismissed outright on technicality, the arguments raised in the petition
for certiorari were not at all considered. However, we will now resolve the issue on the merits so as
not to delay further the disposition of the case instead of remanding it to the CA.

The issue for resolution is whether respondents counterclaim, i.e., reimbursement of the loan
obtained from them in case the deed of absolute sale is declared null and void on the ground of
forgery, is permissive in nature which requires the payment of docket fees and a certification against
forum shopping for the trial court to acquire jurisdiction over the same.

A counterclaim is any claim which a defending party may have against an opposing party.14 A
compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of
or is connected with the transaction or occurrence constituting the subject matter of the opposing
party's claim and does not require for its adjudication the presence of third parties of whom the court
cannot acquire jurisdiction. Such a counterclaim must be within the jurisdiction of the court both as to
the amount and the nature thereof, except that in an original action before the Regional Trial Court,
necessarily connected with the subject matter of the opposing party's claim or even where there is
such a connection, the Court has no jurisdiction to entertain the claim or it requires for adjudication
the presence of third persons over whom the court acquire jurisdiction.15 A compulsory counterclaim
is barred if not set up in the same action.

A counterclaim is permissive if it does not arise out of or is not necessarily connected with the
subject matter of the opposing party's claim.16 It is essentially an independent claim that may be filed
separately in another case.

To determine whether a counterclaim is compulsory or permissive, we have devised the following

tests: (a) Are the issues of fact and law raised by the claim and by the counterclaim largely the
same? (b) Would res judicata bar a subsequent suit on defendants claims, absent the compulsory
counterclaim rule? (c) Will substantially the same evidence support or refute plaintiffs claim as well
as the defendants counterclaim? and (d) Is there any logical relation between the claim and the
counterclaim?17 A positive answer to all four questions would indicate that the counterclaim is
compulsory.18

Based on the above-mentioned tests, we shall determine the nature of respondents counterclaim.
Respondents anchored their assailed counterclaim on the following allegations in their affirmative
defenses in their Answer with Counterclaim, thus:

xxxx

10. The plaintiff's cause of action is based on his allegation that his signature on the Deed of
Absolute Sale was forged.

The Deed of Absolute Sale is a unilateral instrument, i.e., it was signed only by the vendor, who is
the plaintiff in this case and his instrumental witnesses, who are his parents in this case. It was
presented to defendants already completely prepared, accomplished and notarized. Defendants had
no hand in its preparation, accomplishment and notarization.

While the plaintiff claims that his signature on the instrument is forged, he never questioned the
genuineness of the signatures of his instrumental witnesses, his parents Arturo P. Alba, Sr. and
Norma C. Alba, who signed the said instrument below the words "SIGNED IN THE PRESENCE OF"
and above the words "Father" and "Mother," respectively.

Furthermore, plaintiff acknowledged in par. 7 of his Complaint that the stated consideration in the
Deed of Absolute Sale is P500,000.00 and he never categorically denied having received the same.

11. Before the plaintiff sold the property to the defendants, he secured a loan from them in the sum
of Six Hundred Thousand Pesos (P600,000.00) payable on or before November 10, 2008. The loan
is evidenced by a Promissory Note and secured by a Real Estate Mortgage dated September 11,
2008, both executed by him, covering the parcel of land subject of this case, Lot 2332-D, Psd 06-
000738. Like the Deed of Absolute Sale, the Real Estate Mortgage is a unilateral instrument, was
signed solely by the plaintiff, and furthermore, his parents affixed their signatures thereon under the
heading "WITH MY PARENTAL CONSENT", and above the words, "Father" and "Mother,"
respectively.

Prior to this, or as early as July 25, 2008, the plaintiff also obtained a loan payable on or before
September 6, 2008 from defendants' mother, Alma D. David, and already mortgaged to her Lot
2332-D, Psd 06-000738. The loan is evidenced by a Promissory Note and a Real Estate Mortgage,
both of which were executed by plaintiff. Again, the Real Estate Mortgage is an unilateral instrument,
was signed solely by the plaintiff and furthermore, his parents also affixed their signatures thereon
under the heading, "WITH MY PARENTAL CONSENT " and above the words, "Father" and
"Mother," respectively.

In both instances, the plaintiff was always represented by his parents, who always manifested their
authority to transact in behalf of their son the plaintiff.
1w phi 1

As in the case with the Deed of Absolute Sale, the defendants or their mother did not have any hand
in the preparation, accomplishment or notarization of the two Promissory Notes with accompanying
Real Estate Mortgages, x x x.

Neither of the two Real Estate Mortgages have been discharged or extinguished.
12. Considering the foregoing, the plaintiff's allegation that his signature on the Deed of Absolute
Sale was forged, and that the defendants are the "co-authors" of the said forgery, are absolutely
false and baseless.

13. If the Deed of Absolute Sale is declared null and void on the ground of forgery, then the plaintiff
should reimburse the defendants the loan he obtained from them, which he did not deny having
obtained, plus the agreed monthly interest.19

Petitioner seeks to recover the subject property by assailing the validity of the deed of sale on the
subject property which he allegedly executed in favor of respondents Malapajo on the ground of
forgery. Respondents counterclaimed that, in case the deed of sale is declared null and void, they be
paid the loan petitioner obtained from them plus the agreed monthly interest which was covered by a
real estate mortgage on the subject property executed by petitioner in favor of respondents. There is
a logical relationship between the claim and the counterclaim, as the counterclaim is connected with
the transaction or occurrence constituting the subject matter of the opposing party's claim. Notably,
the same evidence to sustain respondents' counterclaim would disprove petitioner's case. In the
event that respondents could convincingly establish that petitioner actually executed the promissory
note and the real estate mortgage over the subject property in their favor then petitioner's complaint
might fail. Petitioner's claim is so related logically to respondents' counterclaim, such that conducting
separate trials for the claim and the counterclaim would result in the substantial duplication of the
time and effort of the court and the parties.20

Since respondents' counterclaim is compulsory, it must be set up in the same action; otherwise, it
would be barred forever.21 If it is filed concurrently with the main action but in a different proceeding,
it would be abated on the ground of litis pendentia; if filed subsequently, it would meet the same fate
on the ground of res judicata.22 There is, therefore, no need for respondents to pay docket fees and
to file a certification against forum shopping for the court to acquire jurisdiction over the said
counterclaim.

We agree with the RTCs disquisition in finding that respondents counterclaim is compulsory, to wit:

The arguments of the plaintiffs that this transaction is a permissive counterclaim do not convince.

By the manner in which the answer pertaining to this transaction was phrased, the real estate
mortgage was the origin of the Deed of Absolute Sale after the loan of P600,000.00 using the same
property as security for the payment thereof was not settled. In short, it is one of defendants'
defenses and controverting evidence against plaintiffs' allegations of falsification of the Deed of
Absolute Sale, the property subject of the Deed of Sale being one and the same property subject of
the mortgage.23

xxxx

Can the Court adjudicate upon the issues [of whether or not the plaintiff could recover ownership
and or whether or not the title to the property in question may be canceled or declared null and void,
and damages] without the presence of the mother of defendants in whose favor the Real Estate
Mortgage of the property subject of this action was executed?

Definitely, this Court can. That there was an allegation pertaining to the mortgage of the property in
question to defendants mother is only some sort of a backgrounder on why a deed of sale was
executed by plaintiff in defendants favor, the truth or falsity of which will have to be evidentiary on
the part of the parties hereto. In short, the Court does not need the presence of defendants mother
before it can adjudicate on whether or not the deed of absolute sale was genuine or falsified and
whether or not the title to the property may be cancelled.24

WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The

Resolutions dated February 28, 2011 and August 31, 2011 issued by the Court of Appeals in CA-
G.R. SP No. 05594 dismissing the petition for certiorari and denying reconsideration thereof,
respectively, for failure to show proper proof of service of the petition to respondents, are SET
ASIDE. Acting on the petition for certiorari, we resolve to DENY the same and AFFIRM the Order
dated June 4, 2010 of the Regional Trial Court of Roxas City, Branch 15, denying petitioner's motion
to set the case for hearing as if a motion to dismiss had been filed, and the Order dated September
30, 2010 denying reconsideration thereof.

SO ORDERED.

LIM TECK CHUAN, Petitioner,

vs.
SERAFIN UY and LEOPOLDA CECILIO, LIM SING CHAN @ HENRY LIM, Respondents.

G.R. No. 155701 March 11, 2015

DECISION

REYES, J.:

Before this Court is a petition for review on certiorari1 under Rule 45 filed by Lim Teck Chuan
(petitioner) assailing the Orders dated April 25, 20022 and October 21, 20023 of the Regional Trial
Court (RTC) of Lapu-lapu City, Branch 27, in Civil Case No. 4786-L, which dismissed the case
uponjointa motion of respondents Serafin Uy (Serafin) and Leopolda Cecilio (Leopolda) despite an
opposition and manifestation of the petitioner to have his counterclaim prosecuted in the same
action, and denied the petitioner's motion for reconsideration for being barren of merit, respectively.

The antecedent facts are as follows:

The subject matter of the present controversy is a piece of land known as Lot 5357 with an area of
33,610 square meters, covered by Transfer Certificate of Title (TCT) No. T-0500, situated in Barrio
Agus, Lapu-lapu City, Cebu, owned and registered under the name of Antonio Lim Tanhu (Antonio),
married to Dy Ochay.

Lot 5357 was sold by Antonio to the spouses Francisco Cabansag (Francisco) and Estrella
Cabansag (Spouses Cabansag) as evidenced by a Deed of Sale executed on January 8, 1966.
Apparently, Francisco failed to transfer the title of the property to their names because of his work
and frequent travels abroad.4

In 1988, Spouses Cabansag sold the lot to Serafin, as evidenced by a Deed of Sale dated April 8,
1988. To pave the way for the transfer of title to Serafins name, Spouses Cabansag attempted to
have the same transferred under their names first. However, Francisco failed to do so as he lost the
owners copy of TCT No. T-0500 together with other documents pertaining to the sale of the subject
lot. This prompted Serafin to exert efforts to secure copies of the lost documents himself. On May
15, 1996, Serafin filed a petition before the RTC, docketed as Cadastral Case No. 21 praying for the
issuance of a new owners duplicate TCT in his name, thereby cancelling TCT No. T-0500 in the
name of Antonio.5

Serafins petition for the issuance of a new owners copy of TCT No. T-0500 was raffled to the RTC
of Lapu-lapu City, Branch 27, then sitting as a cadastral court (Cadastral Court). After due notice and
hearing, the Cadastral Court issued an Order6 on June 14, 1996 directing the Register of Deeds of
Lapu-lapu City to issue a new owners duplicate copy of TCT No. T-0500.

However, the aforesaid order was recalled and nullified on September 3, 19967 on the ground that
the petitioner filed an Opposition and/or Motion for Reconsideration with Manifestation for Special
Appearance8 dated August 22, 1996 alleging that he is one of the six legitimate descendants of
Antonio; and that the original owners copy of TCT No. T-0500 was not lost and has always been in
his custody. The court further directed the petitioner to deposit the said owners copy of TCT No. T-
0500 with said court.

In the meantime, on August 2, 1996, Lim Sing Chan alias Henry Lim (Henry) executed an Affidavit of
Sole Adjudication/Settlement of the Estate of Antonio Lim Tanhu with Deed of Sale9 (Affidavit of Self-
Adjudication) claiming that he is the only surviving heir of Antonio. In the same document, Henry
sold Lot 5357 to Leopolda in the amount of 500,000.00.

With this turn of events, Serafin filed on July 25, 1997 a Complaint10 for quieting of title, surrender of
owners copy of certificate of title, declaration of nullity of affidavit of adjudication and sale,
annulment of tax declaration, and other reliefs with a prayer for preliminary injunction before the
RTC, docketed as Civil Case No. 4786-L. Impleaded as defendants were Leopolda, Henry, and the
herein petitioner.

Leopolda filed her Answer11 (with counterclaim, and cross-claim against Henry), asserting that she
was the buyer in good faith and for value of Lot 5357. She alleged that the said property was never
encumbered to any person during the lifetime of Antonio; that the deed of sale in favor of Spouses
Cabansag was simulated and spurious; and that the said document was never registered with the
proper government agency, nor was it ever annotated on the certificate of title covering the said
property. She claimed that the lot in question was sold to her as evidenced by the Affidavit of Self-
Adjudication executed by Henry; that she caused the issuance of a new tax declaration over the said
property in her name; that since then, she has been in open, actual and material possession of the
subject lot in the concept of an owner.

For his part, the petitioner averred in his Answer12 (with counterclaim, and cross-claims against
Leopolda and Henry), that Lot 5357 was never transferred nor encumbered to any person during
Antonios lifetime. The deed of sale in favor of Spouses Cabansag was simulated and spurious, and
was intended to defraud the estate of Antonio. Furthermore, the petitioner questioned Henrys claim
that he was an heir of Antonio, much less the only surviving heir of the latter. Corollarily, the
petitioner questioned the validity of Henrys Affidavit of Self-Adjudication and Leopoldas claim of title
to the subject property.

On November 11, 1997, Leopolda filed her Answer13 to the petitioners cross-claim. She basically
reiterated her allegations raised in her Answer to Serafins complaint.

Henry did not file an answer to any of the claims against him.

On December 22, 1998, the pre-trial conference14 was conducted where the parties agreed to the
following stipulation of facts:
[T]hat Antonio Lim Tanhu was the registered owner of Lot 5357 of the Cadastral Survey of Opon
located in Lapu-lapu City[;] that Antonio Lim Tanhu died on April 13, 1991[;] that Antonio Lim Tanhu
was succeeded upon his death by his six children, namely, the defendant Lim Teck Chuan, Lim Sing
Tai, Helen Lim, Lenesita Lim, Warlito Lim and Michael Lim Tan Ho[;] that the defendant Lim Sing
Chan is actually a fictitious person[;] that there exists an ancient document denominated as Deed of
Absolute Sale of Lot 5357 executed on January 8, 1966 by Antonio Lim Tanhu in favor of the
spouses Francisco Cabansag and Estrella M. Cabansag (Exhibit A)[;] that there also exists a
document denominated as Deed of Absolute Sale (Exhibit B) of Lot 5357 executed on April 8, 1988
by the spouses Francisco Cabansag and Estrella M. Cabansag in favor of the plaintiff[;] and that
there exists, too, a document denominated as Affidavit of [Sale] Adjudication/Settlement of Estate of
Antonio Lim Tanhu with Deed of Sale executed on May 2, 1996 by a certain Lim Sing Chan (Exhibit
1-Cecilio). x x x.15

The parties also agreed to the following issues:

1.Whether or not the plaintiff has valid causes of action for quieting of title, declaration of
nullity of documents of sale and tax declarations, reconveyance of title and damages against
the defendants[;]

2.Whether or not the defendants Leopolda Cecilio and Lim Teck Chuan have valid
counterclaims against the plaintiff; and

3.Whether or not the defendant Lim Teck Chuan has a valid cross-claim against the
defendant Leopolda Cecilio.16

Thereafter, the pre-trial order was amended such that it should not be considered as established and
stipulated facts that Henry is a fictitious person and that the Deed of Sale of Lot 5357 purportedly
executed by Antonio on January 8, 1966 is genuine and authentic since there were actually no
admissions made on these circumstances.17

In the same Order18 dated July 17, 1999, the RTC denied Serafins motion for summary
judgment19 because under the circumstances, there were actually genuine issues of fact to be
resolved and passed upon by the court.

Eventually, the RTC set the initial trial of the case on March 28, 2001.20 However, it was postponed
upon motion of Leopoldas counsel and upon the manifestation of Serafins counsel that there was
an on-going negotiation for an amicable settlement. For his part, the petitioners counsel manifested
that the petitioner was not involved in any negotiation for amicable settlement. The scheduled
hearing was reset to July 11, 200121 and later to November 12, 2001.22

On September 20, 2001, Serafin and Leopolda submitted a Joint Motion to Dismiss.23 They averred
that:

1.That the case at [bench] is filed by the Plaintiff Serafin Uy against the defendants for
"quieting of title, surrender of owner of certificate of title, declaration of nullity of affidavit of
adjudication and sale annulment of tax declaration, and other reliefs consistent with law,
justice and equity[ ];

2.That in the case at bench, Plaintiff Serafin Uy seeks the quieting of title on his right over
Lot 5357 of the Cadastral Survey of Opon situated at Barangay Agus, Lapu-lapu City, in view
of the affidavit of adjudication and Sale dated August 2, 1996 (Annex "F") of the Complaint,
 and Tax Decl. No. 01532 issued in the name of Leopolda Cecilio both of which documents
affected Lot 5357 (Annex G to the Complaint);

3.That Plaintiff Serafin Uy and Defendant Leopolda Cecilio have amicably settled their
differences in the case at bench and Def. Leopolda Cecilio has agreed to waive her
counterclaim for damages in the instant case;

4.That Plaintiff Serafin Uy has already secured a certificate of title to Lot No. 5357 in his
name dated July 26, 2001, and has also agreed for the cancellation of the same, and for
issuance of a new one, over said Lot 5357, in their common names;

5.That whatever claim defendant Lim Teck Chuan may have on said Lot No. 5357, the same
may be ventilated by said defendant in an appropriate independent action that he may
initiate and file[.]

PRAYER

WHEREFORE, this Honorable Court is most respectfully prayed and humbly implored to dismiss the
Complaint and the respective counterclaims of the defendants in the case at bench.24

On October 4, 2001, the petitioner filed his Opposition/Comment25 praying for the denial of the Joint
Motion to Dismiss on the ground of bad faith, and to prohibit Serafin and Leopolda from undertaking
any further transaction involving the subject lot. The pertinent portion of his opposition reads as
follows:

1. That the [petitioner] opposes the Joint Motion to Dismiss filed by [Serafin] and [Leopolda]
on the grounds:

1.1that there [is] BAD FAITH on the part of [Serafin] and [Leopolda];

1.2.That the [petitioner] was not involved in any amicable settlements between
[Serafin] and [Leopolda] because both [Serafin] and [Leopolda] connived to
MISLEAD this Honorable Court and to DEFRAUD the estate of [Antonio];

1.3.That the [petitioner] has valid counterclaims against [Serafin] for moral damages
of P 5,000,000[.00]; exemplary damages of P 1,200,000[.00]; and Attorneys fees of
P 50,000[.00]; on the ground that [Serafin] maliciously and deliberately presented to
this Honorable Court the FALSIFIED AND FICTITIOUS deed of sale
PURPORTEDLY executed by [Antonio] in favor of [Francisco];

1.4.That the [petitioner] has valid cross[-]claims against Cross-defendants Lim Sing
Chan alias Henry Lim whose real name is Henry Lim Ormoc, and [Leopolda] for
moral damages of P 5,000,000[.00] each, attorneys fees of P 50,000[.00] each, and
exemplary damages of P 1,000,000[.00] for [Henry] and P 1,600,000[.00] for
[Leopolda] because [Henry] and [Leopolda] connived with each other to defraud the
estate of [Antonio] on the ground that [Henry] MISREPRESENTED himself as an heir
of [Antonio] while [Leopolda] has KNOWLEDGE of such MISREPRESENTATION;

1.5.That the [petitioner] manifest[s] to this Honorable Court of his preference

that the above-counterclaims and cross-claims be resolved in the present
case[.]26
The petitioner further averred that the transfer of Antonios title under TCT No. T-0500 in the name of
Serafin is irregular and illegal since the true owners copy of TCT No. T-0500 remained in his
possession.

Henry continued to remain silent.

On October 10, 2001, Serafin filed his Reply27 to the comment/opposition of the petitioner. He
substantially averred that:

1.With the end in view of registering Lot 5357 in his name, he instituted the instant case due
to the existence of certain documents affecting his title thereto, namely: Henrys Affidavit of
Self-Adjudication with Deed of Sale dated August 2, 1996 naming Leopolda as the buyer,
and Tax Declaration No. 01532 issued in the name of the latter;

2.Under his Affidavit of Self-Adjudication, Henry already transferred whatever right and
interest he had on the subject lot to Leopolda. On the other hand, by reason of the amicable
settlement between him (Serafin) and Leopolda, the latter waived and abandoned all her
rights to Lot 5357. Ergo, as far as Leopolda is concerned, her waiver negated all the legal
consequences of Tax Declaration No. 01532 and Henrys Affidavit of Self-Adjudication. Since
the same were the very documents that cast clouds on his (Serafin) title over Lot 5357, his
main causes of action in the case at bench had become moot and academic as his title to
the said lot had been quieted;

3.The petitioner was impleaded because of the following points: a) he alleged that he is one
of the heirs of the late Antonio; b) he contested the claim of Henry that the latter is the only
surviving heir of said decedent, and prayed upon the court to declare Henry as an impostor;
and c) he challenged the genuineness and due execution of the deed of absolute sale
between Antonio and Spouses Cabansag;

4.Aside from his claim for damages, the petitioners counterclaim sought the nullification of
the Deed of Absolute Sale dated January 8, 1966 between Antonio and Spouses Cabansag
which required the impleading of persons who were not parties in the case. These persons
included Spouses Cabansag who was indispensable party to any action for the annulment of
the deed which was executed in their favor. However, to implead the said persons, there was
a need to summon them so that the court can acquire jurisdiction over them - and in order
that they can be summoned, there was a need for the petitioner to file a formal complaint
against them;

5.Moreover, the cross-claim of the petitioner against Henry can also be resolved in a
separate action for the declaration of the true heirs of Antonio wherein all the heirs of the
latter will be impleaded, and where the petitioner can prove that he was indeed one of the
heirs of said decedent especially so that there is yet no judicial or extra-judicial declaration
as to who were Antonios heirs;

6.The dismissal of the case will not affect the rights of the petitioner because whatever claim
he had on the subject lot and against any party may be ventilated in an appropriate and
separate action.

On November 6, 2001, the petitioner, through counsel, filed his

Motion to Implead Indispensable Parties and Supplemental Opposition to Joint Motion to

Dismiss.28 Invoking Section 1129 of Rule 3 of the Rules of Court, the petitioner averred that there is a
need to implead Spouses Cabansag in order that a final determination of all the issues could be had
in the case.

Acting on the Joint Motion to Dismiss, the RTC issued the assailed Order30 dated April 25, 2002
granting the same and denying the petitioners motion to implead Spouses Cabansag. The order is
quoted as follows:

Going over the arguments of the parties, the Court finds the arguments of the movants as tenable.
For what is the use of so continuously litigating this case when [Serafin] admits and confirms that the
principal reliefs he prayed for have already been met or satisfied as his title to the property in
question has already been quieted with him having "already secured a certificate of title to Lot No.
5357 in his name dated July 26, 2001, and has also agreed for the cancellation of the same, and for
the issuance of a new one, over said Lot 5357, in their common names." In fact, even without said
reliefs having been met or satisfied, nobody, not even the courts of justice, can compel a party-
litigant in a civil action like [Serafin] to so continuously litigate his case if he does not want to
anymore.

Finding therefore, the subject motion to dismiss to be proper and in order, this case is ordered
dismissed so with the respective counterclaims of the defendants. Considering however, that [the
petitioner] is not a party and even opposed the subject motion to dismiss, the dismissal of his
counterclaims and cross-claim is without prejudice to give him his day in court. And with this
pronouncement of dismissal, the motion to implead indispensable parties of [the petitioner] becomes
moot and academic and therefore is denied.31

On May 30, 2002, the petitioner filed a Motion for Reconsideration32 which was denied in the
Order33 dated October 21, 2002.

Aggrieved, the petitioner went up to this Court via a petition for review on certiorari under Rule 45
raising the lone assignment of error that:

THE LOWER COURT ERRED IN DISMISSING CIVIL CASE 4786-L UPON A JOINT MOTION TO
DISMISS FILED BY THE RESPONDENTS WHO ARE PLAINTIFF AND ONE OF THE
DEFENDANTS, RESPECTIVELY, IN THE AFOREMENTIONED CASE DESPITE THE
OPPOSITION BY HEREIN PETITIONER AND THE MANIFESTATION OF THE LATTER OF HIS
PREFERENCE MADE WITHIN FIFTEEN (15) DAYS FROM THE JOINT MOTION TO DISMISS, TO
HAVE HIS COUNTERCLAIM, AS WELL AS HIS CROSS-CLAIM, PROSECUTED IN THE SAME
ACTION, IN ACCORDANCE WITH SECTION 2, RULE 17 OF THE 1997 RULES OF CIVIL
PROCEDURE.34

The petitioner faults the RTC for dismissing the case in its entirety in spite of his counterclaim and
cross-claim. He asserts that within 15 days from notice of the filing of the joint motion to dismiss, he
filed his opposition thereto and expressed his preference to have his counterclaim and cross-claim
be resolved in the same action. Therefore, pursuant to the provisions of Section 2, Rule 17 of the
Rules of Court, his timely expression of such preference should be enough for the trial court not to
dismiss the case in its entirety, and to limit its action to the dismissal of the complaint.

Preliminarily, the respondents question the petitioners recourse to this Court in filing the instant
petition alleging that no appeal may be taken from an order of the RTC dismissing an action without
prejudice.35 Nonetheless, the Rules of Court do not prohibit any of the parties from filing a Rule 45
petition with this Court in case only questions of law are raised or involved.36 In Bukidnon Doctors
Hospital, Inc. v. Metropolitan Bank & Trust Co.,37 the Court explained that:
Section 2(c), Rule 41 of the Rules of Court categorically provides that in all cases where only
questions of law are raised, the appeal from a decision or order of the Regional Trial Court shall be
to the Supreme Court by petition for review on certiorari in accordance with Rule 45. Section 2(c) of
Rule 41 of the Rules of Court reads:

SEC. 2. Modes of appeal.

(a)Ordinary appeal. The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a
notice of appeal with the court which rendered the judgment or final order appealed
from and serving a copy thereof upon the adverse party. No record on appeal shall
be required except in special proceedings and other cases of multiple or separate
appeals where the law or these Rules so require. In such cases, the record on
appeal shall be filed and served in like manner.

(b)Petition for review. The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its appellate jurisdiction shall be by petition for
review in accordance with Rule 42.

(c)Appeal by certiorari. In all cases where only questions of law are raised or
involved, the appeal shall be to the Supreme Court by petition for review on certiorari
in accordance with Rule 45.

Section 1 of Rule 45 provides:

SECTION 1. Filing of petition with Supreme Court.

A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of
Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise
only questions of law which must be distinctly set forth.

A question of law exists when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain set of facts; or when the issue does not call for an examination of the
probative value of the evidence presented, the truth or falsehood of facts being admitted. A question
of fact exists when the doubt or difference arises as to the truth or falsehood of facts or when the
query invites calibration of the whole evidence considering mainly the credibility of the witnesses, the
existence and relevancy of specific surrounding circumstances, as well as their relation to each other
and to the whole, and the probability of the situation.38 (Citation omitted)

Considering that the issue in the instant case is clearly one of law as it calls for the correct
application of the Rules of Court, the petitioners direct resort to this Court is proper.

The Court now looks into the propriety of the order of the RTC in dismissing the case. Needless to
state, the Court is again confronted with the issue of whether the dismissal of the complaint,
specifically upon motion of the plaintiff under Section 2 of Rule 17 of the Rules of Court also calls for
the dismissal of the defendants counterclaim, as in the case at bar.

Rule 17 of the Rules of Civil Procedure provides the following:

SECTION 1. Dismissal upon notice by plaintiff. A complaint may be dismissed by the plaintiff by
filing a notice of dismissal at any time before service of the answer or of a motion for summary
judgment. Upon such notice being filed, the court shall issue an order confirming the dismissal.
Unless otherwise stated in the notice, the dismissal is without prejudice, except that a notice
operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in a
competent court an action based on or including the same claim.

SECTION 2. Dismissal upon motion of plaintiff. Except as provided in the preceding section, a
complaint shall not be dismissed at the plaintiffs instance save upon approval of the court and upon
such terms and conditions as the court deems proper. If a counterclaim has been pleaded by a
defendant prior to the service upon him of the plaintiffs motion for dismissal, the dismissal shall be
limited to the complaint. The dismissal shall be without prejudice to the right of the defendant to
prosecute his counterclaim in a separate action unless within fifteen (15) days from notice of the
motion he manifests his preference to have his counterclaim resolved in the same action. Unless
otherwise specified in the order, a dismissal under this paragraph shall be without prejudice. A class
suit shall not be dismissed or compromised without the approval of the court.

SECTION 3. Dismissal due to fault of plaintiff. If, for no justifiable cause, the plaintiff fails to appear
on the date of the presentation of his evidence in chief on the complaint, or to prosecute his action
for an unreasonable length of time, or to comply with these Rules or any order of the court, the
complaint may be dismissed upon motion of the defendant or upon the courts own motion, without
prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate
action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise
declared by the court.

SECTION 4. Dismissal of counterclaim, cross-claim, or third- party complaint. The provisions of

this Rule shall apply to the dismissal of any counterclaim, cross-claim, or third-party complaint. A
voluntary dismissal by the claimant by notice as in Section 1 of this Rule, shall be made before a
responsive pleading or a motion for summary judgment is served or, if there is none, before the
introduction of evidence at the trial or hearing.

The RTC granted the Joint Motion to Dismiss upon the behest of Serafin, the plaintiff therein on the
main ground that the case had become moot and academic since his title to Lot 5357 had been
allegedly quieted and the reliefs prayed for were obtained. In the Order dated October 21, 2002
denying the motion for reconsideration, the RTC elucidated that:

The Court in issuing the dismissal order dated April 25, 2002 had already made its position on the
matter very clearly such that it finds no reason to disturb the subject order. As clarified, a party-
litigant in a civil action like the plaintiff herein, cannot be compelled to so continuously litigate his
case if he does not want to anymore as was obtaining in this case. More so that the principal reliefs
prayed for in the complaint had already been served as was so admitted by the plaintiff. Being so,
this Court finds it repugnant to go on with the hearing of movants-defendants counterclaim for what
is to be countered by the movant when the claim of the plaintiff, at his own instance, had already
been dismissed it having been served and satisfied as aforestated. And this is so because what is
contemplated under the Rules authorizing the hearing of defendants counterclaim is when the
dismissal is not at the instance of the plaintiff.39

As can be gleaned from the assailed orders, the RTC erred when it dismissed the case when the
present rules state that the dismissal shall be limited only to the complaint. A dismissal of an action
1w phi 1

is different from a mere dismissal of the complaint. For this reason, since only the complaint and not
the action is dismissed, the defendant in spite of said dismissal may still prosecute his counterclaim
in the same action.40 The case of Pinga v. Heirs of German Santiago41 is quite instructive which this
Court finds worth reiterating. In Pinga, the Court clearly stated that the dismissal of the complaint
does not necessarily result to the dismissal of the counterclaim, abandoning the rulings in Metals
Engineering Resources Corporation v. Court of Appeals,42 International Container Terminal Services,
Inc. v. Court of Appeals,43 and BA Finance Corporation v. Co.44 The Court held that:

At present, even Section 2, concerning dismissals on motion of the plaintiff, now recognizes the right
of the defendant to prosecute the counterclaim either in the same or separate action notwithstanding
the dismissal of the complaint, and without regard as to the permissive or compulsory nature of the
counterclaim.

In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado expounds on the
effects of the amendments to Section 2 and 3 of Rule 17:

2. Under this revised section [2], where the plaintiff moves for the dismissal of his complaint
to which a counterclaim has been interposed, the dismissal shall be limited to the complaint.
Such dismissal shall be without prejudice to the right of the defendant to either prosecute his
counterclaim in a separate action or to have the same resolved in the same action. Should
he opt for the first alternative, the court should render the corresponding order granting and
reserving his right to prosecute his claim in a separate complaint. Should he choose to have
his counterclaim disposed of in the same action wherein the complaint had been dismissed,
he must manifest such preference to the trial court within 15 days from notice to him of
plaintiffs motion to dismiss. These alternative remedies of the defendant are available to him
regardless of whether his counterclaim is compulsory or permissive. x x x.45 (Italics in the
original)

In the instant case, the petitioners preference to have his counterclaim (and cross-claims) be
prosecuted in the same action was timely manifested. The records show that Serafin and Leopolda
furnished the petitioners counsel with a copy of their Joint Motion to Dismiss by posting it (via
registered mail) on September 19, 2001.46 Said motion was filed in court the following day.47 On
October 4, 2001, the petitioner filed his Opposition/Comment thereto.48Copies of the said opposition
were personally served upon the opposing parties on the same date.49 In paragraph 1.550 of said
opposition, the petitioner expressed his preference to have his counterclaim and cross-claim
prosecuted in the same case, as he thus stated:

1.5 That the undersigned defendant manifest to this Honorable Court of his preference that
the above[ ]counterclaims and cross-claims be resolved in the present case.51

There are valid reasons why the petitioner vehemently objected to the dismissal of the case upon
the joint motion of Serafin and Leopolda and insisted to have his counterclaim prosecuted in the
same action.

Serafin instituted the instant case due to the existence of certain documents affecting his title,
namely: Henrys Affidavit of Self-Adjudication with Deed of Sale which names Leopolda as the
buyer; and Tax Declaration No. 01532 which was issued in the name of the latter. In his Affidavit of
Self-Adjudication, Henry transferred whatever right and interest he had on the subject lot to
Leopolda. Subsequently, by reason of the amicable settlement between Serafin and Leopolda, the
latter waived and abandoned all her rights to Lot 5357.

On the other hand, the petitioner asserts that the subject property was never transferred nor
encumbered to any person during Antonios lifetime. He insists that the deed of sale in favor of
Spouses Cabansag is simulated and spurious, and was intended to defraud the estate of Antonio.
Further, he asserts that said Spouses Cabansag are mere creations of Serafin.
Forthwith, the foregoing contentions touch on the very merits of the case which this Court is not
prepared to rule upon for want of sufficient factual basis since this case was dismissed by the RTC
even before the parties were able to present their evidence on the merits. Nonetheless, the records
show that Serafin had been aware of the petitioners claim over the property as descendants of
Antonio and Dy Ochay even before the institution of this case, which was why he impleaded the
petitioner in this case. Then, the Joint Motion to Dismiss was filed by Serafin and Leopolda on the
ground that both parties were able to settle their differences. It is rather intriguing that in said joint
motion, it was alleged that Serafin was already able to secure a certificate of title in his name dated
July 26, 2001 and that both parties agreed for its cancellation and have a title over said property
issued in their common names.52Clearly, the petitioner was peremptorily left out of the picture. From
the cases inception, the petitioners interests and that of his siblings over the subject property were
vigilantly defended as evidenced by the numerous and exchange of pleadings made by the parties.
It can not therefore be denied that the petitioner has certainly valid defenses and enforceable claims
against the respondents for being dragged into this case. Thus, the petitioners manifestation of his
preference to have his counterclaim prosecuted in the same action is valid and in accordance with
Section 2, Rule 17 of the Rules of Court.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Orders dated April
25, 2002 and October 21, 2002 of the Regional Trial Court ofLapu-lapu City, Branch 27 in Civil Case
No. 4786-L are MODIFIEDthatin the counterclaim of Lim Teck Chuan as defendant in Civil Case No.
4786-L is REINSTATED. The Regional Trial Court is ORDERED to hear and decide Lim Teck
Chuan's counterclaim with dispatch.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 200567 June 22, 2015

METOROPLITAN BANK AND TRUST COMPANY, Petitioner,

vs.
CPR PROMOTIONS AND MARKETING, INC. and SPOUSES CORNELIO P. REYNOSO, JR. and
LEONIZA* F. REYSONO, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Before Us is a petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
September 28, 2011 Decision1 and February 13, 2012 Resolution2 of the Court of Appeals (CA)
rendered in CA-G.R. CV No. 91424. Said ruling dismissed petitioner Metropolitan Banking and Trust
Companys (MBTCs) claim for deficiency payment upon foreclosing respondents mortgaged
properties and ordered the bank, instead, to return to respondent mortgagors the excess amount of
PhP 722,602.22.

The Facts

The facts of the case, as culled from the records, are as follows:

From February to October 1997, respondent CPR Promotions and Marketing, Inc. (CPR Promotions)
obtained loans from petitioner MBTC. These loans were covered by fifteen (15) promissory note
(PNs) all signed by respondents, spouses Leoniza F. Reynoso and Cornelio P. Reynoso, Jr.
(spouses Reynoso), as Treasurer and President of CPR Promotions, respectively. The issued PNs
are as follows:

PN No. Date Amount

1. 277894 (BDS-143/97) February 7, 1997 P 6,500,000.00
2. 281728 (BD-216/97) July 21, 1997 P 959,034.20
3. 281735 (BD-222/97) July 31, 1997 P 508,580.83
4. 281736 (BD-225/97) August 12, 1997 P 291,732.50
5. 281737 (BD-226/97) August 12 , 1997 P 157,173.12
6. 281745 (BD-229/97) August 22, 1997 P 449,812.25
7. 281747 (BDS-94854.696.00.999) September 3, 1997 P 105,000.00
8. 281749 (BD-236/97) September 11, 1997 P 525,233.93
9. 281750 (BD-238/97) September 12, 1997 P 1,313,099.36
10. 473410 (BD-239/97) September 19, 1997 P 251,725.00
11. 473414 (BD-240/97) September 19, 1997 P 288,975.66
12. 473412 (BD-244/97) September 26, 1997 P 62,982.53
13. 473411 (BD-245/97) September 26, 1997 P 156,038.85
14. 473413 (BD-251/97) October 3, 1997 P 767,512.30
15. 473431 (BD-252/97) October 6, 1997 P 557,497.45
TOTAL PRINCIPAL AMOUNT 12,891,397.78

To secure the loans, the spouses Reynoso executed two deeds of real estate mortgage on separate
dates. The first mortgage, securing the amount of PhP 6,500,000, was executed on February 2,
1996 over real estate covered by Transfer Certificate of Title (TCT) No. 624835;3 the other was
executed on July 18, 1996 over properties covered by TCT Nos. 565381,4 263421,5 and 2746826 to
secure the amount of PhP 2,500,000. All of the mortgaged properties are registered under the
spouses Reynosos names, except for TCT No. 565381, which is registered under CPR Promotions.7

Thereafter, on December 8, 1997, the spouses Reynoso executed a continuing surety

agreement8 binding themselves solidarily with CPR Promotions to pay any and all loans CPR
Promotions may have obtained from petitioner MBTC, including those covered by the said PNs, but
not to exceed PhP 13,000,000.
Upon maturity of the loans, respondents defaulted, prompting MBTC to file a petition for extra-
judicial foreclosure of the real estate mortgages, pursuant to Act No. 3135,9 as amended. MBTCs
request for foreclosure,10 dated March 6, 1998, pertinently reads:

We have the honor to request your good Office to conduct/undertake extra-judicial foreclosure sale
proceedings under Act No. 3135, as amended, and other applicable laws on the properties covered
by two Real Estate Mortgages executed by CPR PROMOTIONS & MARKETING INC., represented
by its President Mr. Cornelio P. Reynoso and Treasurer Leoniza F. Reynoso and SPOUSES
CORNELIO P. REYNOSO, JR., AND LEONIZA F. REYNOSO in favour of the mortgagee,
METROPLITAN BANK AND TRUST COMPANY, to secure fifteen (15) loans with a total principal
amount of TWELVE MILLION EIGHT HUNDRED NINETY ONE THOUSAND THREE HUNDRED
NINETY SEVEN PESOS AND SEVENTY EIGHT CENTAVOS (12,891,397.78), for breach of the
terms of said mortgage.11

As Annex "R", a copy of the Statement of Account, showing that the total amount due on the loans of
the borrowers/mortgagers which remains unpaid and outstanding as a February 10, 1998 was
ELEVEN MILLION TWO HUNDRED SIXTEEN THOUSAND SEVEN HUNDRED EIGHTY THREE
PESOS AND NINETY NIN CENTAVOR (11,216,783.99)

Subsequently, on May 5, 1998, the mortgaged covered by TCT Nos. 624835 and 565381 were sold
at a public auction sale. MBTC participated therein and submitted the highest bid in the amount of
PhP 10,374,000. The day after, on May 6, 1998, petitioner again participated and won in the public
auction sake of the remaining mortgaged properties, having submitted the highest bid amounting to
PhP 3,240,000. As a result petitioner was issued the corresponding Certificates of Sale on July 15
and 16, 1998, covering the properties subjected to the first and second public auctions, respectively.

Notwithstanding the foreclosure of the mortgaged properties for the total amount of PhP 13,
614,000, petitioner MBTC alleged that there remained a deficiency balance of PhP 2,628,520.73,
plus interest and charges as stipulated and agreed upon in the PNs and deeds of real estate
mortgages. Despite petitioners repeated demands, however, respondents failed to settle the alleged
deficiency. Thus, petitioner filed an action for collection of sum of money against respondents,
docketed as Civil Case No. 99-230, entitled Metropolitan Bank and Trust Company v. CPR
Promotions and Marketing, Inc. and Spouses Cornelio Reynoso, Jr. and Leoniza F. Reynoso.

Ruling of the Regional Trial Court

In its Decision13 dated October 11, 2007, the Regional Trial Court, Branch 59 in Makati City (RTC)
ruled in favor of petitioner that there, indeed, was a balance of Php 2,628,520.73, plus interest and
charges, as of September 18, 1998, and that respondents are liable for the said amount, as part of
their contractual obligation.14 The court disposed of the case in this wise:

WHEREFORE, premises considered, judgment is hereby rendered ordering [respondents], jointly

and severally, to pay [petitioner] Metrobank, as follows:

a] the amount of PhP 2,628,520.73 plus stipulated interest and penalty charges stipulated in
the Promissory Notes marked as Exhibits A to O until full payment thereof; and

b] the costs of the suit.

SO ORDERED.
Respondents timely moved for reconsideration of the RTCs Decision, which was denied through the
trial courts February 7, 2008 Order. Aggrieved, respondents elevated the case to the CA.

Ruling of the Court of Appeals

The appellate court, through the assailed Decision, reversed the court a quo and ruled in favor of
respondents. The fallo of the said Decision reads:

Wherefore, in view of the foregoing, the decision appealed from is reversed, and the plaintiff-
appallee Metrobank is ordered to refund or return to the defendants-appellants Cornelio and Leoniza
Reynoso the amount of Ph722,602.22 representing the remainder of the proceeds of the
foreclosure sale, with legal interest of six percent per annum from the date of filing the answer with
counterclaim on March 26, 1999, until paid.

SO ORDERED.15

Supporting the reversal is the CAs finding that there was a sudden change in the terminology used,
from "total amount due" to "principal amount."16 According to the CA, from February to May 1998, the
amount sought to be collected ballooned from PhP 11,216,783.99 to PhP 12,891,397.78. From this
apparently unexplained increase, the CA deduced that the increased amount must mean the
principal and interest and other charges. Furthermore, the appellate court found that petitioner failed
to prove that there was a deficiency, since the records failed to corroborate the claimed amount. As
noted by the CA, "[Petitioner] did not even introduce the continuing surety agreement on which the
trial court gratuitously based its decision."

On October 24, 2011, petitioner filed a motion for reconsideration of the assailed Decision, which the
appellate court denied in its assailed February 13, 2012 Resolution.

The Issues

Hence this recourse, on the following issues:

Whether or not the CA gravely abused its discretion when it failed to consider the continuing surety
agreement presented in evidence and in ruling that petitioner MBTC failed to prove that the spouses
Reynoso are solidarily liable with respondent CPR Promotions.

Whether or not the CA gravely abused its discretion when it grossly misappreciated the promissory
notes, real estate mortgages, petition for extrajudicial foreclosure of mortgage, certificates of sale
and statement of account marked in evidence and ruled that petitioner MBTC failed to prove that a
deficiency balance resulted after conducting the extrajudicial foreclosure sales of the mortgaged
properties.

The Arguments

Anent the first issue, MBTC faults the appellate court for finding that it did not introduce the
continuing surety agreement on which the RTC based its ruling that respondent spouses are
solidarily liable with respondent CPR Promotions.17

As regards the second issue, petitioner asserts that the CAs grant of a refund valued at PhP
722,602.22 plus legal interest of six percent (6%) in favor of respondents is erroneous for two
reasons: first, respondents never set up a counterclaim for refund of any amount18 and second, the
total outstanding obligation as of February 10, 1998, to which the full amount of the bid prices was
applied, is PhP 11,216,783.99 and not Ph12,891,397.78, which was used by the CA in its
computation.19

Lastly, petitioner claims that respondents should be made to answer for certain specific expenses
connected with the foreclosure, i.e., filing fees, publication expense, Sheriffs Commission on Sale,
stipulated attorneys fee, registration fee for the Certificate of Sale, insurance premium and other
miscellaneous expenses, in the amounts of PhP 1,373,238.04 and PhP 419,166.67 for the first and
second foreclosure sales, respectively.20

In their Comment,21 respondents maintained the propriety of the CAs grant of a refund, arguing that
in their Answer with Compulsory Counterclaim, they laid-down in detail the excess of the prices of
the foreclosed properties over their obligation.22 Respondents then went on and argued that "from the
beginning of the instant case in the trial court, [they] have already raised in issue the fact of
[petitioners] taking-over of [their] lands with values over and above the latters financial
liabilities."23 Thus, they postulate that the CA did right when it touched on the issue and ruled
thereon.24

Furthermore, respondents insist that there is actually no difference between the PhP 12,891,397.78
and the PhP 11,261,783.99 amounts except for the accumulated interest, penalties, and other
charges.25 Too, according to them, this is the reason why what respondent CPR owed petitioner at
that time increased substantially from that on February 10, 1998, when the amount was just PhP
11,216,783.99.26

The Court's Ruling

We partially grant the petition. While We fully agree with the CA that MBTC was not able to prove
the amount claimed, We however, find that neither were respondents able to timely setup their claim
for refund.

Respondents belatedly raised their compulsory counterclaim

Rule 6 of the Rules of Court denies a compulsory counterclaim as follows:

Section 7. Compulsory counterclaim. A compulsory counterclaim is one which, being cognizable

by the regular courts of justice, arises out of or is connected with the transaction or occurrence
constituting the subject matter of the opposing partys claim and does not require for its adjudication
the presence of third parties of whom the court cannot acquire jurisdiction. Such a counterclaim must
be within the jurisdiction of the court both as to the amount and the nature thereof. Except that in an
original action before the Regional Trial Court, the counterclaim may be considered compulsory
regardless of the amount.

Accordingly, a counterclaim is compulsory if: (a) it arises out of or is necessarily connected with the
transaction or occurrence which is the subject matter of the opposing partys claim; (b) it does not
require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction;
and (c) the court has jurisdiction to entertain the claim both as to its amount and nature, except that
in an original action before the RTC, the counterclaim may be considered compulsory regardless of
the amount.27

In determining whether a counterclaim is compulsory or permissive, We have, in several cases,

utilized the following tests:28
 (1) Are the issues of fact or law raised by the claim and the counterclaim largely the same?

(2) Would res judicata bar a subsequent suit on defendants claims, absent the compulsory
counterclaim rule?

(3) Will substantially the same evidence support or refute plaintiffs claim as well as the
defendants counterclaim?

(4) Is there any logical relation between the claim and the counterclaim, such that the
conduct of separate trials of the respective claims of the parties would entail a substantial
duplication of effort and time by the parties and the court? This test is the "compelling test of
compulsoriness."29

Based on the above tests, it is evident that a claim for recovery of the excess in the bid price vis--
vis the amount due should be interposed as a compulsory counterclaim in an action for recovery of a
deficiency filed by the mortgagee against the debtor-mortgagor. First, in both cases, substantially the
same evidence is needed in order to prove their respective claim. Second, adjudication in favor of
one will necessarily bar the other since these two actions are absolutely incompatible with each
other; a debt cannot be fully paid and partially unpaid at the same time. Third, these two opposing
claims arose from the same set of transactions. And finally, if these two claims were to be the
subject of separate trials, it would definitely entail a substantial and needless duplication of effort and
time by the parties and the court, for said actions would involve the same parties, the same
transaction, and the same evidence. The only difference here would be in the findings of the courts
based on the evidence presented with regard to the issue of whether or not the bid prices
substantially cover the amounts due.

Having determined that a claim for recovery of an excess in the bid price should be set up in the
action for payment of a deficiency as a compulsory counterclaim, We rule that respondents failed to
timely raise the same.

It is elementary that a defending partys compulsory counterclaim should be interposed at the time
he files his Answer,30 and that failure to do so shall effectively bar such claim.31 As it appears from the
records, what respondents initially claimed herein were moral and exemplary damages, as well as
attorneys fees.32 Then, realizing, based on its computation, that it should have sought the recovery
of the excess bid price, respondents set up another counterclaim, this time in their Appellants Brief
filed before the CA.33 Unfortunately, respondents belated assertion proved fatal to their cause as it
did not cure their failure to timely raise such claim in their Answer. Consequently, respondents claim
for the excess, if any, is already barred. With this, we now resolve the substantive issues of this
case.

The CA erred in ruling that the total amount due was PhP 12,891,397.78

Basic is the rule that a Petition for Review on Certiorari under Rule 45 of the Rules of Court should
only cover questions of law.34 Moreover, findings of fact of the CA are generally final and conclusive
and this Court will not review them on appeal.35 This rule, however, admits of several
exceptions36 such as when the findings of fact are conflicting, manifestly mistaken, unsupported by
evidence or the result of a misapprehension of acts, or when the findings are contrary to that of the
trial court, as in this case.

To recall, the CA, in its assailed Decision, made the following findings as regards the amount due on
the loan against which the proceeds from the auction sales are to be applied:
In the application for extrajudicial foreclosure sale dated March 6, 1998, the total amount due as of
February 10, 1998 was stated to be 11,216,783.99. The plaintiff categorically declared that
11,216,783.99 was the total amount due on February 10, 1998. By the time the auction sales were
conducted, in May 1998, as reflected in the certificate of Sale, the principal amount was said to be
12,891,397.78. What is the meaning of the change from total amount due to principal amount? If
from February to May 1998, a matter of three months, the amount sought to be collected ballooned
to 12,891,397.78, the increase could have resulted from no other source that the interest and other
charges under the promissory notes after the defendants incurred in default. Thus, the amount of
12,891,397.78 as of May 1998, must mean the principal and interest and other charges. The
statement in the certificates of sale that it is the principal amount is a subtle change in language, a
legerdemain to suggest that thte amount does not include the interest and other charges.37

In short, the CA concluded that the amount of PhP 12,891,397.78 is actually comprised of the PhP
11,216,783.99 due as of February 10, 1998, plus additional interest and other charges that became
due from February 10, 1998 until the date of foreclosure on May 5, 1998.

The appellate court is mistaken.

By simply adding the figures stated in the PNs as the principal sum, it can readily be seen that the
amount of PhP 12,891,397.78 actually pertains to the aggregate value of the fifteen (15) PNs, viz:

PN No. Amount
1. 277894 (BDS-143/97)38 P 6,500,000.00
2. 281728 (BD-216/97)39 P 959,034.20
3. 281735 (BD-222/97)40 P 508,580.83
4. 281736 (BD-225/97)41 P 291,732.50
5. 281737 (BD-226/97)42 P 157,173.12
6. 281745 (BD-229/97)43 P 449,812.25
7. 281747 (BDS-94854.696.00.999)44 P 105,000.00
8. 281746 (BD-236/97)45 P 525,233.93
9. 281750 (BD-238/97)46 P 1,31,099.36
10. 473410 (BD-239/97)47 P 251,725.00
11. 473414 (BD-240/97)48 P 288,975.66
12. 473412 (BD-244/97)49 P 62,982.53
13. 473411 (BD-245/97)50 P 156,038.85
14. 473413 (BD-251/97)51 P 767,512.30
15. 473431 (BD-252/97)52 P 557,497.45
TOTAL PRINCIPAL AMOUNT 12,897,397.78

This belies the findings of the CA that PhP 12, 891,397.78 is the resulting value of PhP
11,216,783.99 plus interest and other charges. Consequently, the CAs conclusion that there is an
excess of PhP 722,602.22, after deducting the amount of PhP 12,891,397.78 from the total bid price
of PhP 13,614,000, is erroneous.

Nevertheless, while the CAs factual finding as to the amount due is flawed, petitioner, as discussed
below, is still not entitled to the alleged deficiency balance of PhP 2,628,520.73.

MBTC failed to prove that there is a deficiency balance of PhP 2,628,520.73

To support its deficiency claim, petitioner presented a Statement of Account,53 which referes to the
amounts due as of May 5, 1998, the date of the first foreclosure sale, to wit:

Statement of Account as of May 05, 1998

PN No. Principal Amt Outs. PDI Penalty
1 BD#216/97 489,219.20 54,808.77 49,166.53
2 BD#222/97 167,289.35 18,613.61 16,310.71
3 BD#225/97 291,732.50 32,683.72 27,422.86
4 BD#226/97 44,694.50 5,007.24 4,201.28
5 BD#229/97 435,229.25 48,760.10 44,393.38
6 BD#238/97 365,238.55 40,918.83 33,236.71
7 BD#233/97 105,000.00 11,763.50 9,082.50
8 BD#244/97 62,982.53 7,056.13 5,290.53
9 BD#236/97 497,649.70 56,135.10 38,070.20
10 BD#240/97 145,950.00 16,463.20 11,165.18
11 BD#245/97 156,038.85 17,481.55 11,897.43
12 BD#239/97 210,421.50 22,605.52 15,360.77
13 BD#251/97 572,470.15 64,574.86 38,232.57
14 BD#252/97 557,497.45 47,896.46 31,110.63
16 BDS#143/97 6,500,000.00 573,681.89 336,818.28
17 BDS#218/97 1,800,000.00 93,536.05 74,401.15
18 Fire Insurance 49,238.69 0.00 1,698.73
TOTAL 12,450,652.22 1,111,986.53 747,859.44
GRAND TOTAL 14,310,498.19

Applying the proceeds from the auction sales to the foregoing amount, according to petitioner, would
result in a deficiency balance of PhP 2,443,143.43. Afterwards, the amount allegedly earned interest
for four (4) months in the amount of PhP 185,337.30,54 bringing petitioners claim for deficiency
judgment to a total of PhP 2,628,520.73.55

We are not convinced.

We have already ruled in several cases56 that in extrajudicial foreclosure of mortgage, where the
proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to recover the
deficiency from the debtor.57 In ascertaining the deficit amount, Sec. 4, Rule 68 of the Rules of Court
is elucidating, to wit:

Section 4. Disposition of proceeds of sale. The amount realized from the foreclosure sale of the
mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing the
mortgage, and when there shall be any balance or residue, after paying off the mortgage debt due,
the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the
court, or if there be no such encumbrancers or there be a balance or residue after payment to them,
then to the mortgagor or his duly authorized agent, or to the person entitled to it.

Verily, there can only be a deficit when the proceeds of the sale is not sufficient to cover (1) the
costs of foreclosure proceedings; and (2) the amount due to the creditor, inclusive of interests and
penalties, if any, at the time of foreclosure.

a. Petitioner failed to prove the amount due at the time of foreclosure

Having alleged the existence of a deficiency balance, it behooved petitioner to prove, at the very
least, the amount due at the date of foreclosure against which the proceeds from the auction sale
would be applied. Otherwise, there can be no basis for awarding the claimed deficiency balance.
Unfortunately for petitioner, it failed to substantiate the amount due as of May 5, 1998 as appearing
in its Statement of Account.

To recall, MBTC admitted that the amount due as of February 10, 1998 is PhP 11,216,783.99,
inclusive of interests and charges. As alleged in the petition:

57. Firstly, it should be noted that respondents total unpaid obligations inclusive of interest and
penalties as of 10 February 1998 amounted to Php 11,216,783.99. This amount was the subject of
1wphi 1

petitioner Metrobanks Petitioners for Extrajudicial Foreclosure of Mortgage and NOT Php
12,891,397.78 which is the total principal amount of respondents loan obligations at the time when
they obtained said loans as shown in the Promissory Notes and the Certificates of Sale. After the
execution of the Promissory Notes, payments were made, although insufficient, which resulted
in the balance of PhP 11,216,783.99 as of February 1998 inclusive of interest and penalties.58

If the total amount due as of February 10, 1998 is PhpP 11,216,783.99 is already inclusive of
interests and penalties, the principal amount, exclusive of interests and charges, would naturally be
lower than the PhP 11,216,783.99 threshold. How petitioner made the determination in its Statement
of Account that the principal amount due on the date of the auction sale is PhP 12,450,652.22 is
then questionable, nay impossible, unless respondents contracted another loan anew.

Moreover, the amounts petitioner itself supplied would result in the following computation:

PhP
Total outstanding obligation as of February 10, 1998
11,216,783.99

1,373,238.04 Add: Alleged May 5, 1998 public auction sale expenses

(no consistent Add: Additional interests and charges earned

data) between February 10, 1998 to May 5, 1998
 (no consistent
Subtotal: Amount due as of May 5, 1998
data)
10,374,000.00 Less: May 5 Bid Price to be applied to the amount due
419,166.67 Add: Alleged May 6, 1998 public auction sale expenses

(no consisted Add: Interests and charges earned from May 5 to 6,

data) 1998
3,240,000.00 Less: May 6 Bid Price to be applied to the amount due

Total: Deficiency reflected in the Statement of Account

PhP 2,443,143.43
from May 5 to September 18, 1998

As can be gleaned, petitioner failed to sufficiently explain during the proceedings how it came up
with the alleged "deficiency" in the amount of PhP 2,443,143.43, as per the Statement of Account.
Reversing the formula, petitioners claim would only be mathematically possible if the missing
interest and penalties for the three-month period-from February 10, 1998 to May 6, 1998-
amounted to PhP 3,047,954,73,59 which is inconsistent with MBTCs declaration in its Statement of
Account as of May 5, 1998.60 Needless to say, this amount is not only unconscionable, it also finds
no support from any of the statement of accounts and loan stipulations agreed upon by the parties.

Given MBTCs conflicting, if not irreconcilable, allegations as to the amount due as of the date of
foreclosure-as noted in the statement of accounts, the petition for foreclosure, and the promissory
notes-the computation offered by MBTC cannot be accepted at face value. Consequently, there can
then be no basis for determining the value of the additional interests and penalty charges that
became due, and, more importantly, whether or not there was indeed a deficiency balance at the
time the mortgaged properties were foreclosed.

In addition, it is noticeable that petitioners presentation of the computation is circuitous and

needlessly lengthened. As a matter of fact, nowhere in the petition, in its complaint,61 reply.62 pre-trial
1wphi1

brief,63 among others, did it make a simple computation of respondents obligation as well as the
amounts to be applied to it, or even a summary thereof, when it could have easily done so.

b. Petitioner failed to prove the amount of expenses incurred in foreclosing the mortgaged
properties

another obstacle against petitioners claim for deficiency balance is the burden of proving the
amount of expenses incurred during the foreclosure sales. To recall, petitioner alleged that it
incurred expenses totaling PhP 1,373,238.04 and PhP 419,166.67 for the first and second public
auction sales, respectively. However, in claiming that there is a deficiency, petitioner only submitted
the following pieces of evidence, to wit:

1. The fifteen (15) promissory notes (Exhibits A to O);

2. Continuing Surety Agreement (Exhibit P);

3. Real Estate Mortgage (Exhibits Q & R);

4. Petition for Sale under Act. No. 3135, as amended (Exhibit S);
 5. Notices of Sheriffs Sale (Exhibits T & U);

6. Affidavit of Publication (Exhibits V & W);

7. Certificates of Posting and a Xerox copy thereof (exhibits X & Y);

8. Certificates of Sale (Exhibits Z & AA);

9. Demand Letters (Exhibits BB & CC); and

10. Statement of Account (Exhibit DD).

Curiously, petitioner never offered as evidence receipts proving payment of filing fees, publication
expenses, Sheriffs Commission on Sale, attorneys fee, registration fee for the Certificate of Sale,
insurance premium and other miscellaneous expenses, all of which MBTC claims that it incurred.
Instead, petitioner urges the Court to take judicial notice of the following expenses:64

May 5, 1998 auction sale expenses

Filing Fee PhP 52,084.00
Publication Expenses 24,267.75
Sheriffs Commission on Sale 207,560.00
Registration fee and other Miscellaneous Expenses 32,644.50
Attorneys Fees (10% of total amount claimed) 1,005,744.37
Fire Insurance 50,937.42
Sub-total PhP 1,373,238.04
May 6, 1998 auction sale expenses
Publication Expenses 24,267.75
Sheriffs Commission on Sale 64,880.00
Registration fee and other Miscellaneous Expenses 16,593.00
Attorneys Fees (10% of total amount claimed) 313,425.92
Sub-total 419,166.67

Petitioners argument is untenable.

First, the Court cannot take judicial notice of the attorneys fees being claimed by petitioner because
although 10% was the rate agreed upon by the parties, We have, in a line of cases, held that the
percentage to be charged can still be fixed by the Court. For instance, in Mambulao Lumber
Company v. Philippine National Bank,65 the Court held:

In determining the compensation of an attorney, the following circumstances should be considered:

the amount and character of the services rendered; the responsibility imposed; the amount of money
or the value of the property affected by the controversy, or involved in the employment; the skill and
experience called for in the performance of the service; the professional standing of the attorney; the
results secured; and whether or not the fee is contingent or absolute, it being a recognized rule that
an attorney may properly charge a much larger fee when it is to be contingent that when it is not.
From the stipulation in the mortgage contract earlier quoted, it appears that the agreed fee is 10% of
the total mortgage is to be effected. The agreement is perhaps fair enough in case the foreclosure
proceedings is prosecuted judicially but, surely, it is unreasonable when, as in this case, the
mortgage was foreclosed extra-judicially, and all that the attorney did was to file a petition for
foreclosure with the sheriff concerned.

Similarly, in Bank of the Philippine Islands, Inc. v. Spouses Norman and Angelina Yu,66 the Court
reduced the claim for attorneys fees from 10% to 1% based on the following reasons: (1) attorneys
fee is not essential to the cost of borrowing, but a mere incident of collection; (2) 1% is just and
adequate because the mortgagee bank had already charged foreclosure expenses; (3) attorneys
fee of 10% of the total amount due is onerous considering the rote effort that goes into extrajudicial
foreclosures.

Second, the Court cannot also take judicial notice of the expenses incurred by petitioner in causing
the publication of the notice of foreclosure and the cost of insurance. This is so because there are no
standard rates cited or mentioned by petitioner that would allow Us to take judicial notice of such
expenses. It is not unthinkable that the cost of publication would vay from publisher to publisher, and
would depend on several factors, including the size of the publication space. Insurance companies
also have their own computations on the insurance premiums to be paid by the insurer, which the
courts cannot be expected to be knowledgeable of. To be sure, in arguing the Court to take judicial
notice of the alleged expenses, MBTC merely cited Sec. 3 of Act 3135 requiring publication and the
mortgage agreement provision on the insurance requirement, without more.67 Said provisions never
expressly provided for the actual cost of publication and insurance, nor any formulae for determining
the same. Thus, the claims for publication and insurance expenses ought to be disallowed.

Third, the claims for registration fees and miscellaneous expenses were also never substantiated by
receipts.

Conclusion

In demanding payment of a deficiency in an extrajudicial foreclosure of mortgage, proving that there

is indeed one and what its exact amount is, is naturally a precondition thereto. The same goes with a
claim for reimbursement of foreclosure expenses, as here. In this regard, it is elementary that the
burden to prove a claim rests on the party asserting such. Ei incumbit probation qui dicit, non qui
negat. He who asserts, not he who denies, must prove.68 For having failed to adequately substantiate
its claims, We cannot sustain the finding of the trial court that respondents are liable for the claimed
deficiency, inclusive of foreclosure expenses. Neither can We sustain the CAs finding that
respondents are entitled to the recovery of the alleged excess payment.

In light of the foregoing, the Court need not belabor the other assigned errors.

WHEREFORE, premises considered, the instant petition is hereby PARTIALLY GRANTED.

Accordingly, the Decision of the Court of Appeals dated September 28, 2011 in CA-G.R. CV No.
91424 and its February 13, 2012 Resolution are hereby AFFIRMED with MODIFICATION. The
award of refund in favor of respondents in the amount of 722,602.22 with legal interest of six
percent (6%) per annum is hereby DELETED.

No pronouncement as to costs.

SO ORDERED.

November 16, 2015

A.C. No. 7353

NELSON P. VALDEZ, Petitioner,

vs.
ATTY. ANTOLIN ALLYSON DABON, JR., Respondent.

DECISION

Per Curiam:

This is an administrative complaint for disbarment filed by Nelson P. Valdez (Nelson) against Atty.
Antolin Allyson M. Dabon, Jr. (Atty. Dabon) anchored on the ground of grossly immoral and indecent
conduct which transgressed the high moral standards required for membership in the Bar.

The Position of the Complainant

Complainant Nelson charged respondent Atty. Dabon, a Division Clerk of Court of the Court of
Appeals (CA), with gross immorality for allegedly carrying on an adulterous relationship with his wife,
Sonia Romero Valdez (Sonia), which was made possible by sexual assaults and maintained through
threat and intimidation.

In his Affidavit-Complaint,1 dated September 13, 2006, Nelson averred, among others, that he
married Sonia on January 28, 1998 in Paniqui, Tarlac; that Sonia was employed as Court
Stenographer of the CA from 1992 until her resignation on May 15, 2006;2 that Sonia admitted to
have had an adulterous and immoral relationship with Atty. Dabon, from 2000 to 2006, a span of
more than five years; that he came to know of the relationship only on April 18, 2006 after receiving
an anonymous text message hinting/stating about the existence of an illicit affair between the two;
and that initially, Sonia denied the affair but eventually broke down and admitted her sexual liaison
with Atty. Dabon when confronted with a text message he received from Atty. Jocelyn Dabon (Atty.
Joy), the wife of the respondent, on May 4, 2006 at about 9:47 o'clock in the morning, which stated:

Nelson, Jun and I were separating I will file an annulment anytime soon, although I'm in great pain, I
ask for your apology and forgiveness for everything he is leaving for US and I hope he evolves into a
strong and mature person there. D cya masamang tao, just emotional and easily manipulated. Sana
don't blame him entirely bee. he is d type that never initiate things. He is passive and tame. He was
honest with me and I hope Sonia would find d courage to tell d truth to you. I just pray for peace and
fresh start for all of us. I just want to go on with my life and use above all these for my son's sake. I
love jun and I appeal to you n asana wala ka maisip sa atin lahat. Just as I have accepted
everything. Salamat sa panahon at pangunawa. God bless.3

Nelson also asserted that Sonia confessed her infidelity and described her extramarital affair with
Atty. Dabon to have been attended by sexual assaults and maintained through intimidation and
threats of exposure, humiliation and embarrassment.

In her own Affidavit,4 dated September 13, 2006 and attached to the complaint, Sonia narrated that
her illicit relationship with Atty. Dabon started sometime in November 2000 and ended in March
2006 when she, bothered by her conscience, decided to break it off; that Atty. Dabon relentlessly
pursued her for years and even admitted that he fell in love with her the first time he laid eyes on
her; that on November 13, 2000, Atty. Dabon lured her to what appeared to be a mere friendly lunch
date, managed to put sleep-inducing drug into her food or drink causing her to feel drowsy and weak
and, thereafter, brought her to Victoria Court Motel where he sexually molested her while she was
asleep; that she opted to keep silent about the incident for fear of its adverse repercussions of
shame and embarrassment to her and her family; that she pleaded with Atty. Dabon to leave her and
forget what had happened, but the respondent instead taunted her by laughing at her misery; that
since then, Atty. Dabon succeeded in having repeated carnal knowledge of her once or twice a week
through intimidation and threats; that Atty. Dabon threatened her that he would tell everyone that she
had been playing around with him, if she would not yield to his lascivious cravings; and that she
suffered in silence for years and submitted herself to the bestial desires of Atty. Dabon, until she
even thought that she was in love with him.

Sonia further claimed that after years of living in deception and infidelity, she decided to call it quits
with Atty. Dabon sometime in March 2006 but he could not let go of their relationship; that Atty.
Dabon started pestering and threatening her through phone calls and handwritten messages in vile
attempts to persuade her to continue their illicit affair; that despite their break-up, Atty. Dabon still
pursued his lustful quest by bringing her to Anito Motel, along Quirino A venue on March 10, 2006,
but she foiled his plan when she went ballistic prompting the respondent to drive her back to the CA;
that on March 13, 2006, Atty. Dabon forcibly boarded her car and pleaded for forgiveness and
reconciliation but she remained firm in her resolve to end the affair; that she had to seek the
assistance of her officemates, Atty. Heiddi Venecia Barrozo (Atty. Barrozo) and Atty. Aileen T.
Ligot (Atty. Ligot), just to convince Atty. Dabon to alight from her car as the said incident had already
drawn the attention of several employees within the vicinity of the CA parking lot; that Atty. Dabon
used the members of his staff to relay his messages and deliver his handwritten letters to her; that
Atty. Dabon, angered by her repeated rejection, went berserk and sent her a letter which stated,
among others, that he could no longer stand her constant avoidance of him and that he would
divulge their illicit relationship to her husband; that it numbed her with fright, so she called Atty. Joy,
without disclosing her identity, and told her that Atty. Dabon was harassing an employee at the CA;
that Atty. Dabon sent a text message to Nelson telling him of the extramarital affair; that Atty. Joy
called up Nelson and informed him that her husband, Atty. Dabon, had confessed to her the illicit
relationship; and that when she was asked by Nelson, she initially denied the affair for fear of
reprisal but, afterwards, admitted the truth and explained to him that she was merely a victim of Atty.
Dabon's threat and intimidation which led to their illicit relationship.

Nels on further stated that Atty. Dabon' s willful, flagrant and shameless conduct was in gross
defiance of the customs, values and sense of morality of the community. He prayed for the
disbarment of Atty. Dabon whose immoral acts showed his lack of moral character, honesty, probity,
and good demeanor and, hence, unworthy to continue as an officer of the court. Nelson alleged that
he had previously filed an administrative complaint for "Gross Immorality" against Atty. Dabon before
the CA.

Together with Sonia's Affidavit, Nelson also attached to his AffidavitComplaint for disbarment, the
Joint Affidavit5executed by Atty. Barrozo and Atty. Ligot on May 19, 2006; the Affidavit6 of Virginia D.
Ramos (Ramos), dated May 19, 2006; and the Affidavit7 of Marie Iris Magdalene
Minerva (Minerva), dated May 22, 2006, wherein the said affiants corroborated the declaration of
Sonia in her affidavit.

The Position of Atty. Dabon

Respondent Atty. Dabon strongly refuted the accusation against him claiming that the same was
baseless and unfounded and that the complaint for disbarment was merely calculated to harass,
annoy and besmirch his reputation.

In his Comment,8 Atty. Dabon denied the charges of grossly immoral and unlawful acts through
sexual assaults, abuses, threats and intimidation. He posited that the allegations of spouses Nelson
and Sonia in their respective affidavits were nothing but pure fabrication solely intended to malign his
name and honor. In support of his prayer for the dismissal of the present disbarment case, Atty.
Dabon proffered the following arguments:

First, complainant Nelson had no personal knowledge of the alleged illicit relationship
between him and Sonia. He relied heavily on the sworn statement of Sonia which was
replete with inconsistencies and incredible and preposterous claims which defied logic and
common sense, thus, revealing the fallacy of the subject complaint. He contended that it was
highly improbable for him, a married lawyer at that, to suddenly turn crazy and abandon all
cares just to satisfy his purported lustful hungerness by sexually assaulting Sonia, "an
ordinary plain-looking 43-year old woman with two (2) teen aged children."9

Second, nowhere in the administrative complaint of Nelson previously filed before the CA
was there any mention of any sexual assault he allegedly committed against Sonia or of an
adulterous relationship that was maintained through threats and intimidation. Surprisingly,
such allegations were included in the present complaint for disbarment. He also pointed out
that Nelson did not attach to his administrative complaint before the CA the September 13,
2006 Affidavit of Sonia containing grave imputations against him. Such omissions were
indicative that the serious charges against him were mere concoctions and afterthoughts
designed to attain Nelson's desire to come up with a graver accusation against him. The
filing of the complaint for disbarment was motivated by vengeance against him as Nelson
was consummed by his suspicion that he had seduced Sonia which led to the deterioration
of their marriage. He was a victim caught in the crossfire between the troubled couple,
Nelson and Sonia.

Third, there was no truth to Sonia's allegation that he was attracted to her from the first time
he saw her much less pursued her relentlessly. He and Sonia were just close friends. He
was Sonia's confidante. She would usually confide in him her personal woes and problems
especially those concerning her husband, Nelson. It was Sonia who aggressively sought his
companionship and frequented his office, bringing food, fruits and other goodies. The said
visits were attested to by Mary Jane Tulalian and Imelda Adan in their respective
affidavits,10 both dated April 30, 2008. His friendship with Sonia turned sour when she
learned of his plan to settle for good in the Unites States with his family. Sonia began to
avoid him. He exerted efforts to make her understand his decision, but to no avail.

Fourth, the cards expressing Sonia's affection towards him as well as the expensive gifts she
gave him belied her claim that she was sexually assaulted and that she resisted his alleged
sexual advances.

Fifth, it was unlikely that Sonia would not tell anyone the grave injustice and abuses that she
allegedly suffered in his hands or report the matter to the police considering her length of
service in the Judiciary and her familiarity on how the criminal justice system worked.

Sixth, he denied Nelson's allegation that he confessed to his wife, Atty. Joy, his illicit
relationship with Sonia. He also denied that the alleged text messages, quoted by Nelson
and Sonia in their respective affidavits, were sent by him or his wife. All were part of an
elaborate scheme to force him to immediately resign as Division Clerk of Court from the CA.

Lastly, it was not true that he harassed Sonia through text messages and phone calls. It was
he who was the victim of harassment from Nelson, who orchestrated a series of events that
compelled him to leave the country earlier than scheduled for fear that an untoward incident
might happen to him.
On August 15, 2007, the Court referred the case to the Integrated Bar of the Philippines (IBP) for
investigation, report and recommendation.11

After the parties had submitted their respective verified position papers, Investigating Commissioner
Manuel T. Chan (Investigating Commissioner Chan) of the IBP Commission on Bar Discipline (IBP-
CBD) rendered his Report and Recommendation,12 dated October 2, 2008, finding that the charge
against respondent Atty. Dabon had been sufficiently proven. The recommendatory portion of the
report reads:

WHEREFORE, this Commissioner, after a thorough and exhaustive review of the facts and
applicable legal provisions, recommends that respondent be found guilty of gross immoral conduct
and, accordingly, be disbarred and dropped from the Roll of Attorneys.13

On December 11, 2008, the Board of Governors of the IBP adopted and approved the
recommendation and issued Resolution No. XVIII-2008- 653, the pertinent portion of which reads:

RESOLVED to ADOPT and APPROVE, as it is hereby unanimously ADOPTED and APPROVED the
Report and Recommendation of the Investigating Commissioner of the aboveentitled case, herein
made part of this Resolution as Annex "A"; and, finding the recommendation fully supported by the
evidence on record and the applicable laws and rules, and finding Respondent guilty of gross
immoral conduct, Atty. Antolin Allyson M. Dabon, Jr. is hereby DISBARRED and his name be
stricken off from the Roll of Attorneys.14

Atty. Dabon filed a motion for reconsideration of Resolution No. XVIII-2008-653, but it was denied by
the IBP Board of Governors in its Resolution No. XX-2012-550,15 dated December 14, 2012.

After due consideration, the Court resolves to adopt the findings and recommendation of the IBP-
CBD.

Lawyers have been repeatedly reminded by the Court that possession of good moral character is
both a condition precedent and a continuing requirement to warrant admission to the Bar and to
retain membership in the legal profession. This proceeds from the lawyer's bounden duty to observe
the highest degree of morality in order to safeguard the Bar's integrity,16 and the legal profession
exacts from its members nothing less. Lawyers are called upon to safeguard the integrity of the Bar,
free from misdeeds and acts constitutive of malpractice. Their exalted positions as officers of the
court demand no less than the highest degree of morality.17

The Court explained in Arnobit v. Atty. Arnobit18 that "as officers of the court, lawyers must not only in
fact be of good moral character but must also be seen to be of good moral character and leading
lives in accordance with the highest moral standards of the community. A member of the bar and an
officer of the court is not only required to refrain from adulterous relationships or keeping a mistress
but must also so behave himself as to avoid scandalizing the public by creating the impression that
he is flouting those moral standards." Consequently, any errant behavior of the lawyer, be it in his
public or private activities, which tends to show deficiency in moral character, honesty, probity or
good demeanor, is sufficient to warrant suspension or disbarment.19

In the case at bench, the Court subscribes to the IBP's opinion that there was substantial evidence
showing that Atty. Dabon did have an illicit relationship with Nelson's legal wife.

To begin with, the Court notes from the respondent's Comment that he appeared to be perplexed as
to whether or not he would admit his extramarital liaisons with Sonia. As Investigating Commissioner
Chan stated in his report, Atty. Dabon interposed a blanket denial of the romantic involvement but at
the same time, he seemed to have tacitly admitted the illicit affair only that it was not attended by
sexual assaults, threats and intimidations. The Court also observed that he devoted considerable
effort to demonstrate that the affair did not amount to gross immoral conduct and that no sexual
abuse, threat or intimidation was exerted upon the person of Sonia, but not once did he squarely
deny the affair itself.

In other words, the respondent's denial is a negative pregnant, a denial coupled with the admission
of substantial facts in the pleading responded to which are not squarely denied. Stated otherwise, a
negative pregnant is a form of negative expression which carries with it an affirmation or at least an
implication of some kind favorable to the adverse party. Where a fact is alleged with qualifying or
modifying language and the words of the allegation as so qualified or modified are literally denied, it
has been held that the qualifying circumstance alone is denied while the fact itself is admitted.20 It is
clear from Atty. Dabon's Comment that his denial only pertained as to the existence of a forced illicit
relationship. Without a categorical denial thereof, he is deemed to have admitted his consensual
affair with Sonia.

More telling of the existence of a romantic relationship are the notes and cards21 that Sonia sent to
Atty. Dabon containing personal and intimate messages in her own handwriting. The messages
conveyed Sonia's affection towards him as she even referred to him as "hon" or "honey." There were
also gifts she gave him on special occasions such as signature shoes, watch and shirts. It also
appeared that Sonia frequently visited him in his office either to bring him food, fruits and other
goodies or to invite him to lunch which apparently displayed her emotional attachment to him.
Curiously, the foregoing was never refuted by Sonia. Such "ego-boosting admissions"22 of Atty.
Dabon indeed proved that a consensual relationship between him and Sonia existed.

It has not escaped the Court's attention either that Atty. Dabon really tried hard to win back Sonia
because he could not let go of their relationship, even to the point of pestering her with his persistent
pleas for reconciliation.

In one instance, Atty. Dabon boarded Sonia's car and refused to alight unless she would talk to him.
Sonia had to seek the assistance of her officemates, Atty. Barrazo and Atty. Ligot, who pleaded with
him to alight from the vehicle. Moreover, Atty. Dabon made several attempts to communicate with
Sonia in the hope of rekindling their relationship through letters and phone calls but she remained
firm in her stand to avoid him. Such incident was recounted by Ramos and Minerva in their
respective affidavits.

Incidentally, vis-a-vis Nelson's overwhelming evidence of said harassments, he offered only denials
which was self-serving and weak under the law on evidence. Other than his general claim that Atty.
Barrazo, Atty. Ligot, Ramos, and Minerva were biased witnessess because they were former
officemates of Sonia, the respondent did not even bother to proffer his own version of the supposed
harassment incidents.

In light of the above disquisition, the Court finds Sonia's allegation that the illicit relationship was
made possible by sexual assaults and maintained through threat and intimidations, to be untrue.
Certainly, a sexually abused woman could not be expected to lavish her oppressor with expensive
gifts or pay him affectionate compliments or words of endearment. The natural reaction of a victim of
a sexual molestation would be to avoid her ravisher. In this case, however, it appeared that Sonia
continually remained in the company of Atty. Dabon for more than five years, even inviting him for
lunch-outs and frequenting his office to bring food whenever the latter was preoccupied with his
workload and could not go out with her to eat. Verily, Sonia's actuations towards Atty. Dabon are in
stark contrast to the expected demeanor of one who had been repeatedly sexually abused.
Further, the Court cannot fathom why Sonia never reported the alleged sexual abuse to the police, if
such was the truth. She could have placed the respondent behind bars and put an end to her
claimed misery. Also, the Court cannot lend credence to Sonia's claim that she merely succumbed to
the respondent's sexual advances because of his continuous threats of public exposure and
humiliation. It must be stressed that Atty. Dabon would be in a much more precarious situation if he
would carry out such threats, as this would exposed himself to countless criminal and administrative
charges. The Court believes that Nelson's allegation of sexual assaults and continuing threat and
intimidation was not established by clear preponderant evidence. The Court is left with the most
logical conclusion that Sonia freely and wittingly entered into an illicit and immoral relationship with
Atty. Dabon sans any threat and intimidation.

Consequently, the Court quotes with approval the following observations of Investigating
Commissioner Chan on this score, thus:

Sorting out the maze of technicalities, denials and evasions of the respondent as well as the
oftentimes exaggerated language of complainant or his wife, Sonia, and the self-exculpatory
declarations of Sonia, this Commissioner considers the following facts as established:

1. Respondent and Sonia are both married, not to each other, but to other persons, and each
is aware of this fact, or should have known such fact at the start of their illicit relationship
because they were officemates at that time;

2. Respondent and Sonia engaged in an intimate and sexual relationship, intermittent

perhaps, for a period of about six years starting 2000 up to 2006;

3. Respondent and Sonia, despite protestations of Sonia that respondent assaulted her
using drugs and employing threats and blackmail to maintain the relationship, appeared to
have entered into such illicit relationship voluntarily and also appeared to have been fueled
by their deep emotional needs, if not mutual lust, as shown by the fact that the illicit
relationship lasted for six long years;

4. Respondent and Sonia, despite the protestation of Sonia to the contrary, were not really
ready to give up the illicit relationship even if they were fully aware of its immorality or its
devastating effect on their respective marriages and careers as shown by the fact that both
respondent and Sonia did not voluntarily confess to their respective spouses their dark
secret, but were only discovered by complainant through other channels.23

For what ethical breaches then may Atty. Dabon be held liable?

The Code of Professional Responsibility provides:

Rule 1.01- A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.

Canon 7- A lawyer shall at all times uphold the integrity and dignity of the legal profession, and
support the activities of the Integrated Bar.

Rule 7.03- A lawyer shall not engage in conduct that adversely reflects on his fitness to practice law,
nor should he, whether in public or private life, behave in a scandalous manner to the discredit of the
legal profession.
Morality in our liberal society today is probably a far cry from what it used to be. Notwithstanding
1avvphi1

this permissiveness, lawyers, as keepers of public faith, are burdened with a high degree of social
responsibility and, hence, must handle their personal affairs with greater caution.24 Indeed, those who
have taken the oath to assist in the dispensation of justice should be more possessed of the
consciousness and the will to overcome the weakness of the flesh.

It has been repeatedly held that to justify suspension or disbarment, the act complained of must not
only be immoral, but grossly immoral.25 A grossly immoral act is one that is so corrupt as to constitute
a criminal act, or so unprincipled as to be reprehensible to a high degree or committed under such
scandalous or revolting circumstances as to shock the common sense of decency. It is willful,
flagrant, or shameless as to show indifference to the opinion of good and respectable members of
the community.26

In the case at bench, Atty. Dabon's intimate relationship with a woman other than his wife showed
his moral indifference to the opinion of the good and respectable members of the community. It
manifested his disrespect for the laws on the sanctity of marriage and for his own marital vow of
fidelity. It showed his utmost moral depravity and low regard for the fundamental ethics of his
profession. Indeed, he has fallen below the moral bar. Such detestable behavior warrants a
disciplinary sanction. Even if not all forms of extramarital relations are punishable under penal law,
sexual relations outside of marriage are considered disgraceful and immoral as they manifest
deliberate disregard of the sanctity of marriage and the marital vows protected by the Constitution
and affirmed by our laws.27

In Advincula v. Macabata,28 the Court elucidated as to what disciplinary sanction should be imposed
against a lawyer found guilty of misconduct. Thus:

Xxx. When deciding upon the appropriate sanction, the Court must consider that the primary
purposes of disciplinary proceedings are to protect the public; to foster public confidence in the Bar;
to preserve the integrity of the profession; and to deter other lawyers from similar misconduct.
Disciplinary proceedings are means of protecting the administration of justice by requiring those who
carry out this important function to be competent, honorable and reliable men in whom courts and
clients may repose confidence. While it is discretionary upon the Court to impose a particular
sanction that it may deem proper against an erring lawyer, it should neither be arbitrary and despotic
nor motivated by personal animosity or prejudice, but should ever be controlled by the imperative
need to scrupulously guard the purity and independence of the bar and to exact from the lawyer
strict compliance with his duties to the court, to his client, to his brethren in the profession and to the
public.

The power to disbar or suspend ought always to be exercised on the preservative and not on the
vindictive principle, with great caution and only for the most weighty reasons and only on clear cases
of misconduct which seriously affect the standing and character of the lawyer as an officer of the
court and member of the Bar. Only those acts which cause loss of moral character should merit
disbarment or suspension, while those acts which neither affect nor erode the moral character of the
lawyer should only justify a lesser sanction unless they are of such nature and to such extent as to
clearly show the lawyer's unfitness to continue in the practice of law. The dubious character of the
act charged as well as the motivation which induced the lawyer to commit it must be clearly
demonstrated before suspension or disbarment is meted out. The mitigating or aggravating
circumstances that attended the commission of the offense should also be considered.

The penalty for maintaining an illicit relationship may either be suspension or disbarment, depending
on the circumstances of the case.29 In case of suspension, the period would range from one year30 to
indefinite suspension, as in the case of Cordova v. Cordova,31 where the lawyer was found to have
maintained an adulterous relationship for two years and refused to support his family. On the other
hand, there is a string of cases where the Court meted out the extreme penalty of disbarment, to wit:

In Toledo v. Toledo,32 a lawyer was disbarred from the practice of law, when he abandoned his lawful
wife and cohabited with another woman who had borne him a child.

In Obusan v. Obusan, Jr.,33 a lawyer was disbarred after the complainant proved that he had
abandoned her and maintained an adulterous relationship with a married woman. The Court
declared that the respondent failed to maintain the highest degree of morality expected and required
of a member of the Bar.

In Cojuangco, Jr. v. Palma,34 the respondent lawyer was disbarred when he abandoned his lawful
wife and three children, lured an innocent woman into marrying him and misrepresented himself as a
"bachelor" so he could contract marriage in a foreign land.

In Dantes v. Dantes,35 disbarment was imposed as a penalty on the respondent lawyer who
maintained illicit relationships with two different women during the subsistence of his marriage to the
complainant. The Complainant's testimony, taken in conjunction with the documentary evidence,
sufficiently established that the respondent breached the high and exacting moral standards set for
members of the law profession.

In Villatuya v. Tabalingcos,36 the respondent lawyer was disbarred because he was found to have
entered into marriage twice while his first marriage was still subsisting. The Court declared that he
exhibited a deplorable lack of that degree of morality required of him as a member of the Bar. He
made a mockery of marriage, a sacred institution demanding respect and dignity.

In the case at bench, Atty. Dabon's misconduct and unrepentant demeanor clearly showed a serious
flaw in his character, his moral indifference to the sanctity of marriage and marital vows, and his
outright defiance of established norms. All these could not but put the legal profession in disrepute
and place the integrity of the administration of justice in peril. Accordingly, the Court finds the need
for the imposition of the extreme administrative penalty of disbarment.

WHEREFORE, finding the respondent Atty. Antolin Allyson M. Dabon, Jr. GUILTY of Gross
Immorality, the Court hereby DISBARS him from the practice of law.

Let respondent's name be stricken from the Roll of Attorneys immediately. Furnish the Bar
Confidant, the Integrated Bar of the Philippines and all court throughout the country with copies of
this Decision.

SO ORDERED.

G.R. No. 152154 July 15, 2003

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HONORABLE SANDIGANBAYAN (SPECIAL FIRST DIVISION), FERDINAND E. MARCOS
(REPRESENTED BY HIS ESTATE/HEIRS: IMELDA R. MARCOS, MARIA IMELDA [IMEE]
MARCOS-MANOTOC, FERDINAND R. MARCOS, JR. AND IRENE MARCOS-ARANETA) AND
IMELDA ROMUALDEZ MARCOS, respondents.
CORONA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court seeking to (1) set aside the
Resolution dated January 31, 2002 issued by the Special First Division of the Sandiganbayan in Civil
Case No. 0141 entitled Republic of the Philippines vs. Ferdinand E. Marcos, et. al., and (2) reinstate
its earlier decision dated September 19, 2000 which forfeited in favor of petitioner Republic of the
Philippines (Republic) the amount held in escrow in the Philippine National Bank (PNB) in the
aggregate amount of US$658,175,373.60 as of January 31, 2002.

BACKGROUND OF THE CASE

On December 17, 1991, petitioner Republic, through the Presidential Commission on Good
Government (PCGG), represented by the Office of the Solicitor General (OSG), filed a petition for
forfeiture before the Sandiganbayan, docketed as Civil Case No. 0141 entitled Republic of the
Philippines vs. Ferdinand E. Marcos, represented by his Estate/Heirs and Imelda R. Marcos,
pursuant to RA 13791 in relation to Executive Order Nos. 1,2 2,3 144 and 14-A.5

In said case, petitioner sought the declaration of the aggregate amount of US$356 million (now
estimated to be more than US$658 million inclusive of interest) deposited in escrow in the PNB, as
ill-gotten wealth. The funds were previously held by the following five account groups, using various
foreign foundations in certain Swiss banks:

(1) Azio-Verso-Vibur Foundation accounts;

(2) Xandy-Wintrop: Charis-Scolari-Valamo-Spinus- Avertina Foundation accounts;

(3) Trinidad-Rayby-Palmy Foundation accounts;

(4) Rosalys-Aguamina Foundation accounts and

(5) Maler Foundation accounts.

In addition, the petition sought the forfeiture of US$25 million and US$5 million in treasury notes
which exceeded the Marcos couple's salaries, other lawful income as well as income from
legitimately acquired property. The treasury notes are frozen at the Central Bank of the Philippines,
now Bangko Sentral ng Pilipinas, by virtue of the freeze order issued by the PCGG.

On October 18, 1993, respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta
and Ferdinand R. Marcos, Jr. filed their answer.

Before the case was set for pre-trial, a General Agreement and the Supplemental
Agreements6 dated December 28, 1993 were executed by the Marcos children and then PCGG
Chairman Magtanggol Gunigundo for a global settlement of the assets of the Marcos family.
Subsequently, respondent Marcos children filed a motion dated December 7, 1995 for the approval
of said agreements and for the enforcement thereof.

The General Agreement/Supplemental Agreements sought to identify, collate, cause the inventory of
and distribute all assets presumed to be owned by the Marcos family under the conditions contained
therein. The aforementioned General Agreement specified in one of its premises or "whereas
clauses" the fact that petitioner "obtained a judgment from the Swiss Federal Tribunal on December
21, 1990, that the Three Hundred Fifty-six Million U.S. dollars (US$356 million) belongs in principle
to the Republic of the Philippines provided certain conditionalities are met x x x." The said decision
of the Swiss Federal Supreme Court affirmed the decision of Zurich District Attorney Peter
Consandey, granting petitioner's request for legal assistance.7 Consandey declared the various
deposits in the name of the enumerated foundations to be of illegal provenance and ordered that
they be frozen to await the final verdict in favor of the parties entitled to restitution.

Hearings were conducted by the Sandiganbayan on the motion to approve the

General/Supplemental Agreements. Respondent Ferdinand, Jr. was presented as witness for the
purpose of establishing the partial implementation of said agreements.

On October 18, 1996, petitioner filed a motion for summary judgment and/or judgment on the
pleadings. Respondent Mrs. Marcos filed her opposition thereto which was later adopted by
respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr.

In its resolution dated November 20, 1997, the Sandiganbayan denied petitioner's motion for
summary judgment and/or judgment on the pleadings on the ground that the motion to approve the
compromise agreement "(took) precedence over the motion for summary judgment."

Respondent Mrs. Marcos filed a manifestation on May 26, 1998 claiming she was not a party to the
motion for approval of the Compromise Agreement and that she owned 90% of the funds with the
remaining 10% belonging to the Marcos estate.

Meanwhile, on August 10, 1995, petitioner filed with the District Attorney in Zurich, Switzerland, an
additional request for the immediate transfer of the deposits to an escrow account in the PNB. The
request was granted. On appeal by the Marcoses, the Swiss Federal Supreme Court, in a decision
dated December 10, 1997, upheld the ruling of the District Attorney of Zurich granting the request for
the transfer of the funds. In 1998, the funds were remitted to the Philippines in escrow.
Subsequently, respondent Marcos children moved that the funds be placed in custodia
legis because the deposit in escrow in the PNB was allegedly in danger of dissipation by petitioner.
The Sandiganbayan, in its resolution dated September 8, 1998, granted the motion.

After the pre-trial and the issuance of the pre-trial order and supplemental pre-trial order dated
October 28, 1999 and January 21, 2000, respectively, the case was set for trial. After several
resettings, petitioner, on March 10, 2000, filed another motion for summary judgment pertaining to
the forfeiture of the US$356 million, based on the following grounds:

THE ESSENTIAL FACTS WHICH WARRANT THE FORFEITURE OF THE FUNDS

SUBJECT OF THE PETITION UNDER R.A. NO. 1379 ARE ADMITTED BY
RESPONDENTS IN THEIR PLEADINGS AND OTHER SUBMISSIONS MADE IN THE
COURSE OF THE PROCEEDING.

II

RESPONDENTS' ADMISSION MADE DURING THE PRE-TRIAL THAT THEY DO NOT

HAVE ANY INTEREST OR OWNERSHIP OVER THE FUNDS SUBJECT OF THE ACTION
FOR FORFEITURE TENDERS NO GENUINE ISSUE OR CONTROVERSY AS TO ANY
MATERIAL FACT IN THE PRESENT ACTION, THUS WARRANTING THE RENDITION OF
SUMMARY JUDGMENT.8
Petitioner contended that, after the pre-trial conference, certain facts were established, warranting a
summary judgment on the funds sought to be forfeited.

Respondent Mrs. Marcos filed her opposition to the petitioner's motion for summary judgment, which
opposition was later adopted by her co-respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr.

On March 24, 2000, a hearing on the motion for summary judgment was conducted.

In a decision9 dated September 19, 2000, the Sandiganbayan granted petitioner's motion for
summary judgment:

CONCLUSION

There is no issue of fact which calls for the presentation of evidence.

The Motion for Summary Judgment is hereby granted.

The Swiss deposits which were transmitted to and now held in escrow at the PNB are
deemed unlawfully acquired as ill-gotten wealth.

DISPOSITION

WHEREFORE, judgment is hereby rendered in favor of the Republic of the Philippines and
against the respondents, declaring the Swiss deposits which were transferred to and now
deposited in escrow at the Philippine National Bank in the total aggregate value equivalent to
US$627,608,544.95 as of August 31, 2000 together with the increments thereof forfeited in
favor of the State.10

Respondent Mrs. Marcos filed a motion for reconsideration dated September 26, 2000. Likewise,
Mrs. Manotoc and Ferdinand, Jr. filed their own motion for reconsideration dated October 5, 2000.
Mrs. Araneta filed a manifestation dated October 4, 2000 adopting the motion for reconsideration of
Mrs. Marcos, Mrs. Manotoc and Ferdinand, Jr.

Subsequently, petitioner filed its opposition thereto.

In a resolution11 dated January 31, 2002, the Sandiganbayan reversed its September 19, 2000
decision, thus denying petitioner's motion for summary judgment:

CONCLUSION

In sum, the evidence offered for summary judgment of the case did not prove that the money
in the Swiss Banks belonged to the Marcos spouses because no legal proof exists in the
record as to the ownership by the Marcoses of the funds in escrow from the Swiss Banks.

The basis for the forfeiture in favor of the government cannot be deemed to have been
established and our judgment thereon, perforce, must also have been without basis.

WHEREFORE, the decision of this Court dated September 19, 2000 is reconsidered and set
aside, and this case is now being set for further proceedings.12
Hence, the instant petition. In filing the same, petitioner argues that the Sandiganbayan, in reversing
its September 19, 2000 decision, committed grave abuse of discretion amounting to lack or excess
of jurisdiction considering that --

PETITIONER WAS ABLE TO PROVE ITS CASE IN ACCORDANCE WITH THE

REQUISITES OF SECTIONS 2 AND 3 OF R.A. NO. 1379:

A. PRIVATE RESPONDENTS CATEGORICALLY ADMITTED NOT ONLY THE

PERSONAL CIRCUMSTANCES OF FERDINAND E. MARCOS AND IMELDA R.
MARCOS AS PUBLIC OFFICIALS BUT ALSO THE EXTENT OF THEIR SALARIES
AS SUCH PUBLIC OFFICIALS, WHO UNDER THE CONSTITUTION, WERE
PROHIBITED FROM ENGAGING IN THE MANAGEMENT OF FOUNDATIONS.

B. PRIVATE RESPONDENTS ALSO ADMITTED THE EXISTENCE OF THE SWISS

DEPOSITS AND THEIR OWNERSHIP THEREOF:

1. ADMISSIONS IN PRIVATE RESPONDENTS' ANSWER;

2. ADMISSION IN THE GENERAL / SUPPLEMENTAL AGREEMENTS

THEY SIGNED AND SOUGHT TO IMPLEMENT;

3. ADMISSION IN A MANIFESTATION OF PRIVATE RESPONDENT

IMELDA R. MARCOS AND IN THE MOTION TO PLACE THE RES IN
CUSTODIA LEGIS; AND

4. ADMISSION IN THE UNDERTAKING TO PAY THE HUMAN RIGHTS

VICTIMS.

C. PETITIONER HAS PROVED THE EXTENT OF THE LEGITIMATE INCOME OF

FERDINAND E. MARCOS AND IMELDA R. MARCOS AS PUBLIC OFFICIALS.

D. PETITIONER HAS ESTABLISHED A PRIMA FACIE PRESUMPTION OF

UNLAWFULLY ACQUIRED WEALTH.

II

SUMMARY JUDGMENT IS PROPER SINCE PRIVATE RESPONDENTS HAVE NOT

RAISED ANY GENUINE ISSUE OF FACT CONSIDERING THAT:

A. PRIVATE RESPONDENTS' DEFENSE THAT SWISS DEPOSITS WERE

LAWFULLY ACQUIRED DOES NOT ONLY FAIL TO TENDER AN ISSUE BUT IS
CLEARLY A SHAM; AND

B. IN SUBSEQUENTLY DISCLAIMING OWNERSHIP OF THE SWISS DEPOSITS,

PRIVATE RESPONDENTS ABANDONED THEIR SHAM DEFENSE OF
LEGITIMATE ACQUISITION, AND THIS FURTHER JUSTIFIED THE RENDITION
OF A SUMMARY JUDGMENT.

III
 THE FOREIGN FOUNDATIONS NEED NOT BE IMPLEADED.

IV

THE HONORABLE PRESIDING JUSTICE COMMITTED GRAVE ABUSE OF DISCRETION

IN REVERSING HIMSELF ON THE GROUND THAT ORIGINAL COPIES OF THE
AUTHENTICATED SWISS DECISIONS AND THEIR "AUTHENTICATED TRANSLATIONS"
HAVE NOT BEEN SUBMITTED TO THE COURT, WHEN EARLIER THE
SANDIGANBAYAN HAS QUOTED EXTENSIVELY A PORTION OF THE TRANSLATION
OF ONE OF THESE SWISS DECISIONS IN HIS "PONENCIA" DATED JULY 29, 1999
WHEN IT DENIED THE MOTION TO RELEASE ONE HUNDRED FIFTY MILLION US
DOLLARS ($150,000,000.00) TO THE HUMAN RIGHTS VICTIMS.

PRIVATE RESPONDENTS ARE DEEMED TO HAVE WAIVED THEIR OBJECTION TO

THE AUTHENTICITY OF THE SWISS FEDERAL SUPREME COURT DECISIONS.13

Petitioner, in the main, asserts that nowhere in the respondents' motions for reconsideration and
supplemental motion for reconsideration were the authenticity, accuracy and admissibility of the
Swiss decisions ever challenged. Otherwise stated, it was incorrect for the Sandiganbayan to use
the issue of lack of authenticated translations of the decisions of the Swiss Federal Supreme Court
as the basis for reversing itself because respondents themselves never raised this issue in their
motions for reconsideration and supplemental motion for reconsideration. Furthermore, this
particular issue relating to the translation of the Swiss court decisions could not be resurrected
anymore because said decisions had been previously utilized by the Sandiganbayan itself in
resolving a "decisive issue" before it.

Petitioner faults the Sandiganbayan for questioning the non-production of the authenticated
translations of the Swiss Federal Supreme Court decisions as this was a marginal and technical
matter that did not diminish by any measure the conclusiveness and strength of what had been
proven and admitted before the Sandiganbayan, that is, that the funds deposited by the Marcoses
constituted ill-gotten wealth and thus belonged to the Filipino people.

In compliance with the order of this Court, Mrs. Marcos filed her comment to the petition on May 22,
2002. After several motions for extension which were all granted, the comment of Mrs. Manotoc and
Ferdinand, Jr. and the separate comment of Mrs. Araneta were filed on May 27, 2002.

Mrs. Marcos asserts that the petition should be denied on the following grounds:

A.

PETITIONER HAS A PLAIN, SPEEDY, AND ADEQUATE REMEDY AT THE

SANDIGANBAYAN.

B.

THE SANDIGANBAYAN DID NOT ABUSE ITS DISCRETION IN SETTING THE CASE FOR
FURTHER PROCEEDINGS.14
Mrs. Marcos contends that petitioner has a plain, speedy and adequate remedy in the ordinary
course of law in view of the resolution of the Sandiganbayan dated January 31, 2000 directing
petitioner to submit the authenticated translations of the Swiss decisions. Instead of availing of said
remedy, petitioner now elevates the matter to this Court. According to Mrs. Marcos, a petition for
certiorari which does not comply with the requirements of the rules may be dismissed. Since
petitioner has a plain, speedy and adequate remedy, that is, to proceed to trial and submit
authenticated translations of the Swiss decisions, its petition before this Court must be dismissed.
Corollarily, the Sandiganbayan's ruling to set the case for further proceedings cannot and should not
be considered a capricious and whimsical exercise of judgment.

Likewise, Mrs. Manotoc and Ferdinand, Jr., in their comment, prayed for the dismissal of the petition
on the grounds that:

(A)

BY THE TIME PETITIONER FILED ITS MOTION FOR SUMMARY JUDGMENT ON 10

MARCH 2000, IT WAS ALREADY BARRED FROM DOING SO.

(1) The Motion for Summary Judgment was based on private respondents' Answer and other
documents that had long been in the records of the case. Thus, by the time the Motion was
filed on 10 March 2000, estoppel by laches had already set in against petitioner.

(2) By its positive acts and express admissions prior to filing the Motion for Summary
Judgment on 10 March 1990, petitioner had legally bound itself to go to trial on the basis of
existing issues. Thus, it clearly waived whatever right it had to move for summary judgment.

(B)

EVEN ASSUMING THAT PETITIONER WAS NOT LEGALLY BARRED FROM FILING THE
MOTION FOR SUMMARY JUDGMENT, THE SANDIGANBAYAN IS CORRECT IN RULING
THAT PETITIONER HAS NOT YET ESTABLISHED A PRIMA FACIE CASE FOR THE
FORFEITURE OF THE SWISS FUNDS.

(1) Republic Act No. 1379, the applicable law, is a penal statute. As such, its provisions,
particularly the essential elements stated in section 3 thereof, are mandatory in nature.
These should be strictly construed against petitioner and liberally in favor of private
respondents.

(2) Petitioner has failed to establish the third and fourth essential elements in Section 3 of
R.A. 1379 with respect to the identification, ownership, and approximate amount of the
property which the Marcos couple allegedly "acquired during their incumbency".

(a) Petitioner has failed to prove that the Marcos couple "acquired" or own the Swiss
funds.

(b) Even assuming, for the sake of argument, that the fact of acquisition has been
proven, petitioner has categorically admitted that it has no evidence showing how
much of the Swiss funds was acquired "during the incumbency" of the Marcos couple
from 31 December 1965 to 25 February 1986.
 (3) In contravention of the essential element stated in Section 3 (e) of R.A. 1379,
petitioner has failed to establish the other proper earnings and income from
legitimately acquired property of the Marcos couple over and above their government
salaries.

(4) Since petitioner failed to prove the three essential elements provided in paragraphs
(c)15 (d),16 and (e)17of Section 3, R.A. 1379, the inescapable conclusion is that the prima facie
presumption of unlawful acquisition of the Swiss funds has not yet attached. There can,
therefore, be no premature forfeiture of the funds.

(C)

IT WAS ONLY BY ARBITRARILY ISOLATING AND THEN TAKING CERTAIN

STATEMENTS MADE BY PRIVATE RESPONDENTS OUT OF CONTEXT THAT
PETITIONER WAS ABLE TO TREAT THESE AS "JUDICIAL ADMISSIONS" SUFFICIENT
TO ESTABLISH A PRIMA FACIE AND THEREAFTER A CONCLUSIVE CASE TO JUSTIFY
THE FORFEITURE OF THE SWISS FUNDS.

(1) Under Section 27, Rule 130 of the Rules of Court, the General and Supplemental
Agreements, as well as the other written and testimonial statements submitted in relation
thereto, are expressly barred from being admissible in evidence against private respondents.

(2) Had petitioner bothered to weigh the alleged admissions together with the other
statements on record, there would be a demonstrable showing that no such "judicial
admissions" were made by private respondents.

(D)

SINCE PETITIONER HAS NOT (YET) PROVEN ALL THE ESSENTIAL ELEMENTS TO
ESTABLISH A PRIMA FACIE CASE FOR FORFEITURE, AND PRIVATE RESPONDENTS
HAVE NOT MADE ANY JUDICIAL ADMISSION THAT WOULD HAVE FREED IT FROM ITS
BURDEN OF PROOF, THE SANDIGANBAYAN DID NOT COMMIT GRAVE ABUSE OF
DISCRETION IN DENYING THE MOTION FOR SUMMARY JUDGMENT. CERTIORARI,
THEREFORE, DOES NOT LIE, ESPECIALLY AS THIS COURT IS NOT A TRIER OF
FACTS.18

For her part, Mrs. Araneta, in her comment to the petition, claims that obviously petitioner is unable
to comply with a very plain requirement of respondent Sandiganbayan. The instant petition is
allegedly an attempt to elevate to this Court matters, issues and incidents which should be properly
threshed out at the Sandiganbayan. To respondent Mrs. Araneta, all other matters, save that
pertaining to the authentication of the translated Swiss Court decisions, are irrelevant and
impertinent as far as this Court is concerned. Respondent Mrs. Araneta manifests that she is as
eager as respondent Sandiganbayan or any interested person to have the Swiss Court decisions
officially translated in our known language. She says the authenticated official English version of the
Swiss Court decisions should be presented. This should stop all speculations on what indeed is
contained therein. Thus, respondent Mrs. Araneta prays that the petition be denied for lack of merit
and for raising matters which, in elaborated fashion, are impertinent and improper before this Court.

PROPRIETY OF PETITIONER'S ACTION FOR CERTIORARI

But before this Court discusses the more relevant issues, the question regarding the propriety of
petitioner Republic's action for certiorari under Rule 6519 of the 1997 Rules of Civil Procedure
assailing the Sandiganbayan Resolution dated January 21, 2002 should be threshed out.

At the outset, we would like to stress that we are treating this case as an exception to the general
rule governing petitions for certiorari. Normally, decisions of the Sandiganbayan are brought before
this Court under Rule 45, not Rule 65.20 But where the case is undeniably ingrained with immense
public interest, public policy and deep historical repercussions, certiorari is allowed notwithstanding
the existence and availability of the remedy of appeal.21

One of the foremost concerns of the Aquino Government in February 1986 was the recovery of the
unexplained or ill-gotten wealth reputedly amassed by former President and Mrs. Ferdinand E.
Marcos, their relatives, friends and business associates. Thus, the very first Executive Order (EO)
issued by then President Corazon Aquino upon her assumption to office after the ouster of the
Marcoses was EO No. 1, issued on February 28, 1986. It created the Presidential Commission on
Good Government (PCGG) and charged it with the task of assisting the President in the "recovery of
all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family,
relatives, subordinates and close associates, whether located in the Philippines or abroad, including
the takeover or sequestration of all business enterprises and entities owned or controlled by them
during his administration, directly or through nominees, by taking undue advantage of their public
office and/or using their powers, authority, influence, connections or relationship." The urgency of
this undertaking was tersely described by this Court in Republic vs. Lobregat22:

surely x x x an enterprise "of great pith and moment"; it was attended by "great
expectations"; it was initiated not only out of considerations of simple justice but also out of
sheer necessity - the national coffers were empty, or nearly so.

In all the alleged ill-gotten wealth cases filed by the PCGG, this Court has seen fit to set
aside technicalities and formalities that merely serve to delay or impede judicious resolution.
This Court prefers to have such cases resolved on the merits at the Sandiganbayan. But
substantial justice to the Filipino people and to all parties concerned, not mere legalisms or
perfection of form, should now be relentlessly and firmly pursued. Almost two decades have
passed since the government initiated its search for and reversion of such ill-gotten wealth.
The definitive resolution of such cases on the merits is thus long overdue. If there is proof of
illegal acquisition, accumulation, misappropriation, fraud or illicit conduct, let it be brought out
now. Let the ownership of these funds and other assets be finally determined and resolved
with dispatch, free from all the delaying technicalities and annoying procedural sidetracks.23

We thus take cognizance of this case and settle with finality all the issues therein.

ISSUES BEFORE THIS COURT

The crucial issues which this Court must resolve are: (1) whether or not respondents raised any
genuine issue of fact which would either justify or negate summary judgment; and (2) whether or not
petitioner Republic was able to prove its case for forfeiture in accordance with Sections 2 and 3 of
RA 1379.

(1) THE PROPRIETY OF SUMMARY JUDGMENT

We hold that respondent Marcoses failed to raise any genuine issue of fact in their pleadings. Thus,
on motion of petitioner Republic, summary judgment should take place as a matter of right.
In the early case of Auman vs. Estenzo24, summary judgment was described as a judgment which a
court may render before trial but after both parties have pleaded. It is ordered by the court upon
application by one party, supported by affidavits, depositions or other documents, with notice upon
the adverse party who may in turn file an opposition supported also by affidavits, depositions or
other documents. This is after the court summarily hears both parties with their respective proofs
and finds that there is no genuine issue between them. Summary judgment is sanctioned in this
jurisdiction by Section 1, Rule 35 of the 1997 Rules of Civil Procedure:

SECTION 1. Summary judgment for claimant.- A party seeking to recover upon a claim,
counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with supporting affidavits, depositions or
admissions for a summary judgment in his favor upon all or any part thereof.25

Summary judgment is proper when there is clearly no genuine issue as to any material fact in the
action.26 The theory of summary judgment is that, although an answer may on its face appear to
tender issues requiring trial, if it is demonstrated by affidavits, depositions or admissions that those
issues are not genuine but sham or fictitious, the Court is justified in dispensing with the trial and
rendering summary judgment for petitioner Republic.

The Solicitor General made a very thorough presentation of its case for forfeiture:

xxx

4. Respondent Ferdinand E. Marcos (now deceased and represented by his Estate/Heirs)

was a public officer for several decades continuously and without interruption as
Congressman, Senator, Senate President and President of the Republic of the Philippines
from December 31, 1965 up to his ouster by direct action of the people of EDSA on February
22-25, 1986.

5. Respondent Imelda Romualdez Marcos (Imelda, for short) the former First Lady who ruled
with FM during the 14-year martial law regime, occupied the position of Minister of Human
Settlements from June 1976 up to the peaceful revolution in February 22-25, 1986. She
likewise served once as a member of the Interim Batasang Pambansa during the early years
of martial law from 1978 to 1984 and as Metro Manila Governor in concurrent capacity as
Minister of Human Settlements. x x x

xxx xxx xxx

11. At the outset, however, it must be pointed out that based on the Official Report of the
Minister of Budget, the total salaries of former President Marcos as President form 1966 to
1976 was P60,000 a year and from 1977 to 1985, P100,000 a year; while that of the former
First Lady, Imelda R. Marcos, as Minister of Human Settlements from June 1976 to February
22-25, 1986 was P75,000 a year xxx.

ANALYSIS OF RESPONDENTS LEGITIMATE INCOME

xxx

12. Based on available documents, the ITRs of the Marcoses for the years 1965-1975 were
filed under Tax Identification No. 1365-055-1. For the years 1976 until 1984, the returns were
filed under Tax Identification No. M 6221-J 1117-A-9.
13. The data contained in the ITRs and Balance Sheet filed by the "Marcoses are
summarized and attached to the reports in the following schedules:

Schedule A:

Schedule of Income (Annex "T" hereof);

Schedule B:

Schedule of Income Tax Paid (Annex "T-1" hereof);

Schedule C:

Schedule of Net Disposable Income (Annex "T-2" hereof);

Schedule D:

Schedule of Networth Analysis (Annex "T-3" hereof).

14. As summarized in Schedule A (Annex "T" hereof), the Marcoses reported

P16,408,442.00 or US$2,414,484.91 in total income over a period of 20 years from 1965 to
1984. The sources of income are as follows:

Official Salaries - P 2,627,581.00 - 16.01%

Legal Practice - 11,109,836.00 - 67.71%
Farm Income - 149,700.00 - .91%
Others - 2,521,325.00 - 15.37%
Total P16,408,442.00 - 100.00%

15. FM's official salary pertains to his compensation as Senate President in 1965 in the
amount of P15,935.00 and P1,420,000.00 as President of the Philippines during the period
1966 until 1984. On the other hand, Imelda reported salaries and allowances only for the
years 1979 to 1984 in the amount of P1,191,646.00. The records indicate that the reported
income came from her salary from the Ministry of Human Settlements and allowances from
Food Terminal, Inc., National Home Mortgage Finance Corporation, National Food Authority
Council, Light Rail Transit Authority and Home Development Mutual Fund.

16. Of the P11,109,836.00 in reported income from legal practice, the amount of
P10,649,836.00 or 96% represents "receivables from prior years" during the period 1967 up
to 1984.

17. In the guise of reporting income using the cash method under Section 38 of the National
Internal Revenue Code, FM made it appear that he had an extremely profitable legal practice
before he became a President (FM being barred by law from practicing his law profession
during his entire presidency) and that, incredibly, he was still receiving payments almost 20
years after. The only problem is that in his Balance Sheet attached to his 1965 ITR
immediately preceeding his ascendancy to the presidency he did not show any Receivables
from client at all, much less the P10,65-M that he decided to later recognize as income.
There are no documents showing any withholding tax certificates. Likewise, there is nothing
on record that will show any known Marcos client as he has no known law office. As
previously stated, his networth was a mere P120,000.00 in December, 1965. The joint
income tax returns of FM and Imelda cannot, therefore, conceal the skeletons of their
kleptocracy.

18. FM reported a total of P2,521,325.00 as Other Income for the years 1972 up to 1976
which he referred to in his return as "Miscellaneous Items" and "Various Corporations."
There is no indication of any payor of the dividends or earnings.

19. Spouses Ferdinand and Imelda did not declare any income from any deposits and
placements which are subject to a 5% withholding tax. The Bureau of Internal Revenue
attested that after a diligent search of pertinent records on file with the Records Division, they
did not find any records involving the tax transactions of spouses Ferdinand and Imelda in
Revenue Region No. 1, Baguio City, Revenue Region No.4A, Manila, Revenue Region No.
4B1, Quezon City and Revenue No. 8, Tacloban, Leyte. Likewise, the Office of the Revenue
Collector of Batac. Further, BIR attested that no records were found on any filing of capital
gains tax return involving spouses FM and Imelda covering the years 1960 to 1965.

20. In Schedule B, the taxable reported income over the twenty-year period was
P14,463,595.00 which represents 88% of the gross income. The Marcoses paid income
taxes totaling P8,233,296.00 or US$1,220,667.59. The business expenses in the amount of
P861,748.00 represent expenses incurred for subscription, postage, stationeries and
contributions while the other deductions in the amount of P567,097.00 represents interest
charges, medicare fees, taxes and licenses. The total deductions in the amount of
P1,994,845.00 represents 12% of the total gross income.

21. In Schedule C, the net cumulative disposable income amounts to P6,756,301.00 or

US$980,709.77. This is the amount that represents that portion of the Marcoses income that
is free for consumption, savings and investments. The amount is arrived at by adding back to
the net income after tax the personal and additional exemptions for the years 1965-1984, as
well as the tax-exempt salary of the President for the years 1966 until 1972.

22. Finally, the networth analysis in Schedule D, represents the total accumulated networth
of spouses, Ferdinand and Imelda. Respondent's Balance Sheet attached to their 1965 ITR,
covering the year immediately preceding their ascendancy to the presidency, indicates an
ending networth of P120,000.00 which FM declared as Library and Miscellaneous assets. In
computing for the networth, the income approach was utilized. Under this approach, the
beginning capital is increased or decreased, as the case may be, depending upon the
income earned or loss incurred. Computations establish the total networth of spouses
Ferdinand and Imelda, for the years 1965 until 1984 in the total amount of US$957,487.75,
assuming the income from legal practice is real and valid x x x.

G. THE SECRET MARCOS DEPOSITS IN SWISS BANKS

23. The following presentation very clearly and overwhelmingly show in detail how both
respondents clandestinely stashed away the country's wealth to Switzerland and hid the
same under layers upon layers of foundations and other corporate entities to prevent its
detection. Through their dummies/nominees, fronts or agents who formed those foundations
or corporate entities, they opened and maintained numerous bank accounts. But due to the
difficulty if not the impossibility of detecting and documenting all those secret accounts as
well as the enormity of the deposits therein hidden, the following presentation is confined to
five identified accounts groups, with balances amounting to about $356-M with a reservation
for the filing of a supplemental or separate forfeiture complaint should the need arise.

H. THE AZIO-VERSO-VIBUR FOUNDATION ACCOUNTS

24. On June 11, 1971, Ferdinand Marcos issued a written order to Dr. Theo Bertheau, legal
counsel of Schweizeresche Kreditanstalt or SKA, also known as Swiss Credit Bank, for him
to establish the AZIO Foundation. On the same date, Marcos executed a power of attorney
in favor of Roberto S. Benedicto empowering him to transact business in behalf of the said
foundation. Pursuant to the said Marcos mandate, AZIO Foundation was formed on June 21,
1971 in Vaduz. Walter Fessler and Ernst Scheller, also of SKA Legal Service, and Dr.
Helmuth Merling from Schaan were designated as members of the Board of Trustees of the
said foundation. Ferdinand Marcos was named first beneficiary and the Marcos Foundation,
Inc. was second beneficiary. On November 12, 1971, FM again issued another written order
naming Austrahil PTY Ltd. In Sydney, Australia, as the foundation's first and sole beneficiary.
This was recorded on December 14, 1971.

25. In an undated instrument, Marcos changed the first and sole beneficiary to CHARIS
FOUNDATION. This change was recorded on December 4, 1972.

26. On August 29, 1978, the AZIO FOUNDATION was renamed to VERSO FOUNDATION.
The Board of Trustees remained the same. On March 11, 1981, Marcos issued a written
directive to liquidated VERSO FOUNDATION and to transfer all its assets to account of
FIDES TRUST COMPANY at Bank Hofman in Zurich under the account "Reference OSER."
The Board of Trustees decided to dissolve the foundation on June 25, 1981.

27. In an apparent maneuver to bury further the secret deposits beneath the thick layers of
corporate entities, FM effected the establishment of VIBUR FOUNDATION on May 13, 1981
in Vaduz. Atty. Ivo Beck and Limag Management, a wholly-owned subsidiary of Fides Trust,
were designated as members of the Board of Trustees. The account was officially opened
with SKA on September 10, 1981. The beneficial owner was not made known to the bank
since Fides Trust Company acted as fiduciary. However, comparison of the listing of the
securities in the safe deposit register of the VERSO FOUNDATION as of February 27, 1981
with that of VIBUR FOUNDATION as of December 31, 1981 readily reveals that exactly the
same securities were listed.

28. Under the foregoing circumstances, it is certain that the VIBUR FOUNDATION is the
beneficial successor of VERSO FOUNDATION.

29. On March 18, 1986, the Marcos-designated Board of Trustees decided to liquidate
VIBUR FOUNDATION. A notice of such liquidation was sent to the Office of the Public
Register on March 21, 1986. However, the bank accounts and respective balances of the
said VIBUR FOUNDATION remained with SKA. Apparently, the liquidation was an attempt
by the Marcoses to transfer the foundation's funds to another account or bank but this was
prevented by the timely freeze order issued by the Swiss authorities. One of the latest
documents obtained by the PCGG from the Swiss authorities is a declaration signed by Dr.
Ivo Beck (the trustee) stating that the beneficial owner of VIBUR FOUNDATION is Ferdinand
E. Marcos. Another document signed by G. Raber of SKA shows that VIBUR FOUNDATION
is owned by the "Marcos Familie"

30. As of December 31, 1989, the balance of the bank accounts of VIBUR FOUNDATION
with SKA, Zurich, under the General Account No. 469857 totaled $3,597,544.00
I. XANDY-WINTROP: CHARIS-SCOLARI-
VALAMO-SPINUS-AVERTINA FOUNDATION ACCOUNTS

31. This is the most intricate and complicated account group. As the Flow Chart hereof
shows, two (2) groups under the foundation organized by Marcos dummies/nominees for
FM's benefit, eventually joined together and became one (1) account group under the
AVERTINA FOUNDATION for the benefit of both FM and Imelda. This is the biggest group
from where the $50-M investment fund of the Marcoses was drawn when they bought the
Central Bank's dollar-denominated treasury notes with high-yielding interests.

32. On March 20, 1968, after his second year in the presidency, Marcos opened bank
accounts with SKA using an alias or pseudonym WILLIAM SAUNDERS, apparently to hide
his true identity. The next day, March 21, 1968, his First Lady, Mrs. Imelda Marcos also
opened her own bank accounts with the same bank using an American-sounding alias,
JANE RYAN. Found among the voluminous documents in Malacaang shortly after they fled
to Hawaii in haste that fateful night of February 25, 1986, were accomplished forms for
"Declaration/Specimen Signatures" submitted by the Marcos couple. Under the caption
"signature(s)" Ferdinand and Imelda signed their real names as well as their respective
aliases underneath. These accounts were actively operated and maintained by the Marcoses
for about two (2) years until their closure sometime in February, 1970 and the balances
transferred to XANDY FOUNDATION.

33. The XANDY FOUNDATION was established on March 3, 1970 in Vaduz. C.W. Fessler,
C. Souviron and E. Scheller were named as members of the Board of Trustees.

34. FM and Imelda issued the written mandate to establish the foundation to Markus Geel of
SKA on March 3, 1970. In the handwritten Regulations signed by the Marcos couple as well
as in the type-written Regulations signed by Markus Geel both dated February 13, 1970, the
Marcos spouses were named the first beneficiaries, the surviving spouse as the second
beneficiary and the Marcos children Imee, Ferdinand, Jr. (Bongbong) and Irene as equal
third beneficiaries.

35. The XANDY FOUNDATION was renamed WINTROP FOUNDATION on August 29,
1978. The Board of Trustees remained the same at the outset. However, on March 27, 1980,
Souviron was replaced by Dr. Peter Ritter. On March 10. 1981, Ferdinand and Imelda
Marcos issued a written order to the Board of Wintrop to liquidate the foundation and transfer
all its assets to Bank Hofmann in Zurich in favor of FIDES TRUST COMPANY. Later,
WINTROP FOUNDATION was dissolved.

36. The AVERTINA FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo
Beck and Limag Management, a wholly-owned subsidiary of FIDES TRUST CO., as
members of the Board of Trustees. Two (2) account categories, namely: CAR and NES,
were opened on September 10, 1981. The beneficial owner of AVERTINA was not made
known to the bank since the FIDES TRUST CO. acted as fiduciary. However, the securities
listed in the safe deposit register of WINTROP FOUNDATION Category R as of December
31, 1980 were the same as those listed in the register of AVERTINA FOUNDATION
Category CAR as of December 31, 1981. Likewise, the securities listed in the safe deposit
register of WINTROP FOUNDATION Category S as of December 31, 1980 were the same
as those listed in the register of Avertina Category NES as of December 31, 1981.Under the
circumstances, it is certain that the beneficial successor of WINTROP FOUNDATION is
AVERTINA FOUNDATION. The balance of Category CAR as of December 31, 1989
amounted to US$231,366,894.00 while that of Category NES as of 12-31-83 was
US$8,647,190.00. Latest documents received from Swiss authorities included a declaration
signed by IVO Beck stating that the beneficial owners of AVERTINA FOUNDATION are FM
and Imelda. Another document signed by G. Raber of SKA indicates that Avertina
Foundation is owned by the "Marcos Families."

37. The other groups of foundations that eventually joined AVERTINA were also established
by FM through his dummies, which started with the CHARIS FOUNDATION.

38. The CHARIS FOUNDATION was established in VADUZ on December 27, 1971. Walter
Fessler and Ernst Scheller of SKA and Dr. Peter Ritter were named as directors. Dr. Theo
Bertheau, SKA legal counsel, acted as founding director in behalf of FM by virtue of the
mandate and agreement dated November 12, 1971. FM himself was named the first
beneficiary and Xandy Foundation as second beneficiary in accordance with the handwritten
instructions of FM on November 12, 1971 and the Regulations. FM gave a power of attorney
to Roberto S. Benedicto on February 15, 1972 to act in his behalf with regard to Charis
Foundation.

39. On December 13, 1974, Charis Foundation was renamed Scolari Foundation but the
directors remained the same. On March 11, 1981 FM ordered in writing that the Valamo
Foundation be liquidated and all its assets be transferred to Bank Hofmann, AG in favor of
Fides Trust Company under the account "Reference OMAL". The Board of Directors decided
on the immediate dissolution of Valamo Foundation on June 25, 1981.

40 The SPINUS FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo
Beck and Limag Management, a wholly-owned subsidiary of Fides Trust Co., as members of
the Foundation's Board of Directors. The account was officially opened with SKA on
September 10, 1981. The beneficial owner of the foundation was not made known to the
bank since Fides Trust Co. acted as fiduciary. However, the list of securities in the safe
deposit register of Valamo Foundation as of December 31, 1980 are practically the same
with those listed in the safe deposit register of Spinus Foundation as of December 31, 1981.
Under the circumstances, it is certain that the Spinus Foundation is the beneficial successor
of the Valamo Foundation.

41. On September 6, 1982, there was a written instruction from Spinus Foundation to SKA to
close its Swiss Franc account and transfer the balance to Avertina Foundation. In
July/August, 1982, several transfers from the foundation's German marks and US dollar
accounts were made to Avertina Category CAR totaling DM 29.5-M and $58-M, respectively.
Moreover, a comparison of the list of securities of the Spinus Foundation as of February 3,
1982 with the safe deposit slips of the Avertina Foundation Category CAR as of August 19,
1982 shows that all the securities of Spinus were transferred to Avertina.

J. TRINIDAD-RAYBY-PALMY FOUNDATION ACCOUNTS

42. The Trinidad Foundation was organized on August 26, 1970 in Vaduz with C.W. Fessler
and E. Scheller of SKA and Dr. Otto Tondury as the foundation's directors. Imelda issued a
written mandate to establish the foundation to Markus Geel on August 26, 1970. The
regulations as well as the agreement, both dated August 28, 1970 were likewise signed by
Imelda. Imelda was named the first beneficiary and her children Imelda (Imee), Ferdinand,
Jr. (Bongbong) and, Irene were named as equal second beneficiaries.

43. Rayby Foundation was established on June 22, 1973 in Vaduz with Fessler, Scheller and
Ritter as members of the board of directors. Imelda issued a written mandate to Dr. Theo
Bertheau to establish the foundation with a note that the foundation's capitalization as well as
the cost of establishing it be debited against the account of Trinidad Foundation. Imelda was
named the first and only beneficiary of Rayby foundation. According to written information
from SKA dated November 28, 1988, Imelda apparently had the intention in 1973 to transfer
part of the assets of Trinidad Foundation to another foundation, thus the establishment of
Rayby Foundation. However, transfer of assets never took place. On March 10, 1981, Imelda
issued a written order to transfer all the assets of Rayby Foundation to Trinidad Foundation
and to subsequently liquidate Rayby. On the same date, she issued a written order to the
board of Trinidad to dissolve the foundation and transfer all its assets to Bank Hofmann in
favor of Fides Trust Co. Under the account "Reference Dido," Rayby was dissolved on April
6, 1981 and Trinidad was liquidated on August 3, 1981.

44. The PALMY FOUNDATION was established on May 13, 1981 in Vaduz with Dr. Ivo Beck
and Limag Management, a wholly-owned subsidiary of Fides Trust Co, as members of the
Foundation's Board of Directors. The account was officially opened with the SKA on
September 10, 1981. The beneficial owner was not made known to the bank since Fides
Trust Co. acted as fiduciary. However, when one compares the listing of securities in the
safe deposit register of Trinidad Foundation as of December 31,1980 with that of the Palmy
Foundation as of December 31, 1980, one can clearly see that practically the same
securities were listed. Under the circumstances, it is certain that the Palmy Foundation is the
beneficial successor of the Trinidad Foundation.

45. As of December 31, 1989, the ending balance of the bank accounts of Palmy Foundation
under General Account No. 391528 is $17,214,432.00.

46. Latest documents received from Swiss Authorities included a declaration signed by Dr.
Ivo Beck stating that the beneficial owner of Palmy Foundation is Imelda. Another document
signed by Raber shows that the said Palmy Foundation is owned by "Marcos Familie".

K. ROSALYS-AGUAMINA FOUNDATION ACCOUNTS

47. Rosalys Foundation was established in 1971 with FM as the beneficiary. Its Articles of
Incorporation was executed on September 24, 1971 and its By-Laws on October 3, 1971.
This foundation maintained several accounts with Swiss Bank Corporation (SBC) under the
general account 51960 where most of the bribe monies from Japanese suppliers were
hidden.

48. On December 19, 1985, Rosalys Foundation was liquidated and all its assets were
transferred to Aguamina Corporation's (Panama) Account No. 53300 with SBC. The
ownership by Aguamina Corporation of Account No. 53300 is evidenced by an opening
account documents from the bank. J. Christinaz and R.L. Rossier, First Vice-President and
Senior Vice President, respectively, of SBC, Geneva issued a declaration dated September
3, 1991 stating that the by-laws dated October 3, 1971 governing Rosalys Foundation was
the same by-law applied to Aguamina Corporation Account No. 53300. They further
confirmed that no change of beneficial owner was involved while transferring the assets of
Rosalys to Aguamina. Hence, FM remains the beneficiary of Aguamina Corporation Account
No. 53300.

As of August 30, 1991, the ending balance of Account No. 53300 amounted to
$80,566,483.00.

L. MALER FOUNDATION ACCOUNTS

 49. Maler was first created as an establishment. A statement of its rules and regulations was
found among Malacaang documents. It stated, among others, that 50% of the Company's
assets will be for sole and full right disposal of FM and Imelda during their lifetime, which the
remaining 50% will be divided in equal parts among their children. Another Malacaang
document dated October 19,1968 and signed by Ferdinand and Imelda pertains to the
appointment of Dr. Andre Barbey and Jean Louis Sunier as attorneys of the company and as
administrator and manager of all assets held by the company. The Marcos couple, also
mentioned in the said document that they bought the Maler Establishment from SBC,
Geneva. On the same date, FM and Imelda issued a letter addressed to Maler
Establishment, stating that all instructions to be transmitted with regard to Maler will be
signed with the word "JOHN LEWIS". This word will have the same value as the couple's
own personal signature. The letter was signed by FM and Imelda in their signatures and as
John Lewis.

50. Maler Establishment opened and maintained bank accounts with SBC, Geneva. The
opening bank documents were signed by Dr. Barbey and Mr. Sunnier as authorized
signatories.

51. On November 17, 1981, it became necessary to transform Maler Establishment into a
foundation. Likewise, the attorneys were changed to Michael Amaudruz, et. al. However,
administration of the assets was left to SBC. The articles of incorporation of Maler
Foundation registered on November 17, 1981 appear to be the same articles applied to
Maler Establishment. On February 28, 1984, Maler Foundation cancelled the power of
attorney for the management of its assets in favor of SBC and transferred such power to
Sustrust Investment Co., S.A.

52. As of June 6, 1991, the ending balance of Maler Foundation's Account Nos. 254,508 BT
and 98,929 NY amount SF 9,083,567 and SG 16,195,258, respectively, for a total of SF
25,278,825.00. GM only until December 31, 1980. This account was opened by Maler when
it was still an establishment which was subsequently transformed into a foundation.

53. All the five (5) group accounts in the over-all flow chart have a total balance of about
Three Hundred Fifty Six Million Dollars ($356,000,000.00) as shown by Annex "R-5" hereto
attached as integral part hereof.

xxx x x x.27

Respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and Ferdinand Marcos,
Jr., in their answer, stated the following:

xxx xxx xxx

4. Respondents ADMIT paragraphs 3 and 4 of the Petition.

5. Respondents specifically deny paragraph 5 of the Petition in so far as it states that

summons and other court processes may be served on Respondent Imelda R. Marcos at the
stated address the truth of the matter being that Respondent Imelda R. Marcos may be
served with summons and other processes at No. 10-B Bel Air Condominium 5022 P.
Burgos Street, Makati, Metro Manila, and ADMIT the rest.

xxx xxx xxx

10. Respondents ADMIT paragraph 11 of the Petition.

11. Respondents specifically DENY paragraph 12 of the Petition for lack of knowledge
sufficient to form a belief as to the truth of the allegation since Respondents were not privy to
the transactions and that they cannot remember exactly the truth as to the matters alleged.

12. Respondents specifically DENY paragraph 13 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs and Balance Sheet.

13. Respondents specifically DENY paragraph 14 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.

14. Respondents specifically DENY paragraph 15 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.

15. Respondents specifically DENY paragraph 16 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.

16. Respondents specifically DENY paragraph 17 of the Petition insofar as it attributes willful
duplicity on the part of the late President Marcos, for being false, the same being pure
conclusions based on pure assumption and not allegations of fact; and specifically DENY the
rest for lack of knowledge or information sufficient to form a belief as to the truth of the
allegation since Respondents cannot remember with exactitude the contents of the alleged
ITRs or the attachments thereto.

17. Respondents specifically DENY paragraph 18 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.

18. Respondents specifically DENY paragraph 19 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs and that they are not privy
to the activities of the BIR.

19. Respondents specifically DENY paragraph 20 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.

20. Respondents specifically DENY paragraph 21 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.

21. Respondents specifically DENY paragraph 22 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegation since Respondents
cannot remember with exactitude the contents of the alleged ITRs.
 22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents
clandestinely stashed the country's wealth in Switzerland and hid the same under layers and
layers of foundation and corporate entities for being false, the truth being that Respondents
aforesaid properties were lawfully acquired.

23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition
for lack of knowledge or information sufficient to form a belief as to the truth of the allegation
since Respondents were not privy to the transactions regarding the alleged Azio-Verso-Vibur
Foundation accounts, except that as to Respondent Imelda R. Marcos she specifically
remembers that the funds involved were lawfully acquired.

24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36,37, 38, 39, 40, and 41
of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of
the allegations since Respondents are not privy to the transactions and as to such
transaction they were privy to they cannot remember with exactitude the same having
occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically
remembers that the funds involved were lawfully acquired.

25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and 46, of the Petition for
lack of knowledge or information sufficient to form a belief as to the truth of the allegations
since Respondents were not privy to the transactions and as to such transaction they were
privy to they cannot remember with exactitude the same having occurred a long time ago,
except that as to Respondent Imelda R. Marcos she specifically remembers that the funds
involved were lawfully acquired.

26. Respondents specifically DENY paragraphs 49, 50, 51 and 52, of the Petition for lack of
knowledge or information sufficient to form a belief as to the truth of the allegations since
Respondents were not privy to the transactions and as to such transaction they were privy to
they cannot remember with exactitude the same having occurred a long time ago, except
that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved
were lawfully acquired.

Upon careful perusal of the foregoing, the Court finds that respondent Mrs. Marcos and the Marcos
children indubitably failed to tender genuine issues in their answer to the petition for forfeiture. A
genuine issue is an issue of fact which calls for the presentation of evidence as distinguished from
an issue which is fictitious and contrived, set up in bad faith or patently lacking in substance so as
not to constitute a genuine issue for trial. Respondents' defenses of "lack of knowledge for lack of
privity" or "(inability to) recall because it happened a long time ago" or, on the part of Mrs. Marcos,
that "the funds were lawfully acquired" are fully insufficient to tender genuine issues. Respondent
Marcoses' defenses were a sham and evidently calibrated to compound and confuse the issues.

The following pleadings filed by respondent Marcoses are replete with indications of a spurious
defense:

(a) Respondents' Answer dated October 18, 1993;

(b) Pre-trial Brief dated October 4, 1999 of Mrs. Marcos, Supplemental Pre-trial Brief dated
October 19, 1999 of Ferdinand, Jr. and Mrs. Imee Marcos-Manotoc adopting the pre-trial
brief of Mrs. Marcos, and Manifestation dated October 19, 1999 of Irene Marcos-Araneta
adopting the pre-trial briefs of her co- respondents;
 (c) Opposition to Motion for Summary Judgment dated March 21, 2000, filed by Mrs. Marcos
which the other respondents (Marcos children) adopted;

(d) Demurrer to Evidence dated May 2, 2000 filed by Mrs. Marcos and adopted by the
Marcos children;

(e) Motion for Reconsideration dated September 26, 2000 filed by Mrs. Marcos; Motion for
Reconsideration dated October 5, 2000 jointly filed by Mrs. Manotoc and Ferdinand, Jr., and
Supplemental Motion for Reconsideration dated October 9, 2000 likewise jointly filed by Mrs.
Manotoc and Ferdinand, Jr.;

(f) Memorandum dated December 12, 2000 of Mrs. Marcos and Memorandum dated
December 17, 2000 of the Marcos children;

(g) Manifestation dated May 26, 1998; and

(h) General/Supplemental Agreement dated December 23, 1993.

An examination of the foregoing pleadings is in order.

Respondents' Answer dated October 18, 1993.

In their answer, respondents failed to specifically deny each and every allegation contained in the
petition for forfeiture in the manner required by the rules. All they gave were stock answers like "they
have no sufficient knowledge" or "they could not recall because it happened a long time ago," and,
as to Mrs. Marcos, "the funds were lawfully acquired," without stating the basis of such assertions.

Section 10, Rule 8 of the 1997 Rules of Civil Procedure, provides:

A defendant must specify each material allegation of fact the truth of which he does not
admit and, whenever practicable, shall set forth the substance of the matters upon which he
relies to support his denial. Where a defendant desires to deny only a part of an averment,
he shall specify so much of it as is true and material and shall deny the remainder. Where a
defendant is without knowledge or information sufficient to form a belief as to the truth of a
material averment made in the complaint, he shall so state, and this shall have the effect of a
denial.28

The purpose of requiring respondents to make a specific denial is to make them disclose facts which
will disprove the allegations of petitioner at the trial, together with the matters they rely upon in
support of such denial. Our jurisdiction adheres to this rule to avoid and prevent unnecessary
expenses and waste of time by compelling both parties to lay their cards on the table, thus reducing
the controversy to its true terms. As explained in Alonso vs. Villamor,29

A litigation is not a game of technicalities in which one, more deeply schooled and skilled in
the subtle art of movement and position, entraps and destroys the other. It is rather a contest
in which each contending party fully and fairly lays before the court the facts in issue and
then, brushing aside as wholly trivial and indecisive all imperfections of form and
technicalities of procedure, asks that justice be done upon the merits. Lawsuits, unlike duels,
are not to be won by a rapier's thrust.
On the part of Mrs. Marcos, she claimed that the funds were lawfully acquired. However, she failed
to particularly state the ultimate facts surrounding the lawful manner or mode of acquisition of the
subject funds. Simply put, she merely stated in her answer with the other respondents that the funds
were "lawfully acquired" without detailing how exactly these funds were supposedly acquired legally
by them. Even in this case before us, her assertion that the funds were lawfully acquired remains
bare and unaccompanied by any factual support which can prove, by the presentation of evidence at
a hearing, that indeed the funds were acquired legitimately by the Marcos family.

Respondents' denials in their answer at the Sandiganbayan were based on their alleged lack of
knowledge or information sufficient to form a belief as to the truth of the allegations of the petition.

It is true that one of the modes of specific denial under the rules is a denial through a statement that
the defendant is without knowledge or information sufficient to form a belief as to the truth of the
material averment in the complaint. The question, however, is whether the kind of denial in
respondents' answer qualifies as the specific denial called for by the rules. We do not think so. In
Morales vs. Court of Appeals,30 this Court ruled that if an allegation directly and specifically charges
a party with having done, performed or committed a particular act which the latter did not in fact do,
perform or commit, a categorical and express denial must be made.

Here, despite the serious and specific allegations against them, the Marcoses responded by simply
saying that they had no knowledge or information sufficient to form a belief as to the truth of such
allegations. Such a general, self-serving claim of ignorance of the facts alleged in the petition for
forfeiture was insufficient to raise an issue. Respondent Marcoses should have positively stated how
it was that they were supposedly ignorant of the facts alleged.31

To elucidate, the allegation of petitioner Republic in paragraph 23 of the petition for forfeiture stated:

23. The following presentation very clearly and overwhelmingly show in detail how both
respondents clandestinely stashed away the country's wealth to Switzerland and hid the
same under layers upon layers of foundations and other corporate entities to prevent its
detection. Through their dummies/nominees, fronts or agents who formed those foundations
or corporate entities, they opened and maintained numerous bank accounts. But due to the
difficulty if not the impossibility of detecting and documenting all those secret accounts as
well as the enormity of the deposits therein hidden, the following presentation is confined to
five identified accounts groups, with balances amounting to about $356-M with a reservation
for the filing of a supplemental or separate forfeiture complaint should the need arise.32

Respondents' lame denial of the aforesaid allegation was:

22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents

clandestinely stashed the country's wealth in Switzerland and hid the same under layers and
layers of foundations and corporate entities for being false, the truth being that Respondents'
aforesaid properties were lawfully acquired.33

Evidently, this particular denial had the earmark of what is called in the law on pleadings as
a negative pregnant, that is, a denial pregnant with the admission of the substantial facts in the
pleading responded to which are not squarely denied. It was in effect an admission of the averments
it was directed at.34 Stated otherwise, a negative pregnant is a form of negative expression which
carries with it an affirmation or at least an implication of some kind favorable to the adverse party. It
is a denial pregnant with an admission of the substantial facts alleged in the pleading. Where a fact
is alleged with qualifying or modifying language and the words of the allegation as so qualified or
modified are literally denied, has been held that the qualifying circumstances alone are denied while
the fact itself is admitted.35

In the instant case, the material allegations in paragraph 23 of the said petition were not specifically
denied by respondents in paragraph 22 of their answer. The denial contained in paragraph 22 of the
answer was focused on the averment in paragraph 23 of the petition for forfeiture that "Respondents
clandestinely stashed the country's wealth in Switzerland and hid the same under layers and layers
of foundations and corporate entities." Paragraph 22 of the respondents' answer was thus a denial
pregnant with admissions of the following substantial facts:

(1) the Swiss bank deposits existed and

(2) that the estimated sum thereof was US$356 million as of December, 1990.

Therefore, the allegations in the petition for forfeiture on the existence of the Swiss bank deposits in
the sum of about US$356 million, not having been specifically denied by respondents in their
answer, were deemed admitted by them pursuant to Section 11, Rule 8 of the 1997 Revised Rules
on Civil Procedure:

Material averment in the complaint, xxx shall be deemed admitted when not specifically
denied. xxx.36

By the same token, the following unsupported denials of respondents in their answer were pregnant
with admissions of the substantial facts alleged in the Republic's petition for forfeiture:

23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition
for lack of knowledge or information sufficient to form a belief as to the truth of the allegation
since respondents were not privy to the transactions regarding the alleged Azio-Verso-Vibur
Foundation accounts, except that, as to respondent Imelda R. Marcos, she specifically
remembers that the funds involved were lawfully acquired.

24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 of
the Petition for lack of knowledge or information sufficient to form a belief as to the truth of
the allegations since respondents were not privy to the transactions and as to such
transactions they were privy to, they cannot remember with exactitude the same having
occurred a long time ago, except as to respondent Imelda R. Marcos, she specifically
remembers that the funds involved were lawfully acquired.

25. Respondents specifically DENY paragraphs 42, 43, 45, and 46 of the petition for lack of
knowledge or information sufficient to from a belief as to the truth of the allegations since
respondents were not privy to the transactions and as to such transaction they were privy to,
they cannot remember with exactitude, the same having occurred a long time ago, except
that as to respondent Imelda R. Marcos, she specifically remembers that the funds involved
were lawfully acquired.

26. Respondents specifically DENY paragraphs 49, 50, 51 and 52 of the petition for lack of
knowledge and information sufficient to form a belief as to the truth of the allegations since
respondents were not privy to the transactions and as to such transaction they were privy to
they cannot remember with exactitude the same having occurred a long time ago, except
that as to respondent Imelda R. Marcos, she specifically remembers that the funds involved
were lawfully acquired.
The matters referred to in paragraphs 23 to 26 of the respondents' answer pertained to the creation
of five groups of accounts as well as their respective ending balances and attached documents
alleged in paragraphs 24 to 52 of the Republic's petition for forfeiture. Respondent Imelda R. Marcos
never specifically denied the existence of the Swiss funds. Her claim that "the funds involved were
lawfully acquired" was an acknowledgment on her part of the existence of said deposits. This only
reinforced her earlier admission of the allegation in paragraph 23 of the petition for forfeiture
regarding the existence of the US$356 million Swiss bank deposits.

The allegations in paragraphs 4737 and 4838 of the petition for forfeiture referring to the creation and
amount of the deposits of the Rosalys-Aguamina Foundation as well as the averment in paragraph
52-a39 of the said petition with respect to the sum of the Swiss bank deposits estimated to be
US$356 million were again not specifically denied by respondents in their answer. The respondents
did not at all respond to the issues raised in these paragraphs and the existence, nature and amount
of the Swiss funds were therefore deemed admitted by them. As held in Galofa vs. Nee Bon Sing,40 if
a defendant's denial is a negative pregnant, it is equivalent to an admission.

Moreover, respondents' denial of the allegations in the petition for forfeiture "for lack of knowledge or
information sufficient to form a belief as to the truth of the allegations since respondents were not
privy to the transactions" was just a pretense. Mrs. Marcos' privity to the transactions was in fact
evident from her signatures on some of the vital documents41 attached to the petition for forfeiture
which Mrs. Marcos failed to specifically deny as required by the rules.42

It is worthy to note that the pertinent documents attached to the petition for forfeiture were even
signed personally by respondent Mrs. Marcos and her late husband, Ferdinand E. Marcos, indicating
that said documents were within their knowledge. As correctly pointed out by Sandiganbayan Justice
Francisco Villaruz, Jr. in his dissenting opinion:

The pattern of: 1) creating foundations, 2) use of pseudonyms and dummies, 3) approving
regulations of the Foundations for the distribution of capital and income of the Foundations to
the First and Second beneficiary (who are no other than FM and his family), 4) opening of
bank accounts for the Foundations, 5) changing the names of the Foundations, 6)
transferring funds and assets of the Foundations to other Foundations or Fides Trust, 7)
liquidation of the Foundations as substantiated by the Annexes U to U-168, Petition [for
forfeiture] strongly indicate that FM and/or Imelda were the real owners of the assets
deposited in the Swiss banks, using the Foundations as dummies.43

How could respondents therefore claim lack of sufficient knowledge or information regarding the
existence of the Swiss bank deposits and the creation of five groups of accounts when Mrs. Marcos
and her late husband personally masterminded and participated in the formation and control of said
foundations? This is a fact respondent Marcoses were never able to explain.

Not only that. Respondents' answer also technically admitted the genuineness and due execution of
the Income Tax Returns (ITRs) and the balance sheets of the late Ferdinand E. Marcos and Imelda
R. Marcos attached to the petition for forfeiture, as well as the veracity of the contents thereof.

The answer again premised its denials of said ITRs and balance sheets on the ground of lack of
knowledge or information sufficient to form a belief as to the truth of the contents thereof. Petitioner
correctly points out that respondents' denial was not really grounded on lack of knowledge or
information sufficient to form a belief but was based on lack of recollection. By reviewing their own
records, respondent Marcoses could have easily determined the genuineness and due execution of
the ITRs and the balance sheets. They also had the means and opportunity of verifying the same
from the records of the BIR and the Office of the President. They did not.
When matters regarding which respondents claim to have no knowledge or information sufficient to
form a belief are plainly and necessarily within their knowledge, their alleged ignorance or lack of
information will not be considered a specific denial.44 An unexplained denial of information within the
control of the pleader, or is readily accessible to him, is evasive and is insufficient to constitute an
effective denial.45

The form of denial adopted by respondents must be availed of with sincerity and in good faith, and
certainly not for the purpose of confusing the adverse party as to what allegations of the petition are
really being challenged; nor should it be made for the purpose of delay.46 In the instant case, the
Marcoses did not only present unsubstantiated assertions but in truth attempted to mislead and
deceive this Court by presenting an obviously contrived defense.

Simply put, a profession of ignorance about a fact which is patently and necessarily within the
pleader's knowledge or means of knowing is as ineffective as no denial at all.47 Respondents'
ineffective denial thus failed to properly tender an issue and the averments contained in the petition
for forfeiture were deemed judicially admitted by them.

As held in J.P. Juan & Sons, Inc. vs. Lianga Industries, Inc.:

Its "specific denial" of the material allegation of the petition without setting forth the
substance of the matters relied upon to support its general denial, when such matters were
plainly within its knowledge and it could not logically pretend ignorance as to the same,
therefore, failed to properly tender on issue.48

Thus, the general denial of the Marcos children of the allegations in the petition for forfeiture "for lack
of knowledge or information sufficient to form a belief as to the truth of the allegations since they
were not privy to the transactions" cannot rightfully be accepted as a defense because they are the
legal heirs and successors-in-interest of Ferdinand E. Marcos and are therefore bound by the acts of
their father vis-a-vis the Swiss funds.

PRE-TRIAL BRIEF DATED OCTOBER 18, 1993

The pre-trial brief of Mrs. Marcos was adopted by the three Marcos children. In said brief, Mrs.
Marcos stressed that the funds involved were lawfully acquired. But, as in their answer, they failed to
state and substantiate how these funds were acquired lawfully. They failed to present and attach
even a single document that would show and prove the truth of their allegations. Section 6, Rule 18
of the 1997 Rules of Civil Procedure provides:

The parties shall file with the court and serve on the adverse party, x x x their respective pre-trial
briefs which shall contain, among others:

xxx

(d) the documents or exhibits to be presented, stating the purpose thereof;

xxx

(f) the number and names of the witnesses, and the substance of their respective
testimonies.49
It is unquestionably within the court's power to require the parties to submit their pre-trial briefs and
to state the number of witnesses intended to be called to the stand, and a brief summary of the
evidence each of them is expected to give as well as to disclose the number of documents to be
submitted with a description of the nature of each. The tenor and character of the testimony of the
witnesses and of the documents to be deduced at the trial thus made known, in addition to the
particular issues of fact and law, it becomes apparent if genuine issues are being put forward
necessitating the holding of a trial. Likewise, the parties are obliged not only to make a formal
identification and specification of the issues and their proofs, and to put these matters in writing and
submit them to the court within the specified period for the prompt disposition of the action.50

The pre-trial brief of Mrs. Marcos, as subsequently adopted by respondent Marcos children, merely
stated:

xxx

WITNESSES

4.1 Respondent Imelda will present herself as a witness and reserves the right to present
additional witnesses as may be necessary in the course of the trial.

xxx

DOCUMENTARY EVIDENCE

5.1 Respondent Imelda reserves the right to present and introduce in evidence documents
as may be necessary in the course of the trial.

Mrs. Marcos did not enumerate and describe the documents constituting her evidence. Neither the
names of witnesses nor the nature of their testimony was stated. What alone appeared certain was
the testimony of Mrs. Marcos only who in fact had previously claimed ignorance and lack of
knowledge. And even then, the substance of her testimony, as required by the rules, was not made
known either. Such cunning tactics of respondents are totally unacceptable to this Court. We hold
that, since no genuine issue was raised, the case became ripe for summary judgment.

OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

DATED MARCH 21, 2000

The opposition filed by Mrs. Marcos to the motion for summary judgment dated March 21, 2000 of
petitioner Republic was merely adopted by the Marcos children as their own opposition to the said
motion. However, it was again not accompanied by affidavits, depositions or admissions as required
by Section 3, Rule 35 of the 1997 Rules on Civil Procedure:

x x x The adverse party may serve opposing affidavits, depositions, or admissions at least
three (3) days before hearing. After hearing, the judgment sought shall be rendered forthwith
if the pleadings, supporting affidavits, depositions, and admissions on file, show that, except
as to the amount of damages, there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.51

The absence of opposing affidavits, depositions and admissions to contradict the sworn declarations
in the Republic's motion only demonstrated that the averments of such opposition were not genuine
and therefore unworthy of belief.
 Demurrer to Evidence dated May 2, 2000;52
Motions for Reconsideration;53 and Memoranda
of Mrs. Marcos and the Marcos children54

All these pleadings again contained no allegations of facts showing their lawful acquisition of the
funds. Once more, respondents merely made general denials without alleging facts which would
have been admissible in evidence at the hearing, thereby failing to raise genuine issues of fact.

Mrs. Marcos insists in her memorandum dated October 21, 2002 that, during the pre-trial, her
counsel stated that his client was just a beneficiary of the funds, contrary to petitioner Republic's
allegation that Mrs. Marcos disclaimed ownership of or interest in the funds.

This is yet another indication that respondents presented a fictitious defense because, during the
pre-trial, Mrs. Marcos and the Marcos children denied ownership of or interest in the Swiss funds:

PJ Garchitorena:

Make of record that as far as Imelda Marcos is concerned through the statement of
Atty. Armando M. Marcelo that the US$360 million more or less subject matter of the
instant lawsuit as allegedly obtained from the various Swiss Foundations do not
belong to the estate of Marcos or to Imelda Marcos herself. That's your statement of
facts?

Atty. MARCELO:

Yes, Your Honor.

PJ Garchitorena:

That's it. Okay. Counsel for Manotoc and Manotoc, Jr. What is your point here? Does
the estate of Marcos own anything of the $360 million subject of this case.

Atty. TECSON:

We joined the Manifestation of Counsel.

PJ Garchitorena:

You do not own anything?

Atty. TECSON:

Yes, Your Honor.

PJ Garchitorena:

Counsel for Irene Araneta?

Atty. SISON:
 I join the position taken by my other compaeros here, Your Honor.

xxx

Atty. SISON:

Irene Araneta as heir do (sic) not own any of the amount, Your Honor.55

We are convinced that the strategy of respondent Marcoses was to confuse petitioner Republic as to
what facts they would prove or what issues they intended to pose for the court's resolution. There is
no doubt in our mind that they were leading petitioner Republic, and now this Court, to perplexity, if
not trying to drag this forfeiture case to eternity.

Manifestation dated May 26, 1998 filed by MRS.

Marcos; General/Supplemental Compromise
Agreement dated December 28, 1993

These pleadings of respondent Marcoses presented nothing but feigned defenses. In their earlier
pleadings, respondents alleged either that they had no knowledge of the existence of the Swiss
deposits or that they could no longer remember anything as it happened a long time ago. As to Mrs.
Marcos, she remembered that it was lawfully acquired.

In her Manifestation dated May 26, 1998, Mrs. Marcos stated that:

COMES NOW undersigned counsel for respondent Imelda R. Marcos, and before this
Honorable Court, most respectfully manifests:

That respondent Imelda R, Marcos owns 90% of the subject matter of the above-entitled
case, being the sole beneficiary of the dollar deposits in the name of the various foundations
alleged in the case;

That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of
the late President Ferdinand E. Marcos.

In the Compromise/Supplemental Agreements, respondent Marcoses sought to implement the

agreed distribution of the Marcos assets, including the Swiss deposits. This was, to us, an
unequivocal admission of ownership by the Marcoses of the said deposits.

But, as already pointed out, during the pre-trial conference, respondent Marcoses denied knowledge
as well as ownership of the Swiss funds.

Anyway we look at it, respondent Marcoses have put forth no real defense. The "facts" pleaded by
respondents, while ostensibly raising important questions or issues of fact, in reality comprised mere
verbiage that was evidently wanting in substance and constituted no genuine issues for trial.

We therefore rule that, under the circumstances, summary judgment is proper.

In fact, it is the law itself which determines when summary judgment is called for. Under the rules,
summary judgment is appropriate when there are no genuine issues of fact requiring the
presentation of evidence in a full-blown trial. Even if on their face the pleadings appear to raise
issue, if the affidavits, depositions and admissions show that such issues are not genuine, then
summary judgment as prescribed by the rules must ensue as a matter of law.56

In sum, mere denials, if unaccompanied by any fact which will be admissible in evidence at a
hearing, are not sufficient to raise genuine issues of fact and will not defeat a motion for summary
judgment.57 A summary judgment is one granted upon motion of a party for an expeditious
settlement of the case, it appearing from the pleadings, depositions, admissions and affidavits that
there are no important questions or issues of fact posed and, therefore, the movant is entitled to a
judgment as a matter of law. A motion for summary judgment is premised on the assumption that the
issues presented need not be tried either because these are patently devoid of substance or that
there is no genuine issue as to any pertinent fact. It is a method sanctioned by the Rules of Court for
the prompt disposition of a civil action where there exists no serious controversy.58 Summary
judgment is a procedural device for the prompt disposition of actions in which the pleadings raise
only a legal issue, not a genuine issue as to any material fact. The theory of summary judgment is
that, although an answer may on its face appear to tender issues requiring trial, if it is established by
affidavits, depositions or admissions that those issues are not genuine but fictitious, the Court is
justified in dispensing with the trial and rendering summary judgment for petitioner.59

In the various annexes to the petition for forfeiture, petitioner Republic attached sworn statements of
witnesses who had personal knowledge of the Marcoses' participation in the illegal acquisition of
funds deposited in the Swiss accounts under the names of five groups or foundations. These sworn
statements substantiated the ill-gotten nature of the Swiss bank deposits. In their answer and other
subsequent pleadings, however, the Marcoses merely made general denials of the allegations
against them without stating facts admissible in evidence at the hearing, thereby failing to raise any
genuine issues of fact.

Under these circumstances, a trial would have served no purpose at all and would have been totally
unnecessary, thus justifying a summary judgment on the petition for forfeiture. There were no
opposing affidavits to contradict the sworn declarations of the witnesses of petitioner Republic,
leading to the inescapable conclusion that the matters raised in the Marcoses' answer were false.

Time and again, this Court has encountered cases like this which are either only half-heartedly
defended or, if the semblance of a defense is interposed at all, it is only to delay disposition and gain
time. It is certainly not in the interest of justice to allow respondent Marcoses to avail of the appellate
remedies accorded by the Rules of Court to litigants in good faith, to the prejudice of the Republic
and ultimately of the Filipino people. From the beginning, a candid demonstration of respondents'
good faith should have been made to the court below. Without the deceptive reasoning and
argumentation, this protracted litigation could have ended a long time ago.

Since 1991, when the petition for forfeiture was first filed, up to the present, all respondents have
offered are foxy responses like "lack of sufficient knowledge or lack of privity" or "they cannot recall
because it happened a long time ago" or, as to Mrs. Marcos, "the funds were lawfully acquired." But,
whenever it suits them, they also claim ownership of 90% of the funds and allege that only 10%
belongs to the Marcos estate. It has been an incredible charade from beginning to end.

In the hope of convincing this Court to rule otherwise, respondents Maria Imelda Marcos-Manotoc
and Ferdinand R. Marcos Jr. contend that "by its positive acts and express admissions prior to filing
the motion for summary judgment on March 10, 2000, petitioner Republic had bound itself to go to
trial on the basis of existing issues. Thus, it had legally waived whatever right it had to move for
summary judgment."60
We do not think so. The alleged positive acts and express admissions of the petitioner did not
preclude it from filing a motion for summary judgment.

Rule 35 of the 1997 Rules of Civil Procedure provides:

Rule 35

Summary Judgment

Section 1. Summary judgment for claimant. - A party seeking to recover upon a claim,
counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with supporting affidavits, depositions
or admissions for a summary judgment in his favor upon all or any part thereof.

Section 2. Summary judgment for defending party. - A party against whom a claim,
counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any time,
move with supporting affidavits, depositions or admissions for a summary judgment in his
favor as to all or any part thereof. (Emphasis ours)61

Under the rule, the plaintiff can move for summary judgment "at any time after the pleading in
answer thereto (i.e., in answer to the claim, counterclaim or cross-claim) has been served." No fixed
reglementary period is provided by the Rules. How else does one construe the phrase "any time
after the answer has been served?"

This issue is actually one of first impression. No local jurisprudence or authoritative work has
touched upon this matter. This being so, an examination of foreign laws and jurisprudence,
particularly those of the United States where many of our laws and rules were copied, is in order.

Rule 56 of the Federal Rules of Civil Procedure provides that a party seeking to recover upon a
claim, counterclaim or cross-claim may move for summary judgment at any time after the expiration
of 20 days from the commencement of the action or after service of a motion for summary judgment
by the adverse party, and that a party against whom a claim, counterclaim or cross-claim is asserted
may move for summary judgment at any time.

However, some rules, particularly Rule 113 of the Rules of Civil Practice of New York, specifically
provide that a motion for summary judgment may not be made until issues have been joined, that is,
only after an answer has been served.62 Under said rule, after issues have been joined, the motion
for summary judgment may be made at any stage of the litigation.63 No fixed prescriptive period is
provided.

Like Rule 113 of the Rules of Civil Practice of New York, our rules also provide that a motion for
summary judgment may not be made until issues have been joined, meaning, the plaintiff has to wait
for the answer before he can move for summary judgment.64 And like the New York rules, ours do
not provide for a fixed reglementary period within which to move for summary judgment.

This being so, the New York Supreme Court's interpretation of Rule 113 of the Rules of Civil Practice
can be applied by analogy to the interpretation of Section 1, Rule 35, of our 1997 Rules of Civil
Procedure.
Under the New York rule, after the issues have been joined, the motion for summary judgment may
be made at any stage of the litigation. And what exactly does the phrase "at any stage of the
litigation" mean? In Ecker vs. Muzysh,65 the New York Supreme Court ruled:

"PER CURIAM.

Plaintiff introduced her evidence and the defendants rested on the case made by the plaintiff.
The case was submitted. Owing to the serious illness of the trial justice, a decision was not
rendered within sixty days after the final adjournment of the term at which the case was tried.
With the approval of the trial justice, the plaintiff moved for a new trial under Section 442 of
the Civil Practice Act. The plaintiff also moved for summary judgment under Rule 113 of the
Rules of Civil Practice. The motion was opposed mainly on the ground that, by
proceeding to trial, the plaintiff had waived her right to summary judgment and that the
answer and the opposing affidavits raised triable issues. The amount due and unpaid under
the contract is not in dispute. The Special Term granted both motions and the defendants
have appealed.

The Special Term properly held that the answer and the opposing affidavits raised no triable
issue. Rule 113 of the Rules of Civil Practice and the Civil Practice Act prescribe no
limitation as to the time when a motion for summary judgment must be made. The
object of Rule 113 is to empower the court to summarily determine whether or not a
bona fide issue exists between the parties, and there is no limitation on the power of
the court to make such a determination at any stage of the litigation." (emphasis ours)

On the basis of the aforequoted disquisition, "any stage of the litigation" means that "even if the
plaintiff has proceeded to trial, this does not preclude him from thereafter moving for summary
judgment."66

In the case at bar, petitioner moved for summary judgment after pre-trial and before its scheduled
date for presentation of evidence. Respondent Marcoses argue that, by agreeing to proceed to trial
during the pre-trial conference, petitioner "waived" its right to summary judgment.

This argument must fail in the light of the New York Supreme Court ruling which we apply by
analogy to this case. In Ecker,67 the defendant opposed the motion for summary judgment on a
ground similar to that raised by the Marcoses, that is, "that plaintiff had waived her right to summary
judgment" by her act of proceeding to trial. If, as correctly ruled by the New York court, plaintiff was
allowed to move for summary judgment even after trial and submission of the case for resolution,
more so should we permit it in the present case where petitioner moved for summary
judgment before trial.

Therefore, the phrase "anytime after the pleading in answer thereto has been served" in Section 1,
Rule 35 of our Rules of Civil Procedure means "at any stage of the litigation." Whenever it becomes
evident at any stage of the litigation that no triable issue exists, or that the defenses raised by the
defendant(s) are sham or frivolous, plaintiff may move for summary judgment. A contrary
interpretation would go against the very objective of the Rule on Summary Judgment which is to
"weed out sham claims or defenses thereby avoiding the expense and loss of time involved in a
trial."68

In cases with political undertones like the one at bar, adverse parties will often do almost anything to
delay the proceedings in the hope that a future administration sympathetic to them might be able to
influence the outcome of the case in their favor. This is rank injustice we cannot tolerate.
The law looks with disfavor on long, protracted and expensive litigation and encourages the speedy
and prompt disposition of cases. That is why the law and the rules provide for a number of devices
to ensure the speedy disposition of cases. Summary judgment is one of them.

Faithful therefore to the spirit of the law on summary judgment which seeks to avoid unnecessary
expense and loss of time in a trial, we hereby rule that petitioner Republic could validly move for
summary judgment any time after the respondents' answer was filed or, for that matter, at any
subsequent stage of the litigation. The fact that petitioner agreed to proceed to trial did not in any
way prevent it from moving for summary judgment, as indeed no genuine issue of fact was ever
validly raised by respondent Marcoses.

This interpretation conforms with the guiding principle enshrined in Section 6, Rule 1 of the 1997
Rules of Civil Procedure that the "[r]ules should be liberally construed in order to promote their
objective of securing a just, speedy and inexpensive disposition of every action and proceeding."69

Respondents further allege that the motion for summary judgment was based on respondents'
answer and other documents that had long been in the records of the case. Thus, by the time the
motion was filed on March 10, 2000, estoppel by laches had already set in against petitioner.

We disagree. Estoppel by laches is the failure or neglect for an unreasonable or unexplained length
of time to do that which, by exercising due diligence, could or should have been done earlier,
warranting a presumption that the person has abandoned his right or declined to assert it.70 In effect,
therefore, the principle of laches is one of estoppel because "it prevents people who have slept on
their rights from prejudicing the rights of third parties who have placed reliance on the inaction of the
original parties and their successors-in-interest".71

A careful examination of the records, however, reveals that petitioner was in fact never remiss in
pursuing its case against respondent Marcoses through every remedy available to it, including the
motion for summary judgment.

Petitioner Republic initially filed its motion for summary judgment on October 18, 1996. The motion
was denied because of the pending compromise agreement between the Marcoses and petitioner.
But during the pre-trial conference, the Marcoses denied ownership of the Swiss funds, prompting
petitioner to file another motion for summary judgment now under consideration by this Court. It was
the subsequent events that transpired after the answer was filed, therefore, which prevented
petitioner from filing the questioned motion. It was definitely not because of neglect or inaction that
petitioner filed the (second) motion for summary judgment years after respondents' answer to the
petition for forfeiture.

In invoking the doctrine of estoppel by laches, respondents must show not only unjustified inaction
but also that some unfair injury to them might result unless the action is barred.72

This, respondents failed to bear out. In fact, during the pre-trial conference, the Marcoses disclaimed
ownership of the Swiss deposits. Not being the owners, as they claimed, respondents did not have
any vested right or interest which could be adversely affected by petitioner's alleged inaction.

But even assuming for the sake of argument that laches had already set in, the doctrine of estoppel
or laches does not apply when the government sues as a sovereign or asserts governmental
rights.73 Nor can estoppel validate an act that contravenes law or public policy.74

As a final point, it must be emphasized that laches is not a mere question of time but is principally a
question of the inequity or unfairness of permitting a right or claim to be enforced or
asserted.75 Equity demands that petitioner Republic should not be barred from pursuing the people's
case against the Marcoses.

(2) The Propriety of Forfeiture

The matter of summary judgment having been thus settled, the issue of whether or not petitioner
Republic was able to prove its case for forfeiture in accordance with the requisites of Sections 2 and
3 of RA 1379 now takes center stage.

The law raises the prima facie presumption that a property is unlawfully acquired, hence subject to
forfeiture, if its amount or value is manifestly disproportionate to the official salary and other lawful
income of the public officer who owns it. Hence, Sections 2 and 6 of RA 137976 provide:

xxx xxx

Section 2. Filing of petition. Whenever any public officer or employee has acquired during
his incumbency an amount or property which is manifestly out of proportion to his salary as
such public officer or employee and to his other lawful income and the income from
legitimately acquired property, said property shall be presumed prima facie to have been
unlawfully acquired.

xxx xxx

Sec. 6. Judgment If the respondent is unable to show to the satisfaction of the court that he
has lawfully acquired the property in question, then the court shall declare such property in
question, forfeited in favor of the State, and by virtue of such judgment the property aforesaid
shall become the property of the State.Provided, That no judgment shall be rendered within
six months before any general election or within three months before any special election.
The Court may, in addition, refer this case to the corresponding Executive Department for
administrative or criminal action, or both.

From the above-quoted provisions of the law, the following facts must be established in order that
forfeiture or seizure of the Swiss deposits may be effected:

(1) ownership by the public officer of money or property acquired during his incumbency,
whether it be in his name or otherwise, and

(2) the extent to which the amount of that money or property exceeds, i. e., is grossly
disproportionate to, the legitimate income of the public officer.

That spouses Ferdinand and Imelda Marcos were public officials during the time material to the
instant case was never in dispute. Paragraph 4 of respondent Marcoses' answer categorically
admitted the allegations in paragraph 4 of the petition for forfeiture as to the personal circumstances
of Ferdinand E. Marcos as a public official who served without interruption as Congressman,
Senator, Senate President and President of the Republic of the Philippines from December 1, 1965
to February 25, 1986.77 Likewise, respondents admitted in their answer the contents of paragraph 5
of the petition as to the personal circumstances of Imelda R. Marcos who once served as a member
of the Interim Batasang Pambansa from 1978 to 1984 and as Metro Manila Governor, concurrently
Minister of Human Settlements, from June 1976 to February 1986.78
Respondent Mrs. Marcos also admitted in paragraph 10 of her answer the allegations of paragraph
11 of the petition for forfeiture which referred to the accumulated salaries of respondents Ferdinand
E. Marcos and Imelda R. Marcos.79 The combined accumulated salaries of the Marcos couple were
reflected in the Certification dated May 27, 1986 issued by then Minister of Budget and Management
Alberto Romulo.80 The Certification showed that, from 1966 to 1985, Ferdinand E. Marcos and
Imelda R. Marcos had accumulated salaries in the amount of P1,570,000 and P718,750,
respectively, or a total of P2,288,750:

Ferdinand E. Marcos, as President

1966-1976 at P60,000/year P660,000

1977-1984 at P100,000/year 800,000
1985 at P110,000/year 110,000
P1,570,00

Imelda R. Marcos, as Minister

June 1976-1985 at P75,000/year P718,000

In addition to their accumulated salaries from 1966 to 1985 are the Marcos couple's combined
salaries from January to February 1986 in the amount of P30,833.33. Hence, their total accumulated
salaries amounted to P2,319,583.33. Converted to U.S. dollars on the basis of the corresponding
peso-dollar exchange rates prevailing during the applicable period when said salaries were received,
the total amount had an equivalent value of $304,372.43.

The dollar equivalent was arrived at by using the official annual rates of exchange of the Philippine
peso and the US dollar from 1965 to 1985 as well as the official monthly rates of exchange in
January and February 1986 issued by the Center for Statistical Information of the Bangko Sentral ng
Pilipinas.

Prescinding from the aforesaid admissions, Section 4, Rule 129 of the Rules of Court provides that:

Section 4. Judicial admissions An admission, verbal or written, made by a party in the

course of the proceedings in the same case does not require proof. The admission may be
contradicted only by showing that it was made through palpable mistake or that no such
admission was made.81

It is settled that judicial admissions may be made: (a) in the pleadings filed by the parties; (b) in the
course of the trial either by verbal or written manifestations or stipulations; or (c) in other stages of
judicial proceedings, as in the pre-trial of the case.82 Thus, facts pleaded in the petition and answer,
as in the case at bar, are deemed admissions of petitioner and respondents, respectively, who are
not permitted to contradict them or subsequently take a position contrary to or inconsistent with such
admissions.83

The sum of $304,372.43 should be held as the only known lawful income of respondents since they
did not file any Statement of Assets and Liabilities (SAL), as required by law, from which their net
worth could be determined. Besides, under the 1935 Constitution, Ferdinand E. Marcos as President
could not receive "any other emolument from the Government or any of its subdivisions and
instrumentalities".84 Likewise, under the 1973 Constitution, Ferdinand E. Marcos as President could
"not receive during his tenure any other emolument from the Government or any other source."85 In
fact, his management of businesses, like the administration of foundations to accumulate funds, was
expressly prohibited under the 1973 Constitution:

Article VII, Sec. 4(2) The President and the Vice-President shall not, during their tenure,
hold any other office except when otherwise provided in this Constitution, nor may they
practice any profession, participate directly or indirectly in the management of any business,
or be financially interested directly or indirectly in any contract with, or in any franchise or
special privilege granted by the Government or any other subdivision, agency, or
instrumentality thereof, including any government owned or controlled corporation.

Article VII, Sec. 11 No Member of the National Assembly shall appear as counsel before
any court inferior to a court with appellate jurisdiction, x x x. Neither shall he, directly or
indirectly, be interested financially in any contract with, or in any franchise or special privilege
granted by the Government, or any subdivision, agency, or instrumentality thereof including
any government owned or controlled corporation during his term of office. He shall not
intervene in any matter before any office of the government for his pecuniary benefit.

Article IX, Sec. 7 The Prime Minister and Members of the Cabinet shall be subject to the
provision of Section 11, Article VIII hereof and may not appear as counsel before any court
or administrative body, or manage any business, or practice any profession, and shall also
be subject to such other disqualification as may be provided by law.

Their only known lawful income of $304,372.43 can therefore legally and fairly serve as basis for
determining the existence of a prima facie case of forfeiture of the Swiss funds.

Respondents argue that petitioner was not able to establish a prima facie case for the forfeiture of
the Swiss funds since it failed to prove the essential elements under Section 3, paragraphs (c), (d)
and (e) of RA 1379. As the Act is a penal statute, its provisions are mandatory and should thus be
construed strictly against the petitioner and liberally in favor of respondent Marcoses.

We hold that it was not for petitioner to establish the Marcoses' other lawful income or income from
legitimately acquired property for the presumption to apply because, as between petitioner and
respondents, the latter were in a better position to know if there were such other sources of lawful
income. And if indeed there was such other lawful income, respondents should have specifically
stated the same in their answer. Insofar as petitioner Republic was concerned, it was enough to
specify the known lawful income of respondents.

Section 9 of the PCGG Rules and Regulations provides that, in determining prima facie evidence of
ill-gotten wealth, the value of the accumulated assets, properties and other material possessions of
those covered by Executive Order Nos. 1 and 2 must be out of proportion to the known lawful
income of such persons. The respondent Marcos couple did not file any Statement of Assets and
Liabilities (SAL) from which their net worth could be determined. Their failure to file their SAL was in
itself a violation of law and to allow them to successfully assail the Republic for not presenting their
SAL would reward them for their violation of the law.

Further, contrary to the claim of respondents, the admissions made by them in their various
pleadings and documents were valid. It is of record that respondents judicially admitted that the
money deposited with the Swiss banks belonged to them.

We agree with petitioner that respondent Marcoses made judicial admissions of their ownership of
the subject Swiss bank deposits in their answer, the General/Supplemental Agreements, Mrs.
Marcos' Manifestation and Constancia dated May 5, 1999, and the Undertaking dated February 10,
1999. We take note of the fact that the Associate Justices of the Sandiganbayan were unanimous in
holding that respondents had made judicial admissions of their ownership of the Swiss funds.

In their answer, aside from admitting the existence of the subject funds, respondents likewise
admitted ownershipthereof. Paragraph 22 of respondents' answer stated:

22. Respondents specifically DENY PARAGRAPH 23 insofar as it alleges that respondents

clandestinely stashed the country's wealth in Switzerland and hid the same under layers and
layers of foundations and corporate entities for being false, the truth being that respondents'
aforesaid properties were lawfully acquired. (emphasis supplied)

By qualifying their acquisition of the Swiss bank deposits as lawful, respondents unwittingly admitted
their ownership thereof.

Respondent Mrs. Marcos also admitted ownership of the Swiss bank deposits by failing to deny
under oath the genuineness and due execution of certain actionable documents bearing her
signature attached to the petition. As discussed earlier, Section 11, Rule 886 of the 1997 Rules of
Civil Procedure provides that material averments in the complaint shall be deemed admitted when
not specifically denied.

The General87 and Supplemental88 Agreements executed by petitioner and respondents on

December 28, 1993 further bolstered the claim of petitioner Republic that its case for forfeiture was
proven in accordance with the requisites of Sections 2 and 3 of RA 1379. The whereas clause in the
General Agreement declared that:

WHEREAS, the FIRST PARTY has obtained a judgment from the Swiss Federal Tribunal on
December 21, 1990, that the $356 million belongs in principle to the Republic of the
Philippines provided certain conditionalities are met, but even after 7 years, the FIRST
PARTY has not been able to procure a final judgment of conviction against the PRIVATE
PARTY.

While the Supplemental Agreement warranted, inter alia, that:

In consideration of the foregoing, the parties hereby agree that the PRIVATE PARTY shall
be entitled to the equivalent of 25% of the amount that may be eventually withdrawn from
said $356 million Swiss deposits.

The stipulations set forth in the General and Supplemental Agreements undeniably indicated the
manifest intent of respondents to enter into a compromise with petitioner. Corollarily, respondents'
willingness to agree to an amicable settlement with the Republic only affirmed their ownership of the
Swiss deposits for the simple reason that no person would acquiesce to any concession over such
huge dollar deposits if he did not in fact own them.

Respondents make much capital of the pronouncement by this Court that the General and
Supplemental Agreements were null and void.89 They insist that nothing in those agreements could
thus be admitted in evidence against them because they stood on the same ground as an accepted
offer which, under Section 27, Rule 13090 of the 1997 Rules of Civil Procedure, provides that "in civil
cases, an offer of compromise is not an admission of any liability and is not admissible in evidence
against the offeror."
We find no merit in this contention. The declaration of nullity of said agreements was premised on
the following constitutional and statutory infirmities: (1) the grant of criminal immunity to the Marcos
heirs was against the law; (2) the PCGG's commitment to exempt from all forms of taxes the
properties to be retained by the Marcos heirs was against the Constitution; and (3) the government's
undertaking to cause the dismissal of all cases filed against the Marcoses pending before the
Sandiganbayan and other courts encroached on the powers of the judiciary. The reasons relied
upon by the Court never in the least bit even touched on the veracity and truthfulness of
respondents' admission with respect to their ownership of the Swiss funds. Besides, having made
certain admissions in those agreements, respondents cannot now deny that they voluntarily admitted
owning the subject Swiss funds, notwithstanding the fact that the agreements themselves were later
declared null and void.

The following observation of Sandiganbayan Justice Catalino Castaeda, Jr. in the decision dated
September 19, 2000 could not have been better said:

x x x The declaration of nullity of the two agreements rendered the same without legal effects
but it did not detract from the admissions of the respondents contained therein. Otherwise
stated, the admissions made in said agreements, as quoted above, remain binding on the
respondents.91

A written statement is nonetheless competent as an admission even if it is contained in a document

which is not itself effective for the purpose for which it is made, either by reason of illegality, or
incompetency of a party thereto, or by reason of not being signed, executed or delivered.
Accordingly, contracts have been held as competent evidence of admissions, although they may be
unenforceable.92

The testimony of respondent Ferdinand Marcos, Jr. during the hearing on the motion for the
approval of the Compromise Agreement on April 29, 1998 also lent credence to the allegations of
petitioner Republic that respondents admitted ownership of the Swiss bank accounts. We quote the
salient portions of Ferdinand Jr.'s formal declarations in open court:

ATTY. FERNANDO:

Mr. Marcos, did you ever have any meetings with PCGG Chairman Magtanggol C.
Gunigundo?

F. MARCOS, JR.:

Yes. I have had very many meetings in fact with Chairman.

ATTY. FERNANDO:

Would you recall when the first meeting occurred?

PJ GARCHITORENA:

In connection with what?

ATTY. FERNANDO:
 In connection with the ongoing talks to compromise the various cases initiated by
PCGG against your family?

F. MARCOS, JR.:

The nature of our meetings was solely concerned with negotiations towards
achieving some kind of agreement between the Philippine government and the
Marcos family. The discussions that led up to the compromise agreement were
initiated by our then counsel Atty. Simeon Mesina x x x.93

xxx xxx xxx

ATTY. FERNANDO:

What was your reaction when Atty. Mesina informed you of this possibility?

F. MARCOS, JR.:

My reaction to all of these approaches is that I am always open, we are always open,
we are very much always in search of resolution to the problem of the family and any
approach that has been made us, we have entertained. And so my reaction was the
same as what I have always why not? Maybe this is the one that will finally put an
end to this problem.94

xxx xxx xxx

ATTY. FERNANDO:

Basically, what were the true amounts of the assets in the bank?

PJ GARCHITORENA:

So, we are talking about liquid assets here? Just Cash?

F. MARCOS, JR.:

Well, basically, any assets. Anything that was under the Marcos name in any of the
banks in Switzerland which may necessarily be not cash.95

xxx xxx xxx

PJ GARCHITORENA:

x x x What did you do in other words, after being apprised of this contract in
connection herewith?

F. MARCOS, JR.:

I assumed that we are beginning to implement the agreement because this was
forwarded through the Philippine government lawyers through our lawyers and then,
 subsequently, to me. I was a little surprised because we hadn't really discussed the
details of the transfer of the funds, what the bank accounts, what the mechanism
would be. But nevertheless, I was happy to see that as far as the PCGG is
concerned, that the agreement was perfected and that we were beginning to
implement it and that was a source of satisfaction to me because I thought that finally
it will be the end.96

Ferdinand Jr.'s pronouncements, taken in context and in their entirety, were a confirmation of
respondents' recognition of their ownership of the Swiss bank deposits. Admissions of a party in his
testimony are receivable against him. If a party, as a witness, deliberately concedes a fact, such
concession has the force of a judicial admission.97 It is apparent from Ferdinand Jr.'s testimony that
the Marcos family agreed to negotiate with the Philippine government in the hope of finally putting an
end to the problems besetting the Marcos family regarding the Swiss accounts. This was doubtlessly
an acknowledgment of ownership on their part. The rule is that the testimony on the witness stand
partakes of the nature of a formal judicial admission when a party testifies clearly and unequivocally
to a fact which is peculiarly within his own knowledge.98

In her Manifestation99 dated May 26, 1998, respondent Imelda Marcos furthermore revealed the
following:

That respondent Imelda R. Marcos owns 90% of the subject matter of the above-entitled
case, being the sole beneficiary of the dollar deposits in the name of the various foundations
alleged in the case;

That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of
the late President Ferdinand E. Marcos;

xxx xxx xxx

Respondents' ownership of the Swiss bank accounts as borne out by Mrs. Marcos' manifestation is
as bright as sunlight. And her claim that she is merely a beneficiary of the Swiss deposits is belied
by her own signatures on the appended copies of the documents substantiating her ownership of the
funds in the name of the foundations. As already mentioned, she failed to specifically deny under
oath the authenticity of such documents, especially those involving "William Saunders" and "Jane
Ryan" which actually referred to Ferdinand Marcos and Imelda Marcos, respectively. That failure of
Imelda Marcos to specifically deny the existence, much less the genuineness and due execution, of
the instruments bearing her signature, was tantamount to a judicial admission of the genuineness
and due execution of said instruments, in accordance with Section 8, Rule 8100 of the 1997 Rules of
Civil Procedure.

Likewise, in her Constancia101 dated May 6, 1999, Imelda Marcos prayed for the approval of the
Compromise Agreement and the subsequent release and transfer of the $150 million to the rightful
owner. She further made the following manifestations:

xxx xxx xxx

2. The Republic's cause of action over the full amount is its forfeiture in favor of the
government if found to be ill-gotten. On the other hand, the Marcoses defend that it is a
legitimate asset. Therefore, both parties have an inchoate right of ownership over the
account. If it turns out that the account is of lawful origin, the Republic may yield to the
Marcoses. Conversely, the Marcoses must yield to the Republic. (underscoring supplied)
 xxx xxx xxx

3. Consistent with the foregoing, and the Marcoses having committed themselves to helping
the less fortunate, in the interest of peace, reconciliation and unity, defendant MADAM
IMELDA ROMUALDEZ MARCOS, in firm abidance thereby, hereby affirms her agreement
with the Republic for the release and transfer of the US Dollar 150 million for proper
disposition, without prejudice to the final outcome of the litigation respecting the ownership of
the remainder.

Again, the above statements were indicative of Imelda's admission of the Marcoses' ownership of
the Swiss deposits as in fact "the Marcoses defend that it (Swiss deposits) is a legitimate (Marcos)
asset."

On the other hand, respondents Maria Imelda Marcos-Manotoc, Ferdinand Marcos, Jr. and Maria
Irene Marcos-Araneta filed a motion102 on May 4, 1998 asking the Sandiganbayan to place the res
(Swiss deposits) in custodia legis:

7. Indeed, the prevailing situation is fraught with danger! Unless the aforesaid Swiss deposits
are placed in custodia legis or within the Court's protective mantle, its dissipation or
misappropriation by the petitioner looms as a distinct possibility.

Such display of deep, personal interest can only come from someone who believes that he has a
marked and intimate right over the considerable dollar deposits. Truly, by filing said motion, the
Marcos children revealed their ownership of the said deposits.

Lastly, the Undertaking103 entered into by the PCGG, the PNB and the Marcos foundations on
February 10, 1999, confirmed the Marcoses' ownership of the Swiss bank deposits. The subject
Undertaking brought to light their readiness to pay the human rights victims out of the funds held in
escrow in the PNB. It stated:

WHEREAS, the Republic of the Philippines sympathizes with the plight of the human rights
victims-plaintiffs in the aforementioned litigation through the Second Party, desires to assist
in the satisfaction of the judgment awards of said human rights victims-plaintiffs, by
releasing, assigning and or waiving US$150 million of the funds held in escrow under the
Escrow Agreements dated August 14, 1995, although the Republic is not obligated to do so
under final judgments of the Swiss courts dated December 10 and 19, 1997, and January 8,
1998;

WHEREAS, the Third Party is likewise willing to release, assign and/or waive all its rights
and interests over said US$150 million to the aforementioned human rights victims-plaintiffs.

All told, the foregoing disquisition negates the claim of respondents that "petitioner failed to prove
that they acquired or own the Swiss funds" and that "it was only by arbitrarily isolating and taking
certain statements made by private respondents out of context that petitioner was able to treat these
as judicial admissions." The Court is fully aware of the relevance, materiality and implications of
every pleading and document submitted in this case. This Court carefully scrutinized the proofs
presented by the parties. We analyzed, assessed and weighed them to ascertain if each piece of
evidence rightfully qualified as an admission. Owing to the far-reaching historical and political
implications of this case, we considered and examined, individually and totally, the evidence of the
parties, even if it might have bordered on factual adjudication which, by authority of the rules and
jurisprudence, is not usually done by this Court. There is no doubt in our mind that respondent
Marcoses admitted ownership of the Swiss bank deposits.
We have always adhered to the familiar doctrine that an admission made in the pleadings cannot be
controverted by the party making such admission and becomes conclusive on him, and that all
proofs submitted by him contrary thereto or inconsistent therewith should be ignored, whether an
objection is interposed by the adverse party or not.104 This doctrine is embodied in Section 4, Rule
129 of the Rules of Court:

SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the

course of the proceedings in the same case, does not require proof. The admission may be
contradicted only by showing that it was made through palpable mistake or that no such
admission was made.105

In the absence of a compelling reason to the contrary, respondents' judicial admission of ownership
of the Swiss deposits is definitely binding on them.

The individual and separate admissions of each respondent bind all of them pursuant to Sections 29
and 31, Rule 130 of the Rules of Court:

SEC. 29. Admission by co-partner or agent. The act or declaration of a partner or agent of
the party within the scope of his authority and during the existence of the partnership or
agency, may be given in evidence against such party after the partnership or agency is
shown by evidence other than such act or declaration. The same rule applies to the act or
declaration of a joint owner, joint debtor, or other person jointly interested with the party.106

SEC. 31. Admission by privies. Where one derives title to property from another, the act,
declaration, or omission of the latter, while holding the title, in relation to the property, is
evidence against the former.107

The declarations of a person are admissible against a party whenever a "privity of estate" exists
between the declarant and the party, the term "privity of estate" generally denoting a succession in
rights.108 Consequently, an admission of one in privity with a party to the record is
competent.109 Without doubt, privity exists among the respondents in this case. And where several
co-parties to the record are jointly interested in the subject matter of the controversy, the admission
of one is competent against all.110

Respondents insist that the Sandiganbayan is correct in ruling that petitioner Republic has failed to
establish a prima facie case for the forfeiture of the Swiss deposits.

We disagree. The sudden turn-around of the Sandiganbayan was really strange, to say the least, as
its findings and conclusions were not borne out by the voluminous records of this case.

Section 2 of RA 1379 explicitly states that "whenever any public officer or employee has acquired
during his incumbency an amount of property which is manifestly out of proportion to his salary as
such public officer or employee and to his other lawful income and the income from legitimately
acquired property, said property shall be presumed prima facie to have been unlawfully acquired. x x
x"

The elements which must concur for this prima facie presumption to apply are:

(1) the offender is a public officer or employee;

 (2) he must have acquired a considerable amount of money or property during his
incumbency; and

(3) said amount is manifestly out of proportion to his salary as such public officer or
employee and to his other lawful income and the income from legitimately acquired property.

It is undisputed that spouses Ferdinand and Imelda Marcos were former public officers. Hence, the
first element is clearly extant.

The second element deals with the amount of money or property acquired by the public officer
during his incumbency. The Marcos couple indubitably acquired and owned properties during their
term of office. In fact, the five groups of Swiss accounts were admittedly owned by them. There is
proof of the existence and ownership of these assets and properties and it suffices to comply with
the second element.

The third requirement is met if it can be shown that such assets, money or property is manifestly out
of proportion to the public officer's salary and his other lawful income. It is the proof of this third
element that is crucial in determining whether a prima facie presumption has been established in this
case.

Petitioner Republic presented not only a schedule indicating the lawful income of the Marcos
spouses during their incumbency but also evidence that they had huge deposits beyond such lawful
income in Swiss banks under the names of five different foundations. We believe petitioner was able
to establish the prima facie presumption that the assets and properties acquired by the Marcoses
were manifestly and patently disproportionate to their aggregate salaries as public officials.
Otherwise stated, petitioner presented enough evidence to convince us that the Marcoses had dollar
deposits amounting to US $356 million representing the balance of the Swiss accounts of the five
foundations, an amount way, way beyond their aggregate legitimate income of only US$304,372.43
during their incumbency as government officials.

Considering, therefore, that the total amount of the Swiss deposits was considerably out of
proportion to the known lawful income of the Marcoses, the presumption that said dollar deposits
were unlawfully acquired was duly established. It was sufficient for the petition for forfeiture to state
the approximate amount of money and property acquired by the respondents, and their total
government salaries. Section 9 of the PCGG Rules and Regulations states:

Prima Facie Evidence. Any accumulation of assets, properties, and other material
possessions of those persons covered by Executive Orders No. 1 and No. 2, whose value is
out of proportion to their known lawful income is prima facie deemed ill-gotten wealth.

Indeed, the burden of proof was on the respondents to dispute this presumption and show by clear
and convincing evidence that the Swiss deposits were lawfully acquired and that they had other
legitimate sources of income. A presumption is prima facie proof of the fact presumed and, unless
the fact thus prima facie established by legal presumption is disproved, it must stand as proved.111

Respondent Mrs. Marcos argues that the foreign foundations should have been impleaded as they
were indispensable parties without whom no complete determination of the issues could be made.
She asserts that the failure of petitioner Republic to implead the foundations rendered the judgment
void as the joinder of indispensable parties was a sine qua non exercise of judicial power.
Furthermore, the non-inclusion of the foreign foundations violated the conditions prescribed by the
Swiss government regarding the deposit of the funds in escrow, deprived them of their day in court
and denied them their rights under the Swiss constitution and international law.112
The Court finds that petitioner Republic did not err in not impleading the foreign foundations. Section
7, Rule 3 of the 1997 Rules of Civil Procedure,113 taken from Rule 19b of the American Federal
Rules of Civil Procedure, provides for the compulsory joinder of indispensable parties. Generally, an
indispensable party must be impleaded for the complete determination of the suit. However, failure
to join an indispensable party does not divest the court of jurisdiction since the rule regarding
indispensable parties is founded on equitable considerations and is not jurisdictional. Thus, the court
is not divested of its power to render a decision even in the absence of indispensable parties, though
such judgment is not binding on the non-joined party.114

An indispensable party115 has been defined as one:

[who] must have a direct interest in the litigation; and if this interest is such that it cannot be
separated from that of the parties to the suit, if the court cannot render justice between the
parties in his absence, if the decree will have an injurious effect upon his interest, or if the
final determination of the controversy in his absence will be inconsistent with equity and good
conscience.

There are two essential tests of an indispensable party: (1) can relief be afforded the plaintiff without
the presence of the other party? and (2) can the case be decided on its merits without prejudicing
the rights of the other party?116There is, however, no fixed formula for determining who is an
indispensable party; this can only be determined in the context and by the facts of the particular suit
or litigation.

In the present case, there was an admission by respondent Imelda Marcos in her May 26, 1998
Manifestation before the Sandiganbayan that she was the sole beneficiary of 90% of the subject
matter in controversy with the remaining 10% belonging to the estate of Ferdinand
Marcos.117 Viewed against this admission, the foreign foundations were not indispensable parties.
Their non-participation in the proceedings did not prevent the court from deciding the case on its
merits and according full relief to petitioner Republic. The judgment ordering the return of the $356
million was neither inimical to the foundations' interests nor inconsistent with equity and good
conscience. The admission of respondent Imelda Marcos only confirmed what was already generally
known: that the foundations were established precisely to hide the money stolen by the Marcos
spouses from petitioner Republic. It negated whatever illusion there was, if any, that the foreign
foundations owned even a nominal part of the assets in question.

The rulings of the Swiss court that the foundations, as formal owners, must be given an opportunity
to participate in the proceedings hinged on the assumption that they owned a nominal share of the
assets.118 But this was already refuted by no less than Mrs. Marcos herself. Thus, she cannot now
argue that the ruling of the Sandiganbayan violated the conditions set by the Swiss court. The
directive given by the Swiss court for the foundations to participate in the proceedings was for the
purpose of protecting whatever nominal interest they might have had in the assets as formal owners.
But inasmuch as their ownership was subsequently repudiated by Imelda Marcos, they could no
longer be considered as indispensable parties and their participation in the proceedings became
unnecessary.

In Republic vs. Sandiganbayan,119 this Court ruled that impleading the firms which are the res of the
action was unnecessary:

"And as to corporations organized with ill-gotten wealth, but are not themselves guilty of
misappropriation, fraud or other illicit conduct in other words, the companies themselves
are not the object or thing involved in the action, the res thereof there is no need to implead
 them either. Indeed, their impleading is not proper on the strength alone of their having been
formed with ill-gotten funds, absent any other particular wrongdoing on their part

Such showing of having been formed with, or having received ill-gotten funds, however
strong or convincing, does not, without more, warrant identifying the corporations in question
with the person who formed or made use of them to give the color or appearance of lawful,
innocent acquisition to illegally amassed wealth at the least, not so as place on the
Government the onus of impleading the former with the latter in actions to recover such
wealth. Distinguished in terms of juridical personality and legal culpability from their erring
members or stockholders, said corporations are not themselves guilty of the sins of the latter,
of the embezzlement, asportation, etc., that gave rise to the Government's cause of action
for recovery; their creation or organization was merely the result of their members' (or
stockholders') manipulations and maneuvers to conceal the illegal origins of the assets or
monies invested therein. In this light, they are simply the res in the actions for the recovery of
illegally acquired wealth, and there is, in principle, no cause of action against them and no
ground to implead them as defendants in said actions."

Just like the corporations in the aforementioned case, the foreign foundations here were set up to
conceal the illegally acquired funds of the Marcos spouses. Thus, they were simply the res in the
action for recovery of ill-gotten wealth and did not have to be impleaded for lack of cause of action or
ground to implead them.

Assuming arguendo, however, that the foundations were indispensable parties, the failure of
petitioner to implead them was a curable error, as held in the previously cited case of Republic vs.
Sandiganbayan:120

"Even in those cases where it might reasonably be argued that the failure of the Government
to implead the sequestered corporations as defendants is indeed a procedural abberation, as
where said firms were allegedly used, and actively cooperated with the defendants, as
instruments or conduits for conversion of public funds and property or illicit or fraudulent
obtention of favored government contracts, etc., slight reflection would nevertheless lead to
the conclusion that the defect is not fatal, but one correctible under applicable adjective rules
e.g., Section 10, Rule 5 of the Rules of Court [specifying the remedy of amendment during
trial to authorize or to conform to the evidence]; Section 1, Rule 20 [governing amendments
before trial], in relation to the rule respecting omission of so-called necessary or
indispensable parties, set out in Section 11, Rule 3 of the Rules of Court. It is relevant in this
context to advert to the old familiar doctrines that the omission to implead such parties "is a
mere technical defect which can be cured at any stage of the proceedings even after
judgment"; and that, particularly in the case of indispensable parties, since their presence
and participation is essential to the very life of the action, for without them no judgment may
be rendered, amendments of the complaint in order to implead them should be freely
allowed, even on appeal, in fact even after rendition of judgment by this Court, where it
appears that the complaint otherwise indicates their identity and character as such
indispensable parties."121

Although there are decided cases wherein the non-joinder of indispensable parties in fact led to the
dismissal of the suit or the annulment of judgment, such cases do not jibe with the matter at hand.
The better view is that non-joinder is not a ground to dismiss the suit or annul the judgment. The rule
on joinder of indispensable parties is founded on equity. And the spirit of the law is reflected in
Section 11, Rule 3122 of the 1997 Rules of Civil Procedure. It prohibits the dismissal of a suit on the
ground of non-joinder or misjoinder of parties and allows the amendment of the complaint at any
stage of the proceedings, through motion or on order of the court on its own initiative.123
Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section 7, Rule 3124 on
indispensable parties was copied, allows the joinder of indispensable parties even after judgment
has been entered if such is needed to afford the moving party full relief.125 Mere delay in filing the
joinder motion does not necessarily result in the waiver of the right as long as the delay is
excusable.126 Thus, respondent Mrs. Marcos cannot correctly argue that the judgment rendered by
the Sandiganbayan was void due to the non-joinder of the foreign foundations. The court had
jurisdiction to render judgment which, even in the absence of indispensable parties, was binding on
all the parties before it though not on the absent party.127 If she really felt that she could not be
granted full relief due to the absence of the foreign foundations, she should have moved for their
inclusion, which was allowable at any stage of the proceedings. She never did. Instead she assailed
the judgment rendered.

In the face of undeniable circumstances and the avalanche of documentary evidence against them,
respondent Marcoses failed to justify the lawful nature of their acquisition of the said assets. Hence,
the Swiss deposits should be considered ill-gotten wealth and forfeited in favor of the State in
accordance with Section 6 of RA 1379:

SEC. 6. Judgment. If the respondent is unable to show to the satisfaction of the court that
he has lawfully acquired the property in question, then the court shall declare such property
forfeited in favor of the State, and by virtue of such judgment the property aforesaid shall
become property of the State x x x.

THE FAILURE TO PRESENT AUTHENTICATED TRANSLATIONS OF THE SWISS DECISIONS

Finally, petitioner Republic contends that the Honorable Sandiganbayan Presiding Justice Francis
Garchitorena committed grave abuse of discretion in reversing himself on the ground that the
original copies of the authenticated Swiss decisions and their authenticated translations were not
submitted to the court a quo. Earlier PJ Garchitorena had quoted extensively from the unofficial
translation of one of these Swiss decisions in his ponencia dated July 29, 1999 when he denied the
motion to release US$150 Million to the human rights victims.

While we are in reality perplexed by such an incomprehensible change of heart, there might
nevertheless not be any real need to belabor the issue. The presentation of the authenticated
translations of the original copies of the Swiss decision was not de rigueur for the public respondent
to make findings of fact and reach its conclusions. In short, the Sandiganbayan's decision was not
dependent on the determination of the Swiss courts. For that matter, neither is this Court's.

The release of the Swiss funds held in escrow in the PNB is dependent solely on the decision of this
jurisdiction that said funds belong to the petitioner Republic. What is important is our own
assessment of the sufficiency of the evidence to rule in favor of either petitioner Republic or
respondent Marcoses. In this instance, despite the absence of the authenticated translations of the
Swiss decisions, the evidence on hand tilts convincingly in favor of petitioner Republic.

WHEREFORE, the petition is hereby GRANTED. The assailed Resolution of the Sandiganbayan
dated January 31, 2002 is SET ASIDE. The Swiss deposits which were transferred to and are now
deposited in escrow at the Philippine National Bank in the estimated aggregate amount of
US$658,175,373.60 as of January 31, 2002, plus interest, are hereby forfeited in favor of petitioner
Republic of the Philippines.

SO ORDERED.
 Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

CANELAND SUGAR G.R. No. 142896

CORPORATION,
Petitioner, Present:

YNARES-
SANTIAGO, J.,
- versus - Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
HON. REYNALDO M. ALON, NACHURA, and
LAND BANK OF THE REYES, JJ.
PHILIPPINES, and
ERIC B. DE VERA, Promulgated:
Respondents. September 12, 2007
x----------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:

On July 15, 1999, Caneland Sugar Corporation (petitioner) filed with the Regional
Trial Court (RTC) of Silay City, Branch 40, a complaint for damages, injunction,
and nullity of mortgage against the Land Bank of the Philippines (respondent) and
Sheriff Eric B. de Vera, docketed as Civil Case No. 2067-40, praying for the
following reliefs: issuance of a temporary restraining order enjoining respondent and
the Sheriff from proceeding with the auction sale of petitioners property; declaration
of nullity of any foreclosure sale to be held; declaration of nullity of the mortgage
constituted over petitioners property covered by TCT No. T-11292 in favor of
respondent; and award of damages.[1]

On July 21, 1999, the RTC issued an Order holding in abeyance the auction sale set
on July 23, 1999, as agreed upon by the parties.[2] Notwithstanding said directive,
another foreclosure sale was scheduled on October 15, 1999. Per RTC Order
dated October 14, 1999, the October 15 scheduled sale was held in abeyance; but re-
scheduled the sale on November 15, 1999, for the following reasons:

However, P.D. 385 provides that it shall be mandatory for government

financial institution to foreclose collaterals and/or securities for any loan,
credit accommodations and/or guarantees granted by them whenever the
arrearages on such account, including accrued interest and other charges
amount to at least 20% of the total outstanding obligation as appearing in
the books of the financial institution. Moreover, no restraining order,
temporary or permanent injunction shall be issued by the court against any
government financial institution in any action taken by such institution in
compliance with the mandatory foreclosure provided by said
law. x x x The defendant Land Bank of the Philippines and Eric B. De
Vera, Sheriff of this Court, are hereby authorized to proceed with the
extrajudicial foreclosure sale on November 15, 1999.[3]

Petitioner filed a Motion for Reconsideration of the trial courts Order, but this was
denied per Order dated November 8, 1999.[4]

Petitioner then filed with the Court of Appeals (CA) a Petition for Certiorari and
Prohibition with Injunction, docketed as CA-G.R. SP No. 56137. In a
Decision[5] dated March 22, 2000, the CA, finding that the RTC did not commit any
grave abuse of discretion, denied due course and dismissed the petition for lack of
merit.[6] Petitioner sought reconsideration of the Decision, which was eventually
denied by the CA in a Resolution dated April 17, 2000.[7]
Hence, the present Petition for Review on Certiorari under Rule 45 of the Rules of
Court.

Petitioner contends in the main that the RTCs act of authorizing the foreclosure of
its property amounts to a prejudgment of the case since it amounts to a ruling that
respondent has a valid mortgage in its favor. Petitioner also argues, among others,
that Presidential Decree (P.D.) No. 385 is not applicable inasmuch as at the time of
the lease to Sunnix, Inc., the management and control of its operations has already
been virtually taken over by respondent.

On the other hand, respondent maintains that: P.D. No. 385 prohibits the issuance of
an injunctive order against government financial institutions; the CA did not commit
any grave abuse of discretion; the RTC Order merely dealt with the propriety of the
injunctive order and not the validity of the mortgage; and the issue of the propriety
of the injunctive order has been rendered moot and academic by the foreclosure sale
conducted and the issuance of a certificate of sale by the sheriff.[8]

Based on the arguments of the parties, the principal issue is whether the CA erred in
finding that the RTC did not commit grave abuse of discretion in not enjoining the
extrajudicial foreclosure of the properties subject of this case.
Without first resolving the foregoing issue, the Court finds that the petition should
be denied for the sole reason that the act sought to be enjoined by petitioner is
already fait accompli. In Transfield Philippines, Inc. v. Luzon Hydro
Corporation,[9] the Court held that

[I]njunction would not lie where the acts sought to be enjoined have
already become fait accompli or an accomplished or consummated act.
In Ticzon v. Video Post Manila, Inc. this Court ruled that where the period
within which the former employees were prohibited from engaging in or
working for an enterprise that competed with their former employer the
very purpose of the preliminary injunction has expired, any declaration
upholding the propriety of the writ would be entirely useless as there
 would be no actual case or controversy between the parties insofar as the
preliminary injunction is concerned.[10]

Records show that the foreclosure sale which petitioner sought to be enjoined by the
RTC has already been carried out by the Sheriff, and in fact, a Certificate of Sale
dated June 26, 2000 was issued to respondent.[11] There is, therefore, no more actual
case or controversy between the parties insofar as the RTCs refusal to enjoin the sale
is concerned, and any resolution by the Court of the impropriety or propriety of
the RTCs refusal to issue any restraining or injunctive relief against the foreclosure
sale will serve no purpose but merely lend further addle to Civil Case No. 2067-40
pending before the RTC.

Nevertheless, even if petitioners quest for the issuance of an injunctive relief has
been rendered moot and academic by the holding of the foreclosure sale and
issuance of Certificate of Sale, the Court finds it necessary to resolve the merits of
the principal issue raised for the future guidance of both bench and bar. As the Court
stated in Acop v. Guingona, Jr.,[12] courts will decide a question otherwise moot
and academic if it is capable of repetition, yet evading review.

Petitioner does not dispute its loan obligation with respondent. Petitioners bone of
contention before the RTC is that the promissory notes are silent as to whether they
were covered by the Mortgage Trust Indenture and Mortgage Participation on its
property covered by TCT No. T-11292.[13] It does not categorically deny that these
promissory notes are covered by the security documents. These vague assertions are,
in fact, negative pregnants, i.e., denials pregnant with the admission of the
substantial facts in the pleading responded to which are not squarely denied. As
defined in Republic of the Philippines v. Sandiganbayan,[14] a negative pregnant is a
form of negative expression which carries with it an affirmation or at least an
implication of some kind favorable to the adverse party. It is a denial pregnant with
an admission of the substantial facts alleged in the pleading. Where a fact is alleged
with qualifying or modifying language and the words of the allegation as so qualified
or modified are literally denied, has been held that the qualifying circumstances
alone are denied while the fact itself is admitted.

Petitioners allegations do not make out any justifiable basis for the granting of any
injunctive relief. Even when the mortgagors were disputing the amount being sought
from them, upon the non-payment of the loan, which was secured by the mortgage,
the mortgaged property is properly subject to a foreclosure sale. This is in
consonance with the doctrine that to authorize a temporary injunction, the plaintiff
must show, at least prima facie, a right to the final relief.[15]

The foregoing conclusion finds greater force in light of the provisions of P.D. No.
385,[16] Section 1 of which, provides for a mandatory foreclosure, viz.:

Section 1. It shall be mandatory for government financial

institutions, after the lapse of sixty (60) days from the issuance of this
Decree, to foreclose the collaterals and/or securities for any loan, credit,
accommodation, and/or guarantees granted by them whenever the
arrearages on such account, including accrued interest and other charges,
amount to at least twenty (20%) of the total outstanding obligations,
including interest and other charges, as appearing in the books of account
and/or related records of the financial institution concerned. This shall be
without prejudice to the exercise by the government financial institution
of such rights and/or remedies available to them under their respective
contracts with their debtors, including the right to foreclose on loans,
credits, accommodations, and or guarantees on which the arrearages are
less than twenty percent (20%).

while Section 2 prohibits the issuance of restraining orders or injunctions against

government financial institutions in any foreclosure action taken by such
institutions, to wit:

Section 2. No restraining order, temporary or permanent injunction

shall be issued by the court against any government financial institution
in any action taken by such institution in compliance with the mandatory
foreclosure provided in Section 1 hereof whether such restraining order,
temporary or permanent injunction is sought by the borrower(s) or any
 third party or parties, except after due hearing in which it is established by
the borrower and admitted by the government financial institution
concerned that twenty percent (20%) of the outstanding arrearages had
been paid after the filing of foreclosure proceedings.

Petitioner cannot find any solace in its contention that the case of Filipinas Marble
Corporation v. Intermediate Appellate Court[17] is applicable to the present
case. In Filipinas Marble, it was the DBP-imposed management of FMC that
brought the corporation to ruin, not to mention that there were prima facie findings
of mismanagement and misappropriation of the loan proceeds by DBP
and Bancom. Moreover, the liability of FMC for the loan, which was the basis of the
mortgage being foreclosed, was not yet settled. These circumstances prompted the
Court to grant an injunction against the foreclosure sale. The Court ruled

x x x P.D. 385 was never meant to protect officials of government lending

institutions who take over the management of a borrower corporation, lead
that corporation to bankruptcy through mismanagement or
misappropriation of its funds, and who, after ruining it, use the mandatory
provisions of the decree to avoid the consequences of their misdeeds.

The designated officers of the government financing institution cannot

simply walk away and then state that since the loans were obtained in the
corporations name, then P.D. 385 must be peremptorily applied and that
there is no way the borrower corporation can prevent the automatic
foreclosure of the mortgage on its properties once the arrearages reach
twenty percent (20%) of the total obligation no matter who was
responsible.[18]

In the case at bench, petitioner does not deny its liability. While petitioner alleged
that the management and control of its operations has already been virtually taken
over by respondent, thus, implying that it was respondent that caused petitioner's
present miserable financial state, this allegation is obviously merely an attempt to
place itself under theFilipinas Marble situation in order to preempt the operation of
P.D. No. 385. Petitioners claim is more appropriately threshed out and determined
after trial on the merits.
The Court likewise cannot sustain petitioner's argument that the RTCs refusal to
grant any injunctive relief amounts to a prejudgment of the issues before
it. The RTCs sole basis for allowing the foreclosure sale to proceed is P.D. No.
385. It did not make any finding or disposition on the issue of the validity of the
mortgage.

In any event, such issue of the validity of the mortgage, not to mention the issue of
the nullity of the foreclosure sale as well as petitioners prayer for damages, still has
to be resolved in the trial court.

As ruled in Philippine National Bank v. Court of Appeals,[19] to wit:

In the instant case, aside from the principal action for damages, private
respondent sought the issuance of a temporary restraining order and writ
of preliminary injunction to enjoin the foreclosure sale in order to prevent
an alleged irreparable injury to private respondent. It is settled that these
injunctive reliefs are preservative remedies for the protection of
substantive rights and interests. Injunction is not a cause of action in
itself but merely a provisional remedy, an adjunct to a main suit.
When the act sought to be enjoined ha[d] become fait accompli, only
the prayer for provisional remedy should be denied. However, the
trial court should still proceed with the determination of the principal
action so that an adjudication of the rights of the parties can be
had.[20] (Emphasis supplied)

WHEREFORE, the petition is DENIED.

Costs against petitioner.

SO ORDERED.