Вы находитесь на странице: 1из 200

23.

Boston Equity Resources vs CA


24. Heirs of Dr. Mariano Favis Sr. vs Gonzales et. al.
25. Lui Enterprises Inc. vs Zuellig Pharma Corp. et. al.
26. Cabrera vs Ng
27. Chingkoe vs RP
28. Heirs of Marcelo Sotto vs Palicte
26a. Tung Ho Steel vs Ting Guan
27a. Fernando Medical vs. Wesleyan University
28a. Sps. Villuga vs. Kelly Hardware
29. Mahilum vs Sps. Ilano
30. Sps. Manuel vs Ong
31. Daaco vs Yu
32. Guntalilib vs Dela Cruz
33. Asian Terminals Inc. vs Philam Insurance Co.
34. Dio vs Subic Bay Marine Exploratorium
35. Padilla vs Globe Asiatique
36. Enrile vs People of the Phil. (separate PDF)
37. Palileo vs Planters Devt Bank
38. Heirs of Numeriano Miranda Sr. vs Miranda
39. Heirs of Amada Zaulda vs Zaulda
40. Anama vs Philippine Savings Bank
41. Prudential Bank vs Magdamit Jr.
42. Reicon Realty Builders vs Diamond Dragon Realty
43. Ching vs Cheng
#23

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 173946 June 19, 2013

BOSTON EQUITY RESOURCES, INC., Petitioner,


vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1) the
Decision,1 dated 28 February 2006 and (2) the Resolution,2 dated 1 August 2006 of the Court of
Appeals in CA-G.R. SP No. 88586. The challenged decision granted herein respondent's
petition for certiorari upon a finding that the trial court committed grave abuse of discretion in
denying respondent's motion to dismiss the complaint against her.3 Based on this finding, the
Court of Appeals reversed and set aside the Orders, dated 8 November 20044 and 22
December 2004,5respectively, of the Regional Trial Court (RTC) of Manila, Branch 24.

The Facts

On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the
issuance of a writ of preliminary attachment against the spouses Manuel and Lolita
Toledo.6 Herein respondent filed an Answer dated 19 March 1998 but on 7 May 1998, she filed
a Motion for Leave to Admit Amended Answer7 in which she alleged, among others, that her
husband and co-defendant, Manuel Toledo (Manuel), is already dead.8 The death certificate9 of
Manuel states "13 July 1995" as the date of death. As a result, petitioner filed a motion, dated 5
August 1999, to require respondent to disclose the heirs of Manuel.10 In compliance with the
verbal order of the court during the 11 October 1999 hearing of the case, respondent submitted
the required names and addresses of the heirs.11 Petitioner then filed a Motion for
Substitution,12 dated 18 January 2000, praying that Manuel be substituted by his children as
party-defendants. It appears that this motion was granted by the trial court in an Order dated 9
October 2000.13

Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order
containing, among others, the dates of hearing of the case.14

The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence and
its exhibits were thereafter admitted.

On 26 May 2004, the reception of evidence for herein respondent was cancelled upon
agreement of the parties. On 24 September 2004, counsel for herein respondent was given a
period of fifteen days within which to file a demurrer to evidence.15 However, on 7 October 2004,
respondent instead filed a motion to dismiss the complaint, citing the following as grounds: (1)
that the complaint failed to implead an indispensable party or a real party in interest; hence, the
case must be dismissed for failure to state a cause of action; (2) that the trial court did not
acquire jurisdiction over the person of Manuel pursuant to Section 5, Rule 86 of the Revised
Rules of Court; (3) that the trial court erred in ordering the substitution of the deceased Manuel
by his heirs; and (4) that the court must also dismiss the case against Lolita Toledo in
accordance with Section 6, Rule 86 of the Rules of Court.16

The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having
been filed out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that:
"Within the time for but before filing the answer to the complaint or pleading asserting a claim, a
motion to dismiss may be made x x x."17 Respondents motion for reconsideration of the order of
denial was likewise denied on the ground that "defendants attack on the jurisdiction of this
Court is now barred by estoppel by laches" since respondent failed to raise the issue despite
several chances to do so.18

Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the
trial court seriously erred and gravely abused its discretion in denying her motion to dismiss
despite discovery, during the trial of the case, of evidence that would constitute a ground for
dismissal of the case.19

The Court of Appeals granted the petition based on the following grounds:

It is elementary that courts acquire jurisdiction over the person of the defendant x x x only when
the latter voluntarily appeared or submitted to the court or by coercive process issued by the
court to him, x x x. In this case, it is undisputed that when petitioner Boston filed the complaint
on December 24, 1997, defendant Manuel S. Toledo was already dead, x x x. Such being the
case, the court a quo could not have acquired jurisdiction over the person of defendant Manuel
S. Toledo.

x x x the court a quos denial of respondents motion to dismiss was based on its finding that
respondents attack on the jurisdiction of the court was already barred by laches as respondent
failed to raise the said ground in its [sic] amended answer and during the pre-trial, despite her
active participation in the proceedings.

However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the
proceeding, even for the first time on appeal. By timely raising the issue on jurisdiction in her
motion to dismiss x x x respondent is not estopped from raising the question on jurisdiction.

Moreover, when issue on jurisdiction was raised by respondent, the court a quo had not yet
decided the case, hence, there is no basis for the court a quo to invoke estoppel to justify its
denial of the motion for reconsideration;

It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was
already dead. The complaint should have impleaded the estate of Manuel S. Toledo as
defendant, not only the wife, considering that the estate of Manuel S. Toledo is an indispensable
party, which stands to be benefited or be injured in the outcome of the case. x x x

xxxx

Respondents motion to dismiss the complaint should have been granted by public respondent
judge as the same was in order. Considering that the obligation of Manuel S. Toledo is solidary
with another debtor, x x x, the claim x x x should be filed against the estate of Manuel S. Toledo,
in conformity with the provision of Section 6, Rule 86 of the Rules of Court, x x x. 20

The Court of Appeals denied petitioners motion for reconsideration. Hence, this petition.

The Issues

Petitioner claims that the Court of Appeals erred in not holding that:

1. Respondent is already estopped from questioning the trial courts jurisdiction;

2. Petitioner never failed to implead an indispensable party as the estate of Manuel is


not an indispensable party;

3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not


warranting the dismissal of the case before the lower court; and

4. Since the estate of Manuel is not an indispensable party, it is not necessary that
petitioner file its claim against the estate of Manuel.

In essence, what is at issue here is the correctness of the trial courts orders denying
respondents motion to dismiss.

The Ruling of the Court

We find merit in the petition.

Motion to dismiss filed out of time


To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent.
Well settled is the rule that the special civil action for certiorari is not the proper remedy to assail
the denial by the trial court of a motion to dismiss. The order of the trial court denying a motion
to dismiss is merely interlocutory, as it neither terminates nor finally disposes of a case and still
leaves something to be done by the court before a case is finally decided on the
merits.21 Therefore, "the proper remedy in such a case is to appeal after a decision has been
rendered."22

As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher Education:23

A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted
only to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to
lack of jurisdiction. Its function is limited to keeping an inferior court within its jurisdiction and to
relieve persons from arbitrary acts acts which courts or judges have no power or authority in
law to perform. It is not designed to correct erroneous findings and conclusions made by the
courts. (Emphasis supplied)

Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of
discretion in denying respondents motion to dismiss. It, in fact, acted correctly when it issued
the questioned orders as respondents motion to dismiss was filed SIX YEARS AND FIVE
MONTHS AFTER SHE FILED HER AMENDED ANSWER. This circumstance alone already
warranted the outright dismissal of the motion for having been filed in clear contravention of the
express mandate of Section 1, Rule 16, of the Revised Rules of Court. Under this provision, a
motion to dismiss shall be filed within the time for but before the filing of an answer to the
complaint or pleading asserting a claim.24

More importantly, respondents motion to dismiss was filed after petitioner has completed the
presentation of its evidence in the trial court, giving credence to petitioners and the trial courts
conclusion that the filing of the motion to dismiss was a mere ploy on the part of respondent to
delay the prompt resolution of the case against her.

Also worth mentioning is the fact that respondents motion to dismiss under consideration herein
is not the first motion to dismiss she filed in the trial court. It appears that she had filed an earlier
motion to dismiss26 on the sole ground of the unenforceability of petitioners claim under the
Statute of Frauds, which motion was denied by the trial court. More telling is the following
narration of the trial court in its Order denying respondents motion for reconsideration of the
denial of her motion to dismiss:

As can be gleaned from the records, with the admission of plaintiffs exhibits, reception of
defendants evidence was set on March 31, and April 23, 2004 x x x . On motion of the
defendants, the hearing on March 31, 2004 was cancelled.

On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces
tecum to one Gina M. Madulid, to appear and testify for the defendants on April 23, 2004.
Reception of defendants evidence was again deferred to May 26, June 2 and June 30, 2004, x
x x.

On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad
testificandum to the said Gina Madulid. On May 26, 2004, reception of defendants [sic] evidence
was cancelled upon the agreement of the parties. On July 28, 2004, in the absence of
defendants witness, hearing was reset to September 24 and October 8, 2004 x x x.

On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to file a
demurrer to evidence. On October 7, 2004, defendants filed instead a Motion to Dismiss x x x. 27

Respondents act of filing multiple motions, such as the first and earlier motion to dismiss and
then the motion to dismiss at issue here, as well as several motions for postponement, lends
credibility to the position taken by petitioner, which is shared by the trial court, that respondent is

deliberately impeding the early disposition of this case. The filing of the second motion to
dismiss was, therefore, "not only improper but also dilatory."28 Thus, the trial court, "far from
deviating or straying off course from established jurisprudence on the matter, x x x had in fact
faithfully observed the law and legal precedents in this case."29 The Court of Appeals, therefore,
erred not only in entertaining respondents petition for certiorari, it likewise erred in ruling that
the trial court committed grave abuse of discretion when it denied respondents motion to
dismiss.

On whether or not respondent is estopped from


questioning the jurisdiction of the trial court

At the outset, it must be here stated that, as the succeeding discussions will demonstrate,
jurisdiction over the person of Manuel should not be an issue in this case. A protracted
discourse on jurisdiction is, nevertheless, demanded by the fact that jurisdiction has been raised
as an issue from the lower court, to the Court of Appeals and, finally, before this Court. For the
sake of clarity, and in order to finally settle the controversy and fully dispose of all the issues in
this case, it was deemed imperative to resolve the issue of jurisdiction.

1. Aspects of Jurisdiction

Petitioner calls attention to the fact that respondents motion to dismiss questioning the trial
courts jurisdiction was filed more than six years after her amended answer was filed. According
to petitioner, respondent had several opportunities, at various stages of the proceedings, to
assail the trial courts jurisdiction but never did so for six straight years. Citing the doctrine laid
down in the case of Tijam, et al. v. Sibonghanoy, et al.30 petitioner claimed that respondents
failure to raise the question of jurisdiction at an earlier stage bars her from later questioning it,
especially since she actively participated in the proceedings conducted by the trial court.

Petitioners argument is misplaced, in that, it failed to consider that the concept of jurisdiction
has several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the
parties; (3) jurisdiction over the issues of the case; and (4) in cases involving property,
jurisdiction over the res or the thing which is the subject of the litigation.31

The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by
laches is jurisdiction over the subject matter. Thus, in Tijam, the case relied upon by petitioner,
the issue involved was the authority of the then Court of First Instance to hear a case for the
collection of a sum of money in the amount of 1,908.00 which amount was, at that time, within
the exclusive original jurisdiction of the municipal courts.
In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was the
jurisdiction of the trial court over the subject matter of the case. Accordingly, in Spouses
Gonzaga v. Court of Appeals,32 the issue for consideration was the authority of the regional trial
court to hear and decide an action for reformation of contract and damages involving a
subdivision lot, it being argued therein that jurisdiction is vested in the Housing and Land Use
Regulatory Board pursuant to PD 957 (The Subdivision and Condominium Buyers Protective
Decree). In Lee v. Presiding Judge, MTC, Legaspi City,33 petitioners argued that the respondent
municipal trial court had no jurisdiction over the complaint for ejectment because the issue of
ownership was raised in the pleadings. Finally, in People v. Casuga,34 accused-appellant
claimed that the crime of grave slander, of which she was charged, falls within the concurrent
jurisdiction of municipal courts or city courts and the then courts of first instance, and that the
judgment of the court of first instance, to which she had appealed the municipal court's
conviction, should be deemed null and void for want of jurisdiction as her appeal should have
been filed with the Court of Appeals or the Supreme Court.

In all of these cases, the Supreme Court barred the attack on the jurisdiction of the respective
courts concerned over the subject matter of the case based on estoppel by laches, declaring
that parties cannot be allowed to belatedly adopt an inconsistent posture by attacking the
jurisdiction of a court to which they submitted their cause voluntarily.35

Here, what respondent was questioning in her motion to dismiss before the trial court was that
courts jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel by
laches finds no application in this case. Instead, the principles relating to jurisdiction over the
person of the parties are pertinent herein.

The Rules of Court provide:

RULE 9
EFFECT OF FAILURE TO PLEAD

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

RULE 15
MOTIONS

Sec. 8. Omnibus motion. Subject to the provisions of Section 1 of Rule 9, a motion attacking a
pleading, order, judgment, or proceeding shall include all objections then available, and all
objections not so included shall be deemed waived.

Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived
even if not alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject
matter. x x x Lack of jurisdiction over the subject matter can always be raised anytime, even for
the first time on appeal, since jurisdictional issues cannot be waived x x x subject, however, to
the principle of estoppel by laches."36
Since the defense of lack of jurisdiction over the person of a party to a case is not one of those
defenses which are not deemed waived under Section 1 of Rule 9, such defense must be
invoked when an answer or a motion to dismiss is filed in order to prevent a waiver of the
defense.37 If the objection is not raised either in a motion to dismiss or in the answer, the
objection to the jurisdiction over the person of the plaintiff or the defendant is deemed waived by
virtue of the first sentence of the above-quoted Section 1 of Rule 9 of the Rules of Court.38

The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its
questioned decision, stating that "issue on jurisdiction may be raised at any stage of the
proceeding, even for the first time on appeal" and that, therefore, respondent timely raised the
issue in her motion to dismiss and is, consequently, not estopped from raising the question of
jurisdiction. As the question of jurisdiction involved here is that over the person of the defendant
Manuel, the same is deemed waived if not raised in the answer or a motion to dismiss. In any
case, respondent cannot claim the defense since "lack of jurisdiction over the person, being
subject to waiver, is a personal defense which can only be asserted by the party who can
thereby waive it by silence."39

2. Jurisdiction over the person of a defendant is acquired through a valid service of summons;
trial court did not acquire jurisdiction over the person of Manuel Toledo

In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A
defendant is informed of a case against him when he receives summons. "Summons is a writ by
which the defendant is notified of the action brought against him. Service of such writ is the
means by which the court acquires jurisdiction over his person."40

In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since
there was no valid service of summons upon him, precisely because he was already dead even
before the complaint against him and his wife was filed in the trial court. The issues presented in
this case are similar to those in the case of Sarsaba v. Vda. de Te.41

In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally
dismissed from employment and ordering the payment of his monetary claims. To satisfy the
claim, a truck in the possession of Serenos employer was levied upon by a sheriff of the NLRC,
accompanied by Sereno and his lawyer, Rogelio Sarsaba, the petitioner in that case. A
complaint for recovery of motor vehicle and damages, with prayer for the delivery of the truck
pendente lite was eventually filed against Sarsaba, Sereno, the NLRC sheriff and the NLRC by
the registered owner of the truck. After his motion to dismiss was denied by the trial court,
petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus motion to dismiss
citing, as one of the grounds, lack of jurisdiction over one of the principal defendants, in view of
the fact that Sereno was already dead when the complaint for recovery of possession was filed.

Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of
the issues submitted for resolution in both cases is similar: whether or not a case, where one of
the named defendants was already dead at the time of its filing, should be dismissed so that the
claim may be pursued instead in the proceedings for the settlement of the estate of the
deceased defendant. The petitioner in the Sarsaba Case claimed, as did respondent herein,
that since one of the defendants died before summons was served on him, the trial court should
have dismissed the complaint against all the defendants and the claim should be filed against
the estate of the deceased defendant. The petitioner in Sarsaba, therefore, prayed that the
complaint be dismissed, not only against Sereno, but as to all the defendants, considering that
the RTC did not acquire jurisdiction over the person of Sereno.42 This is exactly the same prayer
made by respondent herein in her motion to dismiss.

The Court, in the Sarsaba Case, resolved the issue in this wise:

x x x We cannot countenance petitioners argument that the complaint against the other
defendants should have been dismissed, considering that the RTC never acquired jurisdiction
over the person of Sereno. The courts failure to acquire jurisdiction over ones person is a
defense which is personal to the person claiming it. Obviously, it is now impossible for Sereno to
invoke the same in view of his death. Neither can petitioner invoke such ground, on behalf of
Sereno, so as to reap the benefit of having the case dismissed against all of the defendants.
Failure to serve summons on Serenos person will not be a cause for the dismissal of the
complaint against the other defendants, considering that they have been served with copies of
the summons and complaints and have long submitted their respective responsive pleadings. In
fact, the other defendants in the complaint were given the chance to raise all possible defenses
and objections personal to them in their respective motions to dismiss and their subsequent
answers.43 (Emphasis supplied.)

Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against
Sereno only.

Based on the foregoing pronouncements, there is no basis for dismissing the complaint against
respondent herein. Thus, as already emphasized above, the trial court correctly denied her
motion to dismiss.

On whether or not the estate of Manuel

Toledo is an indispensable party

Rule 3, Section 7 of the 1997 Rules of Court states:

SEC. 7. Compulsory joinder of indispensable parties. Parties-in-interest without whom no final


determination can be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one who has such an interest in the controversy or subject matter of a
case that a final adjudication cannot be made in his or her absence, without injuring or affecting
that interest. He or she is a party who has not only an interest in the subject matter of the
controversy, but "an interest of such nature that a final decree cannot be made without affecting
that interest or leaving the controversy in such a condition that its final determination may be
wholly inconsistent with equity and good conscience. It has also been considered that an
indispensable party is a person in whose absence there cannot be a determination between the
parties already before the court which is effective, complete or equitable." Further, an
indispensable party is one who must be included in an action before it may properly proceed.44

On the other hand, a "person is not an indispensable party if his interest in the controversy or
subject matter is separable from the interest of the other parties, so that it will not necessarily be
directly or injuriously affected by a decree which does complete justice between them. Also, a
person is not an indispensable party if his presence would merely permit complete relief
between him or her and those already parties to the action, or if he or she has no interest in the
subject matter of the action." It is not a sufficient reason to declare a person to be an
indispensable party simply because his or her presence will avoid multiple litigations.45

Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is
not an indispensable party to the collection case, for the simple reason that the obligation of
Manuel and his wife, respondent herein, is solidary.

The contract between petitioner, on the one hand and respondent and respondents husband,
on the other, states:

FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay BOSTON
EQUITY RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED
(1,400,000.00)] x x x.47

The provisions and stipulations of the contract were then followed by the respective signatures
of respondent as "MAKER" and her husband as "CO-MAKER."48 Thus, pursuant to Article 1216
of the Civil Code, petitioner may collect the entire amount of the obligation from respondent
only. The aforementioned provision states: "The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously. The demand made against one of them
shall not be an obstacle to those which may subsequently be directed against the others, so
long as the debt has not been fully collected."

In other words, the collection case can proceed and the demands of petitioner can be satisfied
by respondent only, even without impleading the estate of Manuel. Consequently, the estate of
Manuel is not an indispensable party to petitioners complaint for sum of money.

However, the Court of Appeals, agreeing with the contention of respondent, held that the claim
of petitioner should have been filed against the estate of Manuel in accordance with Sections 5
and 6 of Rule 86 of the Rules of Court. The aforementioned provisions provide:

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims
for money against the decedent, arising from contract, express or implied, whether the same be
due, not due, or contingent, all claims for funeral expenses and judgment for money against the
decedent, must be filed within the time limited in the notice; otherwise, they are barred forever,
except that they may be set forth as counterclaims in any action that the executor or
administrator may bring against the claimants. x x x.

SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with
another debtor, the claim shall be filed against the decedent as if he were the only debtor,
without prejudice to the right of the estate to recover contribution from the other debtor. x x x.

The Court of Appeals erred in its interpretation of the above-quoted provisions.

In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of
the Revised Rules of Court, which latter provision has been retained in the present Rules of
Court without any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co., Inc.
v. Villarama, et. al.,49 held:50

Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was
taken, this Court held that where two persons are bound in solidum for the same debt and one
of them dies, the whole indebtedness can be proved against the estate of the latter, the
decedents liability being absolute and primary; x x x. It is evident from the foregoing that
Section 6 of Rule 87 provides the procedure should the creditor desire to go against the
deceased debtor, but there is certainly nothing in the said provision making compliance with
such procedure a condition precedent before an ordinary action against the surviving solidary
debtors, should the creditor choose to demand payment from the latter, could be entertained to
the extent that failure to observe the same would deprive the court jurisdiction to take
cognizance of the action against the surviving debtors. Upon the other hand, the Civil Code
expressly allows the creditor to proceed against any one of the solidary debtors or some or all of
them simultaneously. There is, therefore, nothing improper in the creditors filing of an action
against the surviving solidary debtors alone, instead of instituting a proceeding for the
settlement of the estate of the deceased debtor wherein his claim could be filed.

The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank
v. Asuncion51where the Supreme Court pronounced:

A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing
therein prevents a creditor from proceeding against the surviving solidary debtors. Said
provision merely sets up the procedure in enforcing collection in case a creditor chooses to
pursue his claim against the estate of the deceased solidary debtor. The rule has been set forth
that a creditor (in a solidary obligation) has the option whether to file or not to file a claim against
the estate of the solidary debtor. x x x

xxxx

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this
matter. Said provision gives the creditor the right to "proceed against anyone of the solidary
debtors or some or all of them simultaneously." The choice is undoubtedly left to the solidary
creditor to determine against whom he will enforce collection. In case of the death of one of the
solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving solidary
debtors without necessity of filing a claim in the estate of the deceased debtors. It is not
mandatory for him to have the case dismissed as against the surviving debtors and file its claim
against the estate of the deceased solidary debtor, x x x. For to require the creditor to proceed
against the estate, making it a condition precedent for any collection action against the surviving
debtors to prosper, would deprive him of his substantive rightsprovided by Article 1216 of the
New Civil Code. (Emphasis supplied.)

As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were
applied literally, Article 1216 of the New Civil Code would, in effect, be repealed since under the
Rules of Court, petitioner has no choice but to proceed against the estate of [the deceased
debtor] only. Obviously, this provision diminishes the [creditors] right under the New Civil Code
to proceed against any one, some or all of the solidary debtors. Such a construction is not
sanctioned by principle, which is too well settled to require citation, that a substantive law
cannot be amended by a procedural rule. Otherwise stated, Section 6, Rule 86 of the Revised
Rules of Court cannot be made to prevail over Article 1216 of the New Civil Code, the former
being merely procedural, while the latter, substantive.

Based on the foregoing, the estate of Manuel is not an indispensable party and the case can
proceed as against respondent only. That petitioner opted to collect from respondent and not
from the estate of Manuel is evidenced by its opposition to respondents motion to dismiss
asserting that the case, as against her, should be dismissed so that petitioner can proceed
against the estate of Manuel.

On whether or not the inclusion of Manuel as


party defendant is a misjoinder of party

Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-joinder of
parties is ground for dismissal of an action. Parties may be dropped or added by order of the
court on motion of any party or on its own initiative at any stage of the action and on such terms
as are just. Any claim against a misjoined party may be severed and proceeded with
separately."

Based on the last sentence of the afore-quoted provision of law, a misjoined party must have
the capacity to sue or be sued in the event that the claim by or against the misjoined party is
pursued in a separate case. In this case, therefore, the inclusion of Manuel in the complaint
cannot be considered a misjoinder, as in fact, the action would have proceeded against him had
he been alive at the time the collection case was filed by petitioner. This being the case, the
remedy provided by Section 11 of Rule 3 does not obtain here. The name of Manuel as party-
defendant cannot simply be dropped from the case. Instead, the procedure taken by the Court
in Sarsaba v. Vda. de Te,52whose facts, as mentioned earlier, resemble those of this case,
should be followed herein. There, the Supreme Court agreed with the trial court when it resolved
the issue of jurisdiction over the person of the deceased Sereno in this wise:

As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the
person of Patricio Sereno since there was indeed no valid service of summons insofar as
Patricio Sereno is concerned. Patricio Sereno died before the summons, together with a copy of
the complaint and its annexes, could be served upon him.

However, the failure to effect service of summons unto Patricio Sereno, one of the defendants
herein, does not render the action DISMISSIBLE, considering that the three (3) other
defendants, x x x, were validly served with summons and the case with respect to the answering
defendants may still proceed independently. Be it recalled that the three (3) answering
defendants have previously filed a Motion to Dismiss the Complaint which was denied by the
Court.

Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as
a claim against the estate of Patricio Sereno, but the case with respect to the three (3) other
accused [sic] will proceed. (Emphasis supplied.)53

As a result, the case, as against Manuel, must be dismissed.

In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3
of the Rules of Court, which states that: only natural or juridical persons, or entities authorized
by law may be parties in a civil action." Applying this provision of law, the Court, in the case of
Ventura v. Militante,54 held:

Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of


justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a person in
law and possessed of a legal entity as either a natural or an artificial person, and no suit can be
lawfully prosecuted save in the name of such a person.
The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he
institutes a judicial proceeding, to name the proper party defendant to his cause of action. In a
suit or proceeding in personam of an adversary character, the court can acquire no jurisdiction
for the purpose of trial or judgment until a party defendant who actually or legally exists and is
legally capable of being sued, is brought before it. It has even been held that the question of the
legal personality of a party defendant is a question of substance going to the jurisdiction of the
court and not one of procedure.

The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving
spouse Ms. Sulpicia Ventura" as the defendant.1wphi1 Petitioner moved to dismiss the same
on the ground that the defendant as named in the complaint had no legal personality. We agree.

x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same
extent, a decedent does not have the capacity to be sued and may not be named a party
defendant in a court action. (Emphases supplied.)

Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by
law, the complaint may be dismissed on the ground that the pleading asserting the claim states
no cause of action or for failure to state a cause of action pursuant to Section 1(g) of Rule 16 of
the Rules of Court, because a complaint cannot possibly state a cause of action against one
who cannot be a party to a civil action.55

Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is
the dismissal of the case as against him, thus did the trial court err when it ordered the
substitution of Manuel by his heirs. Substitution is proper only where the party to be substituted
died during the pendency of the case, as expressly provided for by Section 16, Rule 3 of the
Rules of Court, which states:

Death of party;duty of counsel. Whenever a party to a pending action dies, and the claim is
not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30)
days after such death of the fact thereof, and to give the name and address of his legal
representative or representatives. x x x

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring
the appointment of an executor or administrator x x x.

The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice. (Emphasis supplied.)

Here, since Manuel was already dead at the time of the filing of the complaint, the court never
acquired jurisdiction over his person and, in effect, there was no party to be substituted.

WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the
Resolution dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586 are
REVERSED and SET ASIDE. The Orders of the Regional Trial Court dated 8 November 2004
and 22 December 2004, respectively, in Civil Case No. 97-86672, are REINSTATED. The
Regional Trial Court, Branch 24, Manila is hereby DIRECTED to proceed with the trial of Civil
Case No. 97-86672 against respondent Lolita G. Toledo only, in accordance with the above
pronouncements of the Court, and to decide the case with dispatch.
SO ORDERED.

JOSE PORTUGAL PEREZ


Associate Justice

#24

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 185922 January 15, 2014

HEIRS OF DR. MARIANO FAVIS SR. represented by their co-heirs and Attorneys-in-Fact
MERCEDES A. FAVIS and NELLY FAVIS- VILLAFUERTE, Petitioners,
vs.
JUANA GONZALES, her son MARIANO G. FAVIS, MA. THERESA JOANA D. FAVIS, JAMES
MARK D. FAVIS, all minors represented herein by their parents SPS. MARIANO FAVIS and
LARCELITA D. FAVIS,Respondents.

DECISION

PEREZ, J.:

Before this Court is a petition for review assailing the 10 April 2008 Decision1 and 7 January 2009
Resolution2 of the Court of Appeals in CA-G.R. CV No. 86497 dismissing petitioners complaint for
annulment of the Deed of Donation for failure to exert earnest efforts towards a compromise.
Dr. Mariano Favis, Sr. (Dr. Favis) was married to Capitolina Aguilar (Capitolina) with whom he had
seven children named Purita A. Favis, Reynaldo Favis, Consolacion Favis-Queliza, Mariano A.
Favis, Jr., Esther F. Filart, Mercedes A. Favis, and Nelly Favis-Villafuerte. When Capitolina died in
March 1944, Dr. Favis took Juana Gonzales (Juana) as his common-law wife with whom he sired
one child, Mariano G. Favis (Mariano). When Dr. Favis and Juana got married in 1974, Dr. Favis
executed an affidavit acknowledging Mariano as one of his legitimate children. Mariano is married to
Larcelita D. Favis (Larcelita), with whom he has four children, named Ma. Theresa Joana D. Favis,
Ma. Cristina D. Favis, James Mark D. Favis and Ma. Thea D. Favis.

Dr. Favis died intestate on 29 July 1995 leaving the following properties:

1. A parcel of residential land located at Bonifacio St. Brgy. 1, Vigan, Ilocos Sur, consisting
an area of 898 square meters, more or less, bounded on the north by Salvador Rivero; on
the East by Eleutera Pena; on the South by Bonifacio St., and on the West by Carmen Giron;
x x x;

2. A commercial building erected on the aforesaid parcel of land with an assessed value of
126,000.00; x x x;

3. A parcel of residential land located in Brgy. VII, Vigan, Ilocos Sur, containing an area of
154 sq. ms., more or less, bounded on the North by the High School Site; on the East by
Gomez St., on the South by Domingo [G]o; and on the West by Domingo Go; x x x;

4. A house with an assessed value of 17,600.00 x x x;

5. A parcel of orchard land located in Brgy. VI, Vigan, Ilocos Sur, containing an area of 2,257
sq. ma. (sic) more or less, bounded on the North by Lot 1208; on the East by Mestizo River;
on the South by Lot 1217 and on the West by Lot 1211-B, 1212 and 1215 x x x.3

Beginning 1992 until his death in 1995, Dr. Favis was beset by various illnesses, such as kidney
trouble, hiatal hernia, congestive heart failure, Parkinsons disease and pneumonia. He died of
"cardiopulmonary arrest secondary to multi-organ/system failure secondary to sepsis secondary to
pneumonia."4

On 16 October 1994, he allegedly executed a Deed of Donation5 transferring and conveying


properties described in (1) and (2) in favor of his grandchildren with Juana.

Claiming that said donation prejudiced their legitime, Dr. Favis children with Capitolina, petitioners
herein, filed an action for annulment of the Deed of Donation, inventory, liquidation and partition of
property before the Regional Trial Court (RTC) of Vigan, Ilocos Sur, Branch 20 against Juana,
Spouses Mariano and Larcelita and their grandchildren as respondents.

In their Answer with Counterclaim, respondents assert that the properties donated do not form part
of the estate of the late Dr. Favis because said donation was made inter vivos, hence petitioners
have no stake over said properties.6

The RTC, in its Pre-Trial Order, limited the issues to the validity of the deed of donation and whether
or not respondent Juana and Mariano are compulsory heirs of Dr. Favis.7

In a Decision dated 14 November 2005, the RTC nullified the Deed of Donation and cancelled the
corresponding tax declarations. The trial court found that Dr. Favis, at the age of 92 and plagued
with illnesses, could not have had full control of his mental capacities to execute a valid Deed of
Donation. Holding that the subsequent marriage of Dr. Favis and Juana legitimated the status of
Mariano, the trial court also declared Juana and Mariano as compulsory heirs of Dr. Favis. The
dispositive portion reads:WHEREFORE, in view of all the foregoing considerations, the Deed of
Donation dated October 16, 1994 is hereby annulled and the corresponding tax declarations issued
on the basis thereof cancelled. Dr. Mariano Favis, Sr. having died without a will, his estate would
result to intestacy. Consequently, plaintiffs Heirs of Dr. Mariano Favis, Sr., namely Purita A. Favis,
Reynaldo A. Favis, Consolacion F. Queliza, Mariano A. Favis, Jr., Esther F. Filart, Mercedes A.
Favis, Nelly F. Villafuerte and the defendants Juana Gonzales now deceased and Mariano G. Favis,
Jr. shall inherit in equal shares in the estate of the late Dr. Mariano Favis, Sr. which consists of the
following:

1. A parcel of residential land located at Bonifacio St. Brgy. 1, Vigan City, Ilocos Sur,
consisting an area of 89 sq. meters more or less, bounded on the north by Salvador Rivero;
on the East by Eleutera Pena; on the South by Bonifacio St., and on the West by Carmen
Giron;

2. A commercial building erected on the aforesaid parcel of land with an assessed value of
126,000.00;

3. One-half (1/2) of the house located in Brgy. VI, Vigan City, Ilocos Sur[,] containing an area
of 2,257 sq. meters more or less, bounded on the north by Lot 1208; on the east by Mestizo
River; on the South by Lot 1217 and on the West by Lot 1211-B, 1212 and 1215.

4. The accumulated rentals of the new Vigan Coliseum in the amount of One Hundred Thirty
[Thousand] (130,000.00) pesos per annum from the death of Dr. Mariano Favis, Sr.8

Respondents interposed an appeal before the Court of Appeals challenging the trial courts
nullification, on the ground of vitiated consent, of the Deed of Donation in favor of herein
respondents. The Court of Appeals ordered the dismissal of the petitioners nullification case.
However, it did so not on the grounds invoked by herein respondents as appellant.

The Court of Appeals motu proprio ordered the dismissal of the complaint for failure of petitioners to
make an averment that earnest efforts toward a compromise have been made, as mandated by
Article 151 of the Family Code. The appellate court justified its order of dismissal by invoking its
authority to review rulings of the trial court even if they are not assigned as errors in the appeal.

Petitioners filed a motion for reconsideration contending that the case is not subject to compromise
as it involves future legitime.

The Court of Appeals rejected petitioners contention when it ruled that the prohibited compromise is
that which is entered between the decedent while alive and compulsory heirs. In the instant case,
the appellate court observed that while the present action is between members of the same family it
does not involve a testator and a compulsory heir. Moreover, the appellate court pointed out that the
subject properties cannot be considered as "future legitime" but are in fact, legitime, as the instant
complaint was filed after the death of the decedent.

Undaunted by this legal setback, petitioners filed the instant petition raising the following arguments:

1. The Honorable Court of Appeals GRAVELY and SERIOUSLY ERRED in DISMISSING the
COMPLAINT.
2. Contrary to the finding of the Honorable Court of Appeals, the verification of the complaint
or petition is not a mandatory requirement.

3. The Honorable Court of Appeals seriously failed to appreciate that the filing of an
intervention by Edward Favis had placed the case beyond the scope of Article 151 of the
Family Code.

4. Even assuming arguendo without admitting that the filing of intervention by Edward Favis
had no positive effect to the complaint filed by petitioners, it is still a serious error for the
Honorable Court of Appeals to utterly disregard the fact that petitioners had substantially
complied with the requirements of Article 151 of the Family Code.

5. Assuming arguendo that petitioners cannot be construed as complying substantially with


Article 151 of the Family Code, still, the same should be considered as a non-issue
considering that private respondents are in estoppel.

6. The dismissal of the complaint by the Honorable Court of Appeals amounts to grave
abuse of discretion amounting to lack and excess of jurisdiction and a complete defiance of
the doctrine of primacy of substantive justice over strict application of technical rules.

7. The Honorable Court of Appeals gravely and seriuosly erred in not affirming the decision
of the Court a quo that the Deed of Donation is void.9

In their Comment, respondents chose not to touch upon the merits of the case, which is the validity
of the deed of donation. Instead, respondents defended the ruling the Court of Appeals that the
complaint is dismissible for failure of petitioners to allege in their complaint that earnest efforts
towards a compromise have been exerted.

The base issue is whether or not the appellate court may dismiss the order of dismissal of the
complaint for failure to allege therein that earnest efforts towards a compromise have been made.
The appellate court committed egregious error in dismissing the complaint. The appellate courts
decision hinged on Article 151 of the Family Code, viz:

Art. 151. No suit between members of the same family shall prosper unless it should appear from
the verified complaint or petition that earnest efforts toward a compromise have been made, but that
the same have failed. If it is shown that no such efforts were in fact made, the case must be
dismissed.

This rule shall not apply to cases which may not be the subject of compromise under the Civil Code.

The appellate court correlated this provision with Section 1, par. (j), Rule 16 of the 1997 Rules of
Civil Procedure, which provides:

Section 1. Grounds. Within the time for but before filing the answer to the complaint or pleading
asserting a claim, a motion to dismiss may be made on any of the following grounds:

xxxx

(j) That a condition precedent for filing the claim has not been complied with.
The appellate courts reliance on this provision is misplaced. Rule 16 treats of the grounds for a
motion to dismiss the complaint. It must be distinguished from the grounds provided under Section 1,
Rule 9 which specifically deals with dismissal of the claim by the court motu proprio. Section 1, Rule
9 of the 1997 Rules of Civil Procedure provides:

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

Section 1, Rule 9 provides for only four instances when the court may motu proprio dismiss the
claim, namely: (a) lack of jurisdiction over the subject matter; (b) litis pendentia ; (c) res judicata ;
and (d) prescription of action.10Specifically in Gumabon v. Larin,11 cited in Katon v. Palanca, Jr.,12 the
Court held:

x x x [T]he motu proprio dismissal of a case was traditionally limited to instances when the court
clearly had no jurisdiction over the subject matter and when the plaintiff did not appear during trial,
failed to prosecute his action for an unreasonable length of time or neglected to comply with the
rules or with any order of the court. Outside of these instances, any motu proprio dismissal would
amount to a violation of the right of the plaintiff to be heard. Except for qualifying and expanding
Section 2, Rule 9, and Section 3, Rule 17, of the Revised Rules of Court, the amendatory 1997
Rules of Civil Procedure brought about no radical change. Under the new rules, a court may motu
proprio dismiss a claim when it appears from the pleadings or evidence on record that it has no
jurisdiction over the subject matter; when there is another cause of action pending between the
same parties for the same cause, or where the action is barred by a prior judgment or by statute of
limitations. x x x.13

The error of the Court of Appeals is evident even if the consideration of the issue is kept within the
confines of the language of Section 1(j) of Rule 16 and Section 1 of Rule 9. That a condition
precedent for filing the claim has not been complied with, a ground for a motion to dismiss
emanating from the law that no suit between members from the same family shall prosper unless it
should appear from the verified complaint that earnest efforts toward a compromise have been made
but had failed, is, as the Rule so words, a ground for a motion to dismiss. Significantly, the Rule
requires that such a motion should be filed "within the time for but before filing the answer to the
complaint or pleading asserting a claim." The time frame indicates that thereafter, the motion to
dismiss based on the absence of the condition precedent is barred. It is so inferable from the
opening sentence of Section 1 of Rule 9 stating that defense and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived. There are, as just noted, only four
exceptions to this Rule, namely, lack of jurisdiction over the subject matter; litis pendentia ; res
judicata ; and prescription of action. Failure to allege in the complaint that earnest efforts at a
compromise has been made but had failed is not one of the exceptions. Upon such failure, the
defense is deemed waived.

It was in Heirs of Domingo Valientes v. Ramas14 cited in P.L. Uy Realty Corporation v. ALS
Management and Development Corporation15 where we noted that the second sentence of Section 1
of Rule 9 does not only supply exceptions to the rule that defenses not pleaded either in a motion to
dismiss or in the answer are deemed waived, it also allows courts to dismiss cases motu propio on
any of the enumerated grounds. The tenor of the second sentence of the Rule is that the allowance
of a motu propio dismissal can proceed only from the exemption from the rule on waiver; which is
but logical because there can be no ruling on a waived ground.
Why the objection of failure to allege a failed attempt at a compromise in a suit among members of
the same family is waivable was earlier explained in the case of Versoza v. Versoza,16 a case for
future support which was dismissed by the trial court upon the ground that there was no such
allegation of infringement of Article 222 of the Civil Code, the origin of Article 151 of the Family
Code. While the Court ruled that a complaint for future support cannot be the subject of a
compromise and as such the absence of the required allegation in the complaint cannot be a ground
for objection against the suit, the decision went on to state thus:

The alleged defect is that the present complaint does not state a cause of action. The proposed
amendment seeks to complete it. An amendment to the effect that the requirements of Article 222
have been complied with does not confer jurisdiction upon the lower court. With or without this
amendment, the subject-matter of the action remains as one for support, custody of children, and
damages, cognizable by the court below.

To illustrate, Tamayo v. San Miguel Brewery, Inc.,17 allowed an amendment which " merely corrected
a defect in the allegation of plaintiff-appellants cause of action, because as it then stood, the original
complaint stated no cause of action." We there ruled out as inapplicable the holding in Campos
Rueda Corporation v. Bautista,18 that an amendment cannot be made so as to confer jurisdiction on
the court x x x. (Italics supplied).

Thus was it made clear that a failure to allege earnest but failed efforts at a compromise in a
complaint among members of the same family, is not a jurisdictional defect but merely a defect in the
statement of a cause of action. Versoza was cited in a later case as an instance analogous to one
where the conciliation process at the barangay level was not priorly resorted to. Both were described
as a "condition precedent for the filing of a complaint in Court."19 In such instances, the consequence
is precisely what is stated in the present Rule. Thus:

x x x The defect may however be waived by failing to make seasonable objection, in a motion to
dismiss or answer, the defect being a mere procedural imperfection which does not affect the
jurisdiction of the court.20 (Underscoring supplied).

In the case at hand, the proceedings before the trial court ran the full course. The complaint of
petitioners was answered by respondents without a prior motion to dismiss having been filed. The
decision in favor of the petitioners was appealed by respondents on the basis of the alleged error in
the ruling on the merits, no mention having been made about any defect in the statement of a cause
of action. In other words, no motion to dismiss the complaint based on the failure to comply with a
condition precedent was filed in the trial court; neither was such failure assigned as error in the
appeal that respondent brought before the Court of Appeals.

Therefore, the rule on deemed waiver of the non-jurisdictional defense or objection is wholly
applicable to respondent. If the respondents as parties-defendants could not, and did not, after filing
1w phi 1

their answer to petitioners complaint, invoke the objection of absence of the required allegation on
earnest efforts at a compromise, the appellate court unquestionably did not have any authority or
basis to motu propio order the dismissal of petitioners complaint.

Indeed, even if we go by the reason behind Article 151 of the Family Code, which provision as then
Article 222 of the New Civil Code was described as "having been given more teeth"21 by Section 1(j),
Rule 16 of the Rule of Court, it is safe to say that the purpose of making sure that there is no longer
any possibility of a compromise, has been served. As cited in commentaries on Article 151 of the
Family Code
This rule is introduced because it is difficult to imagine a sudden and more tragic spectacle than a
litigation between members of the same family. It is necessary that every effort should be made
towards a compromise before a litigation is allowed to breed hate and passion in the family. It is
known that a lawsuit between close relatives generates deeper bitterness than between strangers.22

The facts of the case show that compromise was never an option insofar as the respondents were
concerned. The impossibility of compromise instead of litigation was shown not alone by the
absence of a motion to dismiss but on the respondents insistence on the validity of the donation in
their favor of the subject properties. Nor could it have been otherwise because the Pre-trial Order
specifically limited the issues to the validity of the deed and whether or not respondent Juana and
Mariano are compulsory heirs of Dr. Favis. Respondents not only confined their arguments within
the pre-trial order; after losing their case, their appeal was based on the proposition that it was error
for the trial court to have relied on the ground of vitiated consent on the part of Dr. Favis.

The Court of Appeals ignored the facts of the case that clearly demonstrated the refusal by the
respondents to compromise. Instead it ordered the dismissal of petitioners complaint on the ground
that it did not allege what in fact was shown during the trial. The error of the Court of Appeals is
patent.

Unfortunately for respondents, they relied completely on the erroneous ruling of the Court of Appeals
even when petitioners came to us for review not just on the basis of such defective motu propio
action but also on the proposition that the trial court correctly found that the donation in question is
flawed because of vitiated consent. Respondents did not answer this argument. The trial court stated
that the facts are:

x x x To determine the intrinsic validity of the deed of donation subject of the action for annulment,
the mental state/condition of the donor Dr. Mariano Favis, Sr. at the time of its execution must be
taken into account. Factors such as his age, health and environment among others should be
considered. As testified to by Dr. Mercedes Favis, corroborated by Dr. Edgardo Alday and Dra.
Ofelia Adapon, who were all presented as expert witnesses, Dr. Mariano Favis, Sr. had long been
suffering from Hiatal Hernia and Parkinsons disease and had been taking medications for years.
That a person with Parkinsons disease for a long time may not have a good functioning brain
because in the later stage of the disease, 1/3 of death develop from this kind of disease, and or
dementia. With respect to Hiatal Hernia, this is a state wherein organs in the abdominal cavity would
go up to the chest cavity, thereby occupying the space for the lungs causing the lungs to be
compromised. Once the lungs are affected, there is less oxygenation to the brain. The Hernia would
cause the heart not to pump enough oxygen to the brain and the effect would be chronic, meaning,
longer lack of oxygenation to the brain will make a person not in full control of his faculties. Dr. Alday
further testified that during his stay with the house of Dr. Mariano Favis, Sr. (1992-1994), he noticed
that the latter when he goes up and down the stairs will stop after few seconds, and he called this
pulmonary cripple a very advanced stage wherein the lungs not only one lung, but both lungs are
compromised. That at the time he operated on the deceased, the left and right lung were functioning
but the left lung is practically not even five (5%) percent functioning since it was occupied by
abdominal organ. x x x.

Dr. Mariano Favis, Sr. during the execution of the Deed of Donation was already 92 years old; living
with the defendants and those years from 1993 to 1995 were the critical years when he was sick
most of the time. In short, hes dependent on the care of his housemates particularly the members of
his family. It is the contention of the defendants though that Dr. Mariano Favis, Sr. had full control of
his mind during the execution of the Deed of Donation because at that time, he could go on with the
regular way of life or could perform his daily routine without the aid of anybody like taking a bath,
eating his meals, reading the newspaper, watching television, go to the church on Sundays, walking
down the plaza to exercise and most importantly go to the cockpit arena and bet. Dr. Ofelia Adapon,
a neurology expert however, testified that a person suffering from Parkinsons disease when he goes
to the cockpit does not necessarily mean that such person has in full control of his mental faculties
because anyone, even a retarded person, a person who has not studied and have no intellect can
go to the cockpit and bet. One can do everything but do not have control of his mind. x x x That
Hiatal Hernia creeps in very insidiously, one is not sure especially if the person has not complained
and no examination was done. It could be there for the last time and no one will know. x x x.

The Deed of Donation in favor of the defendants Ma. Theresa, Joana D. Favis, Maria Cristina D.
Favis, James Mark D. Favis and Maria Thea D. Favis, all of whom are the children of Mariano G.
Favis, Jr. was executed on [16 October] 1994, seven (7) months after Dra. Mercedes Favis left the
house of Dr. Favis, Sr. at Bonifacio St., Vigan City, Ilocos Sur, where she resided with the latter and
the defendants.

Putting together the circumstances mentioned, that at the time of the execution of the Deed of
Donation, Dr. Mariano Favis, Sr. was already at an advanced age of 92, afflicted with different
illnesses like Hiatal hernia, Parkinsons disease and pneumonia, to name few, which illnesses had
the effects of impairing his brain or mental faculties and the deed being executed only when Dra.
Mercedes Favis had already left his fathers residence when Dr. Mariano Favis, Sr. could have done
so earlier or even in the presence of Dra. Mercedes Favis, at the time he executed the Deed of
Donation was not in full control of his mental faculties. That although age of senility varies from one
person to another, to reach the age of 92 with all those medications and treatment one have
received for those illnesses, yet claim that his mind remains unimpaired, would be unusual. The fact
that the Deed of Donation was only executed after Dra. Mercedes Favis left his father's house
necessarily indicates that they don't want the same to be known by the first family, which is an
indicia of bad faith on the part of the defendant, who at that time had influence over the donor.23

The correctness of the finding was not touched by the Court of Appeals. The respondents opted to
rely only on what the appellate court considered, erroneously though, was a procedural infirmity. The
trial court's factual finding, therefore, stands unreversed; and respondents did not provide us with
any argument to have it reversed.

The issue of the validity of donation was fully litigated and discussed by the trial court. Indeed, the
trial court's findings were placed at issue before the Court of Appeals but the appellate court chose
to confine its review to the procedural aspect. The judgment of the Court of Appeals, even if it dealt
only with procedure, is deemed to have covered all issues including the correctness of the factual
findings of the trial court. Moreover, remanding the case to the Court of Appeals would only
constitute unwarranted delay in the final disposition of the case.

WHEREFORE, the Decision of the Court of Appeals is REVERSED and SET ASIDE and the
Judgment of the Regional Trial Court of Vigan, Ilocos Sur, Branch 20 is AFFIRMED.

SO ORDERED.

JOSE PORTUGAL PEREZ


Associate Justice
#25

THIRD DIVISION

March 12, 2014

G.R. No. 193494

LUI ENTERPRISES, INC., Petitioners,


vs.
ZUELLIG PHARMA CORPORATION and the PHILIPPINE BANK OF
COMMUNICATIONS, Respondents.

DECISION

LEONEN, J.:

There should be no inexplicable delay in the filing of a motion to set aside order of default. Even
when a motion is filed within the required period, excusable negligence must be properly alleged and
proven.
This is a petition for review on certiorari of the Court of Appeals' decision1 dated May 24, 2010 and
resoluticm2dated August 13, 2010 in CA- G.R. CV No. 88023. The Court of Appeals affirmed in toto
the Regional

Trial Court of Makatis decision3 dated July 4, 2006.

The facts as established from the pleadings of the parties are as follows:

On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma Corporation entered into a 10-year
contract of lease4over a parcel of land located in Barrio Tigatto, Buhangin, Davao City. The parcel of
land was covered by Transfer Certificate of Title No. T-166476 and was registered under Eli L. Lui.5

On January 10, 2003, Zuellig Pharma received a letter6 from the Philippine Bank of Communications.
Claiming to be the new owner of the leased property, the bank asked Zuellig Pharma to pay rent
directly to it. Attached to the letter was a copy of Transfer Certificate of Title No. 336962 under the
name of the Philippine Bank of Communications.7Transfer Certificate ofTitle No. 336962 was derived
fromTransfer Certificate ofTitle No.T-166476.8

Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of Communications claim.
On January 28, 2003, Lui Enterprises wrote to Zuellig Pharma and insisted on its right to collect the
leased propertysrent.9

Due to the conflicting claims of Lui Enterprises and the Philippine Bank of Communications over the
rental payments, Zuellig Pharma filed a complaint10 for interpleader with the Regional Trial Court of
Makati. In its complaint, Zuellig Pharma alleged that it already consigned in court P604,024.35 as
rental payments. Zuellig Pharma prayed that it be allowed to consign in court its succeeding monthly
rental payments and that Lui Enterprises and the Philippine Bank of Communications be ordered to
litigate their conflicting claims.11

The Philippine Bank of Communications filed its answer12 to the complaint. On the other hand, Lui
Enterprises filed a motion to dismiss13 on the ground that Zuellig Pharmas alleged representative did
not have authority to file the complaint for interpleader on behalf of the corporation. Under the
secretarys certificate14 dated May 6, 2003 attached to the complaint, Atty. Ana L.A. Peralta was only
authorized to "initiate and represent [Zuellig Pharma] in the civil proceedings for consignation of
rental payments to be filed against Lui Enterprises, Inc. and/or [the Philippine Bank of
Communications]."15

According to Lui Enterprises, an earlier filed nullification of deed of dation in payment case pending
with the Regional Trial Court of Davao barred the filing of the interpleader case.16 Lui Enterprises
filed this nullification case against the Philippine Bank of Communications with respect to several
properties it dationed to the bank in payment of its obligations. The property leased by Zuellig
Pharma was among those allegedly dationed to the Philippine Bank of Communications.17

In the nullification of deed of dation in payment case, Lui Enterprises raised the issue of which
corporation had the better right over the rental payments.18 Lui Enterprises argued that the same
issue was involved in the interpleader case. To avoid possible conflicting decisions of the Davao trial
court and the Makati trial court on the same issue, Lui Enterprises argued that the subsequently filed
interpleader case be dismissed.

To support its argument, Lui Enterprises cited a writ of preliminary injunction19 dated July 2, 2003
issued by the Regional Trial Court of Davao, ordering Lui Enterprises and the Philippine Bank of
Communications "[to maintain] status quo"20 with respect to the rent. By virtue of the writ of
preliminary injunction, Lui Enterprises argued that it should continue collecting the rental payments
from its lessees until the nullification of deed of dation in payment case was resolved. The writ of
preliminary injunction dated July 2, 2003 reads:

WHEREAS, on June 30, 2003, the Court issued an Order, a portion of which is quoted:

WHEREFORE, PREMISES CONSIDERED, let a Writ of Preliminary Injunction issue, restraining and
enjoining [the Philippine Bank of Communications], its agents or [representative], the Office of the
Clerk of Court- Sheriff and all persons acting on their behalf, from conducting auction sale on the
properties of [Lui Enterprises] in EJF-REM Case No. 6272-03 scheduled on July 3, 2003 at 10:00
a.m. at the Hall of Justice, Ecoland, Davao City, until the final termination of the case, upon plaintiff
[sic] filing of a bond in the amount of P1,000,000.00 to answer for damages that the enjoined parties
may sustain by reason of the injunction if the Court should finally decide that applicant is not entitled
thereto.

WHEREAS, that plaintiff posted a bond of P1,000,000.00 duly approved by this Court.

IT IS HEREBY ORDERED by the undersigned Judge that, until further orders, [the Philippine Bank
of Communications] and all [its] attorneys, representatives, agents and any other persons assisting
[the bank], are directed to restrain from conducting auction sale on the Properties of [Lui Enterprises]
in EJF-REM Case No. 6272-03 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice,
Ecoland, Davao City, until the final termination of the case.21

Zuellig Pharma filed its opposition22 to the motion to dismiss. It argued that the motion to dismiss
should be denied for having been filed late. Under Rule 16, Section 1 of the 1997 Rules of Civil
Procedure, a motion to dismiss should be filed within the required time given to file an answer to the
complaint, which is 15 days from service of summons on the defendant.23 Summons was served on
Lui Enterprises on July 4, 2003. It had until July 19, 2003 to file a motion to dismiss, but Lui
Enterprises filed the motion only on July23, 2003.24

As to Lui Enterprises claim that the interpleader case was filed without authority, Zuellig Pharma
argued that an action interpleader "is a necessary consequence of the action for
consignation."25 Zuellig Pharma consigned its rental payments because of "the clearly conflicting
claims of [Lui Enterprises] and [the Philippine Bank of Communications]."26 Since Atty. Ana L.A.
Peralta was authorized to file a consignation case, this authority necessarily included an authority to
file the interpleader case.

Nevertheless, Zuellig Pharma filed in court the secretarys certificate dated August 28, 2003,27 which
expressly stated that Atty. Ana L.A. Peralta was authorized to file a consignation and interpleader
case on behalf of Zuellig Pharma.28

With respect to the nullification of deed of dation in payment case, Zuellig Pharma argued that its
pendency did not bar the filing of the interpleader case. It was not a party to the nullification case.29

As to the writ of preliminary injunction issued by the Regional Trial Court of Davao, Zuellig Pharma
argued that the writ only pertained to properties owned by Lui Enterprises. Under the writ of
preliminary injunction, the Regional Trial Court of Davao enjoined the July 3, 2003 auction sale of Lui
Enterprises properties, the proceeds of which were supposed to satisfy its obligations to the
Philippine Bank of Communications. As early as April 21, 2001, however, the Philippine Bank of
Communications already owned the leased property as evidenced by Transfer Certificate of Title No.
336962. Thus, the writ of preliminary injunction did not apply to the leased property.30
Considering that Lui Enterprises filed its motion to dismiss beyond the 15-day period to file an
answer, Zuellig Pharma moved that Lui Enterprises be declared in default.31

In its compliance32 dated September 15, 2003, the Philippine Bank of Communications "[joined
Zuellig Pharma] in moving to declare [Lui Enterprises] in default, and in [moving for] the denial of [Lui
Enterprises] motion to dismiss."33

The Regional Trial Court of Makati found that Lui Enterprises failed to file its motion to dismiss within
the reglementary period. Thus, in its order34 dated October 6, 2003, the trial court denied Lui
Enterprisesmotion to dismiss and declared it in default.35

Lui Enterprises did not move for the reconsideration of the order dated October 6, 2003. Thus, the
Makati trial court heard the interpleader case without Lui Enterprisesparticipation.

Despite having been declared in default, Lui Enterprises filed the manifestation with prayer36 dated
April 15, 2004. It manifested that the Regional Trial Court of Davao allegedly issued the order37 dated
April 1, 2004, ordering all of Lui Enterprises lessees to "observe status quo with regard to the rental
payments"38 and continue remitting their rental payments to Lui Enterprises while the nullification of
deed of dation in payment case was being resolved. The order dated April 1, 2004 of the Regional
Trial Court of Davao reads:

ORDER

Posed for Resolution is the Motion for Amendment of Order filed by [Lui Enterprises] on September
23, 2003 seeking for the preservation of status quo on the payment/remittance of rentals to [it] and
the disposal/construction of the properties subject matter of this case.

xxxx

As elsewhere stated, [the Philippine Bank of Communications] did not oppose the instant motion up
to the present. In fact, during the hearing held on March 15, 2004, [the banks] counsel manifested in
open court that except for the rentals due from [Zuellig Pharma] which are the subject of a
consignation suit before a Makati Court, the other rental payments are continuously received by [Lui
Enterprises].

There being no objection from [the Philippine Bank of Communications], and in order to protect the
right of [Lui Enterprises] respecting the subject of the action during the pendency of this case, this
Court, in the exercise of its discretion hereby grants the motion.

Accordingly, consistent with the order of this Court dated June 30, 2003, the parties are hereby
directed to further observe status quo with regard to the rental payments owing or due from the
lessees of the properties subject of the first set of deeds of dacion and that the defendants are
enjoined from disposing of the properties located at Green Heights Village, Davao City until the case
is finally resolved.

With the order dated April 1, 2004 issued by the Regional Trial Court of Davao as basis, Lui
Enterprises argued that Zuellig Pharma must remit its rental payments to it and prayed that the
interpleader case be dismissed.

The Regional Trial Court of Makati only noted the manifestation with prayer dated April 15, 2004.39
It was only on October 21, 2004, or one year after the issuance of the order of default, that Lui
Enterprises filed a motion to set aside order of default40 in the Makati trial court on the ground of
excusable negligence. Lui Enterprises argued that its failure to file a motion to dismiss on time "was
caused by the negligence of [Lui Enterprises] former counsel."41 This negligence was allegedly
excusable because "[Lui Enterprises] was prejudiced and prevented from fairly presenting [its]
case."42

For its allegedly meritorious defense, Lui Enterprises argued that the earlier filed nullification of deed
of dation in payment case barred the filing of the interpleader case. The two actions allegedly
involved the same parties and the same issue of which corporation had the better right over the
rental payments. To prevent "the possibility of two courts x x x rendering conflicting rulings [on the
same issue],"43 Lui Enterprises argued that the subsequently filed interpleader case be dismissed.

Zuellig Pharma filed its opposition44 to the motion to set aside order of default. It argued that a
counsels failure to file a timely answer was inexcusable negligence which bound his client.

Further, Zuellig Pharma argued that the pending case for nullification of deed of dation in payment
"[did] not preclude [Zuellig Pharma] from seeking the relief prayed for in the [interpleader case]."45

While the motion to set aside order of default was still pending for resolution, Lui Enterprises filed the
manifestation and motion to dismiss46 dated April 21, 2005 in the Makati trial court. It manifested that
the Davao trial court issued another order47 dated April 18, 2005 in the nullification of deed of dation
in payment case. In this order, the Davao trial court directed the Philippine Bank of Communications
to inform Zuellig Pharma to pay rent to Lui Enterprises while the Davao trial courts order dated April
1, 2004 was subsisting. The order datedApril 18, 2005 of the Davao trial court reads:

ORDER

Plaintiffs move for execution or implementation of the Order dated September 14, 2004. In
substance, [Lui Enterprises] seek[s] to compel the remittance in their favor of the rentals from
[Zuellig Pharma], one of the lessees alluded to in the September 14, 2004 Order whose rental
payments "must be remitted to and collected by [Lui Enterprises]." [The Philippine Bank of
Communications] did not submit any opposition.

It appears from the records that sometime in February 2003, after being threatened with a lawsuit
coming from [the Philippine Bank of Communications], [Zuellig Pharma] stopped remitting its rentals
to [Lui Enterprises] and instead, has reportedly deposited the monthly rentals before a Makati court
for consignation.

As aptly raised by the plaintiffs, a possible impasse may insist should the Makati Courts ruling be
contrary to or in conflict with the status quo order issued by this Court. To preclude this spectacle,
Zuellig Pharma should accordingly be advised with the import of the Order dated September 14,
2004, the salient portion of which is quoted:

x x x prior to the institution of the instant case and by agreement of the parties, plaintiffs were given
as they did exercise the right to collect, receive and enjoy rental payments x x x.

Since the April 1, 2004 status quo order was a necessary implement of the writ of preliminary
injunction issued on June 30, 2003, it follows that plaintiff's right to collect and receive rental
payments which he enjoyed prior to the filing of this case, must be respected and protected and
maintained until the case is resolved. As such, all rentals due from the above-enumerated lessees
must be remitted to and collectedby the Plaintiffs.
Status quo simply means the last actual peaceable uncontested status that preceded the actual
controversy. (Searth Commodities Corp. v. Court ofAppeals, 207 SCRA 622).

As such, the [Philippine Bank of Communications] [is] hereby directed to forthwith inform [Zuellig
Pharma] of the April 1, 2004 status quo order and the succeeding September 14, 2004 Order, and
consequently, for the said lessee to remit all rentals due from February 23, 2003 and onwards to [Lui
Enterprises] in the meanwhile that the status quo order is subsisting.

In its manifestation and motion to dismiss, Lui Enterprises reiterated its prayer for the dismissal of
the interpleader case to prevent "the possibility of [the Regional Trial Court, Branch 143, Makati City]
and [the Regional Trial Court, Branch 16, Davao City] rendering conflicting rulings [on the same
issue of which corporation has the better right to the rental payments]."48

Without resolving the motion to set aside order of default, the Makati trial court denied the
manifestation with motion to dismiss dated April 21, 2005 on the ground that Lui Enterprises already
lost its standing in court.49

Lui Enterprises did not file any motion for reconsideration of the denial of the manifestation and
motion to dismiss dated April 21, 2005.

In its decision50 dated July 4, 2006, the Regional Trial Court of Makati ruled that Lui Enterprises
"[was] barred from any claim in respect of the [rental payments]"51 since it was declared in default.
Thus, according to the trial court, there was no issue as to which corporation had the better right
over the rental payments.52 The trial court awarded the total consigned amount of P6,681,327.30 to
the Philippine Bank of Communications and ordered Lui Enterprises to pay Zuellig Pharma
P50,000.00 in attorneys fees.53

Lui Enterprises appealed to the Court of Appeals.54

The Court of Appeals found Lui Enterprises appellants brief insufficient. Under Rule 44, Section 13
of the 1997 Rules of Civil Procedure, an appellants brief must contain a subject index, page
references to the record, table of cases, textbooks and statutes cited, and the statement of issues,
among others. However, Lui Enterprises appellants brief did not contain these requirements.55

As to the denial of Lui Enterprises motion to dismiss, the Court of Appeals sustained the trial court.
The Court of Appeals found that Lui Enterprises filed its motion to dismiss four days late.56

With respect to Lui Enterprises motion to set aside order of default, the Court ofAppeals found that
Lui Enterprises failed to show the excusable negligence that prevented it from filing its motion to
dismiss on time. On its allegedly meritorious defense, the Court of Appeals ruled that the nullification
of deed of dation in payment case did not bar the filing of the interpleader case, with Zuellig Pharma
not being a party to the nullification case.57

On the award of attorneys fees, the Court of Appeals sustained the trial court since "Zuellig Pharma
x x x was constrained to file the action for interpleader with consignation inorder to protect its
interests x x x."58

Thus, in its decision59 promulgated on May 24, 2010, the Court of Appeals dismissed Lui
Enterprisesappeal and affirmed in toto the Regional Trial Court of Makatis decision.

Lui Enterprises filed a motion for reconsideration.60


The Court of Appeals denied Lui Enterprises motion for reconsideration in its resolution promulgated
on August 13, 2010.61 Hence, this petition.

In this petition for review on certiorari,62 Lui Enterprises argued that the Court of Appeals applied "the
rules of procedure strictly"63 and dismissed its appeal on technicalities. According to Lui Enterprises,
the Court of Appeals should have taken a liberal stance and allowed its appeal despite the lack of
subject index, page references to the record, table of cases, textbooks and statutes cited, and the
statement of issues in its appellants brief.64

Lui Enterprises also claimed that the trial court should have set aside the order of default since its
failure to file a motion to dismiss on time was due to excusable negligence.65

For its allegedly meritorious defense, Lui Enterprises argued that the pending nullification of deed of
dation in payment case barred the filing of the interpleader case.The nullification of deed of dation in
payment case and the interpleader case allegedly involved the same issue of which corporation had
the better right to the rent. To avoid conflicting rulings on the same issue, Lui Enterprises argued that
the subsequently filed interpleader case be dismissed.66

No attorneys fees should have been awarded to Zuellig Pharma as argued by Lui Enterprises.
Zuellig Pharma filed the interpleader case despite its knowledge of the nullification of deed of dation
in payment case filed in the Davao trial court where the same issue of which corporation had the
better right over the rental payments was being litigated. Thus, Zuellig Pharma filed the interpleader
case in bad faith for which it was not entitled to attorneys fees.67

The Philippine Bank of Communications filed its comment68 on the petition for review on certiorari. It
argued that Lui Enterprises failed to raise any error of law and prayed that we affirm in toto the Court
of Appeals decision.

For Zuellig Pharma, it manifested that it was adopting the Philippine Bank of
Communicationsarguments in its comment.69

The issues for our resolution are:

I. Whether the Court of Appeals erred in dismissing Lui Enterprises appeal for lack of subject
index, page references to the record, table of cases, textbooks and statutes cited, and the
statement of issues in Lui Enterprisesappellants brief;

II. Whether the Regional Trial Court of Makati erred in denying Lui Enterprisesmotion to set
aside order of default;

III. Whether the annulment of deed of dation in payment pending in the Regional Trial Court
of Davao barred the subsequent filing of the interpleader case in the Regional Trial Court of
Makati; and

IV. Whether Zuellig Pharma was entitled to attorneys fees.

Lui Enterprises petition for review on certiorari is without merit. However, we delete the award of
attorneys fees.

I
Lui Enterprises did not comply with the rules on the contents of the appellants brief

Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil Procedure, the Court of Appeals
may, on its own motion or that of the appellee, dismiss an appeal should the appellants brief lack
specific requirements under Rule 44, Section 13, paragraphs (a), (c), (d), and (f):

Section 1. Grounds for dismissal of appeal. An appeal may be dismissed by the Court of Appeals,
on its own motion or on that of the appellee, on the following grounds:

xxxx

(f) Absence of specific assignment of errors in the appellants brief, or of page references to the
record as required in Section 13, paragraphs (a), (c), (d), and (f) of Rule 44.

These requirements are the subject index of the matter in brief, page references to the record, and a
table of cases alphabetically arranged and with textbooks and statutes cited:

Section 13. Contents of the appellants brief. The appellants brief shall contain, in the order herein
indicated, the following:

(a) A subject index of the matter in brief with a digest of the arguments and page references, and a
table of cases alphabetically arranged, textbooks and statutes cited with references to the pages
where they are cited;

xxxx

(c) Under the heading "Statement of the Case," a clear and concise statement of the nature of the
action, a summary of the proceedings, the appealed rulings and orders of the court, the nature of the
controversy, with page references to the record;

(d) Under the heading "Statement of Facts," a clear and concise statement in a narrative form of the
facts admitted by both parties and of those in controversy, together with the substance of the proof
relating thereto in sufficient detail to make it clearly intelligible, with page references to the record;

xxxx

(f) Under the heading "Argument," the appellants arguments on each assignment of error with page
references to the record. The authorities relied upon shall be cited by the page of the report at which
the case begins and the page of the report on which the citation isfound;

xxxx

Lui Enterprises appellants brief lacked a subject index, page references to the record, and table of
cases, textbooks and statutes cited. Under Rule 50, Section 1 of the 1997 Rules of Civil Procedure,
the Court of Appeals correctly dismissed Lui Enterprises appeal.

Except for cases provided in the Constitution,70 appeal is a "purely statutory right."71 The right to
appeal "must be exercised in the manner prescribed by law"72 and requires strict compliance with the
Rules of Court on appeals.73Otherwise, the appeal shall be dismissed, and its dismissal shall not be
a deprivation of due process of law.
In Mendoza v. United Coconut Planters Bank, Inc.,74 this court sustained the Court of Appeals
dismissal of Mendozas appeal. Mendozas appellants brief lacked a subject index, assignment of
errors, and page references to the record. In De Liano v. Court of Appeals,75 this court also sustained
the dismissal of De Lianos appeal. De Lianos appellants brief lacked a subject index, a table of
cases and authorities, and page references to the record.

There are exceptions to this rule. In Philippine Coconut Authority v. Corona International, Inc.,76 the
Philippine Coconut Authoritys appellants brief lacked a clear and concise statement of the nature of
the action, a summary of the proceedings, the nature of the judgment, and page references to the
record. However, this court found that the Philippine Coconut Authority substantially complied with
the Rules. Its appellants brief "apprise[d] [the Court of Appeals] of the essential facts and nature of
the case as well as the issues raised and the laws necessary [to dispose of the case]."77 This court
"[deviated] from a rigid enforcement of the rules"78 and ordered the Court of Appeals to resolve the
Philippine Coconut Authoritys appeal.

In Go v. Chaves,79 Gos 17-page appellants brief lacked a subject index. However, Go subsequently
filed a subject index. This court excused Gos procedural lapse since the appellants brief
"[consisted] only of 17 pages which [the Court of Appeals] may easily peruse to apprise it of [the
case] and of the relief sought."80 This court ordered the Court of Appeals to resolve Gos appeal "in
the interest of justice."81

In Philippine Coconut Authority and Go, the appellants substantially complied with the rules on the
contents of the appellants brief. Thus, this court excused the appellantsprocedural lapses.

In this case, Lui Enterprises did not substantially comply with the rules on the contents of the
appellants brief. It admitted that its appellants brief lacked the required subject index, page
references to the record, and table of cases, textbooks, and statutes cited. However, it did not even
correct its admitted "technical omissions"82 by filing an amended appellants brief with the required
contents.83 Thus, this case does not allow a relaxation of the rules. The Court of Appeals did not err
in dismissing Lui Enterprises appeal.

Rules on appeal "are designed for the proper and prompt disposition of cases before the Court
ofAppeals."84 With respect to the appellants brief, its required contents are designed "to minimize the
[Court ofAppeals] labor in [examining]the record uponwhich the appeal is heard and determined."85

The subject index serves as the briefs table of contents.86 Instead of "[thumbing] through the
[appellants brief]"87every time the Court of Appeals Justice encounters an argument or citation, the
Justice deciding the case only has to refer to the subject index for the argument or citation he or she
needs.88 This saves the Court ofAppeals time in reviewing the appealed case. Efficiency allows the
justices of the appellate court to substantially attend to this case as well as other cases.

Page references to the record guarantee that the facts stated in the appellants brief are supported
by the record.89Astatement of fact without a page reference to the record creates the presumption
that it is unsupported by the record and, thus, "may be stricken or disregarded altogether."90

As for the table of cases, textbooks, and statutes cited, this is required so that the Court of Appeals
can easily verify the authorities cited "for accuracy and aptness."91

Lui Enterprises appellants brief lacked a subject index, page references to the record, and a table
of cases, textbooks, and statutes cited. These requirements "were designed to assist the appellate
court in the accomplishment of its tasks, and, overall, to enhance the orderly administration of
justice."92 This court will not disregard rules on appeal "in the guise of liberal construction."93 For this
court to liberally construe the Rules, the party must substantially comply with the Rules and correct
its procedural lapses.94 Lui Enterprises failed to remedy these errors.

All told, the Court of Appeals did not err in dismissing Lui Enterprises appeal. It failed to comply with
Rule 44, Section 13, paragraphs (a), (c), (d), and (f) of the 1997 Rules of Civil Procedure on the
required contents of the appellants brief.

II

Lui Enterprises failed to show that its failure to answer the complaint within the required
period was due to excusable negligence

When a defendant is served with summons and a copy of the complaint, he or she is required to
answer within 15 days from the day he or she was served with summons.95 The defendant may also
move to dismiss the complaint "[w]ithin the time for but before filing the answer."96

Fifteen days is sufficient time for a defendant to answer with good defenses against the plaintiffs
allegations in the complaint. Thus, a defendant who fails to answer within 15 days from service of
summons either presents no defenses against the plaintiffs allegations in the complaint or was
prevented from filing his or her answer within the required period due to fraud, accident, mistake or
excusable negligence.97

In either case, the court may declare the defendant in default on plaintiffs motion and notice to
defendant.98 The court shall then try the case until judgment without defendants participation99 and
grant the plaintiff such relief as his or her complaint may warrant.100

A defendant declared in default loses his or her standing in court.101 He or she is "deprived of the
right to take part in the trial and forfeits his [or her] rights as a party litigant,"102 has no right "to present
evidence [supporting his or her] allegations,"103 and has no right to "control the proceedings [or]
cross-examine witnesses."104 Moreover, he or she "has no right to expect that [the court] would [act]
upon [his or her pleadings]"105 or that he or she "may [oppose]motions filed against him [or her]."106

However, the defendant declared in default "does not [waive] all of [his or her] rights."107 He or she
still has the right to "receive notice of subsequent proceedings."108 Also, the plaintiff must still present
evidence supporting his or her allegations "despite the default of [the defendant]."109

Default, therefore, is not meant to punish the defendant but to enforce the prompt filing of the answer
to the complaint. For a defendant without good defenses, default saves him or her "the
embarrassment of openly appearing to defend the indefensible."110 As this court explained
in Gochangco v. The Court of First Instance of Negros Occidental, Branch

IV:111

It does make sense for a defendant without defenses, and who accepts the correctness of
the specific relief prayed for in the complaint, to forego the filing of the answer or any sort of
intervention in the action at all. For even if he did intervene, the result would be the same: since he
would be unable to establish any good defense, having none in fact, judgment would inevitably go
against him. And this would be an acceptable result, if not being in his power to alter or prevent it,
provided that the judgment did not go beyond or differ from the specific relief stated in the complaint.
x x x.112 (Emphasis in the original)
On the other hand, for a defendant with good defenses, "it would be unnatural for him [or her] not to
set x x x up [his or her defenses] properly and timely."113 Thus, "it must be presumed that some
insuperable cause prevented him [or her] from [answering the complaint]."114 In which case, his or her
proper remedy depends on when he or she discovered the default and whether the default judgment
was already rendered by the trial court.

After notice of the declaration of default but before the court renders the default judgment, the
defendant may file, under oath, a motion to set aside order of default. The defendant must properly
show that his or her failure to answer was due to fraud, accident,115 mistake116 or excusable
negligence.117 The defendant must also have a meritorious defense. Rule 9, Section 3, paragraph (b)
of the1997 Rules of Civil Procedure provides:

Section 3. Default; declaration of. x x x x

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

If the defendant discovers his or her default after judgment but prior to the judgment becoming final
and executory, he or she may file a motion for new trial under Rule 37, Section 1, paragraph (a) of
the 1997 Rules of Civil Procedure.118 If he or she discovers his or her default after the judgment has
become final and executory, a petition for relief from judgment under Rule 38, Section 1 of the 1997
Rules of Civil Procedure may be filed.119

Appeal is also available to the defendant declared in default. He or she may appeal the judgment for
being contrary to the evidence or to the law under Rule 41, Section 2 of the 1997 Rules of Civil
Procedure.120 He or she may do so even if he or she did not file a petition to set aside order of
default.121

A petition for certiorari may also be filed if the trial court declared the defendant in default with grave
abuse of discretion.122

The remedies of the motion to set aside order of default, motion for new trial, and petition for relief
from judgment are mutually exclusive, not alternative or cumulative. This is to compel defendants to
remedy their default at the earliest possible opportunity. Depending on when the default was
discovered and whether a default judgment was already rendered, a defendant declared in default
may avail of onlyone of the three remedies.

Thus, if a defendant discovers his or her default before the trial court renders judgment, he or she
shall file a motion to set aside order of default. If this motion to set aside order of default is denied,
the defendant declared in default cannot await the rendition of judgment, and he or she cannot file a
motion for new trial before the judgment becomes final and executory, or a petition for relief from
judgment after the judgment becomes final and executory.

Also, the remedies against default become narrower and narrower as the trial nears judgment. The
defendant enjoys the most liberality from this court with a motion to set aside order of default, as he
or she has no default judgment to contend with, and he or she has the whole period before judgment
to remedy his or her default.
With a motion for new trial, the defendant must file the motion within the period for taking an
appeal123 or within 15 days from notice of the default judgment. Although a default judgment has
already been rendered, the filing of the motion for new trial tolls the reglementary period of appeal,
and the default judgment cannot be executed against the defendant.

A petition for relief from judgment is filed after the default judgment has become final and executory.
Thus, the filing of the petition for relief from judgment does not stay the execution of the default
judgment unless a writ of preliminary injunction is issued pending the petitions resolution.124

Upon the grant of a motion to set aside order of default, motion for new trial, or a petition for relief
from judgment, the defendant is given the chance to present his or her evidence against that of
plaintiffs. With an appeal, however, the defendant has no right to present evidence on his or her
behalf and can only appeal the judgment for being contrary to plaintiffs evidence or the law.

Similar to an appeal, a petition for certiorari does not allow the defendant to present evidence on his
or her behalf. The defendant can only argue that the trial court committed grave abuse of discretion
in declaring him or her in default.

Thus, should a defendant prefer to present evidence on his or her behalf, he or she must file either a
motion to set aside order of default, motion for new trial, or a petition for relief from judgment.

In this case, Lui Enterprises had discovered its default before the Regional Trial Court of Makati
rendered judgment. Thus, it timely filed a motion to set aside order of default, raising the ground of
excusable negligence.

Excusable negligence is "one which ordinary diligence and prudence could not have guarded
against."125 The circumstances should be properly alleged and proved. In this case, we find that Lui
Enterprises failure to answer within the required period is inexcusable.

Lui Enterprises counsel filed its motion to dismiss four days late. It did not immediately take steps to
remedy its default and took one year from discovery of default to file a motion to set aside order of
default. In its motion to set aside order of default, Lui Enterprises only "conveniently blamed its x x x
counsel [for the late filing of the answer]"126without offering any excuse for the late filing. This is not
excusable negligence under Rule 9, Section 3, paragraph (b)127 of the 1997 Rules of Civil Procedure.
Thus, the Regional Trial Court of Makati did not err in refusing to set aside the order of default.

Lui Enterprises argued that the Regional Trial Court of Makati should have been liberal in setting
aside its order of default. After it had been declared in default, Lui Enterprises filed several
manifestations informing the Makati trial court of the earlier filed nullification of deed of dation in
payment case which barred the filing of the interpleader case. Lui Enterprises president, Eli L. Lui,
and counsel even flew in from Davao to Makati to "formally [manifest that] a [similar] action between
[Lui Enterprises] and [the Philippine Bank of Communications]"128 was already pending in the
Regional Trial Court of Davao. However, the trial court did not recognize Lui Enterprisesstanding
incourt.

The general rule is that courts should proceed with deciding cases on the merits and set aside
orders of default as default judgments are "frowned upon."129 As much as possible, cases should be
decided with both parties "given every chance to fight their case fairly and in the open, without resort
to technicality."130

However, the basic requirements of Rule 9, Section 3, paragraph (b) of the 1997 Rules of Civil
Procedure must first be complied with.131 The defendants motion to set aside order of default must
satisfy three conditions. First is the time element. The defendant must challenge the default order
before judgment. Second, the defendant must have been prevented from filing his answer due to
fraud, accident, mistake or excusable negligence. Third, he must have a meritorious defense. As this
court held in SSS v. Hon. Chaves:132

Procedural rules are not to be disregarded or dismissed simply because their non-observance may
have resulted in prejudice to a partys substantive rights. Like all rules[,] they are to be followed,
except only when for the most persuasive of reasons they may be relaxed to relieve a litigant of an
injustice not commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed. x x x.133

As discussed, Lui Enterprises never explained why its counsel failed to file the motion to dismiss on
time. It just argued that courts should be liberal in setting aside orders of default. Even assuming that
it had a meritorious defense and that its representative and counsel had to fly in from Davao to
Makati to personally appear and manifest in court its meritorious defense, Lui Enterprises must first
show that its failure to answer was due to fraud, accident, mistake or excusable negligence. This Lui
Enterprises did not do.

Lui Enterprises argued that Zuellig Pharma filed the interpleader case to compel Lui Enterprises and
the Philippine Bank of Communications to litigate their claims. Thus, "[d]eclaring the other claimant
in default would ironically defeat the very purpose of the suit."134 The RegionalTrial Court of Makati
should not have declared Lui Enterprises in default.

Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a special civil
action for interpleader if conflicting claims are made against him or her over a subject matter in
which he or she has no interest. The action is brought against the claimants to compel them to
litigate their conflicting claims among themselves. Rule 62, Section 1 of the 1997 Rules of Civil
Procedure provides:

Section 1. When interpleader proper. Whenever conflicting claims upon the same subject matter
are or may be made against a person who claims no interest whatever in the subject matter, or an
interest which in whole or in part is not disputed bythe claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate their several claims among
themselves.

An interpleader complaint may be filed by a lessee against those who have conflicting claims over
the rent due for the property leased.135 This remedy is for the lessee to protect him or her from
"double vexation in respect of one liability."136 He or she may file the interpleader case to extinguish
his or her obligation to pay rent, remove him or her from the adverse claimantsdispute, and compel
the parties with conflicting claims to litigate among themselves.

In this case, Zuellig Pharma filed the interpleader case to extinguish its obligation to pay rent. Its
purpose in filing the interpleader case "was not defeated"137 when the Makati trial court declared Lui
Enterprises in default.

At any rate, an adverse claimant in an interpleader case may be declared in default. Under Rule 62,
Section 5 of the 1997 Rules of Civil Procedure, a claimant who fails to answer within the required
period may, on motion, be declared in default. The consequence of the default is that the court may
"render judgment barring [the defaulted claimant] from any claim in respect to the subject
matter."138 The Rules would not have allowed claimants in interpleader cases to be declared in
default if it would "ironically defeat the very purpose of the suit."139
The Regional Trial Court of Makati declared Lui Enterprises in default when it failed to answer the
complaint within the required period. Lui Enterprises filed a motion to set aside order of default
without an acceptable excuse why its counsel failed to answer the complaint. It failed to prove the
excusable negligence. Thus, the Makati trial court did not err in refusing to set aside the order of
default.

III

The nullification of deed in dation in payment case did not bar the filing of the interpleader
case. Litis pendentia is not present in this case.

Lui Enterprises allegedly filed for nullification of deed of dation in payment with the Regional Trial
Court of Davao. It sought to nullify the deed of dation in payment through which the Philippine Bank
of Communications acquired title over the leased property. Lui Enterprises argued that this pending
nullification case barred the Regional Trial Court of Makati from hearing the interpleader case. Since
the interpleader case was filed subsequently to the nullification case, the interpleader case should
be dismissed.

Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of Civil Procedure, a motion to dismiss
may be filed on the ground of litis pendentia:

Section 1. Grounds. Within the time for but before filing the answer to the complaint or pleading
asserting a claim, a motion to dismiss may be made on any of the following grounds:

xxxx

(e)That there is another action pending between the same parties for the same cause;

xxxx

Litis pendentia is Latin for "a pending suit."140 It exists when "another action is pending between the
same parties for the same cause of actionx x x."141 The subsequent action is "unnecessary and
vexatious"142 and is instituted to "harass the respondent [in the subsequent action]."143

The requisites of litis pendentia are:

(1)Identity of parties or at least such as represent the same interest in both actions;

(2)Identity of rights asserted and reliefs prayed for, the reliefs being founded on the same
facts; and

(3)The identity in the two cases should be such that the judgment that may be rendered in
one would, regardless of which party is successful, amount to res judicata in the other.144

All of the requisites must be present.145 Absent one requisite, there is no litis pendentia.146

In this case, there is no litis pendentia since there is no identity of parties in the nullification of deed
of dation in payment case and the interpleader case. Zuellig Pharma is not a party to the nullification
case filed in the Davao trial court.
There is also no identity of rights asserted and reliefs prayed for. Lui Enterprises filed the first case
to nullify the deed of dation in payment it executed in favor of the Philippine Bank of
Communications. Zuellig Pharma subsequently filed the interpleader case to consign in court the
rental payments and extinguish its obligation as lessee. The interpleader case was necessary and
was not instituted to harass either Lui Enterprises or the Philippine Bank of Communications.

Thus, the pending nullification case did not bar the filing of the interpleader case.

Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of Appeals147 as authority to
set aside the subsequently filed interpleader case. In this cited case, petitioner Progressive
Development Corporation, Inc. entered into a lease contract with Westin Seafood Market, Inc. The
latter failed to pay rent. Thus, Progressive Development Corporation, Inc. repossessed the leased
premises, inventoried the movable properties inside the leased premises, and scheduled the public
sale of the inventoried properties as they agreed upon in their lease contract.

Westin Seafood Market, Inc. filed for forcible entry with damages against Progressive Development
Corporation, Inc. It subsequently filed an action for damages against Progressive Development
Corporation for its "forcible takeover of the leased premises."148

This court ordered the subsequently filed action for damages dismissed as the pending forcible entry
with damages case barred the subsequently filed damages case.

Progressive Development Corporation, Inc. does not apply in this case. The action for forcible entry
with damages and the subsequent action for damages were filed by the same plaintiff against the
same defendant. There is identity of parties in both cases.

In this case, the nullification of deed of dation in payment case was filed by Lui Enterprises against
the Philippine Bank of Communications. The interpleader case was filed by Zuellig Pharma against
Lui Enterprises and the Philippine Bank of Communications. A different plaintiff filed the interpleader
case against Lui Enterprises and the Philippine Bank of Communications. Thus, there is no identity
of parties, and the first requisite of litis pendentia is absent.

As discussed, Lui Enterprises filed the nullification of deed of dation in payment to recover
ownership of the leased premises. Zuellig Pharma filed the interpleader case to extinguish its
obligation to pay rent.There is no identity of reliefs prayed for, and the second requisite of litis
pendentia is absent.

Since two requisites of litis pendentia are absent, the nullification of deed of dation in payment case
did not bar the filing of the interpleader case.

Lui Enterprises alleged that the Regional Trial Court of Davao issued a writ of preliminary injunction
against the Regional Trial Court of Makati. The Regional Trial Court of Davao allegedly enjoined the
Regional Trial Court of Makati from taking cognizance of the interpleader case. Lui Enterprises
argued that the Regional Trial Court of Makati "should have respected the orders issued by the
Regional Trial Court of Davao."149 Lui Enterprises cited Compania General de Tabacos de Filipinas v.
Court of Appeals150 where this court allegedly held:

x x x [T]he issuance of the said writ by the RTC ofAgoo, La Union not only seeks to enjoin Branch 9
of the RTC of Manila from proceeding with the foreclosure case but also has the effect of pre-
empting the latters orders. x x x.151
Compania General de Tabacos de Filipinas is not an authority for the claim that a court can issue a
writ of preliminary injunction against a co- equal court. The cited sentence was taken out of context.
1wphi1

In Compania General de Tabacos de Filipinas, this court held that the Regional Trial Court ofAgoo
had no power to issue a writ of preliminary injunction against the Regional Trial Court of
Manila.152 Acourt cannot enjoin the proceedings of a co-equal court.

Thus, when this court said that the Regional Trial Court of Agoos writ of preliminary injunction "not
only seeks to enjoin x x x [the Regional Trial Court of Manila] from proceeding with the foreclosure
case but also has the effect of pre-empting the latters orders,"153 this court followed with "[t]his we
cannot countenance."154

At any rate, the Regional Trial Court of Davaos order datedApril 18, 2005 was not a writ of
preliminary injunction. It was a mere order directing the Philippine Bank of Communications to inform
Zuellig Pharma to pay rent to Lui Enterprises while the status quo order between Lui Enterprises and
the Philippine Bank of Communications was subsisting. The Regional Trial Court of Davao did not
enjoin the proceedings before the Regional Trial Court of Makati.The order datedApril 18, 2005
provides:

As such, [the Philippine Bank of Communications] [is] hereby directed to forthwith inform Zuellig
Pharma Corp., of the April 1, 2004 status quo order and the succeeding September 14, 2004 Order,
and consequently, for the said lessee to remit all rentals due from February 23, 2003 and onwards to
plaintiff Lui Enterprises, Inc., in the meanwhile that the status quo order is subsisting.155

Thus, the Regional Trial Court of Davao did not enjoin the Regional Trial Court of Makati
fromhearing the interpleader case.

All told, the trial court did not err in proceeding with the interpleader case. The nullification of deed of
dation in payment case pending with the Regional Trial Court of Davao did not bar the filing of the
interpleader case with the RegionalTrial Court of Makati.

IV

The Court of Appeals erred in awarding attorneys fees

In its ordinary sense, attorneys fees "represent the reasonable compensation [a client pays his or
her lawyer] [for legal service rendered]."156 In its extraordinary sense, attorneys fees "[are] awarded x
x x as indemnity for damages [the losing party pays the prevailingparty]."157

The award of attorneys fees is the exception rather than the rule.158 It is not awarded to the prevailing
party "as a matter of course."159 Under Article 2208 of the Civil Code, attorneys fees cannot be
recovered in the absence of stipulation, except under specific circumstances:

(1)When exemplary damages are awarded;

(2)When the defendants act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;

(3)In criminal cases of malicious prosecution against the plaintiff;

(4)In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5)Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs plainly valid, just and demandable claim;

(6)In actions for legal support;

(7)In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8)In actions for indemnity under workmens compensation and employers liability laws;

(9)In a separate civil action to recover civil liability arising froma crime;

(10)When at least double judicial costs are awarded;

(11)In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered.160

Even if a party is "compelled to litigate with third persons or to incur expenses to protect his [or her]
rights,"161attorney's fees will not be awarded if no bad faith "could be reflected in a party's persistence
in a case."162

To award attorney's fees, the court must have "factual, legal, [and] equitable justification."163 The
court must state the award's basis in its decision.164These rules are based on the policy that "no
premium should be placed.on the right to litigate."165

In this case, the Court of Appeals awarded attorney's fees as "[Zuellig Pharma] was compelled to
litigate with third persons or to incur expenses to protect [its] interest[s]."166 This is not a compelling
reason to award attorney's fees. That Zuellig Pharma had to file an interpleader case to consign its
rental payments did not mean that Lui Enterprises was in bad faith in insisting that rental payments
be paid to it. Thus, the Court. of Appeals erred in awarding attorney's fees to Zuellig Pharma.

All told, the Court of Appeals' award of P50,000.00 as attorney's fees must be deleted.

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED. The Court of
Appeals' decision and resolution in CA- G.R. CV No. 88023 are AFFIRMED with MODIFICATION.
The award of PS0,000.00 attorney's fees to Zuellig Pharma Corporation is DELETED.

SO ORDERED.

MARVIC MARIO VICTOR F. LEONEN


Associate Justice
#26

FIRST DIVISION

G.R. No. 201601 March 12, 2014

MARYLOU CABRERA, Petitioner,


vs.
FELIX NG, Respondent.

DECISION

REYES, J.:

Before this Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision2 dated October 21, 2009 and the Resolution3 dated March 26, 2012
of the Court of Appeals (CA) in CA-G.R. SP No. 03392. The CA denied the petition for certiorari filed
by Marylou Cabrera (petitioner), which assailed the Order4 dated December 19, 2007 of the Regional
Trial Court (RTC) of Mandaue City, Branch 56, in Civil Case No. MAN-4773.

The Facts

On February 14, 2004, Felix Ng (respondent) filed a complaint for sum of money with the RTC
against the petitioner and her husband Marionilo Cabrera (spouses Cabrera), alleging that the latter
issued to him the following: (1) Metrobank Check No. 0244694 dated June 30, 2002 for the amount
of Thirty-One Thousand Pesos (31,000.00); (2) Metrobank Check No. 0244674 dated August 9,
2002 for the amount of Thirty-Eight Thousand Seventy-Four Pesos and Seventy-Six Centavos
(38,074.76); and (3) Metrobank Check No. 0244745 dated August 15, 2005 for Two Million Five
Hundred Thousand Pesos (2,500,000.00). That when presented for payment, the said checks were
all dishonored as the accounts from which they had been drawn were already closed.

The spouses Cabrera admitted that they issued Metrobank Check No. 0244694 and Metrobank
Check No. 0244674 to the respondent and that the same were dishonored when presented for
payment. However, they claimed that they paid the respondent the amount represented by the said
checks through the latters son Richard Ng. Further, they deny having issued Metrobank Check No.
0244745 to the respondent, alleging that the said check was forcibly taken from them by Richard Ng.

On August 7, 2007, the RTC rendered a Decision,5 which ordered the spouses Cabrera to pay the
respondent the following: (1) Two Million Five Hundred Sixty-Nine Thousand Seventy-Four Pesos
(2,569,074.00) plus legal interest from inception of the obligation until fully paid; (2) moral damages
in the amount of Fifty Thousand Pesos (50,000.00); (3) attorneys fees of Twenty Thousand Pesos
(20,000.00); and (4) litigation expenses in the amount of Ten Thousand Pesos (10,000.00).

On August 8, 2007, the spouses Cabrera received a copy of the RTC Decision dated August 7,
2007. On August 14, 2007, the spouses Cabrera filed with the RTC a motion for
reconsideration,6 which they set for hearing on August 17, 2007. On even date, the spouses Cabrera
sent a copy of their motion for reconsideration to the respondent thru registered mail; it was actually
received by the respondent on August 21, 2007.

The said motion for reconsideration, however, was not heard on August 17, 2007 as the new acting
presiding judge of the said court had just assumed office. On August 28, 2007, the RTC issued a
notice,7 which set the said motion for reconsideration for hearing on September 25, 2007.

On September 20, 2007, the respondent filed an opposition8 to the motion for reconsideration filed by
the spouses Cabrera. The respondent alleged that the said motion for reconsideration is a mere
scrap of paper since it violated the three-day notice requirement. The respondent pointed out that
the spouses Cabrera sent to him a copy of their motion for reconsideration, which was set for
hearing on August 17, 2007, via registered mail on August 14, 2007; that he actually received a copy
thereof only on August 21, 2007 four days after the scheduled hearing thereon.

It appears that the scheduled hearing of the spouses Cabreras motion for reconsideration on
September 25, 2007 did not push through. Consequently, on September 26, 2007, the RTC issued
another notice,9 which set the said motion for reconsideration for hearing on October 26, 2007.

On October 26, 2007, the RTC issued an Order,10 which directed the parties to file their additional
pleadings, after which the motion for reconsideration filed by the spouses Cabrera would be deemed
submitted for resolution.

On December 19, 2007, the RTC issued an Order11 which denied the motion for reconsideration filed
by the spouses Cabrera. The RTC pointed out that the spouses Cabrera violated Section 4, Rule 15
of the Rules of Court, which mandates that every motion required to be heard should be served by
the movant in such a manner as to ensure its receipt by the other party at least three days before the
date of hearing. Thus:

After a meticulous scrutiny of the records of this case, the court opines that the motion was filed
beyond the reglementary three (3)[-]day period.

As the records bear out, the instant motion was mailed to the plaintiffs counsel on August 14[, 2007]
and was set for hearing on August 17, 2007. However, the copy of said motion had reached
plaintiffs side and a copy of which was received by plaintiffs counsel only on August 17, 2007[,] four
(4) days late after it was supposed to be heard. Hence, a clear blatant violations [sic] of the rule on
notice and hearing.12

The RTC further opined that a motion, which fails to comply with the three-day notice requirement is
a mere scrap of paper; it is not entitled to judicial cognizance and would not toll the running of the
reglementary period for filing the requisite pleadings. Accordingly, the RTC held, its Decision dated
August 7, 2007 had already become final for failure of the spouses Cabrera to comply with the three-
day notice requirement.

The petitioner then filed a petition for certiorari13 with the CA, alleging that the RTC gravely abused its
discretion in denying her motion for reconsideration. The petitioner pointed out that the RTC did not
actually conduct a hearing on her motion for reconsideration on August 17, 2007;

that her motion for reconsideration was actually heard on October 26, 2007, after the respondent
had already filed his opposition thereto. Thus, the petitioner claimed, the issue of her failure to
comply with the three-day notice requirement had already been rendered moot. In any case, the
petitioner asserted, the RTC should have resolved her motion for reconsideration on its merits rather
than simply denying it on mere technicality.

On October 21, 2009, the CA, by way of the assailed Decision,14 denied the petition for certiorari filed
by the petitioner. The CA opined that the RTC did not abuse its discretion in denying the motion for
reconsideration filed by the spouses Cabrera since it merely applied the three-day notice
requirement under Section 4, Rule 15 of the Rules of Court. Thus:

It appears that petitioners Motion for Reconsideration was set for hearing on 17 August 2007. A
copy thereof was mailed to private respondent on 14 August 2007, and private respondent actually
received his copy only on 21 August 2007 or four (4) days after the set date of hearing; and thus,
depriving him of the opportunity to oppose the motion. Respondent court, therefore, correctly held
that such motion violated the three (3)-day notice rule; the essence of due process. Respondent
court had applied said rule to the given situation, and of no doubt, mere adherence to the rules
cannot be considered grave abuse of discretion on the part of the respondent court. x x x.15(Citation
omitted)

The petitioner sought a reconsideration of the Decision dated October 21, 2009 but it was denied by
the CA in its Resolution16 dated March 26, 2012.

Hence, the instant petition.

The Issue

The sole issue to be resolved by the Court is whether the CA erred in affirming the RTC Order dated
December 19, 2007, which denied the motion for reconsideration filed by the spouses Cabrera.

The Courts Ruling

The petition is meritorious.

Sections 4 and 5, Rule 15 of the Rules of Court provide that:

Sec. 4. Hearing of motion. Except for motions which the court may act upon without prejudicing the
rights of the adverse party, every written motion shall be set for hearing by the applicant.
Every written motion required to be heard and the notice of the hearing thereof shall be served in
such a manner as to ensure its receipt by the other party at least three (3) days before the date of
hearing, unless the court for good cause sets the hearing on shorter notice.

Sec. 5. Notice of hearing. The notice of hearing shall be addressed to all parties concerned, and
shall specify the time and date of the hearing which must not be later than ten (10) days after the
filing of the motion. (Emphasis ours)

The general rule is that the three-day notice requirement in motions under Sections 4 and 5 of the
Rules of Court is mandatory. It is an integral component of procedural due process.17 "The purpose
of the three-day notice requirement, which was established not for the benefit of the movant but
rather for the adverse party, is to avoid surprises upon the latter and to grant it sufficient time to
study the motion and to enable it to meet the arguments interposed therein."18

"A motion that does not comply with the requirements of Sections 4 and 5 of Rule 15 of the Rules of
Court is a worthless piece of paper which the clerk of court has no right to receive and which the
court has no authority to act upon."19 "Being a fatal defect, in cases of motions to reconsider a
decision, the running of the period to appeal is not tolled by their filing or pendency."20

Nevertheless, the three-day notice requirement is not a hard and fast rule. When the adverse party
had been afforded the opportunity to be heard, and has been indeed heard through the pleadings
filed in opposition to the motion, the purpose behind the three-day notice requirement is deemed
realized. In such case, the requirements of procedural due process are substantially complied with.
Thus, in Preysler, Jr. v. Manila Southcoast Development Corporation,21 the Court ruled that:

The three-day notice rule is not absolute. A liberal construction of the procedural rules is proper
where the lapse in the literal observance of a rule of procedure has not prejudiced the adverse party
and has not deprived the court of its authority. Indeed, Section 6, Rule 1 of the Rules of Court
provides that the Rules should be liberally construed in order to promote their objective of securing a
just, speedy and inexpensive disposition of every action and proceeding. Rules of procedure are
tools designed to facilitate the attainment of justice, and courts must avoid their strict and rigid
application which would result in technicalities that tend to frustrate rather than promote substantial
justice.

In Somera Vda. De Navarro v. Navarro, the Court held that there was substantial compliance of the
rule on notice of motions even if the first notice was irregular because no prejudice was caused the
adverse party since the motion was not considered and resolved until after several postponements
of which the parties were duly notified.

Likewise, in Jehan Shipping Corporation v. National Food Authority, the Court held that despite the
lack of notice of hearing in a Motion for Reconsideration, there was substantial compliance with the
requirements of due process where the adverse party actually had the opportunity to be heard and
had filed pleadings in opposition to the motion. The Court held:

This Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of the Rules of
Court, mandatory is the requirement in a motion, which is rendered defective by failure to comply
with the requirement. As a rule, a motion without a notice of hearing is considered pro forma and
does not affect the reglementary period for the appeal or the filing of the requisite pleading.

As an integral component of the procedural due process, the three-day notice required by the Rules
is not intended for the benefit of the movant. Rather, the requirement is for the purpose of avoiding
surprises that may be sprung upon the adverse party, who must be given time to study and meet the
arguments in the motion before a resolution of the court. Principles of natural justice demand that
1wphi1

the right of a party should not be affected without giving it an opportunity to be heard.

The test is the presence of opportunity to be heard, as well as to have time to study the motion and
meaningfully oppose or controvert the grounds upon which it is based. x x x22

(Emphasis supplied and citations omitted)

It is undisputed that the hearing on the motion for reconsideration filed by the spouses Cabrera was
reset by the RTC twice with due notice to the parties; it was only on October 26, 2007 that the
motion was actually heard by the RTC. At that time, more than two months had passed since the
respondent received a copy of the said motion for reconsideration on August 21, 2007. The
respondent was thus given sufficient time to study the motion and to enable him to meet the
arguments interposed therein. Indeed, the respondent was able to file his opposition thereto on
September 20, 2007.

Notwithstanding that the respondent received a copy of the said motion for reconsideration four days
after the date set by the spouses Cabrera for the hearing thereof, his right to due process was not
impinged as he was afforded the chance to argue his position. Thus, the R TC erred in denying the
spouses Cabrera's motion for reconsideration based merely on their failure to comply with the three-
day notice requirement.

WHEREFORE, in consideration of the foregoing disquisitions, the instant petition is GRANTED. The
Decision dated October 21, 2009 and the Resolution dated March 26, 2012 of the Court of Appeals
in CA-G.R. SP No. 03392, are hereby REVERSED and SET ASIDE. The case is hereby
REMANDED to the Regional Trial Court of Mandaue City, Branch 56, to resolve the Motion for
Reconsideration filed by the spouses Cabrera on the merits within five (5) days from the finality of
this Decision.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice
#27

THIRD DIVISION

G.R. No. 183608 July 31, 2013

FAUSTINO T. CHINGKOE and GLORIA CHINGKOE, Petitioners,


vs.
REPUBLIC OF THE PHILIPPINES, represented by the BUREAU OF CUSTOMS, Respondent.

DECISION

VELASCO, JR., J.:

Before Us is a Petition for Review on Certiorari under Rule 45, seeking the reversal of the April 30,
2008 Decision1of the Court of the Appeals (CA) and its subsequent June 27, 2008 Resolution2 in CA-
G.R. SP No. 101394. The assailed CA issuances granted the Petition for Certiorari filed by
respondent Bureau of Customs, thereby revoking the July 14, 2006 and August 31, 2007 Orders3 of
the Regional Trial Court (RTC), Branch 34 in Manila and denying the Motion for Reconsideration,
respectively.

The Facts

This petition stemmed from two collection cases filed by the Republic of the Philippines (Republic),
represented by the Bureau of Customs (BOC) before the Regional Trial Court (RTC) of Manila. In
the first Complaint4 for collection of money and damages, entitled Republic of the Philippines,
represented by the Bureau of Customs v. Chiat Sing Cardboard Inc. (defendant and third party
plaintiff) v. Filstar Textile Industrial Corporation, Faustino T Chingkoe (third party defendants) and
docketed as Civil Case No. 02-102612, the Republic alleged that Chiat Sing Cardboard Inc. (Chiat
Sing), a corporation that imports goods to the Philippines, secured in 1997 fake and spurious tax
credit certificates from Filstar Textile Industrial Corporation (Filstar), amounting to six million seventy-
six thousand two hundred forty-six pesos (PhP 6,076,246). It claimed that Chiat Sing utilized the
fraudulently-acquired tax credit certificates to settle its customs duties and taxes on its importations.
BOC initially allowed the use of the said tax credit certificates, but after investigation, discovered that
the same were fake and spurious. Despite due demand, Chiat Sing failed and refused to pay the
BOC the amount of the tax credit certificates, exclusive of penalties, charges, and interest.

Along with its Answer,5 Chiat Sing, with leave of court,6 filed a Third-Party Complaint against Filstar.
It claimed that it acquired the tax credit certificates from Filstar for valuable consideration, and that
Filstar represented to it that the subject tax credit certificates are good, valid, and genuine.

Meanwhile, in the second Complaint, entitled Republic of the Philippines, represented by the Bureau
of Customs v. Filstar Textile Industrial Corporation and docketed as Civil Case No. 02-102634, the
Republic alleged that in the years 1992-1998, defendant Filstar fraudulently secured 20 tax credit
certificates amounting to fifty-three million six hundred fifty-four thousand six hundred seventy-seven
pesos (PhP 53,654,677). Thereafter, Filstar made various importations, using the tax credit
certificates to pay the corresponding customs duties and taxes. Later, BOC discovered the fact that
they were fraudulently secured; thus, the Republic claimed, the customs duties and tax liability of
Filstar remained unpaid.7

The Complaint was amended to include Dominador S. Garcia, Amalia Anunciacion, Jose G. Pena,
Grace T. Chingkoe, Napoleon Viray, Felix T. Chingkoe, Faustino Chingkoe, and Gloria Chingkoe as
party defendants. Later, however, pursuant to an Order of the trial court, the case against Felix
Chingkoe was dismissed.8

After an Order9 of consolidation was issued on June 23, 2003, the two cases were jointly heard
before the RTC, initially by Branch 40, Manila RTC,10 but after the presiding judge there inhibited
from the case, they were re-raffled to Branch 34, Manila RTC.

Pursuant to a Notice of Mediation Hearing sent to the parties on October 17, 2005,11 the cases were
referred to the Philippine Mediation Center (PMC) for mandatory mediation.12 The pre-trial for the
consolidated cases was initially set on January 9, 2006, but come said date, the report of the
mediation has yet to be submitted; hence, on the motion of the counsel of defendant Chiat Sing, the
pre-trial was canceled and rescheduled to February 15, 2006.13

On February 15, 2006, the PMC reported that the proceedings are still continuing; thus, the trial
court, on motion of the same counsel for Chiat Sing, moved for the re-setting of the pre-trial to March
17, 2006.14 Unfortunately, the mediation proceedings proved to be uneventful, as no settlement or
compromise was agreed upon by the parties.

During the March 17, 2006 pre-trial setting, the Office of the Solicitor General (OSG), representing
the Republic, failed to appear. The counsel for defendant Filstar prayed for a period of 10 days
within which to submit his motion or manifestation regarding the plaintiffs pre-trial brief. The trial
court granted the motion, and again ordered a postponement of the pre-trial to April 19, 2006.15

Come the April 19, 2006 hearing, despite having received a copy of the March 17, 2006 Order, the
OSG again failed to appear. It also failed to submit its comment. Thus, counsels for the defendants
Filstar, Chiat Sing, and Chingkoe moved that plaintiff be declared non-suited. Meanwhile, the
counsel for BOC requested for an update of their case. In its Order16 on the same date, the trial court
warned the plaintiffs Republic and BOC that if no comment is submitted and if they fail to appear
during the pre-trial set on May 25, 2006, the court will be constrained to go along with the motion for
the dismissal of the case.
The scheduled May 25, 2006 hearing, however, did not push through, since the trial court judge
went on official leave. The pre-trial was again reset to June 30, 2006.

During the June 30, 2006 pre-trial conference, the OSG again failed to attend. A certain Atty.
Bautista Corpin, Jr. (Atty. Corpin Jr.), appearing on behalf of BOC, was present, but was not
prepared for pre-trial. He merely manifested that the BOC failed to receive the notice on time, and
moved for another re-setting of the pre-trial, on the condition that if either or both lawyers from the
BOC and OSG fail to appear, the court may be constrained to dismiss the abovementioned cases of
the BOC for failure to prosecute.17 Meanwhile, counsels for defendants Chiat Sing, Filstar, and third-
party defendants Faustino T. Chingkoe and Gloria C. Chingkoe, who were all present during the pre-
trial, moved for the dismissal of the case on the ground of respondents failure to prosecute. The trial
court judge issued an Order18 resetting the pre-trial to July 14, 2006.

At the hearing conducted on July 14, 2006, the respective counsels of the defendants were present.
Notwithstanding the warning of the judge given during the previous hearing, that their failure to
appear will result in the dismissal of the cases, neither the OSG nor the BOC attended the hearing.
Thus, as moved anew by the respective counsels of the three defendants, the trial court issued an
Order19 dismissing the case, which reads:

As prayed for, the charge of the Republic of the Philippines against Chiat Sing Cardboard
Incorporation and the Third Party complaint of Chiat Sing Cardboard Inc., against Textile Industrial
Corporation, Faustino Chingkoe and Gloria Chingkoe in Civil Case No. 02-102612 and the charge of
the Republic of the Philippines against Filstar Industrial Corporation, Faustino Chingkoe and Gloria
Chingkoe in Civil Case No. 02-102634 are hereby dismissed.20

The motion for reconsideration of the July 14, 2006 Order was likewise denied by the RTC on
August 31, 2007.21As recourse, respondents filed a Petition for Certiorari under Rule 65 before the
CA, alleging that the trial court judge acted with grave abuse of discretion in dismissing the two
cases.

In its Decision dated April 30, 2008, the CA granted the petition and remanded the case to the RTC
for further proceedings. In reversing the RTC Order, the CA ruled that the case, being a collection
case involving a huge amount of tax collectibles, should not be taken lightly. It also stated that it
would be the height of injustice if the Republic is deprived of due process and fair play. Finally, it
took "judicial notice of the fact that the collection of customs duties and taxes is a matter imbued with
public interest, taxes being the lifeblood of the government and what we pay for civilized
society."22 The CA said:

We view that the swiftness employed by the Court a quo in dismissing the case without first taking a
thoughtful and judicious look into whether or not there is good reason to delve into the merits of the
instant case by giving the parties an equal opportunity to be hard and submit evidence in support of
their respective claims, was a display of grave abuse of discretion in a manner that is capricious,
arbitrary and in a whimsical exercise of power the very antithesis of the judicial prerogative in
accordance with centuries of both civil law and common law traditions, thus certiorari is necessarily
warranted under the premises.23

The CA, thus, disposed of the case in this manner:

WHEREFORE, premises considered, the instant petition is GRANTED. The Court a quos Orders
dated 14 July 2006 and 31 August 2007, are hereby REVOKED and SET ASIDE and a new one
rendered ordering the REMAND of this case to the Court a quo for further proceedings. The Bureau
of Customs, through the Office of the Solicitor General (OSG), is hereby directed to give this case its
utmost and preferential attention.24

In a Resolution dated June 27, 2008, the CA denied the separate motions for reconsideration filed
by private respondents Faustino T. Chingkoe and Gloria Chingkoe as well as Filstar Textile Industrial
Corporation.

Thus, the present recourse.

Issues

Petitioners posit:

Whether the Honorable Court of Appeals committed a reversible error when it granted the petition for
certiorari and revoked and set aside the order of dismissal of the RTC considering that:

1. The extraordinary writ of certiorari is not available in the instant case as an appeal from
the order of dismissal as a plain, speedy and adequate remedy available to the respondent;

2. The dismissal of the complaints below for the repeated failure of the respondent to appear
during the pre-trial and for its failure to prosecute for an unreasonable length of time despite
the stern warning of the RTC is not a dismissal on mere technical grounds; and

3. The dismissal of the cases with prejudice was not attended with grave abuse of discretion
on the part of the RTC.

Petitioners argue that the CA committed reversible error in granting the Petition for Certiorari,
because such extraordinary writ is unavailing in this case. They posit that contrary to the position of
respondent, an ordinary appeal from the order of dismissal is the proper remedy that it should have
taken. Since the dismissal is due to the failure of respondent to appear at the pre-trial hearing,
petitioners add, the dismissal should be deemed an adjudication on the merits, unless otherwise
stated in the order.25

Second, petitioner argue that the trial court properly dismissed the cases for the failure of the plaintiff
a quo, respondent herein, to attend the pre-trial.

The Courts Ruling

The petition is meritorious.

The remedy of certiorari does not lie


to question the RTC Order of dismissal

Respondents Petition for Certiorari filed before the CA was not the proper remedy against the
assailed Order of the RTC. Pursuant to Rule 65 of the Rules of Court, a special civil action for
certiorari could only be availed of when a tribunal "acts in a capricious, whimsical, arbitrary or
despotic manner in the exercise of its judgment as to be said to be equivalent to lack of
jurisdiction"26 or when it acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction; and if there is no appeal or other plain, speedy,
and adequate remedy in the ordinary course of law.27
It is settled that the Rules precludes recourse to the special civil action of certiorari if appeal by way
of a Petition for Review is available, as the remedies of appeal and certiorari are mutually exclusive
and not alternative or successive.28

Here, respondent cannot plausibly claim that there is no plain, speedy, and adequate remedy
available to it to question the dismissal Order of the trial court. The RTC Order does not fall into any
of the exceptions under Section 1, Rule 41, where appeal is not available as a remedy. It is clear
from the tenor of the RTCs July 14, 2006 Order that it partakes of the nature of a final adjudication,
as it fully disposed of the cases by dismissing them. In fine, there remains no other issue for the trial
court to decide anent the said cases. The proper remedy, therefore, would have been the filing of a
Notice of Appeal under Rule 41 of the Rules of Court. Such remedy is the plain, speedy, and
adequate recourse under the law, and not a Petition for Certiorari under Rule 65, as respondent here
filed before the CA.

A petition for certiorari is not and cannot be a substitute for an appeal, especially if ones own
negligence or error in ones choice of remedy occasioned such loss or lapse. When an appeal is
available, certiorari will not prosper, even if the basis is grave abuse of discretion.29 The RTC Order
subject of the petition was a final judgment which disposed of the case on the merits; hence, an
ordinary appeal was the proper remedy.

In any case, the rule is settled in Mondonedo v. Court of Appeals,30 where We said:

The Court finds no reversible error in the said Resolutions of the Court of Appeals. Well-settled is the
rule that a dismissal for failure to appear at the pre-trial hearing is deemed an adjudication on the
merits, unless otherwise stated in the order.

For nonappearance at the pre-trial, a plaintiff may be non-suited and a dismissal of the complaint for
failure to prosecute has the effect of an adjudication upon the merits unless otherwise provided by
the trial court.

And the remedy of a plaintiff declared non-suited is to appeal from the order of dismissal, the same
being a final resolution of the case (Regalado, Remedial Law Compendium, 1988 ed., p. 185).
Further, if a motion for reconsideration had been filed by the plaintiff but was denied, appeal lies
from both orders (ibid.). And where appeal is the proper remedy, certiorari will not lie. (Citations
omitted.)

Respondent laments that the questioned RTC Order did not specify whether the dismissal is with
prejudice or not, putting it in a precarious situation of what legal actions to take upon its receipt. This
misgiving, however, stems from a misreading of the Rules. Rule 18, Sec. 5 of the Rules of Court
clearly states:

Sec. 5. Effect of failure to appear. The failure of the plaintiff to appear when so required pursuant
to the next preceding section shall be cause for dismissal of the action. The dismissal shall be with
prejudice, unless otherwise ordered by the court. x x x (Emphasis supplied.)

The rule is clear enough that an order of dismissal based on failure to appear at pre-trial is with
prejudice, unless the order itself states otherwise. The questioned Order of the trial court did not
specify that the dismissal is without prejudice. There should be no cause for confusion, and the trial
court is not required to explicitly state that the dismissal is with prejudice. The respondent is not then
left without a remedy, since the Rules itself construes the dismissal to be with prejudice. It should be
considered as adjudication on the merits of the case, where the proper remedy is an appeal under
Rule 41. Regrettably, the respondent chose the wrong mode of judicial review. In not dismissing the
petition for certiorari outright, and in not ruling that such remedy is the wrong mode of judicial review,
the CA committed grave and reversible error.

Neither is this issue a novel one. In Corpuz v. Citibank, N.A.,31 this Court had already ruled that the
proper remedy for an order of dismissal under the aforequoted Sec. 5, Rule 18 of the Rules of Court
is to file an appeal. As in the case at bar, the plaintiffs in that case filed a petition for certiorari
assailing the order of dismissal. Ruling that it is not the proper remedy, this Court said:

Section 5, of Rule 18 provides that the dismissal of an action due to the plaintiffs failure to appear at
the pre-trial shall be with prejudice, unless otherwise ordered by the court. In this case, the trial court
deemed the plaintiffs-herein spouses as non-suited and ordered the dismissal of their Complaint. As
the dismissal was a final order, the proper remedy was to file an ordinary appeal and not a petition
for certiorari. The spouses petition for certiorari was thus properly dismissed by the appellate court.

The OSG should have known better, and filed a Notice of Appeal under Rule 41, instead of a petition
for certiorari under Rule 65. Its failure to file the proper recourse renders its petition dismissible, as it
fails to allege sufficient grounds for the granting of a writ of certiorari. The fact that the CA
overlooked this constitutes a reversible error on its part.

That the case involves the issuance of allegedly fraudulently secured tax credit certificates, and not
an ordinary action for collection of money, is of no moment. This fact alone does not exempt
respondent from complying with the rules of procedure, including the rules on appeal. Neither can
respondent invoke the rule on technicalities yielding to the paramount interest of the nation, as the
facts and circumstances of this case do not warrant such relaxation.

Dismissal due to the fault of respondent

Even going into the merits of the case, however, We find the trial courts dismissal of the case to be
in order. As it were, the trial court amply gave respondent sufficient notice and opportunity to attend
the pre-trial conference, but despite this, it neglected its duty to prosecute its case and attend the
scheduled pre-trial hearings. Hence, the trial court cannot be faulted for dismissing the case.

This Court finds that the dismissal of the case by the trial court was due to the fault and negligence
of respondent. There is clear negligence and laxity on the part of both the BOC and OSG in handling
this case on behalf of the Republic. Despite several re-settings of the hearing, either or both
counsels failed to attend the pre-trial conference, without giving a justifiably acceptable explanation
of their absence. This utter neglect of its duty to attend the scheduled hearings is what led the trial
court to ultimately dismiss the cases. In finding that the dismissal by the trial court is tainted with
grave abuse of discretion, the CA committed reversible error.

The records bear out that the pre-trial conference has been reset for six times, for various reasons. It
was initially set on February 16, 2006, but due to the PMC Report that the mediation proceedings
are still continuing, the hearing was canceled.32 In this first setting, neither BOC nor the OSG was
present. The case was then set for hearing on March 17, 2006. However, the scheduled pre-trial
conference again did not push through, due to the motion of the counsel for Filstar praying for time
to submit his motion/manifestation regarding the Republics pre-trial brief.33Again, during this setting,
neither the BOC nor the OSG was present.

The pre-trial conference was reset for a third time to April 19, 2006. During this setting, pre-trial
again did not push through, because of a pending Motion to Dismiss due to failure to prosecute filed
by Filstar.34 For the third time, there was no appearance on behalf of the Republic. The pre-trial
conference was then reset to May 9, 2006. The hearing did not push through, however, because the
presiding judge was on leave at the time.35 Hence, the setting was transferred to June 30, 2006.

Come June 30, 2006, an unprepared Atty. Corpin, Jr. appeared on behalf of the BOC, and he had
no necessary authority from BOC to represent it as its counsel. He manifested that they failed to
receive the notice of hearing on time, and moved for another chance, "on the condition that if they
will not be appearing, either or both lawyers from the Bureau of Customs or Office of the Solicitor
General, the court may be constrained to dismiss all the above cases of the Bureau of Customs for
failure to prosecute for an unreasonable length of time."36 On the other hand, the BOC again failed to
send a representative. The court again had to cancel the hearing and reset it, this time to July 14,
2006.

During the July 14, 2006 hearing, the counsels for the defendants were present. They were asked by
the court to wait for the OSG until 9:45 a.m., considering that the OSG had already received the
notice of hearing. However, neither the BOC nor the OSG arrived. The counsels for the defendants
reiterated their motion, citing the warning of the trial court during the June 30, 2006 hearing that if no
representative will appear on behalf of the Republic, all the cases will be dismissed. It was due to
this repeated absence on the part of the BOC and the OSG that the trial court issued the Order
dated July 14, 2006 dismissing the cases filed by the Republic.

It is fairly obvious that the trial court gave the Republic, through the OSG and the BOC, every
opportunity to be present during the pre-trial conference. The hearings had to be reset six times due
to various reasons, but not once was the OSG and BOC properly represented. Too, not once did the
OSG and BOC offer a reasonable explanation for their absence during the hearings. Despite the
express warning by the trial court during the penultimate setting on June 30, 2006, the OSG and
BOC still failed to attend the next scheduled setting.

Despite the leeway and opportunity given by the trial court, it seemed that the OSG and BOC did not
accord proper importance to the pre-trial conference. Pre-trial, to stress, is way more than simple
marking of evidence. Hence, it should not be ignored or neglected, as the counsels for respondent
had. In Tolentino v. Laurel,37 this Court has this to say on the matter of importance of pre-trial:

In The Philippine American Life & General Insurance Company v. Enario, the Court held that pre-trial
cannot be taken for granted. It is not a mere technicality in court proceedings for it serves a vital
objective: the simplification, abbreviation and expedition of the trial, if not indeed its dispensation.
The Court said that:

The importance of pre-trial in civil actions cannot be overemphasized. In Balatico v. Rodriguez, the
Court, citing Tiu v. Middleton, delved on the significance of pre-trial, thus:

Pre-trial is an answer to the clarion call for the speedy disposition of cases. Although it was
1wphi1

discretionary under the 1940 Rules of Court, it was made mandatory under the 1964 Rules and the
subsequent amendments in 1997. Hailed as "the most important procedural innovation in Anglo-
Saxon justice in the nineteenth century," pre-trial seeks to achieve the following:

(a) The possibility of an amicable settlement or of a submission to alternative modes of


dispute resolution;

(b) The simplification of the issues;

(c) The necessity or desirability of amendments to the pleadings;


(d) The possibility of obtaining stipulations or admissions of facts and of documents to avoid
unnecessary proof;

(e) The limitation of the number of witnesses;

(f) The advisability of a preliminary reference of issues to a commissioner;

(g) The propriety of rendering judgment on the pleadings, or summary judgment, or of


dismissing the action should a valid ground therefor be found to exist;

(h) The advisability or necessity of suspending the proceedings; and

(i) Such other matters as may aid in the prompt disposition of the action.

Petitioners repeated failure to appear at the pre-trial amounted to a failure to comply with the Rules
and their non-presentation of evidence before the trial court was essentially due to their fault.
(Citations omitted.)

The inevitable conclusion in this case is that the trial court was merely following the letter of Sec. 5,
Rule I 8 of the Rules of Court in dismissing the case. Thus, the CA committed grave and reversible
error in nullifying the Order of dismissal. The trial court had every reason to dismiss the case, not
only due to the Motion to Dismiss filed by the defendants, but because the Rules of Court itself says
so.

In view, however, of the huge amount of tax collectibles involved, and considering that taxes are the
"lifeblood of the government," the dismissal of the case should be without prejudice.

WHEREFORE, premises considered, the instant petition is hereby GRANTED. The April 30, 2008
Decision and June 27, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 101394 are
hereby REVERSED and SET ASIDE. The July 14, 2006 Order of the RTC, Branch 34 in Manila, in
Civil Case Nos. 02-102612 and 02-102634, is hereby REINSTATED with the MODIFICATION that
the dismissal of the two civil cases shall be WITHOUT PREJUDICE.

SO ORDERED.

PRESBITERO J. VELASCO, JR.


Associate Justice
#28

FIRST DIVISION

G.R. No. 159691 February 17, 2014

HEIRS OF MARCELO SOTTO, REPRESENTED BY: LOLIBETH SOTTO NOBLE, DANILO C.


SOTTO, CRISTINA C. SOTTO, EMMANUEL C. SOTTO and FILEMON C. SOTTO; and
SALVACION BARCELONA, AS HEIR OF DECEASED MIGUEL BARCELONA, Petitioners,
vs.
MATILDE S. PALICTE, Respondent.

RESOLUTION

BERSAMIN, J.:

We now determine whether or not the petitioners' counsel, Atty. Makilito B. Mahinay, committed
forum shopping.

There is forum shopping "when a party repetitively avails of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on the same transactions and the
same essential facts and circumstances, and all raising substantially the same issues either pending
in or already resolved adversely by some other court."1 Forum shopping is an act of malpractice that
is prohibited and condemned because it trifles with the courts and abuses their processes. It
degrades the administration of justice and adds to the already congested court dockets.2

An important factor in determining its existence is the vexation caused to the courts and the parties-
litigants by the filing of similar cases to claim substantially the same reliefs.3
The test to determine the existence of forum shopping is whether the elements of litis pendentia are
present, or whether a final judgment in one case amounts to res judicata in the other. Thus, there is
forum shopping when the following elements are present, namely: (a) identity of parties, or at least
such parties as represent the same interests in both actions; (b) identity of rights asserted and reliefs
prayed for, the relief being founded on the same facts; and (c) the identity of the two preceding
particulars, such that any judgment rendered in the other action will, regardless of which party is
successful, amounts to res judicata in the action under consideration.

In our June 13, 2013 decision in this case,4 we directed Atty. Mahinay to show cause "why he should
not be sanctioned as a member of the Integrated Bar of the Philippines for committing a clear
violation of the rule prohibiting forum-shopping by aiding his clients in asserting the same claims at
least twice." The directive was called for by the following observations made in the decision, to wit:

We start this decision by expressing our alarm that this case is the fifth suit to reach the Court
dividing the several heirs of the late Don Filemon Y. Sotto (Filemon) respecting four real properties
that had belonged to Filemons estate (Estate of Sotto).

The first case (Matilde S. Palicte v. Hon. Jose O. Ramolete, et al., No. L-55076, September 21,
1987, 154 SCRA 132) held that herein respondent Matilde S. Palicte (Matilde), one of four declared
heirs of Filemon, had validly redeemed the four properties pursuant to the assailed deed of
redemption, and was entitled to have the title over the four properties transferred to her name,
subject to the right of the three other declared heirs to join her in the redemption of the four
properties within a period of six months.

The second was the civil case filed by Pascuala against Matilde (Civil Case No. CEB-19338) to
annul the formers waiver of rights, and to restore her as a co-redemptioner of Matilde with respect to
the four properties (G.R. No. 131722, February 4, 1998).

The third was an incident in Civil Case No. R-10027 (that is, the suit brought by the heirs of Carmen
Rallos against the Estate of Sotto) wherein the heirs of Miguel belatedly filed in November 1998 a
motion for reconsideration praying that the order issued on October 5, 1989 be set aside, and that
they be still included as Matildes co-redemptioners. After the trial court denied their motion for
reconsideration for its lack of merit, the heirs of Miguel elevated the denial to the CA on certiorari
and prohibition, but the CA dismissed their petition and upheld the order issued on October 5, 1989.
Thence, the heirs of Miguel came to the Court on certiorari (G.R. No. 154585), but the Court
dismissed their petition for being filed out of time and for lack of merit on September 23, 2002.

The fourth was The Estate of Don Filemon Y. Sotto, represented by its duly designated
Administrator, Sixto Sotto Pahang, Jr. v. Matilde S. Palicte, et al. (G.R. No. 158642, September 22,
2008, 566 SCRA 142), whereby the Court expressly affirmed the ruling rendered by the probate
court in Cebu City in Special Proceedings No. 2706-R entitled Intestate Estate of the Deceased Don
Filemon Sotto denying the administrators motion to require Matilde to turn over the four real
properties to the Estate of Sotto.

The fifth is this case. It seems that the disposition by the Court of the previous cases did not yet
satisfy herein petitioners despite their being the successors-in-interest of two of the declared heirs of
Filemon who had been parties in the previous cases either directly or in privity. They now pray that
the Court undo the decision promulgated on November 29, 2002, whereby the Court of Appeals
(CA) declared their action for the partition of the four properties as already barred by the judgments
previously rendered, and the resolution promulgated on August 5, 2003 denying their motion for
reconsideration.
The principal concern here is whether this action for partition should still prosper notwithstanding the
earlier rulings favoring Matildes exclusive right over the four properties.

xxxx

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

On July 22, 2013, Atty. Mahinay submitted a so-called Compliance (With Humble Motion for
Reconsideration) containing his explanations, praying that he not be sanctioned for violating the rule
against forum shopping, as follows:

1. The first three cases did not resolve the issues raised in Civil Case No. CEB-24393;

2. Marcelo Sottos cause of action arose only when respondent Palicte violated her
"hypothetically admitted" agreement with Marcelo Sotto;

3. He (Atty. Mahinay) was not the one who had prepared and signed the complaint in Civil
Case No. CEB-24393, although he assumed the responsibility as to its filing;

4. He (Atty. Mahinay) had filed a motion for referral or consolidation of Civil Case No. CEB-
24293 with the intestate proceedings of the Estate of Filemon Y. Sotto, and

5. He (Atty. Mahinay) had acted in good faith in assisting the administrator of the Estate of
Filemon Y. Sotto in filing the Motion to Require Matilde Palicte To Turn Over And/or Account
Properties Owned by the Estate in Her Possession.5

The Court considers Atty. Mahinays explanations unsatisfactory.

First of all, Atty. Mahinay claims that he could not be deemed guilty of forum shopping because the
previous cases did not involve the issues raised in Civil Case No. CEB-24293; hence, res judicata
would not apply. He maintains that Civil Case No. CEB-24293 was based on the agreement
between Palicte and Marcelo Sotto (as the then Administrator of the Estate) to the effect that Palicte
would redeem the properties under her name using the funds of the Estate, and she would thereafter
share the same properties equally with the Estate.

To establish the agreement between Palicte and Marcelo Sotto, Atty. Mahinay cites Palictes filing of
a motion to dismiss in Civil Case No. CEB-24293 on the ground, among others, of the complaint
failing to state a cause of action whereby Palicte hypothetically admitted the complaints averment of
the agreement. He submits that a constructive trust between Palicte and the Estate was thereby
created; and argues that the issues in Civil Case No. CEB-24293 could not have been raised in the
earlier cases because the plaintiffs cause of action in Civil Case No. CEB-24293 arose only after
Palicte violated her agreement with Marcelo Sotto.
Atty. Mahinays reliance on Palictes hypothetical admission of her agreement with Marcelo Sotto to
buttress his explanation here is unjustified. Such hypothetical admission is only for the purpose of
resolving the merits of the ground of insufficiency of the complaint. This is because the test of the
sufficiency of the statement of the cause of action is whether or not, accepting the veracity of the
facts alleged, the court could render a valid judgment upon the same in accordance with the prayer
of the complaint.6 Even so, the filing of the motion to dismiss assailing the sufficiency of the
complaint does not hypothetically admit allegations of which the court will take judicial notice of to be
not true, nor does the rule of hypothetical admission apply to legally impossible facts, or to facts
inadmissible in evidence, or to facts that appear to be unfounded by record or document included in
the pleadings.7

For the ground to be effective, the insufficiency of the complaint must appear on the face of the
complaint, and nowhere else. It will be unfair to the plaintiff, indeed, to determine the sufficiency of
his cause of action from facts outside of those pleaded in the complaint. According to Moran: "A
complaint should not be dismissed for insufficiency unless it appears to a certainty, from the face of
the complaint, that plaintiff would be entitled to no relief under any state of facts which could be
proved within the facts alleged therein."8 Thus, in Heirs of Juliana Clavano v. Judge Genato,9 the
Court disapproved the act the trial judge of setting a preliminary hearing on the motion to dismiss
based on the insufficiency of the complaint, viz:

x x x We believe that the respondent Judge committed an error in conducting a preliminary hearing
on the private respondent's affirmative defenses. It is a well-settled rule that in a motion to dismiss
based on the ground that the complaint fails to state a cause of action, the question submitted to the
court for determination is the sufficiency of the allegations in the complaint itself. Whether those
allegations are true or not is beside the point, for their truth is hypothetically admitted by the motion.
The issue rather is: admitting them to be true, may the court render a valid judgment in accordance
with the prayer of the complaint? Stated otherwise, the sufficiency of the cause of action must
appear on the face of the complaint in order to sustain a dismissal on this ground. No extraneous
matter may be considered nor facts not alleged, which would require evidence and therefore must
be raised as defenses and await the trial. In other words, to determine the sufficiency of the cause of
action, only the facts alleged in the complaint, and no others should be considered.10

Should the trial court find that the statement of the cause of action in the complaint cannot support a
valid judgment in accordance with the prayer of the complaint, the motion to dismiss is granted and
the complaint is dismissed. But if the motion to dismiss is denied, the defending party who has
moved to dismiss is then called upon to file an answer or other proper responsive pleading allowed
by the rules of procedure, and through such responsive pleading join issues by either admitting or
denying the factual averments of the complaint or initiatory pleading. The case then proceeds upon
the issues thus raised and joined by the exchange of pleadings.

To stress, the admission of the veracity of the facts alleged in the complaint, being only hypothetical,
does not extend beyond the resolution of the motion to dismiss, because a defending party may
effectively traverse the factual averments of the complaint or other initiatory pleading only through
the authorized responsive pleadings like the answer. Clearly, Atty. Mahinay cannot bind Palicte to
her hypothetical admission of the agreement between her and Marcelo Sotto as the Administrator of
the Estate.

Given the foregoing, the complaint was properly dismissed because of res judicata. There is no
question that the ultimate objective of each of the actions was the return of the properties to the
Estate in order that such properties would be partitioned among the heirs. In the other cases, the
petitioners failed to attain the objective because Palictes right in the properties had been declared
exclusive. There was between Civil Case No. CEB-24293 and the other cases a clear identity of the
parties, of subject matter, of evidence, and of the factual and legal issues raised. The Court saw
through the petitioners "ploy to countermand the previous decisions sustaining Palictes rights over
the properties."

Secondly, Atty. Mahinay asserts good faith in the filing Civil Case No. CEB-24293. He points out
1wphi1

that an associate lawyer in his law office prepared and filed the complaint without his law firm being
yet familiar with the incidents in the intestate proceedings involving the Estate, or with those of the
previous three cases mentioned in the decision of June 13, 2013.11 He posits that such lack of
knowledge of the previous cases shows his good faith, and rules out deliberate forum shopping on
his part and on the part of his law firm.

Rather than prove good faith, the filing of the complaint, "simply guided by the facts as narrated and
the documentary evidence submitted by petitioners,"12 smacked of professional irresponsibility. It is
axiomatic that a lawyer shall not handle any legal matter without adequate preparation.13 He is
expected to make a thorough study and an independent assessment of the case he is about to
commence. As such, his claim of good faith was utterly baseless and unfounded.

Moreover, laying the blame on the associate lawyer is not plausible. Any client who employs a law
firm undeniably engages the entire law firm,14 not a particular member of it. Consequently, it was not
only the associate lawyer but the entire law firm, Atty. Mahinay included, who had presumably
prepared the complaint. For Atty. Mahinay to insist the contrary is the height of professional
irresponsibility.

Even assuming that Atty. Mahinay did not himself prepare the complaint, it remains that he
subsequently personally handled the case. In so doing, he had sufficient time to still become fully
acquainted with the previous cases and their incidents, and thereby learn in the due course of his
professional service to the petitioners that the complaint in Civil Case No. CEB-24293 was nothing
but a replication of the other cases. Under the circumstances, the Rules of Court and the canons of
professional ethics bound him to have his clients desist from pursuing the case. Instead, he opted to
re-litigate the same issues all the way up to this Court.

Thirdly, Atty. Mahinay states that his filing of the Motion To Refer Or Consolidate The Instant Case
With The Proceedings In The Intestate Estate Of Filemon Sotto Before RTC Branch XVI In SP Proc.
No. 2706-R15 disproved deliberate forum shopping on his part.

The Court disagrees. Atty. Mahinays filing of the Motion To Refer Or Consolidate The Instant Case
With The Proceedings In The Intestate Estate Of Filemon Sotto Before RTC Branch XVI In SP Proc.
No. 2706-R indicated that he relentlessly pursued the goal of taking away the properties from Palicte
in disregard of the rulings in the earlier cases. We note that the dismissal of the complaint in Civil
Case No. CEB-24293 on November 15, 199916prompted Atty. Mahinay to file a motion for
reconsideration on December 3, 1999.17 But he did not await the resolution of the motion for
reconsideration, and instead filed the Motion To Refer Or Consolidate The Instant Case With The
Proceedings In The Intestate Estate Of Filemon Sotto Before RTC Branch XVI In SP Proc. No.
2706-R on May 9, 2000 obviously to pre-empt the trial courts denial of the motion.18 His actuations
did not manifest good faith on his part. Instead, they indicated an obsession to transfer the case to
another court to enable his clients to have another chance to obtain a favorable resolution, and still
constituted deliberate forum shopping.

And, lastly, Atty. Mahinay argues that his assisting the Administrator of the Estate in filing the Motion
to Require Matilde Palicte To Turn Over And/or Account Properties Owned by the Estate in Her
Possession, wherein he disclosed the commencement of Civil Case No. CEB-24293, and
extensively quoted the allegations of the complaint, disproved any forum shopping. He insists that
his disclosure of the pendency of Civil Case No. CEB-24293 proved that forum shopping was not in
his mind at all.

The insistence cannot command belief. The disclosure alone of the pendency of a similar case does
not negate actual forum shopping. Had Atty. Mahinay been sincere, the least he could have done
was to cause the dismissal of the action that replicated those already ruled against his clients. The
records show otherwise. The filing of the Motion to Require Matilde Palicte To Turn Over And/or
Account Properties Owned by the Estate in Her Possession on June 7, 2000, a day after the trial
court denied his motion for reconsideration in Civil Case No. CEB-24293, was undeniably another
attempt of the petitioners and Atty. Mahinay to obtain a different resolution of the same claim.
Needless to observe, the motion reiterated the allegations in Civil Case No. CEB-24293, and was
the subject of the petition in The Estate of Don Filemon Y. Sotto vs. Palicte.19

The acts of a party or his counsel clearly constituting willful and deliberate forum shopping shall be
ground for the summary dismissal of the case with prejudice, and shall constitute direct contempt, as
well as be a cause for administrative sanctions against the lawyer.20 Forum shopping can be
committed in either of three ways, namely: (1) filing multiple cases based on the same cause of
action and with the same prayer, the previous case not having been resolved yet (litis pendentia); (2)
filing multiple cases based on the same cause of action and the same prayer, the previous case
having been finally resolved (res judicata); or (3) filing multiple cases based on the same cause of
action but with different prayers (splitting of causes of action, where the ground for dismissal is also
either litis pendentia or res judicata). If the forum shopping is not willful and deliberate, the
subsequent cases shall be dismissed without prejudice on one of the two grounds mentioned above.
But if the forum shopping is willful and deliberate, both (or all, if there are more than two) actions
shall be dismissed with prejudice.21

In view of the foregoing, Atty. Mahinay was guilty of forum shopping. Under Revised Circular No. 28-
91,22 any willful and deliberate forum shopping by any party and his counsel through the filing of
multiple petitions or complaints to ensure favorable action shall constitute direct contempt of court.
Direct contempt of court is meted the summary penalty of fine not exceeding 2,000.00.23

WHEREFORE, the Court FINDS and PRONOUNCES ATTY. MAKILITO B. MAHIN A Y guilty of
forum shopping; and ORDERS him to pay to this Court, through the Office of the Clerk of Court, a
FINE of 2,000.00 within fifteen (15) days from notice hereof.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
#26a

SECOND DIVISION

G.R. No. 182153 April 7, 2014

TUNG HO STEEL ENTERPRISES CORPORATION, Petitioner,


vs.
TING GUAN TRADING CORPORATION, Respondent.

DECISION

BRION, J.:

We resolve the petition for review on, certiorari1 filed by petitioner Tung Ho Steel Enterprises Corp.
(Tung Ho) to challenge the July 5, 2006 decision2 and the March 12, 2008 resolution3 of the Court of
Appeals (CA) in CA-G.R. SP No. 92828.

The Factual Antecedents

Tung Ho is a foreign corporation organized under the laws of Taiwan, Republic of China.4 On the
other hand, respondent Ting Guan Trading Corp. (Ting Guan) is a domestic corporation organized
under the laws of the Philippines.5

On January 9, 2002, Ting Guan obligated itself under a contract of sale to deliver heavy metal scrap
iron and steel to Tung Ho. Subsequently, Tung Ho filed a request for arbitration before the ICC
International Court of Arbitration (ICC) in Singapore after Ting Guan failed to deliver the full quantity
of the promised heavy metal scrap iron and steel.6

The ICC ruled in favor of Tung Ho on June 18, 2004 and ordered Ting Guan to pay Tung Ho the
following: (1) actual damages in the amount of US$ 659,646.15 with interest of 6% per annum from
December 4, 2002 until final payment; (2) cost of arbitration in the amount of US $ 47,000.00; and
(3) legal costs and expenses in the amount of NT $ 761,448.00 and US $ 34,552.83.7

On October 24, 2004, Tung Ho filed an action against Ting Guan for the recognition and
enforcement of the arbitral award before the Regional Trial Court (RTC) of Makati, Branch 145. Ting
Guan moved to dismiss the case based on Tung Hos lack of capacity to sue and for prematurity.
Ting Guan subsequently filed a supplemental motion to dismiss based on improper venue. Ting
Guan argued that the complaint should have been filed in Cebu where its principal place of business
was located.8

The Proceedings before the RTC

The RTC denied Ting Guans motion to dismiss in an order dated May 11, 2005. Ting Guan moved
to reconsider the order and raised the RTCs alleged lack of jurisdiction over its person as additional
ground for the dismissal of the complaint. Ting Guan insisted that Ms. Fe Tejero, on whom personal
service was served, was not its corporate secretary and was not a person allowed under Section 11,
Rule 14 of the Rules of Court to receive a summons. It also asserted that Tung Ho cannot enforce
the award in the Philippines without violating public policy as Taiwan is not a signatory to the New
York Convention.9

The RTC denied the motion in an order dated November 21, 2005 and ruled that Ting Guan had
voluntarily submitted to the courts jurisdiction when it raised other arguments apart from lack of
jurisdiction in its motion to dismiss.

The Proceedings before the CA

Ting Guan responded to the denials by filing a petition for certiorari before the CA with an application
for the issuance of a temporary restraining order and a writ of preliminary injunction.10

In its Memorandum, Tung Ho argued that a Rule 65 petition is not the proper remedy to assail the
denial of a motion to dismiss. It pointed out that the proper recourse for Ting Guan was to file an
answer and to subsequently appeal the case. It also posited that beyond the reglementary period for
filing an answer, Ting Guan was barred from raising other grounds for the dismissal of the case.
Tung Ho also claimed that the RTC acquired jurisdiction over the person of Ting Guan since the
return of service of summons expressly stated that Tejero was a corporate secretary.11

In its decision dated July 5, 2006, the CA dismissed the complaint for lack of jurisdiction over the
person of Ting Guan. The CA held that Tung Ho failed to establish that Tejero was Ting Guans
corporate secretary. The CA also ruled that a petition for certiorari is the proper remedy to assail the
denial of a motion to dismiss if the ground raised in the motion is lack of jurisdiction. Furthermore,
any of the grounds for the dismissal of the case can be raised in a motion to dismiss provided that
the grounds were raised before the filing of an answer. The CA likewise ruled that Tung Ho properly
filed the complaint before the RTC-Makati.12

Subsequently, both parties moved to partially reconsider the CA decision. Tung Ho reiterated that
there was proper service of summons. On the other hand, Ting Guan sought to modify the CA
decision with respect to the proper venue of the case. The CA denied Ting Guans motion for partial
reconsideration in an order dated December 5, 2006.13

Ting Guan immediately proceeded to file a petition for review on certiorari before this Court to
question the CAs rulings as discussed below. In the interim (on February 11, 2008), Tung Ho
(whose motion for reconsideration of the CA decision was still pending with that court) filed a "Motion
to Supplement and Resolve Motion for Reconsideration" before the CA. In this motion, Tung Ho
prayed for the issuance of an alias summons if the service of summons had indeed been defective,
but its motion proved unsuccessful.14

It was not until March 12, 2008, after the developments described below, that the CA finally denied
Tung Hos partial motion for reconsideration for lack of merit.

Ting Guans Petition before this Court

(G.R. No. 176110)

Ting Guans petition before this Court was docketed as G.R. No. 176110. Ting Guan argued that the
dismissal of the case should be based on the following additional grounds: first, the complaint was
prematurely filed; second, the foreign arbitral award is null and void; third, the venue was improperly
laid in Makati; and lastly, the enforcement of the arbitral award was against public policy.15

On April 24, 2007, Tung Ho filed its Comment dated April 24, 2007 in G.R. No. 176110, touching on
the issue of jurisdiction, albeit lightly. Tung Ho complained in its Comment that Ting Guan engaged
in dilatory tactics when Ting Guan belatedly raised the issue of jurisdiction in the motion for
reconsideration before the RTC. However, Tung Ho did not affirmatively seek the reversal of the July
5, 2006 decision. Instead, it merely stated that Ting Guans petition "cannot be dismissed on the
ground that the summons was wrongfully issued as the petitioner can always move for the issuance
of an alias summons to be served". Furthermore, Tung Ho only prayed that Ting Guans petition be
denied in G.R. No. 176110 and for other just and equitable reliefs. In other words, Tung Ho failed to
effectively argue its case on the merits before the Court in G.R. No. 176110.

On June 18, 2007, we issued our Resolution denying Ting Guans petition for lack of merit. On
November 12, 2007, we also denied Ting Guans motion for reconsideration. On January 8, 2008,
the Court issued an entry of judgment in Ting Guans petition, G.R. No. 176110.

After the entry of judgment, we referred the matter back to the RTC for further proceedings. On
January 16, 2008, the RTC declared the case closed and terminated. Its order stated:

Upon examination of the entire records of this case, an answer with caution was actually filed by the
respondent to which a reply was submitted by the petitioner. Since the answer was with the
qualification that respondent is not waiving its claim of lack of jurisdiction over its person on the
ground of improper service of summons upon it and that its petition to this effect filed before the
Court of Appeals was acted favorably and this case was dismissed on the aforementioned ground
and it appearing that the Decision as well as the Order denying the motion for reconsideration of the
petitioner now final and executory, the Order of November 9, 2007 referring this petition to the Court
Annexed Mediation for possible amicable settlement is recalled it being moot and academic. This
case is now considered closed and terminated.

On February 6, 2008, Tung Ho moved to reconsider the RTC order. Nothing in the records shows
whether the RTC granted or denied this motion for reconsideration.
Tung Hos Petition before this Court

(G.R. No. 182153)

On May 7, 2008, Tung Ho seasonably filed a petition for review on certiorari to seek the reversal of
the July 5, 2006 decision and the March 12, 2008 resolution of the CA. This is the present G.R. No.
182153 now before us.

Tung Ho reiterates that the RTC acquired jurisdiction over the person of Ting Guan. It also claims
that the return of service of summons is a prima facie evidence of the recited facts i.e., that Tejero is
a corporate secretary as stated therein and that the sheriff is presumed to have regularly performed
his official duties in serving the summons. In the alternative, Tung Ho argues that Ting Guans
successive motions before the RTC are equivalent to voluntary appearance. Tung Ho also prays for
the issuance of alias summons to cure the alleged defective service of summons.16

Respondent Ting Guans Position

(G.R. No. 182153)

In its Comment, Ting Guan submits that the appeal is already barred by res judicata. It also stresses
that the Court has already affirmed with finality the dismissal of the complaint.17 Ting Guan also
argues that Tung Ho raises a factual issue that is beyond the scope of a petition for review on
certiorari under Rule 45 of the Rules of Court.18

The Issues

This case presents to us the following issues:

1) Whether the present petition is barred by res judicata; and

2) Whether the trial court acquired jurisdiction over the person of Ting Guan, specifically:

a) Whether Tejero was the proper person to receive the summons; and

b) Whether Ting Guan made a voluntary appearance before the trial court.

The Courts Ruling

We find the petition meritorious.

I. The Court is not precluded from ruling on the jurisdictional issue raised in the petition

A. The petition is not barred by res judicata

Res judicata refers to the rule that a final judgment or decree on the merits by a court of competent
jurisdiction is conclusive on the rights of the parties or their privies in all later suits on all points and
matters determined in the former suit.19 For res judicata to apply, the final judgment must be on the
merits of the case which means that the court has unequivocally determined the parties rights and
obligations with respect to the causes of action and the subject matter of the case.20
Contrary to Ting Guans position, our ruling in G.R. No. 176110 does not operate as res judicata on
Tung Hos appeal; G.R. No. 176110 did not conclusively rule on all issues raised by the parties in
this case so that this Court would now be barred from taking cognizance of Tung Hos petition. Our
disposition in G.R. No. 176110 only dwelt on technical or collateral aspects of the case, and not on
its merits. Specifically, we did not rule on whether Tung Ho may enforce the foreign arbitral award
against Ting Guan in that case.

B. The appellate court cannot be ousted of jurisdiction until it finally disposes of the case

The courts jurisdiction, once attached, cannot be ousted until it finally disposes of the case. When a
court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to
proceed to the final determination of the case is retained.21 A judge is competent to act on the case
while its incidents remain pending for his disposition.

The CA was not ousted of its jurisdiction with the promulgation of G.R. No. 176110. The July 5, 2006
decision has not yet become final and executory for the reason that there remained a pending
incident before the CA the resolution of Tung Hos motion for reconsideration when this Court
promulgated G.R. No. 176110. In this latter case, on the other hand, we only resolved procedural
issues that are divorced from the present jurisdictional question before us. Thus, what became
immutable in G.R. No. 176110 was the ruling that Tung Hos complaint is not dismissible on grounds
of prematurity, nullity of the foreign arbitral award, improper venue, and the foreign arbitral awards
repugnance to local public policy. This leads us to the conclusion that in the absence of any ruling on
the merits on the issue of jurisdiction, res judicata on this point could not have set in.

C. Tung Hos timely filing of a motion for reconsideration and of a petition for review on certiorari
prevented the July 5, 2006 decision from attaining finality

Furthermore, under Section 2, Rule 45 of the Rules of Court, Tung Ho may file a petition for review
on certiorari before the Court within (15) days from the denial of its motion for reconsideration filed in
due time after notice of the judgment. Tung Hos timely filing of a motion for reconsideration before
the CA and of a Rule 45 petition before this Court prevented the July 5, 2006 CA decision from
attaining finality. For this Court to deny Tung Hos petition would result in an anomalous situation
where a party litigant is penalized and deprived of his fair opportunity to appeal the case by faithfully
complying with the Rules of Court.

II. The trial court acquired jurisdiction over the person of Ting Guan

A. Tejero was not the proper person to receive the summons

Nonetheless, we see no reason to disturb the lower courts finding that Tejero was not a corporate
secretary and, therefore, was not the proper person to receive the summons under Section 11, Rule
14 of the Rules of Court. This Court is not a trier of facts; we cannot re-examine, review or re-
evaluate the evidence and the factual review made by the lower courts. In the absence of compelling
reasons, we will not deviate from the rule that factual findings of the lower courts are final and
binding on this Court.22

B. Ting Guan voluntarily appeared before the trial court

However, we cannot agree with the legal conclusion that the appellate court reached, given the
established facts.23To our mind, Ting Guan voluntarily appeared before the trial court in view of the
procedural recourse that it took before that court. Its voluntary appearance is equivalent to service of
summons.24
As a basic principle, courts look with disfavor on piecemeal arguments in motions filed by the
parties. Under the omnibus motion rule, a motion attacking a pleading, order, judgment, or
proceeding shall include all objections then available.25 The purpose of this rule is to obviate
multiplicity of motions and to discourage dilatory motions and pleadings. Party litigants should not be
allowed to reiterate identical motions, speculating on the possible change of opinion of the courts or
of the judges thereof.

In this respect, Section 1, Rule 16 of the Rules of Court requires the defendant to file a motion to
dismiss within the time for, but before filing the answer to the complaint or pleading asserting a
claim. Section 1, Rule 11 of the Rules of Court, on the other hand, commands the defendant to file
his answer within fifteen (15) days after service of summons, unless a different period is fixed by the
trial court. Once the trial court denies the motion, the defendant should file his answer within the
balance of fifteen (15) days to which he was entitled at the time of serving his motion, but the
remaining period cannot be less than five (5) days computed from his receipt of the notice of the
denial.26

Instead of filing an answer, the defendant may opt to file a motion for reconsideration. Only after the
trial court shall have denied the motion for reconsideration does the defendant become bound to file
his answer.27 If the defendant fails to file an answer within the reglementary period, the plaintiff may
file a motion to declare the defendant in default. This motion shall be with notice to the defendant
and shall be supported by proof of the failure.28

The trial courts denial of the motion to dismiss is not a license for the defendant to file a Rule 65
petition before the CA. An order denying a motion to dismiss cannot be the subject of a petition for
certiorari as the defendant still has an adequate remedy before the trial court i.e., to file an answer
and to subsequently appeal the case if he loses the case.29 As exceptions, the defendant may avail
of a petition for certiorari if the ground raised in the motion to dismiss is lack of jurisdiction over the
person of the defendant30 or over the subject matter.31

We cannot allow and simply passively look at Ting Guans blatant disregard of the rules of procedure
in the present case. The Rules of Court only allows the filing of a motion to dismiss once.32 Ting
Guans filing of successive motions to dismiss, under the guise of "supplemental motion to dismiss"
or "motion for reconsideration", is not only improper but also dilatory.33 Ting Guans belated reliance
on the improper service of summons was a mere afterthought, if not a bad faith ploy to avoid the
foreign arbitral awards enforcement which is still at its preliminary stage after the lapse of almost a
decade since the filing of the complaint.

Furthermore, Ting Guans failure to raise the alleged lack of jurisdiction over its person in the first
motion to dismiss is fatal to its cause. Ting Guan voluntarily appeared before the RTC when it filed a
motion to dismiss and a "supplemental motion to dismiss" without raising the RTCs lack of
jurisdiction over its person. In Anunciacion v. Bocanegra,34 we categorically stated that the defendant
should raise the affirmative defense of lack of jurisdiction over his person in the very first motion to
dismiss. Failure to raise the issue of improper service of summons in the first motion to dismiss is a
waiver of this defense and cannot be belatedly raised in succeeding motions and pleadings.

Even assuming that Ting Guan did not voluntarily appear before the RTC, the CA should have
ordered the RTC to issue an alias summons instead. In Lingner & Fisher GMBH vs. Intermediate
Appellate Court35, we enunciated the policy that the courts should not dismiss a case simply because
there was an improper service of summons. The lower courts should be cautious in haphazardly
dismissing complaints on this ground alone considering that the trial court can cure this defect and
order the issuance of alias summons on the proper person in the interest of substantial justice and to
expedite the proceedings.
III. A Final Note

As a final note, we are not unaware that the present case has been complicated by its unique
development. The complication arose when the CA, instead of resolving the parties separate partial
motions for reconsideration in one resolution, proceeded to first resolve and to deny Ting Guans
partial motion. Ting Guan, therefore, went to this Court via a petition for review on certiorari while
Tung Hos partial motion for reconsideration was still unresolved.

Expectedly, Ting Guan did not question the portions of the CA decision favorable to it when it filed its
petition with this Court. Instead, Ting Guan reiterated that the CA should have included additional
grounds to justify the dismissal of Tung Hos complaint with the RTC. The Court denied Ting Guans
petition, leading to the entry of judgment that improvidently followed. Later, the CA denied Tung Hos
partial motion for reconsideration, prompting Tung Hos own petition with this Court, which is the
present G.R. No. 182153.

Under the Rules of Court, entry of judgment may only be made if no appeal or motion for
reconsideration was timely filed.36 In the proceedings before the CA, if a motion for reconsideration
(including a partial motion for reconsideration37) is timely filed by the proper party, execution of the
CAs judgment or final resolution shall be stayed.38 This rule is applicable even to proceedings before
the Supreme Court, as provided in Section 4, Rule 56 of the Rules of Court.39

In the present case, Tung Ho timely filed its motion for reconsideration with the CA and seasonably
appealed the CAs rulings with the Court through the present petition (G.R. No. 182153).

To now recognize the finality of the Resolution of Ting Guan petition (G.R. No. 176110) based on its
entry of judgment and to allow it to foreclose the present meritorious petition of Tung Ho, would of
course cause unfair and unjustified injury to Tung Ho. First, as previously mentioned, the Ting Guan
petition did not question or assail the full merits of the CA decision. It was Tung Ho, the party
aggrieved by the CA decision, who substantially questioned the merits of the CA decision in its
petition; this petition showed that the CA indeed committed error and Tung Hos complaint before the
RTC should properly proceed. Second, the present case is for the enforcement of an arbitral award
involving millions of pesos. Tung Ho already won in the foreign arbitration and the present case is
simply for the enforcement of this arbitral award in our jurisdiction. Third, and most importantly, Tung
Ho properly and timely availed of the remedies available to it under the Rules of Court, which
provide that filing and pendency of a motion for reconsideration stays the execution of the CA
judgment. Therefore, at the time of the entry of judgment in G.R. No. 176110 in the Supreme Court
on January 8, 2008, the CA decision which the Court affirmed was effectively not yet be final.

Significantly, the rule that a timely motion for reconsideration stays the execution of the assailed
judgment is in accordance with Rule 51, Section 10 (Rules governing the CA proceedings) which
provides that "entry of judgments may only be had if there is no appeal or motion for reconsideration
timely filed. The date when the judgment or final resolution becomes executory shall be deemed as
the date of its entry." Incidentally, this procedure also governs before Supreme Court
proceedings.40 Following these rules, therefore, the pendency of Tung Hos MR with the CA made
the entry of the judgment of the Court in the Ting Guan petition premature and inefficacious for not
being final and executory.

Based on the above considerations, the Court would not be in error if it applies its ruling in the case
of Realty Sales Enterprises, Inc. and Macondray Farms, Inc. v. Intermediate Appellate Court, et
al.41 where the Court, in a per curiam resolution, ruled that an entry of judgment may be recalled or
lifted motu proprio when it is clear that the decision assailed of has not yet become final under the
rules:
The March 6, 1985 resolution denying reconsideration of the January 30, 1985 resolution was, to
repeat, not served on the petitioners until March 20, 1985 - and therefore the Jan. 30, 1985
resolution could not be deemed final and executory until one (1) full day (March 21) had elapsed, or
on March 22, 1985 (assuming inaction on petitioners' part.) The entry of judgment relative to the
January 30, 1985 resolution, made on March 18, 1985, was therefore premature and inefficacious.
An entry of judgment does not make the judgment so entered final and execution when it is not so in
truth. An entry of judgment merely records the fact that a judgment, order or resolution has become
final and executory; but it is not the operative act that make the judgment, order or resolution final
and executory. In the case at bar, the entry of judgment on March 18, 1985 did not make the
January 30, 1985 resolution subject of the entry, final and executory, As of the date of entry, March
18, 1985, notice of the resolution denying reconsideration of the January 30, 1985 resolution had not
yet been served on the petitioners or any of the parties, since March 18, 1985 was also the date of
the notice (and release) of the March 6, 1985 resolution denying reconsideration. 1w phi1

According to this ruling, the motu proprio recall or setting aside of the entry of final judgment was
proper and "entirely consistent with the inherent power of every court inter alia to amend and control
its process and orders so as to make them conformable to law and justice [Sec. 5(g), Rule 135,
Rules of Court,]. That the recall has in fact served to achieve a verdict consistent with law and justice
is clear from the judgment subsequently rendered on the merits." This course of action is effectively
what the Court undertook today, adapted of course to the circumstances of the present case.

In light of these premises, we hereby REVERSE and SET ASIDE the July 5, 2006 decision and the
March 12, 2008 resolution of the Court of Appeals in CA-G.R. SP No. 92828. SP. Proc. No. 11.-5954
is hereby ordered reinstated. Let the records of this case be remanded to the court of origin for
further proceedings. No costs.

SO ORDERED.

ARTURO D. BRION
Associate Justice
#27a

FIRST DIVISION

January 20, 2016

G.R. NO. 207970

FERNANDO MEDICAL ENTERPRISES, INC., Petitioner,


vs.
WESLEYAN UNIVERSITY PHILIPPINES, INC., Respondent.

DECISION

BERSAMIN, J.:

The trial court may render a judgment on the pleadings upon motion of the claiming party when the
defending party's answer fails to tender an issue, or otherwise admits the material allegations of the
adverse party's pleading. For that purpose, only the pleadings of the parties in the action are
considered. It is error for the trial court to deny the motion for judgment on the pleadings because
the defending party's pleading in another case supposedly tendered an issue of fact.

The Case

The petitioner appeals the decision promulgated on July 2, 2013,1 whereby the Court of Appeals
(CA) affirmed the order issued on November 23, 2011 by the Regional Trial Court (RTC), Branch 1,
in Manila, denying its motion for judgment on the pleadings in Civil Case No. 09-122116
entitled Fernando Medical Enterprises, Inc. v. Wesleyan University-Philippines.2

Antecedents
From January 9, 2006 until February 2, 2007, the petitioner, a domestic corporation dealing with
medical equipment and supplies, delivered to and installed medical equipment and supplies at the
respondents hospital under the following contracts:

a. Memorandum of Agreement dated January 9, 2006 for the supply of medical equipment in
the total amount of P18,625,000.00;3

b. Deed of Undertaking dated July 5, 2006 for the installation of medical gas pipeline system
valued at P8,500,000.00;4

c. Deed of Undertaking dated July 27, 2006 for the supply of one unit of Diamond Select
Slice CT and one unit of Diamond Select CV-P costing P65,000,000.00;5 and

d. Deed of Undertaking dated February 2, 2007 for the supply of furnishings and equipment
worth P32,926,650.00.6

According to the petitioner, the respondent paid only P67,357,683.23 of its total obligation of
P123,901,650.00, leaving unpaid the sum of P54,654,195.54.7 However, on February 11, 2009, the
petitioner and the respondent, respectively represented by Rafael P. Fernando and Guillermo T.
Maglaya, Sr., entered into an agreement,8 whereby the former agreed to reduce its claim to only
P50,400,000.00, and allowed the latter to pay the adjusted obligation on installment basis within 36
months.9

In the letter dated May 27, 2009,10 the respondent notified the petitioner that its new administration
had reviewed their contracts and had found the contracts defective and rescissible due to economic
prejudice or lesion; and that it was consequently declining to recognize the February 11, 2009
agreement because of the lack of approval by its Board of Trustees and for having been signed by
Maglaya whose term of office had expired.

On June 24, 2009, the petitioner sent a demand letter to the respondent.11

Due to the respondents failure to pay as demanded, the petitioner filed its complaint for sum of
money in the RTC,12averring as follows:

xxxx

2. On January 9, 2006, plaintiff supplied defendant with hospital medical equipment for an in
consideration of P18,625,000.00 payable in the following manner: (2.1) For nos. 1 to 9 of
items to be sourced from Fernando Medical Equipment, Inc. (FMEI) 30% down payment of
P17,475,000 or P5,242,500 with the balance of P12,232,500 or 70% payable in 24 equal
monthly instalments of P509,687.50 and (2.2.) cash transaction amounting to P1,150,000.00
(2.3) or an initial cash payment of P6,392,500.00 with the remaining balance payable in 24
equal monthly installments every 20th day of each month until paid, as stated in the
Memorandum of Agreement, copy of which is hereto attached as Annex "A";

3. On July 5, 2006, plaintiff installed defendants medical gas pipeline system in the latters
hospital building complex for and in consideration of P8,500,000.00 payable upon installation
thereof under a Deed of Undertaking, copy of which is hereto attached as Annex "B";

4. On July 27, 2006, plaintiff supplied defendant one (1) unit Diamond Select Slice CT and
one (1) unit Diamond Select CV-9 for and in consideration of P65,000,000.00 thirty percent
(30%) of which shall be paid as down payment and the balance in 30 equal monthly
instalments as provided in that Deed of Undertaking, copy of which is hereto attached
as Annex "C";

5. On February 2, 2007, plaintiff supplied defendants hospital furnishings and equipment for
an in consideration of P32,926,650.00 twenty percent (20%) of which was to be paid as
downpayment and the balance in 30 months under a Deed of Undertaking, copy of which is
hereto attached as Annex "D";

6. Defendants total obligation to plaintiff was P123,901,650.00 as of February 15, 2009, but
defendant was able to pay plaintiff the sum of P67,357,683.23 thus leaving a balance
P54,654,195.54 which has become overdue and demandable;

7. On February 11, 2009, plaintiff agreed to reduce its claim to only P50,400,000.00 and
extended its payment for 36 months provided defendants shall pay the same within 36
months and to issue 36 postdated checks therefor in the amount of P1,400,000.00 each to
which defendant agreed under an Agreement, copy of which is hereto attached as Annex
"E";

8. Accordingly, defendant issued in favor of plaintiff 36 postdated checks each in the


[a]mount of P1,400,000.00 but after four (4) of the said checks in the sum of P5,600,000.00
were honored defendant stopped their payment thus making the entire obligation of
defendant due and demandable under the February 11, 2009 agreement;

9. In a letter dated May 27, 2009, defendant claimed that all of the first four (4) agreements
may be rescissible and one of them is unenforceable while the Agreement dated February
11, 2009 was without the requisite board approval as it was signed by an agent whose term
of office already expired, copy of which letter is hereto attached as Annex "F";

10. Consequently, plaintiff told defendant that if it does not want to honor the February 11,
2009 contract then plaintiff will insists [sic] on its original claim which is P54,654,195.54 and
made a demand for the payment thereof within 10 days from receipt of its letter copy of
which is hereto attached as Annex "G";

11. Defendant received the aforesaid letter on July 6, 2009 but to date it has not paid plaintiff
any amount, either in the first four contracts nor in the February 11, 2009 agreement, hence,
the latter was constrained to institute the instant suit and thus incurred attorneys fee
equivalent to 10% of the overdue account but only after endeavouring to resolve the dispute
amicable and in a spirit of friendship[;]

12. Under the February 11, 2009 agreement the parties agreed to bring all actions or
proceedings thereunder or characterized therewith in the City of Manila to the exclusion of
other courts and for defendant to pay plaintiff 3% per months of delay without need of
demand;13

xxxx

The respondent moved to dismiss the complaint upon the following grounds,14 namely: (a) lack of
jurisdiction over the person of the defendant; (b) improper venue; (c) litis pendentia; and (d) forum
shopping. In support of the ground of litis pendentia, it stated that it had earlier filed a complaint for
the rescission of the four contracts and of the February 11, 2009 agreement in the RTC in
Cabanatuan City; and that the resolution of that case would be determinative of the petitioners
action for collection.15

After the RTC denied the motion to dismiss on July 19, 2009,16 the respondent filed its answer (ad
cautelam),17averring thusly:

xxxx

2. The allegations in Paragraphs Nos. 2, 3, 4, and 5 of the complaint are ADMITTED subject
to the special and affirmative defenses hereafter pleaded;

3. The allegations in Paragraphs Nos. 6, 7 and 8 of the complaint are DENIED for lack of
knowledge or information sufficient to form a belief as to the truth or falsity thereof, inasmuch
as the alleged transactions were undertaken during the term of office of the past officers of
defendant Wesleyan University-Philippines. At any rate, these allegations are subject to the
special and affirmative defenses hereafter pleaded;

4. The allegations in Paragraphs Nos. 9 and 10 of the complaint are ADMITTED subject to
the special and affirmative defenses hereafter pleaded;

5. The allegations in Paragraphs Nos. 11 and 12 of the complaint are DENIED for being
conclusions of law.18

xxxx

The petitioner filed its reply to the answer.19

On September 28, 2011, the petitioner filed its Motion for Judgment Based on the
Pleadings,20 stating that the respondent had admitted the material allegations of its complaint and
thus did not tender any issue as to such allegations.

The respondent opposed the Motion for Judgment Based on the Pleadings, arguing that it had
specifically denied the material allegations in the complaint, particularly paragraphs 6, 7, 8, 11 and
12.21

On November 23, 2011, the RTC issued the order denying the Motion for Judgment Based on the
Pleadings of the petitioner, to wit:

At the hearing of the "Motion for Judgment Based on the Pleadings" filed by the plaintiff thru counsel,
Atty. Jose Maacop on September 28, 2011, the court issued an Order dated October 27, 2011
which read in part as follows:
xxxx
Considering that the allegations stated on the Motion for Judgment Based on the Pleadings, are
evidentiary in nature, the Court, instead of acting on the same, hereby sets this case for pre-trial,
considering that with the Answer and the Reply, issues have been joined.
xxxx
In view therefore of the Order of the Court dated October 27, 2011, let the Motion for Judgment
Based on the Pleadings be hereby ordered DENIED on reasons as abovestated and hereto
reiterated.
xxxx
SO ORDERED.22
The petitioner moved for reconsideration,23 but its motion was denied on December 29, 2011.24

The petitioner assailed the denial in the CA on certiorari.25

Judgment of the CA

On July 2, 2013, the CA promulgated its decision. Although observing that the respondent had
admitted the contracts as well as the February 11, 2009 agreement, viz.:

It must be remembered that Private Respondent admitted the existence of the subject contracts,
including Petitioners fulfilment of its obligations under the same, but subjected the said admission to
the "special and affirmative defenses" earlier raised in its Motion to Dismiss.

xxxx

Obviously, Private Respondents special and affirmative defenses are not of such character as to
avoid Petitioners claim. The same special and affirmative defenses have been passed upon by the
RTC in its Order dated July 19, 2010 when it denied Private Respondents Motion to Dismiss. As
correctly found by the RTC, Private Respondents special and affirmative defences of lack of
jurisdiction over its person, improper venue, litis pendentia and wilful and deliberate forum shopping
are not meritorious and cannot operate to dismiss Petitioners Complaint. Hence, when Private
Respondent subjected its admission to the said defenses, it is as though it raised no defense at all.

Not even is Private Respondents contention that the rescission case must take precedence over
Petitioners Complaint for Sum of Money tenable. To begin with, Private Respondent had not yet
1avvphi1

proven that the subject contracts are rescissible. And even if the subject contracts are indeed
rescissible, it is well-settled that rescissible contracts are valid contracts until they are rescinded.
Since the subject contracts have not yet been rescinded, they are deemed valid contracts which may
be enforced in legal contemplation.

In effect, Private Respondent admitted that it entered into the subject contracts and that Petitioner
had performed its obligations under the same.

As regards Private Respondents denial by disavowal of knowledge of the Agreement dated


February 11, 2009, We agree with Petitioner that such denial was made in bad faith because such
allegations are plainly and necessarily within its knowledge.

In its letter dated May 27, 2009, Private Respondent made reference to the Agreement dated
February 11, 2009, viz.:

"The Agreement dated 11 February 2009, in particular, was entered into by an Agent of the
University without the requisite authority from the Board of Trustees, and executed when said
agents term of office had already expired. Consequently, such contract is, being an unenforceable
contract."

Also, Private Respondent averred in page 5 of its Complaint for Rescission, which it attached to its
Motion to Dismiss, that:

"13. On 6 February 2009, when the terms of office of plaintiffs Board of Trustess chaired by
Dominador Cabasal, as well as of Atty. Guillermo C. Maglaya as President, had already expired,
thereby rendering them on a hold-over capacity, the said Board once again authorized Atty. Maglaya
to enter into another contract with defendant FMEI, whereby the plaintiff was obligated to pay and
deliver to defendant FMEI the amount of Fifty Million Four Hundred Thousand Pesos
(Php50,400,000.00) in thirty five (35) monthly instalments of One Million Four Hundred Thousand
Pesos (Php1,400,000.00), representing the balance of the payment for the medical equipment
supplied under the afore-cited rescissible contracts. This side agreement, executed five (5) days
later, or on 11 February 2009, and denominated as "AGREEMENT", had no object as a contract, but
was entered into solely for the purpose of getting the plaintiff locked-in to the payment of the balance
price under the rescissible contracts; x x x"

From the above averments, Private Respondent cannot deny knowledge of the Agreement dated
February 11, 2009. In one case, it was held that when a respondent makes a "specific denial" of a
material allegation of the petition without setting forth the substance of the matters relied upon to
support its general denial, when such matters where plainly within its knowledge and the defendant
could not logically pretend ignorance as to the same, said defendant fails to properly tender an
issue.26

the CA ruled that a judgment on the pleadings would be improper because the outstanding balance
due to the petitioner remained to be an issue in the face of the allegations of the respondent in its
complaint for rescission in the RTC in Cabanatuan City, to wit:

However, Private Respondents disavowal of knowledge of its outstanding balance is well-taken.


Paragraph 6 of Petitioners Complaint states that Private Respondent was able to pay only the
amount of P67,357,683.23. Taken together with paragraph 8, which states that Private Respondent
was only able to make good four (4) check payments worth P1,400,000.00 or a total of
P5,600,000.00, Private Respondents total payments would be, in Petitioners view, P72,957,683.23.
However, in its Complaint for Rescission, attached to its Motion to Dismiss Petitioners Complaint for
Sum of Money, Private Respondent alleged that:

"16. To date, plaintiff had already paid defendant the amount of Seventy Eight Million Four Hundred
One Thousand Six Hundred Fifty Pesos (P78,401,650.00)"

It is apparent that Private Respondents computation and Petitioners computation of the total
payments made by Private Respondent are different. Thus, Private Respondent tendered an issue
as to the amount of the balance due to Petitioner under the subject contracts.27

Hence, this appeal.

Issue

The petitioner posits that the CA erred in going outside of the respondents answer by relying on the
allegations contained in the latters complaint for rescission; and insists that the CA should have
confined itself to the respondents answer in the action in order to resolve the petitioners motion for
judgment based on the pleadings. 1wphi 1

In contrast, the respondent contends that it had specifically denied the material allegations of the
petitioners complaint, including the amount claimed; and that the CA only affirmed the previous
ruling of the RTC that the pleadings submitted by the parties tendered an issue as to the balance
owing to the petitioner.

Did the CA commit reversible error in affirming the RTCs denial of the petitioners motion for
judgment on the pleadings?
Ruling of the Court

The appeal is meritorious.

The rule on judgment based on the pleadings is Section 1, Rule 34 of the Rules of Court, which
provides thus:

Section 1. Judgment on the pleadings. Where an answer fails to tender an issue, or otherwise
admits the material allegations of the adverse partys pleading, the court may, on motion of that
party, direct judgment on such pleading. x x x

The essential query in resolving a motion for judgment on the pleadings is whether or not there are
issues of fact generated by the pleadings.28 Whether issues of fact exist in a case or not depends on
how the defending partys answer has dealt with the ultimate facts alleged in the complaint. The
defending partys answer either admits or denies the allegations of ultimate facts in the complaint or
other initiatory pleading. The allegations of ultimate facts the answer admit, being undisputed, will
not require evidence to establish the truth of such facts, but the allegations of ultimate facts the
answer properly denies, being disputed, will require evidence.

The answer admits the material allegations of ultimate facts of the adverse partys pleadings not only
when it expressly confesses the truth of such allegations but also when it omits to deal with them at
all.29 The controversion of the ultimate facts must only be by specific denial. Section 10, Rule 8 of
the Rules of Court recognizes only three modes by which the denial in the answer raises an issue of
fact. The first is by the defending party specifying each material allegation of fact the truth of which
he does not admit and, whenever practicable, setting forth the substance of the matters upon which
he relies to support his denial. The second applies to the defending party who desires to deny only a
part of an averment, and the denial is done by the defending party specifying so much of the
material allegation of ultimate facts as is true and material and denying only the remainder. The third
is done by the defending party who is without knowledge or information sufficient to form a belief as
to the truth of a material averment made in the complaint by stating so in the answer. Any material
averment in the complaint not so specifically denied are deemed admitted except an averment of the
amount of unliquidated damages.30

In the case of a written instrument or document upon which an action or defense is based, which is
also known as the actionable document, the pleader of such document is required either to set forth
the substance of such instrument or document in the pleading, and to attach the original or a copy
thereof to the pleading as an exhibit, which shall then be deemed to be a part of the pleading, or to
set forth a copy in the pleading.31 The adverse party is deemed to admit the genuineness and due
execution of the actionable document unless he specifically denies them under oath, and sets forth
what he claims to be the facts, but the requirement of an oath does not apply when the adverse
party does not appear to be a party to the instrument or when compliance with an order for an
inspection of the original instrument is refused.32

In Civil Case No. 09-122116, the respondent expressly admitted paragraphs no. 2, 3, 4, 5, 9 and 10
of the complaint. The admission related to the petitioners allegations on: (a) the four transactions for
the delivery and installation of various hospital equipment; (b) the total liability of the respondent; (c)
the payments made by the respondents; (d) the balance still due to the petitioner; and (e) the
execution of the February 11, 2009 agreement. The admission of the various agreements, especially
the February 11, 2009 agreement, significantly admitted the petitioners complaint. To recall, the
petitioners cause of action was based on the February 11, 2009 agreement, which was the
actionable document in the case. The complaint properly alleged the substance of the February 11,
2009 agreement, and contained a copy thereof as an annex. Upon the express admission of the
genuineness and due execution of the February 11, 2009 agreement, judgment on the pleadings
became proper.33 As held in Santos v. Alcazar:34

There is no need for proof of execution and authenticity with respect to documents the genuineness
and due execution of which are admitted by the adverse party. With the consequent admission
engendered by petitioners failure to properly deny the Acknowledgment in their Answer, coupled
with its proper authentication, identification and offer by the respondent, not to mention petitioners
admissions in paragraphs 4 to 6 of their Answer that they are indeed indebted to respondent, the
Court believes that judgment may be had solely on the document, and there is no need to present
receipts and other documents to prove the claimed indebtedness. The Acknowledgment, just as an
ordinary acknowledgment receipt, is valid and binding between the parties who executed it, as a
document evidencing the loan agreement they had entered into. The absence of rebutting evidence
occasioned by petitioners waiver of their right to present evidence renders the Acknowledgment as
the best evidence of the transactions between the parties and the consequential indebtedness
incurred. Indeed, the effect of the admission is such that a prima facie case is made for the plaintiff
which dispenses with the necessity of evidence on his part and entitled him to a judgment on the
pleadings unless a special defense of new matter, such as payment, is interposed by the
defendant.35 (citations omitted)

The respondent denied paragraphs no. 6, 7 and 8 of the complaint "for lack of knowledge or
information sufficient to form a belief as to the truth or falsity thereof, inasmuch as the alleged
transactions were undertaken during the term of office of the past officers of defendant Wesleyan
University-Philippines." Was the manner of denial effective as a specific denial?

We answer the query in the negative. Paragraph no. 6 alleged that the respondents total obligation
as of February 15, 2009 was P123,901,650.00, but its balance thereafter became only
P54,654,195.54 because it had since then paid P67,357,683.23 to the petitioner. Paragraph no. 7
stated that the petitioner had agreed with the respondent on February 11, 2009 to reduce the
balance to only P50,400,000.00, which the respondent would pay in 36 months through 36
postdated checks of P1,400,000.00 each, which the respondent then issued for the purpose.
Paragraph no. 8 averred that after four of the checks totalling P5,600,000.00 were paid the
respondent stopped payment of the rest, rendering the entire obligation due and demandable
pursuant to the February 11, 2009 agreement. Considering that paragraphs no. 6, 7 and 8 of the
complaint averred matters that the respondent ought to know or could have easily known, the
answer did not specifically deny such material averments. It is settled that denials based on lack of
knowledge or information of matters clearly known to the pleader, or ought to be known to it, or could
have easily been known by it are insufficient, and constitute ineffective36 or sham denials.37

That the respondent qualified its admissions and denials by subjecting them to its special and
affirmative defenses of lack of jurisdiction over its person, improper venue, litis pendentia and forum
shopping was of no consequence because the affirmative defenses, by their nature, involved
matters extrinsic to the merits of the petitioners claim, and thus did not negate the material
averments of the complaint.

Lastly, we should emphasize that in order to resolve the petitioners Motion for Judgment Based on
the Pleadings, the trial court could rely only on the answer of the respondent filed in Civil Case No.
09-122116. Under Section 1, Rule 34 of the Rules of Court, the answer was the sole basis for
ascertaining whether the complaints material allegations were admitted or properly denied. As such,
the respondents averment of payment of the total of P78,401,650.00 to the petitioner made in its
complaint for rescission had no relevance to the resolution of the Motion for Judgment Based on the
Pleadings. The CA thus wrongly held that a factual issue on the total liability of the respondent
remained to be settled through trial on the merits. It should have openly wondered why the
respondent's answer in Civil Case No. 09-122116 did not allege the supposed payment of the
P78,401,650.00, if the payment was true, if only to buttress the specific denial of its alleged liability.
The omission exposed the respondent's denial of liability as insincere.

WHEREFORE, the Court REVERSES and SETS ASIDE the decision promulgated on July 2,
2013; DIRECTS the Regional Trial Court, Branch 1, in Manila to resume its proceedings in Civil
Case No. 09-122116 entitled Fernando Medical Enterprises, Inc. v. Wesleyan University-
Philippines, and to forthwith act on and grant the Motion for Judgment Based on the Pleadings by
rendering the proper judgment on the pleadings; and ORDERS the respondent to pay the costs of
suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

#28a

THIRD DIVISION

G.R. No. 176570 July 18, 2012

SPOUSES RAMON VILLUGA and MERCEDITA VILLUGA, Petitioners,


vs.
KELLY HARDWARE AND CONSTRUCTION SUPPLY INC., represented by ERNESTO V. YU,
Executive Vice-President and General Manager, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the Decision1 and Resolution2 dated November 30, 2006 and February 8, 2007
of the Court of Appeals (CA) in CA-G.R. CV No. 69001. The CA Decision affirmed the Orders of the
Regional Trial Court (RTC) of Bacoor, Cavite, Branch 89, dated September 28, 1998 and May 6,
1999, while theCA Resolution denied petitioners' Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:

On March 3, 1995, herein respondent filed with the RTC of Bacoor, Cavite a Complaint for a Sum of
Money and Damages against herein petitioners alleging as follows:

xxxx
(3) During the period of November 19, 1992 to January 5, 1993, defendants [herein
petitioners] made purchases of various construction materials from plaintiff corporation
[herein respondent] in the sum of P259,809.50, which has not been paid up to the present
time, both principal and stipulated interests due thereon.

(4) Plaintiff made several demands, oral and written, for the same defendants to pay all their
obligations due plaintiff herein, but defendants fail and refuse to comply with, despite
demands made upon them, to the damage and prejudice of plaintiff.

xxxx

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that
judgment be rendered in favor of plaintiff and against defendants by ordering defendants to pay the
sum of:

(1) P259,809.50 as principal obligation due plaintiff, plus interest due thereon at 14% interest
per annum, until all sums due are paid in full.

(2) P64,952.38 by way of reimbursements of attorney's fees plus P500.00 appearance fee in
court.

(3) P26,000.00 for litigation and other related expenses.

And to pay the cost of suit.3

In their Answer to Complaint,4 petitioners admitted having made purchases from respondent, but
alleged that they do not remember the exact amount thereof as no copy of the documents
evidencing the purchases were attached to the complaint. Petitioners, nonetheless, claimed that
they have made payments to the respondent on March 4, 1994 and August 9, 1994 in the amounts
of P110,301.80 and P20,000.00, respectively, and they are willing to pay the balance of their
indebtedness after deducting the payments made and after verification of their account.

In a Manifestation5 dated July 18, 1995, petitioners stated that in order to buy peace, they were
willing to pay respondent the principal sum of P259,809.50, but without interests and costs, and on
installment basis.

In its Counter Manifestation,6 respondent signified that it was amenable to petitioners' offer to pay the
principal amount of P259,809.50. However, respondent insisted that petitioners should also pay
interests, as well as litigation expenses and attorney's fees, and all incidental expenses.

Subsequently, on August 11, 1995, respondent filed a Motion for Partial Judgment on the
Pleadings7 contending that petitioners were deemed to have admitted in their Answer that they owed
respondent the amount of P259,809.50 when they claimed that they made partial payments
amounting to P130,301.80. Based on this premise, respondent prayed that it be awarded the
remaining balance of P129,507.70. Petitioners filed their Opposition8 to the said Motion.

On September 11, 1995, the RTC issued an Order9 deferring resolution of respondent's Motion for
Partial Judgment on the ground that there is no clear and specific admission on the part of
petitioners as to the actual amount that they owe respondent.
On January 30, 1996, respondent filed an Amended Complaint,10 with leave of court, alleging that
between October 1992 until January 5, 1993, petitioners purchased from it (respondent) various
construction materials and supplies, the aggregate value of which is P279,809.50; that only
P20,000.00 had been paid leaving a balance of P259,809.50.

In their Answer to Amended Complaint,11 petitioners reiterated their allegations in their Answer to
Complaint.

On March 8, 1996, respondent filed a Request for Admission12 asking that petitioners admit the
genuineness of various documents, such as statements of accounts, delivery receipts, invoices and
demand letter attached thereto as well as the truth of the allegations set forth therein.

Respondent basically asked petitioners to admit that the latter's principal obligation is P279,809.50
and that only P20,000.00 was paid.

On June 3, 1996, respondent filed a Manifestation and Motion13 before the RTC praying that since
petitioners failed to timely file their comment to the Request for Admission, they be considered to
have admitted the genuineness of the documents described in and exhibited with the said Request
as well as the truth of the matters of fact set forth therein, in accordance with the Rules of Court.

On June 6, 1996, petitioners filed their Comments on the Request for Admission14 stating their
objections to the admission of the documents attached to the Request.

On January 24, 1997, respondent filed its Second Amended Complaint,15 again with leave of court.
The amendment modified the period covered by the complaint. Instead of October 1992 to January
5, 1993, it was changed to July 29, 1992 until August 10, 1994. The amendment also confirmed
petitioners' partial payment in the sum of P110,301.80 but alleged that this payment was applied to
other obligations which petitioners owe respondent. Respondent reiterated its allegation that, despite
petitioners' partial payment, the principal amount which petitioners owe remains P259,809.50.

Petitioners filed their Answer to the Second Amended Complaint16 denying the allegations therein and
insisting that they have made partial payments.

On September 4, 1997, respondent filed a Motion to Expunge with Motion for Summary
Judgment17 claiming that petitioners' Comments on respondent's Request for Admission is a mere
scrap of paper as it was signed by petitioners' counsel and not by petitioners themselves and that it
was filed beyond the period allowed by the Rules of Court. Respondent goes on to assert that
petitioners, in effect, were deemed to have impliedly admitted the matters subject of the said
request. Respondent also contended that it is already entitled to the issuance of a summary
judgment in its favor as petitioners not only failed to tender a genuine issue as to any material fact
but also did not raise any special defenses, which could possibly relate to any factual issue.

In their Opposition to Motion to Expunge with Motion for Summary Judgment,18 petitioners argued
that respondent's request for admission is fatally defective, because it did not indicate or specify a
period within which to answer; that verification by petitioners' counsel is sufficient compliance with
the Rules of Court; that petitioners' request for admission should be deemed dispensed with and no
longer taken into account as it only relates to the Amended Complaint, which was already
abandoned when the Second Amended Complaint was filed; and that summary judgment is
improper and without legal basis, as there exists a genuine controversy brought about by petitioners'
specific denials and defenses.

On September 28, 1998, the RTC issued an Order, the dispositive portion of which reads as follows:
ACCORDINGLY, plaintiff's [herein respondent's] Motion to Expunge with Motion for Summary
Judgment is hereby GRANTED.

Defendants' Petitioners "Comments on the Request for Admission" dated 04 June 1996 is hereby
expunged from the record for being contrary to the Rules of Court. Judgment is hereby rendered in
favor of the plaintiff and against the defendants as follows:

Defendants are hereby ordered to pay, jointly and severally, plaintiff the sum of TWO HUNDRED
FIFTY-NINE [THOUSAND] EIGHT HUNDRED NINE PESOS and 50/100 (P259,809.50), with legal
interest due thereon until the whole amount is paid.

SO ORDERED.19

Petitioners filed a Motion for Reconsideration, but it was denied by the RTC in its Order dated May 6,
1999.

Unyielding, petitioners filed an appeal with the CA.

On November 30, 2006, the CA rendered its presently assailed Decision, affirming the September
28, 1998 and May 6, 1999 Orders of the RTC.

Petitioners' Motion for Reconsideration was subsequently denied by the CA via its Resolution dated
February 8, 2007.

Hence, the instant petition for review on certiorari raising the following issues:

THE HONORABLE COURT SHOULD NOT HAVE DENIED DEFENDANTS-APPELLANTS'


(PETITIONERS) COMMENT AND RULED THAT THERE WAS IMPLIED ADMISSION CONTAINED
IN THE REQUEST.

THERE SHOULD NOT HAVE BEEN A SUMMARY JUDGMENT AGAINST


DEFENDANTSAPPELLANTS (PETITIONERS).20

In their first assigned error, petitioners insist in arguing that respondent waived its Request for
Admission when it filed its Second Amended Complaint; that all motions or requests based on the
complaint, which was amended, should no longer be considered. Petitioners also contend that the
Request for Admission was not in the form specified by the Rules of Court as it did not specify a
period within which to reply as required by Section 1, Rule 26 of the same Rules.

As to the second assignment of error, petitioners aver that the summary judgment issued by the
RTC is improper and without legal bases, considering that genuine issues were raised in the
pleadings filed by petitioners.

The petition lacks merit.

The Court agrees with the CA in holding that respondent's Second Amended Complaint supersedes
only its Amended Complaint and nothing more.

Section 8, Rule 10 of the Rules of Court provides:


Sec. 8. Effect of amended pleading. An amended pleading supersedes the pleading that it
amends. However, admissions in superseded pleadings may be received in evidence against the
pleader; and claims or defenses alleged therein not incorporated in the amended pleading shall be
deemed waived.

From the foregoing, it is clear that respondent's Request for Admission is not deemed abandoned or
withdrawn by the filing of the Second Amended Complaint.

The Court also finds no error when the CA ruled that petitioners' Comments on the Request for
Admission was filed out of time, and quotes with approval the disquisition of the appellate court on
this matter, to wit:

x x x Pursuant to the above-quoted Section 2 of Rule 26 of the Rules of Court, the party to whom the
request is directed must respond to the request within a period of not less than ten (10) days after
the service thereof, or upon such further time the Court may allow on motion. In the instant case, the
plaintiff-appellee's herein respondent's "Request" failed to designate any period for the filing of the
defendants-appellants' herein petitioners' response. Neither did the trial court fix the period for the
same upon motion of the parties. However, such failure to designate does not automatically mean
that the filing or the service of an answer or comment to the "Request" would be left to the whims
and caprices of defendants-appellants. It must be reiterated that one of the main objectives of Rule
26 is to expedite the trial of the case (Duque vs. Court of Appeals, 383,

SCRA 520, 527 2002 ). Thus, it is also provided in the second paragraph of Section 2 of Rule 26 of the
Rules of Court that "[o]bjections on the ground of irrelevancy or impropriety of the matter requested
shall be promptly submitted to the court for resolution."21

Nonetheless, the Court takes exception to the ruling of the CA that by reason of the belated filing of
petitioners' Comments on the Request for Admission, they are deemed to have impliedly admitted
that they are indebted to respondent in the amount of P259,809.50.

A careful examination of the said Request for Admission shows that the matters of fact set forth
therein are simply a reiteration of respondent's main allegation in its Amended Complaint and that
petitioners had already set up the affirmative defense of partial payment with respect to the above
allegation in their previous pleadings.

This Court has ruled that if the factual allegations in the complaint are the very same allegations set
forth in the request for admission and have already been specifically denied, the required party
cannot be compelled to deny them anew.22 A request for admission that merely reiterates the
allegations in an earlier pleading is inappropriate under Rule 26 of the Rules of Court, which as a
mode of discovery, contemplates of interrogatories that would clarify and tend to shed light on the
truth or falsity of the allegations in the pleading.23 Rule 26 does not refer to a mere reiteration of what
has already been alleged in the pleadings.24 Nonetheless, consistent with the abovementioned Rule,
the party being requested should file an objection to the effect that the request for admission is
improper and that there is no longer any need to deny anew the allegations contained therein
considering that these matters have already been previously denied.

The foregoing notwithstanding, the Court finds that the CA was correct in sustaining the summary
judgment rendered by the RTC. 1wphi1

Sections 1 and 3, Rule 35 of the Rules of Court provide as follows:


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 3. Motion and proceedings thereon. The motion shall be served at least ten (10) days
before the time specified for the hearing. The adverse party may serve opposing affidavits,
depositions, or admissions at least three (3) days before the hearing. After the 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.

Summary judgment is a procedural device resorted to in order to avoid long drawn out litigations and
useless delays.25 Such judgment is generally based on the facts proven summarily by affidavits,
depositions, pleadings, or admissions of the parties.26

In this respect, the Court's ruling in Nocom v. Camerino,27 is instructive, to wit:

x x x When the pleadings on file show that there are no genuine issues of fact to be tried, the Rules
of Court allow a party to obtain immediate relief by way of summary judgment, that is, when the facts
are not in dispute, the court is allowed to decide the case summarily by applying the law to the
material facts. Conversely, where the pleadings tender a genuine issue, summary judgment is not
proper. A "genuine issue" is such issue of fact which requires the presentation of evidence as
distinguished from a sham, fictitious, contrived or false claim. Section 3 of [Rule 35 of the Rules of
Court] provides two (2) requisites for summary judgment to be proper: (1) there must be no genuine
issue as to any material fact, except for the amount of damages; and (2) the party presenting the
motion for summary judgment must be entitled to a judgment as a matter of law. A summary
judgment is permitted only if there is no genuine issue as to any material fact and a moving party is
entitled to a judgment as a matter of law. A summary judgment is proper if, while the pleadings on
their face appear to raise issues, the affidavits, depositions, and admissions presented by the
moving party show that such issues are not genuine.28

In the present case, it bears to note that in its original Complaint, as well as in its Amended
Complaint, respondent did not allege as to how petitioners' partial payments of P110,301.80 and
P20,000.00 were applied to the latter's obligations. In fact, there is no allegation or admission
whatsoever in the said Complaint and Amended Complaint that such partial payments were made.
Petitioners, on the other hand, were consistent in raising their affirmative defense of partial payment
in their Answer to the Complaint and Answer to Amended Complaint. Having pleaded a valid
defense, petitioners, at this point, were deemed to have raised genuine issues of fact.

The situation became different, however, when respondent subsequently filed its Second Amended
Complaint admitting therein that petitioners, indeed, made partial payments of P110,301.80 and
P20,000.00. Nonetheless, respondent accounted for such payments by alleging that these were
applied to petitioners' obligations which are separate and distinct from the sum of P259,809.50 being
sought in the complaint. This allegation was not refuted by petitioners in their Answer to Second
Amended Complaint. Rather, they simply insisted on their defense of partial payment while claiming
lack of knowledge or information to form a belief as to the truth of respondent's allegation that they
still owe the amount of P259,809.50 despite their payments of P110,301.80 and P20,000.00. It is
settled that the rule authorizing an answer to the effect that the defendant has no knowledge or
information sufficient to form a belief as to the truth of an averment and giving such answer the effect
of a denial, does not apply where the fact as to which want of knowledge is asserted, is so plainly
and necessarily within the defendants knowledge that his averment of ignorance must be palpably
untrue.29 In the instant case, it is difficult to believe that petitioners do not know how their payment
was applied. Instead of denying knowledge, petitioners could have easily asserted that their
payments of P110,301.80 and P20,000.00 were applied to, and should have been deducted from,
the sum sought to be recovered by respondent, but they did not, leading the court to no other
conclusion than that these payments were indeed applied to their other debts to respondent leaving
an outstanding obligation of P259,809.50.

On the basis of the foregoing, petitioners' defense of partial payment in their Answer to Second
Amended Complaint, in effect, no longer raised genuine issues of fact that require presentation of
evidence in a full-blown trial. Hence, the summary judgment of the RTC in favor of respondent is
proper.

WHEREFORE, the instant petition Is DENIED. The assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

#29

SECOND DIVISION

G.R. No. 197923 June 22, 2015

RUBY RUTH S. SERRANO MAHILUM, Petitioner,


vs.
SPOUSES EDILBERTO ILANO and LOURDES ILANO, Respondents.

DECISION

DEL CASTILLO, J.:

Assailed in this Petition for Review on Certiorari1 are the following dispositions of the Court of
Appeals: 1) February 2, 2011 Decision2 in CA-G.R. SP No. 113782 which granted herein
respondents' Petition for Certiorari and Prohibition and thus nullified and set aside the January 5,
20103 and February 24, 20104 Orders of the Regional Trial Court of Las Pinas City, Branch 255 in
Civil Case No. LP-07-0109; and 2) July 28, 2011 Resolution5denying the herein petitioner's motion
for reconsideration.

Factual Antecedents
Petitioner Ruby Ruth S. Serrano Mahilum is the registered owner of a parcel of land covered by
Transfer Certificate of Title No. 855336 (TCT 85533) of the Registry of Deeds of Las Pinas City.

In September 2003, she entrusted the original owners duplicate copy of TCT 85533 to Teresa Perez
(Perez) a purported real estate broker who claimed that she can assist petitioner in obtaining a
loan, with TCT 85533 serving as collateral. After several months, petitioner demanded the return of
the title, but Perez failed to produce the same; after much prodding, Perez admitted that the title was
lost. Thus, in June 2004, petitioner executed an Affidavit of Loss and caused the same to be
annotated upon the origin al registry copy of TCT 85533 as Entry No. 1668-247 on October 7, 2004.

In June 2006, petitioner received a letter from the Registry of Deeds of Las Pias City informing her
that the owners duplicate copy of TCT 85533 was not lost, but that it was presented to the registry
by respondents, spouses Edilberto and Lourdes Ilano, who claimed that the property covered by the
title was sold to them. In this connection, respondents instead of registering the supposed sale in
their favor executed an Affidavit of Non-Loss, which was entered on TCT 85533 on June 28, 2006
as Entry No.1875-27.8

Petitioner confronted respondents, w ho showed her a notarized Agreement9 with right of repurchase
dated December 4, 2003 and a notarized and undated Deed of Absolute Sale,10 on which documents
petitioners purported signatures were affixed. These documents indicate that petitioner sold the
property covered by TCT 85533 to respondents for 250,000.00 with right to repurchase the same
within a period of 90 days. Petitioner told respondents that she did not execute these documents,
and that her purported signatures therein were in fact falsified and forged. She demanded the return
of TCT85533, but respondents refused to surrender the title to her. They claimed that the property
was sold to them by Perez and "a companion."

All this time, title to the property remained in petitioners name, as respondents have not registered
the unnotarized and undated Deed of Absolute Sale.

Civil Case No. LP-07-0109

On June 20, 2007, petitioner and her husband Richard instituted against respondents and Perez
Civil Case No. LP-07-0109 with the Regional Trial Court of Las Pias City. Her Complaint11 for
"annulment of agreement and deed of absolute sale, specific performance, with damages," which
contained the foregoing statement of facts, likewise contained the following allegations and prayer:

18. That by reason of the actuations of the defendants in facilitating the execution of the aforesaid
falsified documents, and adamant refusal to return to plaintiffs the duplicate original owners copy of
their title, which were all done with evident bad faith, the plaintiffs suffered and continue to suffer
sleepless nights, wounded feelings, besmirched reputation, serious anxiety and other similar
feelings, which, when quantified, can reasonably be compensated with the sum of Fifty Thousand
(50,000.00) Pesos, as moral damages;

PRAYER

WHEREFORE, it is most respectfully prayed of this Honorable Court, that after due notice and
hearing, judgment be rendered in favor of the plaintiffs and against the defendants, as follows:

1. Ordering the annulment of the documents denominated as Agreement (Deed of Sale with
Right to Repurchase) , dated December 4, 2003, and Deed of Absolute Sale and declaring
the same as null and void;
2. Ordering defendants Ilano to surrender and return to plaintiffs the duplicate original
owners copy of TCT No. 85533;

3. Ordering the defendants, jointly and severally, to pay the plaintiffs the sum of Fifty
Thousand Pesos (50,000.00) as moral damages;

[4.] Ordering the defendants, jointly and severally, to pay the plaintiffs the sum of Twenty
Thousand Pesos (20,00 0.00) as attorneys fees, and the additional amount of Two
Thousand Pesos (2,000.00) for every court hearing; and

[5.] Ordering the defendants to pay the costs of this suit.

Other reliefs deemed just and equitable are also prayed for.12

Respondents Amended Answer with Compulsory Counterclaim13 alleged and admitted, among
others, that petitioner was the owner of the lot covered by TCT 85533; that said title was entrusted to
Perez; that petitioner executed an affidavit of loss which was annotated on TC T 85533; that they
caused the annotation of an affidavit of non-loss on TCT 85533, as Entry No. 1875-27; that petitioner
confronted them ; that they showed petitioner the Agreement and unnotarized Deed of Absolute
Sale; that they are in possession of the owners copy of TCT 85533; that sometime in October 2003,
Perez accompanied by one Corazon Tingson (Tingson) "and a female person who introduced
herself as Ruby Ruth Serrano" offered to sell to them the property covered by TCT 85533; that "in
support of the identity of the said Ruby Ruth Serrano, the original owners copies of the title (T CT
No. T-85533), Declaration of Real Property, Tax Clearance, Barangay Clearance, Community Tax
Certificate with picture of Ruby Ruth Serrano attached therein" were presented to respondent
Edilberto Ilano (Edilberto); that upon being satisfied as to the "identity of the person who introduced
herself as Ruby Ruth Serrano," Edilberto instructed his secretary to verify the authenticity of the title
with the Register of Deeds of Las Pias City and conduct an ocular inspection of the property; that
"the person who introduced herself as Ruby Ruth Serrano" obtained a cash advance of 50,000.00;
that after verification confirmed that the property is indeed owned by and registered in the name of
Ruby Ruth Serrano, Edilberto "believing in good faith that the person [with] whom he is dealing x x
x is indeed the real Ruby Ruth Serrano" entered into the sale transaction; that on the same day, or
October 30, 2004, petitioner received the full consideration of 250,000.00 and signed the Agreement
and Deed of Absolute Sale; that petitioners affidavit of loss filed with the Registry of Deeds is false
as TCT 85533 was never lost but was entrusted to Perez who, together with Tingson "and another
person he rein named as Jane Doe whose identity is yet to be established who introduced herself
as Ruby Ruth Serrano," came to respondents office to obtain a loan because petitioner was in dire
need of money as she admitted in her complaint; that TCT 85533 was negotiated and/or sold by
petitioner "or by her duly authorized person, otherwise no one can present/deliver the original
owners duplicate copy of the said title x x x and the original copies of the documents x x x;" that "for
failure of the registered owner, Ruby Ruth Serrano, to exercise her right of repurchase within the
agreed period, ownership of the subject property now lawfully belongs to" respondents; that the
complaint failed to allege that respondents were purchasers in bad faith or at least with notice of the
defect in the title, which leads to the conclusion that the complaint states no cause of action; and that
respondents filed a perjury case against petitioner with the Office of the City Prosecutor of
Paraaque.

Respondents thus prayed for the dismissal of the complaint, and by way of counterclaim, sought
indemnity for moral damages in the amount of 300,000.00; 100,000.00 as nominal damages;
200,000.00 as exemplary damages; 100,000.00 for attorneys fees; and costs of suit.

Pre-trial and presentation of petitioners evidence ensued. Thereafter, petitioner rested her case.
Respondents filed a Demurrer to Evidence,14arguing that the complaint failed to state a cause of
action in that petitioner failed to allege that respondents were purchasers in bad faith or with notice
of a defect in the title; that in the absence of such an allegation, the presumption that respondents
are purchasers in good faith prevails. Petitioner filed a Comment/ Opposition,15 contending
essentially that her complaint contained an allegation that respondents were purchasers in bad faith,
which is found in paragraphs 13 to 15 of the complaint; and that the issues raised in the demurrer
may only be resolved after trial on the merits.

Ruling of the Regional Trial Court

In a January 5, 2010 Order,16 the trial court denied respondents demurrer. It held that the question of
whether respondents are purchasers in bad faith can only be resolved after the parties present their
respective evidence. Thus, it stated:

The Court, after taking into account a ll the foregoing, does not find merit in the above demurrer. For
one, the Court already held in its Order dated 11 April 2008 that "during the pre-trial held last 11
February 2008 one of the issues submitted for resolution by the Court is whether or not [sic]
defendants Sps. Ilano are buyers in good faith and for value of the property subject hereof". This
being so, the same can only be resolved upon presentation of evidence by the parties herein
regarding their respective positions."Thus, the instant case cannot just be dismissed simply because
the defendants said so base on their own evaluation of the evidence presented by the plaintiff.

If only to stress, as far as the Court is concerned the assertions of the defendants are merely
conclusions they arrived at on their own that [run] counter to the position of the plaintiffs. As such,
the defendants will have to present their own evidence to substantiate their claims.

More importantly, the Court cannot just disregard the evidence and testimonies of the witnesses
presented by the plaintiffs. Further, in order to ferret out the truth and determine the veracity of the
assertions being made by the parties herein, it is best that the "other side" be heard. It is only in
allowing the defendants to present their evidence that this can be achieved so that the herein case
against them can be resolved judiciously.

In the end, it is for the Court to evaluate the evidence to be presented by the parties herein. The
conclusions being forwarded by the parties will have to be reckoned with what have been presented
and not on their respective self-serving assertions.

Indeed, a demurrer to evidence is anchored on the claim that "upon the facts and the law the plaintiff
has shown no right to relief" (Sec. 1, Rule 33, Rules of Court). With respect to the herein case, there
is no clear showing that plaintiffs Sps. Mahilum have no right to the reliefs being sought by them. On
the contrary, and if not opposed by contravening evidence by the defendants, their causes of action
may end up being supported by evidence that may merit rulings in their favor.

WHEREFORE, premises considered, the "Demurrer to Evidence" dated 11 November 2009 filed by
defendants Sps. Edilberto and Lourdes Ilano is DENIED for lack of merit.

SO ORDERED.17

Respondents filed a Motion for Reconsideration,18but the trial court denied the same in a February
24, 2010 Order.19

Ruling of the Court of Appeals


Respondents went up to the Court of Appeals (CA) via an original Petition for Certiorari.20 Docketed
as CA-G.R. SP No. 113782, the petition essentially insisted that since petitioners complaint failed to
include an allegation that respondents were purchasers in bad faith, then her complaint for
annulment of sale failed to state a cause of action, which entitles them to a dismissal on demurrer;
and that in denying their demurrer, the trial court disregarded existing jurisprudence to the effect that
where a complaint does not contain all the facts constituting the plaintiffs cause of action, it is
subject to a motion to dismiss. In addition to seeking the reversal of the trial courts January 5, 2010
and February 24, 2010 Orders, respondents prayed for injunctive relief as well.

On July 15, 2010, the CA issued a Resolution21 denying respondents application for a temporary
restraining order.

Petitioner filed her Comment to the Petition.

On February 2, 2011, the CA issued the assailed Decision, which contained the following decretal
portion:

WHEREFORE, the above premises considered, the instant petition is GRANTED. The Orders of
public respondent Regional Trial Court of Las Pias City, Branch 255 dated 5 January 2010 and 24
February 2010, respectively, are NULLIFIED and SET ASIDE. Private respondents complaint for
Annulment of Agreement and Deed of Absolute Sale, Specific Performance with Damages is
DISMISSED for lack of cause of action.

SO ORDERED.22

The CA held that

A careful reading of private respondents23 complaint before public respondent would show that
private respondents indeed failed to allege that petitioners24 were in bad faith or at least aw are of the
misrepresentation of the vendor of the subject property at the time they purchased the same.

Thus, absent an allegation in the subject complaint that petitioners were in bad faith or with notice of
the vendors misrepresentation at the time of sale or prior thereto, they are presumed to be innocent
purchasers for value of the subject property.

Under the law, a title procured through fraud and misrepresentation can still be the source of a
completely legal and valid title if the same is in the hands of an innocent purchaser for value and in
good faith. Again, how can public respondent render a valid judgment when, based on the
allegations in the complaint, petitioners are presumed to have bought the subject lot in good faith?
Stated differently, private respondents have no cause of action against petitioners.

In their comment or opposition to petitioners demurrer to evidence, private respondents argued that
it is not accurate that they failed to allege bad faith because paragraphs 13, 14, and 15 of their
complaint indicated the evident bad faith of petitioners. However, a review of said averments would
only prove that petitioners became aware of the alleged fraud or misrepresentation after the
execution of the assailed agreement and deed of sale when private respondents confronted the
former, and not before or during the execution of the same. The Supreme Court held:

"A person is considered in law as an innocent purchaser for value when he buys the property of
another, without notice that some other person has a right or an interest in such property, and pays a
full price for the same at the time of such purchase, or before he has notice of the claims or interest
of some other person in the property. A person dealing with registered land may safely rely on the
correctness of the certificate of title of the vendor/transferor, and the law will in no way oblige him to
go behind the certificate to determine the condition of the property."25

When the complaint alleges that private respondents did not sell the subject property to petitioners
but does not allege that the latter were purchasers in bad faith or with notice of the defect in the title
of their vendors, there is a failure to state a cause of action.26 By reason of this failure, petitioners are
presumed to be innocent purchasers for value and in good faith, entitled to protection under the law.

"In Spouses Chu, Sr. v. Benelda Estate Development Corporation, this Court pronounced that it is
crucial that a complaint for annulment of title must allege that the purchaser was aware of the defect
in the title, so that the cause of action against him or her will be sufficient. Failure to do so, as in the
case at bar, is fatal for the reason that the court cannot render a valid judgment against the
purchaser who is presumed to be in good faith in acquiring said property."27

It was further held that a title issued to an innocent purchaser and for value cannot be revoked on
the basis that the deed of sale was falsified, if he or she had no knowledge of the fraud
committed.28 Here, there is clearly no imputation that petitioners had knowledge of the fraud
committed during the execution of the assailed agreement and deed of sale. Furthermore, in the
formal offer of the testimony of private respondent Ruby Ruth, proving bad faith was not even among
the purposes for which her testimony was offered. Accordingly, the testimony itself did not show bad
faith on the part of petitioners.

It is significant to note that in the subject complaint, formal offer of evidence, and oral testimony, only
two things were established: (1) private respondents did not sell the subject property to petitioners
and (2) Teresa Perez breached the trust given to her by private respondents. These facts cannot
constitute a cause of action or relief against petitioners because, absent an allegation of bad faith in
the complain t, they are presumed to be innocent purchasers for value during the execution of the
agreement and deed of sale.

There is the established rule that if the defendant permits evidence to be introduced, without
objection, which supp lies the necessary allegations of a defective complaint, this evidence has the
effect of curing the defects of such complaint, and a demurrer thereafter is inadmissible on the
ground that the complaint does not state fact s sufficient to constitute a cause of action. This rule,
however, cannot be applied in the instant case. Granting that petitioners did not object to the
presentation of evidence of private respondents, the latter still failed to cure the defect in their
complaint since no evidence of bad faith on the part of petitioners was presented before the court.
Proofs of bad faith were all directed against Teresa Perez and her companion who introduced
herself as Ruby Ruth Serrano.

Although this Court relied on the transcript of stenographic notes quoted by petitioners, as complete
records of the case are still with public respondent, private respondents did not question in their
Comment on the petition, the truthfulness of the statements quoted therein. Hence, private
respondents are deemed to have admitted the veracity of said transcript. Without an imputation [or]
a showing that petitioners were in bad faith or aware of the fraud perpetrated by Teresa Perez and
her companion, no action can be maintained against them.

In view of the foregoing, public respondent RTC committed grave abuse of discretion amounting to
lack or excess of jurisdiction when it denied the Demurrer to Evidence notwithstanding the complete
absence of a cause of action against petitioners. Public respondent RTC contravened and
disregarded the settled and prevailing jurisprudence on the matter.29
Petitioner filed her Motion for Reconsideration,30 which the CA denied in its assailed July 28,
2011Resolution. Hence, the present Petition.

Issues

Petitioner raises the following issues:

ON QUESTION OF LAW, WHETHER x x x FAILURE TO ALLEGE BAD FAITH IN THE


COMPLAINT IS A FATAL DEFECT CONSIDERING THAT THE SUBJECT DOCUMENTS
(AGREEMENT/DEED OF ABSOLUTE SALE WITH RIGHT TO REPURCHASE, AND
UNNOTARIZED DEED OF SALE) WERE MERELY SIMULATED, FICTITIOUS AND
FORGERY [sic], AND HENCE, NULL AND VOID FROM THE BEGINNING.

II

ON QUESTION OF LAW, WHETHER x x x THE PETITIONER WAS DEPRIVED OF HER


PROPERTY WHEN THE COURT OF APPEALS GRANTED THE DEMURRER TO
EVIDENCE ON THE GROUND THAT THERE WAS NO CAUSE OF ACTION WHEN ONE
OF THE ISSUED[sic] AGREED UPON BY THE PARTIES DURING THE PRE-TRIAL
BEFORE THE RTC WAS WHETHER x x x PRIVATE RESPONDENTS WERE
PURCHASERS IN GOOD FAITH.

III

WHETHER x x x PETITIONER/S WERE PREVENTED FROM CONFRONTING THE


PRIVATE RESPONDENTS AND THEIR WITNESSES TO DETERMINE WHETHER x x x
THEY REALLY DEALT WITH PETITIONER AND TO DETERMINE WHO WAS THE
IMPOSTOR WHO SIGNED THE SUBJECT AGREEMENT AND DEED OF ABSOLUTE
SALE AND HENCE, ALLOW THE RTC COURT TO DETERMINE WHETHER THE
SUBJECT AGREEMENT AND DEED OF ABSOLUTE SALE WERE SIMULATED,
FICTITIOUS AND NULL AND VOID AND IF PRIVATE RESPONDENTS WERE REALLY
PURCHASERS FOR VALUE IN GOOD FAITH THAT WILL AF FECT THE OUTCOME OF
THE INSTANT CASE.31

Petitioners Arguments

In praying that the assailed CA dispositions be set aside and that in effect the January 5, 2010 and
February 24, 2010 Orders of the trial court denying respondents demurrer to evidence be re
instated, petitioner insists in her Petition and Reply32 that during the pre-trial conference, one of the
issues agreed upon by the parties to be resolved was whether respondents were buyers in good
faith, which was reflected in the trial courts January 5, 2010 Order;33that since the issue of good or
bad faith has been agreed upon by the parties as one of the matters to be tackled during trial, then
the failure to allege bad faith in the complaint is deemed cured, and the defense is deemed waived
by the respondents with their assent given during pre-trial; and that the agreement and deed of
absolute sale, being forgeries, are null and void and without force and effect.

Petitioner adds that although a complaint which does not contain all the facts constituting the
plaintiffs cause of action is subject to a motion to dismiss, the defect is cured if the defendant
permits the introduction of evidence which supplies or remedies such defect;34 thus, respondents
assent to the framing of the issues during pre-trial and their failure to object to the presentation of
evidence on the issue of good or bad faith cu red her defective complaint.

Finally, petitioner contends that the grant of respondents demurrer amounts to a deprivation of
property without due process of law, as she was prevented from defending her ownership over the
same by duly confronting the respondents and their witnesses and proving that the agreement and
deed of absolute sale were mere forgeries.

Respondents Arguments

Respondents, on the other hand, argue in their Comment35 that the CA was correct in declaring that
petitioners complaint in Civil Case No. LP-07-0109 failed to state a cause of action owing to her
failure to allege that the property in question was purchased in bad faith. They add that petitioner
failed to present evidence during trial to the effect that they bought the subject property in bad faith;
that the scope of her evidence covered only her claim that she did not execute the subject
agreement and deed of absolute sale, and that these documents are fictitious and forged she did
not present evidence to show that they were buyers in bad faith. Thus, they maintain that for failing
to allege and prove bad faith on their part, the CA was correct in ordering the dismissal of Civil Case
No. LP-07-0109.

Our Ruling

The Court grants the Petition.

In granting demurrer, the CA failed to consider that title to the property remained in petitioners
name; TCT 85533 was never cancelled and no new title was issued in respondents name. As a
matter of fact, what they did when petitioner annotated her affidavit of loss upon TCT 85533 was to
cause the annotation of an "affidavit of non-loss" afterward.

Since a new title was never issued in respondents favor and, instead, title remained in petitioners
name, the former never came within the coverage and protection of the Torrens system, where the
issue of good or bad faith becomes relevant. Since respondents never acquired a new certificate of
title in their name, the issue of their good or bad faith which is central in an annulment of title case is
of no consequence; petitioners case is for annulment of the Agreement and Deed of Absolute Sale ,
and not one to annul title since the certificate of title is still in her name. The jurisprudential bases for
the CAs pronouncement that there is a failure to state a cause of action if the e is no allegation in
the complaint that respondents were purchasers in bad faith Castillo v. Heirs of Vicente
Madrigal36and Heirs of Julian Tiro v. Philippine Estates Corporation37 involved complaints for
annulment of new titles issued to the buyers ; they cannot apply to petitioners case where title
remains in her name.

Petitioners case is to annul the agreement and deed of sale based on the allegation that they are
forgeries, and that respondents were parties to the fraud; since no new title was issued in
respondents favor, there is no new title to annul. Indeed, if the agreement and deed of sale are
forgeries, then they are a nullity and convey no title.38 The underlying principle is that no one can give
what one does not have. Nemo dat quod non habet .

In Sps. Solivel v. Judge Francisco, we held that:

x x x in order that the holder of a certificate for value issued by virtue of the registration of a voluntary
instrument may be considered a holder in good faith for value, the instrument registered should not
be forged. When the instrument presented is forged, even if accompanied by the owners duplicate
certificate of title, the registered owner does not thereby lose his title, and neither does the assignee
in the forged deed acquire any right or title to the property.

x x x The innocent purchaser for value protected by law is one who purchases a titled land by virtue
of a deed executed by the registered owner himself, not by a forged deed, as the law expressly
states. x x x

In Instrade, Inc. v. Court of Appeals, we reiterated the said ruling maintaining that "[A]s early as
Joaquin v. Madrid, x x x, we said that in order that the holder of a certificate for value issued by
virtue of the registration of a voluntary instrument may be considered a holder in good faith and for
value, the instrument registered should not be forged." Indubitably, therefore, the questioned Deed
of Absolute Sale did not convey any title to herein petitioners. Consequently, they cannot take refuge
in the protection accorded by the Torrens system on titled lands.

Thus, we hold that with the presentation of the forged deed, even if accompanied by the owners
duplicate certificate of title, the registered owner did not thereby lose his title, and neither does the
assignee in the forged deed acquire any right or title to the said property. x x x39

In this case, it is petitioner who must be protected under the Torrens system as the registered
owner of the subject property. "A certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name appears therein. The real
purpose of the Torrens system of land registration is to quiet title to land and put a stop forever to
any question as to the legality of the title."40

In Tenio-Obsequio v. Court of Appeals , we explained the purpose of the Torrens system and its
legal implications to third persons dealing with registered land, as follows:

The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and to
facilitate transactions relative thereto by giving the public the right to rely upon the face of a Torrens
certificate of title and to dispense with the need of inquiring further, except when the party concerned
has actual knowledge of facts and circumstances that should impel a reasonably cautious man to
make such further inquiry. Where innocent third persons, relying on the correctness of the certificate
of title thus issued, acquire rights over the property, the court cannot disregard such rights and order
the total cancellation of the certificate. The effect of such an outright cancellation would be to impair
public confidence in the certificate of title, for everyone dealing with property registered under the
Torrens syst em would have to inquire in every instance as to whether the title has been regularly or
irregularly issued by the court . Every person dealing with registered land may safely rely on the
correctness of the certificate of title issued there for and the law will in no way oblige him to go
beyond the certificate to determine the condition of the property.

The Torrens system was adopted in this country because it was believed to be the most effective
measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of
ownership is established and recognized. If a person purchases a piece of land on the assurance
that the sellers title thereto is valid, he should not run the risk of being told later that his acquisition
was ineffectual after all. This would not only be unfair to him. What is worse is that if this were
permitted, public confidence in the system would be eroded and land transactions would have to be
attended by complicated and not necessarily conclusive investigations and proof of ownership. The
further consequence would be that land conflicts could be even more numerous and complex than
they are now and possibly also more abrasive, if not even violent. The Government, recognizing the
worthy purposes of the Torrens system, should be the first to accept the validity of titles issued there
under once the conditions laid down by the law are satisfied.
The Torrens system was intended to guarantee the integrity and conclusiveness of the certificate of
registration, but the system cannot be used for the perpetration of fraud against the real owner of the
registered land. The system merely confirms ownership and does not create it. It cannot be used to
divest lawful owners of their title for the purpose of transferring it to another one who has not
acquired it by any of the modes allowed or recognized by law. Thus, the Torrens system cannot be
used to protect a usurper from the true owner or to shield the commission of fraud or to enrich
oneself at the expense of another.41

A cursory examination of the record will show that petitioners action does not appear to be
groundless. There are circumstances which lead one to believe that respondents are not exactly
innocent of the charge. Their failure to register the unnotarized and undated deed of absolute sale is
at the very least unusual; it is contrary to experience. It is uncharacteristic of a conscientious buyer
of real estate not to cause the immediate registration of his deed of sale as well as the issuance of a
new certificate of title in his name. Having supposedly paid a considerable amount (250,000.00) for
the property, respondents certainly would have protected themselves by immediately registering the
sale and obtaining a new title in their name; but they did not. Even after petitioner caused the
annotation of her affidavit of loss, respondents did not register their supposed sale, but merely
annotated an "affidavit of non-lo ss." This, together with the fact that the deed of absolute sale is
undated and unnotarized, places their claim that they are purchasers in good faith seriously in doubt.
The ruling in Rufloe v. Burgos42 comes to mind:

We cannot ascribe good faith to those who have not shown any diligence in protecting their rights,
Respondents had know ledge of facts that should have led them to inquire and investigate in order
to acquaint themselves with possible defects in the title of the seller of the property. However, they
failed to do so. Thus, Leonarda, as well as the Burgos siblings, cannot take cover under the
protection the law accords to purchasers in good faith and for value. They cannot claim valid tit le to
the property.

Moreover, the defense of indefeasibility of a Torrens title does not extend to a transferee who takes
it with notice of a flaw in the title of his transferor. To be effective, the inscription in the regist ry must
1w phi 1

have been made in good faith. A holder in bad faith of a certificate of title is not entitled to the
protection of the law, for the law cannot be used as a shield for fraud.

We quote with approval the following findings of the trial court showing that the sale between the
Burgos siblings and Leonarda is simulated :

1. The sale was not registered, a circumstance which is inconceivable in a legitimate transfer. A true
vendee would not brook any delay in registering the sale in his favor. Not only because registration
is the operative act that effects property covered by the Torrens System, but also because
registration and issuance of new title to the transferee, enable this transferee to assume domiciliary
and possessory rights over the property. These benefits of ownership shall be denied him if the titles
of the property shall remain in the name of vendor. Therefore, it is inconceivable as contrary to
behavioral pattern of a true buyer and the empirical knowledge of man to assume that a buyer who
invested on the property he bought would be uninvolved and not endeavor to register the property
he bought. The nonchalance of Leonarda amply demonstrates the pretended sale to her, and the
evident scheme of her brother

Amado who invested on the property he bought.43

Most telling is respondents Amended Answer with Compulsory Counterclaim, which tends to admit
and indicate that when the December 4, 2003 Agreement with right of repurchase and unnotarized
and undated Deed of Absolute Sale were executed, an individual who falsely represented herself
to be petitioner appeared and signed these documents. Thus, respondents alleged in their
amended answer that sometime in October 2003, Perez accompanied by one Corazon Tingson
(Tingson) " and a female person who introduced herself as Ruby Ruth Serrano" offered to sell to
them the property covered by TCT 85533; that "in support of the identity of the said Ruby Ruth
Serrano, the original owners copies of the title (TCT No. T-85533), Declaration of Real Property,
Tax Clearance, Barangay Clearance, Community Tax Certificate with picture of Ruby Ruth Serrano
attached therein" were presented to respondent Edilberto Ilano (Edilberto); that upon being satisfied
as to the "identity of the person who introduced herself as Ruby Ruth Serrano," Edilberto instructed
his secretary to verify the authenticity of the title from the Register of Deeds of Las Pias City and
conduct an ocular inspection of the property; that " the person who introduced herself as Ruby Ruth
Serrano " obtained a cash advance of 50,000.00; that after verification confirmed that the property is
indeed owned by and registered in the name of Ruby Ruth Serrano, Edilberto " believing in good
faith that the person [with] whom he is dealing x x x is indeed the real Ruby Ruth Serrano" entered
into the sale transaction; that petitioners affidavit of loss filed with the Registry of Deeds is false as
TCT 85533 was never lost but was entrusted to Perez who, together with Tingson "and another
person herein named as Jane Doe whose identity is yet to be established who introduced herself as
Ruby Ruth Serrano ," came to respondents office to obtain a loan because petitioner was in dire
need of money as she admitted in her complaint.

Even at the level of the CA, respondents admitted, in their petition for certiorari, that they bought the
property not from petitioner, but from their "co-defendants who had a defective title" presumably
Perez and the impostor. The pertinent portion of their petition reads:

Bad faith cannot be presumed. It must be established by clear evidence. And it appearing that the
subject complaint is for recovery and possession of a parcel of land, and that defendants bought it
from their co-defendants who had a defective title, but does not allege in the complaint that the
purchasers were buyers in bad faith or with notice of the defect in the title of their vendors x x x44

The above allegations in respondents pleadings are certainly revealing. They already knew
petitioners identity and how she looked, having me t her even before the filing of the complaint
when petitioner confronted them and they showed her the agreement and deed of sale. Thus, they
should not have referred to the supposed seller as " another person herein named as Jane Doe
whose identity is yet to be established who introduced herself as Ruby Ruth Serrano" or "the person
who introduced herself as Ruby Ruth Serrano" if indeed it was petitioner herself who appeared and
signed the agreement and deed of sale in question. They should have categorically alleged that they
bought the property from petitioner herself if indeed this was so. Their ambiguous allegations
constitute a negative pregnant, which is in effect an admission.

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. 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, it has been held that the qualifying circumstances alone are denied
while the fact itself is admitted.45

"If an allegation is not specifically denied or the denial is a negative pregnant, the allegation is
deemed admitted." "Where a fact is alleged with some qualifying or modifying language, and the
denial is conjunctive, a 'negative pregnant' exists, and only the qualification or modification is denied,
while the fact itself is admitted." "A denial in the form of a negative pregnant is an ambiguous
pleading, since it cannot be ascertained whether it is the fact or only the qualification that is intended
to be denied." "Profession of ignorance about a fact which is patently and necessarily within the
pleader's knowledge, or means of knowing as ineffectual, is no denial at all.'46

Finally, petitioner's complaint in Civil Case No. LP-07-0109 clearly states that in the execution of the
agreement and deed of absolute sale, respondents and Perez acted in bad faith and connived in the
forgery. Specifically, paragraph 18 of her complaint states, as follows:

18. That by reason of the actuations of the defendants in facilitating the execution of the aforesaid
falsified documents, and adamant refusal to return to plaintiffs the duplicate original owner's copy of
their title, which were all done with evident bad faith, the plaintiffs suffered and continue to suffer
sleepless nights, wounded feelings, besmirched reputation, serious anxiety and other similar
feelings, which, when quantified, can reasonably be compensated with the sum of Fifty Thousand
(50,000.00) Pesos, as moral damages;47

Thus, the CA' s pronouncement - that nowhere in the complaint is it alleged that respondents were
purchasers in bad faith - is patently erroneous. The primary ground for reversing the trial court's
denial of respondents' demurrer is therefore completely unfounded. Besides, the action itself, which
is grounded on forgery, necessarily presupposes the existence of bad faith.

With the foregoing pronouncement, the Court finds no need to tackle the other issues raised by
petitioner. They are rendered moot and irrelevant by the view taken and manner in which the case
was resolved.

WHEREFORE, the Petition is GRANTED. The assailed February 2, 2011 Decision and July 28,
2011 Resolution of the Court of Appeals in CA-G.R. SP No. 113782 are REVERSED and SET
ASIDE. The case is remanded to the Regional Trial Court of Las Pifias City, Branch 255 in Civil
Case No. LP-07-0109 for proper disposition.

SO ORDERED.

MARIANO C. DEL CASTILLO


Associate Justice
#30

SECOND DIVISION

G.R. No. 205249 October 15, 2014

SPOUSES BENEDICT and SANDRA MANUEL, Petitioners,


vs.
RAMON ONG, Respondent.

DECISION

LEONEN, J.:

This resolves a petition1 for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
praying that the June 28, 2012 decision2 and the December 19, 2012 resolution3 of the Court of
Appeals in CA-G.R. SP No. 119270 be reversed and set aside. The assailed June 28, 2012 decision
dismissed for lack of merit the petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure filed by petitioners Benedict and Sandra Manuel (the Spouses Manuel) and sustained the
November 30, 2010 and February 16, 2011 orders of the Regional Trial Court, La Trinidad,
Benguet.4 The assailed December 19, 2012 resolution of the Court of Appeals denied the Spouses
Manuels motion for reconsideration. The Regional Trial Courts November 30, 2010 order denied
their motion to lift order of default, while its February 16, 2011 order denied their motion for
reconsideration.5

On December 21, 2009, respondent Ramon Ong (Ong) filed with the Regional Trial Court, La
Trinidad, Benguet, a complaint for accion reivindicatoria.6 Ong charged the Spouses Manuel with
having constructed improvements through force, intimidation, strategy, threats, and stealth on
a property he supposedly owned.7 The case was docketed as Civil Case No. 09-CV-2582.8
On January 19, 2010, Ong filed an "amended complaint."9 On February 3, 2010, summons was
issued directed to the Spouses Manuel.10

On April 23, 2010, Ong filed with the Regional Trial Court a motion to declare the Spouses Manuel in
default.11 Per the sheriffs return on summons, on February 12, 2010, Sheriff Joselito Sales, along
with Ongs counsel, Atty. Christopher Donaal, and a certain Federico Laureano, attempted to
personally serve summons on the Spouses Manuel at their address in Lower Bacong, Loacan,
Itogon, Benguet.12 The Spouses Manuel, however, requested that service be made at another time
considering that petitioner Sandra Manuel's mother was then critically ill.13 The sheriffs return further
indicates that on March 16, 2010, another attempt at personal service was made. After Sheriff
Joselito Sales had personally explained to petitioner Sandra Manuel the content of the summons
and the complaint, the latter refused to sign and receive the summons and the complaint. Sheriff
Joselito Sales was thus prompted to merely tender the summons and complaint to petitioner Sandra
Manuel and to advise her to file their answer within fifteen (15) days.14 As the Spouses Manuel failed
to file their answer within this period, Ong asked that they be declared in default.15

On June 28, 2010, the Regional Trial Court issued an order granting Ong's motion to declare the
Spouses Manuel in default. Following this, Ong moved for the ex parte presentation ofevidence,
which the Regional Trial Court granted.16

On September 13, 2010, the Spouses Manuel filed a motion to lift the order of default. They alleged
thatit is the siblings of petitioner Sandra Manuel who resided in Lower Bacong, Itogon, Benguet,
while they resided in Ambiong, La Trinidad, Benguet. Thus, summons could not have been properly
served on them in the former address. They surmised that Ong and his companions mistook
petitioner Sandra Manuels siblings as the defendants in Civil Case No. 09-CV-2582.They further
claimed that they only subsequently received via registered mail copies of (1) a compliance and
manifestation filed by Ong and (2) the Regional Trial Courts order scheduling the ex parte
presentation of evidence. Attachedto the Spouses Manuels motion to lift order of default was their
answer.17

In its order dated November 30, 2010,the Regional Trial Court denied the Spouses Manuels motion
to lift order of default. It noted that, first, their motion was not sworn to, as required by the 1997
Rules of Civil Procedure, and, second, they did not showthat their failure to timely file an answer
"was due to fraud, accident, mistake or excusable negligence."18 In its order dated February16, 2011,
the Regional Trial Court denied the Spouses Manuels motion for reconsideration.19

Aggrieved, the Spouses Manuel filed a petition for certiorari before the Court of Appeals.20

As mentioned, the assailed June 28, 2012 decision of the Court of Appeals dismissed the Spouses
Manuels Rule 65 petition for lack of merit. The assailed December 19, 2012 resolution of the Court
of Appeals denied their motion for reconsideration.

Hence, this petition.

For resolution is the sole issue ofwhether the Spouses Manuel may be granted relief from the
Regional Trial Courts June 28, 2010 order of default.

Jurisdiction over the persons of the Spouses Manuel acquired

As a preliminary matter, we ruleon whether jurisdiction over the persons of the Spouses Manuel, as
defendants in Civil Case No. 09-CV-2582, was validly acquired. This preliminary matter is
determinative of whether the fifteen-day period within which they must file their answer started to
run, thereby facilitating the context in which they could have validly been declared to be in default.

We hold that jurisdiction over the persons of both defendants in Civil Case No. 09-CV-2582 the
Spouses Benedict and Sandra Manuel was validly acquired. This is so because personal service
of summons, via tender to petitioner Sandra Manuel, was made by Sheriff Joselito Sales on March
16, 2010.

Rule 14, Section 6 of the 1997 Rules of Civil Procedure provides:

SEC. 6. Service in person on defendant. Whenever practicable, the summons shall be served by
handing a copy thereof to the defendant in person, or, if he refuses to receive and sign for it, by
tendering it to him.

Tendering summons is itself a means of personal service as it is contained in Rule 14, Section 6.
Personal service, as provided by Rule 14, Section 6, is distinguished from its alternative
substituted service as provided by Rule 14, Section 7:

SEC. 7. Substituted service. If, for justifiable causes, the defendant cannot be served within a
reasonable time as provided in the preceding section, service may be effected (a) by leaving copies
of the summons at the defendant's residence with some person of suitable age and discretion then
residing therein, or (b) by leaving the copies at defendant's office or regular place of business with
some competent person in charge thereof. (Emphasis supplied)

In this case, the sheriffs returnon summons indicated that Sheriff Joselito Sales endeavored to
personallyhand the summons and a copy of the complaint to the Spouses Manuel on two (2)
separate occasions. He relented from doing so on the first occasion in deference to the medical
condition of petitioner Sandra Manuels mother. On the second occasion, he was constrained to
tender the summons and copy of the complaint as petitioner Sandra Manuel refused to accept them.

The Spouses Manuel did not deny the occurrence of the events narrated in the sheriffs return but
claimed that no valid service of summons was made. They claimed that they did not reside in Lower
Bacong, Loacan, Itogon, Benguet, where the service of summons was made. From this, they
surmised that the "Sandra Manuel" who was specifically identified in the sheriffs return was
someone other than petitioner Sandra Manuel.

The Spouses Manuel cannot capitalize on the supposed variance of address. Personal service of
summons has nothing to do with the location where summons is served. A defendantsaddress is
inconsequential. Rule 14, Section 6 of the 1997 Rules of Civil Procedure is clear in what it requires:
personally handing the summons to the defendant (albeit tender is sufficient should the defendant
refuseto receive and sign). What is determinative of the validity of personal service is, therefore, the
person of the defendant, not the locus of service.

In any case, the Court of Appeals iscorrect in pointing out that the Spouses Manuels self-serving
assertion must crumble in the face of the clear declarations in the sheriffs return.21 Pursuant to Rule
131, Section 3(m) of the Revised Rules on Evidence,22 the acts of Sheriff Joselito Sales and the
events relating to the attempt to personally hand the summons and a copy of the complaint to the
Spouses Manuel, as detailed in the sheriffs return, enjoy the presumption of regularity.23 Moreover,
Sheriff Joselito Sales must be presumed to have taken ordinary care and diligence in carrying out
his duty to make service upon the proper person(s) and not upon an impostor.24
A sheriffs return, if complete on its face, must be accorded the presumption of regularity and, hence,
taken to be an accurate and exhaustive recital of the circumstances relating to the steps undertaken
by a sheriff. In this case, the Spouses Manuel have harped on their (self-serving) claim of
maintaining residence elsewhere but failed to even allege that there was anything irregular about the
sheriffsreturn or that it was otherwise incomplete.

Having alleged irregularities in the service of summons, it was incumbent upon the Spouses Manuel
to adduce proof of their claims. All they mustered was their self-serving allegation of an alternative
address. If at all, this claim of maintaining residence elsewhere should not even be lent an iota of
credibility considering that, as respondent Ramon Ong pointed out, the barangay clearances, which
the Spouses Manuel themselves attached to one of their pleadings (as proof of their identities),
actually indicated that they were residents of Bacong Loacan, Itogon, Benguet.25 Their lie is, thus,
revealed by their own pleading.

As the Spouses Manuel not only failed in discharging the burden of proving their allegation but even
succeeded in contradicting themselves, Sheriff Joselito Sales recollection of events must be taken
tobe true. Thus, valid personal service of summons, via tender to petitioner Sandra Manuel, was
made. From this, it follows that jurisdiction over the persons of petitioners Benedict and Sandra
Manuel was acquired by the Regional Trial Court, La Trinidad, Benguet, in Civil Case No. 09-CV-
2582.

The Spouses Manuel are not entitled to relief from the order of default

As valid service of summons was made on them, it was incumbent upon the Spouses Manuel,
pursuant to Rule 11, Section 1 of the 1997 Rules of Civil Procedure,26 to file their answer withinfifteen
(15) days from March 16, 2011. Having failed to do so, they wererightly declared to be in default.

Rule 9, Section 3 of the 1997 Rules of Civil Procedure provides for when a party to an action may be
declared in default. Further, Rule 9, Section 3(b) governs the grant of relief from orders of default:

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

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

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

Pursuant to Rule 9, Section 3, a court may proceed to render judgment as the pleading may warrant
should a defendant fail to timely file his or her answer. However, a court may decline from
immediately rendering judgment and instead require the plaintiff to present evidence. Per Rule 9,
Section 3(a), a party declared to be indefault shall nevertheless be "entitled to notice of subsequent
proceedings," although he or she may no longer take part in the trial.
As explained in Spouses Delos Santos v. Carpio,27 "there are three requirements which must be
complied with by the claiming party before the court may declare the defending party in default:

(1) the claiming party must filea motion asking the court to declare the defending party in
default;

(2) the defending party must be notified of the motion to declare him in default;

(3) the claiming party must provethat the defending party has failed to answer within the
period provided by the Rule."28

All these requisites were complied with by respondent Ramon Ong.

It is not disputed that Ong filed a motion to declare the Spouses Manuel in default. It is also not
disputed that the latter filed their answer after the fifteen-day period, counted from March 16, 2010,
had lapsed. The Spouses Manuel only filed their answer along with their motion to lift order of default
on September 13, 2010.

It is similarly settled that the Spouses Manuel were notified that a motion to declare them in default
had been filed. They acknowledged in the present petition for certiorari that on June 23, 2010, Ong
filed a compliance to the Regional Trial Courts April 30, 2010 order that required the submission of
the registry return card evidencing the mailing to the Spouses Manuel of a copy of the motion to
have them declared in default.

Not only were the requisites for declaring a party in default satisfied, the Spouses Manuels motion to
lift order of default was also shown to be procedurally infirm.

Consistent with Rule 9, Section 3(b) of the 1997 Rules of Civil Procedure, "the remedy against an
order of default is a motion to set it aside on the ground of fraud, accident, mistake, or excusable
negligence."29 However, it is not only the motion to lift order of default which a defendant must file. As
this court emphasized in Agravante v. Patriarca,30to the motion to lift order of default must "be
appended an affidavit showing the invoked ground, and another, denominated affidavit of merit,
setting forth facts constituting the party's meritorious defense or defenses."31

The need for an affidavit of merit isconsistent with Rule 8, Section 5 of the 1997 Rules of Civil
Procedure,32 which requires that "[i]n all averments of fraud or mistake, the circumstances
constituting fraud or mistake must be statedwith particularity."

In Montinola, Jr. v. Republic Planters Bank,33 this court noted that the three (3) requisites that must
be satisfied by a motion in order "to warrant the setting aside of an order of default for failure to file
answer, are:

(1) it must be made by motion under oath by one that has knowledge of the facts;

(2) it must be shown that the failure to file answer was due to fraud, accident, mistake or
excusable negligence; and

(3) there must be a proper showing of the existence of a meritorious defense."34 (Citations
omitted)
Consistent with Agravante, it is through an affidavit of merit that a defendant seeking relief from an
order of default shows that "the failure to file answer was due to fraud, accident, mistake or
excusable negligence."35

In this case, the Court of Appeals noted that the Spouses Manuels motion to lift order of default was
not made under oath. We add that this motion was not accompanied by an affidavit of merit
specifying the facts which would show that their non-filing of an answer within fifteen (15) days from
March 16, 2010 was due to fraud, accident, mistake, or excusable negligence.

Failing both in making their motion under oath and in attaching an affidavit of merits, the Spouses
Manuels motion to lift order of default must be deemed pro-forma. It is not even worthy of
consideration.

Certainly, there is jurisprudence to the effect that an affidavit of merit is not necessary "where a
motion to lift an order of default is grounded on the very root of the proceedings [such as] where the
court has not acquired jurisdiction over the defendants."36 Similarly, there is jurisprudence stating that
"when a motion to lift an order ofdefault contains the reasons for the failure to answer as well as the
facts constituting the prospective defense of the defendant and it is sworn to by said defendant,
neither a formal verification nor a separate affidavit of merit is necessary."37

However, in this case, the Spouses Manuel failed not only in attaching an affidavit of merit but alsoin
making their motion under oath. They are, therefore, left without any alternative on which to rest.
Their motion is utterly ineffectual.

Apart from their failure to make their motion to lift order of default under oath and to attach to it an
affidavit of merit, the Court of Appeals also noted that the Spouses Manuel set their motion to lift
order of default for hearing on the same date that they filed it(i.e., September 13, 2010). Thus, they
also violated Rule 15, Section 4 of the 1997 Rules of Civil Procedure,38 which requires that service of
a motion upon an adverse party must be made in such a manner that ensures receipt by the latter
"at least three (3) days before the date of hearing. . . ."

We do not lose sight of the admonitions that have been made in jurisprudence that, as a rule, courts
should be liberal in setting aside orders of default and that default judgments are frowned
upon.39 Indeed, apart from a motion to lift order of default,other remedies are available to a defaulted
defendant evenafter judgment has been rendered. Thus, if judgment had already been rendered but
has not yet become final and executory, an appeal asserting that the judgment was contrary to the
law or to the evidence,40 or a motion for new trial under Rule 37, may be filed.41 In the case of the
latter, the same affidavits as are required in a motion to lift order of default must be attached.42 If
judgment has become final and executory, a defaulted defendant may file a petition for relief from
judgment under Rule 38.43 Still, should the defaulted defendant fail tofile a petition for relief, a petition
for annulment ofjudgment on the ground of lack of jurisdiction or extrinsic fraud remains available.44

However, jurisprudence, too, has qualified the intent that animates this liberality. As this court stated
1w phi1

in Acance v. Court of Appeals:45

The issuance of the orders of default should be the exception rather than the rule, to be allowed only
in clear cases of obstinate refusal by the defendant to comply with the orders of the trial
court.46 (Emphasis supplied)

Moreover, this liberality must be tempered with a recognition that, in the first place, it is a defendant
who is at fault in failing to timely file an answer.
Rule 9, Section 3(b) gives an exclusive list of only four (4) grounds that allow for relief from orders of
default. Moreover, these grounds extrinsic fraud, accident, mistake, and excusable negligence
relate to factors that are extraneous to a defendant, that is, grounds that show that a defendant was
prevented, by reasons beyond his or her influence, from timely filing an answer.

The recognition that it is the defendant who is at fault and must suffer the consequences of his or her
own failure is analogous to the dismissal of an action due to the fault of a plaintiff, as provided by
Rule 17, Section 3 of the 1997 Rules of Civil Procedure. Rule 17, Section 3 reads:

SEC. 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 court's 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.

Rule 17, Section 3 is qualified by the phrase "for no justifiable cause." Thus, in cases covered by
Rule 17, Section 3, should the failure to comply with court processes be the result of the plaintiffs
own fault, it is but logical that a plaintiff must suffer the consequences of his own heedlessness. Rule
9, Section 3 on default applies the same logic to a culpable defendant. In this case, the
Spouses Manuel only have themselves to blame in not properly receiving the summons and copyof
the complaint served on them. It has been shown that their claim that service of summons was made
on persons other than them deserves no credence. Quite the contrary, it is quite apparent that
Sheriff Joselito Sales notonly explained the contents of the summons and the complaint but actually
told them that they must file their answer in fifteen (15) days. It was petitioner Sandra Manuel who
refused to sign and receive the summons and the complaint. This is evidently an act of obstinate
refusal to submit to and to comply with court processes. Thus, the Spouses Manuel are not
deserving of any leniency.

WHEREFORE, the petition for review on certiorari is DENIED. The June 28, 2012 decision and the
December 19, 2012 resolution of the Court of Appeals in CA-G.R. SP No. 119270 are AFFIRMED.

SO ORDERED

MARVIC M.V.F. LEONEN


Associate Justice
#31

THIRD DIVISION

G.R. No. 183398 June 22, 2015

CLODUALDA D. DAACO, Petitioner,


vs.
VALERIANA ROSALDO YU, Respondent.

DECISION

PERALTA J.:

Before the Court is a petition for review on certiorari under Section 2( c ), Rule 41, in relation to Rule
45 of the Rules of Court, seeking to reverse and set aside the Order1 dated October 4, 2007 of the
Regional Trial Court (RTC), Branch 6, of Tacloban City in Civil Case No. 2006-12-16 dismissing the
case for annulment of title, recovery of property under Transfer Certificate (TCT) No. T-28120 and
damages due to the absence or failure of petitioner to appear at the pre-trial conference.

The antecedent facts are as follows:

The instant petition stems from a complaint filed by petitioner Clodualda D. Daaco against
respondent Valeriana Rosaldo Yu, Faustina Daaco, and the Register of Deeds of Tacloban City
docketed before the RTC, Branch 6, Tacloban City as Civil Case No. 2006-02-16 for Annulment of
Title, Recovery of Property under TCT No. T-28120 and Damages.
After the answer had been filed and preliminary matters disposed of, the RTC, on September 5,
2007, set the pre-trial conference on October 4, 2007. However, upon motion, the trial court
dismissed the case as against respondent Yu in its assailed Order for petitioners failure to appear
thereat.

Subsequently, petitioner filed a Motion for Reconsideration alleging the following grounds: (1) that
she was not properly notified of the pre-trial conference scheduled at 8:30 a.m. on October 4, 2007
as she received notice thereof only at 5:30 p.m. of October 3, 2007, or merely 15 hours before the
scheduled conference, and thus, the order of dismissal was invalid; and (2) that there is still an
unresolved Motion to Consider the Answer of Respondent as Not Filed, which she had previously
filed on October 4, 2006.

On December 27, 2007, the RTC issued an Order2 denying the Motion for Reconsideration in the
following wise:

It is not disputed, in fact admitted, that plaintiff herself and his non-licensed lawyer son, received the
notice of pre-trial on October 3, 2007. Their failure, therefore, to appear in the pre-trial conference
set on October 4, 2007 at 8:30A.M. is good reason for defendant Valeria Rosaldo Yu to move and to
pray the court for dismissal of the complaint.

It is no good reason to excuse the absence of plaintiff in the pretrial conference on October 4, 2007
simply because plaintiff and her counsel received the notice of pre-trial short of twenty-four (24)
hours before the pre-trial conference was conducted. Vital, plaintiff and her counsel have had notice
of the pre-trial conference that if prudence, diligence and respect for the court had been observed
there was sufficient time still for both to come to court on October 4, 2007 at 8:30 A.M. That they
didnt appear despite notice, righty, upon motion by defendant, the court has to order the dismissal
of the complaint.

San. Jose District, Tacloban City where plaintiff and her counsel resides is just fifteen (15) to twenty
(20) minutes ride to the court thru public utility vehicle. Veritably, under the circumstance, plaintiffs
not going to court to appear in the pre-trial conference despite notice showed nothing more but
abandonment of their cause not to mention their deliberate defiance to the notice of the court for
them to appear in the scheduled pre-trial conference. Under Rule 17 of the Rules of Court, failure to
comply the order of the court is a ground to dismiss plaintiffs complaint.

It is not correct to claim that there is still a pending motion filed by plaintiff which this court failed to
resolve. The motion to consider the answer to the complaint of defendant Valeria Ronaldo Yu as not
filed was filed by plaintiff on October 4, 2006. Yet, as early as of May 26, 2006, and after Valeria
Ronaldo Yu had filed her Answer to the complaint, plaintiff had filed a motion for judgment on the
pleadings. This motion for judgment on the pleadings was denied by the court in the order issued on
June 9, 2006.On June 19, 2006, plaintiff filed a motion for reconsideration to the order denying the
motion for judgment on the pleadings. On July 18, 2006, the motion for reconsideration to the order
of the court, dated June 9, 2006 was denied. With the facts obtaining, obviously, the motion filed by
plaintiff on October 4, 2006 is a motion which this court must not take cognizance of. When a party
to a case files a motion for judgment on the pleadings, by it, necessarily he admits the propriety of
the answer to the complaint as filed. Hence, after admitting the propriety of the pleadings which in
this case, is the answer to the complaint, obedience to ethical precepts requires abstention from
further wasting unnecessarily the time of the court by filing another motion of similar import. The
motion filed on October 4, 2006 in effect a second motion for reconsideration to the order issued on
June 9, 2006.
On February 1, 2008, petitioner sought recourse from the Court by filing the instant petition
essentially invoking the following question of law:

I.

WHETHER OR NOT THE REGIONALTRIAL COURTS DISMISSAL OF THE CASE FOR


PETITIONERS FAILURE TO APPEAR IN THE PRE-TRIAL CONFERENCE IS CONTRARY TO
LAW, RULES, AND EXISTING JURISPRUDENCE.

Petitioner assails the RTCs October 4, 2007 Order dismissing her case on the ground of an alleged
irregularity in the notice of pre-trial conference, which she received only at 5:30 p.m. of October 3,
2007, or merely 15 hours before the conference scheduled at 8:30 a.m. on October 4, 2007. She
maintains that since she was belatedly notified of the pre-trial conference, she was unable to appear
thereat for she had yet to secure counsel to represent her as well as prepare the necessary
documents therefor. Considering the sheer impossibility for her to prepare for the scheduled
conference, the 15-hour notice is deemed as if no notice was given at all, and hence, the impropriety
of the trial courts dismissal. In support of this, she invokes our ruling in Leobrera v. Court of
Appeals,3 which provides that "observance of notice requirement is a mandatory requirement which
cannot be dispensed with as this is the minimum requirement of procedural due process."4

Petitioner further faults the RTC for repeatedly stating that petitioner "and her counsel" failed to
appear during the pre-trail conference when it is clear from the records of the case that she is not
represented by any counsel. Because of this, she claims that the lower courts order dismissing her
case has no legal basis and is, therefore, patently void.

The petition is devoid of merit.

At the outset, it must be noted that petitioners reliance on our ruling in Leobrera v. Court of Appeals
is misplaced. In said case, the issue was the propriety of an order of the trial court granting a Motion
to File Supplemental Complaint, when notice thereof was received by the other party only a day after
the issuance of the said order, when it was already too late to contest the same. In addition, it was
also observed that the notice did not even indicate the time and place of the scheduled hearing. As
such, the order of the trial court granting the admission of the supplemental complaint was nullified
for non-compliance with Sections 4,5 5,6 and 67 of Rule 15 of the Rules of Court. Here, it is
undisputed that notice of the pre-trial conference was received by petitioner a day before the same.
Said notice sufficiently indicated the time and place of the scheduled pre-trial. Thus, petitioner
cannot invoke our ruling in the aforementioned case in view of the dissimilar factual circumstances
herein.

To repeat, the issue in this case is the propriety of the trial courts order dismissing the case for
petitioners failure to appear at the pre-trial conference. In relation to this, Sections4 and 5 of Rule 18
of the Rules of Court provides:

Section 4. Appearance of parties. It shall be the duty of the parties and their counsel to appear at
the pre-trial. The nonappearance of a party may be excused only if a valid cause is shown therefor
or if a representative shall appear in his behalf fully authorized in writing to enter into an amicable
settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations or
admissions of facts and of documents. (n)

Section 5. Effect of failure to appear. The failure of the plaintiff to appear when so required
pursuant to the next preceding section shall be cause for dismissal of the action. The dismissal shall
be with prejudice, unless other-wise ordered by the court. A similar failure on the part of the
defendant shall be cause to allow the plaintiff to present his evidence ex parte and the court to
render judgment on the basis thereof. (2a, R20)

Thus, the failure of a party to appear at the pre-trial has adverse consequences. If the absent party
is the plaintiff, then he may be declared non-suited and his case dismissed. If it is the defendant who
fails to appear, then the plaintiff may be allowed to present his evidence ex parte and the court to
render judgment on the basis thereof.8

In certain instances, however, the non-appearance of a party may be excused if a valid cause is
shown. What constitutes a valid ground to excuse litigants and their counsels at the pre-trial is
subject to the sound discretion of a judge.9 Unless and until a clear and manifest abuse of discretion
is committed by the judge, his appreciation of a partys reasons for his nonappearance will not be
disturbed.

In this case, petitioner harps on the fact that the notice of pre-trial was sent to her 15 hours before
the scheduled conference. She maintained that said amount of time rendered it impossible for her to
appear thereat since she had yet to secure counsel to represent her as well as prepare documents
necessary for the case. Thus, the 15-hournotice is deemed no notice at all, resulting in the invalidity
of the trial courts dismissal of the case.

Petitioners argument is untenable. First, this Court finds petitioners reasoning that she had yet to
secure the services of a counsel rather specious. Had this been the case, she should already be
represented by one at this stage in the proceedings. Yet, as the records bear, petitioner comes to
this Court by herself, via Petition for Certiorari, unrepresented by any counsel. In fact, in her petition,
she even faults the trial court for repeatedly referring to her counsel when it is clear that no such
counsel exists. Thus, contrary to her allegation, this Court is under the impression that petitioner
never really intended on securing the services of counsel.

Second, while it cannot be denied that every party to a case must be given the chance to come to
court prepared, they must do so within the parameters set by the rules. In this case, it must be noted
that petitioner had more than a year from the filing of respondents Answer before the month of May
2006 to prepare for the pre-trial conference scheduled by the trial court in October 2007. Note that
during said period when she was supposedly preparing for the conference, petitioner was able to file
3 motions in a span of 6 months.10 First, she filed a Motion for Judgment on the Pleadings on May
26, 2006, after respondent had filed her Answer to the Complaint. Second, was a Motion to Declare
Defendant in Default for Failure to File Pre-Trial Brief filed on September 6,2006, which was denied
by the trial court for being premature. Third, she filed a Motion to Consider the Answer to the
Complaint as Not Filed on October 4, 2006, which was likewise denied by the trial court for being
inconsistent with her first motion.

In addition, petitioner even filed a Petition for Certiorari and Mandamus with Prayer for the Issuance
of a Temporary Restraining Order and/or Preliminary Injunction before the Court entitled Clodualda
D. Daacao v. Honorable Judge Santos T. Gil, et al., assailing the Orders dated September 18, 2006
and June 4, 2007 of the trial court denying petitioners Motion to Declare Defendant in Default for
Failure to File Pre-Trial Brief. In a Resolution11 dated September 19, 2007, however, this Court
dismissed the said petition for failure to sufficiently show any grave abuse of discretion committed in
rendering said Orders, which appear to be in accord with applicable law and jurisprudence. It is
clear, therefore, that petitioners rather active participation in the proceedings during the period
leading up to the pre-trial conference contradicts her defense of unpreparedness. Petitioner cannot
persistently file multiple motions before the trial court, diligently participating in the hearings thereon,
and yet claim to need more time to prepare for the pre-trial conference, the proceeding wherein she
may rightly assert the rights for which she had originally filed her complaint.
Furthermore, it bears stressing that the foregoing justifications given by petitioner for failure to
appear at the pre-trial conference were never raised before the trial court. A perusal of her Motion for
Reconsideration merely alleged the ground that she was improperly notified of the conference for
having received the notice thereof 15 hours before the same, therefore nullifying the trial courts
dismissal of the case. Her need to secure counsel and prepare documents necessary for the case
were only asserted in the instant petition before this Court. It is settled that points of law, theories,
issues and arguments not brought to the attention of the lower court need not be, and ordinarily will
not be, considered by a reviewing court, as they cannot be raised for the first time at that late stage.12

Accordingly, the trial court cannot be said to have whimsically or capriciously dismissed the case for
it was merely implementing the letter of the law. As the trial court observed, the court was just 20
minutes away from petitioners residence. Prudence and diligence in complying with the rules and
orders of the court would have prompted petitioner to have at least notified the court of her
predicament. This way, she could have been appointed with counsel or granted an extension of time
to prepare for pre-trial. Unfortunately for petitioner, she not only failed to attend the scheduled
conference, she also failed to inform the court the reasons for her absence. Indeed, while a 15-hour
notice may be quite impulsive, this fact, standing alone, fails to excuse petitioners absence. The fact
remains that notice was received by petitioner before the date of the pre-trial, in compliance with the
notice requirement mandated by the Rules.

In The Philippine American Life & General Insurance Company v. Enario,13 it has been held that pre-
trial cannot be taken for granted. It is more than a simple marking of evidence. It is not a mere
technicality in court proceedings for it serves a vital objective: the simplification, abbreviation and
expedition of the trial, if not indeed its dispensation. Hence, it should not be ignored or neglected, as
petitioner had.

As to petitioners allegation that the RTCs order is patently void because the RTC erroneously
included the absence of her counsel despite due notice as reason to dismiss the case when the
records reveal that she is not actually represented by any counsel, the same is rather flawed.
Section 3,14 Rule 18 of the 1997 Rules of Civil Procedure requires that notice of pre-trial conference
be served on counsel. The counsel served with notice is charged with the duty of notifying the party
he represents. However, when a party has no counsel, as in this case, the notice of pre-trial is
required to be served personally on him. In view of the fact that petitioner was, and still is, not
represented by counsel, and that as petitioner herself admitted, notice of the pre-trial conference
was served on her, the mandate of the law was sufficiently complied with. Thus, the fact that the trial
court mistakenly referred to her counsel when no such counsel exists is immaterial. For as long as
notice was duly served on petitioner, in accordance with the rules, the trial courts order of dismissal
cannot be invalidated due to statements referring to her counsel, for the same have no bearing on
the validity of the notice of pre-trial.

In view of the foregoing, this Court does not find that the facts in the case at hand warrant a liberal
construction of the rules. Considering that the petitioner failed to offer sufficient justification for her
failure to appear at the pre-trial conference, this Court finds no compelling reason to disturb the
findings of the trial court. Concomitant to a liberal application of the rules of procedure should be an
effort on the part of the party invoking liberality to at least promptly explain its failure to comply with
the rules.15 Indeed, technical rules of procedure are not designed to frustrate the ends of justice.
These are provided to effect the prompt, proper and orderly disposition of cases and thus effectively
prevent the clogging of court dockets. Utter disregard of these rules cannot justly be rationalized by
harking on the policy of liberal construction.16
WHEREFORE, premises considered, the instant petition is DENIED. The Order dated October 4,
2007 of the Regional Trial Court, Branch 6, of Tacloban City in Civil Case No. 2006-12-16 dismissing
the case for annulment of title, recovery of property under Transfer Certificate

(TCT) No. T-28120 and damages is AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

#32

SECOND DIVISION

G.R. No. 200042, July 07, 2016

FELIZARDO T. GUNTALILIB, Petitioner, v. AURELIO Y. DELA CRUZ AND SALOME V.


DELA CRUZ, Respondents.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 seeks to set aside: 1) the August 10, 2011 Decision2 of
the Court of Appeals (CA) in CA-G.R. SP No. 115963 dismissing the Petition for Certiorari in
said case and affirming the January 12, 20103 and June 21, 20104 Orders of the Regional Trial
Court (RTC) of Bayombong, Nueva Vizcaya, Branches 28 and 27, respectively, in Civil Case
No. 6975; and 2) the CA's January 5, 2012 Resolution5 denying herein petitioner's Motion for
Reconsideration.

Factual Antecedents

On July 14, 2009, respondents Aurelio and Salome dela Cruz filed a Complaint6 for "Quieting Of
Titles x x x; Annulment and Cancellation of Unnumbered OCT/Damages," against petitioner
Felizardo Guntalilib and other heirs of Bernardo (or Bernardino) Tumaliuan. The case was
docketed as Civil Case No. 6975 and assigned to Branch 28 of the RTC of Bayombong, Nueva
Vizcaya.

The subject property is Lot 421 located in Nueva Vizcaya consisting of 8,991 square meters and
which, as respondents claimed in their Complaint, was originally registered on August 7, 1916
as Original Certificate of Title (OCT) No. 213. Respondent Aurelio's grandfather, Juan dela
Cruz, later acquired the property in 1919, and Transfer Certificate of Title (TCT) No. R-3 was
issued in his name; when he passed away, the property was inherited by Aurelio's father,
Leonor, and, in lieu of TCT R-3, TCT 14202 was issued in Leonor's favor. Later on, Leonor
conveyed the property to Aurelio and his brother, Joseph, and TCT T-46087 was then issued in
their favor. In turn, Joseph waived ownership in favor of Aurelio by deed of quitclaim dated
December 31, 2001, in which case a new title, TCT T-126545, was issued in Aurelio's name as
sole owner.

Respondents claimed further that all this time, the dela Cruz family was in full possession,
occupation and enjoyment of the property, and petitioner and his co-heirs have never set foot on
the property; that later on, Lot 421 was subdivided and new titles were issued in lieu of TCT T-
126545; and that Aurelio sold portions thereof to several individuals, but he remains the
registered owner of the remaining portion.

Respondents likewise alleged that on February 20, 2008, petitioner filed in court a petition,
docketed as LRC Case No. 6544 and assigned to the Bayombong, Nueva Vizcaya RTC, Branch
29, for reconstitution or issuance of a new certificate of title in lieu of an allegedly lost
unnumbered OCT which was issued on August 29, 1916 in the name of petitioner's
predecessor, Bernardo Tumaliuan, and covering the very same property, or Lot 421, which they
owned; that said petition was eventually granted, and the Nueva Vizcaya Register of Deeds was
ordered to issue another owner's duplicate copy of their predecessor's supposed unnumbered
OCT; and that said unnumbered OCT constituted a cloud upon their titles that must necessarily
be removed.

Petitioner and his co-defendants filed a Motion to Dismiss7 Civil Case No. 6975, arguing that the
Complaint stated no cause of action; that the case constituted a collateral attack on their
unnumbered OCT; that respondents failed to implead all the heirs of Bernardo Tumaliuan, who
are indispensable parties to the case; and that the Complaint's verification and certification on
non-forum shopping were defective.

Respondents filed a Motion for Admission of Amended Complaint,8 with attached Amended
Complaint9for "Quieting Of Titles x x x; Cancellation of Unnumbered OCT/Damages." Apart from
incorporating the same allegations contained in their original Complaint, respondents further
alleged in said Amended Complaint that their mother title, OCT 213 which was issued on
August 7, 1916, should prevail over the petitioner's unnumbered OCT which was issued only on
August 29, 1916; that petitioner and his co-heirs had prior knowledge of the dela Cruzes'
previous and existing titles, and were never in possession of Lot 421; and that through fraud,
false misrepresentations, and irregularities in the proceedings for reconstitution (LRC Case No.
6544), petitioner was able to secure a copy of his predecessor's supposed unnumbered OCT.
Respondents prayed, thus:

WHEREFORE, premises considered, it is most respectfully prayed that after trial in this case,
this Honorable Court issue a judgment in favor of Plaintiffs and against, defendants, as follows:

1. Quieting [of] title and ownership over Lot No. 421 and portions thereof, in favor of Plaintiffe,
particularly TCT No. 147078; TCT No. 142232; TCT No. 142233; TCT No. 142235; TCT No.
142236; TCT No. 142237; TCT No. 142239; and TCT Nos. 142241 thru 142245 and all such
titles of individuals who acquired title to portions of Lot No. 421 from Plaintiffs;

2. An order directing the cancellation of the Unnumbered Original Certificate of Title to Lot 421
in the name of Bernardo Tumaliuan;

3. An order directing defendants to pay plaintiffs moral damages in the amount of P100,000.00;

4. Ordering defendants to reimburse plaintiffs for their attorney's fees, appearance fee and costs
of this suit.

5. Any such other relief as may be just and fair under the attendant circumstances.10cralawred

Petitioner and his co-defendants opposed the Motion for Admission of Amended Complaint,
arguing in their Opposition (Ad Cautelam)11 that the motion was a mere scrap of paper because
it did not comply with Sections 4, 5 and 6 of Rule 15 of the 1997 Rules of Civil
Procedure12 (1997 Rules), as no date of hearing was set and the motion was addressed to the
Clerk of Court alone; that the verification and certification on non-forum shopping contained in
the original Complaint, being defective, could not be cured by the subsequent filing of the
Amended Complaint; and that the Amended Complaint was improper and prohibited, as it is
essentially aimed at setting aside the Decision in LRC Case No. 6544 issued by a court of
concurrent jurisdiction.

On January 12, 2010, the trial court in Civil Case No. 6975 issued an Order13 admitting
respondents' Amended Complaint and denying petitioner's Motion to Dismiss. It held that -

Assuming arguendo that this Court shall treat the Motion for Admission of Amended Complaint
as not filed, this Court is still duty bound to recognize the right of herein plaintiff under Rule 10
Section 2 where plaintiffs are allowed as a matter of right to file their amended complaint
anytime before a responsive pleading is filed. Considering that a Motion to Dismiss is not a
responsive pleading, this Court has no other recourse but to allow plaintiffs to submit their
amended complaint.

With respect to the contention of the defendants that the complaint did not raise any cause of
action, this Court x x x is in the belief that the plaintiff may be entitled to the relief sought for
after exhaustively trying the case on the merits. On that note, considering the quantum of
documentary evidence adduced by the plaintiff herein, this Court is inclined to try the case on
the merits.

With respect to the contention of the defendants that the complaint failed to include and implead
all indispensable parties, this Court construes the cited case of Teresita V. Orbeta vs. Paul B.
Sendiong x x x that the High Court contemplated "the absence of an indispensable party" and
not the "absence of all indispensable parties". As this Court is in the belief that plaintiff had
impleaded some indispensable parties, then a trial on the merits should proceed.

Defendants likewise had raised as an issue that a Decision rendered by Regional Trial Court
Branch 29, Bayombong, Nueva Vizcaya, particularly LRC Case No. 6544 x x x rendered on July
21, 2008 should bar any inquiry with regard to the issue of the ownership of one of the parcels
of land subject of this instant case.
Placing a parcel [of land] under the mantle of the Torrens System does not mean that ownership
thereof can no longer be disputed. Ownership is different from a certificate of title x x x.

In LRC Case No. 6544, Regional Trial Court Branch 29 adjudicated on the issuance of another
Certificate of Title in favor of petitioner, now defendant in this case, Felizardo T. Guntalilib. In
this instant case, the issue of ownership is being brought to the fore. This distinction should be
heavily noted. Moreover, on closer inquiry, this Court notes the point raised by the Registry of
Deeds of Nueva Vizcaya in its Motion for, Reconsideration to the Decision rendered in LRC
Case No. 6544 xxx:

xxxx

To this Court, it would appear that the issue of ownership remains unsettled and this instant
case will squarely address this issue.

To make out an action to quiet title under the foregoing provision (Article 476 of the Civil Code),
the initiatory pleading has only to set forth allegations showing that (1) the plaintiff has "title to
real property or any interest therein" and (2) the defendant claims an interest therein adverse to
the plaintiffs arising from an instrument, record, claim, encumbrance, or proceeding which is
apparently valid or effective but is in truth and in fact invalid, ineffective, voidable or
unenforceable." x x x

A perusal of the allegations of the initiatory pleadings reveals that an action to quiet title is
proper and this Court shall properly proceed to try this case on the merits.

A reading of the Opposition by the defendants reveals alarming allegations and imputations.

Defendants aver that Mr. Aristotle Mercado, Legal Researcher of this Branch, is allegedly one of
the buyers of the property subject of this instance case from plaintiffs. Consequently,
defendants doubt if the Motion filed by the plaintiffs on September 17,2009 had been read by
the undersigned Judge and as it appears was "kept from the Honorable presiding Judge and the
defendants so that the matter can be submitted for the Court's consideration and approval
immediately upon receipt hereof."

Defendants likewise aver that plaintiffs deliberately absented themselves in the proceedings of
September 22,2009 for unknown reasons.

This Court would like to remind defendants to exercise restraint and caution in imputing
allegations which are unsubstantiated. A perusal of the records would reveal that the plaintiffs
had furnished defendants with a copy of plaintiffs' Motion filed on September 17,2009 per
Registry Receipt No. 234.

To impute on Mr. Mercado as a buyer of the plaintiffs and of allegedly executing acts prejudicial
to defendants' interest and of directly accusing plaintiffs of deliberately absenting themselves
from the proceedings of September 22, 2009 are reasons enough for this Court to warn
defendants to exercise restraint in accusing parties, be it adversary or court personnel.

WHEREFORE, premises considered, this Court hereby admits the Amended Complaint filed by
plaintiffs herein. The Motion to Dismiss filed by defendants is DENIED.

SO ORDERED.14cralawred
Petitioner filed a Motion for Reconsideration;15 meanwhile, the case was re-raffled to Branch 27
of the RTC of Bayombong, Nueva Vizcaya. On June 21, 2010, the trial court issued an
Order16 denying petitioner's Motion for Reconsideration and ordering the defendants in the case
to file their answer.

Ruling of the Court of Appeals

Petitioner filed an original Petition for Certiorari17 with prayer for injunctive relief before the CA,
which was docketed as CA-G.R. SP No. 115963. In seeking reversal of the trial court's January
12, 2010 and June 21,2010 Orders, petitioner essentially reiterated the arguments contained in
his Motion to Dismiss, adding that the trial court should not have admitted respondents'
Amended Complaint since the original Complaint was a mere scrap of paper as it was defective
in form and substance; that since in the first instance the Complaint was a mere scrap of paper,
then there is no Complaint to be amended; and that the assailed Orders were null and void.

On August 10, 2011, the CA issued the assailed Decision affirming the trial court's assailed
Orders, pronouncing thus:

The RTC found the allegations in the initiatory pleading proper in the action to quiet title, thus,
was "inclined to try the merits of the case". In a motion to dismiss for failure to state a cause of
action, the inquiry is into the sufficiency and not the veracity, of the material allegations. If the
allegations of the complaint are sufficient in form and substance but their veracity and
correctness are assailed, it is incumbent upon the court to deny the motion to dismiss and
require the defendant to answer and go to trial to prove his defense. The veracity of the
assertions of the parties can be ascertained at the trial of the case on the merits. Further,
Section 3 of Rule 16 of the Rules of Court, the rule in point,
provides:chanRoblesvirtualLawlibrary
"x x x x

Sec. 3. Resolution of motion. After the hearing, the court may dismiss the action, or claim, deny
the motion, or order the amendment of the pleading.

xxxx
As gleaned from the above-quoted provision, there are three (3) courses of action which the trial
court may take in resolving a motion to dismiss, i.e. to grant, to deny, or to allow amendment of
the pleading. We find no grave error on the part of the trial court in denying the motion to
dismiss as the allegations are sufficient to support a cause of action for quieting of title.

Parenthetically, under Rule 65 of the Revised Rules of Civil Procedure, for


a certiorariproceeding to prosper, there should be a concurrence of the essential requisites, to
wit: (a) the tribunal, board or officer exercising judicial functions has acted without or in excess
of jurisdiction or with grave abuse of discretion amounting to lack or in excess of jurisdiction,
and (b) there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of
law for the purpose of annulling or modifying the proceeding.

Petitioner's claim that it had no other plain, speedy and adequate remedy is baseless. He can
still file an answer, proceed to trial and meet the issues head-on. An order denying a motion to
dismiss is an interlocutory order which neither terminates nor finally disposes of a case, as it
leaves something to be done by the court before the case is finally decided on the merits. The
general rule is that the denial of a motion to dismiss cannot be questioned in a special civil
action for certiorari which is not intended to correct every controversial interlocutory ruling.
Neither can a denial of a motion to dismiss be the subject of an appeal unless and until a final
judgment or order is rendered.

Quite obviously, this petition filed by petitioner with us is not the proper remedy to assail the trial
court's denial of his motion to dismiss. We reiterate that the special civil action of certiorari is a
remedy designed to correct errors of jurisdiction including commission of grave abuse of
discretion amounting to lack or excess of jurisdiction and not errors of judgment. The abuse of
discretion must be grave, that is, the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility. It must be so patent and gross as to amount to evasion
of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of the law. To justify the grant of such extraordinary remedy, the abuse of
discretion must be grave and patent, and it must be shown that discretion was exercised
arbitrarily or despotically. In this case, no such circumstances attended the denial of petitioner's
Motion to Dismiss.

Petitioner further alleged that the trial court committed a procedural infirmity when it gave due
course to the Motion for Admission of Amended Complaint despite non-compliance with
Sections 4,5 and 6 of the Rules of Court and admitted private respondent's Amended
Complaint.

Private respondent's amendment of the complaint was made pursuant to Section 2, Rule 10 of
the Rules of Court. Under the said provision, formal and substantial amendments to a pleading
may be made at anytime before a responsive pleading has been filed. Such amendment is a
matter of right. This means that prior to the filing of an answer, the plaintiff has the absolute right
to amend the complaint.

xxxx

For obvious reasons, petitioner has not filed an answer to controvert the allegations raised by
private respondent. A motion to dismiss is not a responsive pleading, thus, private respondent
may amend its complaint. It cannot be said that the petitioner's rights have been violated by
changes made in the complaint if he has yet to file an answer thereto. In such an event,
petitioner has not presented any defense that can be altered or affected by the amendment of
the complaint in accordance with Section 2 of Rule 10.

Case law dictates that the right granted to the plaintiff under procedural law to amend the
complaint before an answer has been served is not.precluded by the filing of a motion to
dismiss or any other proceeding contesting its sufficiency. Were we to conclude otherwise, the
right to amend a pleading under Section 2, Rule 10 will be rendered nugatory and ineffectual,
since all that a defendant has to do to foreclose this remedial right is to challenge the adequacy
of the complaint before he files an answer. Moreover, amendment of pleadings is favored and
should be liberally allowed in the furtherance of justice in order to determine every case as far
as possible on its merits without regard to technicalities. This principle is generally recognized to
speed up trial and save party litigants from incurring unnecessary expense, so that a full hearing
on the merits of every case may be had and multiplicity of suits avoided. Consequently, the
amendment should be allowed in this case as a matter of right in accordance with the rules.

As for petitioner's application for injunction, we find no compelling reason to pass upon it as
petitioner failed to convince us of the necessity of this relief.
WHEREFORE, premises considered, the petition under consideration is DISMISSED and the
assailed Order dated January 12, 2010 and the Order dated June 21, 2010 are hereby
AFFIRMED.

SO ORDERED.18

Petitioner filed a Motion for Reconsideration,19 which the CA denied in its subsequent January
5,2012 Resolution. Hence, the present Petition.

Meanwhile, on June 29,2012, the trial court issued an Order,20 stating thus:

In this continuation of pre-trial, Arty. Rosario and Atty. Manuel appeared. The spouses plaintiffs
and the representatives of the defendants, who are defendant [sic] themselves namely,
Felizardo and Mario Guntalilib were also around.

It is observed that in the previous proceedings, the court and the parties encountered difficulty in
knowing who are the registered owners in addition to the plaintiff spouses Dela Cruz and also
the identification of the defendant heirs. To the mind of the court, it would be more convenient in
proceeding with the pre-trial with the complete identification of the present registered owners
and also those heirs so that complete relief would accordingly be given to the parties. The court
directed the plaintiffs to amend the complaint within 30 days from today to identify the registered
owners and for the defendants to make available the names of the heirs. The counsels
suggested that before further proceedings could be had, the plaintiffs should identify the other
registered owners of the property and the defendants to identify the heirs.

SO ORDERED.21cralawred

Issues

In a March 31, 2014 Resolution,22 this Court resolved to give due course to the instant Petition,
which contains the following assignment of errors:

I. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN FAILING TO


DECLARE THE COURT A QUO'S ORDERS NULL AND VOID BASED ON THE FOLLOWING
GROUNDS:chanRoblesvirtualLawlibrary
(i) THE RELIEF SOUGHT BY RESPONDENTS IN THE PRESENT ACTION, WHICH IS, TO
ANNUL AND REVERSE THE DECISION OF RTC-BRANCH 29, THAT ORDERED THE
ISSUANCE OF OCT WITH DECREE NO. 54584 IN THE NAME OF BERNARDINO
TUMALrUAN, IS IMPROPER FOR AN ACTION TO QUIET TITLE, THUS, THE COMPLAINT
STATES NO CAUSE OF ACTION, WARRANTING THE PROMPT AND TIMELY DISMISSAL
OF THE CASE.

(ii) THE ORIGINAL, AS WELL AS THE AMENDED COMPLAINT OF RESPONDENTS FAILED


TO INCLUDE ALL INDISPENSABLE PARTIES, THUS, THE COURTS A QUO DO NOT HAVE
JURISDICTION OVER THE PERSON OF THESE OMITTED INDIVIDUALS, WARRANTING
THE PROMPT DISMISSAL OF THE CASE.

(iii) FOLLOWING THE DOCTRINE OF NONINTERFERENCE, THE COURTS A QUO HAVE


NO JURISDICTION TO INTERVENE WITH THE PROCEEDINGS OF A COURT OF EQUAL
JURISDICTION, MUCH LESS ANNUL THE FINAL JUDGMENT OF A COEQUAL BRANCH,
I.E. RTC BRANCH-29. THUS RESPONDENTS' COMPLAINT DESERVES OUTRIGHT
DISMISSAL.
II. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW WHEN IT
DECLARED THAT THERE IS A PLAIN, SPEEDY AND ADEQUATE REMEDY AVAILABLE TO
PETITIONER IN THIS PRESENT CASE.

III. RESPONDENTS' RIGHT TO AMEND THEIR COMPLAINT BY VIRTUE OF SECTION 2,


RULE 20 MUST YIELD TO THE CLEAR AND CATEGORICAL DIRECTIVE OF SECTION 5,
RULE 7 OF THE RULES OF COURT, WHICH STATES THAT "FAILURE TO COMPLY WITH
THE REQUIREMENTS ON VERIFICATION AND CERTIFICATION AGAINST FORUM-
SHOPPING SHALL NOT BE CURABLE BY MERE AMENDMENT OF THE COMPLAINT BUT
SHALL BE A CAUSE FOR THE DISMISSAL OF THE CASE WITHOUT PREJUDICE.

IV. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW WHEN IT


DECLARED THAT AMENDMENT OF PLEADINGS IS FAVORED AND SHOULD BE
LIBERALLY ALLOWED IN CONTRAVENTION WITH THE CLEAR AND UNEQUIVOCAL
PROVISIONS OF THE RULES AND JURISPRUDENCE.23

Petitioner's Arguments

In his Petition and Counter-Manifestation24 seeking reversal of the assailed CA dispositions and
nullification of the January 12, 2010 and June 21, 2010 Orders in Civil Case No. 6975, petitioner
insists that respondents' Complaint for quieting of title constitutes a prohibited collateral attack
of the unnumbered OCT of Bernardo Tumaliuan and an unjustified interference with and assault
on the Decision of a co-equal court in LRC Case No. 6544; that for failure to implead all
indispensable parties, namely, the heirs of Bernardo Tumaliuan and subsequent buyers of
portions of the subject property sold by respondents, respondents' case should be dismissed as
all proceedings taken therein are null and void, following the Court's ruling in Dr. Orbeta v.
Sendiong25 and Speed Distributing Corporation v. Court of Appeals26 to the effect that the failure
to implead all indispensable parties to a case renders all actions of the court null and void; that
Civil Case No. 6975 is in effect an attempt to annul the Decision in LRC Case No. 6544; that
contrary to the CA's declaration, a Petition for Certiorari with the appellate court was the only
speedy and adequate remedy available to him, considering that the proceedings in Civil Case
No. 6975 are fundamentally null and void since the case is precisely being used to collaterally
and illegally attack Bernardo Tumaliuan's title and the Decision in LRC Case No. 6544; and that
the rule of procedure on verification and certification against forum-shopping should override the
rule on amendment; in other words, the trial court should not have admitted respondents'
Amended Complaint since the original Complaint on which it was based was a mere scrap of
paper as it contained a defective verification and certification against forum-shopping, and being
so, there is no valid complaint to speak, of which required amendment.

Respondents' Arguments

In their Compliance with incorporated Comment27 and Memorandum,28 respondents contend


that the failure to implead all the heirs of Bernardo Tumaliuan was cured by the trial court's June
29, 2012 Order which reflects the parties' agreement arrived at during the pre-trial that
respondents shall amend their complaint to include all the heirs upon being furnished the names
thereof by petitioner and his co-defendants; directing respondents to further amend their
complaint within 30 days in order to.include the registered owners of the subject property; and
for the defendants to disclose the names of all heirs of Bernardo Tumaliuan. They add that an
action by one party asserting his own title to and seeking nullification of another title covering
the same property is deemed to be one for quieting of title,29 and the nullification of petitioner's
title is merely an incidental result in such action; that since petitioner has not filed his Answer,
they were entitled to amend their complaint as a matter of right, and no motion to admit their
Amended Complaint was even necessary;30 and that the CA committed no reversible error in
declaring that petitioner's resort to an original Petition for Certiorari was unwarranted.

Our Ruling

The Court denies the Petition.

Petitioner's claim that respondents' Amended Complaint must be disallowed for failure to
implead all indispensable parties has been rendered moot by the parties' agreement that
respondents shall further amend their complaint after petitioner and his co-defendants furnish
them with the complete list of Bernardo Tumaliuan's heirs. Pursuant to this agreement, the trial
court issued its June 29,2012 Order, which petitioner does not assail.

Next, petitioner's claim that the trial court should not have admitted respondents' Amended
Complaint since the original Complaint on which it was based is void for being a mere scrap of
paper as it contained a defective verification and certification against forum-shopping, is
fundamentally absurd. A party to a civil case is precisely given the opportunity to amend his
pleadings, under certain conditions, in order to correct the mistakes found therein; if one were to
follow petitioner's reasoning, then the rule on amendment of pleadings might just as well be
scrapped, for then no pleading would be susceptible of amendment. In the present case,
respondents' Complaint was amended even before petitioner could file any responsive pleading
thereto; under the 1997 Rules, a party may amend his pleading once as a matter of right at any
time before a responsive pleading is served.31 No motion to admit the same was required; as
the amendment is allowed as a matter of right, prior leave of court was unnecessary. 32Indeed,
even if such a motion was filed, no hearing was required therefor, because it is not a
contentious motion.

On the final procedural matter that must be tackled, suffice it to state, as the CA did, that as a
general rule, the denial of a motion to dismiss cannot be questioned through a special civil
action for certiorari.

An order denying a motion to dismiss is interlocutory and neither terminates nor finally disposes
of a case; it is interlocutory as it leaves something to be done by the court before the case is
finally decided on the merits.

The denial of a motion to dismiss generally cannot be questioned in a special civil action
for certiorari, as this remedy is designed to correct only errors of jurisdiction and not errors of
judgment. Neither can a denial of a motion to dismiss be the subject of an appeal which is
available only after a judgment or order on the merits has been rendered. Only when the denial
of the motion to dismiss is tainted with grave abuse of discretion can the grant of the
extraordinary remedy of certiorari be justified.33

Such a rule applies especially when, as in this case, the petition is completely lacking in merit.

Moving on to the substantive issues raised, the Court finds without merit petitioner's claim that
respondents' quieting of title case constitutes a prohibited attack on his predecessor Bernardo
Tumaliuan's unnumbered OCT as well as the proceedings in LRC Case No. 6544. It is true that
"the validity of a certificate of title cannot be assailed in an action for quieting of title; an action
for annulment of title is the more appropriate remedy to seek the cancellation of a certificate of
title."34Indeed, it is settled that a certificate of title is not subject to collateral attack. However,
while respondents' action is denominated as one for quieting of title, it is in reality an action to
annul and cancel Bernardo Tumaliuan's unnumbered OCT. The allegations and prayer in their
Amended Complaint make out a case for annulment and cancellation of title, and not merely
quieting of title: they claim that their predecessor's OCT 213, which was issued on August
7,1916, should prevail over Bernardo Tumaliuan's unnumbered OCT which was issued only on
August 29, 1916; that petitioner and his co-defendants have knowledge of OCT 213 and their
existing titles; that through fraud, false misrepresentations, and irregularities in the proceedings
for reconstitution (LRC Case No. 6544), petitioner was able to secure a copy of his
predecessor's supposed unnumbered OCT; and for these reasons, Bernardo Tumaliuan's
unnumbered OCT should be cancelled. Besides, the case was denominated as one for
"Quieting Of Titles x x x; Cancellation of Unnumbered OCT/Damages."

It has been held that "[t]he underlying objectives or reliefs sought in both the quieting-of-title and
the annulment-of-title cases are essentially the same adjudication of the ownership of the
disputed lot and nullification of one of the two certificates of title."35 Nonetheless, petitioner
should not have been so simplistic as to think that Civil Case No. 6975 is merely a quieting of
title case. It is more appropriate to suppose that one of the effects of cancelling Bernardo
Tumaliuan's unnumbered OCT would be to quiet title over Lot 421; in this sense, quieting of title
is subsumed in the annulment of title case.

WHEREFORE, the Petition is DENIED. The August 10, 2011 Decision and January 5, 2012
Resolution of the Court of Appeals in CA-G.R. SP No. 115963 are AFFIRMED.

SO ORDERED.
#33

FIRST DIVISION

G.R. No. 181163 July 24, 2013

ASIAN TERMINALS, INC., Petitioner,


vs.
PHILAM INSURANCE CO., INC. (now Chartis Philippines Insurance, Inc.), Respondent.

x-----------------------x

G.R. No. 181262

PHILAM INSURANCE CO., INC. (now Chartis Philippines Insurance, Inc.), Petitioner,
vs.
WESTWIND SHIPPING CORPORATION and ASIAN TERMINALS, INC., Respondents.

x-----------------------x

G.R. No. 181319

WESTWIND SHIPPING CORPORATION, Petitioner,


vs.
PHILAM INSURANCE CO., INC. (now Chartis Philippines Insurance, Inc.) and ASIAN
TERMINALS, INC.,Respondents.
DECISION

VILLARAMA, JR., J.:

Before us are three consolidated petitions for review on certiorari assailing the Decision1 dated
October 15, 2007 and the Resolution2 dated January 11, 2008 of the Court of Appeals (CA) which
affirmed with modification the Decision3 of the Regional Trial Court (RTC) of Makati City, Branch
148, in Civil Case No. 96-062. The RTC had ordered Westwind Shipping Corporation (Westwind)
and Asian Terminals, Inc. (ATI) to pay, jointly and severally, Philam Insurance Co., Inc. (Philam) the
sum of 633,957.15, with interest at 12% per annum from the date of judicial demand and
158,989.28 as attorneys fees.

The facts of the case follow:

On April 15, 1995, Nichimen Corporation shipped to Universal Motors Corporation (Universal
Motors) 219 packages containing 120 units of brand new Nissan Pickup Truck Double Cab 4x2
model, without engine, tires and batteries, on board the vessel S/S "Calayan Iris" from Japan to
Manila. The shipment, which had a declared value of US$81,368 or 29,400,000, was insured with
Philam against all risks under Marine Policy No. 708-8006717-4.4

The carrying vessel arrived at the port of Manila on April 20, 1995, and when the shipment was
unloaded by the staff of ATI, it was found that the package marked as 03-245-42K/1 was in bad
order.5 The Turn Over Survey of Bad Order Cargoes6 dated April 21, 1995 identified two packages,
labeled 03-245-42K/1 and 03/237/7CK/2, as being dented and broken. Thereafter, the cargoes were
stored for temporary safekeeping inside CFS Warehouse in Pier No. 5.

On May 11, 1995, the shipment was withdrawn by R.F. Revilla Customs Brokerage, Inc., the
authorized broker of Universal Motors, and delivered to the latters warehouse in Mandaluyong City.
Upon the request7 of Universal Motors, a bad order survey was conducted on the cargoes and it was
found that one Frame Axle Sub without LWR was deeply dented on the buffle plate while six Frame
Assembly with Bush were deformed and misaligned.8 Owing to the extent of the damage to said
cargoes, Universal Motors declared them a total loss.

On August 4, 1995, Universal Motors filed a formal claim for damages in the amount of 643,963.84
against Westwind,9 ATI10 and R.F. Revilla Customs Brokerage, Inc.11 When Universal Motors
demands remained unheeded, it sought reparation from and was compensated in the sum of
633,957.15 by Philam. Accordingly, Universal Motors issued a Subrogation Receipt12 dated
November 15, 1995 in favor of Philam.

On January 18, 1996, Philam, as subrogee of Universal Motors, filed a Complaint13 for damages
against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. before the RTC of Makati City,
Branch 148.

On September 24, 1999, the RTC rendered judgment in favor of Philam and ordered Westwind and
ATI to pay Philam, jointly and severally, the sum of 633,957.15 with interest at the rate of 12% per
annum, 158,989.28 by way of attorneys fees and expenses of litigation.

The court a quo ruled that there was sufficient evidence to establish the respective participation of
Westwind and ATI in the discharge of and consequent damage to the shipment. It found that the
subject cargoes were compressed while being hoisted using a cable that was too short and taut.
The trial court observed that while the staff of ATI undertook the physical unloading of the cargoes
from the carrying vessel, Westwinds duty officer exercised full supervision and control throughout
the process. It held Westwind vicariously liable for failing to prove that it exercised extraordinary
diligence in the supervision of the ATI stevedores who unloaded the cargoes from the vessel.
However, the court absolved R.F. Revilla Customs Brokerage, Inc. from liability in light of its finding
that the cargoes had been damaged before delivery to the consignee.

The trial court acknowledged the subrogation between Philam and Universal Motors on the strength
of the Subrogation Receipt dated November 15, 1995. It likewise upheld Philams claim for the value
of the alleged damaged vehicle parts contained in Case Nos. 03-245-42K/1 and 03-245-51K or
specifically for "7 pieces of Frame Axle Sub Without Lower and Frame Assembly with Bush."14

Westwind filed a Motion for Reconsideration15 which was, however, denied in an Order16 dated
October 26, 2000.

On appeal, the CA affirmed with modification the ruling of the RTC. In a Decision dated October 15,
2007, the appellate court directed Westwind and ATI to pay Philam, jointly and severally, the amount
of 190,684.48 with interest at the rate of 12% per annum until fully paid, attorneys fees of 47,671
and litigation expenses.

The CA stressed that Philam may not modify its allegations by claiming in its Appellees Brief 17 that
the six pieces of Frame Assembly with Bush, which were purportedly damaged, were also inside
Case No. 03-245-42K/1. The CA noted that in its Complaint, Philam alleged that "one (1) pc. FRAME
AXLE SUB W/O LWR from Case No. 03-245-42K/1 was completely deformed and misaligned, and
six (6) other pcs. of FRAME ASSEMBLY WITH BUSH from Case No. 03-245-51K were likewise
completely deformed and misaligned."18

The appellate court accordingly affirmed Westwind and ATIs joint and solidary liability for the
damage to only one (1) unit of Frame Axle Sub without Lower inside Case No. 03-245-42K/1. It also
noted that when said cargo sustained damage, it was not yet in the custody of the consignee or the
person who had the right to receive it. The CA pointed out that Westwinds duty to observe
extraordinary diligence in the care of the cargoes subsisted during unloading thereof by ATIs
personnel since the former exercised full control and supervision over the discharging operation.

Similarly, the appellate court held ATI liable for the negligence of its employees who carried out the
offloading of cargoes from the ship to the pier. As regards the extent of ATIs liability, the CA ruled
that ATI cannot limit its liability to 5,000 per damaged package. It explained that Section 7.0119 of
the Contract for Cargo Handling Services20does not apply in this case since ATI was not yet in
custody and control of the cargoes when the Frame Axle Sub without Lower suffered damage.

Citing Belgian Overseas Chartering and Shipping N.V. v. Philippine First Insurance Co., Inc.,21 the
appellate court also held that Philams action for damages had not prescribed notwithstanding the
absence of a notice of claim.

All the parties moved for reconsideration, but their motions were denied in a Resolution dated
January 11, 2008. Thus, they each filed a petition for review on certiorari which were consolidated
together by this Court considering that all three petitions assail the same CA decision and resolution
and involve the same parties.

Essentially, the issues posed by petitioner ATI in G.R. No. 181163, petitioner Philam in G.R. No.
181262 and petitioner Westwind in G.R. No. 181319 can be summed up into and resolved by
addressing three questions: (1) Has Philams action for damages prescribed? (2) Who between
Westwind and ATI should be held liable for the damaged cargoes? and (3) What is the extent of their
liability?

Petitioners Arguments

G.R. No. 181163

Petitioner ATI disowns liability for the damage to the Frame Axle Sub without Lower inside Case No.
03-245-42K/1. It shifts the blame to Westwind, whom it charges with negligence in the supervision of
the stevedores who unloaded the cargoes. ATI admits that the damage could have been averted
had Westwind observed extraordinary diligence in handling the goods. Even so, ATI suspects that
Case No. 03-245-42K/1 is "weak and defective"22 considering that it alone sustained damage out of
the 219 packages.

Notwithstanding, petitioner ATI submits that, at most, it can be held liable to pay only 5,000 per
package pursuant to its Contract for Cargo Handling Services. ATI maintains that it was not properly
notified of the actual value of the cargoes prior to their discharge from the vessel.

G.R. No. 181262

Petitioner Philam supports the CA in holding both Westwind and ATI liable for the deformed and
misaligned Frame Axle Sub without Lower inside Case No. 03-245-42K/1. It, however, faults the
appellate court for disallowing its claim for the value of six Chassis Frame Assembly which were
likewise supposedly inside Case Nos. 03-245-51K and 03-245-42K/1. As to the latter container,
Philam anchors its claim on the results of the Inspection/Survey Report23 of Chartered Adjusters,
Inc., which the court received without objection from Westwind and ATI. Petitioner believes that with
the offer and consequent admission of evidence to the effect that Case No. 03-245-42K/1 contains
six pieces of dented Chassis Frame Assembly, Philams claim thereon should be treated, in all
respects, as if it has been raised in the pleadings. Thus, Philam insists on the reinstatement of the
trial courts award in its favor for the payment of 633,957.15 plus legal interest, 158,989.28 as
attorneys fees and costs.

G.R. No. 181319

Petitioner Westwind denies joint liability with ATI for the value of the deformed Frame Axle Sub
without Lower in Case No. 03-245-42K/1. Westwind argues that the evidence shows that ATI was
already in actual custody of said case when the Frame Axle Sub without Lower inside it was
misaligned from being compressed by the tight cable used to unload it. Accordingly, Westwind
ceased to have responsibility over the cargoes as provided in paragraph 4 of the Bill of Lading which
provides that the responsibility of the carrier shall cease when the goods are taken into the custody
of the arrastre.

Westwind contends that sole liability for the damage rests on ATI since it was the latters stevedores
who operated the ships gear to unload the cargoes. Westwind reasons that ATI is an independent
company, over whose employees and operations it does not exercise control. Moreover, it was ATIs
employees who selected and used the wrong cable to lift the box containing the cargo which was
damaged.

Westwind likewise believes that ATI is bound by its acceptance of the goods in good order despite a
finding that Case No. 03-245-42K/1 was partly torn and crumpled on one side. Westwind also notes
that the discovery that a piece of Frame Axle Sub without Lower was completely deformed and
misaligned came only on May 12, 1995 or 22 days after the cargoes were turned over to ATI and
after the same had been hauled by R.F. Revilla Customs Brokerage, Inc.

Westwind further argues that the CA erred in holding it liable considering that Philams cause of
action has prescribed since the latter filed a formal claim with it only on August 17, 1995 or four
months after the cargoes arrived on April 20, 1995. Westwind stresses that according to the
provisions of clause 20, paragraph 224 of the Bill of Lading as well as Article 36625 of the Code of
Commerce, the consignee had until April 20, 1995 within which to make a claim considering the
readily apparent nature of the damage, or until April 27, 1995 at the latest, if it is assumed that the
damage is not readily apparent.

Lastly, petitioner Westwind contests the imposition of 12% interest on the award of damages to
Philam reckoned from the time of extrajudicial demand. Westwind asserts that, at most, it can only
be charged with 6% interest since the damages claimed by Philam does not constitute a loan or
forbearance of money.

The Courts Ruling

The three consolidated petitions before us call for a determination of who between ATI and
Westwind is liable for the damage suffered by the subject cargo and to what extent. However, the
resolution of the issues raised by the present petitions is predicated on the appreciation of factual
issues which is beyond the scope of a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended. It is settled that in petitions for review on certiorari, only
questions of law may be put in issue. Questions of fact cannot be entertained.26

There is a question of law if the issue raised is capable of being resolved without need of reviewing
the probative value of the evidence. The resolution of the issue must rest solely on what the law
provides on the given set of circumstances. Once it is clear that the issue invites a review of the
evidence presented, the question posed is one of fact. If the query requires a re-evaluation of the
credibility of witnesses, or the existence or relevance of surrounding circumstances and their relation
to each other, the issue in that query is factual.27

In the present petitions, the resolution of the question as to who between Westwind and ATI should
be liable for the damages to the cargo and to what extent would have this Court pass upon the
evidence on record. But while it is not our duty to review, examine and evaluate or weigh all over
again the probative value of the evidence presented,28the Court may nonetheless resolve questions
of fact when the case falls under any of the following exceptions:

(1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of
fact are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of
the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to those of the trial court; (8) when the findings are conclusions
without citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioners main and reply briefs are not disputed by the respondent; and
(10) when the findings of fact are premised on the supposed absence of evidence and contradicted
by the evidence on record.29

In the cases at bar, the fifth and seventh exceptions apply. While the CA affirmed the joint liability of
ATI and Westwind, it held them liable only for the value of one unit of Frame Axle Sub without Lower
inside Case No. 03-245-42K/1. The appellate court disallowed the award of damages for the six
pieces of Frame Assembly with Bush, which petitioner Philam alleged, for the first time in its
Appellees Brief, to be likewise inside Case No. 03-245-42K/1. Lastly, the CA reduced the award of
attorneys fees to 47,671.

Foremost, the Court holds that petitioner Philam has adequately established the basis of its claim
against petitioners ATI and Westwind. Philam, as insurer, was subrogated to the rights of the
consignee, Universal Motors Corporation, pursuant to the Subrogation Receipt executed by the latter
in favor of the former. The right of subrogation accrues simply upon payment by the insurance
company of the insurance claim.30 Petitioner Philams action finds support in Article 2207 of the Civil
Code, which provides as follows:

Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract complained
of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or
the person who has violated the contract. x x x.

In their respective comments31 to Philams Formal Offer of Evidence,32 petitioners ATI and Westwind
objected to the admission of Marine Certificate No. 708-8006717-4 and the Subrogation Receipt as
documentary exhibits "B" and "P," respectively. Petitioner Westwind objects to the admission of both
documents for being hearsay as they were not authenticated by the persons who executed them.
For the same reason, petitioner ATI assails the admissibility of the Subrogation Receipt. As regards
Marine Certificate No. 708-8006717-4, ATI makes issue of the fact that the same was issued only on
April 27, 1995 or 12 days after the shipment was loaded on and transported via S/S "Calayan Iris."

The nature of documents as either public or private determines how the documents may be
presented as evidence in court. Public documents, as enumerated under Section 19,33 Rule 132 of
the Rules of Court, are self-authenticating and require no further authentication in order to be
presented as evidence in court.34

In contrast, a private document is any other writing, deed or instrument executed by a private person
without the intervention of a notary or other person legally authorized by which some disposition or
agreement is proved or set forth. Lacking the official or sovereign character of a public document, or
the solemnities prescribed by law, a private document requires authentication35 in the manner
prescribed under Section 20, Rule 132 of the Rules:

SEC. 20. Proof of private document. Before any private document offered as authentic is received
in evidence, its due execution and authenticity must be proved either:

(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.

Any other private document need only be identified as that which it is claimed to be.

The requirement of authentication of a private document is excused only in four instances,


specifically: (a) when the document is an ancient one within the context of Section 21,36 Rule 132 of
the Rules; (b) when the genuineness and authenticity of the actionable document have not been
specifically denied under oath by the adverse party; (c) when the genuineness and authenticity of
the document have been admitted; or (d) when the document is not being offered as genuine.37
Indubitably, Marine Certificate No. 708-8006717-4 and the Subrogation Receipt are private
documents which Philam and the consignee, respectively, issue in the pursuit of their business.
Since none of the exceptions to the requirement of authentication of a private document obtains in
these cases, said documents may not be admitted in evidence for Philam without being properly
authenticated.

Contrary to the contention of petitioners ATI and Westwind, however, Philam presented its claims
officer, Ricardo Ongchangco, Jr. to testify on the execution of the Subrogation Receipt, as follows:

ATTY. PALACIOS

Q How were you able to get hold of this subrogation receipt?

A Because I personally delivered the claim check to consignee and have them receive the said
check.

Q I see. Therefore, what you are saying is that you personally delivered the claim check of Universal
Motors Corporation to that company and you have the subrogation receipt signed by them
personally?

A Yes, sir.

Q And it was signed in your presence?

A Yes, sir.38

Indeed, all that the Rules require to establish the authenticity of a document is the testimony of a
person who saw the document executed or written. Thus, the trial court did not err in admitting the
Subrogation Receipt in evidence despite petitioners ATI and Westwinds objections that it was not
authenticated by the person who signed it.

However, the same cannot be said about Marine Certificate No. 708-8006717-4 which
Ongchangcho, Jr. merely identified in court. There is nothing in Ongchangco, Jr.s testimony which
indicates that he saw Philams authorized representative sign said document, thus:

ATTY. PALACIOS

Q Now, I am presenting to you a copy of this marine certificate 708-8006717-4 issued by Philam
Insurance Company, Inc. to Universal Motors Corporation on April 15, 1995. Will you tell us what
relation does it have to that policy risk claim mentioned in that letter?

A This is a photocopy of the said policy issued by the consignee Universal Motors Corporation.

ATTY. PALACIOS

I see. May I request, if Your Honor please, that this marine risk policy of the plaintiff as submitted by
claimant Universal Motors Corporation be marked as Exhibit B.

COURT
Mark it.39

As regards the issuance of Marine Certificate No. 708-8006717-4 after the fact of loss occurred,
suffice it to say that said document simply certifies the existence of an open insurance policy in favor
of the consignee. Hence, the reference to an "Open Policy Number 9595093" in said certificate. The
Court finds it completely absurd to suppose that any insurance company, of sound business
practice, would assume a loss that has already been realized, when the profitability of its business
rests precisely on the non-happening of the risk insured against.

Yet, even with the exclusion of Marine Certificate No. 708-8006717-4, the Subrogation Receipt, on
its own, is adequate proof that petitioner Philam paid the consignees claim on the damaged goods.
Petitioners ATI and Westwind failed to offer any evidence to controvert the same. In Malayan
Insurance Co., Inc. v. Alberto,40 the Court explained the effect of payment by the insurer of the
insurance claim in this wise:

We have held that payment by the insurer to the insured operates as an equitable assignment to the
insurer of all the remedies that the insured may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out
of, any privity of contract. It accrues simply upon payment by the insurance company of the
insurance claim. The doctrine of subrogation has its roots in equity. It is designed to promote and
accomplish justice; and is the mode that equity adopts to compel the ultimate payment of a debt by
one who, in justice, equity, and good conscience, ought to pay.41

Neither do we find support in petitioner Westwinds contention that Philams right of action has
prescribed.

The Carriage of Goods by Sea Act (COGSA) or Public Act No. 521 of the 74th US Congress, was
accepted to be made applicable to all contracts for the carriage of goods by sea to and from
Philippine ports in foreign trade by virtue of Commonwealth Act (C.A.) No. 65.42 Section 1 of C.A. No.
65 states:

Section 1. That the provisions of Public Act Numbered Five hundred and twenty-one of the Seventy-
fourth Congress of the United States, approved on April sixteenth, nineteen hundred and thirty-six,
be accepted, as it is hereby accepted to be made applicable to all contracts for the carriage of goods
by sea to and from Philippine ports in foreign trade: Provided, That nothing in the Act shall be
construed as repealing any existing provision of the Code of Commerce which is now in force, or as
limiting its application.

The prescriptive period for filing an action for the loss or damage of the goods under the COGSA is
found in paragraph (6), Section 3, thus:

(6) Unless notice of loss or damage and the general nature of such loss or damage be given in
writing to the carrier or his agent at the port of discharge before or at the time of the removal of the
goods into the custody of the person entitled to delivery thereof under the contract of carriage, such
removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the
bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the
delivery.

Said notice of loss or damage maybe endorsed upon the receipt for the goods given by the person
taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their receipt been
the subject of joint survey or inspection.

In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the date when the goods should
have been delivered: Provided, That if a notice of loss or damage, either apparent or concealed, is
not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper
to bring suit within one year after the delivery of the goods or the date when the goods should have
been delivered.

In the Bill of Lading43 dated April 15, 1995, Rizal Commercial Banking Corporation (RCBC) is
indicated as the consignee while Universal Motors is listed as the notify party. These designations
are in line with the subject shipment being covered by Letter of Credit No. I501054, which RCBC
issued upon the request of Universal Motors.

A letter of credit is a financial device developed by merchants as a convenient and relatively safe
mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who
refuses to part with his goods before he is paid, and a buyer, who wants to have control of his goods
before paying.44 However, letters of credit are employed by the parties desiring to enter into
commercial transactions, not for the benefit of the issuing bank but mainly for the benefit of the
parties to the original transaction,45 in these cases, Nichimen Corporation as the seller and Universal
Motors as the buyer. Hence, the latter, as the buyer of the Nissan CKD parts, should be regarded as
the person entitled to delivery of the goods. Accordingly, for purposes of reckoning when notice of
loss or damage should be given to the carrier or its agent, the date of delivery to Universal Motors is
controlling.

S/S "Calayan Iris" arrived at the port of Manila on April 20, 1995, and the subject cargoes were
discharged to the custody of ATI the next day. The goods were then withdrawn from the CFS
Warehouse on May 11, 1995 and the last of the packages delivered to Universal Motors on May 17,
1995. Prior to this, the latter filed a Request for Bad Order Survey46 on May 12,1995 following a joint
inspection where it was discovered that six pieces of Chassis Frame Assembly from two bundles
were deformed and one Front Axle Sub without Lower from a steel case was dented. Yet, it was not
until August 4, 1995 that Universal Motors filed a formal claim for damages against petitioner
Westwind.

Even so, we have held in Insurance Company of North America v. Asian Terminals, Inc. that a
request for, and the result of a bad order examination, done within the reglementary period for
furnishing notice of loss or damage to the carrier or its agent, serves the purpose of a claim. A claim
is required to be filed within the reglementary period to afford the carrier or depositary reasonable
opportunity and facilities to check the validity of the claims while facts are still fresh in the minds of
the persons who took part in the transaction and documents are still available.47 Here, Universal
Motors filed a request for bad order survey on May 12, 1995, even before all the packages could be
unloaded to its warehouse.

Moreover, paragraph (6), Section 3 of the COGSA clearly states that failure to comply with the notice
requirement shall not affect or prejudice the right of the shipper to bring suit within one year after
delivery of the goods. Petitioner Philam, as subrogee of Universal Motors, filed the Complaint for
damages on January 18, 1996, just eight months after all the packages were delivered to its
possession on May 17, 1995. Evidently, petitioner Philams action against petitioners Westwind and
ATI was seasonably filed.
This brings us to the question that must be resolved in these consolidated petitions. Who between
Westwind and ATI should be liable for the damage to the cargo?

It is undisputed that Steel Case No. 03-245-42K/1 was partly torn and crumpled on one side while it
was being unloaded from the carrying vessel. The damage to said container was noted in the Bad
Order Cargo Receipt48dated April 20, 1995 and Turn Over Survey of Bad Order Cargoes dated April
21, 1995. The Turn Over Survey of Bad Order Cargoes indicates that said steel case was not
opened at the time of survey and was accepted by the arrastre in good order. Meanwhile, the Bad
Order Cargo Receipt bore a notation "B.O. not yet t/over to ATI." On the basis of these documents,
petitioner ATI claims that the contents of Steel Case No. 03-245-42K/1 were damaged while in the
custody of petitioner Westwind.

We agree.

Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them. Subject to
certain exceptions enumerated under Article 173449 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in the possession of,
and received by the carrier for transportation until the same are delivered, actually or constructively,
by the carrier to the consignee, or to the person who has a right to receive them.50

The court a quo, however, found both petitioners Westwind and ATI, jointly and severally, liable for
the damage to the cargo. It observed that while the staff of ATI undertook the physical unloading of
the cargoes from the carrying vessel, Westwinds duty officer exercised full supervision and control
over the entire process. The appellate court affirmed the solidary liability of Westwind and ATI, but
only for the damage to one Frame Axle Sub without Lower.

Upon a careful review of the records, the Court finds no reason to deviate from the finding that
petitioners Westwind and ATI are concurrently accountable for the damage to the content of Steel
Case No. 03-245-42K/1.

Section 251 of the COGSA provides that under every contract of carriage of goods by the sea, the
carrier in relation to the loading, handling, stowage, carriage, custody, care and discharge of such
goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities
set forth in the Act. Section 3 (2)52 thereof then states that among the carriers responsibilities are to
properly load, handle, stow, carry, keep, care for and discharge the goods carried.53

At the trial, Westwinds Operation Assistant, Menandro G. Ramirez, testified on the presence of a
ship officer to supervise the unloading of the subject cargoes.

ATTY. LLAMAS

Q Having been present during the entire discharging operation, do you remember who else were
present at that time?

A Our surveyor and our checker the foreman of ATI.

Q Were there officials of the ship present also?

A Yes, sir there was an officer of the vessel on duty at that time.54
xxxx

Q Who selected the cable slink to be used?

A ATI Operation.

Q Are you aware of how they made that selection?

A Before the vessel arrived we issued a manifesto of the storage plan informing the ATI of what type
of cargo and equipment will be utilitized in discharging the cargo.55

xxxx

Q You testified that it was the ATI foremen who select the cable slink to be used in discharging, is
that correct?

A Yes sir, because they are the one who select the slink and they know the kind of cargoes because
they inspected it before the discharge of said cargo.

Q Are you aware that the ship captain is consulted in the selection of the cable sling?

A Because the ship captain knows for a fact the equipment being utilized in the discharge of the
cargoes because before the ship leave the port of Japan the crew already utilized the proper
equipment fitted to the cargo.56(Emphasis supplied.)

It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under
the custody of the carrier.57 The Damage Survey Report58 of the survey conducted by Phil. Navtech
Services, Inc. from April 20-21, 1995 reveals that Case No. 03-245-42K/1 was damaged by ATI
stevedores due to overtightening of a cable sling hold during discharge from the vessels hatch to
the pier. Since the damage to the cargo was incurred during the discharge of the shipment and while
under the supervision of the carrier, the latter is liable for the damage caused to the cargo.

This is not to say, however, that petitioner ATI is without liability for the damaged cargo.

The functions of an arrastre operator involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and the ships tackle. Being the custodian of
the goods discharged from a vessel, an arrastre operators duty is to take good care of the goods
and to turn them over to the party entitled to their possession.59

Handling cargo is mainly the arrastre operators principal work so its drivers/operators or employees
should observe the standards and measures necessary to prevent losses and damage to shipments
under its custody.60

While it is true that an arrastre operator and a carrier may not be held solidarily liable at all
times,61 the facts of these cases show that apart from ATIs stevedores being directly in charge of the
physical unloading of the cargo, its foreman picked the cable sling that was used to hoist the
packages for transfer to the dock. Moreover, the fact that 218 of the 219 packages were unloaded
with the same sling unharmed is telling of the inadequate care with which ATIs stevedore handled
and discharged Case No. 03-245-42K/1.
With respect to petitioners ATI and Westwinds liability, we agree with the CA that the same should
be confined to the value of the one piece Frame Axle Sub without Lower.

In the Bad Order Inspection Report62 prepared by Universal Motors, the latter referred to Case No.
03-245-42K/1 as the source of said Frame Axle Sub without Lower which suffered a deep dent on its
buffle plate. Yet, it identified Case No. 03-245-51K as the container which bore the six pieces Frame
Assembly with Bush. Thus, in Philams Complaint, it alleged that "the entire shipment showed one
(1) pc. FRAME AXLE SUB W/O LWR from Case No. 03-245-42K/1 was completely deformed and
misaligned, and six (6) other pcs. of FRAME ASSEMBLY WITH BUSH from Case No. 03-245-51K
were likewise completely deformed and misaligned."63 Philam later claimed in its Appellees Brief that
the six pieces of Frame Assembly with Bush were also inside the damaged Case No. 03-245-42K/1.

However, there is nothing in the records to show conclusively that the six Frame Assembly with
Bush were likewise contained in and damaged inside Case No. 03-245-42K/1. In the Inspection
Survey Report of Chartered Adjusters, Inc., it mentioned six pieces of chassis frame assembly with
deformed body mounting bracket. However, it merely noted the same as coming from two bundles
with no identifying marks.

Lastly, we agree with petitioner Westwind that the CA erred in imposing an interest rate of 12% on
the award of damages. Under Article 2209 of the Civil Code, when an obligation not constituting a
loan or forbearance of money is breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum.64 In the similar case of Belgian
Overseas Chartering and Shipping NV v. Philippine First Insurance Co., lnc.,65 the Court reduced the
rate of interest on the damages awarded to the carrier therein to 6% from the time of the filing of the
complaint until the finality of the decision.

WHEREFORE, the Court AFFIRMS with MODIFICATION the Decision dated October 15,2007 and
the Resolution dated January 11, 2008 of the Court of Appeals in CA-G.R. CV No. 69284 in that the
interest rate on the award of 190,684.48 is reduced to 6% per annum from the date of extrajudicial
demand, until fully paid.

With costs against the petitioners in G.R. No. 181163 and G.R. No. 181319, respectively.

SO ORDERED.

MARTIN S. VILLARAMA, JR.


Associate Justice
#34

SECOND DIVISION

G.R. No. 189532 June 11, 2014

VIRGINIA S. DIO and H.S. EQUITIES, LTD., Petitioners,


vs.
SUBIC BAY MARINE EXPLORATORIUM, INC., represented by its Chairman and Chief
Executive Officer, TIMOTHY DESMOND, Respondents.

DECISION

PEREZ, J.:

This is a Petition for Review on Certiorari1 pursuant to Rule 45 of the Revised Rules of Court,
assailing the 3 April 2009 Order2 of the Regional Trial Court (RTC) of Balanga City, Bataan, on pure
question of law. In its assailed Order, the RTC denied the motion filed by petitioners to set their
counterclaims for hearing on the ground that the main case was already dismissed with finality by
the Court of Appeals in CA-G.R. CV No. 87117.

In an Order3 dated 26 August 2009, the RTC refused to reconsider its earlier disposition.

The Facts
Petitioner H.S. Equities, Ltd., (HSE) is a foreign corporation duly organized and existing under the
laws of the British Virgin Islands, with registered address at Akara Building, 24 De Castro Street,
Wickhams Cay I, Road Town, Tortola, British Virgin Islands. It entered into an isolated transaction
subject of the instant case. It is represented in this action by petitioner Virginia S. Dio (Dio).

Respondent Subic Bay Marine Exploratorium, Inc. (SBME) is a domestic corporation, duly organized
and existing under the Philippine laws and is represented in this action by its Chief Executive Officer,
respondent Timothy Desmond (Desmond).

In 2002, SBME decided to expand its business by operating a beach resort inside the property
administered by the Subic Bay Metropolitan Authority (SBMA). For the business venture to take off,
SBME needed to solicit investors who are willing to infuse funds for the construction and operation of
the beach resort project. HSE (formerly known as Westdale Assets Limited) thru its authorized
director, Dio, agreed to invest the amount of US$2,500,000.00 with SBME by purchasing 750,000
common shares with a par value of 100 per share from the increase in its authorized capital stock.
The agreement was reduced into writing wherein HSE, in order to protect its interest in the company,
was afforded minority protection rights such as the right to appoint a member of the board of
directors and the right to veto certain board resolutions. After HSE initially paid US$200,000.00 for
its subscription, it refused to further lay out money for the expansion project of the SBME due to the
alleged mismanagement in the handling of corporate funds.

Consequently, SBME initiated an intra-corporate dispute before the RTC of Balanga City, Bataan
against petitioners HSE and Dio.4 Before petitioners could file their answer to the complaint,
respondents impleaded its Corporate Secretary, Atty. Winston Ginez, as additional defendant. In
their Amended Complaint5 docketed as Civil Case No. 7572, SBME essentially alleged that HSE
unjustly refused to pay the balance of its unpaid subscription effectively jeopardizing the companys
expansion project. Apart from their refusal to honor their obligation under the subscription contract, it
was further alleged by SBME that Dio tried to dissuade local investors and financial institutions from
putting in capital to SBME by imputing defamatory acts against Desmond. To protect the interest of
the corporation and its stockholders, SBME sought that petitioners be enjoined from committing acts
inimical to the interest of the company.

To refute the claims of respondents, petitioners maintained in their Answer with Compulsory
Counterclaim6 that it would be highly preposterous for them to dissuade investors and banks from
putting in money to SBME considering that HSE and Dio are stakeholders of the company with
substantial investments therein. In turn, petitioners countered that their reputation and good name in
the business community were tarnished as a result of the filing of the instant complaint, and thus
prayed that they be indemnified in the amount of US$2,000,000.00 as moral damages. Constrained
to litigate to protect their rights, petitioners asked that they be indemnified in the amount
of1,000,000.00 in litigation expenses. Petitioners likewise sought to recover their investment of
US$1,500,000.00 since they were purportedly inveigled by Desmond into putting in money to SBME
under the pretext that they will be accorded with minority protection rights. It was alleged that after
the filing of the instant complaint, Desmond, in collusion with other Board of Directors of SBME,
managed to unjustly deny HSE and Dio their rights under the Subscription Agreement. To curb
similar socially abhorrent actions, petitioners prayed that SBME and its Board of Directors, namely,
Desmond, John Corcoran, Gaile Laule and Gregorio Magdaraog, be jointly and severally held liable
to pay exemplary damages in the amount of US$2,000,000.00.

After petitioners filed their Answer with Compulsory Counterclaim, the RTC, instead of setting the
case for pre-trial, issued an Order7 dated 15 August 2005 motu proprio dismissing Civil Case No.
7572. The dismissal was grounded on the defective certificate of non-forum shopping which was
signed by Desmond without specific authority from the Board of Directors of SBME.
Armed with a board resolution specifically authorizing Desmond to sign the certificate of non-forum
shopping on behalf of SBME, respondents moved that Civil Case No. 7572 be reinstated and further
proceedings thereon be conducted. A copy of such authority was attached by respondents to their
Motion for Reconsideration.

For lack of merit, RTC denied respondents motion and affirmed the dismissal in an Order8 dated 22
September 2005. In refusing to reinstate respondents complaint, the court a quo ruled that the
belated submission of a board resolution evidencing Desmonds authority to bind the corporation did
not cure the initial defect in the complaint and declared that strict compliance with procedural rules is
enjoined for the orderly administration of justice.

Aggrieved by the lower courts refusal to reinstate their complaint, respondents elevated the matter
before the Court of Appeals assailing the propriety of the 15 August 2005 and 22 September 2005
RTC Orders via Petition for Review which was docketed as CA-G.R. CV No. 87117.

For failure of the respondents to file their appellants brief, the appellate court proceeded to dismiss
CA-G.R.CV No. 87117 and considered the case closed and terminated in its Resolution9 dated 2
January 2007.

After respondents failed to seasonably move for the reconsideration of the aforementioned
Resolution, the dismissal of CA-G.R. CV No. 87117 became final and executory, as shown in the
Entry of Judgment10 dated 3 May 2007.

The procedural incidents before the appellate court having been resolved with finality, petitioners
went back to the RTC to file a motion to set their counterclaims for hearing11 which was opposed by
the respondents on the ground that the filing of the compulsory counterclaims was not accompanied
by payment of the required docket fees precluding the court from acquiring jurisdiction over the
case.12

Acting on the motions filed by the opposing parties, the RTC, in an Order13 dated 3 April 2009
granted the motion of the respondents, thereby directing the dismissal of petitioners counterclaims
but not on the ground of non-payment of docket fees. In disallowing petitioners counterclaims to
proceed independently of respondents complaint, the lower court pointed out that in view of the
dismissal of the main case, which has already been affirmed with finality by the appellate court, it
has already lost its jurisdiction to act on petitioners counterclaim, the compulsory counterclaim being
merely ancillary to the principal controversy.

In an Order14 dated 26 August 2009, the RTC refused to reconsider its earlier disposition. Petitioners
filed this instant Petition for Review on Certiorari15 on pure question of law seeking the reversal of the
3 April 2009 and 26 August 2009 RTC Orders on the ground that:

THE TRIAL COURT COMMITTED AN ERROR OF LAW WHEN IT REFUSED TO SET


[PETITIONERS] COUNTERCLAIMS FOR HEARING ON THE GROUND THATTHE CASE WAS
DEEMED "CLOSED AND TERMINATED" BYTHE COURT OF APPEALS AFTER THE LATTER
DISMISSED RESPONDENTS APPEAL BECAUSE OF THEIR FAILURE TOFILE THEIR
APPELLANTS BRIEF.16

The Courts Ruling

Petitioners argue that despite the dismissal of the main case, the counterclaim may still remain for
independent adjudication under Section 6, Rule 16 of the Revised Rules of Court.17 Petitioners
pointed out that while the dismissal of respondents complaint is a confirmation of Desmonds lack of
legal personality to file the case, this does not, however, mean that they also do not have the
qualification to pursue their counterclaim. To fault petitioners for the fatal infirmity in the respondents
complaint would not only work injustice to the former but would result to an absurd situation where
the fate of their counterclaims is placed entirely in the hands of the respondents.

For their part, respondents posit that, in directly assailing the adverse RTC Orders before the Court,
petitioners erroneously availed themselves of an erroneous remedy arguing that this petition should
have been initially filed with the appellate court. By seeking relief directly from the Court, petitioners
ignored the judicial hierarchy warranting the peremptory dismissal of their petition. Unless special
and important reasons were clearly and specifically set out in the petition, and in this case it was not,
a direct invocation of this Courts original jurisdiction may not be allowed.

The established policy of strict observance of the judicial hierarchy of courts, as a rule, requires that
recourse must first be made to the lower ranked court exercising concurrent jurisdiction with a higher
court. A regard for judicial hierarchy clearly indicates that petitions for the issuance of extraordinary
writs against first level courts should be filed in the RTC and those against the latter should be filed
in the Court of Appeals. The rule is not iron-clad, however, as it admits of certain exceptions.18

Thus, a strict application of the rule is unnecessary when cases brought before the appellate courts
do not involve factual but purely legal questions.19 In fact, Rule 41, Section 2(c)20 of the Revised
Rules of Court provides that a decision or order of the RTC may as it was done in the instant case,
be appealed to the Supreme Court by petition for review on certiorari under Rule 45, provided that
such petition raises only questions of law.

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 the 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 whole situation.21 Thus, the test of whether a question is
one of law or of fact is not the appellation given to such question by the party raising the same;
rather, it is whether the appellate court can determine the issue raised without reviewing or
evaluating the evidence, in which case, it is a question of law; otherwise it is a question of fact.22

Petitioners here raise the solitary issue of the propriety of the dismissal of their counterclaim on the
basis of the reasoning of the lower court that the counterclaim derives its jurisdictional support from
the complaint which has already been dismissed. Petitioners maintain that the court a quo erred in
arriving at the legal conclusion that the counterclaim can no longer stand for independent
adjudication after the main case was already dismissed with finality. In order to resolve this issue,
the Court need only to look into the pleadings, depositions, admissions, and affidavits submitted by
the respective parties without going into the truth or falsity of such documents. Consequently, the
petitioners remedy for assailing the correctness of the dismissal of their counterclaims, involving as
it does a pure question of law, indeed lies with this Court. Now to the issue of the propriety of the
dismissal of the counterclaim.

The dismissal of the complaint resulted from respondents failure to append to the complaint a copy
of the board resolution authorizing Desmond to sign the certificate of non-forum shopping on behalf
of SBME. The subsequent dismissal of the counterclaim, in turn, erroneously proceeded from the
ratio that since the main action has already been dismissed with finality by the appellate court, the
lower court has lost its jurisdiction to grant any relief under the counterclaim.
In the significant case of Pinga v. Heirs of German Santiago,23 this Court speaking through Justice
Dante Tinga, resolved the nagging question as to whether or not the dismissal of the complaint
carries with it the dismissal of the counterclaim. Putting to rest the remaining confusion occasioned
by Metals Engineering Resources Corp. v. Court of Appeals24 and BA Finance Corporation v.
Co,25 the Court articulated that, in light of the effectivity of the 1997 Rules of Civil Procedure, the
correct and prevailing doctrine is as follows:

To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the
amended Rule17, those previous jural doctrines that were inconsistent with the new rules
incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar as incidents
arising after the effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the
doctrine that a counterclaim may be necessarily dismissed along with the complaint, clearly conflicts
with the 1997 Rules of Civil Procedure. The abandonment of BA Finance as doctrine extends as far
back as 1997, when the Court adopted the new Rules of Civil Procedure. If, since then, such
abandonment has not been affirmed in jurisprudence, it is only because no proper case has arisen
that would warrant express confirmation of the new rule. That opportunity is here and now, and we
thus rule that the dismissal of a complaint due to fault of the plaintiff is without prejudice to the right
of the defendant to prosecute any pending counterclaims of whatever nature in the same or separate
action. We confirm that BA Finance and all previous rulings of the Court that are inconsistent with
this present holding are now abandoned.

xxxx

Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable disposition
of the counterclaims by ensuring that any judgment thereon is based on the merit of the
counterclaim itself and not on the survival of the main complaint. Certainly, if the counterclaim is
palpably without merit or suffers jurisdictional flaws which stand independent of the complaint, the
trial court is not precluded from dismissing it under the amended rules, provided that the judgment or
order dismissing the counterclaim is premised on those defects. At the same time, if the
counterclaim is justified, the amended rules now unequivocally protect such counterclaim from
peremptory dismissal by reason of the dismissal of the complaint.26 Reviewing the vacated position,
in Metals Engineering Resources Corp., severance of causes of action was not be permitted in order
to prevent circuity of suits and to avert the possibility of inconsistent rulings based on the same set of
facts, viz:

For all intents and purposes, such proposition runs counter to the nature of a compulsory
counterclaim in that it cannot remain pending for independent adjudication by the court. This is
because a compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its
jurisdictional support therefrom, inasmuch as it arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the complaint. It follows that if the court does
not have jurisdiction to entertain the main action of the case and dismisses the same, then the
compulsory counterclaim, being ancillary to the principal controversy, must likewise be dismissed
since no jurisdiction remained for any grant of relief under the counterclaim.

The aforementioned doctrine is in consonance with the primary objective of a counterclaim which is
to avoid and prevent circuity of action by allowing the entire controversy between the parties to be
litigated and finally determined in one action, wherever this can be done with entire justice to all
parties before the court. The philosophy of the rule is to discourage multiplicity of suits. It will be
1w phi 1

observed that the order of the trial court allowing herein private respondent to proceed with the
presentation of his evidence in support of the latter's counterclaim is repugnant to the very purpose
and intent of the rule on counterclaims.27
In BA Finance Corporation, we likewise refused to entertain the compulsory counterclaim after the
trial court lost its jurisdiction in the main case, thus:

The rule is that a compulsory counterclaim cannot "remain pending for independent adjudication by
the court." This is because a compulsory counterclaim is auxiliary to the proceeding in the original
suit and merely derives its jurisdictional support therefrom.

Thus, it necessarily follows that if the trial court no longer possesses jurisdiction to entertain the main
action of the case, as when it dismisses the same, then the compulsory counterclaim being ancillary
to the principal controversy, must likewise be similarly dismissed since no jurisdiction remains for the
grant of any relief under the counterclaim.28

As the rule now stands, the nature of the counterclaim notwithstanding, the dismissal of the
complaint does not ipso jure result in the dismissal of the counterclaim, and the latter may remain for
independent adjudication of the court, provided that such counterclaim, states a sufficient cause of
action and does not labor under any infirmity that may warrant its outright dismissal. Stated
differently, the jurisdiction of the court over the counterclaim that appears to be valid on its face,
including the grant of any relief thereunder, is not abated by the dismissal of the main action. The
courts authority to proceed with the disposition of the counterclaim independent of the main action is
premised on the fact that the counterclaim, on its own, raises a novel question which may be aptly
adjudicated by the court based on its own merits and evidentiary support.

In Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporartion,29 a case on all fours with the
present one, we expounded our ruling in Pinga and pointed out that the dismissal of the
counterclaim due to the fault of the plaintiff is without prejudice to the right of the defendant to
prosecute any pending counterclaims of whatever nature in the same or separate action, thus:
Based on the aforequoted ruling of the Court, if the dismissal of the complaint somehow eliminates
the cause of the counterclaim, then the counterclaim cannot survive. Conversely, if the counterclaim
itself states sufficient cause of action then it should stand independently of and survive the dismissal
of the complaint. Now, having been directly confronted with the problem of whether the compulsory
counterclaim by reason of the unfounded suit may prosper even if the main complaint had been
dismissed, we rule in the affirmative.

It bears to emphasize that petitioner's counterclaim against respondent is for damages and
attorney's fees arising from the unfounded suit. While respondent's Complaint against petitioner is
already dismissed, petitioner may have very well already incurred damages and litigation expenses
such as attorney's fees since it was forced to engage legal representation in the Philippines to
protect its rights and to assert lack of jurisdiction of the courts over its person by virtue of the
improper service of summons upon it. Hence, the cause of action of petitioner's counterclaim is not
eliminated by the mere dismissal of respondent's complaint.30 (Emphasis theirs).

Once more, we allow the counterclaim of the petitioners to proceed independently of the complaint
of the respondents.

WHEREFORE, premises considered, the petition is GRANTED. The assailed R TC Orders dated 3
April 2009 and 26 August 2009 are hereby REVERSED and SET ASIDE. The case is REMANDED
to the Regional Trial Court of Balanga City, Bataan for further proceedings, on the matter of
petitioners Virginia S. Dio and H.S. Equities, Ltd. 's counterclaims. No pronouncement as to costs.

SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice

#35

FIRST DIVISION

G.R. No. 207376 August 6, 2014

AIDA PADILLA, Petitioner,


vs.
GLOBE ASIATIQUE REALTY HOLDINGS CORPORATION, FILMAL REALTY CORPORATION,
DELFIN S. LEE and DEXTER L. LEE, Respondents.

DECISION

VILLARAMA, JR., J.:

Assailed in this petition for review under Rule 45 are the Orders1 dated November 12, 2012 denying
the motion to set the counterclaim for pre-trial and May 8, 2013 denying petitioner's motion for
reconsideration, issued by the Regional Trial Court (RTC) of Pasig City, Branch 155 in Civil Case
No. 73132.

Factual Antecedents

From the years 2005 to 2008, Philippine National Bank (PNB) entered into several Contracts to Sell
(CTS) Facility Agreements2 with respondents Globe Asiatique Realty Holdings Corporation (Globe
Asiatique) and Filmal Realty Corporation (Filmal) represented by Delfin S. Lee and Dexter L. Lee,
President and Vice-President, respectively, of the two corporations. PNB thereby agreed to make
available toGlobe Asiatique and Filmal CTS Facility in the amount not exceeding Two Hundred
Million Pesos (200,000,000.00) to finance the purchase of certain Accounts Receivables or the in-
house installment receivables of respondents arising from the sale of subdivision houses in their real
estate/housing projects as evidenced by contracts to sell. These availments werelater increased to a
total amount of One Billion Two Hundred Million Pesos (1,200,000,000.00).3

Pursuant to and as a condition for the CTS Facility availments, respondents executed in favor of
PNB several Deeds of Assignment4 covering accounts receivables in the aggregate amount of One
Billion One Hundred Ninety-Five Million Nine Hundred Twenty-Six Thousand Three Hundred Ninety
Pesos and Seventy-two centavos (1,195,926,390.72). In the said instruments, respondents
acknowledged the total amount of One Billion Three Hundred Ninety FiveMillion Six Hundred Sixty-
Five Thousand Five Hundred Sixty-FourPesos and Sixty-nine centavos (1,395,665,564.69)
released to themby PNB in consideration of the aforesaid accounts receivables.5

Sometime in the first quarter of 2010, respondents defaulted in the payment of their outstanding
balance and delivery to PNB of transfer certificates of title corresponding to the assigned accounts
receivables, for which PNB declared them in default under the CTS Facility Agreements.
Subsequently, respondents made partial payments and made proposals for paying in full its
obligation to PNB as shown in the exchange of correspondence between respondents and PNB.

In a letter dated August 5, 2010,6 PNB made a formal and final demand upon respondents to
pay/settle the total amount of 974,377,159.10 representing their outstanding obligation.In the
course of credit monitoring and verification, PNB claimed it discovered 231 out of 240 Contracts to
Sell to have either inexistent addresses ofbuyers or the names of the buyers are non-existent or
both.

Thereafter, PNB instituted Civil Case No. R-PSY-10-04228-CV (Philippine National Bank v. Globe
Asiatique Realty Holdings Corporation, Filmal Realty Corporation, Delfin S. Lee and Dexter L. Lee)
for recovery of sum of money and damages with prayerfor writ of preliminary attachment before the
RTC of Pasay City.

In their complaint, PNB alleged in detail the fraudulent acts and misrepresentations committed by
respondents in obtaining PNBs conformity to the CTS Facility Agreements and the release of
various sums to respondents in the total amountof 974,377,159.10. PNB accused respondents of
falsely representing that they have valid and subsisting contracts to sell, which evidently showed
they had no intention to pay their loan obligations. The Verification and Certification of Non-Forum
Shopping attached to the complaint was signed byPNBs Senior Vice-president of the Remedial
Management Group, Aida Padilla, who likewise executed an "Affidavit in Support of the Application
for the Issuance of the Writ of Preliminary Attachment."

Proceedings in the Pasay


City RTC (Civil Case No.
R-PSY-10-04228-CV)

On August 25, 2010, the Pasay City RTC issued an Order7 granting PNBs application for issuance
of preliminary attachment after finding that defendants Globe Asiatique and Filmal "through the
active participation or connivance/conspiracy of defendants Delfin and Dexter Lee from the revealing
evidence presented by plaintiff are guilty of fraud in contracting their outstanding loan applications to
plaintiff Philippine National Bank (PNB)."8 The writ of preliminary attachment was accordingly issued
on August 27, 2010 after PNB complied withthe posting of attachment bond as ordered by the court.9
Defendants Delfin Lee and DexterLee filed their Answer with Counterclaim with motion to
dismiss,arguing that PNB has no cause of action against them as there is nothing in the CTS Facility
Agreements that suggest they are personally liable or serve as guarantors for Globe Asiatique and
Filmal, and that they were just sued as signatories of the CTS Facility Agreements. They likewise
filed a motion to discharge preliminary attachment.10

Defendants Globe Asiatique and Filmalalso filed their Answer with Counterclaim denying PNBs
allegationsof fraud and misrepresentation particularly after PNB had accepted payments from the
corporations. In their motion to discharge preliminary attachment, Globe Asiatique and Filmal
asserted that the allegations of fraud in the complaint are without basis and no proof was presented
by plaintiff on the existence of preconceived fraud and lack of intention to pay their obligations, citing
their timely payments made to PNB. They further assailed the affidavit executed by Aida Padilla who
they claimed has no personal knowledge of the subject transactions and there being no allegation of
threat or possibility that defendant corporations will dispose oftheir properties in fraud of their
creditors.11

In its Order12 dated April 29, 2011, the Pasay City RTC denied defendants motion to dismiss,
motions to discharge preliminary attachment and to expunge or suspend proceedings, as well as
PNBs motion to expunge.

In succession, the parties in Civil Case No. R-PSY-10-04228-CV filed the following motions:

1) Defendants Motion for Reconsideration of the Order dated April 29, 2011 filed on May 27,
2011;

2) Plaintiffs Motion to Set Case for Pre-trial Conference filed on June 8, 2011;

3) Plaintiffs Motion for Summary Judgment filed on June 28, 2011;

4) Defendants Motion for Leave to Admit Attached Amended Answer with Compulsory
Counterclaim filed on July 12, 2011;

5) Defendants Omnibus Motion (a) to discharge the writ of attachment on the ground of
newly discovered evidence; (b) set preliminary hearing on affirmative defenses pleaded in
the amended answer; (c) issue preliminary attachment against plaintiff on account of fraud in
incurring the obligation as alleged in the amended answer; and (d) render partial summary
judgment on the compulsory counterclaim, filed on July 26, 2011;

6) Defendants Motion for Reconsideration of the Order dated July 29, 2011, with Motion to
Continue with the Proceedings Involving Defendants Omnibus Motion, filed on August 31,
2011; 7) Defendants Motion to Set for Hearing their earlier motion to discharge the writ of
attachment filed on January 24, 2012; and

8) Plaintiffs Motion to Expunge defendants Reply (on defendants motion to set hearing)
filed on April 30, 2012.

Meanwhile, and before the Pasay City RTC could act upon the foregoing motions, defendants Globe
Asiatique, Filmal, Delfin S. Lee and Dexter L. Lee filed on August 10, 2011 a complaint13 for
Damages in the RTC of Pasig City, Branch 155 docketed as Civil Case No. 73132.

On May 18, 2012, the Pasay City RTC issued an Order14 resolving the pending motions, as follows:
WHEREFORE, the motion for reconsideration of the Order dated 27 May 2011 is denied insofar as
the prayer to reconsider denial of the motion to dismiss. However, the prayer to expunge the
Manifestation filed on 26 November 2010 is granted thus, the Manifestation is expunged.

The motion for leave and to admit amended answer is denied. The motion for reconsideration of the
Order dated 29 July 2011 is likewise denied. The other prayers in the omnibus motion to set
preliminary hearing of affirmative defenses in the amended answer, issuance of preliminary
attachment based thereon and for partial summary judgment on the compulsory counterclaims in the
amended answer are denied. Plaintiffs motion to expunge defendants reply is likewise denied.

Hearing on plaintiffs motion for summary judgment is set on 19 June 2012 at 8:30 a.m., while
hearing on defendants motion to discharge the writ of preliminary attachmentis set on 26 June 2012
at 8:30 a.m.

Action on plaintiffs motion to set the case for pre-trial is deferred until after resolution of the motion
for summary judgment.

SO ORDERED.15

Pasig City RTC Case


(Civil Case No. 73132)

In their Complaint against Judge Pedro De Leon Gutierrez and Aida Padilla (both sued in their
personal capacity), respondents claimed that Globe Asiatique and Filmal are well-known and
successful real estate developers whose projects were "being continuously supported by various
banks and other financial institutions prior to the malicious and devastating unfounded civil action"
filed by AidaPadilla (petitioner) which wrought havoc to their businesses and lives. As to the CTS
Facility Agreements with PNB, respondents alleged that these were already novated by the parties
who agreed upon a term loan starting May 31, 2010 and to expire on April 30, 2012. But despite her
knowledge of such novation and that the obligation was not yet due and demandable, petitioner with
malice and evident bad faith still executed a "perjured" Affidavit in support of the application for writ
of preliminary attachment before the Pasay City RTC. Respondents likewise sought to hold Judge
Gutierrez personally liable for issuing the writ of preliminary attachment in favor of PNB
notwithstanding that the obligation subject of PNBs complaint was sufficiently secured by the value
of realproperties sold to it by virtue of the CTS Facility Agreements and deeds ofassignment of
accounts receivables.

They further contended that Judge Gutierrez blindly approved the attachment bond offered by PNBs
sister company, PNB General Insurers Company, Inc. despite the fact that from its submitted
documents, said insurers authorized capital stock isonly 400 million while its paid-up capital is only
312.6 million, which is way below the 974,377,159.10 attachment bond it issued.

Respondents thus prayed for a judgment ordering petitioner and Judge Gutierrez to pay moral
damages, exemplary damages, litigation expenses, attorneys fees and cost of suit.

Judge Gutierrez moved to dismiss16 the complaint against him on the following grounds: (1)
respondents haveno cause of action against him; and (2) the Pasig City court has no jurisdiction
over the case and his person, movant being of co-equal and concurrent jurisdiction.

Petitioner filed her Answer With Compulsory Counterclaims,17 praying for the dismissal of
respondents complaint on the following grounds: (1) submission of a false certification of non-forum
shopping by respondents and their blatant commission of willful, deliberate and contumacious forum
shopping (respondents failed to disclose a criminal complaint entitled "Tbram Cuyugan v. Aida
Padilla and Members of the Board of Directors of PNB", docketed as I.S. No. XV-13-INV-11-H-01208
pending before the office of the CityProsecutor of Pasay City); (2) litis pendentia; (3) respondents
failure to attach the alleged actionable document, i.e.the supposed "new term loan", inviolation of
Section 7, Rule 8 of the Rules of Court; (4) failure to state a cause of action against petitioner; and
(5) petitioner cannot be held personally liable for her official acts done for and in behalf of PNB.

On January 5, 2012, petitioner filed a motion for preliminary hearing on affirmative defenses,
contending that respondents are parroting the very same arguments raised and relying on the same
evidence they presented before the Pasay City RTC to establish the alleged novation and purported
insufficiency of the attachment bond,which issues are still pending in the said court. It was thus
stressed that respondents are evidently guilty of forum shopping.18

Respondents filed their Comment/Opposition,19 arguing that there is nothing in their complaint that
would slightly suggest they are asking the Pasig City RTC to issue any injunction or otherwise issue
an order setting aside the writ of preliminary attachmentissued by the Pasay City RTC, and neither
did they ask for a ruling on whether said writ is illegal or whether Judge Gutierrez committed a grave
abuse of discretion.They asserted that what they seek from the Pasig City RTC is to allow them to
recover damages from Judge De Leon for his tortious action in approving PNBs attachment bond.
They also insisted that forum shopping and litis pendentiaare absent in this case, contrary to
petitioners claims. Respondents likewise opposed20 the motion to dismiss filed by Judge Gutierrez,
citing this Courts ruling in J. King & Sons Company, Inc. v. JudgeAgapito L. Hontanosas, Jr.21 in
support of their position that the separate complaint before another forum against the judge for his
actionable wrong in a pending case before him can proceed independently without necessarily
interfering with the courts jurisdiction, as what happened in the said case where the judge was
merely penalized for gross misconduct and gross ignorance of the law without actually invalidating
the judges order approving the counter-bond without reviewing the documents presented.

In her Reply,22 petitioner reiterated her previous arguments and additionally contended that in any
event, there is no basis for respondents claim for damages arising from the issuance of the writ of
preliminary attachment before the Pasay City RTC considering that PNBGEN Bond No. SU-JC14-
HO-10-0000001-00 is valid and sufficient to secure and answer for whatever damages respondents
may have suffered by reason of such issuance should it be finally decided that PNB was not entitled
to the said bond.

On April 2, 2012, the RTC of Pasig City issued an Order23 dismissing Civil Case No. 73132 for lack of
jurisdiction.

On May 7, 2012, petitioner filed a Motion to Set Counterclaims for Pre-Trial Conference.24

On October 22, 2012, the Pasig CityRTC denied respondents motion for reconsideration of the April
2, 2012 Order dismissing their complaint.25 Respondents filed a Notice of Appeal26 under Section
1(a), Rule 41 of the Rules of Court.

On November 12, 2012, the Pasig City RTC issued the first questioned Order, which reads:

xxxx

Records show that this Court, through then Acting Presiding Judge Amorfina Cerrado-Cezar, issued
an Order dated April 2, 2012, dismissing the case on the ground that issues involved in this case
already impinge upon the validity of the Order dated August 25, 2010 and Writ of Attachment dated
August 27, 2010 issued by the Regional Trial Court, Branch 119, Pasay City, a court of concurrent
and coordinate jurisdiction, in Civil Case No. R-PSY-10-04228 entitled "Philippine National Bank vs.
Globe Asiatique Realty Holdings Corp. et al." The ruling in said Order dated April 2, 2012, was
affirmed by this Court per its Order dated October 22, 2012, whereby it reiterated that acting on the
plaintiffs Complaint is a brazen violation of the principle of judicial stability, which essentially states
that the judgment or order of a court of competent jurisdiction may not be interfered with by any court
of concurrent jurisdiction for the simple reason that the power to open, modify or vacate the said
order is not only possessed but is restricted to the court in which the judgment or order is rendered
or issued. (Cojuangco vs. Villegas, 184 SCRA 374)

The foregoing principles are equally applicable to the counterclaims of Aida Padilla. Indeed, to hear
the counterclaims of defendant Aida Padilla will open the door, so to speak, for the plaintiffs to
interpose as ostensibledefenses its claims regarding the alleged illegality of the aforesaid orders and
writ of attachment issued by the RTC of Pasay City. In effect this Court will be forced to dwell upon
issues involving the pending civil case in the RTC Branch 199, Pasay City, thereby interfering, albeit
indirectly, with said issues.This is precisely the very evil which the Court sought to avoid when it
dismissed the plaintiffs complaint. Therefore, upholding once more the principle of judicial stability,
this Court is impelled to refuse to hear the counterclaims of defendant Padilla.

WHEREFORE, premises considered, the instant Motion filed by defendant Aida Padilla is DENIED
without prejudice to the re-filing of defendant Aida Padillas causes of action against herein plaintiffs
after final resolution of Civil Case No. R-PSY-10-04228 entitled "Philippine National Bank vs. Globe
Asiatique Realty Holdings Corp, et al."

SO ORDERED. (Emphasis supplied.)

Petitioners motion for reconsideration was likewise denied under the second assailed Order27 dated
May 8, 2013, as follows:

xxxx

Defendant Padilla argues that this Court has jurisdictional competence and authority to resolve her
counterclaims notwithstanding the dismissal of the Complaint dated August 10, 2011 for violation of
the principle of judicial stability. The resolution of her compulsory counterclaims will not require this
Court to look into or pass upon the validity of the acts of the Regional Trial Court of Pasay City,
Branch 119 in issuing the Writ of Attachment dated August 27, 2010. Defendant Padillas
counterclaims arose directly from the malicious filing by the plaintiffs of the Complaint and are
compulsory counterclaims which must be raised and resolved in the same action as the Complaint.

The Court remains unpersuaded of the propriety of proceeding to hear defendant Padillas
counterclaims.

As movant herself stated, the grant of her counterclaim calls for the determination of the issue of
whether or not herein plaintiffs had maliciously filed the above-entitled Complaint against
defendants. Necessarily, the Court in threshing out such issue would be constrained to rule on
whether the plaintiffs filed their complaint with a sinister design knowing fully wellthat their cause of
action was baseless. Thus, the Court would have to pass upon the veracity or genuineness of
plaintiffs claims thatthey were unjustly injured by the orders and processes issued by RTC Branch
119, Pasay City, in Civil Case No. R-PSY-10-04228entitled "Philippine National Bank vs. Globe
Asiatique Realty Holdings Corp. et al." Hence, whatever ruling this Court may arrive at on said
issues would inevitably impinge upon matters already pending before the RTC Branch 119, Pasay
City.
Once more, under the principle of juridical stability, the Court is constrained to refuse to hear
defendant Padillas counterclaims. Verily, this Court cannot allow itself to interfere either directly,
as desired by plaintiff, or indirectly, as defendant Padilla would have it with the acts of a co-equal
court.

WHEREFORE, premises considered, the instant Motion for Reconsideration filed by defendant Aida
Padilla is hereby DENIED without prejudice to the re-filing of defendant Aida Padillas causes of
action against herein plaintiffs after resolution of Civil Case No. R-PSY-10-04228 entitled "Philippine
National Bank vs. Globe Asiatique Realty Holdings Corp. et al."

SO ORDERED. (Emphasis supplied.)

The Petition

Petitioner came directly to this Court raising the primordial legal issue of whether or not a court can
take cognizance of a compulsory counterclaim despite the fact that the corresponding complaint was
dismissed for lack of jurisdiction.

The present petition was de-consolidated from seven other petitions involving respondents and their
transactions with Home Development Mutual Fund, as well as the pending criminal complaints
arising therefrom.28

The Courts Ruling

Before we resolve the legal question presented, we first address the issue of propriety of petitioners
resort to Rule 45.

Respondents are incorrect in arguing that petitioner adopted the wrong mode of appeal, stating that
the remedy from the dismissal of her counterclaims without prejudice is a petition for certiorari under
Rule 65 and not an appeal under Rule 45.

There is no dispute with respect to the fact that when an appeal raises only pure questions of law,
this Court has jurisdiction to entertain the same.29 Section 1, Rule 45 of the 1997 Rules of Civil
Procedure, as amended, 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.

In Republic v. Sunvar Realty Development Corporation,30 this Court held:

Respondent Sunvar argued that petitioners resort to a Rule 45 Petition for Review on
Certioraribefore this Court is an improper mode of review of the assailed RTC Decision. Allegedly,
petitioners should have availed themselves of a Rule 65 Petition instead, since the RTC Decision
was an order of dismissal of the Complaint, from which no appeal can be taken except by a certiorari
petition.

The Court is unconvinced of the arguments of respondent Sunvar and holds that the resortby
petitioners to the present Rule 45 Petition is perfectly within the bounds of our procedural rules.
As respondent Sunvar explained, noappeal may be taken from an order of the RTC dismissing an
action without prejudice, but the aggrieved party may file a certiorari petition under Rule 65.
Nevertheless, the Rules do not prohibit any of the parties fromfiling a Rule 45 Petition with this
Court, in case only questions of law are raised or involved. This latter situation was one that
petitioners found themselves in when they filed the instant Petition to raise only questions of law. In
Republic v. Malabanan, the Court clarified the three modes of appeal from decisions of the RTC, to
wit: (1) by ordinary appeal or appeal by writ of error under Rule 41, whereby judgment was rendered
in a civil or criminal action by the RTC in the exercise of its original jurisdiction; (2) by a petition for
review under Rule 42, whereby judgment was rendered by the RTC in the exercise of its appellate
jurisdiction; and (3) by a petition for review on certioraribefore the Supreme Court under Rule 45.
"The first mode of appeal istaken to the [Court of Appeals] on questions of fact or mixed questions of
fact and law. The second mode of appeal is brought to the CA on questions of fact, of law, or mixed
questions of fact and law. The third mode of appeal is elevated to the Supreme Court only on
questions of law." (Emphasis supplied.)

There is a question of law when the issue does not call for an examination of the probative value of
the evidence presented or of the truth or falsehood of the facts being admitted, and the doubt
concerns the correct application of law and jurisprudence on the matter. The resolution of the issue
must rest solely on what the law provides on the given set of circumstances.

In the instant case, petitioners raise only questions of law with respect to the jurisdiction of the RTC
to entertain a certioraripetition filed against the interlocutory order of the MeTC in an unlawful
detainer suit. At issue in the present case is the correct application of the Rules on Summary
Procedure; or, more specifically, whether the RTC violated the Rules when it took cognizance and
granted the certioraripetition against the denial by the MeTC of the Motion to Dismiss filed by
respondent Sunvar. This is clearly a question of law that involves the proper interpretation of the
Rules on Summary Procedure. Therefore, the instant Rule 45 Petition has been properly lodged with
this Court.

In this case, petitioner raises the lone issue of whether the Pasig City RTC was correct in refusing to
hear her counterclaims after the dismissal of respondents complaint for lack of jurisdiction. Said
issue involves the proper interpretation of the 1997 Rules of Civil Procedure, as amended,
specifically on whether the dismissal of the complaint automatically results in the dismissal of
counterclaims pleaded by the defendant. Since this is clearly a question of law, petitioner
appropriately filed in thisCourt a Rule 45 petition.

On the lone issue raised in the petition, we rule for the petitioner.

A counterclaim is any claim which a defending party may have against an opposing party.31 It is in
the nature of a cross-complaint; a distinct and independent cause of action which, though alleged in
the answer, is not part of the answer.32

Counterclaims may be either compulsory or permissive. Section 7, Rule 6 of the 1997 Rules of Civil
Procedure provides:

SEC. 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.
In this case, petitioners counterclaim for damages raised in her answer before the Pasig City RTC
iscompulsory, alleging suffering and injury caused to her as a consequence of the unwarranted filing
of the baseless complaint filed byrespondents. Said court, however, dismissed her counterclaim
upon the same ground of lackof jurisdiction as its resolution supposedly would entail passing upon
the validity of orders and processes still pending before the Pasay City RTC. In Metals Engineering
Resources Corp. v. Court of Appeals,33 we reversed the trial courts order allowing private
respondent to proceed with the presentation of his evidence in support of his counterclaim after the
complaint was dismissed for not paying the correct docket fee and hence the trial court did not
acquire jurisdiction over the case. We held that if the court does not have jurisdiction to entertain the
main action of the case and dismisses the same, then the compulsorycounterclaim, being ancillary
to the principal controversy, must likewise be dismissed since no jurisdiction remained for any grant
of relief under the counterclaim.34

Under the 1997 Rules of Civil Procedure, it is now explicitly provided that the dismissal of the
complaint due tofailure of the plaintiff to prosecute his case is "without prejudice to the rightof the
defendant to prosecute his counterclaim in the same or in a separate action."35 The effect of this
amendment on previous rulings on whether the dismissal of a complaint carries with it the dismissal
of the counterclaims as well, was discussed in the case of Pinga v. The Heirs of German
Santiago,36 thus:

Similarly, Justice Feria notes that "the present rule reaffirms the right of the defendant to move for
the dismissal of the complaint and to prosecute his counterclaim, as stated in the separate opinion
[of Justice Regalado in BA Finance.] Retired Court of Appeals Justice Herrera pronounces that the
amendment to Section 3, Rule 17 settles that "nagging question" whether the dismissal of the
complaint carries with it the dismissal of the counterclaim, and opines that by reason of the
amendments, the rulings in Metals Engineering, International Container, and BA Finance"may be
deemed abandoned." On the effect of amendment to Section 3, Rule 17, the commentators are in
general agreement, although there is less unanimity of views insofar as Section 2, Rule 17 is
concerned.

To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the
amended Rule 17, those previous jural doctrines that were inconsistent with the new rules
incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar as incidents
arising after the effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the
doctrine that a counterclaim may be necessarily dismissed along with the complaint, clearly conflicts
with the 1997 Rules of Civil Procedure. The abandonment of BA Financeas doctrine extends as far
back as 1997, when the Court adopted the new Rules of Civil Procedure. we thus rule that the
dismissal of a complaint due to fault of the plaintiff is without prejudice to the right of the defendant to
prosecute any pending counterclaims ofwhatever nature in the same or separate action. We confirm
that BA Financeand all previous rulings of the Court that are inconsistent with this present holding
are now abandoned. (Emphasis supplied.)

Subsequently, in Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corporation37 this Court held that
while the declaration in Pinga refers to instances covered by Section 3, Rule 17 on dismissal of
complaints due to the fault of plaintiff, it does not preclude the application of the same rule when the
dismissal was upon the instance of defendant who correctly argued lack of jurisdiction over its
person.Further, in stark departure from Metals Engineering, we declared that the courts jurisdiction
over respondents complaint is not to be confusedwith jurisdiction over petitioners counterclaim, viz:

.Petitioner seeks to recover damages and attorneys fees as a consequence of the unfounded
suitfiled by respondent against it. Thus, petitioners compulsory counterclaim isonly consistent with
its position that the respondent wrongfully filed a case against it and the RTC erroneously exercised
jurisdiction over its person.

Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of the RTC over
respondents complaint and over petitioners counterclaim while it may have no jurisdiction over
the former, it may exercise jurisdiction over the latter. The compulsory counterclaim attached to
petitioners Answer ad cautelamcan be treated as a separate action, wherein petitioner is the plaintiff
while respondent is the defendant. Petitioner could have instituted a separate action for the very
same claims but, for the sake of expediency and to avoid multiplicity of suits, it chose to demand the
samein Civil Case No. MC99-605. Jurisdiction of the RTC over the subject matter and the parties in
the counterclaim must thus be determined separately and independently from the jurisdiction of the
samecourt in the same case over the subject matter and the parties in respondents
complaint.38 (Emphasis supplied.)

Still anchored on the pronouncement in Pinga, we then categorically ruled that a counterclaim
arising from the unfounded suit may proceed despite the dismissal of the complaint for lack of
jurisdiction over the person of defendant-counterclaimant, thus:

Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the situation wherein the
very filing of the complaint by the plaintiff against the defendant caused the violation of the latters
rights. As to whether the dismissal of such a complaint should also include the dismissal of the
counterclaim, the Court acknowledged that said matter is still debatable, viz:

Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint;
namely a cause (or causes) of action constituting an act or omission by which a party violates the
right of another. The main difference lies in that the cause of action in the counterclaim is maintained
bythe defendant against the plaintiff, while the converse holds true with the complaint. Yet, as with a
complaint, a counterclaim without a cause of action cannot survive.

x x x if the dismissal of the complaint somehow eliminates the cause(s) of the counterclaim, then the
counterclaim cannot survive. Yet that hardly is the case, especially as a general rule. More often
than not, the allegations that form the counterclaim are rooted in an act or omission of the plaintiff
other than the plaintiffs very act of filing the complaint. Moreover, such acts or omissions imputed to
the plaintiff are often claimed to have occurred prior to the filing of the complaint itself.The only
apparent exception to thiscircumstance is if it is alleged in the counterclaim that the very act of the
plaintiff in filing the complaint precisely causes the violation of the defendants rights. Yet even in
such an instance, it remains debatable whether the dismissal or withdrawal of the complaint is
sufficient to obviate the pending cause of action maintained by the defendant against the plaintiff.

Based on the aforequoted ruling of the Court, if the dismissal of the complaint somehow eliminates
the cause of the counterclaim, then the counterclaim cannot survive. Conversely, if the counterclaim
itself states sufficient cause of action then it should stand independently of and survive the dismissal
of the complaint. Now, having been directly confronted with the problem of whether the compulsory
counterclaim by reason of the unfounded suit may prosper even if the maincomplaint had been
dismissed, we rule in the affirmative.

It bears to emphasize that petitioners counterclaim against respondent is for damages and
attorneys fees arising from the unfounded suit. While respondents Complaint against petitioner is
already dismissed, petitioner may have very well already incurred damages and litigation expenses
such as attorneys fees since it was forced to engage legal representation in the Philippines to
protect its rights and to assert lack of jurisdiction of the courts over its person by virtue of the
improper service of summons upon it. Hence, the cause of action of petitioners counterclaim is not
eliminated by the mere dismissal of respondents complaint.

It may also do well to rememberthat it is this Court which mandated that claims for damages and
attorneys fees based on unfounded suit constitute compulsory counterclaim which must be pleaded
in the same action or, otherwise, it shall be barred. It will then be iniquitous and the height of
injustice to require the petitioner to make the counterclaim in the present action, under threat of
losing his right to claim the same ever again in any other court, yet make his right totally dependent
on the fate of the respondents complaint.

If indeed the Court dismisses petitioners counterclaim solely on the basis of the dismissal of
respondents Complaint, then what remedy is left for the petitioner? It can be said that he can still file
a separate action to recover the damages and attorneys fees based on the unfounded suit for he
cannot be barred from doing so since he did file the compulsory counterclaim in the present action,
only that it was dismissed when respondents Complaint was dismissed. However, this reasoning is
highly flawed and irrational considering that petitioner, already burdened by the damages and
attorneys fees itmay have incurred in the present case, must again incur more damages and
attorneys fees in pursuing a separate action, when, in the first place, it should not have been
involved in any case at all.

Since petitioners counterclaim iscompulsory in nature and its cause of action survives that of the
dismissal of respondents complaint, then it should be resolved based on its own merits and
evidentiary support.39 (Additional emphasis supplied.)

The above ruling was applied in Rizal Commercial Banking Corporation v. Royal Cargo
Corporation40 where we granted petitioners prayer for attorneys fees under its Compulsory
Counterclaim notwithstanding the dismissal of the complaint.

In the present case, the RTC of Pasig City should have allowed petitioners counterclaim to proceed
notwithstanding the dismissal of respondents complaint, the same being compulsory in nature and
with its cause not eliminated by such dismissal.It bears stressing that petitioner was hailed to a
separate court (Pasig City RTC) even while the dispute between PNB and respondents was still
being litigated, and she already incurred expenses defending herself, having beensued by
respondents in her personal capacity. The accusations hurled against her were serious (perjury and
misrepresentation in executing the affidavit in support of the application for writ of attachment before
the Pasay City RTC) with hints at possible criminal prosecution apart from that criminal complaint
already lodged in the Pasig City Prosecutors Office. The Pasig City RTC clearly erred in refusing to
hear the counterclaims upon the same ground for dismissal of the complaint, i.e.,lack of jurisdiction
in strictobservance of the policy against interference with the proceedings of a co-equal court.

Respondents contend that if petitioner is allowed to prove her counterclaims before the Pasay City
RTC, they have no choice but to justify their action in filing their case beforethe Pasig City RTC by
going back to the allegations in their complaint that they are merely vindicating themselves against
the perjured affidavit executed by petitioner which led to the issuance of the illegal orders of the
Pasay City RTC that resulted to the damage and injury sustained by respondents. Obviously,
respondents are invoking the same principle of judicialstability which we find inapplicable insofar as
petitioners counterclaim arising from respondents unfounded suit. As petitioner set forth in her
Compulsory Counterclaim, there is actually no necessity for the Pasig City RTC, in ruling on the
merits of the counterclaim, to pass upon the validity ofthe writ of attachment and related orders
issued by the Pasay City RTC. Precisely, petitioner faulted the respondents in prematurely, and in a
contumacious act of forum shopping, filing a separate damage suit when there is no final judicial
determination yet of any irregularity in the attachment proceedings before the Pasay City RTC.
5.95. In this regard, it must be noted that in filing the present suit, plaintiffs goal is to have the
Honorable Court reexamine and review the pronouncements made by defendant JudgeGutierrez in
the Pasay case.

With all due respect, the Honorable Court certainly has no such power over the Pasay Court which is
a co-equal court. While the power to determine whether or not a judgment or order is unjust is a
judicial function, the hierarchy of courts should be respected:

"To belabor the obvious, the determination of whether or not a judgment or order is unjust or was
(or was not) rendered within the scope of the issuing judges authority, or that the judge had
exceeded his jurisdiction and powers or maliciously delayed the disposition of a case is an
essentially judicial function, lodged by existing law and immemorial practice in a hierarchy of courts
and ultimately in the highest court of the land. To repeat, no other entity or official of the
Government, not the prosecution or investigation service or any other branch, nor any functionary
thereof, has competence to review a judicial order or decision whether final and executory or not
and pronounce it erroneous soas to lay the basis for a criminal or administrative complaint for
rendering an unjust judgment or order. That prerogative belongs to the courts alone." [Emphasis
supplied]

5.96. Accordingly, since there is no "final judicial pronouncement" yet on whether the filing of the
PNB Complaintand the issuance of the writ of preliminary attachment violate any law, neither is there
any basis for defendant Padilla to be held liable for damages on account of her official acts as Head
of the Remedial Management Group of PNB. 1wphi 1

5.97. Clearly, the filing of this baseless, if not contemptuous, suit is nothing but a continuation of
plaintiffs fraudulent attempt to evade the payment of undeniably due and demandable obligations.
Accordingly, the complaint against defendant Padilla should be dismissed for utter lack of
merit.41 (Emphasis supplied.)

Ironically, while it is the respondents who erroneously and maliciously asked the Pasig City RTC to
pass upon these issues still pending in a co-equal court, for which reason the said court dismissed
their complaint, petitioner was notallowed to prove her counterclaim by reason of the unfounded suit
in the same case aspurportedly it will entail verifying respondents claim that they were prejudiced by
the orders and processes in the Pasay City RTC. This situation exemplifies the rationale in Perkin
Elmer Singapore Pte Ltd.42 on requiring the petitioner to make the counterclaim in the present action,
under threat of losing such right to claim the same ever again any other court, yet make such right of
the petitioner totally dependent on the fate of the respondents complaint.

As fittingly expressed by petitioner in her Reply:

Pertinently, it is relevant to note that respondents never denied in their Commentthat the institution
of the case a quowas premature and violated the principle of judicial stability. Stated otherwise,
respondents admit that they are the ones who have invited the court a quo to interfere with the
rulings of the Pasay Court, which fortunately, the former refused to do so. To allow the respondents
to cite their own unlawful actions as a shield against the harm that they have inflicted upon petitioner
Padilla would indubitably allow the respondents to profit from their own misdeeds. With due respect,
this cannot be countenanced by the Honorable Court.43 WHEREFORE, the petition is GRANTED.
The Orders dated November 12, 2012 and May 8, 2013 of the Regional Trial Court of Pasig City,
Branch 155 in Civil Case No. 73132 are hereby REVERSED and SET ASIDE. Said court is hereby
directed to proceed with the presentation of evidence in support of the compulsory counterclaim of
petitioner Aida Padilla.
SO ORDERED.

MARTIN S. VILLARAMA, JR.


Associate Justice

#37

SECOND DIVISION

G.R. No. 193650 October 8, 2014

GEORGE PIDLIP P. PALILEO and JOSE DE LA CRUZ, Petitioners,


vs.
PLANTERS DEVELOPMENT BANK, Respondent.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the July 28, 2009 Amended Decision2 of the Court of
Appeals (CA) in CA-G.R. SP No. 01317-MIN, entitled "Planters Development Bank, Petitioner,
versus Hon. Eddie R. Roxas (in his capacity as the former Pairing Judge), Hon. Panambulan M
Mimbisa (in his capacity as the Presiding Judge of RTC, Branch 37, General Santos City), Sheriff
Marilyn P. Alano, Sheriff Ramon A. Castillo, George Philip P. Palileo, and Jose Dela Cruz,
Respondents," as well as its August 23, 2010 Resolution3 denying reconsideration of the assailed
amended judgment.

Factual Antecedents
In a June 15, 2006 Decision4 rendered by the Regional Trial Court (RTC) of General Santos City,
Branch 37, in an action for specific performance/sum of money with damages docketed as Civil
Case No. 6474 and entitled "George Philip P. Palileo and Jose Dela Cruz, Plaintiffs, versus, Planters
Development Bank, Engr. Edgardo R. Torcende, Arturo R. delos Reyes, Benjamin N. Tria, Mao
Tividad and Emmanuel Tesalonia, Defendants," it was held thus:

Before this Court is a complaint for specific performance and/or sum of money and damages with
prayer for the issuance of writs of preliminary attachment and preliminary injunction filed by Plaintiff
George Philip Palileo and Jose L. Dela Cruz against Engr. Edgardo R. Torcende, Planters
Development Bank (defendant Bank), Arturo R. Delos Reyes, Benjamin N. Tria, Mao Tividad, and
Emmanuel Tesalonia on 22 December 1998.

After summons together with the verified Complaint and its annexes were duly served upon
defendants, the latter answered. During Pre-Trial conference defendant Bank manifested [its]
intention of settling the case amicably and several attempts to explore the said settlement [were]
made as per records of this case. In the last pre-trial hearing dated 17 November 2000, only
plaintiffs[,] George Philip Palileo and Jose L. Dela Cruz[,] and their counsel appeared, thus, the latter
move [sic] for the presentation of evidence ex-parte, which was granted by the Court with the
reservation of verifying the return card [to determine] whether the order for the pre-trial was indeed
received by defendants. Finally, [at the] 21 November 2001 hearing, x x x defendants [again] failed
to appear and their failure to file pre-trial brief was noted; thus [plaintiffs were] allowed to present
evidence ex-parte before the Clerk of Court.

xxxx

IN LIGHT OF THE FOREGOING, defendants are hereby ORDERED to jointly and severally PAY
plaintiffs as follows:

i) Actual Damages;

a) Plaintiff George Philip Palileo[,] the amount of Two Million Six Hundred Five
Thousand Nine [sic] Seventy Two Pesos and Ninety Two Centavos (2,605,972.92),
with 12% compounded interest [per annum] reckoned from the filing of this case until
full settlement thereof;

b) Plaintiff Jose R. Dela Cruz[,] the amount of One Million Five Hundred Twenty Nine
Thousand Five Hundred Eight Thousand [sic] and Eighty Centavos (1,529,508.80),
with 12% compounded interest [per annum] reckoned from the filing of this case until
full settlement thereof;

ii) Moral damages in the amount of Five Hundred Thousand Pesos (500,000.00) each;

iii) Exemplary Damages in the amount of Five Hundred Thousand Pesos (500,000.00)
each;

iv) Attorneys Fees in the amount of Five Hundred Thousand [Pesos] (500,000.00) each x x
x and to pay the costs.

SO ORDERED.5
Respondent Planters Development Bank (PDB) received a copy of the RTC Decision on July 17,
2006.

On July 31, 2006, PDB filed by private courier service specifically LBC6 an Omnibus Motion for
Reconsideration and for New Trial,7 arguing therein that the trial courts Decision was based on
speculation and inadmissible and selfserving pieces of evidence; that it was declared in default after
its counsel failed to attend the pre-trial conference on account of the distance involved and difficulty
in booking a flight to General Santos City; that it had adequate and sufficient defenses to the
petitioners claims; that petitioners claims are only against its codefendant, Engr. Edgardo R.
Torcende [Torcende]; that the award of damages and attorneys fees had no basis; and that in the
interest of justice, it should be given the opportunity to cross-examine the petitioners witnesses, and
thereafter present its evidence.

Petitioners copy of the Omnibus Motion for Reconsideration and for New Trial was likewise sent on
July 31, 2006 by courier service through LBC, but in their address of record Tupi, South Cotabato
there was no LBC service at the time.

On August 2, 2006, PDB filed with the RTC another copy of the Omnibus Motion for Reconsideration
and for New Trial via registered mail; another copy thereof was simultaneously sent to petitioners by
registered mail as well.

Meanwhile, petitioners moved for the execution of the Decision pending appeal.

In an August 30, 2006 Order,8 the RTC denied the Omnibus Motion for Reconsideration and for New
Trial, while it granted petitioners motion for execution pending appeal, which it treated as a motion
for the execution of a final and executory judgment. The trial court held, as follows:

Anent the first motion, records show that the Omnibus Motion for Reconsideration and for New Trial
dated 28 July 2006 was initially filed via an LBC courier on 28 July 2006 and was actually received
by the Court on 31 July 2006, which was followed by filing of the same motion thru registered mail
on 2 August 2006. Said motion was set for hearing by the movant on 18 August 2006 or 16 days
after its filing.

The motion fails to impress. Section 5, Rule 159 of the 1997 Rules of Civil Procedure as amended is
pertinent thus:

Section 5. Notice of hearing. The notice of hearing shall be addressed to all parties concerned,
and shall specify the time and date of the hearing which must not be later than ten (10) days after
the filing of the motion. (Underscoring and italics supplied)

The aforesaid provision requires [that] every motion shall be addressed to all parties concerned, and
shall specify the time and date of the hearing NOT later than ten (10) days after the filing of the
motion. Being a litigated motion, the aforesaid rule should have been complied [with]. Its
noncompliance renders it defective.

[The] Rule is settled that a motion in violation thereof is pro forma and a mere scrap of paper. It
presents no question which the court could decide [upon]. In fact, the court has NO reason to
consider it[;] neither [does] the clerk of court [have] the right to receive the same. Palpably, the
motion is nothing but an empty formality deserving no judicial cognizance. Hence, the motion
deserves a short shrift and peremptory denial for being procedurally defective.
As such, it does not toll the running of the reglementary period thus making the assailed decision
final and executory. This supervening situation renders the Motion for Execution pending appeal
academic but at the same time it operates and could serve [as] well as a motion for execution of the
subject final and executory decision. Corollarily, it now becomes the ministerial duty of this Court to
issue a writ of execution thereon.

IN LIGHT OF THE FOREGOING, the Omnibus Motion for Reconsideration and New Trial is hereby
DENIED, and the Motion for Execution Pending Appeal (which is treated as a motion for execution of
a final and executory judgment) is also GRANTED as explained above. Accordingly, let A WRIT OF
EXECUTION be issued against herein defendants to enforce the FINAL and EXECUTORY Decision
dated 15 June 2006.

SO ORDERED.10

PDB received a copy of the above August 30, 2006 Order on September 14, 2006.11

On August 31, 2006, a Writ of Execution12 was issued. PDB filed an Urgent Motion to Quash Writ of
Execution,13arguing that it was prematurely issued as the June 15, 2006 Decision was not yet final
and executory; that its counsel has not received a copy of the writ; and that no entry of judgment has
been made with respect to the trial courts Decision. Later on, it filed a Supplemental Motion to
Quash Writ of Execution,14 claiming that the writ was addressed to its General Santos branch, which
had no authority to accept the writ.

On September 7, 2006, PDB filed a Notice of Appeal.15

In an October 6, 2006 Order,16 the RTC denied the motion to quash the writ of execution.

On October 9, 2006, the RTC issued a second Writ of Execution.17

Ruling of the Court of Appeals

On October 11, 2006, PDB filed with the CA an original Petition for Certiorari, which was later
amended,18 assailing 1) the trial courts August 30, 2006 Order which denied the omnibus motion
for reconsideration of the RTC Decision and for new trial; 2) its October 6, 2006 Order which
denied the motion to quash the writ of execution; and 3) the August 31, 2006 and October 9, 2006
writs of execution.

On May 31, 2007, the CA issued a Decision19 dismissing PDBs Petition for lack of merit. It sustained
the trial courts pronouncement, that by setting the hearing of the Omnibus Motion for
Reconsideration and for New Trial on August 18, 2006 or 16 days after its filing on August 2, 2006
PDB violated Section 5, Rule 15 of the Rules of Court which categorically requires that the notice
of hearing shall specify the time and date of the hearing which must not be later than 10 days after
the filing of the motion. Citing this Courts ruling in Bacelonia v. Court of Appeals,20 the CA declared
that the 10-day period prescribed in Section 5 is mandatory, and a motion that fails to comply
therewith is pro forma and presents no question which merits the attention and consideration of the
court.

The appellate court further characterized PDBs actions as indicative of a deliberate attempt to delay
the proceedings, noting that it did not timely move to reconsider the trial courts November 17, 2000
ruling21 allowing petitioners to present their evidence ex parte, nor did it move to be allowed to
present evidence in support of its defense. It was only after the RTC rendered its June 15, 2006
Decision that PDB moved to be allowed to cross-examine petitioners witnesses and to present its
evidence on defense.

The CA likewise held that the RTC did not err in ruling that the omnibus motion for reconsideration
did not toll the running of the prescriptive period, which thus rendered the June 15, 2006 Decision
final and executory. It noted as well that PDBs September 7, 2006 notice of appeal was tardy.

The CA found no irregularity with respect to the writs of execution, which contained the fallo of the
June 15, 2006 Decision of the RTC thus itemizing the amount of the judgment obligation.
Additionally, it held that the fact that the judgment debtors are held solidarily liable does not require
that the writs should be served upon all of the defendants; that it is not true that the sheriffs failed to
make a demand for the satisfaction of judgment upon PDB, as the mere presentation of the writ to it
operated as a demand to pay; and that PDB failed to attach the Sheriffs Return to its Petition, which
thus prevents the appellate court from resolving its claim that the writs were not validly served.

PDB filed a Motion for Reconsideration,22 arguing that Rule 15, Section 5 of the Rules of Court
should be relaxed in view of the fact that judgment against it was based on a technicality and not
on a trial on the merits; that there was no deliberate intention on its part to delay the proceedings;
that the court acted with partiality in declaring that the Omnibus Motion for Reconsideration and for
New Trial was pro forma; that its notice of appeal was timely; and that the writs of execution are null
and void.

On July 28, 2009, the CA made a complete turnaround and issued the assailed Amended Decision,
which decreed thus:

WHEREFORE, the motion for reconsideration is GRANTED. This Courts May 31, 2007 Decision is
SET ASIDE and a new one is rendered GRANTING the petition for certiorari. The trial courts Order
dated August 30, 2006 is SET ASIDE and the Writ of Execution issued by the trial court is
QUASHED. The trial court is ORDERED to hear and rule on the merits of petitioners "Omnibus
Motion for Reconsideration and New Trial."

SO ORDERED.23

The CA reversed its original finding that the Omnibus Motion for Reconsideration and for New Trial
was pro forma. This time, it held just the opposite, ruling that PDBs "tacit argument" that the
"distances involved in the case at bench call for a relaxation of the application of Section 5, Rule 15
of the Rules of Court" deserved consideration. It held that Section 5 should be read together with
Section 424 of the same Rule, thus:

When a pleading is filed and served personally, there is no question that the requirements in
Sections 4 and 5 of Rule 15 of the Revised Rules of Civil Procedure pose no problem to the party
pleading. Under this mode of service and filing of pleadings, the party pleading is able to ensure
receipt by the other party of his pleading at least three days prior to the date of hearing while at the
same time setting the hearing on a date not later than ten days from the filing of the pleading.

When, as in the case at bench, the address of the trial court as well as that of the opposing counsel
is too distant from the office of the counsel of the party pleading to personally effect the filing and
service of the pleading, the latter counsel faces a real predicament. In a perfect world with the best
postal service possible, it would be problematic enough to ensure that both requisites are fully met:
that opposing counsel receives the pleading at least three days before the date of hearing and that
the date of hearing is no more than ten days after the filing (mailing) of the pleading. But, as a matter
of fact, given the state of the postal service today a matter the Court takes judicial notice of the
party pleading often finds himself [locked] between the horns of a dilemma.

The case at bench presents the Court with the novel issue of whether the same rigid application of
the cited Sections-and-Rule is warranted when the filing and service of pleadings is by mail. The
Court is of the opinion that when confronted between [sic] the demands of sufficient notice and due
process on the one hand and the requirement that the date of hearing be set no later than ten days
from filing, the stringent application of the Rules is not warranted and a liberal posture is more in
keeping with Section 6, Rule 1 of the 1997 Rules of Civil Procedure which provides:

SECTION 6. Construction. - These Rules shall be liberally construed in order to promote their
objective of securing a just, speedy, and inexpensive disposition of every action and proceeding.25

The CA further sustained PDBs argument that since judgment against it was arrived at by mere
default or technicality, it is correspondingly entitled to a relaxation of the Rules, in line with the
principles of substantial justice. It likewise held that PDB counsels act of setting the hearing of the
Omnibus Motion for Reconsideration and for New Trial 16 days after its filing was an excusable
lapse; that no scheme to delay the case is evident from PDBs actions; that more telling is the trial
courts "blurring in cavalier fashion" the distinction between Sections 1 and 2 of Rule 39 of the Rules
of Court,26 as well as its unequal treatment of the parties from its strict application of Section 5, Rule
15 against respondent, while it bent backward to accommodate petitioners by converting the latters
motion for execution pending appeal into a motion for execution of a final and executor judgment.

Lastly, the appellate court concluded that the trial court committed grave abuse of discretion, which
thus warrants the grant of PDBs Petition for Certiorari.

Petitioners filed their Urgent Motion for Reconsideration,27 which the CA denied through its assailed
August 23, 2010 Resolution. Hence, the instant Petition.

Issues

Petitioners frame the issues involved in this Petition, as follows:

Being assailed herein is the refusal of the Court of Appeals, which is a patent error, for not giving
credence to petitioners-appellants arguments that the respondent-appellees special civil action for
certiorari before it is clearly devoid of merit as (i) the Decision dated June 15, 2006 of the RTC,
Branch 37, General Santos City had become final and executory before the special civil action for
Certiorari was filed before it which should have been dismissed outright, and which issue of "finality"
was never ruled upon, (ii) granting arguendo that a certiorari proceeding could still be had, the same
should be filed under Rule 45 instead of Rule 65 of the 1997 Rules of Civil Procedure, (iii) the
alleged attendant abuse of discretion on the part of the public respondent judges, even granting
arguendo that it exist [sic], were [sic] not grave but on the contrary were purely errors of judgment
and, (iv) the substantial and glaring defects of the petition in the special civil action for certiorari
before the Court of Appeals were consistently and clearly called to its attention but were unjustifiably
ignored by it.28

Petitioners Arguments

In their Petition and Reply,29 petitioners seek to reverse the assailed CA dispositions and to reinstate
the appellate courts original May 31, 2007 Decision, arguing that the trial courts June 15, 2006
Decision became final and executor on account of PDBs failure to timely file its Omnibus Motion for
Reconsideration and for New Trial, as it properly filed the same only on August 2, 2006 or beyond
the 15-day period allowed by the Rules of Court.

Petitioners argue that PDBs filing of its Omnibus Motion for Reconsideration and for New Trial on
July 31, 2006 by courier service through LBC was improper, since there was no LBC courier service
in Tupi, South Cotabato at the time; naturally, they did not receive a copy of the omnibus motion.
This is precisely the reason why PDB re-filed its omnibus motion on August 2, 2006 through
registered mail, that is, to cure the defective service by courier; but by then, the 15-day period within
which to move for reconsideration or new trial, or to file a notice of appeal, had already expired, as
the last day thereof fell on August 1, 2006 counting from PDBs receipt of the trial courts Decision
on July 17, 2006.

Petitioners add that PDBs notice of appeal which was filed only on September 7, 2006 was tardy
as well; that PDBs resort to an original Petition for Certiorari to assail the trial courts August 30,
2006 Order denying the Omnibus Motion for Reconsideration and for New Trial was improper, for as
provided under Section 9, Rule 37 of the Rules of Court,30 an order denying a motion for new trial or
reconsideration is not appealable, the remedy being an appeal from the judgment or final order; that
certiorari was resorted to only to revive PDBs appeal, which was already lost; and that it was merely
a face-saving measure resorted to by PDB to recover from its glaring blunders, as well as to delay
the execution of the RTC Decision. They also assert that certiorari is not an available remedy, since
PDB did not file a motion for reconsideration with respect to the other assailed orders of the trial
court.

Petitioners maintain as well that the CA erred in relaxing the application of the Rules of Court as to
PDB, a banking institution with adequate resources to engage counsel within General Santos City
and not relegate Civil Case No. 6474 to its Manila lawyers who are thus constrained by the distance
involved.

Respondents Arguments

Seeking the denial of the Petition, PDB in its Comment31 maintains that the CA did not err in
declaring that its Omnibus Motion for Reconsideration and for New Trial was not pro forma; that
there are justifiable grounds to move for reconsideration and/or new trial; that it had no intention to
delay the proceedings; that it was correct for the appellate court to relax the application of Section 5,
Rule 15; and that the CA is correct in finding that the trial court committed grave abuse of discretion
in misapplying the Rules and in exhibiting partiality.

Our Ruling

The Court grants the Petition.

The proceedings in the instant case would have been greatly abbreviated if the court a quo and the
CA did not overlook the fact that PDBs Omnibus Motion for Reconsideration and for New Trial was
filed one day too late. The bank received a copy of the trial courts June 15, 2006 Decision on July
17, 2006; thus, it had 15 days or up to August 1, 2006 within which to file a notice of appeal,
motion for reconsideration, or a motion for new trial, pursuant to the Rules of Court.32 Yet, it filed the
omnibus motion for reconsideration and new trial only on August 2, 2006.

Indeed, its filing or service of a copy thereof to petitioners by courier service cannot be
trivialized. Service and filing of pleadings by courier service is a mode not provided in the
1wphi1

Rules.33 This is not to mention that PDB sent a copy of its omnibus motion to an address or area
which was not covered by LBC courier service at the time. Realizing its mistake, PDB re-filed and re-
sent the omnibus motion by registered mail, which is the proper mode of service under the
circumstances. By then, however, the 15-day period had expired.

PDBs Notice of Appeal, which was filed only on September 7, 2006, was tardy; it had only up to
August 1, 2006 within which to file the same. The trial court therefore acted regularly in denying
PDBs notice of appeal.

Since PDBs Omnibus Motion for Reconsideration and for New Trial was filed late and the 15-day
period within which to appeal expired without PDB filing the requisite notice of appeal, it follows that
its right to appeal has been foreclosed; it may no longer question the trial courts Decision in any
other manner. "Settled is the rule that a party is barred from assailing the correctness of a judgment
not appealed from by him."34 The "presumption that a party who did not interject an appeal is
satisfied with the adjudication made by the lower court"35 applies to it. There being no appeal taken
by PDB from the adverse judgment of the trial court, its Decision has become final and can no longer
be reviewed, much less reversed, by this Court. "Finality of a judgment or order becomes a fact upon
the lapse of the reglementary period to appeal if no appeal is perfected, and is conclusive as to the
issues actually determined and to every matter which the parties might have litigated and have x x x
decided as incident to or essentially connected with the subject matter of the litigation, and every
matter coming within the legitimate purview of the original action both in respect to matters of claim
and of defense."36 And "[i]n this jurisdiction, the rule is that when a judgment becomes final and
executory, it is the ministerial duty of the court to issue a writ of execution to enforce the
judgment;"37 "execution will issue as a matter of right x x x (a) when the judgment has become final
and executory; (b) when the judgment debtor has renounced or waived his right of appeal; [or] (c)
when the period for appeal has lapsed without an appeal having been filed x x x."38

Neither can the Court lend a helping hand to extricate PDB from the effects of its mistake; indeed,
PDB erred more than once during the course of the proceedings. For one, it did not attempt to set
right its failure to appear during pre-trial, which prompted the court to allow petitioners to present
evidence ex parte and obtain a favorable default judgment. Second, assuming for the sake of
argument that it timely filed its Omnibus Motion for Reconsideration and for New Trial, it nonetheless
violated the ten-day requirement on the notice of hearing under Section 5 of Rule 15. Third, even
before it could be notified of the trial courts resolution of its omnibus motion on September 14, 2006
assuming it was timely filed, it filed a notice of appeal on September 7, 2006 which thus implies
that it abandoned its bid for reconsideration and new trial, and instead opted to have the issues
resolved by the CA through the remedy of appeal. If so, then there is no Omnibus Motion for
Reconsideration and for New Trial that the trial court must rule upon; its August 30, 2006 Order thus
became moot and academic and irrelevant. "[W]here [an action] or issue has become moot and
academic, there is no justiciable controversy, so that a declaration thereon would be of no practical
use or value."39

Fourth, instead of properly pursuing its appeal to free itself from the unfavorable effects of the trial
courts denial of its notice of appeal, PDB chose with disastrous results to gamble on its Omnibus
Motion for Reconsideration and for New Trial by filing an original Petition for Certiorari to assail the
trial courts denial thereof. Time and again, it has been said that certiorari is not a substitute for a lost
appeal, especially if ones own negligence or error in ones choice of remedy occasioned such loss.40

What remains relevant for this Court to resolve, then, is the issue relative to the trial courts October
6, 2006 Order which denied the motion to quash the writ of execution and the August 31, 2006
and October 9, 2006 writs of execution. The Court observes that the October 6, 2006 Order and the
August 31, 2006 and October 9, 2006 writs of execution were set aside and quashed merely as a
necessary consequence of the CAs directive in the Amended Decision for the trial court to hear and
rule on the merits of PDBs Omnibus Motion for Reconsideration and for New Trial. Other than this
singular reason, the CA would have sustained them, and this is clear from a reading of both its
original May 31, 2007 Decision and its subsequent Amended Decision. Now, since the Court has
herein declared that PDBs omnibus motion may not be considered for being tardy and for having
been superseded by the banks filing of a notice of appeal, then the CAs original pronouncement
regarding the October 6, 2006 Order and the August 31, 2006 and October 9, 2006 writs of
execution should necessarily be reinstated as well.

In light of the above conclusions, the Court finds no need to further discuss the other issues raised
by the parties. They are rendered irrelevant by the above pronouncements.

WHEREFORE, the Petition is GRANTED. The assailed July 28, 2009 Amended Decision and
August 23, 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 01317-MIN are REVERSED
and SET ASIDE. The Regional Trial Court of General Santos City, Branch 37 is ORDERED to
proceed with the execution ofits June 15, 2006 Decision in Civil Case No. 6474.

SO ORDERED.

MARIANO C. DEL CASTILLO


Associate Justice

#38

SECOND DIVISION

G.R. No. 179638 July 8, 2013

HEIRS OF NUMERIANO MIRANDA, SR., namely: CIRILA (deceased), CORNELIO,


NUMERIANO, JR., ERLINDA, LOLITA, RUFINA, DANILO, ALEJANDRO, FELIMON, TERESITA,
ELIZABETH and ANALIZA, all surnamed MIRANDA, Petitioners,
vs.
PABLO R. MIRANDA, Respondent.

DECISION

DEL CASTILLO, J.:

An action for revival of a judgment cannot modify, alter, or reverse the original judgment, which is
already final and executory.1
This Petition for Review on Certiorari2 under Rule 45 of the Rules of Court assails the
Decision3 dated June 14, 2007 and the Resolution4 dated September 11, 2007 of the Court of
Appeals (CA) in CA-G.R. SP No. 97350.

Factual Antecedents

In 1994, petitioners Cirila, Cornelio, Numeriano, Jr., Erlinda, Lolita, Rufina, Danilo, Alejandro,
Felimon, Teresita, Elizabeth, and Analiza, all surnamed Miranda, representing themselves as the
heirs of Numeriano Miranda, Sr., filed before the Regional Trial Court (RTC) of Muntinlupa City, a
Complaint5 for Annulment of Titles and Specific Performance, docketed as Civil Case No. 94-612,
against the heirs of Pedro Miranda, namely: Pacita and Oscar Miranda; the heir of Tranquilino
Miranda, Rogelio Miranda; and the spouses respondent Pablo Miranda and Aida Lorenzo.

After trial, the RTC, Branch 256, rendered a Decision6 dated August 30, 1999, the dispositive portion
of which reads:

WHEREFORE, premises considered, this court resolves:

1. To uphold and sustain the validity of TCT Nos. 186011, 186012, and 186013;

2. Ordering Pablo Miranda to indemnify all other heirs of NUMERIANO MIRANDA the amount
equivalent to 12/13 fair market value of the co-owned residential house, erected on the lot 826-A-3
covered by TCT No. 186013 corresponding to their shares, and for the said heirs to divide among
themselves the aforesaid amount as follows:

1/13 to CIRILA MIRANDA

1/13 to CORNELIO MIRANDA

1/13 to NUMERIANO MIRANDA, JR.

1/13 to ERLINDA MIRANDA

1/13 to LOLITA MIRANDA

1/13 to RUFINA MIRANDA

1/13 to DANILO MIRANDA

1/13 to ALEJANDRO MIRANDA

1/13 to FELIMON MIRANDA

1/13 to TERESITA MIRANDA

1/13 to ELIZABETH MIRANDA

1/13 to ANALIZA MIRANDA


3. Ordering Plaintiffs Lolita Miranda, Alejandro Miranda, Teresita Miranda, Rufina Miranda and all
persons claiming rights under them to immediately vacate the abovementioned residential house
and to jointly and severally pay to the spouses Pablo and Aida Miranda a monthly rental of
2,000.00 from the date of notice of the promulgation of this judgment up to the time that they have
actually vacated the property;

4. Proclaiming that ROGELIO MIRANDA is not the biological son or child by nature of
TRANQUILINO MIRANDA, and therefore is not entitled to inherit from the latter;

5. Declaring CORNELIO MIRANDA, NUMERIANO MIRANDA, JR., ERLINDA MIRANDA, LOLITA


MIRANDA, RUFINA MIRANDA, DANIL[O] MIRANDA, ALEJANDRO MIRANDA, FELIMON
MIRANDA, TERESITA MIRANDA, ELIZABETH MIRANDA, ANALIZA MIRANDA, PABLO MIRANDA
and PACITA MIRANDA as the lawful legal heirs of the deceased TRANQUILINO MIRANDA and
ordering them to partition among themselves Lot 826-A-1 covered by TCT No. 186011 registered in
the name of TRANQUILINO MIRANDA, containing an area of 213 square meters, as follows:

1/13 aliquot share to Cornelio Miranda

1/13 aliquot share to Numeriano Miranda, Jr.

1/13 aliquot share to Erlinda Miranda

1/13 aliquot share to Lolita Miranda

1/13 aliquot share to Rufina Miranda

1/13 aliquot share to Danilo Miranda

1/13 aliquot share to Alejandro Miranda

1/13 aliquot share to Felimon Miranda

1/13 aliquot share to Teresita Miranda

1/13 aliquot share to Elizabeth Miranda

1/13 aliquot share to Analiza Miranda

1/13 aliquot share to Pablo Miranda

1/13 aliquot share to Pacita Miranda

6. Ordering all the abovenamed heirs to commission the survey of Lot 826-A-1 or to authorize in
writing, one of them to commission such survey, in order to avoid a chaotic situation similar to the
case at bar. Should they not agree as to what particular portion shall belong to one another, they
may agree that it be allotted to one or two or several of them, who shall indemnify the others at a
price agreed upon by all of them. Should they not agree as to whom shall the property be allotted, to
sell the property to a third person at a price agreed upon by a majority of all of them, and to partition
the proceeds of the sale in accordance with No. 5 above.
SO ORDERED.7

Petitioners did not file any appeal hence the Decision became final and executory.8

On December 11, 2001, the RTC issued a Writ of Execution,9 which was not implemented.10

On July 8, 2005, respondent filed an Ex-parte Motion11 praying that the RTC issue a "Break-Open
and Demolition Order" in order to compel the petitioners to vacate his property.12 But since more
than five years have elapsed from the time the Writ of Execution should have been enforced, the
RTC denied the Motion in its Order13 dated August 16, 2005.

This prompted respondent to file with the RTC a Petition14 for Revival of Judgment, which was
docketed as Civil Case No. 05-131. Petitioners opposed the revival of judgment assailing, among
others, the jurisdiction of the RTC to take cognizance of the Petition for Revival of Judgment.15

On June 20, 2006, the RTC rendered a Decision16 granting the Petition. Thus:

WHEREFORE, finding the instant petition to be meritorious, the petition is hereby GRANTED.
Pursuant to Rule 39, Section 6 of the Rules of Court, the Decision dated August 30, 1999 in Civil
Case No. 94-612 is hereby REVIVED.

SO ORDERED.17

On July 13, 2006, petitioners filed a Notice of Appeal18 via LBC,19 which was opposed by respondent
on the ground that the Decision dated August 30, 1999 has long become final and
executory.20 Petitioners, in turn, moved for the transmittal of the original records of the case to the
CA, insisting that respondents opposition is without merit.21

Ruling of the Regional Trial Court

Finding the appeal barred by prescription, the RTC denied the Notice of Appeal in its Order22 dated
October 10, 2006, to wit:

WHEREFORE, in view of the foregoing, the notice of appeal herein filed is hereby DENIED for lack
of merit.

SO ORDERED.23

Feeling aggrieved, petitioners filed a Petition for Mandamus24 with the CA praying that their Notice of
Appeal be given due course.25

Ruling of the Court of Appeals

On June 14, 2007, the CA denied the Petition for Mandamus on the ground that the Notice of Appeal
was filed out of time.26 The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the petition is DENIED. The appeal is hereby DISMISSED for
having been filed out of time.

SO ORDERED.27
Petitioners moved for reconsideration but the same was denied by the CA in its Resolution28 dated
September 11, 2007.

Issues

Hence, this recourse, with petitioners raising the following issues:

1. WHETHER X X X THE APPEAL WAS PERFECTED ON TIME?

2. WHETHER X X X THE LATE (ONE DAY) FILING WAS JUSTIFIED?

3. WHETHER X X X AN ACTION FOR REVIVAL OF JUDGMENT IS APPEALABLE?

4. WHETHER THE APPEAL IS MERITORIOUS?

a. Whether the RTC below has exclusive original jurisdiction over an action for
revival of judgment?

b. Whether xxx respondent herein, plaintiff therein, as one of the judgment creditors
can file the said action for revival ALONE?

c. Whether subsequent events or laws have rendered the judgment sought to be


revived modified or altered, or prevent its enforcement?

d. Whether res judicata or laches has seeped in, other judgment creditors not suing
for any such implementation of the 1999 judgment, ONLY PLAINTIFF ALONE?

e. Whether x x x the Petitioners are entitled to damages?29

Petitioners Arguments

Petitioners assert that an action to revive judgment is appealable,30 and that their appeal was
perfected on time.31They insist that the Notice of Appeal, which they filed on the 15th day via LBC,
was seasonably filed since the law does not require a specific mode of service for filing a notice of
appeal.32

Besides, even if their appeal was belatedly filed, it should still be given due course in the interest of
justice,33considering that their counsel had to brave the storm and the floods caused by typhoon
"Florita" just to file their Notice of Appeal on time.34

Petitioners further contend that their appeal is meritorious.35 They insist that it is the Metropolitan
Trial Court (MeTC), not the RTC, which has jurisdiction over the Petition for Revival of Judgment
since the amount in the tax declarations of the properties involved is less than Fifty Thousand Pesos
(50,000.00).36 They likewise assail the Decision dated August 30, 1999, claiming that the deeds
and certificates of title subject of Civil Case No. 94-612 were falsified.37

Respondents Arguments

Respondent, on the other hand, maintains that the Notice of Appeal was belatedly filed,38 and that
the revival of judgment is unappealable as it is barred by prescription.39
Our Ruling

The Petition lacks merit.

The Notice of Appeal was belatedly filed.

It is basic and elementary that a Notice of Appeal should be filed "within fifteen (15) days from notice
of the judgment or final order appealed from."40

Under Section 3,41 Rule 13 of the Rules of Court, pleadings may be filed in court either personally or
by registered mail. In the first case, the date of filing is the date of receipt. In the second case, the
date of mailing is the date of receipt.

In this case, however, the counsel for petitioners filed the Notice of Appeal via a private courier, a
mode of filing not provided in the Rules. Though not prohibited by the Rules, we cannot consider the
filing of petitioners Notice of Appeal via LBC timely filed. It is established jurisprudence that "the
date of delivery of pleadings to a private letter-forwarding agency is not to be considered as the date
of filing thereof in court;" instead, "the date of actual receipt by the court x x x is deemed the date of
filing of that pleading."42 Records show that the Notice of Appeal was mailed on the 15th day and
was received by the court on the 16th day or one day beyond the reglementary period. Thus, the CA
correctly ruled that the Notice of Appeal was filed out of time.

Neither can petitioners use typhoon "Florita" as an excuse for the belated filing of the Notice of
Appeal because work in government offices in Metro Manila was not suspended on July 13, 2006,
the day petitioners Notice of Appeal was mailed via LBC.43

And even if we, in the interest of justice, give due course to the appeal despite its late filing, the
result would still be the same. The appeal would still be denied for lack of merit.

The Decision dated August 30, 1999 is already final and executory.

An action for revival of judgment is a new and independent action.44 It is different and distinct from
the original judgment sought to be revived or enforced.45 As such, a party aggrieved by a decision of
a court in an action for revival of judgment may appeal the decision, but only insofar as the merits of
the action for revival is concerned. The original judgment, which is already final and executory, may
no longer be reversed, altered, or modified.46

In this case, petitioners assail the Decision dated August 30, 1999, which is the original judgment
sought to be revived or enforced by respondent. Considering that the said Decision had already
1wphi1

attained finality, petitioners may no longer question its correctness. As we have said, only the merits
of the action for revival may be appealed, not the merits of the original judgment sought to be
revived or enforced.

RTC has jurisdiction over the Petition for Revival of Judgment

As to whether the RTC has jurisdiction, we rule in the affirmative. An action for revival of judgment
may be filed either "in the same court where said judgment was rendered or in the place where the
plaintiff or defendant resides, or in any other place designated by the statutes which treat of the
venue of actions in general."47 In this case, respondent filed the Petition for Revival of Judgment in
the same court which rendered the Decision dated August 30, 1999.
All told, we find no error on the part of the CA in denying the Petition and dismissing the appeal for
having been filed out of time.

WHEREFORE, the Petition is hereby DENIED. The Decision dated June 14, 2007 and the
Resolution dated September 11, 2007 of the Court of Appeals in CA-G.R. SP No. 97350 are hereby
AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO


Associate Justice

#39

THIRD DIVISION

G.R. No. 201234 March 17, 2014

HEIRS OF AMADA A. ZAULDA, namely: ELESEO A. ZAULDA and RODOLFO A.


ZAULDA, Petitioners,
vs.
ISAAC Z. ZAULDA, Respondent.

DECISION

MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing the
February 11, 2011 Resolution1 of the Court of Appeals (CA), in CA G.R. SP No. 05379, dismissing
the petition for review of the petitioners, and its March 6, 2012 Resolution,2 denying the petitioners'
motion for reconsideration. The February 11, 2011 CA Resolution reads:

A perusal of the Petition revealed there were impediments to the Court's subsequent action thereon:

1. the Petition was not filed in the nick of time inasmuch as the Court could not have pursued
action on or before September 9, 2010 which was supposedly the last day specified on the
Motion for Extension of Time to File Petition for Review dated August 23, 2010, postmarked
August 24, 2010, and received by this Court on September 13, 2010 for the simple reason
that this Division apparently received a copy of the Motion only on September 14, 2010, and
the Rollo was forwarded to the Office of the ponente only on January 5, 2011. Certainly,
parties and counsel should not assume that Courts are bound to grant the time they pray for.
By parity of reasoning, a motion that is not acted upon in due time is deemed denied.

2. there was no competent evidence regarding petitioners identity on the attached


Verification and Certification Against Forum Shopping as required by Section 12, Rule II of
the 2004 Rules on Notarial Practice which now requires a photocopy of petitioners
competent evidence of identity.

Accordingly, petitioners Petition for Review dated September 9, 2010 is hereby DISMISSED.

SO ORDERED.3

[Emphases supplied]

The Antecedents:

The controversy stemmed from a complaint for recovery of possession and declaration of ownership
filed by the heirs of Amada Aguila-Zaulda, namely, Eleseo A. Zaulda and Rodolfo A. Zaulda
(petitioners), against respondent Isaac Z. Zaulda (respondent), before the Municipal Circuit Trial
Court, Banga-Libacao-Madalag, Banga, Aklan (MCTC).

The complaint4 alleged, among others, that petitioners were the legal heirs of the late Amada Aguila
Zaulda; that the latter was one of the children and legal heirs of the late Teodulo Aguila and Dorotea
Zolina (Spouses Aguila); that they were co-owners of a parcel of land, Lot 917-M, with an area of
4,263 square meters, situated in Barangay Guadalupe, Libacao, Aklan; that they acquired the
subject property by inheritance from the Spouses Aguila per Deed of Extra-judicial Partition of
Realty, dated November 2, 1993; that they have been in open, continuous and adverse possession
of the subject property since time immemorial as evidenced by tax declarations for the years 1945,
1953, 1957, 1980, 1985, and 1990; that sometime in March 2000, respondent, through force and
intimidation, forcibly entered the subject property and, there and then, cut and took with him
bamboos and other forest/agricultural products; that on March 29, 2000, respondent, together with
two (2) other unidentified persons, forcibly entered the subject property and, with threat and
intimidation, constructed and built a house made of light material; and that petitioners demanded
respondent to vacate and turn over the subject property to them but the latter refused to do so.

In his Answer,5 respondent averred that Erene Aguila Zaula (Erene), his predecessor-in-interest, was
the actual and physical possessor of the subject land; that the property which the petitioners were
claiming was donated to the Municipality of Libacao, Aklan, for school site purposes; that after the
donation, Tax Declaration No. 6636 covering the said land was cancelled, and a new Tax
Declaration No. 8619 in the name of the Municipality of Libacao was issued and Tax Declaration No.
8618 for the remaining portion of 3,805 square meters was issued to Spouses Aguila; that in Tax
Declaration No. 8618, it was erroneously entered therein that it contained 14,500 square meters
when it should be only 3,805 square meters; that petitioners caused the survey of the land and
instead of confining themselves to the remaining area of 3,805 square meters, they included part
and portion of the property including the subject land which was owned by Erene; and that when the
heirs of Erene found out that part of their land was included in the tax declaration issued to spouses
Aguila, they filed a protest before the DENR.

On December 29, 2008, the MCTC rendered judgment,6 disposing as follows:

WHEREFORE, premises considered, the court finds preponderance of evidence in favor of plaintiffs
(as regards Lots 1, 3 and 6) by:

1. Declaring plaintiffs the lawful owners entitled to possession of the Lots 1, 3 and 6
described in the Commissioners Report and Sketches being part and parcel of plaintiffs
inherited Lot 917;

2. Declaring Lot 1 as the portion owned by the heirs of Amada Zaulda and Lot 3 as the
portion owned by the heirs of Coronacion A. Vidad by virtue of the Deed of Extra-judicial
Partition executed by the heirs of spouses Teodulo and Dorotea Aguila; Lot 6 (portion of the
barangay road) as included in plaintiffs inherited Lot 917;

3. Ordering the defendant Isaac Zaulda and intervenors Celedonia Aguila-Villorente and
Danny A. Villorente, their assigns and privies to peacefully deliver possession of the above-
mentioned lots to plaintiffs and/or their representatives;

4. Ordering the defendant Isaac Zaulda to remove the nipa houses he built found on Lot 3 at
his expense.

Further, (with respect to Lots A and B):

5. Declaring Lots A and B described in the Commissioners Sketch found on page 164 of the
record, as the combined area of Lot F-39 owned by parties predecessor Estanislao Aguila
covered by tax declaration no. 011-0458 and are therefore co-owned by his heirs: plaintiffs,
defendant, and intervenors included along with the rest of the children and descendants of
Teodulo Aguila, Erene Aguila Zaulda and Jaime Aguila;

6. Ordering all parties to respect the co-ownership among them over Lots A and B until they
execute an agreement of partition into three (3) equal parts representing the shares of
Teodulo, Erene and Jaime.

No pronouncement as to costs.

SO ORDERED.7

On appeal, the Regional Trial Court, Branch 4, Kalibo, Aklan (RTC), partly modified the decision of
the MCTC and declared respondent as the owner and possessor of lots 1 and 3, the dispositive
portion reads:

WHEREFORE, judgment is hereby rendered as follows:


1) Defendant Isaac Zaulda is declared, as reflected in the Commissioners Sketches and
Reports, dated July 11, 2002 and March 4, 2004, the lawful owner and possessor of Lot No.
916 (shaded blue) and parts of Lot 1 and 3 (shaded green) as against the plaintiffs;

2) Paragraphs 5 and 6 of the dispositive portion of the decision appealed from is affirmed.

Costs against the plaintiffs.

SO ORDERED.8

Petitioner Eleseo Zaulda, the lone surviving heir of Amada Aguila-Zaulda, after his co-heir Rodolfo
Zaulda passed away, filed a petition for review under Rule 42 of the 1997 Rules of Civil Procedure
before the CA. In the assailed resolution, dated February 11, 2011, the CA dismissed the petition for
being filed out of time and for lack of competent evidence on affiants identity on the attached
verification and certification against forum shopping.

Petitioners motion for reconsideration was likewise denied in the assailed resolution, dated March 6,
2012.

Hence, petitioners filed this petition, raising the following issues:

1. Whether or not the CA erred in dismissing the petition for being filed out of time despite
the motion for extension of time having been timely filed; and

2. Whether or not the CA erred in not passing upon the issue of whether or not the RTC
erred in reversing the decision of the MCTC based on erroneous findings of facts and on
mere suppositions and presumptions absent any evidence on the same.

On January 17, 2013, respondent filed his Comment,9 reiterating that no special and important
reason exists to warrant the Courts review of the assailed CA resolutions, the same having been
issued in accord with law and supported by jurisprudence.

On June 6, 2013, petitioners filed their Reply,10 invoking the relaxation of the strict application of
procedural rules in the interest of substantial justice. They submit that the petition should not have
been dismissed based on technicalities because the appeal was instituted in accordance with the
rules. They pray that the petition be given due course as they were deprived of their property without
due process of law considering that the case was not properly ventilated upon, more so that the
findings of fact of MCTC and RTC were different.

The Courts Ruling:

Petition for review from the RTC to the CA is governed by Rule 42 of the Rules of Court, which
provides:

Section 1. How appeal taken; time for filing. A party desiring to appeal from a decision of the
Regional Trial Court rendered in the exercise of its appellate jurisdiction may file a verified petition
for review with the Court of Appeals, paying at the same time to the clerk of said court the
corresponding docket and other lawful fees, x x x. The petition shall be filed and served within fifteen
(15) days from notice of the decision sought to be reviewed or of the denial of petitioners motion for
new trial or reconsideration x x x. Upon proper motion x x x, the Court of Appeals may grant an
additional period of fifteen (15) days only within which to file the petition for review. No further
extension shall be granted except for the most compelling reason and in no case to exceed fifteen
(15) days. [Emphasis supplied]

In this case, the petitioners complied with the requirements laid down in the above quoted provision.

Records show that on March 10, 2010, petitioners timely filed a motion for reconsideration and/or
new trial11 of the RTC decision (dated January 20, 2010, received by petitioners on February 25,
2010), but the same was denied in the RTC Order,12 dated August 4, 2010, copy of which was
received by petitioners on August 10, 2010. Thus, they had until August 25, 2010 within which to file
a petition for review pursuant to said Section 1, Rule 42.

On August 24, 2010, petitioners filed their Motion for Extension of Time to File Petition for Review
before the CA, paying the docket and other lawful fees and deposit for costs and prayed for an
additional period of fifteen (15) days from August 25, 2010 or until September 9, 2010, within which
to file the said petition.

On September 9, 2010, they filed the Petition for Review.13

The Court notes that the petition for review before the CA was filed within the additional fifteen (15)
day period prayed for in their motion for extension of time to file it, which was filed on time by
registered mail. To repeat, the petition was filed on September 9, 2010, within the fifteen (15) day
period requested in their motion for extension of time to file the petition.

As earlier stated, the Motion For Extension Of Time To File Petition For Review, which was filed
through registered mail on August 24, 2010, was filed on time. It was physically in the appellate
courts possession long before the CA issued its Resolution on February 11, 2011, dismissing the
petition for review for being filed out of time. The record shows that 1] the CA received the motion for
extension of time to file petition for review on September 13, 2010; 2] the CA Division received the
motion on September 14, 2010; and 3] the ponentes office received it on January 5, 2011.

Indeed, there was a delay, but it was a delay that cannot be attributed at all to the petitioners. The
almost four (4) months that lapsed before the records reached the ponentes office was caused by
the gross incompetence and inefficiency of the division personnel at the CA. It was the height of
injustice for the CA to dismiss a petition just because the motion for extension reached the ponentes
office beyond the last date prayed for. Clearly, the petitioners were unreasonably deprived of their
right to be heard on the merits because of the CAs unreasonable obsession to reduce its load. In
allowing the petitioners to be fatally prejudiced by the delay in the transmittal attributable to its inept
or irresponsible personnel, the CA committed an unfortunate injustice.

The petitioners could not also be faulted that the motion for extension of time was received by the
CA on September 13, 2010. The rules allow parties to file a pleading by registered mail.14 They are
not required to ensure that it would be received by the court on or before the last day of the
extended period prayed for. Though no party can assume that its motion for extension would be
granted, any denial thereof should be reasonable.

Granting that the petition was filed late, substantial justice begs that it be allowed and be given due
course. Indeed, the merits of petitioners cause deserve to be passed upon considering that the
findings of the RTC were in complete contrast to the findings of the MCTC which declared petitioners
as the lawful owners entitled to possession of the lots in question.

In Montajes v. People of the Philippines,15 petitioner therein, due to erroneous computation, filed his
petition for review before the CA two (2) days after the expiration of the requested 15-day extension
period. The Court held in that case that being a few days late in the filing of the petition for review did
not automatically warrant its dismissal and where strong considerations of substantial justice were
manifest in the petition, the stringent application of technical rules could be relaxed in the exercise of
equity jurisdiction. It found that the circumstances obtaining in that case merited the liberal
application of the rule absent any intention to cause delay.

As regards the competent identity of the affiant in the Verification and Certification, records16 show
that he proved his identity before the notary public through the presentation of his Office of the
Senior Citizen (OSCA) identification card. Rule II, Sec. 12 of the 2004 Rules on Notarial Practice
requires a party to the instrument to present competent evidence of identity. Sec. 12, as amended,
provides:

Sec. 12. Competent Evidence of Identity. The phrase "competent evidence of identity" refers to the
identification of an individual based on:

(a) at least one current identification document issued by an official agency bearing the
photograph and signature of the individual, such as but not limited to, passport, drivers
license, Professional Regulations Commission ID, National Bureau of Investigation
clearance, police clearance, postal ID, voters ID, Barangay certification, Government
Service Insurance System (GSIS) e-card, Social Security System (SSS) card, PhilHealth
card, senior citizen card, Overseas Workers Welfare Administration (OWWA) ID, OFW ID,
seamans book, alien certificate of registration/immigrant certificate of registration,
government office ID, certificate from the National Council for the Welfare of Disabled
Persons (NCWDP), Department of Social Welfare and Development certification [as
amended by A.M. No. 02-8-13-SC dated February 19, 2008]; or

(b) the oath or affirmation of one credible witness not privy to the instrument, document or
transaction who is personally known to the notary public and who personally knows the
individual, or of two credible witnesses neither of whom is privy to the instrument, document
or transaction who each personally knows the individual and shows to the notary public
documentary identification.

It is clear from the foregoing provisions that a senior citizen card is one of the competent
identification cards recognized in the 2004 Rules on Notarial Practice. For said reason, there was
compliance with the requirement. Contrary to the perception of the CA, attachment of a photocopy of
the identification card in the document is not required by the 2004 Rules on Notarial Practice. Even
A.M. No. 02-8-13-SC, amending Section 12 thereof, is silent on it. Thus, the CAs dismissal of the
petition for lack of competent evidence on the affiants identity on the attached verification and
certification against forum shopping was without clear basis.

Even assuming that a photocopy of competent evidence of identity was indeed required, non-
attachment thereof would not render the petition fatally defective. It has been consistently held17 that
verification is merely a formal, not jurisdictional, requirement, affecting merely the form of the
pleading such that non-compliance therewith does not render the pleading fatally defective. It is
simply intended to provide an assurance that the allegations are true and correct and not a product
of the imagination or a matter of speculation, and that the pleading is filed in good faith. The court
may in fact order the correction of the pleading if verification is lacking or it may act on the pleading
although it may not have been verified, where it is made evident that strict compliance with the rules
may be dispensed so that the ends of justice may be served. The Court, in Altres v. Empleo,18 issued
guidelines based on previous jurisprudential pronouncements respecting non-compliance with the
requirements on, or submission of a defective, verification as well as on certification against forum
shopping, as follows:
xxx

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the
pleading fatally defective. The court may order its submission or correction or act on the pleading if
the attending circumstances are such that strict compliance with the Rule may be dispensed with in
order that the ends of justice may be served thereby.

x x x.19

Again, granting arguendo that there was non-compliance with the verification requirement, the rule is
that courts should not be so strict about procedural lapses which do not really impair the proper
administration of justice. After all, the higher objective of procedural rule is to ensure that the
substantive rights of the parties are protected. Litigations should, as much as possible, be decided
on the merits and not on technicalities. Every party-litigant must be afforded ample opportunity for
the proper and just determination of his case, free from the unacceptable plea of technicalities.20

In Coca-Cola Bottlers v. De la Cruz,21 where the verification was marred only by a glitch in the
evidence of the identity of the affiant, the Court was of the considered view that, in the interest of
justice, the minor defect can be overlooked and should not defeat the petition.

The reduction in the number of pending cases is laudable, but if it would be attained by precipitate, if
not preposterous, application of technicalities, justice would not be served. The law abhors
technicalities that impede the cause of justice. The court's primary duty is to render or dispense
justice. "It is a more prudent course of action for the court to excuse a technical lapse and afford the
parties a review of the case on appeal rather than dispose of the case on technicality and cause a
grave injustice to the parties, giving a false impression of speedy disposal of cases while actually
resulting in more delay, if not miscarriage of justice."22 [Italicization supplied]

What should guide judicial action is the principle that a party-litigant should be given the fullest
opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty,
honor, or property on technicalities. The rules of procedure should be viewed as mere tools
designed to facilitate the attainment of justice. Their strict and rigid application, which would result in
technicalities that tend to frustrate rather than promote substantial justice, must always be
eschewed.23 At this juncture, the Court reminds all members of the bench and bar of the admonition
in the often-cited case of Alonso v. Villamor:24

Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper
1w phi1

office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant
consideration from courts. There should be no vested rights in technicalities.

WHEREFORE, the petition is GRANTED. The February 11, 2011 and March 6, 2012 Resolutions of
the Court of Appeals in CA-G.R. SP No. 05379 are SET ASIDE.

Accordingly, the Court GRANTS petitioners' Motion For Extension Of Time To File Petition For
Review filed with the Cou1i of Appeals and gives due course to their Petition for Review. The case is
REMANDED to the Court of Appeals for decision on the merits of the petition.

SO ORDERED.

JOSE CATRAL MENDOZA


Associate Justice
#40

THIRD DIVISION

G.R. No. 187021 January 25, 2012

DOUGLAS F. ANAMA, Petitioner,


vs.
PHILIPPINE SAVINGS BANK, SPOUSES SATURNINA BARIA &TOMAS CO and THE
REGISTER OF DEEDS, METRO MANILA, DISTRICT II, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review under Rule 45 assailing the March 31, 2008 Decision1 of the Court of
Appeals (CA) and its February 27, 2009 Resolution,2 in CA G.R. No. SP-94771, which affirmed the
November 25, 2005 Order of the Regional Trial Court, Branch 167, Pasig City (RTC), granting the
motion for issuance of a writ of execution of respondents.

The Facts

The factual and procedural backgrounds of this case were succinctly recited by the CA in its decision
as follows:

Sometime in 1973, the Petitioner, Douglas F. Anama (Anama), and the Respondent, Philippine
Savings Bank (PSB), entered into a "Contract to Buy," on installment basis, the real property owned
and covered by Transfer Certificate of Title (TCT) No. 301276 in the latters name. However, Anama
defaulted in paying his obligations thereunder, thus, PSB rescinded the said contract and title to the
property remained with the latter. Subsequently, the property was sold by PSB to the Spouses
Saturnina Baria and Tomas Co (Co Spouses) who, after paying the purchase price in full, caused
the registration of the same in their names and were, thus, issued TCT No. 14239.

Resultantly, Anama filed before the Respondent Court a complaint for declaration of nullity of the
deed of sale, cancellation of transfer certificate of title, and specific performance with damages
against PSB, the Co Spouses, and the Register of Deeds of Metro Manila, District II.

On August 21, 1991 and after trial on the merits, the Respondent Court dismissed Anamas
complaint and upheld the validity of the sale between PSB and the Co Spouses. Undaunted, Anama
appealed, at first, to this Court, and after failing to obtain a favorable decision, to the Supreme Court.

On January 29, 2004, the Supreme Court rendered judgment denying Anamas petition and
sustaining the validity of the sale between PSB and the Co Spouses. Its decision became final and
executory on July 12, 2004. Pursuant thereto, the Co Spouses moved for execution, which was
granted by the Respondent Court per its Order, dated November 25, 2005.

Aggrieved, Anama twice moved for the reconsideration of the Respondent Courts November 25,
2005 Order arguing that the Co Spouses motion for execution is fatally defective. He averred that
the Spouses motion was pro forma because it lacked the required affidavit of service and has a
defective notice of hearing, hence, a mere scrap of paper. The Respondent Court, however, denied
Anamas motion(s) for reconsideration.

Dissatisfied, the petitioner questioned the RTC Order before the CA for taking judicial cognizance of
the motion for execution filed by spouses Tomas Co and Saturnina Baria (Spouses Co) which was
(1) not in accord with Section 4 and Section 15 of the Rules of Court because it was without a notice
of hearing addressed to the parties; and (2) not in accord with Section 6, Rule 15 in conjunction with
Section 13, Rule 13 of the Rules of Court because it lacks the mandatory affidavit of service.

On March 31, 2008, the CA rendered a decision dismissing the petition. It reasoned out, among
others, that the issue on the validity of the deed of sale between respondents, Philippine Savings
Bank (PSB) and the Spouses Co, had long been laid to rest considering that the January 29, 2004
Decision of this Court became final and executory on July 12, 2004. Hence, execution was already a
matter of right on the part of the respondents and the RTC had the ministerial duty to issue a writ of
execution enforcing a final and executory decision.

The CA also stated that although a notice of hearing and affidavit of service in a motion are
mandatory requirements, the Spouses Cos motion for execution of a final and executory judgment
could be acted upon by the RTC ex parte, and therefore, excused from the mandatory requirements
of Sections 4, 5 and 6 of Rule 15 of the Rules of Court.
The CA was of the view that petitioner was not denied due process because he was properly notified
of the motion for execution of the Spouses Co. It stated that the act of the Spouses Co in resorting to
personal delivery in serving their motion for execution did not render the motion pro forma. It refused
to apply a rigid application of the rules because it would result in a manifest failure of justice
considering that petitioners position was nothing but an obvious dilatory tactic designed to prevent
the final disposition of Civil Case No. 44940.

Not satisfied with the CAs unfavorable disposition, petitioner filed this petition praying for the
reversal thereof presenting the following

ARGUMENTS:

THE RESPONDENT APPELLATE COURT DID NOT TAKE INTO CONSIDERATION THE CLEAR
TEACHING OF THE HONORABLE COURT WITH REGARD TO THE REQUISITE NOTICE OF
HEARING IT SHOULD BE ADDRESSED TO THE PARTIES NOT TO THE CLERK OF COURT,
THE LATEST (THEN) BEING GARCIA V. SANDIGANBAYAN, G.R. NO. 167103, AUGUST 31,
2006, 500 SCRA 361; DE JESUS V. JUDGE DILAG, A.M. NO. RTJ-05-1921, SEPTEMBER 30,
2005, 471 SCRA 176; LAND BANK OF THE PHILIPPINES V. NATIVIDAD, G.R. NO. 127198, MAY
16, 2005, 458 SCRA 441; ATTY. JULIUS NERI V. JUDGE JESUS S. DE LA PEA, A.M NO. RTJ-
05-1896, APRIL 29, 2005, 457 SCRA 538; AND ALVAREZ V. DIAZ, A.M. NO. MTJ-00-1283,
MARCH 3, 2004, 424 SCRA 213;

THE RESPONDENT APPELLATE COURT DID NOT TAKE INTO CONSIDERATION THE CLEAR
TEACHING OF THE HONORABLE COURT WITH REGARD TO THE REQUISITE AFFIDAVIT OF
SERVICE IT SHOULD BE IN THE PROPER FORM AS PRESCRIBED IN THE RULES AND IT
SHOULD BE ATTACHED TO THE MOTION, THE LATEST (THEN) BEING ELLO V. COURT OF
APPEALS, G.R. NO. 141255, JUNE 21, 2005, 460 SCRA 406; LOPEZ DELA ROSA
DEVELOPMENT CORPORATION V. COURT OF APPEALS, G.R. NO. 148470, APRIL 29, 2005,
457 SCRA 614; ALVAREZ V. DIAZ, A.M. NO. MTJ-00-1283, MARCH 3, 2004, 424 SCRA 213; EL
REYNO HOMES, INC. V. ERNESTO ONG, 397 SCRA 563; CRUZ V. COURT OF APPEALS, 388
SCRA 72, 80-81; AND MERIS V. OFILADA, 293 SCRA 606;

THE RESPONDENT APPELLATE COURT DID NOT TAKE APPROPRIATE ACTION ON THE
"FRAUD PERPETRATED UPON THE COURT" BY RESPONDENT-SPOUSES AND THEIR LEAD
COUNSEL.

SINCE THE RESPONDENT APPELLATE COURT REFUSED TO TAKE INTO CONSIDERATION


THE RESPONDENT BANKS ACTION THAT OF:

ENGAGING IN A DAGDAG-BAWAS (LEGALLY "INTERCALATION") OPERATION OF A PORTION


OF THE TRANSCRIPT OF STENOGRAPHIC NOTES (TSN), OCTOBER 12, 1984, OF THE
REGIONAL TRIAL COURT, BRANCH 167, PASIG CITY, IN CIVIL CASE NO. 44940, PAGES 54-55,
AND

PRESENTING IT IN ITS APPELLEES BRIEF (IN THE OWNERSHIP CASE, CA-G.R. NO. CV-
42663, LIKEWISE, BEFORE THE RESPONDENT APPELLATE COURT) BY CITING IT ON PAGE
14 OF SAID BRIEF, AS IMPLIEDLY COMING FROM THE TSN OF THE TRIAL COURT.

THINKING THAT THEIR FALSIFIED APPELLEES BRIEF WAS MATERIAL IN SAID CA-G.R. NO.
CV-42663.
IT COULD NOT RULE THAT THE SAME HAS BROUGHT ABOUT A CRUCIAL MATERIAL
CHANGE IN THE SITUATION OF THE PARTIES WHICH MAKES EXECUTION INEQUITABLE
(PUNCIA V. GERONA, 252 SCRA 424, 430-431), OR, IN THE WORDS OF DEVELOPMENT BANK
OF RIZAL V. CA, G.R. NO. 75964, DECEMBER 1, 1987, 156 SCRA 84, 90, "THERE EXISTS A
COMPELLING REASON FOR STAYING THE EXECUTION OF JUDGMENT."

Basically, petitioner argues that the respondents failed to substantially comply with the rule on notice
and hearing when they filed their motion for the issuance of a writ of execution with the RTC. He
claims that the notice of hearing in the motion for execution filed by the Spouses Co was a mere
scrap of paper because it was addressed to the Clerk of Court and not to the parties. Thus, the
motion for execution did not contain the required proof of service to the adverse party. He adds that
the Spouses Co and their counsel deliberately "misserved" the copy of their motion for execution,
thus, committing fraud upon the trial court.

Additionally, he claims that PSB falsified its appellees brief by engaging in a "dagdag-bawas"
("intercalation") operation in pages 54 to 55 of the TSN, dated October 12, 1984.

Position of the Spouses Co

The Spouses Co counter that the petition should be dismissed outright for raising both questions of
facts and law in violation of Section 1, Rule 45 of the Rules of Court. The Spouses Co aver that
petitioner attempts to resurrect the issue that PSB cheated him in their transaction and that the RTC
committed a "dagdag-bawas." According to the Spouses Co, these issues had long been threshed
out by this Court.

At any rate, they assert that they have substantially complied with the requirements of notice and
hearing provided under Sections 4 and 5 of Rule 15 and Section 13, Rule 13 of the Rules of Court.
Contrary to petitioners allegations, a copy of the motion for the issuance of a writ of execution was
given to petitioner through his principal counsel, the Quasha Law Offices. At that time, the said law
office had not formally withdrawn its appearance as counsel for petitioner. Spouses Co argue that
what they sought to be executed was the final judgment of the RTC duly affirmed by the CA and this
Court, thus, putting the issues on the merits to rest. The issuance of a writ of execution then
becomes a matter of right and the courts duty to issue the writ becomes ministerial.

Position of respondent PSB

PSB argues that the decision rendered by the RTC in Civil Case No. 44940 entitled "Douglas F.
Anama v. Philippine Savings Bank, et. al."3 had long become final and executory as shown by the
Entry of Judgment made by the Court on July 12, 2004. The finality of the said decision entitles the
respondents, by law, to the issuance of a writ of execution. PSB laments that petitioner relies more
on technicalities to frustrate the ends of justice and to delay the enforcement of a final and executory
decision.

As to the principal issue, PSB points out that the notice of hearing appended to the motion for
execution filed by the Spouses Co substantially complied with the requirements of the Rules since
petitioners then counsel of record was duly notified and furnished a copy of the questioned motion
for execution. Also, the motion for execution filed by the Spouses Co was served upon and
personally received by said counsel.
The Courts Ruling

The Court agrees with the Spouses Co that petitioners allegations on the "dagdag-bawas operation
of the Transcript of Stenographic Notes," the "fraud perpetuated upon the Court by said spouses and
their lead counsel," the "ownership," and "falsification" had long been laid to rest in the case
of "Douglas F. Anama v. Philippine Savings Bank, et. al."4 For said reason, the Court cannot review
those final pronouncements. To do so would violate the rules as it would open a final judgment to
another reconsideration which is a prohibited procedure.

On the subject procedural question, the Court finds no compelling reason to stay the execution of
the judgment because the Spouses Co complied with the notice and hearing requirements under
Sections 4, 5 and 6 of Rule 15. Said sections, as amended, provide:

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

Every written motion required to be heard and the notice of the hearing thereof shall be served in
such a manner as to ensure its receipt by the other party at least three (3) days before the date of
hearing, unless the court for good cause sets the hearing on shorter notice.

SECTION 5. Notice of hearing. The notice of hearing shall be addressed to all parties concerned,
and shall specify the time and date of the hearing which must not be later than ten (10) days after
the filing of the motion.

SECTION 6. Proof of service necessary. No written motion set for hearing shall be acted upon by
the court without proof of service thereof.

Pertinently, Section 13 of Rule 13 of the 1997 Rules of Civil Procedure, as amended, 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.

Elementary is the rule that every motion must contain the mandatory requirements of notice and
hearing and that there must be proof of service thereof. The Court has consistently held that a
motion that fails to comply with the above requirements is considered a worthless piece of paper
which should not be acted upon. The rule, however, is not absolute. There are motions that can be
acted upon by the court ex parte if these would not cause prejudice to the other party. They are not
strictly covered by the rigid requirement of the rules on notice and hearing of motions.

The motion for execution of the Spouses Co is such kind of motion. It cannot be denied that the
judgment sought to be executed in this case had already become final and executory. As such, the
Spouses Co have every right to the issuance of a writ of execution and the RTC has the ministerial
duty to enforce the same. This right on the part of the Spouses Co and duty on the part of the RTC
are based on Section 1 and Section 2 of Rule 39 of the 1997 Revised Rules of Civil Procedure
provides, as follows:

Section 1. Execution upon judgments or final orders. Execution shall issue as a matter of right, on
motion, upon a judgment or order that disposes of the action or proceeding upon the expiration of
the period to appeal therefrom if no appeal has been duly perfected.

If the appeal has been duly perfected and finally resolved, the execution may forthwith be applied for
in the court of origin, on motion of the judgment obligee, submitting therewith certified true copies of
the judgment or judgments or final order or orders sought to be enforced and of the entry
thereof, with notice to the adverse party.

The appellate court may, on motion in the same case, when the interest of justice so requires, direct
the court of origin to issue the writ of execution.

SEC. 2. Discretionary execution.

(a) Execution of a judgment or final order pending appeal. On motion of the prevailing party with
notice to the adverse party filed in the trial court while it has jurisdiction over the case and is in
possession of either the original record or the record on appeal, as the case may be, at the time of
the filing of such motion, said court may, in its discretion, order execution of a judgment or final order
even before the expiration of the period to appeal.

After the trial court has lost jurisdiction, the motion for execution pending appeal may be filed in the
appellate court.

Discretionary execution may only issue upon good reasons to be stated in a special order after due
hearing.

(b) Execution of several, separate or partial judgments.A several, separate or partial judgment
may be executed under the same terms and conditions as execution of a judgment or final order
pending appeal. (2a) [Emphases and underscoring supplied]

As can be gleaned therefrom, under Paragraph 1 of Section 1 of Rule 39 of the 1997 Revised Rules
of Civil Procedure, the Spouses Co can have their motion for execution executed as a matter of right
without the needed notice and hearing requirement to petitioner. This is in contrast to the provision
of Paragraph 2 of Section 1 and Section 2 where there must be notice to the adverse party. In the
case of Far Eastern Surety and Insurance Company, Inc. v. Virginia D. Vda. De Hernandez,5 it was
written:

It is evident that Section 1 of Rule 39 of the Revised Rules of Court does not prescribe that a
copy of the motion for the execution of a final and executory judgment be served on the
defeated party, like litigated motions such as a motion to dismiss (Section 3, Rule 16), or motion for
new trial (Section 2, Rule 37), or a motion for execution of judgment pending appeal (Section 2, Rule
39), in all of which instances a written notice thereof is required to be served by the movant on the
adverse party in order to afford the latter an opportunity to resist the application.

It is not disputed that the judgment sought to be executed in the case at bar had already become
final and executory. It is fundamental that the prevailing party in a litigation may, at any time within
five (5) years after the entry thereof, have a writ of execution issued for its enforcement and the court
not only has the power and authority to order its execution but it is its ministerial duty to do so. It has
also been held that the court cannot refuse to issue a writ of execution upon a final and executory
judgment, or quash it, or order its stay, for, as a general rule, the parties will not be allowed, after
final judgment, to object to the execution by raising new issues of fact or of law, except when there
had been a change in the situation of the parties which makes such execution inequitable or when it
appears that the controversy has ever been submitted to the judgment of the court; or when it
appears that the writ of execution has been improvidently issued, or that it is defective in substance,
or is issued against the wrong party, or that judgment debt has been paid or otherwise satisfied; or
when the writ has been issued without authority. Defendant-appellant has not shown that she falls in
any of the situations afore-mentioned. Ordinarily, an order of execution of a final judgment is not
appealable. Otherwise, as was said by this Court in Molina v. de la Riva,a case could never end.
Once a court renders a final judgment, all the issues between or among the parties before it are
deemed resolved and its judicial function as regards any matter related to the controversy litigated
comes to an end. The execution of its judgment is purely a ministerial phase of adjudication. The
nature of its duty to see to it that the claim of the prevailing party is fully satisfied from the properties
of the loser is generally ministerial.

In Pamintuan v. Muoz, We ruled that once a judgment becomes final and executory, the prevailing
party can have it executed as a matter of right, and the judgment debtor need not be given
advance notice of the application for execution.

Also of the same stature is the rule that once a judgment becomes final and executory, the prevailing
party can have it executed as a matter of right and the granting of execution becomes a ministerial
duty of the court. Otherwise stated, once sought by the prevailing party, execution of a final
judgment will just follow as a matter of course. Hence, the judgment debtor need not be given
advance notice of the application for execution nor he afforded prior hearing.

Absence of such advance notice to the judgment debtor does not constitute an infringement of the
constitutional guarantee of due process.

However, the established rules of our system of jurisprudence do not require that a defendant who
has been granted an opportunity to be heard and has had his day in court should, after a judgment
has been rendered against him, have a further notice and hearing before supplemental proceedings
are taken to reach his property in satisfaction of the judgment. Thus, in the absence of a statutory
requirement, it is not essential that he be given notice before the issuance of an execution against
his tangible property; after the rendition of the judgment he must take "notice of what will follow," no
further notice being "necessary to advance justice." [Emphases and underscoring supplied]

Likewise, in the case of Leonardo Lim De Mesa v. Hon. Court of Appeals,6 it was stated:

In the present case, the decision ordering partition and the rendition of accounting had already
become final and executory. The execution thereof thus became a matter of right on the part of the
plaintiffs, herein private respondents, and is a mandatory and ministerial duty on the part of the
court. Once a judgment becomes final and executory, the prevailing party can have it
executed as a matter of right, and the judgment debtor need not be given advance notice of
the application for execution nor be afforded prior hearings thereon.

On the bases of the foregoing considerations, therefore, the Court of Appeals acted correctly in
holding that the failure to serve a copy of the motion for execution on petitioner is not a fatal defect.
In fact, there was no necessity for such service. [Emphases and underscoring supplied]

At any rate, it is not true that the petitioner was not notified of the motion for execution of the
Spouses Co. The records clearly show that the motion for execution was duly served upon, and
received by, petitioners counsel-of-record, the Quasha Ancheta Pena Nolasco Law Offices, as
evidenced by a "signed stamped received mark" appearing on said pleading.7 The records are bereft
of proof showing any written denial from petitioners counsel of its valid receipt on behalf of its client.
Neither is there proof that the Quasha Ancheta Pena Nolasco Law Offices has formally withdrawn its
appearance as petitioners counsel-of-record. Considering that there is enough proof shown on
record of personal delivery in serving the subject motion for execution, there was a valid compliance
with the Rules, thus, no persuasive reason to stay the execution of the subject final and executory
judgment.

Moreover, this Court takes note that petitioner was particularly silent on the ruling of the CA that he
was notified, through his counsel, of the motion for execution of the Spouses Co when he filed a
motion for reconsideration of the RTCs order dated June 28, 2005, holding in abeyance said motion
pending the resolution of petitioners pleading filed before this Court. He did not dispute the ruling of
the CA either that the alleged defect in the Spouses Cos motion was cured when his new counsel
was served a copy of said motion for reconsideration of the RTCs June 28, 2005 Order.8

The three-day notice rule is not absolute. A liberal construction of the procedural rules is proper
where the lapse in the literal observance of a rule of procedure has not prejudiced the adverse party
and has not deprived the court of its authority. Indeed, Section 6, Rule 1 of the Rules of Court
provides that the Rules should be liberally construed in order to promote their objective of securing a
just, speedy and inexpensive disposition of every action and proceeding. Rules of procedure are
tools designed to facilitate the attainment of justice, and courts must avoid their strict and rigid
application which would result in technicalities that tend to frustrate rather than promote substantial
justice.

In Somera Vda. De Navarro v. Navarro, the Court held that there was substantial compliance of the
rule on notice of motions even if the first notice was irregular because no prejudice was caused the
adverse party since the motion was not considered and resolved until after several postponements
of which the parties were duly notified.

Likewise, in Jehan Shipping Corporation v. National Food Authority, the Court held that despite the
lack of notice of hearing in a Motion for Reconsideration, there was substantial compliance with the
requirements of due process where the adverse party actually had the opportunity to be heard and
had filed pleadings in opposition to the motion. The Court held:

This Court has indeed held time and again, that under Sections 4 and 5 of Rule 15 of the Rules of
Court, mandatory is the requirement in a motion, which is rendered defective by failure to comply
with the requirement. As a rule, a motion without a notice of hearing is considered pro forma and
does not affect the reglementary period for the appeal or the filing of the requisite pleading.

As an integral component of the procedural due process, the three-day notice required by the Rules
is not intended for the benefit of the movant. Rather, the requirement is for the purpose of avoiding
surprises that may be sprung upon the adverse party, who must be given time to study and meet the
arguments in the motion before a resolution of the court. Principles of natural justice demand that the
right of a party should not be affected without giving it an opportunity to be heard.

The test is the presence of opportunity to be heard, as well as to have time to study the
motion and meaningfully oppose or controvert the grounds upon which it is
based.9 [Emphases and underscoring supplied]

Likewise, in the case of KKK Foundation, Inc. v. Hon. Adelina Calderon-Bargas,10 this Court stated:
Anent the second issue, we have consistently held that a motion which does not meet the
requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is considered a worthless piece of
paper, which the Clerk of Court has no right to receive and the trial court has no authority to act
upon. Service of a copy of a motion containing a notice of the time and the place of hearing of that
motion is a mandatory requirement, and the failure of movants to comply with these requirements
renders their motions fatally defective. However, there are exceptions to the strict application of
this rule. These exceptions are: (1) where a rigid application will result in a manifest failure or
miscarriage of justice especially if a party successfully shows that the alleged defect in the
questioned final and executory judgment is not apparent on its face or from the recitals contained
therein; (2) where the interest of substantial justice will be served; (3) where the resolution of the
motion is addressed solely to the sound and judicious discretion of the court; and (4) where the
injustice to the adverse party is not commensurate with the degree of his thoughtlessness in not
complying with the procedure prescribed.

A notice of hearing is an integral component of procedural due process to afford the adverse parties
a chance to be heard before a motion is resolved by the court. Through such notice, the adverse
party is given time to study and answer the arguments in the motion. Records show that while
Angeless Motion for Issuance of Writ of Execution contained a notice of hearing, it did not
particularly state the date and time of the hearing. However, we still find that petitioner was not
denied procedural due process. Upon receiving the Motion for Issuance of Writ of Execution, the trial
court issued an Order dated September 9, 2002 giving petitioner ten (10) days to file its comment.
The trial court ruled on the motion only after the reglementary period to file comment lapsed. Clearly,
petitioner was given time to study and comment on the motion for which reason, the very purpose of
a notice of hearing had been achieved.

The notice requirement is not a ritual to be followed blindly. Procedural due process is not based
1wphi1

solely on a mechanical and literal application that renders any deviation inexorably fatal. Instead,
procedural rules are liberally construed to promote their objective and to assist in obtaining a just,
speedy and inexpensive determination of any action and proceeding. [Emphases supplied]

At any rate, it is undisputed that the August 21, 1991 RTC Decision11 in Civil Case No. 44940 is
already final and executory. Once a judgment becomes final and executory, all the issues between
the parties are deemed resolved and laid to rest. All that remains is the execution of the decision
which is a matter of right. The prevailing party is entitled to a writ of execution, the issuance of which
is the trial courts ministerial duty.12

The Court agrees with the respondents that petitioner mainly relies on mere technicalities to frustrate
the ends of justice and further delay the execution process and enforcement of the RTC Decision
that has been affirmed by the CA and this Court. The record shows that the case has been dragging
on for almost 30 years since petitioner filed an action for annulment of sale in 1982. From the time
the Spouses Co bought the house from PSB in 1978, they have yet to set foot on the subject house
and lot.

To remand the case back to the lower court would further prolong the agony of the Spouses Co. The
Court should not allow this to happen. The Spouses Co should not be prevented from enjoying the
fruits of the final judgment in their favor. In another protracted case, the Court wrote:

As a final note, it bears to point out that this case has been dragging for more than 15 years and the
execution of this Courts judgment in PEA v. CA has been delayed for almost ten years now simply
because De Leon filed a frivolous appeal against the RTCs order of execution based on arguments
that cannot hold water. As a consequence, PEA is prevented from enjoying the fruits of the final
judgment in its favor. The Court agrees with the Office of the Solicitor General in its contention that
every litigation must come to an end once a judgment becomes final, executory and unappealable.
Just as a losing party has the right to file an appeal within the prescribed period, the winning party
also has the correlative right to enjoy the finality of the resolution of his case by the execution and
satisfaction of the judgment, which is the "life of the law." To frustrate it by dilatory schemes on the
part of the losing party is to frustrate all the efforts, time and expenditure of the courts. It is in the
interest of justice that this Court should write finis to this litigation.13

WHEREFORE, the petition is DENIED.

SO ORDERED.

JOSE CATRAL MENDOZA


Associate Justice

#41

FIRST DIVISION

G.R. No. 183795 November 12, 2014

PRUDENTIAL BANK (now Bank of the Philippine Islands) as the duly appointed
ADMINISTRATOR OF THE ESTATE OF JULIANA DIEZ VDA. DE GABRIEL,Petitioner,
vs.
AMADOR A. MAGDAMIT, JR., on his behalf and as substituted heir (son) of AMADOR
MAGDAMIT, SR., and AMELIA F. MAGDAMIT, as substituted heir (Widow) of AMADOR
MAGDAMIT, SR., Respondents.

DECISION

PEREZ, J.:

Before us is a Petition for Review under Rule 45 of the 1997 Rules of Civil Procedure assailing the
Decision1 and Resolution2 of the Court of Appeals (CA) dated 3 September 2007 and 18 July 2008,
respectively, in CA-G.R. SP No. 93368, affirming the Decision of the Regional Trial Court
(RTC),3 dated 18 January 2006, in Civil Case No. 05-112499, which reversed the ruling of the
Metropolitan Trial Court (MeTC) on the ground that the MeTC did not acquire jurisdiction over the
person of the respondents due to invalid service of summons.

The facts as culled from the records are as follows:

This is a case of unlawful detainer filed by petitioner Prudential Bank, now Bank of the Philippine
Islands (petitioner), in its capacity as administrator of the Estate of Juliana Diez Vda. De Gabriel
(Estate). It is based on the ground of respondents failure to pay rentals and refusal to vacate the
subject property, which is allegedly part of the Estate located at 1164 Interior, Julio Nakpil St., Paco,
Manila, covered by Transfer Certificate of Title No. 118317 of the Registry of Deeds of Manila.

In the Original Complaint4 filed before the MeTC, Branch 15 of Manila, petitioner impleaded Amador
A. Magdamit, Jr. (Magdamit, Jr.), as respondent.

Instead of filing an Answer, Magdamit, Jr. filed a Notice of Special Appearance with Motion to
Dismiss. Among others, Magdamit, Jr. argued that (1) petitioner was not duly authorized through a
Board Resolution to institute the complaint, (2) he was not the occupant of the subject property but
instead, his parents, as grantees or awardees of Juliana Diez Vda. De Gabriel, and (3) the MeTC did
not acquire jurisdiction over his person because the summons was served at his former address at
1164 Interior Julio Nakpil St., Paco, Manila. On 30 April 2003, petitioner filed a Motion to Strike Out
this pleading on the ground that it is prohibited. Petitioner then filed an Amended Complaint, this
time, impleading both Magdamit, Jr. and Amador Magdamit, Sr. (Magdamit, Sr.).

In an Order5 dated 26 June 2003, the MeTC granted petitioners Motion to Strike Out Magdamit, Jr.s
Notice of Special Appearance with Motion to Dismiss and ordered Magdamit,Jr. to file an Answer.
The Order reads:

After due consideration of the matter and arguments stated therein, the Court resolves to DENY the
defendants Motion to dismiss, it appearing that the summons issued in this case was served, albeit
substituted nevertheless valid. It is of no consequence that defendant is also presently residing in
Bacoor, Cavite. Suffice it to say that summons was served upon him (although substituted) on the
leased premises which plaintiff is justified in assuming that he is also residing there at. Moreover, it
appears that he knew the person on whom summons was served (together with a copy of the
complaint) as a certain Dara Cabug only that he claims that the latter is not of "suitable age and
discretion" to receive the summons. Simply put, the requirement of due process has been satisfied.
Be that as it may, it would not unduly prejudice the rights of the plaintiff if defendant is given
additional period of five (5) days from notice hereof within which to file his Answer.6
In response to the Amended Complaint, both Magdamit, Jr. and Magdamit, Sr. filed their Answers
separately. On 9 July 2003, Magdamit, Jr., filed his Answerwith Counterclaim7 (In a Special
Appearance Capacity). On the other hand, Magdamit, Sr. filed his Answer8 on 13 November 2003.
Magdamit, Sr. argued that the MeTC did not acquire jurisdiction over his person because the
summons was not properly served as the summons was received by Madel Magalona, who is not
authorized to receive summons being a mere housemaid of Magdamit, Sr.s daughter, Arleen Marie
Cabug. Also, Magdamit, Sr. argued that in the 1960s, the Spouses Francisco and Juliana Gabriel
assigned the subject property to him free of charge as a reward and in recompense for the long,
faithful, and devoted services he rendered to them. Since then, he had been continuously exercising
acts of ownership over the subject property, including payment of real estate taxes. Magdamit, Sr.
further argued that amendment of the Complaint in order to implead him is improper. According to
Magdamit, Sr., amendment cannot be allowed so as to confer jurisdiction upon a court that never
acquired it in the first place, and the ejectment case cannot be instituted against Magdamit, Jr.
because an action to recover possession cannot be maintained against one who is not in actual or
legal possession thereof.9

Pending litigation of the case, Magdamit, Jr., who was made an original defendant in the MeTC,
substituted his deceased father, Magdamit, Sr.

Ruling of the MeTC

After trial, the MeTC ruled in favor of petitioner. According to the MeTC, "[t]he fact that the person
who received the summons was a 13-year old girl does not make the service of summons invalid.
That she was of sufficient age and discretion is shown by the fact that she was intelligent enough to
immediately bring to the attention of defendant Atty. Amador Magdamit, Jr. the summons and copy
of the complaint she received."10 The MeTC went on further, stating that Magdamit Sr.s claim of
ownership is beyond its jurisdiction because the onlyissue in an ejectment case is "possession de
facto". The dispositive portion of the MeTC Decision dated 21 March 2005 reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against defendants Amador
Magdamit, Sr.:

1. ordering said defendant and all persons claiming right under him to vacate the subject
three (3) lots covered by TCT No. 118317 of the Registry of Deeds of Manila, located at and
also known as 1164 Interior J. Nakpil St., Paco, Manila and to peacefully surrender
possession thereof to plaintiff;

2. ordering said defendant to pay plaintiff the sum of 180,000.00 representing rentals or
reasonable compensation for the use of the property due from August 2003 up to February
2005 and 10,000.00 per month thereafter until defendants fully vacate the subject property;

3. ordering said defendant to pay plaintiff the sum of 20,000.00 as attorneys fees; and

4. to pay the costs. The complaint is dismissed as against defendant Amador Magdamit, Jr.
and the latters counterclaim is likewise dismissed.
SO ORDERED.11
Ruling of the RTC
On appeal, the RTC set aside the decision of the MeTC and dismissed the case for lack of
jurisdiction over the person of the respondents.12 According to the RTC, amending the original
complaint to implead Magdamit, Sr. to cure a defect in the complaint and introduce a non-existing
cause of action, which petitioner did not possess at the outset, and to confer
jurisdiction upon the court that never acquired jurisdiction in the first place renders the complaint
dismissible. The RTC further stated that because the Return did not clearly indicate the impossibility
of service of summons within a reasonable time upon the respondents, the process servers resort to
substituted service of summons was unjustified. The decision of the RTC reads:

WHEREFORE, this Court finds merit on the appeal and consequently, the decision on appeal is
hereby set aside, and this case is accordingly dismissed for lack of jurisdiction over the persons of
the defendants.13

Ruling of the CA

Aggrieved, petitioner filed an appeal via a petition for review under Rule 42 of the Rules of Court
beforethe CA. The petitioner argued that the RTC erred in ruling thatthe MeTC did not acquire
jurisdiction over the person of the respondents due to improper service of summons considering that
the respondents participated in the proceedings in the MeTC by filing a Notice of Appearance with
Motion to Dismiss, Answer with Counterclaim, entering into pre-trial, submitting position papers, and
presenting evidence, which militate against the alleged improper service of summons. On 3
September 2007, the CA denied the petition and affirmed the decision of the RTC.

According to the CA, the Return, with only a general statement and without specifying the details of
the attendant circumstances or of the efforts exerted to serve the summons, will notsuffice for
purposes of complying with the rules of substituted service of summons. The CA also rejected
petitioners contention that respondents voluntary submission to the jurisdiction of the court cured
any defect in the substituted service of summons when as early as during the infancy of the
proceedings in the MeTC, Magdamit, Jr. seasonably raised the ground of lack of jurisdiction over his
person by filing a Notice of Appearance with Motion to Dismiss, which the respondents incessantly
reiterated in their pleadings even when the case was elevated to the RTC, then to the CA. The
dispositive portion of the decision of the CA reads:

Having found that the MeTC did notacquire jurisdiction over the persons (sic) of respondents, it
would be futile on Our part to still pass upon the other errors assigned by petitioner. WHEREFORE,
premises considered, the petition is DENIED. Costs against petitioner.

SO ORDERED.14

The motion for reconsideration was likewise denied for lack of merit.

Hence, this Petition, raising the following assignment of errors:

"I. Whether or not the Court of Appeals erred in dismissing the Petition for Review of the
Decision of the Regional Trial Court of Manila dated January 18,2006; and disposing of only
the issue of lack of jurisdiction over the person of respondents for alleged improper service of
summons;

II. Whether or not the Court of Appeals erred in not ruling on the material and substantial
issues in the case; and

III. Whether or not the Court of Appeals erred in affirming the decision of the Metropolitan
Trial Court of Manila dismissing of the Complaint against Magdamit, Jr., based on the ground
that he was no longer residing at the subject property prior to, and at the time of the filing of
the ejectment complaint."15
The pivotal issue is whether or not the MeTC acquired jurisdiction over the person of the
respondents.

The petition is bereft of merit.

Both respondents, Magdamit, Jr. and Magdamit, Sr. argued that the MeTC did not acquire
jurisdiction overtheir persons due to defective or improper service of summons. Magdamit,Sr. argued
that the MeTC could not have acquired jurisdiction over his person due to improper/defective service
of summons because it was served upon an incompetent person, the housemaid of his daughter.
Magdamit Sr. also argued that the MeTC did not acquire jurisdiction over him because he was
impleaded asa respondent only after the inherently invalid original complaint was amended.
According to Magdamit, Sr., the original complaint was inherently invalid because it was instituted
against Magdamit, Jr., against whom an action to recover possession cannot be maintained,
because he is not in actual or legal possession thereof. Thus, the amendment of the inherently
invalid original complaint for the purpose of curing a defect to confer jurisdiction was invalid as the
MeTC never acquired jurisdiction in the first place.16Pertinent to the position of Magdamit, Sr. is the
Sheriffs Return dated 24 October 2003 on the service of summons on Magdamit, Jr. which reads:

1. That, on October 22, 2003, he proceeded to the place of defendant Amador Magdamit, Sr.
at No. 1164 Int. Julio Nakpil St., Paco, Manila, for the purpose of serving the Summons
issued in the above-entitled case, but no service was effected because he was not around;

2. That, on October 23, 2003, undersigned repaired (sic) anew to the said place but for the
second time, he failed to reached (sic) said defendant. Thus, he elected (sic) substituted
service by serving the said summons together with the copy of the complaint and annexes
attached thereat (sic) to Ms. Madel Magalona, a person of sufficient age and living thereat
who however refused to acknowledge(d) receipt thereof;

3. That, undersigned explained to (this)Ms. Magalona the contents of the said process in a
language she fully understood and adviced (sic) her to gave (sic) the same to her employer
as soon as he arrives.17

On the other hand, Magdamit, Jr. argued that the MeTC did not acquire jurisdiction over his person
because the summons was not served at his residence but at the house of Magdamit, Sr., and on a
person not authorized to receive summons. The Sheriffs Return dated 25 March 2003 reads:

This is to certify, that on the 24th day of March, 2003, xxx served copy of the Summons together
with the copy of the Complaint and its attachment, upon defendant/s Amador A. Magdamit, Jr. at
1164 Int., J. Nakpil St., Paco, Manila, by tendering the copy to Dara Cabug (grand daughter), a
person of sufficient age, discretion and residing therein who however refused to acknowledged (sic)
receipt thereof.

That on several occasions despite deligent (sic) efforts exerted to serve the said processes
personally to defendant/s herein the same proved futile. Thus, substituted service was effected in
accordance with the provision of Sec. 8, Rule 14, Rules of Court.

In view of the foregoing, the original summons is now respectfully returned to the Honorable Court,
DULY SERVED.18

Fundamental is the rule that jurisdiction over a defendant in a civil case is acquired either through
service of summons or through voluntary appearance in court and submission to its authority. In the
absence or when the service of summons upon the person of the defendant isdefective, the court
acquires no jurisdiction over his person, and a judgment rendered against him is null and void.19

In actionsin personamsuch as ejectment, the court acquires jurisdiction over the person of the
defendant through personal or substituted service of summons. However, because substituted
service is in derogation of the usual method of service and personal service of summons is preferred
over substituted service, parties do not have unbridled right to resort to substituted service of
summons.20 Before substituted service of summons is resorted to, the parties must: (a) indicate the
impossibility of personal service of summons within a reasonable time; (b) specify the efforts exerted
to locate the defendant; and (c) state that the summons was served upon a person of sufficient age
and discretion who is residing in the address, or who is in charge of the office or regular place of
business of the defendant.21

In Manotoc v. Court of Appeals,22 we have succinctly discussed a valid resort to substituted service
of summons:

We can break down this section into the following requirements to effect a valid substituted service:

(1) Impossibility of Prompt Personal Service

The party relying on substituted service or the sheriff must show that defendant cannot be served
promptly or there is impossibility of prompt service. Section 8, Rule 14 provides that the plaintiff or
the sheriff is given a "reasonable time" to serve the summons to the defendant in person, but no
specific time frame is mentioned. "Reasonable time" is defined as "so much time as is necessary
under the circumstances for a reasonably prudent and diligent man to do, conveniently, what the
contract or duty requires that should be done, having a regard for the rights and possibility of loss, if
any, to the other party." Under the Rules, the service of summons has no set period.

However, when the court, clerk of court,or the plaintiff asks the sheriff to make the return of the
summons and the latter submits the return of summons, then the validity of the summons lapses.
The plaintiff may then ask for an alias summons if the service of summons has failed. What then is a
reasonable time for the sheriff to effect a personal service in order to demonstrate impossibility of
prompt service? To the plaintiff, "reasonable time" means no more than seven (7) days since an
expeditious processing of a complaint is what a plaintiff wants. To the sheriff, "reasonable time"
means 15 to 30 days because at the end of the month, it is a practice for the branch clerk of court to
require the sheriff to submit a return of the summons assigned to the sheriff for service. The Sheriffs
Return provides data to the Clerk of Court, which the clerk uses in the Monthly Report of Cases to
be submitted to the Office of the Court Administrator within the first ten (10) days of the succeeding
month. Thus, one month from the issuance of summons can be considered "reasonable time" with
regard to personal service on the defendant.

Sheriffs are asked to discharge their duties on the service of summons with due care, utmost
diligence, and reasonable promptness and speed so as not to prejudice the expeditious dispensation
of justice. Thus, they are enjoined to try their best efforts to accomplish personal service on
defendant. On the other hand, since the defendant is expected to try to avoid and evade service of
summons, the sheriff must be resourceful, persevering, canny, and diligent in serving the process on
the defendant. For substituted service of summons to be available, there must be several attempts
by the sheriff to personally serve the summons within a reasonable period [of one month] which
eventually resulted in failure to prove impossibility of prompt service. "Several attempts" means at
least three (3) tries, preferably on at least two different dates. In addition, the sheriff must cite why
such efforts were unsuccessful. It is only then that impossibility of service can be confirmed or
accepted.
(2) Specific Details in the Return

The sheriff must describe in the Return of Summons the facts and circumstances surrounding the
attempted personal service. The efforts made to find the defendant and the reasons behind the
failure must be clearly narrated in detail in the Return.The date and time of the attempts on personal
service, the inquiries made to locate the defendant, the name/s of the occupants of the alleged
residence or house of defendant and all other acts done, though futile, to serve the summons on
defendant must be specified in the Return to justify substituted service. The form on Sheriffs Return
of Summons on Substituted Service prescribed in the Handbook for Sheriffs published by the
Philippine Judicial Academy requires a narration of the efforts made to find the defendant personally
and the fact of failure. Supreme Court Administrative Circular No. 5 dated November 9, 1989
requires that "impossibility of prompt service should be shown by stating the efforts made to find the
defendant personallyand the failure of such efforts," which should be made in the proof of service.

(3) A Person of Suitable Age and Discretion

If the substituted service will be effected at defendants house or residence, it should be left with a
person of "suitable age and discretion then residing therein." A person of suitable age and discretion
is one who has attained the age of full legal capacity (18 years old) and is considered to have
enough discernment to understand the importance of a summons. "Discretion" isdefined as "the
ability to make decisions which represent a responsible choice and for which an understanding of
what is lawful, right or wise may be presupposed". Thus, to be of sufficient discretion, suchperson
must know how to read and understand English to comprehend the import of the summons, and fully
realize the need to deliver the summonsand complaint to the defendant at the earliest possible time
for the person to take appropriate action. Thus, the person must have the "relation of confidence" to
the defendant, ensuring that the latter would receive orat least be notified of the receipt of the
summons. The sheriff must therefore determine if the person found in the alleged dwelling or
residence of defendant is of legal age, what the recipients relationship with the defendant is, and
whether said person comprehends the significance of the receipt of the summons and his duty to
immediately deliver it to the defendant or at least notify the defendant of said receipt of summons.
These matters must be clearly and specifically described in the Return of Summons.

(4) A Competent Person in Charge

If the substituted service will be done at defendants office or regular place of business, then it
should be served on a competent person in charge of the place. Thus, the person on whom the
substituted service will be made must be the one managing the office or business of defendant, such
as the president or manager; and such individual must have sufficient knowledge tounderstand the
obligation of the defendant in the summons, its importance, and the prejudicial effects arising from
inaction on the summons. Again, these details must be contained in the Return.23(Emphasis and
underscoring supplied; citations omitted)

The service of summons on Magdamit, Sr. failed to comply with the rule laid down in Manotoc. The
resort to substituted service after just two (2) attempts to personally serve the summons on
Magdamit, Sr., is premature under our pronouncement that:

What then is a reasonable time for the sheriff to effect a personal service in order to demonstrate
impossibility of prompt service? To the plaintiff, "reasonable time"means no more than seven (7)
days since an expeditious processing of a complaint is what a plaintiff wants. To the sheriff,
"reasonable time" means 15 to 30 days because at the end of the month, it is a practice for the
branch clerk of court to require the sheriff to submit a return of the summons assigned to the sheriff
for service. The Sheriffs Return provides data to the Clerk of Court, which the clerk uses in the
Monthly Report of Cases to be submitted to the Office of the Court Administrator within the first ten
(10) days of the succeeding month. Thus, one month from the issuance of summons can be
considered "reasonable time" with regard to personal service on the defendant.24

Then too, the proof of service failed to specify the details of the attendant circumstances. The Return
merely expressed a general statement that because the Sheriff failed to reachMagdamit, Sr., he
elected substituted service of summons. The Return failed to state the impossibility to serve
summons within a reasonable time. And the further defect in the service was that the summons was
served on a person not of sufficient discretion, an incompetent person, Madel Magalona, a
housemaid of Magdamit Sr.s daughter, Arleen Marie Cabug.

Similar to the case of Magdamit, Sr., the service of summons on Magdamit, Jr. also failed to
complywith the rules laid down in Manotoc. The summons was served at 1163 Int., J. Nakpil St.,
Paco, Manila, Magdamit, Jr.s former residence when at the time, Magdamit, Jr. was residing at
0369 Jupiter St., Progressive Village 20 and 21, Molino I, Bacoor, Cavite. In Keister v. Navarro,25 we
have defined "dwelling house" or "residence" to refer to a place where the person named in the
summons is living at the time when the service is made, even though he may be temporarily out of
the country at the time to the time of service. Therefore, it is not sufficient for the Sheriff "to leave the
copy at defendant's former dwelling house, residence, or place ofabode, as the case may be, after
his removal therefrom".26

Worse, the Return did not make mention of any attempt to serve the summons at the actual
residence of Magdamit, Jr. The Return merely expressed a general statement that the sheriff
exerted efforts to serve the summons and that the same was futile, "[t]hat on several occasions
despite deligent (sic) efforts exerted to serve the said processes personally to defendant/s herein the
same proved futile," without any statement on the impossibility of service of summons within a
reasonable time. Further, the summons was served on a certain DaraCabug, a person not of
suitable age and discretion, who is unauthorized to receive the same.

Notably, the requirement additionally is that

Thus, to be of sufficient discretion, such person must know how to read and understand English to
comprehend the import of the summons, and fully realize the need to deliver the summons and
complaint to the defendant at the earliest possible timefor the person to take appropriate action.
Thus, the person must have the "relation of confidence" to the defendant, ensuring that the latter
would receive or at least be notified of the receipt of the summons. The sheriff must therefore
determine if the person found in the alleged dwelling or residence of defendant is of legal age, what
the recipients relationship with the defendant is, and whether said person comprehends the
significance of the receipt of the summons and his duty to immediately deliver it tothe defendant or
at least notify the defendant of said receipt of summons. These matters must be clearly and
specifically described in the Return of Summons.27

The readily acceptable conclusion inthis case is that the process server at once resorted to
substituted service of summons without exerting enough effort to personally serve summons on
respondents. In Sps. Jose v. Sps. Boyon,28 we discussed the effect of failure to specify the details of
the effort exerted by the process serverto personally serve summons upon the defendants:

The Return of Summons shows no effort was actually exerted and no positive step taken by either
the process server or petitioners to locate and serve the summons personally on respondents. At
best, the Return merely states the alleged whereabouts of respondents without indicating that such
information was verified from a person who had knowledge thereof. Certainly, without specifying the
details of the attendant circumstances or of the efforts exerted to serve the summons, a general
statement that such efforts were made will not suffice for purposes of complying withthe rules of
substituted service of summons.29 (Emphasis and underscoring supplied)

In the case at bar, the Returns contained mere general statements that efforts at personal service
were made. Not having specified the details of the attendant circumstances or of the efforts exerted
to serve the summons,30 there was a failure to comply strictly with all the requirements of substituted
service, and as a result the service of summons is rendered ineffective.31

Filing an Answer does not amount to voluntary appearance

The petitioner asserted that assuming arguendo that the service of summons was defective,
respondents filing of their respective Answers and participation in the proceedings in the MeTC,
such as attending the pre-trial and presenting evidence, amount to voluntary appearance which
vested the MeTC jurisdiction over their persons.

Indeed, despite lack of valid service of summons, the court can still acquire jurisdiction over the
person of the defendant by virtue of the latters voluntary appearance. Section 20, Rule14 of the
Rules of Court clearly states:

Sec. 20. Voluntary appearance. The defendants voluntary appearance in the action shall be
equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from
lack of jurisdiction over the person shall not be deemed a voluntary appearance.

However, such is not the case atbar. Contrary to petitioners contention, respondents are not
deemed to have voluntarily submitted to the courts jurisdiction by virtue of filing an Answer or other
appropriate responsive pleadings and by participating in the case.

The mandate under the Rules on Summary Proceedings that govern ejectment cases, is expeditious
administration of justice such that the filing of an Answer is mandatory. To give effect to the
mandatory character and speedy disposition of cases, the defendant is required to file an answer
within ten (10) days from service of summons, otherwise, the court, motu proprio, or upon motion of
the plaintiff, shall render judgment as may be warranted by the facts alleged in the complaint, limited
to the relief prayed for by the petitioner.32 Through this rule, the parties are precluded from resorting
to dilatory maneuvers.

Compliantly, respondents filed their respective Answers. In the MeTC, at first, Magdamit, Jr. filed a
Notice of Special Appearance with Motion to Dismiss, where he seasonably raised the issue of lack
of jurisdiction, which the MeTC later ordered to be stricken out. In lieu thereof, Magdamit, Jr. filed an
Answer with Counterclaim (In a Special Appearance Capacity). Again, Magdamit, Jr. reiterated the
lack of jurisdiction over his person and the subject matter. On the other hand, Magdamit, Sr. filed an
Answer with an allegation by special defense that the original complaint

should be dismissed outright because the MeTC did not acquire jurisdiction over his person and the
subject matter. In sum, both respondents filed their Answers via special appearance.
1w phi 1

In Philippine Commercial International Bank v. Spouses Wilson Dy Hong Pi and Lolita Dy,33 we held
that filing of an answer in a special appearance cannot be construed as voluntary appearance or
submission to the courts jurisdiction:

Preliminarily, jurisdiction over the defendant in a civil case is acquired either by the coercive power
of legal processes exerted over his person, or his voluntary appearance in court. As a general
proposition, one who seeks an affirmative relief is deemed to have submitted to the jurisdiction of the
court. It is by reason of this rule that we have had occasion to declare that the filing of motions to
admit answer, for additional time to file answer, for reconsideration of a default judgment, and to lift
order of default with motion for reconsideration, is considered voluntary submission to the courts
jurisdiction. This, however, is tempered by the concept of conditional appearance, such that a party
who makes a special appearance to challenge, among others, the courts jurisdiction over his person
cannot be considered to have submitted to its authority.

Prescinding from the foregoing, it is thus clear that:


(1) Special appearance operates as an exception to the general rule on voluntary
appearance;
(2) Accordingly, objections to the jurisdiction of the court over the person of the
defendantmust be explicitly made, i.e., set forth in an unequivocal manner; and
(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court, especially
in instanceswhere a pleading or motion seeking affirmative relief is filed and submitted to the
court for resolution.34 (Emphasis supplied and underscoring supplied)

Parallel to our ruling in Philippine Commercial International Bank, the respondents act of filing their
respective Answers with express reservation should not be construed as a waiver of the lack of
jurisdiction of the MeTC over their person because of non-service/defective/improper service of
summons and for lack of jurisdiction over the subject matter. Hence, sans voluntary submission to
the courts jurisdiction, filing an answer in compliance with the rules on summary procedure in lieu of
obtaining an adverse summary judgment does not amount to voluntary submission. As we already
held, a party who makes a special appearance in court, challenging the jurisdiction of said court, is
not deemed to have submitted himself to the jurisdiction of the court.35 It should not be construed as
voluntary submission to the jurisdiction of the court.

In view of the foregoing, the petition is DENIED. The Decision and

Resolution of the Court of Appeals in CA-G.R. SP No. 93368, which upheld the ruling of the
Regional Trial Court that the Metropolitan Trial Court in Civil Case No. 174798 did not acquire
jurisdiction over the person of the respondents due to invalid service of summons, are AFFIRMED.

SO ORDERED.

JOSE PORTUGAL PEREZ


Associate Justice

#42

FIRST DIVISION

G.R. No. 204796 February 4, 2015

REICON REALTY BUILDERS CORPORATION, Petitioner,


vs.
DIAMOND DRAGON REALTY AND MANAGEMENT, INC., Respondent.
DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Resolutions dated May 21, 20122 and
November 21, 20123rendered by the Court of Appeals (CA) in CA-G.R. SP No. 116845 which
dismissed outright petitioner Reicon Realty Builders Corporation's (Reicon) certiorari petition on
procedural grounds.

The Facts

Reicon is the owner of a parcel of land and the one-storey building erected thereon located at the
comer of Aurora Boulevard and Araneta Avenue, Sta. Mesa, Quezon City,4 covered by Transfer
Certificate of Title No. 330668 (subject property).5 On January 9, 1991, Reicon and respondent
Diamond Dragon Realty and Management, Inc. (Diamond) entered into a Contract of
Lease6 (January 9, 1991 Contract), whereby Reicon leased the subject property to Diamond for a
period of twenty (20) years, from January 15, 1991 to January 15, 2011, for a monthly rental of
75,000.00, subject to periodical increments.7 In tum, Diamond sublet portions of the subject
property to Jollibee Foods Corporation8 (Jollibee) and Maybunga U.K. Enterprises (Maybunga),
represented by its proprietor, Andrew D. Palangdao (Andrew).9

Beginning June 2006, Diamond failed to pay the monthly rentals due, and the checks it had issued
by way of payments from June 2006 to December 2006 were all dishonored upon
presentment.10 This prompted Reicon to send, through counsel, a letter11 dated July 23, 2007
demanding the payment of the accrued rentals and terminating the January 9, 1991
Contract.12 Thereafter, it entered into separate contracts with Jollibee13 and Maybunga14 over the
portions of the subject property they respectively occupy.

On December 14, 2009, Diamond filed a complaint15 for breach of contract with damages against
Reicon, Jollibee, Maybunga, Andrew, and a certain Mary Palangdao (Mary) (defendants) before the
Regional Trial Court of Pasig City, Branch 166 (RTC), docketed as Civil Case No. 72319, alleging
that the January 9, 1991 Contract did not provide for its unilateral termination by either of the
parties.16 It also alleged that the act of defendants in entering into separate contracts, despite the
existence of the January 9, 1991 Contract, constitutes unlawful interference,17for which they must be
held solidarily liable for damages. As such, Diamond prayed that the unilateral termination of the
January 9, 1991 Contract effected by Reicon, as well as the separate contracts of lease it entered
into with Jollibee and Maybunga, be declared invalid and illegal.18 Further, it sought the award of
unpaid rentals from Jollibee and Maybunga starting July 23, 2007 up to the present, moral and
exemplary damages, and attorney's fees.19

By way of special appearance, Reicon filed a motion to dismiss20 the complaint on the following
grounds: (a) lack of jurisdiction over its person, c onsidering that the summons was not served upon
its president, managing partner, general manager, corporate secretary, treasurer, or in-house
counsel, as required by the Rules of Court (Rules),21but upon a certain Fernando Noyvo, a
houseboy/gardener, at a residence located at 1217 Acacia St., Dasmarifias Village, Makati City,
which is not the principal office of Reicon;22 (b) lack of legal capacity to sue as a juridical person on
the part of Diamond, its certificate of registration having already been revoked by the Securities and
Exchange Commission (SEC) as early as September 29, 2003, per certifications23 issued by the
latter;24 and ( c) lack of cause of action, in the absence of the requisite allegations of the ultimate
facts constituting bad faith and malice on the part of the defendants as would support the cause of
action of "unlawful interference. "25
Opposing Reicon's motion to dismiss, Diamond argued26 that, even assuming that summons was not
properly served upon Reicon, improper service is not a ground to dismiss its complaint.27 It also
insisted that it has legal capacity to sue,28 as the corporation whose certificate of registration was
revoked was "Diamond Dragon Realty and Mgt. Inc.," while its name, per its General Information
Sheet29 for 2009, was "Diamond Dragon Realty & Management, Inc." Moreover, it claimed that its
legal existence cannot be attacked except in a quo warranto petition.30

In its reply,31 Reicon pointed out, inter alia, that the corporation whose certificate of registration was
revoked by the SEC on September 29, 200332 was registered under SEC No. 144830.33 Per the
SEC's Certificate of Corporate Filing/Information34 dated February 1, 2010 which referred to
"Diamond Dragon Realty & Mgt. Inc. " as well as Certificate of Corporate Filing/Information35 dated
March 2, 2010 which referred to "Diamond Dragon Realty and Management, Inc.," both corporations
were registered under SEC No. 144830, which can only mean that it is one and the same
corporation. Reicon also reiterated its previous arguments in its motion to dismiss.

For its part, Jollibee filed a separate motion to dismiss36 the complaint on the ground of lack of
jurisdiction over its person, the summons having been improperly served; lack of jurisdiction over the
subject matter, as Diamond failed to allege the value of the subject property, which is required in an
action involving title to, or possession of, real property, as in this case; and improper venue.37 As for
Maybunga, records do not show that they filed a similar motion for the dismissal of the complaint.

The RTC Ruling

In an Order38 dated June 9, 2010, the RTC denied Reicon's (and Jollibee's) motion to dismiss,
ratiocinating that improper service of summons is not among the grounds enumerated under Section
1,39 Rule 16 of the Rules allowing for the dismissal of a complaint. With regard to the legal capacity of
Diamond to sue as a juridical person, the R TC cited Section 2040 of the Corporation Code,41 in
relation to Sections 142 and 543 of Rule 66 of the Rules, in ruling that Diamond's legal existence can
only be impugned in a quo warranto proceeding.

Reicon moved for reconsideration44 thereof which was, however, denied in an Order45 dated
September 16, 2010.

The Proceedings Before the CA

Aggrieved, Reicon elevated the matter to the CA via petition for certiorari46 taken under Rule 65 of
the Rules, ascribing grave abuse of discretion upon Presiding Judge Rowena De Juan Quinagoran
(Judge Quinagoran) of the RTC in not dismissing Diamond's complaint on the grounds discussed in
Reicon's motion to dismiss, particularly the issue respecting Diamond's lack of legal capacity to
sue.47 Reicon filed its certiorari petition on November 18, 2010, entitled "Reicon Realty Builders
Corporation v. Hon. Rowena De Juan-Quinagoran and Diamond Dragon Realty and Management,
Inc.," docketed as CA-G.R. SP No. 116845.

In a Resolution48 dated March 28, 2011, however, the CA required Reicon to show cause as to why
its petition for certiorari should. not be dismissed for its failure to acquire jurisdiction over the person
of Diamond, as private respondent, as required under Section 4,49 Rule 46 of the Rules. It appears
that the CA's earlier Resolution dated January 5, 2011 addressed to Diamond, with address at "Suite
305, AIC Burgundy Empire Tpwer, ADB Ave., cor[.] Gamet50 Road, Ortigas Center 1605 Pasig City"
was returned to it, with the notation "RTS-Moved Out."51

In its Compliance,52 Reicon stated that the address "Suite 305, AIC Burgundy Empire Tower, ADB
Avenue comer Gamet Road, Ortigas Center, Pasig City" was Diamond's address on record in Civil
Case No. 72319, the civil case from which the certiorari petition originated. From the institution
thereof up to the filing of Re icon's petition before the CA, Diamond has not submitted any paper or
pleading notifying the RTC of any change in its address. As such, Reicon maintained that the service
of its petition to Diamond's address as above-indicated should be deemed effective. In the
alternative, it proffered that Diamond may be served through its counsel of record in Civil Case No.
72319, Atty. Anselmo A. Marqueda (Atty. Marqueda) of A.A. MARQUEDA LAW OFFICES, at the
latter's office address.53

Alleging that it received a copy of Reicon's Compliance, Diamond, through its counsel, Atty.
Marqueda, filed a manifestation,54 under a special appearance, averring that Reicon' s petition for
certiorari must be dismissed outright for its failure to serve a copy thereof on its counsel of record
(i.e., Atty. Marqueda).55 It cited the rule that when a party is represented by counsel, notice of
proceedings must be served upon said counsel to constitute valid service.56

In a Resolution57 dated May 21, 2012, the CA dismissed Reicon's certiorari petition without passing
upon its merits based on the following grounds: (a) non-compliance with the requirements of proof of
service of the petition on Diamond pursuant to Section 3,58 Rule 46 of the Rules, and (b) non-
compliance with the rule on service upon a party through counsel under Section 2, Rule 13 of the
Rules.

Reicons motion for reconsideration59 was denied in a Resolution60 dated November 21, 2012, hence,
this petition.

The Issues Before the Court

The sole issue to resolve is whether or not Reicon's certiorari petition before the CA was properly
served upon the person of Diamond.

The Court's Ruling

The petition is meritorious.

I.

Sections 3 and 4, Rule 46 of the Rules, which covers cases originally Filed61 before the CA, provide
as follows:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. - The petition
shall contain the full names and actual addresses of all the petitioners and respondents, a concise
statement of the matters involved, the factual background of the case, and the grounds relied upon
for the relief prayed for.

In actions filed under Rule 65, the petition shall further indicate the material dates showing when
notice of the judgment or final order or resolution subject thereof was received, when a motion for
new trial or reconsideration, if any, was filed and when notice of the denial thereof was received.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the
respondent with the original copy intended for the court indicated as such by the petitioner, and shall
be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order,
resolution, or ruling subject thereof, such material portions of the record as are referred to therein,
and other documents relevant or pertinent thereto. x x x.
xxxx

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient
ground for the dismissal of the petition.

SEC. 4. Jurisdiction over the person of respondent, how acquired. - The court shall acquire
jurisdiction over the person of the respondent by the service on him of its order or resolution
indicating its initial action on the petition or by his voluntary submission to such jurisdiction.
(Emphases and underscoring supplied)

A punctilious review of the records, particularly of the certiorari petition filed by Reicon before the
CA, shows that it contains the registry numbers corresponding to the registry receipts62 as well as the
affidavit of service and/or filing63of the person who filed and served the petition via registered mail on
behalf of Reicon. These imply that a copy of Reicon' s certiorari petition had been served to the R
TC as well as to Diamond through its address at "Suite 305 AIC Burgundy Empire Tower, ADB
Avenue comer Gamet Road, Ortigas Center, Pasig City,"64 in compliance with Section 13,65 Rule 13
of the Rules on proof of service as well as with Sections 3 and 4 of Rule 46 above-quoted.66

On this score, the Court notes that Diamond declared the aforesaid address as its business
address67 in its complaint before the RTC, and that there is dearth of evidence to show that it had
since changed its address or had moved out. Hence, Reicon cannot be faulted for adopting the said
address in serving a copy of its certiorari petition to Diamond in light of the requirement under
Sections 3 and 4, Rule 46 of the Rules as above-cited, which merely entails service of the petition
upon the respondent itself, not upon his counsel.

The underlying rationale behind this rule is that a certiorari proceeding is, by nature, an original and
independent action, and, therefore not considered as part of the trial that had resulted in the
rendition of the judgment or order complained of.68 Hence, at the preliminary point of serving the
certiorari petition, as in other initiatory pleadings, it cannot be said that an appearance for
respondent has been made by his counsel. Consequently, the requirement under Section 2,69 Rule
13 of the Rules, which provides that if any party has appeared by counsel, service upon him shall be
made upon his counsel, should not apply.

Thus, the CA erred when it dismissed Reicon's certiorari petition outright for non-compliance with
Section 3, Rule 46 of the Rules as well as the rule on service upon a party through counsel under
Section 2, Rule 13 of the Rules. The service of said pleading upon the person of the respondent,
and not upon his counsel, is what the rule properly requires, as in this case.

II.

On a related note, the Court further observes that jurisdiction over the person of Diamond had
already been acquired by the CA through its voluntary appearance by virtue of the Manifestation
dated May 5, 2011, filed by its counsel, Atty. Marqueda, who, as the records would show, had
consistently represented Diamond before the proceedings in the court a quo and even before this
Court. To restate, Section 4, Rule 46 of the Rules provides:

SEC. 4. Jurisdiction over person of respondent, how acquired. -The court shall acquire jurisdiction
over the person of the respondent by the service on him of its order or resolution indicating its initial
action on the petition or by his voluntary submission to such jurisdiction. (Emphasis and
underscoring supplied)
Hence, while the CA' s resolution indicating its initial action on the petition, i.e., the Resolution dated
January 5, 2011 requiring Diamond to comment, was returned with the notation "RTS-Moved Out,"
the alternative mode of Diamond's voluntary appearance was enough for the CA to acquire
jurisdiction over its person. Diamond cannot escape this conclusion by invoking the convenient
excuse of limiting its manifestation as a mere "special appearance," considering that it affirmatively
sought therein the dismissal of the certiorari petition. Seeking an affirmative relief is inconsistent with
the position that no voluntary appearance had been made, and to ask for such relief, without the
proper objection, necessitates submission to the Court's jurisdiction. Here, Diamond's special
appearance cannot be treated as a specific objection to the CA's jurisdiction over its person for the
reason that the argument it pressed on was about the alleged error in the service of Reicon's
certiorari petition, and not the CA's service of its resolution indicating its initial action on the said
pleading. Properly speaking, this argument does not have anything to do with the CA's acquisition of
jurisdiction over Diamond for it is the service of the appellate court's resolution indicating its initial
action, and not of the certiorari petition itself, which is material to this analysis.

Note that the conclusion would be different if Diamond had actually objected to the CA's service of
its resolution indicating its initial action; if such were the case, then its special appearance could then
be treated as a proper conditional appearance challenging the CA's jurisdiction over its person. To
parallel, in ordinary civil cases, a conditional appearance to object to a trial court's jurisdiction over
the person of the defendant may be made when said party specifically objects to the service of
summons, which is an issuance directed by the court, not the complainant. If the defendant,
however, enters a special appearance but grounds the same on the service of the complainant's
initiatory pleading to him, then that would not be considered as an objection to the court's jurisdiction
over his person. It must be underscored that the service of the initiatory pleading has nothing to do
with how courts acquire jurisdiction over the person of the defendant in an ordinary civil action.
Rather, it is the propriety of the trial court's service of summons - same as the CA's service of its
resolution indicating its initial action on the certiorari petition - which remains material to the matter of
the court's acquisition jurisdiction over the defendant's/respondents' person.

In Philippine Commercial International Bank v. Spouses Dy,70 it was ruled that "[a]s a general
proposition, one who seeks an affirmative relief is deemed to have submitted to the jurisdiction of the
court. It is by reason of this rule that we have had occasion to declare that the filing of motions to
1w phi 1

admit answer, for additional time to file answer, for reconsideration of a default judgment, and to lift
order of default with motion for reconsideration, is considered voluntary submission to the court's
jurisdiction. This, however, is tempered by the concept of conditional appearance, such that a party
who makes a special appearance to challenge, among others, the court's jurisdiction over his person
cannot be considered to have submitted to its authority. Prescinding from the foregoing, it is thus
clear that:

(1) Special appearance operates as an exception to the general rule on voluntary


appearance;

(2) Accordingly, objections to the jurisdiction of the court over the person of the defendant
must be explicitly made, i.e., set forth in an unequivocal manner; and

(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court, especially
in instances where a pleading or motion seeking affirmative relief is filed and submitted to the
court for resolution."71

Considering that the tenor of Diamond's objection in its special appearance had actually no legal
bearing on the CA's jurisdiction over its person (that is, since it objected to the propriety of Reicon's
service of its petition, and not the CA's service of its order indicating its initial action), it cannot be
said that the proper objection to the appellate court's jurisdiction, as above-discussed, had been
made by Diamond. Thus, by asking for an affirmative relief, i.e., the dismissal of Rei con's certiorari
petition, bereft of the proper jurisdictional objection, the Court therefore concludes that Diamond had
submitted itself to the jurisdiction of the appellate court.

In fine, the proper course of action would be for the CA to reinstate Reicon's certiorari petition,
docketed as CA-G.R. SP No. 116845, given that it had already acquired jurisdiction over Diamond's
person. In order to ensure that Diamond's due process rights are protected, Reicon should, however,
be directed to submit proof that the service of its petition had actually been completed in accordance
with Rule 1372 of the Rules.73 Diamond, in the meantime, should be ordered to furnish the CA the
details of its current address and confirm whether or not Atty. Marqueda would be representing it as
its counsel of record in the main (and not only through special appearance); if Diamond will be
represented by a different counsel, it must so notify the appellate court. Henceforth, all pleadings
and papers should be addressed to such counsel and would equally bind Diamond as client.
Throughout the proceedings, the CA is exhorted to bear in mind the judicial policy to resolve the
present controversy with utmost dispatch in order to avoid further delay.

WHEREFORE, the petition is GRANTED. The Resolutions dated May 21, 2012 and November 21,
2012 of the Court of Appeals (CA) are REVERSED and SET ASIDE. Accordingly, the CA is
DIRECTED to REINSTATE the petition for certiorari, docketed as CA-G.R. SP No. 116845 under the
parameters discussed in this Decision.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

#43

SECOND DIVISION

G.R. No. 175507 October 8, 2014


RAMON CHING AND POWING PROPERTIES, INC., Petitioners,
vs.
JOSEPH CHENG, JAIME CHENG, MERCEDES IGNE1 AND LUCINA SANTOS, Respondents.

DECISION

LEONEN, J.:

Rule 17 of the Rules of Civil Procedure governs dismissals of actions at the instance of the plaintiff.
Hence, the "two-dismissal rule" under Rule 17, Section 1 of the Rules of Civil Procedure will not
apply if the prior dismissal was done at the instance of the defendant.

This is a petition for review on certiorari assailing the decision2 and resolution3 of the Court of
Appeals in CA-G.R. SP. No. 86818, which upheld the (1) order4 dated November 22, 2002
dismissing Civil Case No. 02-103319 without prejudice, and (2) the omnibus order5 dated July 30,
2004, which denied petitioners motion for reconsideration. Both orders were issued by the Regional
Trial Court of Manila, Branch 6.6

The issues before this court are procedural. However, the factual antecedents in this case, which
stemmed from a complicated family feud, must be stated to give context to its procedural
development.

It is alleged that Antonio Ching owned several businesses and properties, among which was Po
Wing Properties, Incorporated (Po Wing Properties).7 His total assets are alleged to have been worth
more than 380 million.8 It is also alleged that whilehe was unmarried, he had children from two
women.9

Ramon Ching alleged that he was the only child of Antonio Ching with his common-law wife, Lucina
Santos.10 She, however, disputed this. She maintains that even ifRamon Chings birth certificate
indicates that he was Antonio Chings illegitimate child, she and Antonio Ching merely adopted him
and treated him like their own.11

Joseph Cheng and Jaime Cheng, on the other hand, claim to be Antonio Chings illegitimate children
with his housemaid, Mercedes Igne.12 While Ramon Ching disputed this,13 both Mercedes and Lucina
have not.14

Lucina Santos alleged that when Antonio Ching fell ill sometime in 1996, he entrusted her with the
distribution of his estate to his heirs if something were to happen to him. She alleged that she
handed all the property titles and business documents to Ramon Ching for
safekeeping.15 Fortunately, Antonio Ching recovered from illness and allegedly demanded that
Ramon Ching return all the titles to the properties and business documents.16

On July 18, 1996, Antonio Ching was murdered.17 Ramon Ching allegedly induced Mercedes Igne
and her children, Joseph Cheng and Jaime Cheng, to sign an agreement and waiver18 to Antonio
Chings estate in consideration of 22.5 million. Mercedes Ignes children alleged that Ramon Ching
never paid them.19 On October 29, 1996, Ramon Ching allegedly executed an affidavit of settlement
of estate,20 naming himself as the sole heir and adjudicating upon himself the entirety of Antonio
Chings estate.21

Ramon Ching denied these allegationsand insisted that when Antonio Ching died, the Ching family
association, headed by Vicente Cheng, unduly influenced him to give Mercedes Igne and her
children financial aid considering that they served Antonio Ching for years. It was for this reason that
an agreement and waiver in consideration of 22.5 million was made. He also alleged that hewas
summoned by the family association to execute an affidavit of settlement of estate declaring him to
be Antonio Chings sole heir.22

After a year of investigating Antonio Chings death, the police found Ramon Ching to be its primary
suspect.23Information24 was filed against him, and a warrant of arrest25 was issued.

On October 7, 1998, Joseph Cheng, Jaime Cheng, and Mercedes Igne (the Chengs) filed a
complaint for declaration of nullity of titles against Ramon Ching before the Regional Trial Court of
Manila. This case was docketed as Civil Case No. 98-91046 (the first case).26

On March 22, 1999, the complaint was amended, with leave of court, to implead additional
defendants, including Po Wing Properties, of which Ramon Ching was a primary stockholder.The
amended complaint was for "Annulment of Agreement, Waiver, Extra-Judicial Settlement of Estate
and the Certificates of Title Issued by Virtue of Said Documents with Prayer for Temporary
Restraining Order and Writ of Preliminary Injunction."27 Sometime after, Lucina Santos filed a motion
for intervention and was allowed to intervene.28

After the responsive pleadings had been filed, Po Wing Properties filed a motion to dismiss on the
ground of lack of jurisdiction of the subject matter.29

On November 13, 2001, the Regional Trial Court of Manila, Branch 6, granted the motion to dismiss
on the ground of lack of jurisdiction over the subject matter.30 Upon motion of the Chengs counsel,
however, the Chengs and Lucina Santos were given fifteen (15) days to file the appropriate
pleading. They did not do so.31

On April 19, 2002, the Chengs and Lucina Santos filed a complaint for "Annulment of Agreement,
Waiver, Extra-Judicial Settlement of Estate and the Certificates of Title Issued by Virtue of Said
Documents with Prayer for Temporary Restraining Order and Writ of Preliminary Injunction" against
Ramon Ching and Po Wing Properties.32This case was docketed as Civil Case No. 02-103319 (the
second case) and raffled to Branch 20 of the Regional Trial Court of Manila.33 When Branch 20 was
made aware of the first case, it issued an order transferring the case to Branch 6, considering that
the case before it involved substantially the same parties and causes of action.34

On November 11, 2002, the Chengs and Lucina Santos filed a motion to dismiss their complaint in
the second case, praying that it be dismissed without prejudice.35

On November 22, 2002, Branch 6 issued an order granting the motion to dismiss on the basis that
the summons had not yet been served on Ramon Ching and Po Wing Properties, and they had not
yet filed any responsive pleading. The dismissal of the second case was made without prejudice.36

On December 9, 2002, Ramon Ching and Po Wing Properties filed a motion for reconsideration of
the order dated November 22, 2002. They argue that the dismissal should have been with prejudice
under the "two dismissal rule" of Rule 17, Section 1 of the 1997 Rules of Civil Procedure, in view of
the previous dismissal of the first case.37

During the pendency of the motion for reconsideration, the Chengs and Lucina Santos filed a
complaint for "Disinheritance and Declaration of Nullity of Agreement and Waiver, Affidavit of Extra
judicial Agreement, Deed of Absolute Sale, and Transfer Certificates of Title with Prayer for TRO
and Writ of Preliminary Injunction" against Ramon Ching and Po Wing Properties. This case was
docketed as Civil Case No. 02-105251(the third case) and was eventually raffled to Branch 6.38
On December 10, 2002, Ramon Ching and Po Wing Properties filed their comment/opposition to the
application for temporary restraining order in the third case. They also filed a motion to dismiss on
the ground of res judicata, litis pendencia, forum-shopping, and failure of the complaint to state a
cause of action. A series of responsive pleadings were filed by both parties.39

On July 30, 2004, Branch 6 issued an omnibus order40 resolving both the motion for reconsideration
in the second case and the motion to dismiss in the third case. The trial court denied the motion for
reconsideration and the motion to dismiss, holding that the dismissal of the second case was without
prejudice and, hence, would not bar the filing of the third case.41 On October 8, 2004, while their
motion for reconsideration in the third case was pending, Ramon Ching and Po Wing Properties filed
a petition for certiorari (the first certiorari case) with the Court of Appeals, assailing the order dated
November 22,2002 and the portion of the omnibus order dated July 30, 2004, which upheldthe
dismissal of the second case.42

On December 28, 2004, the trial court issued an order denying the motion for reconsideration in the
third case. The denial prompted Ramon Ching and Po Wing Properties to file a petition for certiorari
and prohibition with application for a writ of preliminary injunction or the issuance of a temporary
restraining order (the second certiorari case) with the Court of Appeals.43

On March 23, 2006, the Court of Appeals rendered the decision44 in the first certiorari case
dismissing the petition. The appellate court ruled that Ramon Ching and Po Wing Properties
reliance on the "two-dismissal rule" was misplaced since the rule involves two motions for dismissals
filed by the plaintiff only. In this case, it found that the dismissal of the first case was upon the motion
of the defendants, while the dismissal of the second case was at the instance of the plaintiffs.45

Upon the denial of their motion for reconsideration,46 Ramon Ching and Po Wing Properties filed this
present petition for review47 under Rule 45 of the Rules of Civil Procedure.

Ramon Ching and Po Wing Properties argue that the dismissal of the second case was with
prejudice since the non-filing of an amended complaint in the first case operated as a dismissal on
the merits.48 They also argue that the second case should be dismissed on the ground of res judicata
since there was a previous final judgment of the first case involving the same parties, subject matter,
and cause of action.49

Lucina Santos was able to file a comment50 on the petition within the period required.51 The Chengs,
however, did not comply.52 Upon the issuance by this court of a show cause order on September 24,
2007,53 they eventually filed a comment with substantially the same allegations and arguments as
that of Lucina Santos.54

In their comment, respondents allege that when the trial court granted the motion to dismiss, Ramon
Chings counsel was notified in open court that the dismissal was without prejudice. They argue that
the trial courts order became final and executory whenhe failed to file his motion for reconsideration
within the reglementary period.55

Respondents argue that the petition for review should be dismissed on the ground of forum shopping
and litis pendencia since Ramon Ching and Po Wing Properties are seeking relief simultaneously in
two forums by filing the two petitions for certiorari, which involved the same omnibus order by the
trial court.56 They also argue that the "two-dismissal rule" and res judicata did not apply since (1) the
failure to amend a complaint is not a dismissal, and (2) they only moved for dismissal once in the
second case.57
In their reply,58 petitioners argue that they did not commit forum shopping since the actions they
commenced against respondents stemmed from the complaints filed against them in the trial
courts.59 They reiterate that their petition for review is only about the second case; it just so
happened that the assailed omnibus order resolved both the second and third cases.60

Upon the filing of the parties respective memoranda,61 the case was submitted for decision.62

For this courts resolution are the following issues:

I. Whether the trial courts dismissal of the second case operated as a bar to the filing of a
third case, asper the "two-dismissal rule"; and

II. Whether respondents committed forum shopping when they filed the third case while the
motion for reconsideration of the second case was still pending.

The petition is denied.

The "two-dismissal rule" vis--vis

the Rules of Civil Procedure

Dismissals of actions are governed by Rule 17 of the 1997 Rules of Civil Procedure. The pertinent
provisions state:

RULE 17
DISMISSAL OF ACTIONS

SEC. 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.

SEC. 2. Dismissal upon motion of plaintiff. Except as provided in the preceding section, a
complaint shall not be dismissed at the plaintiff's 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.

SEC. 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 court's 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. (Emphasis supplied)
The first section of the rule contemplates a situation where a plaintiff requests the dismissal of the
case beforeany responsive pleadings have been filed by the defendant. It is donethrough notice by
the plaintiff and confirmation by the court. The dismissal is without prejudice unless otherwise
declared by the court.

The second section of the rule contemplates a situation where a counterclaim has been pleaded by
the defendant before the service on him or her of the plaintiffs motion to dismiss. It requires leave of
court, and the dismissal is generally without prejudice unless otherwise declared by the court.

The third section contemplates dismissals due to the fault of the plaintiff such as the failure to
prosecute. The case is dismissed either upon motion of the defendant or by the court motu propio.
Generally, the dismissal is with prejudice unless otherwise declared by the court.

In all instances, Rule 17 governs dismissals at the instance of the plaintiff, not of the defendant.
Dismissals upon the instance of the defendant are generally governed by Rule 16, which covers
motions to dismiss.63

In Insular Veneer, Inc. v. Hon. Plan,64 Consolidated Logging and Lumber Mills filed a complaint
against Insular Veneer to recover some logs the former had delivered to the latter. It also filed ex
partea motion for issuance of a restraining order. The complaint and motion were filed in a trial court
in Isabela.65

The trial court granted the motion and treated the restraining order as a writ of preliminary injunction.
When Consolidated Logging recovered the logs, it filed a notice of dismissal under Rule 17, Section
1 of the 1964 Rules of Civil Procedure.66

While the action on its notice for dismissal was pending, Consolidated Logging filed the same
complaint against Insular Veneer, this time in a trial court in Manila. It did not mention any previous
action pending in the Isabela court.67

The Manila court eventually dismissed the complaint due to the nonappearance of Consolidated
Loggings counsel during pre-trial. Consolidated Logging subsequently returned to the Isabela court
to revive the same complaint. The Isabela court apparently treated the filing of the amended
complaint as a withdrawal of its notice of dismissal.68

Insular Veneer also filed in the Isabela court a motion to dismiss, arguing that the dismissal by the
Manila court constituted res judicataover the case. The Isabela court, presided over by Judge Plan,
denied the motion to dismiss. The dismissal was the subject of the petition for certiorari and
mandamus with this court.69

This court stated that:

In resolving that issue, we are confronted with the unarguable fact that Consolidated Logging on its
volition dismissed its action for damages and injunction in the Isabela court and refiled substantially
the same action in the Manila court. Then, when the Manila court dismissed its action for failure to
prosecute, it went hack [sic] to the Isabela court and revived its old action by means of an amended
complaint.

Consolidated Logging would liketo forget the Manila case, consign it to oblivion as if it were a bad
dream, and prosecute its amended complaint in the Isabela court as if nothing had transpired in the
Manila court. We hold that it cannot elude the effects of its conduct in junking the Isabela case and in
giving that case a reincarnation in the Manila court.

Consolidated Logging [sic] filed a new case in Manila at its own risk. Its lawyer at his peril failed
toappear at the pre-trial.70

This court ruled that the filing of the amended complaint in the Isabela court was barred by the prior
dismissal of the Manila court, stating that:

The provision in section 1(e), Rule 16 of the Rules of Court that an action may be dismissed
because "there is another action pending between the same parties for the same cause"
presupposes that two similar actions are simultaneously pending in two different Courts of First
Instance. Lis pendensas a ground for a motion to dismiss has the same requisites as the plea of res
judicata.

On the other hand, when a pleading is amended, the original pleading is deemed abandoned. The
original ceases to perform any further function as a pleading. The case stands for trial on the
amended pleading only. So, when Consolidated Logging filed its amended complaint dated March
16, 1970 in Civil Case No. 2158, the prior dismissal order dated January 5, 1970 in the Manila case
could he [sic] interposed in the Isabela court to support the defense of res judicata.71

As a general rule, dismissals under Section 1 of Rule 17 are without prejudice except when it is the
second time that the plaintiff caused its dismissal. Accordingly, for a dismissal to operate as an
adjudication upon the merits, i.e, with prejudice to the re-filing of the same claim, the following
requisites must be present:

(1) There was a previous case that was dismissed by a competent court;

(2) Both cases were based on or include the same claim;

(3) Both notices for dismissal werefiled by the plaintiff; and

(4) When the motion to dismiss filed by the plaintiff was consented to by the defendant on
the ground that the latter paid and satisfied all the claims of the former.72

The purpose of the "two-dismissal rule" is "to avoid vexatious litigation."73 When a complaint is
dismissed a second time, the plaintiff is now barred from seeking relief on the same claim.

The dismissal of the second case was without prejudice in view of the "two-dismissal rule"

Here, the first case was filed as an ordinary civil action. It was later amended to include not only new
defendants but new causes of action that should have been adjudicated in a special proceeding. A
motion to dismiss was inevitably filed by the defendants onthe ground of lack of jurisdiction.

The trial court granted that motion to dismiss, stating that:

A careful perusal of the allegations of the Amended Complaint dated February 10, 1999, filed by
Plaintiff Joseph Cheng, show that additional causes of action were incorporated i.e. extra-judicial
settlement of the intestate estate of Antonio Ching and receivership, subject matters, which should
be threshed out in a special proceedings case. This is a clear departure from the main cause of
action in the original complaint which is for declaration of nullity of certificate of titles with damages.
And the rules of procedure which govern special proceedings case are different and distinct from the
rules of procedure applicable in an ordinary civil action.

In view of the afore-going, the court finds the Motion to Dismiss filed by Atty. Maria Lina Nieva S.
Casals to be meritorious and the Court is left with no alternative but to dismiss as it hereby
dismisses the Amended Complaint.

However, on motion of Atty. Mirardo Arroyo Obias, counsel for the plaintiffs, he is given a period of
fifteen (15) days from today, within which to file an appropriate pleading, copy furnished to all the
parties concerned.
....
SO ORDERED.74

Petitioners are of the view that when Atty. Mirardo Arroyo Obias failed to file the appropriate
pleading within fifteen (15) days, he violated the order of the court. This, they argue, made the
original dismissal an adjudication upon the merits, in accordance with Rule 17, Section 3, i.e., a
dismissal through the default of the plaintiff. Hence, they argue that when respondents filed the
second case and then caused its dismissal, the dismissal should have been with prejudice according
to Rule 17, Section 1, i.e., two dismissals caused by the plaintiff on the same claim. Unfortunately,
petitioners theory is erroneous.

The trial court dismissed the first case by granting the motion to dismiss filed by the defendants.
When it allowed Atty. Mirardo Arroyo Obias a period of fifteen (15) days tofile an appropriate
pleading, it was merely acquiescing to a request made bythe plaintiffs counsel that had no bearing
on the dismissal of the case.

Under Rule 17, Section 3, a defendant may move to dismiss the case if the plaintiff defaults; it does
not contemplate a situation where the dismissal was due to lack of jurisdiction. Since there was
already a dismissal prior to plaintiffs default, the trial courts instruction to file the appropriate
pleading will not reverse the dismissal. If the plaintiff fails to file the appropriate pleading, the trial
court does not dismiss the case anew; the order dismissing the case still stands.

The dismissal of the first case was done at the instance of the defendant under Rule 16, Section 1(b)
of the Rules of Civil Procedure, which states:

SECTION 1. Grounds. Within the time for but before filing the answer to the complaint or pleading
asserting a claim, a motion to dismiss may be made on any of the following grounds:
....
(b) That the court has no jurisdiction over the subject matter of the claim;
....
Under Section 5 of the same rule,75 a party may re-file the same action or claim subject to certain
exceptions.

Thus, when respondents filed the second case, they were merely refiling the same claim that had
been previously dismissed on the basis of lack of jurisdiction. When they moved to dismiss the
second case, the motion to dismiss can be considered as the first dismissal at the plaintiffs instance.

Petitioners do not deny that the second dismissal was requested by respondents before the service
of any responsive pleadings. Accordingly, the dismissal at this instance is a matter of right that is not
subject to the trial courts discretion. In O.B. Jovenir Construction and Development Corporation v.
Macamir Realty and Development Corporation:76
[T]he trial court has no discretion or option to deny the motion, since dismissal by the plaintiff under
Section 1, Rule 17 is guaranteed as a matter of right to the plaintiffs. Even if the motion cites the
most ridiculous of grounds for dismissal, the trial court has no choice but to consider the complaint
as dismissed, since the plaintiff may opt for such dismissal as a matter of right, regardless of
ground.77 (Emphasis supplied)

For this reason, the trial court issued its order dated November 22, 2002 dismissing the case,
without prejudice. The order states:

When this Motion was called for hearing, all the plaintiffs namely, Joseph Cheng, Jaime Cheng,
Mercedes Igne and Lucina Santos appeared without their counsels. That they verbally affirmed the
execution of the Motion to Dismiss, as shown by their signatures over their respective names
reflected thereat. Similarly, none of the defendants appeared, except the counsel for defendant,
Ramon Chang [sic], who manifested that they have not yet filed their Answer as there was a defect
in the address of Ramon Cheng [sic] and the latter has not yet been served with summons.

Under the circumstances, and further considering that the defendants herein have not yet filed their
Answers nor any pleading, the plaintiffs has [sic] the right to out rightly [sic] cause the dismissal of
the Complaint pursuant to Section 2, Rule 17 of the 1997 Rules of Civil Procedure without prejudice.
Thereby, and as prayed for, this case is hereby ordered DISMISSED without prejudice.

SO ORDERED.78 (Emphasis supplied)

When respondents filed the third case on substantially the same claim, there was already one prior
dismissal at the instance of the plaintiffs and one prior dismissal at the instance of the defendants.
While it is true that there were two previous dismissals on the same claim, it does not necessarily
follow that the re-filing of the claim was barred by Rule 17, Section 1 of the Rules of Civil Procedure.
The circumstances surrounding each dismissal must first be examined to determine before the rule
may apply, as in this case.

Even assuming for the sake of argument that the failure of Atty. Mirardo Arroyo Obias to file the
appropriate pleading in the first case came under the purview of Rule 17, Section 3 of the Rules of
Civil Procedure, the dismissal in the second case is still considered as one without prejudice. In
Gomez v. Alcantara:79

The dismissal of a case for failure to prosecute has the effect of adjudication on the merits, and is
necessarily understood to be with prejudice to the filing of another action, unless otherwise provided
in the order of dismissal. Stated differently, the general rule is that dismissal of a case for failure to
prosecute is to be regarded as an adjudication on the merits and with prejudice to the filing of
another action, and the only exception is when the order of dismissal expressly contains a
qualification that the dismissal is without prejudice.80 (Emphasis supplied)

In granting the dismissal of the second case, the trial court specifically orders the dismissal to be
without prejudice. It is only when the trial courts order either is silent on the matter, or states
otherwise, that the dismissal will be considered an adjudication on the merits.

However, while the dismissal of the second case was without prejudice, respondents act of filing the
third case while petitioners motion for reconsideration was still pending constituted forum shopping.

The rule against forum shopping and the "twin-dismissal rule"


In Yap v. Chua:81

Forum shopping is the institution of two or more actions or proceedings involving the same parties
for the same cause of action, either simultaneously or successively, on the supposition that one or
the other court would make a favorable disposition. Forum shopping may be resorted to by any party
against whom an adverse judgment or order has been issued in one forum, in an attempt to seek a
favorable opinion in another, other than by appeal or a special civil action for certiorari. Forum
shopping trifles with the courts, abuses their processes, degrades the administration of justice and
congest court dockets. What iscritical is the vexation brought upon the courts and the litigants by a
party who asks different courts to rule on the same or related causes and grant the same or
substantially the same reliefs and in the process creates the possibility of conflicting decisions being
renderedby the different fora upon the same issues. Willful and deliberate violation of the rule
against forum shopping is a ground for summary dismissal of the case; it may also constitute direct
contempt.

To determine whether a party violated the rule against forum shopping, the most important factor
toask is whether the elements of litis pendentiaare present, or whether a final judgment in one case
will amount to res judicatain another; otherwise stated, the test for determining forum shopping is
whether in the two (or more) cases pending, there is identity of parties, rights or causes of action,
and reliefs sought.82 (Emphasis supplied)

When respondents filed the third case, petitioners motion for reconsideration of the dismissal of the
second case was still pending. Clearly, the order of dismissal was not yet final since it could still be
overturned upon reconsideration, or even on appeal to a higher court.

Moreover, petitioners were not prohibited from filing the motion for reconsideration. This court has
already stated in Narciso v. Garcia83 that a defendant has the right to file a motion for reconsideration
of a trial courts order denying the motion to dismiss since "[n]o rule prohibits the filing of such a
motion for reconsideration."84 The second case, therefore, was still pending when the third case was
filed.

The prudent thing that respondents could have done was to wait until the final disposition of the
second case before filing the third case. As it stands, the dismissal of the second case was without
prejudice to the re-filing of the same claim, in accordance with the Rules of Civil Procedure. In their
haste to file the third case, however, they unfortunately transgressed certain procedural safeguards,
among which are the rules on litis pendentiaand res judicata.

In Yap:

Litis pendentiaas a ground for the dismissal of a civil action refers to that situation wherein another
action is pending between the same parties for the same cause of action, such that the second
action becomes unnecessary and vexatious. The underlying principle of litis pendentia is the theory
that a party is not allowed to vex another more than once regarding the same subject matter and for
the same cause of action. This theory is founded on the public policy that the same subject matter
should not be the subject of controversy incourts more than once, in order that possible conflicting
judgments may be avoided for the sake of the stability of the rights and status of persons.

The requisites of litis pendentiaare: (a) the identity of parties, or at least such as representing the
same interests in both actions; (b) the identity of rights asserted and relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two cases such that judgment in one,
regardless ofwhich party is successful, would amount to res judicatain the other.85 (Emphasis
supplied)
There is no question that there was an identity of parties, rights, and reliefs in the second and third
cases. While it may be true that the trial court already dismissed the second case when the third
case was filed, it failed to take into account that a motion for reconsideration was filed in the second
case and, thus, was still pending. Considering that the dismissal of the second case was the subject
of the first certiorari case and this present petition for review, it can be reasonably concluded that the
second case, to this day, remains pending.

Hence, when respondents filed the third case, they engaged in forum shopping. Any judgment by
this court on the propriety of the dismissal of the second case will inevitably affect the disposition of
the third case.

This, in fact, is the reason why there were two different petitions for certiorari before the appellate
court. The omnibus order dated July 30, 2004 denied two pending motions by petitioners: (1) the
motion for reconsideration in the second case and (2) the motion to dismiss in the third case. Since
petitioners are barred from filing a second motion for reconsideration of the second case, the first
certiorari case was filed before the appellate court and is now the subject of this review. The denial
of petitioners motion for reconsideration in the third case, however, could still be the subject of a
separate petition for certiorari. That petition would be based now on the third case, and not on the
second case.

This multiplicity of suits is the veryevil sought to be avoided by the rule on forum shopping. In Dy v.
Mandy Commodities Co., Inc.,86 the rule is that:

Once there is a finding of forum shopping, the penalty is summary dismissal not only of the petition
pending before this Court, but also of the other case that is pending in a lower court. This is so
because twin dismissal is a punitive measure to those who trifle with the orderly administration of
justice.87 (Emphasis supplied)

The rule originated from the 1986 case of Buan v. Lopez, Jr.88 In Buan, petitioners filed a petition for
prohibition with this court while another petition for prohibition with preliminary injunction was
pending before the Regional Trial Court of Manila involving the same parties and based on the same
set of facts. This court, in dismissing both actions, stated:

Indeed, the petitioners in both actions . . . have incurred not only the sanction of dismissal oftheir
case before this Court in accordance with Rule 16 of the Rules of Court, but also the punitive
measure of dismissal of both their actions, that in this Court and that in the Regional Trial Court as
well. Quite recently, upon substantially identical factual premises, the Court en banchad occasion to
condemn and penalize the act of litigants of filing the same suit in different courts, aptly described as
"forum shopping[.]"89

The rule essentially penalizes the forum shopper by dismissing all pending actions on the same
claim filed in any court. Accordingly, the grant of this petition would inevitably result in the summary
dismissal of the third case. Any action, therefore, which originates from the third case pending with
any court would be barred by res judicata.

Because of the severity of the penalty of the rule, an examination must first be made on the purpose
of the rule. Parties resort to forum shopping when they file several actions of the same claim in
1wphi 1

different forums in the hope of obtaining a favorable result. It is prohibited by the courts as it "trifle[s]
with the orderly administration of justice."90

In this case, however, the dismissal of the first case became final and executory upon the failure of
respondentscounsel to file the appropriate pleading. They filed the correct pleading the second time
around but eventually sought its dismissal as they"[suspected] that their counsel is not amply
protecting their interests as the case is not moving for almost three (3) years."91 The filing of the third
case, therefore, was not precisely for the purpose of obtaining a favorable result butonly to get the
case moving, in an attempt to protect their rights.

It appears that the resolution on the merits of the original controversy between the parties has long
beenmired in numerous procedural entanglements. While it might be more judicially expedient to
apply the "twin-dismissal rule" and disallow the proceedings in the third case to continue, it would not
serve the ends of substantial justice. Courts of justice must always endeavor to resolve cases on
their merits, rather than summarily dismiss these on technicalities: [C]ases should be determined on
the merits, after all parties have been given full opportunity to ventilate their causes and defenses,
rather than on technicalities or procedural imperfections. In that way, the ends of justice would be
served better. Rules of procedure are mere tools designed to expedite the decision or resolution of
cases and other matters pending in court. A strict and rigid application of rules, resulting in
technicalities that tend to frustrate rather than promote substantial justice, must be avoided.In fact,
Section 6 of Rule 1 states that the Rules [on Civil Procedure] shall be liberally construed in order to
promote their objective of ensuring the just, speedy and inexpensive disposition of every action and
proceeding.92 (Emphasis supplied)

The rule on forum shopping will not strictly apply when it can be shown that (1) the original case has
been dismissed upon request of the plaintiff for valid procedural reasons; (2) the only pending matter
is a motion for reconsideration; and (3) there are valid procedural reasons that serve the goal of
substantial justice for the fresh new case to proceed.

The motion for reconsideration filed in the second case has since been dismissed and is now the
subject of a petition for certiorari. The third case filed apparently contains the better cause of action
for the plaintiffs and is now being prosecuted by a counsel they are more comfortable with.
Substantial justice will be better served if respondents do not fall victim to the labyrinth in the
procedures that their travails led them. It is for this reason that we deny the petition. WHEREFORE,
the petition is DENIED. The Regional Trial Court of Manila, Branch 6 is ordered to proceed with Civil
Case No. 02-105251 with due and deliberate dispatch.

SO ORDERED.

MARVIC M.V.F. LEONEN


Associate Justice