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V. Rule 3 – Sections 1-3: Parties to a Civil Action P.D. No.

P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August
1973.1 When ISA's original term expired on 10 October 1978, its term was extended for another
Republic of the Philippines ten (10) years by Executive Order No. 555 dated 31 August 1979.
SUPREME COURT
Manila The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National
Development Corporation which is itself an entity wholly owned by the National Government,
THIRD DIVISION embarked on an expansion program embracing, among other things, the construction of an
integrated steel mill in Iligan City. The construction of such a steel mill was considered a priority
G.R. No. 102976 October 25, 1995
and major industrial project of the Government. Pursuant to the expansion program of the NSC,
IRON AND STEEL AUTHORITY, petitioner, Proclamation No. 2239 was issued by the President of the Philippines on 16 November 1982
vs. withdrawing from sale or settlement a large tract of public land (totalling about 30.25 hectares
THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER in area) located in Iligan City, and reserving that land for the use and immediate occupancy of
CORPORATION, respondents. NSC.

FELICIANO, J.: Since certain portions of the public land subject matter Proclamation No. 2239 were occupied
by a non-operational chemical fertilizer plant and related facilities owned by private respondent
Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 Maria Cristina Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also
dated 9 August 1973 in order, generally, to develop and promote the iron and steel industry in dated 16 November 1982, was issued directing the NSC to "negotiate with the owners of
the Philippines. The objectives of the ISA are spelled out in the following terms: MCFC, for and on behalf of the Government, for the compensation of MCFC's present
occupancy rights on the subject land." LOI No. 1277 also directed that should NSC and private
Sec. 2. Objectives — The Authority shall have the following objectives: respondent MCFC fail to reach an agreement within a period of sixty (60) days from the date of
LOI No. 1277, petitioner ISA was to exercise its power of eminent domain under P.D. No. 272
(a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and and to initiate expropriation proceedings in respect of occupancy rights of private respondent
export markets for the products of the industry; MCFC relating to the subject public land as well as the plant itself and related facilities and to
(b) to promote the consolidation, integration and rationalization of the industry in order to cede the same to the NSC.2
increase industry capability and viability to service the domestic market and to compete in Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August
international markets; 1983, petitioner ISA commenced eminent domain proceedings against private respondent
(c) to rationalize the marketing and distribution of steel products in order to achieve a balance MCFC in the Regional Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in
between demand and supply of iron and steel products for the country and to ensure that industry possession of the property involved upon depositing in court the amount of P1,760,789.69
prices and profits are at levels that provide a fair balance between the interests of investors, representing ten percent (10%) of the declared market values of that property. The Philippine
consumers suppliers, and the public at large; National Bank, as mortgagee of the plant facilities and improvements involved in the
expropriation proceedings, was also impleaded as party-defendant.
(d) to promote full utilization of the existing capacity of the industry, to discourage investment
in excess capacity, and in coordination, with appropriate government agencies to encourage On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA
capital investment in priority areas of the industry; in turn placed NSC in possession and control of the land occupied by MCFC's fertilizer plant
installation.
(e) to assist the industry in securing adequate and low-cost supplies of raw materials and to
reduce the excessive dependence of the country on imports of iron and steel. The case proceeded to trial. While the trial was ongoing, however, the statutory existence of
petitioner ISA expired on 11 August 1988. MCFC then filed a motion to dismiss, contending
The list of powers and functions of the ISA included the following: that no valid judgment could be rendered against ISA which had ceased to be a juridical person.
Petitioner ISA filed its opposition to this motion.
Sec. 4. Powers and Functions. — The authority shall have the following powers and functions:
In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did
xxx xxx xxx dismiss the case. The dismissal was anchored on the provision of the Rules of Court stating that
"only natural or juridical persons or entities authorized by law may be parties in a civil
(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent case."3 The trial court also referred to non-compliance by petitioner ISA with the requirements
resale and/or lease to the companies involved if it is shown that such use of the State's power is of Section 16, Rule 3 of the Rules of Court.4
necessary to implement the construction of capacity which is needed for the attainment of the
objectives of the Authority; Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the
expiration of its term, its juridical existence continued until the winding up of its affairs could
xxx xxx xxx be completed. In the alternative, petitioner ISA urged that the Republic of the Philippines, being
the real party-in-interest, should be allowed to be substituted for petitioner ISA. In this
(Emphasis supplied)
connection, ISA referred to a letter from the Office of the President dated 28 September 1988 Under the above quoted provision, it will be seen that those who can be parties to a civil action
which especially directed the Solicitor General to continue the expropriation case. may be broadly categorized into two (2) groups:

The trial court denied the motion for reconsideration, stating, among other things that: (a) those who are recognized as persons under the law whether natural, i.e., biological persons,
on the one hand, or juridical person such as corporations, on the other hand; and
The property to be expropriated is not for public use or benefit [__] but for the use and benefit
[__] of NSC, a government controlled private corporation engaged in private business and for (b) entities authorized by law to institute actions.
profit, specially now that the government, according to newspaper reports, is offering for sale
to the public its [shares of stock] in the National Steel Corporation in line with the pronounced Examination of the statute which created petitioner ISA shows that ISA falls under category (b)
policy of the present administration to disengage the government from its private business above. P.D. No. 272, as already noted, contains express authorization to ISA to commence
ventures.5 (Brackets supplied) expropriation proceedings like those here involved:

Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court Sec. 4. Powers and Functions. — The Authority shall have the following powers and functions:
of Appeals affirmed the order of dismissal of the trial court. The Court of Appeals held that
xxx xxx xxx
petitioner ISA, "a government regulatory agency exercising sovereign functions," did not have
the same rights as an ordinary corporation and that the ISA, unlike corporations organized under (j) to initiate expropriation of land required for basic iron and steel facilities for subsequent
the Corporation Code, was not entitled to a period for winding up its affairs after expiration of resale and/or lease to the companies involved if it is shown that such use of the State's power is
its legally mandated term, with the result that upon expiration of its term on 11 August 1987, necessary to implement the construction of capacity which is needed for the attainment of the
ISA was "abolished and [had] no more legal authority to perform governmental functions." The objectives of the Authority;
Court of Appeals went on to say that the action for expropriation could not prosper because the
basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had xxx xxx xxx
become ineffective as a result of the delegate's dissolution, and could not be continued in the
name of Republic of the Philippines, represented by the Solicitor General: (Emphasis supplied)

It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has It should also be noted that the enabling statute of ISA expressly authorized it to enter into
to be dismissed without prejudice to the refiling of a new complaint for expropriation if the certain kinds of contracts "for and in behalf of the Government" in the following terms:
Congress sees it fit." (Emphases supplied)
xxx xxx xxx
At the same time, however, the Court of Appeals held that it was premature for the trial court to
have ruled that the expropriation suit was not for a public purpose, considering that the parties (i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government,
had not yet rested their respective cases. for the bulk purchase of materials, supplies or services for any sectors in the industry, and to
maintain inventories of such materials in order to insure a continuous and adequate supply
In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted thereof and thereby reduce operating costs of such sector;
the action for expropriation in its capacity as agent of the Republic of the Philippines, the
Republic, as principal of ISA, is entitled to be substituted and to be made a party-plaintiff after xxx xxx xxx
the agent ISA's term had expired. (Emphasis supplied)
Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a Clearly, ISA was vested with some of the powers or attributes normally associated with juridical
law further extending the term of ISA after 11 August 1988 evinced a "clear legislative intent personality. There is, however, no provision in P.D. No. 272 recognizing ISA as possessing
to terminate the juridical existence of ISA," and that the authorization issued by the Office of general or comprehensive juridical personality separate and distinct from that of the
the President to the Solicitor General for continued prosecution of the expropriation suit could Government. The ISA in fact appears to the Court to be a non-incorporated agency or
not prevail over such negative intent. It is also contended that the exercise of the eminent domain instrumentality of the Republic of the Philippines, or more precisely of the Government of the
by ISA or the Republic is improper, since that power would be exercised "not on behalf of the Republic of the Philippines. It is common knowledge that other agencies or instrumentalities of
National Government but for the benefit of NSC." the Government of the Republic are cast in corporate form, that is to say, are incorporated
The principal issue which we must address in this case is whether or not the Republic of the agencies or instrumentalities, sometimes with and at other times without capital stock, and
Philippines is entitled to be substituted for ISA in view of the expiration of ISA's term. As will accordingly vested with a juridical personality distinct from the personality of the Republic.
be made clear below, this is really the only issue which we must resolve at this time. Among such incorporated agencies or instrumentalities are: National Power
Corporation;6 Philippine Ports Authority;7 National Housing Authority;8 Philippine National
Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action: Oil Company;9 Philippine National Railways; 10 Public Estates Authority; 11 Philippine
Virginia Tobacco Administration,12 and so forth. It is worth noting that the term "Authority" has
Sec. 1. Who May Be Parties. — Only natural or juridical persons or entities authorized by law been used to designate both incorporated and non-incorporated agencies or instrumentalities of
may be parties in a civil action. the Government.
We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Sec. 3. Representative Parties. — A trustee of an expressed trust, a guardian, an executor or
Philippines. The Republic itself is a body corporate and juridical person vested with the full administrator, or a party authorized by statute may sue or be sued without joining the party for
panoply of powers and attributes which are compendiously described as "legal personality." The whose benefit the action is presented or defended; but the court may, at any stage of the
relevant definitions are found in the Administrative Code of 1987: proceedings, order such beneficiary to be made a party. . . . . (Emphasis supplied)

Sec. 2. General Terms Defined. — Unless the specific words of the text, or the context as a In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or
whole, or a particular statute, require a different meaning: delegate or representative of the Republic of the Philippines pursuant to its authority under P.D.
No. 272. The present expropriation suit was brought on behalf of and for the benefit of the
(1) Government of the Republic of the Philippines refers to the corporate governmental Republic as the principal of ISA. Paragraph 7 of the complaint stated:
entity through which the functions of government are exercised throughout the Philippines,
including, save as the contrary appears from the context, the various arms through which 7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the
political authority is made effective in the Philippines, whether pertaining to the autonomous construction and installation of iron and steel manufacturing facilities that are indispensable to
regions, the provincial, city, municipal or barangay subdivisions or other forms of local the integration of the iron and steel making industry which is vital to the promotion of public
government. interest and welfare. (Emphasis supplied)

xxx xxx xxx The principal or the real party in interest is thus the Republic of the Philippines and not the
National Steel Corporation, even though the latter may be an ultimate user of the properties
(4) Agency of the Government refers to any of the various units of the Government, including a involved should the condemnation suit be eventually successful.
department, bureau, office, instrumentality, or government-owned or controlled corporation, or
a local government or a distinct unit therein. From the foregoing premises, it follows that the Republic of the Philippines is entitled to be
substituted in the expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term
xxx xxx xxx of ISA having expired. Put a little differently, the expiration of ISA's statutory term did not by
itself require or justify the dismissal of the eminent domain proceedings.
(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration
if not all corporate powers, administering special funds, and enjoying operational autonomy, of ISA's statutory term, was not a ground for dismissal of such proceedings since a party may
usually through a charter. This term includes regulatory agencies, chartered institutions and be dropped or added by order of the court, on motion of any party or on the court's own initiative
government-owned or controlled corporations. at any stage of the action and on such terms as are just. 13 In the instant case, the Republic has
precisely moved to take over the proceedings as party-plaintiff.
xxx xxx xxx
In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, 14 the Court
(Emphases supplied)
recognized that the Republic may initiate or participate in actions involving its agents. There the
When the statutory term of a non-incorporated agency expires, the powers, duties and functions Republic of the Philippines was held to be a proper party to sue for recovery of possession of
as well as the assets and liabilities of that agency revert back to, and are re-assumed by, the property although the "real" or registered owner of the property was the Philippine Ports
Republic of the Philippines, in the absence of special provisions of law specifying some other Authority, a government agency vested with a separate juridical personality. The Court said:
disposition thereof such as, e.g., devolution or transmission of such powers, duties, functions,
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted
etc. to some other identified successor agency or instrumentality of the Republic of the
as principal of the Philippine Ports Authority, directly exercising the commission it had earlier
Philippines. When the expiring agency is an incorporated one, the consequences of such expiry
conferred on the latter as its agent. . . .15 (Emphasis supplied)
must be looked for, in the first instance, in the charter of that agency and, by way of
supplementation, in the provisions of the Corporation Code. Since, in the instant case, ISA is a In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again
non-incorporated agency or instrumentality of the Republic, its powers, duties, functions, assets another proceeding, as the trial court and Court of Appeals had required, was to generate
and liabilities are properly regarded as folded back into the Government of the Republic of the unwarranted delay and create needless repetition of proceedings:
Philippines and hence assumed once again by the Republic, no special statutory provision
having been shown to have mandated succession thereto by some other entity or agency of the More importantly, as we see it, dismissing the complaint on the ground that the Republic of the
Republic. Philippines is not the proper party would result in needless delay in the settlement of this
matter and also in derogation of the policy against multiplicity of suits. Such a decision would
The procedural implications of the relationship between an agent or delegate of the Republic of require the Philippine Ports Authority to refile the very same complaint already proved by the
the Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The Republic of the Philippines and bring back as it were to square one.16 (Emphasis supplied)
general rule is, of course, that an action must be prosecuted and defended in the name of the real
party in interest. (Rule 3, Section 2) Petitioner ISA was, at the commencement of the As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the
expropriation proceedings, a real party in interest, having been explicitly authorized by its Philippines for the ISA upon the ground that the action for expropriation could not prosper
enabling statute to institute expropriation proceedings. The Rules of Court at the same time because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate,
expressly recognize the role of representative parties: had become legally ineffective by reason of the expiration of the statutory term of the agent or
delegated i.e., ISA. Since, as we have held above, the powers and functions of ISA have reverted before the trial court. Those proceedings have yet to produce a decision on the merits, since trial
to the Republic of the Philippines upon the termination of the statutory term of ISA, the question was still on going at the time the Regional Trial Court precipitously dismissed the expropriation
should be addressed whether fresh legislative authority is necessary before the Republic of the proceedings. Moreover, as a pragmatic matter, the Republic is, by such substitution as party-
Philippines may continue the expropriation proceedings initiated by its own delegate or agent. plaintiff, accorded an opportunity to determine whether or not, or to what extent, the proceedings
should be continued in view of all the subsequent developments in the iron and steel sector of
While the power of eminent domain is, in principle, vested primarily in the legislative the country including, though not limited to, the partial privatization of the NSC.
department of the government, we believe and so hold that no new legislative act is necessary
should the Republic decide, upon being substituted for ISA, in fact to continue to prosecute the WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991
expropriation proceedings. For the legislative authority, a long time ago, enacted a continuing to the extent that it affirmed the trial court's order dismissing the expropriation proceedings, is
or standing delegation of authority to the President of the Philippines to exercise, or cause the hereby REVERSED and SET ASIDE and the case is REMANDED to the court a quo which
exercise of, the power of eminent domain on behalf of the Government of the Republic of the shall allow the substitution of the Republic of the Philippines for petitioner Iron and Steel
Philippines. The 1917 Revised Administrative Code, which was in effect at the time of the Authority and for further proceedings consistent with this Decision. No pronouncement as to
commencement of the present expropriation proceedings before the Iligan Regional Trial Court, costs.
provided that:
SO ORDERED.
Sec. 64. Particular powers and duties of the President of the Philippines. — In addition to his
general supervisory authority, the President of the Philippines shall have such other specific Republic of the Philippines
powers and duties as are expressly conferred or imposed on him by law, and also, in particular, SUPREME COURT
the powers and duties set forth in this Chapter. Manila

Among such special powers and duties shall be: FIRST DIVISION

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

(h) To determine when it is necessary or advantageous to exercise the right of eminent domain PABLO RALLA, substituted by his wife and co-defendant CARMEN MUÑOZ-RALLA,
in behalf of the Government of the Philippines; and to direct the Secretary of Justice, where and his legal heirs, HILDA RALLA-ALMINE, BELISTA, RENE RALLA-BELISTA and
such act is deemed advisable, to cause the condemnation proceedings to be begun in the court GERARDO M. RALLA, petitioners,
having proper jurisdiction. (Emphasis supplied) vs.
PEDRO RALLA, substituted by his legal heirs, LEONI, PETER, and MARINELA all
The Revised Administrative Code of 1987 currently in force has substantially reproduced the surnamed RALLA, and COURT OF APPEALS, respondents.
foregoing provision in the following terms:
Rafael Triunfante and Teodorico C. Almine, Jr. for petitioners.
Sec. 12. Power of eminent domain. — The President shall determine when it is necessary or Ruben R. Basa for private respondents.
advantageous to exercise the power of eminent domain in behalf of the National Government,
and direct the Solicitor General, whenever he deems the action advisable, to institute CRUZ, J.:
expopriation proceedings in the proper court. (Emphasis supplied)
Rosendo Ralla had two sons, Pablo and Pedro. The father apparently loved the former but not
In the present case, the President, exercising the power duly delegated under both the 1917 and the latter, Pablo and his family lived with Rosendo, who took care of all the household expenses.
1987 Revised Administrative Codes in effect made a determination that it was necessary and Pablo administered part of the family properties and received a monthly salary of P250.00 plus
advantageous to exercise the power of eminent domain in behalf of the Government of the part of the produce of the land. Pedro lived with his mother, Paz Escarella, in another town. He
Republic and accordingly directed the Solicitor General to proceed with the suit. 17 was not on good terms with his father.

It is argued by private respondent MCFC that, because Congress after becoming once more the Paz Escarella died in 1957 and the two brothers partitioned 63 parcels of land she left as her
depository of primary legislative power, had not enacted a statute extending the term of ISA, paraphernalia property. The partition was sustained by this Court in G.R. Nos. 63253-54 on
such non-enactment must be deemed a manifestation of a legislative design to discontinue or April 27, 1989.1 Meanwhile, on December 22, 1958, Rosendo executed a will disinheriting
abort the present expropriation suit. We find this argument much too speculative; it rests too Pedro and leaving everything he owned to Pablo, to whom he said he had earlier sold a part of
much upon simple silence on the part of Congress and casually disregards the existence of his property for P10,000.00. Rosendo himself filed for the probate of the will but pendente
Section 12 of the 1987 Administrative Code already quoted above. lite died on October 1, 1960.

Other contentions are made by private respondent MCFC, such as, that the constitutional On November 3, 1966, the probate judge converted SP 564 into an intestate proceeding. On
requirement of "public use" or "public purpose" is not present in the instant case, and that the February 28, 1978, a creditor of the deceased filed a petition for the probate of Rosendo's will
indispensable element of just compensation is also absent. We agree with the Court of Appeals in SP 1106, which was heard jointly with SP 564. On August 3, 1979, the order of November 3,
in this connection that these contentions, which were adopted and set out by the Regional Trial 1966, was set aside.
Court in its order of dismissal, are premature and are appropriately addressed in the proceedings
The last will and testament of Rosendo Ralla was allowed on June 7, 1982 2 but on October 20, to support the findings of the respondent court. However, we do not and cannot make any
1982, the disinheritance of Pedro was disapproved.3 This order was elevated to the Court of decision on this matter because of one insuperable obstacle. That obstacle is the proper party
Appeals in AC-G.R. Nos. 00472, 00489. personality of Pedro Ralla to question the transaction.

In a decision dated July 25, 1986, the Court of Appeals4 reversed the trial court and reinstated The decision of the Court of Appeals in AC-G.R. Nos. 00472, 00489 approved the disinheritance
the disinheritance clause after finding that the requisites of a valid disinheritance had been of Pedro Ralla. That decision was appealed to this Court, but the petition for review was
complied with in the will. The appellate court noted that Pedro had threatened to kill his father, dismissed as above related. The decision has long since become final. Since then, Pedro Ralla
who was afraid of him and had earlier sued him for slander and grave oral defamation. no longer had the legal standing to question the validity of the sale executed by Rosendo in favor
of his other son Pablo.
The decision was assailed before this Court in G.R. Nos. 76657-58, which was dismissed in our
resolution of August 26, 1987, reading as follows: The real party-in-interest is the party who stands to be benefited or injured by the judgment or
the party entitled to the avails of the suit. "Interest" within the meaning of the rule means material
. . . Assuming that, as claimed, the petitioners' counsel received a copy of the questioned decision interest, an interest in issue and to be affected by the decree, as distinguished from mere interest
only on August 15, 1986 (although it should have been earlier because it was mailed to him at in the question involved, or a mere incidental interest. As a general rule, one having no right or
his address of record on July 28, 1986), they had 15 days, or until August 30, 1986, within which interest to protect cannot invoke the jurisdiction of the court as a party-plaintiff in an action.
to move for its reconsideration or appeal therefrom by certiorari to this Court. Instead, they filed
on August 28, 1986, a motion for extension of time to file a motion for reconsideration, which As the sole heir, Pablo Ralla had the right to inherit the totality of his father's estate after payment
was not allowed under our ruling in Habaluyas Enterprises, Inc. v. Japson, 142 SCRA 208, and of all its debts. Even if it be assumed that the deed of sale was indeed invalid, the subject-matter
so did not interrupt the running of the reglementary period. Indeed, even if the period were to thereof nevertheless devolved upon Pablo as the universal successor of his father Rosendo. In
be counted from October 7, 1986, when notice of the denial of the motion for extension was his wig, Rosendo claimed the 149 parcels as "part of my property" –– as distinguished from the
received by the petitioners, the petition would still be 30 days late, having been filed on conjugal estate –– which he had earlier sold to Pablo. Significantly, Pedro did not deny this
December 8, 1986. Moreover, the petitioners have not shown that the questioned decision is description of the property in his Comment to the present petition, confining himself to assailing
tainted with grave abuse of discretion or that it is not in accord with law and jurisprudence. For the validity of the sale.
these reasons, the Court Resolved to DISMISS the petition.
The Court must note the lackadaisical attitude of the heirs of Pedro Ralla, who substituted him
The motion for reconsideration was denied with finality in the following resolution dated upon his death.1âwphi1 They seem to have lost interest in this litigation, probably because of
October 26, 1987: the approval of their father's disinheritance by the respondent court. When the parties were
required to submit their respective memoranda after we gave due course to this petition, the
. . . The Court, after deliberation, Resolved to DENY with finality the motion for petitioners did but not the private respondents. Although the period to do so had already expired,
reconsideration, wherein the petitioners pray that they be relieved from the effects of our ruling the Court relaxed its rules to give the private respondents another opportunity to comply with
in Habaluyas Enterprises, Inc. v. Japson, 142 SCRA 208, under which the petition was denied the requirement. When the resolution of August 22, 1990, could not be served upon the private
for tardiness. Counsel are expected to be abreast of current developments in law and respondents' counsel, we directed that it be served on the private respondents themselves. 9 On
jurisprudence and cannot plead ignorance thereof as an excuse for non-compliance with the January 18, 1991, the heirs of Pedro Ralla informed the Court that they were retaining another
same. As earlier observed, the petition was filed extremely late, and, moreover, it was inadequate counsel and asked that they be furnished a copy of the petition and given 30 days within which
even on the merits, same having failed to show that the questioned decision was tainted with to file their memorandum.10 This motion was granted. The records show that they received a
grave abuse of discretion or reversible error. copy of the petition on February 26, 1991, but their memorandum was never filed. On May 29,
1991, the Court, noting this omission, finally resolved to dispense with the memorandum and to
What is involved in the present petition is the correctness of the decision of the respondent court
decide this case on the basis of the available records.
annulling the deed of sale executed by Rosendo Ralla in favor of Pablo over 149 parcels of land.
Pedro had filed on May 19, 1972, a complaint to annul the transaction on the ground that it was Our decision is that as a validly disinherited heir, and not claiming to be a creditor of his
simulated.5 The original decision of the trial court declared the sale null and void. 6 In the deceased father, Pedro Ralla had no legal personality to question the deed of sale dated
resolution of the motion for reconsideration, however, Judge Jose F. Madara completely November 29, 1957, between Rosendo Ralla and his son Pablo. Legally speaking, Pedro Ralla
reversed himself and held the deed of sale to be valid. 7 This order was in turn set aside by the was a stranger to the transaction as he did not stand to benefit from its annulment. His
respondent court, which reinstated the original decision invalidating the deed of sale. disinheritance had rendered him hors de combat.
It is indeed intriguing that the trial judge should, in resolving the motion for reconsideration, WHEREFORE, the decision of the respondent court dated January 23, 1987, is set aside and
make a complete turnabout on the basis of the same evidence and jurisprudence that he another judgment is hereby rendered dismissing Civil Case 194 (originally Civil Case 4624) in
considered in rendering the original decision. It is no less noteworthy that the respondent court, this Regional Trial Court of Ligao, Albay, Branch 5.
after studying the two conclusions reached by him, saw fit to sustain his original findings as the
correct appreciation of the evidence and the applicable law. SO ORDERED

But we find that, regardless of these curious resolutions, the petition must nevertheless be
sustained albeit not on the ground that the deed of sale was indeed valid. The Court is inclined
Republic of the Philippines From the aforesaid decision, petitioner Esperidion Tanpingco interposed the present petition
SUPREME COURT under the following assignment of errors.
Manila
I
THIRD DIVISION
Was it proper for the trial court to grant the Motion to Dismis filed by the defendant inspite of
explicit mandate against such action as contained in Section 17 of P.D. No. 946?

G.R. No. 76225 March 31, 1992 II

ESPIRIDION TANPINGCO, petitioner, Was respondent Court correct in sustaining the validity of the conversion of the subject tenanted
vs. riceland into a school site?
INTERMEDIATE APPELLATE COURT, and BENEDICTO HORCA, SR., respondents.
III

Was it correct in ruling that a tenant is not entitled to payment of disturbance compensation in
GUTIERREZ, JR., J.: case his tenanted landholding is donated and converted into a school site?

May a tenanted parcel of land be donated by the landowner so that it can be the site of a public Anent the first assignment of error, the petitioner anchors his contention mainly on Section 17
high school without securing the consent of the tenant-lessee? Who bears the responsibility of of Presidential Decree No. 946 which provides:
paying disturbance compensation? These are the issues raised in this case.
Sec. 17. Pleading, Hearing, Limitation on Postponements. — The defendant shall file answer
On May 10, 1985, a complaint for payment of disturbance compensation with damages was to the complaint (not a motion to dismiss), within a non-extendible period of ten (10) days from
filed by petitioner Espiridion Tanpingco against respondent Benedicto Horca, Sr. with the service of
Regional Trial Court of Palo, Leyte. summons . . .

It is alleged in the complaint that the petitioner is the tenant-lessee in the respondent's parcel of In Sucaldito and De Guzman v. Hon. Montejo (193 SCRA 556 [1991]), the Court declared that
agricultural riceland situated at Brgy. Buenavista, Jaro, Leyte under a leasehold contract entered where the law speaks in clear and categorical language, there is no room for interpretation.
into sometime in April, 1976; that in a letter dated April 9, 1985, the respondent through his However, technicalities may be disregarded in order to resolve the case on its merits. (Ruiz v.
representative informed him to desist from working on the subject land, having already donated Court of Appeals, G.R. No. 93454, September 13, 1991 citing Tesoro v. Mathay, 185 SCRA
the same on February 3, 1985; that the respondent openly ordered the petitioner to vacate the 124 [1990]).
landholding and is determined to oust him from the premises in violation of the law; that the
petitioner is willing to accept payment of disturbance compensation in an amount computed in On this point, the respondent appellate court noted that:
accordance with law and in the alternative to remain as tenant-lessee of the subject riceland.
The rationale of the rule requiring a defendant in an agrarian case to file an answer and not a
On July 5, 1985, the case was called for pre-trial following which the trial court gave the motion to dismiss is to expedite the proceedings. The filing of the motion to dismiss and the
respondent until July 9, 1985 to file his answer. The respondent filed instead a Motion to Dismiss granting thereof by the lower court based upon indubitable grounds precisely expedited the
alleging principally that the complaint states no cause of action because the respondent is not proceedings and conforms with the spirit and intention of P.D. 946 which requires courts trying
the real party-in-interest having already donated the subject land to the Ministry of Education, agrarian cases to employ every reasonable means to ascertain the facts of every case in
Culture, and Sports, Region VIII, as a school site of the Buenavista Barangay High School; and accordance with justice and equity without regard to technicalities of law and procedure and
that the donation not having in anyway benefited the respondent, no disturbance compensation empowering the Court to adopt any appropriate measure or procedure in any situation or matter
is due the petitioner since under Section 36 (1) of the Agrarian Reform Code as amended, not provided for or covered by the Decree (Section 16, 3rd and 4th sentences, P.D. 946).
disturbance compensation holds true only in cases wherein the lessor-owner derives financial
We, therefore, take exception to the literal application of Section 17 of P.D. No. 946 for as stated
benefits from the conversion of the agricultural land into non-agricultural purposes.
in Salonga v. Warner Barnes and Co., Ltd. (88 Phil. 125 [1951], an action is brought for a
The trial court granted the respondent's Motion to Dismiss and denied the petitioner's Motion practical purpose, nay to obtain actual and positive relief. If the party sued upon is not the proper
for Reconsideration. party, any decision that may be rendered against him would be futile, for it cannot be enforced
or executed. The effort that may be employed will be wasted.
On June 20, 1986, the Intermediate Appellate Court rendered the decision now assailed, the
dispositive portion of which reads as follows: Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted in the name
of the real party-in-interest. A corollary proposition to this rule is that an action must be brought
WHEREFORE, finding no merit in the instant appeal, the same is hereby DISMISSED with against the real party-in-interest, or against a party which may be bound by the judgment to be
costs taxed against the appellant. rendered therein (Salonga v. Warner Barnes and Co., Ltd. supra citing Salmon and Pacific
Commercial Co., v. Tan Cuenco, 36 Phil. 556 [1917]). The real party-in-interest is one who
stands to be benefited or be injured by the judgment, or the party entitled to the avails of the suit
(Rebollido v. Court of Appeals, 170 SCRA 800 [1989] citing Samahan ng mga Nangungupahan In view of the foregoing, we are of the opinion and so hold that the trial court correctly dismissed
sa Azcarraga Textile Market, Inc., et al. v. Court of Appeals, 165 SCRA 598 [1988]). If the suit the complaint for payment of disturbance compensation because the private respondent is not
is not brought against the real party-in-interest, a motion to dismiss may be filed on the ground the real party-in-interest. And having arrived at this conclusion, we do not deem it necessary to
that the complaint states no cause of action (Section 1(g), Rule 16, Rules of Court). pass upon the other errors assigned by the petitioner for as stated in Filamer Christian Institute
v. Court of Appeals (190 SCRA 485 [1990]), a person who was not impleaded in the complaint
Hence, the resolution of the dispute hinges upon the determination of whether or not the private could not be bound by the decision rendered therein, for no man shall be affected by a
respondent is the real party-in-interest against whom the suit should be brought. proceeding to which he is a stranger. The remedy then of the petitioner is to claim his disturbance
compensation from the new owner or whatever agency, local or national, is in a position to pay
The private respondent bolsters his claim that he is not the real party-in-interest on Section 10
for it.
of Republic Act No. 3844 (Code of Agrarian Reforms of the Philippines) which provides that:
WHEREFORE, the petition is hereby DENIED. The decision dated 20 June 1986 of the
. . . In the case the agricultural lessor sells, alienates or transfers the legal possession of the
Intermediate Appellate Court is AFFIRMED. No pronouncement as to costs.
landholding, the purchaser or transferee thereof shall be subrogated to the rights and substituted
to the obligation of the agricultural lessor. SO ORDERED.
In effect, the private respondent is of the view that the Ministry of Education, Culture and Sports, FIRST DIVISION
as donee, became the new lessor of the agricultural lessee by operation of law and is therefore
the real party-in-interest against whom the claim for disturbance compensation should be G.R. No. 161298 January 31, 2006
directed.
Spouses ANTHONY and PERCITA OCO, Petitioners,
We agree with the contentions of the private respondent. The petitioner should have impleaded vs.
the Ministry of Education, Culture and Sports as the party-defendant for as stated in Roman VICTOR LIMBARING, Respondent.
Catholic Archbishop of Manila v. Court of Appeals (198 SCRA 300 [1991]), a donation, as a
mode of acquiring ownership, results in an effective transfer of title over the property from the DECISION
donor to the donee and once a donation is accepted, the donee becomes the absolute owner of
the property donated. PANGANIBAN, CJ.:

Basic in procedural law is the rule that every action must be prosecuted or defended in the name
Under Article 428 of the New Civil Code, the owner has the right to dispose of a thing without
of the real party in interest. In the present case, the respondent, who was not a party to the
other limitations than those established by law. As an incident of ownership therefore, there is
contracts being sued upon, was not able to prove material interest in the litigation. For his failure
nothing to prevent a landowner from donating his naked title to the land. However, the new
to do so, the trial court cannot be faulted for dismissing the action to rescind the contracts. His
owner must respect the rights of the tenant. Section 7 of R.A. No. 3844, as amended (Code of
status as trustor remained a bare allegation, as he had failed to rebut the legal presumption: that
Agrarian Reforms of the Philippines) gives the agricultural lessee the right to work on the
there is absence of a trust when the purchase price in a deed of sale is paid by a parent in favor
landholding once the leasehold relationship is established. It also entitles him to security of
of a child. Here, the prima facie presumption is "that there is a gift in favor of the child." Any
tenure on his landholding. He can only be ejected by the court for cause. Time and again, this
allegation to the contrary must be proven by clear and satisfactory evidence, a burden that was
Court has guaranteed the continuity and security of tenure of a tenant even in cases of a mere
not discharged by the plaintiff.
transfer of legal possession. As elucidated in the case of Bernardo v. Court of Appeals (168
SCRA 439 [1988]), security of tenure is a legal concession to agricultural lessees which they The Case
value as life itself and deprivation of their landholdings is tantamount to deprivation of their
only means of livelihood. Also, under Section 10 of the same Act, the law explicitly provides Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the August
that the leasehold relation is not extinguished by the alienation or transfer of the legal possession 26, 2003 Decision2 and the November 25, 2003 Resolution3 of the Court of Appeals (CA) in
of the landholding. The only instances when the agricultural leasehold relationship is CA-GR CV No. 69386. The challenged Decision disposed as follows:
extinguished are found in Section 8, 28 and 36 of the Code of Agrarian Reforms of the
Philippines. The donation of the land did not terminate the tenancy relationship. However, the "WHEREFORE, the order dated October 2, 2000 of the Regional Trial Court, Branch 15,
donation itself is valid. Ozami[s] City in Civil Case No. OZC 99-14 is hereby REVERSED. The agreement entered
upon by plaintiff-appellant and defendant-appellee Percita L. Oco is hereby RESCINDED. After
Considering that the tenant in the case at bar is willing to accept payment of disturbance returning the agreed purchase amount of P60,000.00 to defendants-appellees, the Register of
compensation in exchange for his right to cultivate the landholding in question, the real issue is Deeds of Ozami[s] City shall issue the new Transfer Certificates of Title in the name of plaintiff-
who should pay the compensation. We rule that the Ministry of Education, Culture and Sports appellant thereby canceling the TCT Nos. T-22073 and T-22072."4
as the new owner cannot oust the petitioner from the subject riceland and build a public high
school thereon until after there is payment of the disturbance compensation in accordance with The Facts
Section 36 (1) of R.A. No. 3844, as amended.
The pertinent facts are not disputed. Sometime in 1996, Sabas Limbaring subdivided his Lot
2325-D, covered by Transfer Certificate of Title (TCT) No. 5268, into two lots denominated as
Lot Nos. 2325-D-1 and 2325-D-2.5 He then executed in favor of Jennifer Limbaring a Deed of
Sale for Lot 2325-D-2 for P60,000; and, in favor of Sarah Jane Limbaring, another Deed for Lot to convince Sabas Limbaring to execute the two Deeds of Sale, notwithstanding the lack of any
2325-D-1 for P14,440. Accordingly, TCT No. 5268 was cancelled and TCT Nos. T-21921 and consideration; 3) that Sabas informed Percita that the agricultural land had never been sold; 4)
T-21920 were issued in the names of Jennifer and Sarah Jane, respectively. 6 that she refused to pay the P25,000, because the suspensive conditions stated in the Promissory
Note had not been complied with; 5) that she paid for all the expenses incurred in their
Sensing some irregularities in the transaction, Percita Oco, the daughter of Sabas Limbaring, transaction; 6) that for her alleged failure to pay the P25,000 and for "other deceits," respondent
left Puerto Princesa City and went to Ozamis City.7 She then filed a case of perjury and filed a criminal Complaint docketed as Criminal Case No. 2985; 7) that respondent was guilty
falsification of documents against respondent, her uncle who was the father of Jennifer and of forum shopping for filing that case despite the institution of the civil aspect in the criminal
Sarah Jane. During the pre-litigation conference called by City Prosecutor Luzminda Uy on July case; 8) that respondent was not the real party in interest and had no legal standing to sue; 9)
1, 1996, the parties agreed that the two parcels of land should be reconveyed to Percita, who that the lots, which were acquired by Jennifer and Sarah Jane without paying any consideration,
was to pay respondent all the expenses that had been and would be incurred to transfer the titles should be returned to Percita without any consideration; and 10) that the Deeds of Sale
to her name.8 reconveying the lots acknowledged receipt of consideration.17
Respondent demanded P30,000 for the estimated expenses for documentation, capital gains, and Respondent testified on his behalf. He then formally offered his exhibits.18 After filing their
documentary stamp taxes; registration fees for the Register of Deeds; and other incidental Comments to Plaintiff’s Formal Offer of Exhibits, Spouses Oco filed a Demurrer to Evidence,
expenses for clearances from the Department of Agrarian Reform (DAR).9 Percita succeeded in to which he filed his Opposition.19
lowering the amount to P25,000, for which she executed an undertaking worded as follows:
On October 2, 2000, the RTC granted the demurrer and dismissed the Complaint and
"I, Percita Oco, of legal age, and residing at Puerto Princesa, do hereby undertake to give the Counterclaim,20 on the ground that respondent was not the real party in interest. The trial court
full amount of Twenty Five Thousand (P25,000.00) Pesos to my uncle Victor Limbaring after also held that Jennifer and Sarah Jane had already acknowledged receipt of the consideration
document No. 230, series of 1996; Transfer Certificate of Title No. T-21920 and Transfer for the reconveyance of the lots. It added that the P25,000 was an independent obligation for the
Certificate of Title No. T-21921 shall have been cancelled and revoked. reimbursement of the expenses incurred for the transfer of the titles.21
"Ozamis City, Philippines, July 1, 1996."10 Ruling of the Court of Appeals
Pursuant to their agreement, respondent facilitated the transfer of the titles to her from the names The CA held that a trust relationship was created when respondent purchased the lots in favor
of his daughters. After the transfer had been effected on July 12, 1996, Percita left for Puerta of his daughters.22Thus, he was a real party in interest.
Princesa on July 17, 1996, without paying the P25,000. Several demands were made, but she
refused to pay. The appellate court also ruled that the P25,000 was part of the consideration for the
reconveyance of the two parcels of land.23 The CA held that, since Percita had admitted her
On April 6, 1999, respondent filed against Spouses Anthony and Percita Oco a Complaint for failure to pay the amount, respondent had the right to rescind the contracts of reconveyance. 24
the rescission of the sales contracts, with recovery of possession and ownership of the two
parcels of land.11 Among others, he claimed 1) that he was the actual buyer of the lots, but the The assailed November 25, 2003 CA Resolution denied reconsideration. Hence, this Petition. 25
vendees whose names appeared on the Deeds were his daughters; 2) that he initially refused to
reconvey the properties because he had paid for them with his hard-earned money, which was The Issues
partly used by Sabas Limbaring for medical expenses; 3) that Percita had prepared the two Deeds
Petitioners state the issues in this wise:
of Sale, which his daughters signed despite receiving no consideration as stated in the Deeds; 4)
that because she refused to pay the P25,000, the Limbaring clan held a meeting on October 26, "I. The Honorable Court of Appeals gravely erred in finding respondent the trustor of the subject
1996, during which it was agreed that P1,000 per month would be given to respondent from the properties and in declaring respondent the real party in interest for the rescission of the two
rentals of Sabas Limbaring’s house; and 5) that the agreement was not implemented, because deeds of absolute sale executed by Jennifer Limbaring and Sarah Jane Limbaring in favor of the
Percita had failed to cooperate.12 petitioners.
On May 27, 1999, Spouses Oco filed a Motion to Dismiss on the ground that the plaintiff (herein "II. The Honorable Court of Appeals gravely erred in declaring that respondent has fully
respondent) was not the real party in interest.13 In his Opposition to the Motion to Dismiss, complied [with] his obligation in the undertaking executed by petitioner after the ownership of
respondent contended that he was a trustor, whose property was being held in trust by his the subject properties were transferred to petitioners.
daughters.14 He also averred that, on the assumption that he was not the real party in interest, he
was entitled to an amendment of the pleadings.15 "III. The Honorable Court of Appeals gravely erred and gravely abused [its] discretion in
ordering the rescission of the Deed of Absolute Sale executed by Jennifer Limbaring and Sarah
On August 30, 1999, the RTC issued an Order denying the Motion to Dismiss. It ruled that Jane Limbaring in favor of the petitioners involving the subject properties.
evidence was required to resolve the parties’ respective allegations.16
"IV. The Honorable Court of Appeals gravely abused [its] discretion when it ignored the
On October 4, 1999, Spouses Oco filed an Answer with Counterclaim, alleging in the main: 1) pending case before the Fourth Division of the Honorable Court of Appeals with the same
that respondent had tried to secure a DAR clearance and to have a certificate of title issued in transaction, essential facts and circumstances in this case."26
his name, but failed because Republic Act (RA) 6657 prohibited the acquisition of more than
five hectares of agricultural land; 2) that through deceit and manipulation, respondent was able
The threshold issue is whether respondent, who was the plaintiff in the trial court, was a real Presently Involved
party in interest in the suit to rescind the Deeds of Reconveyance.
Respondent’s Complaint, entitled "Rescission of Contract & Recovery of Possession &
The Court’s Ruling Ownership of Two Parcels of Land," is clearly an action on a contract. The agreements sought
to be rescinded41 clearly show that the parties to the Deeds of Absolute Sale were Jennifer and
The Petition is meritorious. Sarah Jane Limbaring42 as vendors and Percita Oco as vendee. Clearly then, the action upon the
contracts may -- as a rule -- be instituted only by Jennifer and Sarah Jane against Percita.
Main Issue:
Respondent is not a real party in interest. He was not a party to the contracts and has not
Real Party in Interest
demonstrated any material interest in their fulfillment. Evidently, the allegations in the
Petitioners contend that respondent was not a trustor, and therefore not the real party in interest Complaint do not show that the properties would be conveyed to him, even if Percita were to be
and had no legal right to institute the suit.27 The real parties in interest were Jennifer and Sarah proven to have committed a breach of the subject agreements.
Jane, to whom the subject properties had been given as gifts.28
Trust Relationship
The controversy centers on Rule 3 of the Rules of Court, specifically an elementary rule in
To show material interest, respondent argues that a trust was created when he purchased the
remedial law, which is quoted as follows:
properties from Sabas Limbaring in favor of his daughters. As trustor, he allegedly stands to be
"Sec. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or benefited or injured by any decision in the case.43
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
Trust is the legal relationship between one person who has equitable ownership of a property
authorized by law or these Rules, every action must be prosecuted or defended in the name of
and another who owns the legal title to the property.44 The trustor is the one who establishes the
the real party in interest."
trust; the beneficiary, the person for whose benefit the trust was created; and the trustee, the one
As applied to the present case, this provision has two requirements: 1) to institute an action, the in whom, by conferment of a legal title, confidence has been reposed as regards the property of
plaintiff must be the real party in interest; and 2) the action must be prosecuted in the name of the beneficiary.45
the real party in interest.29 Necessarily, the purposes of this provision are 1) to prevent the
Trusts may be either express or implied.46 Express trusts are those created by direct and positive
prosecution of actions by persons without any right, title or interest in the case; 2) to require that
acts of the parties, such as by some writing, deed or will; or by words either expressly or
the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a multiplicity
impliedly evidencing an intention to create a trust. Implied trusts are those that, without being
of suits; and 4) to discourage litigation and keep it within certain bounds, pursuant to sound
expressed, are deducible from the nature of the transaction as matters of intent; or that are super-
public policy.30
induced in the transaction by operation of law as a matter of equity, independently of the
Interest within the meaning of the Rules means material interest or an interest in issue to be particular intention of the parties.47
affected by the decree or judgment of the case, as distinguished from mere curiosity about the
Respondent has presented only bare assertions that a trust was created. Noting the need to prove
question involved.31 One having no material interest to protect cannot invoke the jurisdiction of
the existence of a trust, this Court has held thus:
the court as the plaintiff in an action.32 When the plaintiff is not the real party in interest, the
case is dismissible on the ground of lack of cause of action. 33 "As a rule, the burden of proving the existence of a trust is on the party asserting its existence,
and such proof must be clear and satisfactorily show the existence of the trust and its elements.
Action on Contracts
While implied trusts may be proved by oral evidence, the evidence must be trustworthy and
The parties to a contract are the real parties in interest in an action upon it, as consistently held received by the courts with extreme caution, and should not be made to rest on loose, equivocal
by the Court.34 Only the contracting parties are bound by the stipulations in the contract;35 they or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be
are the ones who would benefit from and could violate it. 36 Thus, one who is not a party to a fabricated."48
contract, and for whose benefit it was not expressly made, cannot maintain an action on it. One
On this point, the Civil Code states as follows:
cannot do so, even if the contract performed by the contracting parties would incidentally inure
to one’s benefit.37 "ART. 1448. There is an implied trust when property is sold, and the legal estate is granted to
one party but the price is paid by another for the purpose of having the beneficial interest of the
As an exception, parties who have not taken part in a contract may show that they have a real
property. The former is the trustee, while the latter is the beneficiary. However, if the person to
interest affected by its performance or annulment.38 In other words, those who are not
whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of
principally or subsidiarily obligated in a contract, in which they had no intervention, may show
the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of
their detriment that could result from it.39 Contracts pour autrui are covered by this
the child."
exception.40 In this latter instance, the law requires that the "contracting parties must have
clearly and deliberately conferred a favor upon a third person." A "mere incidental benefit is not Under the last sentence of Article 1448, respondent’s alleged acts -- paying the price of the
enough." subject properties and, in the titles, naming his children as owners -- raise the presumption that
a gift was effected in their favor. Respondent failed to rebut this presumption. Absent any clear
Action on the Contracts
proof that a trust was created, he cannot be deemed a real party in interest.49 That he should be Pursuant to the SPA, Sagario filed on October 14, 2002 before the Isabela RTC at Roxas a
deemed a trustor on the basis merely of having paid the purchase price is plainly contradicted complaint entitled "Dante M. Pascual, plaintiff v. Marilou M. Pascual and Register of Deeds,
by the presumption based on Article 1448 of the Civil Code "that there is a gift in favor of the Defendants," docketed as Civil Case No. Br. 23-713-02, for Annulment of Transfer Certificate
child," not a trust in favor of the parent. of Title No. T-271657 of Isabela and Deed of Absolute Sale of Registered Land and/or
Reconveyance with Damages.2
Other Issues
To the Complaint the defendant-herein respondent Marilou M. Pascual filed a Motion to
Having found that respondent is not a real party in interest, this Court deems it no longer Dismiss3 on two grounds one of which was non-compliance with the requirement under Section
necessary to rule on the other issues raised by petitioner. 412 of the Local Government Code,4 she contending that there is no showing that the dispute
was referred to the barangay court before the case was filed in court.
WHEREFORE, the Petition is GRANTED, and the assailed Decision and Resolution are SET
ASIDE. Civil Case No. OZC99-14, entitled "Victor Limbaring v. Spouses Percita L. Oco and By the assailed Order of February 10, 2003,5 Branch 23 of the Isabela RTC at Roxas granted
Anthony Oco," is DISMISSED. No pronouncement as to costs. respondent’s Motion to Dismiss in this wise:
SO ORDERED. . . . RA 7160 repealing P.D. 1508 otherwise known as the Revised Katarungang Pambarangay
provides under Section 409 "All disputes involving real property or any interest therein shall be
Republic of the Philippines
brought in the barangay where the real property or the larger portion thereof is situated." Hence,
SUPREME COURT
the reliance of the plaintiff on Section 408 of R.A. 7160 is incorrect. When real property or any
THIRD DIVISION interest therein is involved, the dispute shall be filed before the barangay where the property is
located, regardless of the residence of the parties. Besides, it is incorrect to say that the parties
G.R. No. 157830 November 17, 2005 are not residents of the same place, Vira, Roxas, Isabela. The Attorney-in-fact of the plaintiff
in the person of Reymel R. Sagario is a resident of Vira, Roxas, Isabela, and he
DANTE M. PASCUAL, represented by REYMEL R. SAGARIO, Petitioner, substitute (sic) Dante Pascual by virtue of said Special Power of Attorney. Hence, said
vs. Attorney-in-fact should have brought the dispute before barangay Vira, Roxas, Isabela, where
MARILOU M. PASCUAL, Respondent. the property is located. In the case of Royales vs. Intermediate Appellate Court 127 SCRA 470,
"Ordinarily, non-compliance with the condition precedent prescribed by P.D. 1508 could affect
DECISION the sufficiency of the plaintiff’s cause of action and make his complaint vulnerable to dismissal
CARPIO MORALES, J.: on ground of lack of cause of action or prematurity."6 (Emphasis and underscoring supplied)

On challenge via Petition for Review on Certiorari is the February 10, 2003 Order of the Petitioner’s Motion for Reconsideration7 of the above-said order was denied by Order of March
Regional Trial Court (RTC) of Isabela, Branch 23 at Roxas dismissing, on motion of herein 24, 2003:8
respondent Marilou M. Pascual, the complaint filed against her by her brother-herein petitioner xxx
Dante M. Pascual, represented by his attorney-in-fact Reymel R. Sagario (Sagario), for non-
compliance with the conciliation provision-pre condition to filing of complaint in court under Consequently, the Court is [of] the opinion that the said Attorney-in-fact shall be deemed to
R.A. 7160 (the Local Government Code). be the real party in interest, reading from the tenor of the provisions of the Special Power of
Attorney. Being a real party in interest, the Attorney-in-fact is therefore obliged to bring this
Petitioner, a permanent resident of the United States of America, appointed Sagario as his case first before the Barangay Court. Sec. 3, Rule 3 of the Rules of Court provides that "Where
attorney-in-fact by a Special Power of Attorney (SPA) dated April 10, 2002: the action is allowed to be prosecuted or defended by a representative or someone acting in a
1. To file a case for the cancellation of Transfer Certificate of Title No. T-271656 issued in the fiduciary capacity, the beneficiary shall be included in the title of the case and shall be deemed
name of Marilou M. Pascual as well as the Deed of Sale of Registered Land (Dec. No. 639; Page to be the real party in interest.
No. 52; Book No. XXI; Series of 1994) and/or Reconveyance at the appropriate court; xxx
2. To collect the monthly rentals from the tenant; Being the real party in interest, the Attorney-in-fact may therefore bring the necessary complaint
3. To enter into amicable settlement with Marilou M. Pascual or any other mode of before the Lupon Tagapayapa and appear in person as if he is the owner of the
payment/and/or dispute resolution; land.9 (Emphasis and underscoring supplied)

4. To execute and sign any and all papers, contracts/documents which may be necessary relative Hence, the present petition questioning "the palpable legal errors" of the RTC.
to the above acts. Petitioner argues that since he, not his attorney-in-fact Sagario, is the real party in interest, and
xx x1 since he actually resides abroad, the lupon would have no jurisdiction to pass upon the dispute
involving real property, he citing Agbayani v. Belen.10
Respondent submits, on the other hand, that Section 408, paragraph (f), of the Local Government (b) Those involving actual residents of different barangays within the same city or municipality
Code, is qualified by paragraph (c) of Section 409 of the same Code the latter of which provides shall be brought in the barangay where the respondent or any of the respondents actually resides,
that "[a]ll disputes involving real property or any interest therein shall be brought in the barangay at the election of the complainant.
where the real property is located," hence, the use of the word "shall" makes it mandatory for
the bringing of the dispute before the lupon. (c) All disputes involving real property or any interest therein shall be brought in the barangay
where the real property or the larger portion thereof is situated.
That attorney-in-fact Sagario is a resident of the same barangay as that of hers, respondent
argues in any event, brings the matter under the jurisdiction of the lupon, for Sagario, following (d) Those arising at the workplace where the contending parties are employed or at the institution
Section 3 of Rule 3 of the 1997 Rules of Civil Procedure which provides: where such parties are enrolled for study shall be brought in the barangay where such workplace
or institution is located.
Sec. 3. Representative as parties. - Where the action is allowed to be prosecuted or defended by
a representative or someone acting in a fiduciary capacity, the beneficiary shall be included in Objections to venue shall be raised in the mediation proceedings before the punong barangay;
the title of the case and shall be deemed to be the real party in interest. A representative may be otherwise, the same shall be deemed waived. Any legal question which may confront the punong
a trustee of an express trust, a guardian, an executor or administrator, or a party authorized by barangay in resolving objections to venue herein referred to may be submitted to the Secretary
law or these Rules. An agent acting in his own name for the benefit of an undisclosed principal of Justice or his duly designated representative whose ruling thereon shall be binding. (Emphasis
may sue or be sued without joining the principal except when the contract involves things supplied)
belonging to the principal,
In the 1982 case of Tavora v. Veloso,11 this Court held that where the parties are not actual
being a substitute, becomes the real party-in-interest. residents in the same city or municipality or adjoining barangays, there is no requirement for
them to submit their dispute to the lupon as provided for in Section 6 vis a vis Sections 2 and 3
Respondent’s submissions do not lie. of P.D. 1508 (Katarungang Pambarangay Law).

The pertinent provisions of the Local Government Code read: [B]y express statutory inclusion and exclusion, the Lupon shall have no jurisdiction over
disputes where the partiesare not actual residents of the same city or municipality, except where
SEC. 408. Subject Matter for Amicable Settlement; Exception Thereto. – The lupon of each the barangays in which they actually reside adjoin each other. (Underscoring supplied)
barangay shall have authority to bring together the parties actually residing in the same city or
municipality for amicable settlement of all disputes except: In the 2000 case of Vercide v. Hernandez,12 this Court, noting that the Tavora ruling, reiterated
in other cases including the 1996 case of Agbayani13 cited by petitioner, was decided under the
(a) Where one party is the government or any subdivision or instrumentality thereof; provisions of P.D. No. 1508 (Katarungang Pambarangay) Law which were, except for some
modifications, echoed in Sections 408-409 of the Local Government Code which took effect on
(b) Where one party is a public officer or employee, and the dispute relates to the performance
January 1, 1992, held that the Tavora ruling remained.
of his official functions;
To construe the express statutory requirement of actual residency as applicable to the attorney-
(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five
in-fact of the party-plaintiff, as contended by respondent, would abrogate the meaning of a "real
Thousand pesos (P5,000.00);
party in interest" as defined in Section 2 of Rule 314 of the 1997 Rules of Court vis a vis Section
(d) Offenses where there is no private offended party; 3 of the same Rule which was earlier quoted but misread and misunderstood by respondent.

(e) Where the dispute involves real properties located in different cities or municipalities unless In fine, since the plaintiff-herein petitioner, the real party in interest, is not an actual resident
the parties thereto agree to submit their differences to amicable settlement by an appropriate of the barangay where the defendant-herein respondent resides, the local lupon has no
lupon; jurisdiction over their dispute, hence, prior referral to it for conciliation is not a pre-condition to
its filing in court.
(f) Disputes involving parties who actually reside in barangays of different cities or
municipalities, except where such barangay units adjoin each other and the parties thereto agree The RTC thus erred in dismissing petitioner’s complaint.
to submit their differences to amicable settlement by an appropriate lupon; and
WHEREFORE, the petition is granted. The assailed February 10, 2003 Order, as well as the
(g) Such other classes of disputes which the President may determine in the interest of justice March 24, 2003 Order denying reconsideration of the first, of Branch 23 of the Regional Trial
or upon the recommendation of the Secretary of Justice. Court of Isabela at Roxas is SET ASIDE. Said court is accordingly directed to reinstate Civil
Case No. 23-713-02 to its docket and take appropriate action thereon with dispatch.
The court in which non-criminal cases not falling within the authority of the lupon under this
Code are filed may, at any time before trial, motu proprio refer the case to the lupon concerned SO ORDERED.
for amicable settlement. (Emphasis supplied)
Republic of the Philippines
SEC. 409. Venue. – (a) Disputes between persons actually residing in the same barangay shall SUPREME COURT
be brought for amicable settlement before the lupon of said barangay . Manila
FIRST DIVISION prosecution caused the service of the subpoena too late for the hearing on February 20. For the
next three months, the prosecution simply did not apply for a subpoena. The Court finds that the
G.R. No. 157952 September 8, 2009 intention to delay the proceedings is evident. As prayed for, the prosecution is declared to have
terminated further evidence.
JOWETT K. GOLANGCO, Petitioner,
vs. The prosecution is given 20 days from today to make its formal offer with copy furnished the
JONE B. FUNG, Respondent. defense counsel who is given 15 days from receipt to make his comment and thereafter the offer
will be deemed submitted for resolution.
DECISION
SO ORDERED.
BERSAMIN, J.:
The petitioner, by his lonesome, assailed on certiorari in the Court of Appeals the order dated
We have before us a petition for review on certiorari seeking the review of the decision dated
May 23, 2001, claiming that the RTC judge thereby committed grave abuse of discretion for not
September 12, 2002 (dismissing the petitioner’s petition for certiorari)1 and the resolution dated
issuing the subpoena to require Atty. Ramos to appear and testify in the May 23, 2001 hearing.
April 2, 2003 (denying the petitioner’s motion for reconsideration), 2 both promulgated by the
He contended that his prior request for the subpoena for the February 20, 2001 hearing should
Court of Appeals in C.A.-G.R. SP No. 66616 entitled Jowett K. Golangco v. The Presiding
have been treated as a continuing request for the subpoena considering that the Rules of Court
Judge of Branch 53, Regional Trial Court of Manila and Jone B. Fung.
did not require a party to apply for a subpoena again should it not be served in the first time. 6
Antecedents
In its decision dated September 12, 2002, the Court of Appeals rebuffed the petitioner and
C.A.-G.R. SP No. 66616 was a special civil action for certiorari commenced by the petitioner dismissed the petition for certiorari, holding:
to assail the order issued by the Regional Trial Court (RTC), Branch 53, in Manila in Criminal
Axiomatically, any request for a subpoena to a witness must indicate the date and time when the
Case No. 95-145703 entitled People v. Jone B. Fung, whereby the RTC declared the Prosecution
witness must appear in court to give his or her testimony. It is on the basis of that request that
to have terminated the presentation of further evidence and required the Prosecution to file a
the court personnel prepares the subpoena indicating the title of the case, the date and time for
written offer of evidence within 20 days, furnishing a copy of the offer to the accused who in
the appearance of the intended witness. This is where petitioner fell into error. His urgent request
turn had to comment on the offer within 15 days from receipt.
for subpoena (Annex "A") failed to contain the date and time when the intended witness, Atty.
Criminal Case No. 95-145703, a prosecution for libel initiated by the petitioner as the Oscar Ramos, must appear in court to testify.
complainant against the respondent, was commenced in 1995.3 Allegedly, the respondent had
Even then, granting that the subpoena issued for February 20, 2001 hearing was properly served
issued an office memorandum dated May 10, 1995 maliciously imputing against the petitioner
but which hearing was later on postponed, there is still a need to ask for a new subpoena to the
the commission of bribery and had sent copies of the memorandum to the petitioner’s superiors
same witness for the next scheduled hearing. The court cannot be tasked to guess whether or not
in the Philippine Overseas Employment Administration (POEA) and to other public officers and
petitioner still intends to present the witness at the next hearing. An intention to still present the
personalities not connected with the POEA, causing damage and prejudice to the petitioner. 4
witness necessarily requires another request for a subpoena.
After almost 6 years, the Prosecution had presented only two witnesses in Criminal Case No.
Moreover, the case was last heard on January 23, 2001 prior to the February 20, 2001
95-145703. On February 16, 2001, the Prosecution requested that a subpoena ad testificandum
hearing. Apropos, to ask for a subpoena to his next witness on February 16, 2001, for the hearing
be issued to and served on Atty. Oscar Ramos, Resident Ombudsman of the POEA, to compel
on February 20, 2001 was rather late. As the complainant in the case, petitioner should have
him to testify in the criminal case on February 20, 2001. The hearing of February 20, 2001 was,
exercised due diligence or proper zeal in the prosecution of his case which has long been pending
however, reset to May 23, 2001 due to the unavailability of Atty. Ramos.
for five (5) years, let alone that it was the last chance given by the court to the prosecution to
On May 23, 2001, the Prosecution still failed to present Atty. Ramos as its witness because no the prosecution to produce its witness on February 20, 2001 on account of its previous failure
subpoena had been issued to and served on him for the purpose. Consequently, the RTC judge to do so.
issued an order terminating the Prosecution’s presentation of evidence, 5 as follows:
Then, again, as correctly observed by the court a quo, from February 20, 2001 to May 23, 2001,
ORDER a good three (3) months period passed without the prosecution requesting for a subpoena for its
intended witness. When the respondent court, as a consequence, deemed the prosecution
When the case was called for hearing, the accused is in court with his lawyer Atty. Benigno evidence terminated and required it to formally offer its evidence, it was not committing any
Palamos. Private prosecutor Atty. Agripino Baybay is in court but he has no witnesses today. error nor abuse of discretion. Here, petitioner created its own predicament and should suffer
He manifested that he has to present Atty. Oscar Ramos, but since the last hearing on February from its adverse effect.7
20, to this date he has not asked for any subpoena. Defense counsel moves to terminate the
presentation of prosecution evidence in view of the failure of the prosecution to present Hence, this appeal.
witnesses despite numerous postponements. The private prosecutor asks for another
Issue
continuance. The records show that on January 23, 2001 this Court gave a stern warning to the
prosecutor that it is giving one final postponement for the production of witnesses. Yet the
The issue is whether the Court of Appeals correctly ruled on the petition for certiorari of the abuse of discretion implies a capricious and whimsical exercise of judgment that is equivalent
petitioner. to lack of jurisdiction whenever the power is exercised in an arbitrary or despotic manner by
reason of passion, prejudice or personal aversion amounting to an evasion of a positive duty or
Ruling of the Court to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law.91avvphi1
We find no reversible error on the part of the Court of Appeals. Also, it does not escape our notice that the trial court’s assailed order terminating the
Prosecution’s presentation of evidence was merely interlocutory. This fact surely adds
I
justification to the Court of Appeals’ rejection of the petition for certiorari, because it is the
Before dealing with the petition for review, we point out the gross procedural misstep committed settled rule that certiorari does not lie to review an interlocutory order, but only a final judgment
by the petitioner in the Court of Appeals. or order that terminates the proceedings. Certiorari will be refused where there has been no final
judgment or order and the proceeding for which the writ is sought is still pending and
The petitioner did not join the People of the Philippines as a party in his action for certiorari in undetermined in the lower court. Indeed, a writ of certiorari is not intended to correct every
the Court of Appeals. He thereby ignored that the People of the Philippines were indispensable controversial interlocutory ruling unless the ruling is attended by grave abuse of discretion or
parties due to his objective being to set aside the trial court’s order dated May 23, 2001 that tainted by whimsical exercise of judgment equivalent to lack of jurisdiction, for the function of
concerned the public aspect of Criminal Case No. 95-145703. The omission was fatal and certiorari is limited to keeping an inferior court within its jurisdiction and to relieving persons
already enough cause for the summary rejection of his petition for certiorari. from its arbitrary acts – acts that courts or judges have no power or authority in law to perform.

The petitioner did not also obtain the consent of the Office of the Solicitor General (OSG) to his Instead, the proper remedy for the petitioner was to proceed in the action until judgment, which,
petition for certiorari. At the very least, he should have furnished a copy of the petition for once rendered, might then be reviewed on appeal, along with the assailed interlocutory
certiorari to the OSG prior to the filing thereof,8but even that he did not do. Thereby, he violated order.10 As long as the trial court acted within its jurisdiction, its alleged error committed in the
Section 35(l), Chapter 12, Title III of Book IV of Executive Order No. 292 (The Administrative exercise of its jurisdiction amounted to nothing more than an error of judgment that was
Code of 1987), which mandates the OSG to represent "the Government in the Supreme Court reviewable by a timely appeal, not by a special civil action of certiorari. 11
and the Court of Appeals in all criminal proceedings; represent the Government and its officers
in the Supreme Court, the Court of Appeals, and all other courts or tribunals in all civil actions WHEREFORE, we affirm the decision dated September 12, 2002 rendered in CA-G.R. SP No.
and special proceedings in which the Government or any officer thereof in his official capacity 66616.
is a party."1avvphi1
Costs of suit to be paid by the petitioner.
Although the petition for certiorari bore the conformity of the public prosecutor (i.e., Assistant
SO ORDERED.
City Prosecutor Danilo Formoso of Manila), that conformity alone did not suffice. The authority
of the City Prosecutor or his assistant to appear for and represent the People of the Philippines Republic of the Philippines
was confined only to the proceedings in the trial court. SUPREME COURT
Manila
II
G.R. No. 178529 September 4, 2009
Even on the merits, the petition for review fails.
EQUITABLE PCI BANK, INC. (now known as BANCO DE ORO - EPCI,
The criminal case had been pending since 1995 and the petitioner as the complainant had
INC.) Petitioner,
presented only two witnesses as of the issuance of the assailed order. The trial court had not
vs.
been wanting in giving warnings to the Prosecution on the dire consequences should the
HEIRS OF ANTONIO C. TIU, namely: ARLENE T. FU, MICHAEL U. TIU, ANDREW
Prosecution continue to fail to complete its evidence. The Prosecution had retained the duty to
U. TIU, EDGAR U. TIU and ERWIN U. TIU, Respondents.
ensure that its witnesses would be present during the trial, for its obligation to the administration
of justice had been to prove its case sans vexatious and oppressive delays. Yet, the warnings of DECISION
the trial court had gone unheeded. Instead, the Prosecution would deflect the responsibility for
the delays to the failure of the trial court to issue the subpoena to its proposed witness and to CARPIO MORALES, J.:
cause the subpoena to be served. Such attitude of the Prosecution, which included the petitioner
as the complainant, manifested a lack of the requisite diligence required of all litigants coming To secure loans in the aggregate amount of ₱7 Million obtained by one Gabriel Ching from
to the courts to seek redress. herein petitioner Equitable PCI Bank, Inc. (now known as Banco de Oro-EPCI, Inc.),1 Antonio
C. Tiu (Antonio), of which herein respondents allege to be heirs, executed on July 6, 1994 a
We find that the trial judge did not act capriciously, arbitrarily or whimsically in issuing the Real Estate Mortgage (REM)2 in favor of petitioner covering a lot located in Tacloban City.
assailed order. Thus, the Court of Appeals properly dismissed the petition for certiorari. The Before the words "With my Marital Consent" appearing in the REM is a signature attributed to
petitioner now needs to be reminded that certiorari is an extraordinary remedy to correct a grave Antonio’s wife Matilde.
abuse of discretion amounting to lack or excess of jurisdiction when an appeal, or any plain,
speedy and adequate remedy in the ordinary course of law is not available. In this regard, grave
On October 5, 1998, Antonio executed an Amendment to the Real Esate Mortgage3 (AREM) and preserved in this action. As they are real parties in interest, they therefore have a cause of
increasing the amount secured by the mortgage to ₱26 Million, also bearing a signature action against herein defendant.14
attributed to his wife Matilde above the words "With my Marital Consent."
It thus ordered petitioner to file Answer within the reglementary period. Petitioner’s motion for
The property mortgaged was covered by TCT No. T-1381 of the Tacloban Register of Deeds reconsideration of the said Resolution having been denied,15 it filed a Petition16 for Certiorari,
which, the AREM states, was "registered in the name of the Mortgagor." Prohibition, and Mandamus with prayer for preliminary injunction before the Court of Appeals
which it denied by Decision17 of August 30, 2006, quoting with approval the trial court’s ratio
Antonio died on December 26, 1999.4 in denying petitioner’s Motion to Dismiss.
The loan obligation having remained unsettled, petitioner filed in November 2003 before the Hence, the present Petition,18 petitioner faulting the Court of Appeals in affirming the trial
Regional Trial Court (RTC) of Tacloban City a "Petition for Sale"5 dated November 4, 2003, court’s denial of its Motion to Dismiss.
for the extrajudicial foreclosure of the AREM and the sale at public auction of the lot covered
thereby. Acting on the petition, the RTC Clerk of Court and Ex-Oficio Sheriff scheduled the Petitioner argues, in the main, that as respondents are not the real parties in interest, their
public auction on December 17, 2003.6 complaint states no cause of action. Citing Travel Wide Associated, Inc. v. Court of
Appeals,19 petitioner adds that since the party in interest is respondents’ mother but the
A day before the scheduled auction sale or on December 16, 2003, the herein respondents, Heirs complaint is not brought in her name, respondents’ complaint states no cause of action.
of Antonio C. Tiu, namely Arlene T. Fu, Michael U. Tiu, Andrew U. Tiu, Edgar U. Tiu, and
Erwin U. Tiu, filed a Complaint/Petition7before the RTC of Tacloban against petitioner and the The issue in the main thus is whether the complaint filed by respondents-children of Antonio,
Clerk of Court-Ex Oficio Sheriff, docketed as Civil Case No. 2003-12-205 for annulment of the without impleading Matilde who must also be Antonio’s heir and who, along with Antonio,
AREM, injunction with prayer for issuance of writ of preliminary injunction and/or temporary was principally obliged under the AREM sought to be annulled, is dismissible for lack of cause
restraining order and damages, alleging, among other things, that of action.

x x x the said AREM is without force and effect, the same having been executed without the The pertinent provision of the Civil Code on annulment of contracts reads:
valid consent of the wife of mortgagor Antonio C. Tiu who at the time of the execution of the
said instrument was already suffering from advance[d] Alzheimer’s Disease and, henceforth, Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby
incapable of giving consent, more so writing and signing her name[.] 8 (Emphasis and obliged principally or subsidiarily. However, persons who are capable cannot allege the
underscoring supplied.)1awphi1 incapacity of those with whom they contracted; nor can those who exerted intimidation,
violence, or undue influence, or employed fraud, or caused mistake base their action upon these
The RTC issued a temporary restraining order,9 and subsequently, a writ of preliminary flaws of the contract. (Emphasis and underscoring supplied)
injunction.10
Upon the other hand, the pertinent provisions of Rule 3 of the Rules of Court (Parties to Civil
To the Complaint petitioner filed a Motion to Dismiss,11 raising the following grounds: Actions) read:

I SEC. 2 Parties in interest. ─ A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
THE PLAINTIFFS/PETITIONERS NOT BEING THE REAL PARTIES-IN-INTEREST, authorized by law or these Rules, every action must be prosecuted or defended in the name of
THEIR COMPLAINT STATES NO CAUSE OF ACTION; the real party in interest. (Emphasis and underscoring supplied)
II SEC. 3. Representatives as parties. ─ Where the action is allowed to be prosecuted or defended
by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included
EVEN IF THERE IS A CAUSE OF ACTION, THE SAME IS ALREADY BARRED BY THE
in the title of the case and shall be deemed to be the real party in interest. A representative may
STATUTE OF LIMITATIONS; and
be a trustee of an express trust, a guardian, an executor or administrator, or a party authorized
III by law or these Rules. An agent acting in his own name and for the benefit of an undisclosed
principal may sue or be sued without joining the principal except when the contract involves
THE PRESENT ACTION BEING A PERSONAL ONE, THE VENUE IS IMPROPERLY things belonging to the principal. (Emphasis and underscoring supplied)
LAID.12(Underscoring supplied)
The AREM was executed by Antonio, with the marital consent of Matilde. Since the mortgaged
By Resolution13 of April 14, 2004, Branch 8 of the Tacloban RTC denied the Motion to Dismiss property is presumed conjugal, she is obliged principally under the AREM. It is thus she,
in this wise: following Art. 1397 of the Civil Code vis a vis Sec. 2 of Rule 3 of the Rules of Court, who is
the real party in interest, hence, the action must be prosecuted in her name as she stands to be
From the facts of the case, herein plaintiffs/petitioners are so situated that they will either be benefited or injured in the action.
benefited or injured in subject action. They are therefore real parties in interest, as they will be
damnified and injured or their inheritance rights and interest on the subject property protected Assuming that Matilde is indeed incapacitated, it is her legal guardian who should file the action
on her behalf. Not only is there no allegation in the complaint, however, that respondents have
been legally designated as guardians to file the action on her behalf. The name of Matilde, who In the decision12 dated August 2, 2006, the Labor Arbiter found that Victor and Enriqui to were
is deemed the real party in interest, has not been included in the title of the case, in violation of illegally dismissed. The Labor Arbiter noted the following contradictory statements inStanley
Sec. 3 of Rule 3 of the Rules of Court. Fine’s position paper, thus:

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated August Also, Stanley Fine was forced todeclare them dismissed due to their failure to report back to
30, 2006 is REVERSED and SET ASIDE. Civil Case No. 2003-12-205 lodged before Branch 8 work for a considerable length of time and also, due to the filing of an unmeritorious labor case
of the Regional Trial Court of Tacloban City is DISMISSED for lack of cause of action. against it by the two complainants. . . .

SO ORDERED. ....

Republic of the Philippines The main claim of the complainants is their allegation that they were dismissed. They were NOT
SUPREME COURT DISMISSED.13(Emphasis in the original)
Manila
The Labor Arbiter resolved these contradictory statements in the following manner:
SECOND DIVISION
In fact, the admission that complainants were dismissed due to the filing of a case against them
G.R. No.190486 November 26, 2014 by complainants is a blatant transgression of the Labor Code that no retaliatory measure shall
be levelled against an employee by reason of an action commenced against an employer. This
STANLEY FINE FURNITURE, ELENAAND CARLOS WANG, Petitioners, is virtually a confession of judgment and a death [k]nell to the cause of respondents. It actually
vs. lends credence tothe fact that complainants were dismissed upon respondents’ knowledge of the
VICTOR T. GALLANO AND ENRIQUITO SIAREZ, Respondents. complaint before the NLRC as attested by the fact that four days after the filing of the complaint,
the same was amended to include illegal dismissal.14
DECISION
The Labor Arbiter also awarded moral and exemplary damages to respondents, reasoning that:
LEONEN, J.:
Finding malice, and ill-will in the dismissal of complainants, which exhibits arrogance and
To terminate the employment of workers simply because they asserted their legal rights by filing defiance of labor laws on the part of respondents, moral and exemplary damages for ₱50,000
a complaint is illegal. It violates their right to security of tenure an'd should not be tolerated. and ₱30,000 respectively for each of the complainants are hereby granted.

In this petition for review1 on certiorari filed by Elena Briones,2 we are asked to reverse the WHEREFORE, premises considered, respondents are hereby declared guilty of illegal
decision3 of the Court of Appeals in CA-G.R. SP No. 101145. The Court of Appeals found grave dismissal. As a consequence, they are ORDERED to reinstate complainant to their former
abuse of discretion on the part of the National Labor Relations Commission, and reinstated the position and pay jointly and severally complainants’ full backwages from date of dismissal until
decision of the Labor Arbiter dated August 2, 2006 finding that respondents Victor Gallano and actual reinstatement[.]15
Enriquito Siarez were illegally dismissed.4
On appeal, the National Labor Relations Commission reversed16 the Labor Arbiter’s decision,
Stanley Fine Furniture (Stanley Fine), through its owners Elena and Carlos Wang, hired ruling that the Labor Arbiter erred in considering the statement, "due to the filing ofan
respondents Victor T. Gallano and Enriquito Siarez in 1995 as painters/carpenters. Victor and unmeritorious labor case," as an admission against interest.17 The National Labor Relations
Enriquito each received 215.00 basic salary per day.5 Commission held that:

On May 26, 2005, Victor and Enriquito filed a labor complaint6 for underpayment/non-payment Contrary to the findings of the Labor Arbiter below . . . respondents-appellants’ allegations in
of salaries, wages, Emergency Cost of Living Allowance (ECOLA), and 13th month pay. They paragraph 5 of their position paper is not an admission that they dismissed complainants-
indicated in the complaint form that they were "still working"7 for Stanley Fine. appellees moreso [sic], in retaliation for complainants-appellees’ filing a complaint against
them. Had the Labor Arbiter been more circumspect analyzing the facts brought before him by
Victor and Enriquito filed an amended complaint8 on May 31, 2005, for actual illegal dismissal, the herein parties pleadings, he could have easily discerned that complainants-appellees were
underpayment/non-payment of overtime pay, holiday pay, premium for holiday pay, service merely required to explain their unauthorized absences they committed for the month of May
incentive leave pay, 13th month pay, ECOLA, and Social Security System (SSS) benefit. In the 2005 alone. Complainants-appellees did notdeny knowledge of the memoranda issued to them
amended complaint, Victor and Enriqui to claimed that they were dismissed on May 26, on May 23, 25 and 27, 2005 for complainant-appellee Siarez and June 1, 2005 memo for
2005.9 Victor and Enriquito were allegedly scolded for filing a complaint for money claims. Gallano. That they simply refused receipt of them cannot extricate themselves from its legal
Later on, they were not allowed to work.10 effects as the last of which clearly show that itwas sent to them thru the mails.

On the other hand, petitioner Elena Briones claimed that Victor and Enriquito were "required to ....
explain their absences for the month of May 2005, but they refused."11
The same holds true with the findings of the Labor Arbiter below that respondents-appellants’
evidence, Annexes "7" to "74" "cannot be admissible in evidence" for being mere xerox copies
and "are easily subjected to interpolation and tampering."
Suffice it to state that these pieces of evidence were adduced during the arbitral proceedings Stanley Fine filed a motion for reconsideration,30 which the Court of Appeals denied in the
below, where complainants-appellees were afforded the opportunity to controvert and deny its resolution31 dated November 27, 2009.
truthfulness and veracity that complainants-appellees never objected thereto or deny its
authenticity, certainly did not render said documents tampered or interpolated. On December 21, 2009, Stanley Fine, Elena, and Carlos Wang filed a motion for extension of
time to file petition for review on certiorari.32
WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSEDand
SET ASIDE.Respondents-appellants are however ordered to reinstate complainants-appellees On January 21, 2010, Elena Briones filed a petition for review.33 Elena alleged that she is the
to their former position without loss of seniority rights and benefits appurtenant thereto, without "registered owner/proprietress of the business operation doing business under the name and style
backwages. ‘Stanley Fine Furniture.’"34She argued that the Court of Appeals erred in ruling that Victor and
Enriquito were illegally dismissed considering that she issued several memoranda to them, but
SO ORDERED.18 they refused to accept the memoranda and explain their absences.35 As to the statement, "due to
the filing of an unmeritorious labor case,"36 it was error on the part of her former counsel which
Victor and Enriquito filed a motion for reconsideration,19 which the National Labor Relations should not bind her.37 Further, the monetary claims should not have been awarded because these
Commission denied in the resolution20 dated August 15, 2007. were based on the allegations in the complaint form,38 whereas Elena presented documentary
evidence to show that Victor and Enriquito’s money claims had been paid. They never rebutted
Thus, Victor and Enriquito filed a petition for certiorari before the Court of Appeals. Generally,
her documentary evidence.39 As to the award of moral and exemplary damages and attorney’s
petitions for certiorari are limited to the determination and correction of grave abuse of
fees, Victor and Enriquito did not present any evidence to support their claim, thus, it was error
discretion amounting to lack or excess of jurisdiction. However,the Court of Appeals reviewed
for the Court of Appeals to have reinstated the Labor Arbiter’s decision. 40
the findings of facts and of law of the labor tribunals, considering that the Labor Arbiter and the
National Labor Relations Commission had different findings.21 In compliance with this court’s resolution41 dated February 17, 2010, Victor and Enriquito filed
their comment42 and argued that the petition should be denied because Elena "is neither the
The Court of Appeals found that Stanley Fine failed to show any valid cause for Victor and
respondent, party in interest or representatives as parties."43 With regard to Victor’s two
Enriquito’s termination and to comply with the twonotice rule.22 Also, the Court of Appeals
absences and Enriquito’s five absences, these should not be interpreted as refusal to go back to
noted that Stanley Fine’s statements — that it was "forced to declare them dismissed"23 due to
work tantamount to abandonment.44 Considering that Elena’s arguments had been passed upon
their absences and "due to the filing of an unmeritorious labor case against it by the two
by the labor tribunals and the Court of Appeals, this petition should be denied. 45
complainants"24 — were admissions against interest and binding upon Stanley Fine. Thus: An
admission against interest is the best evidence which affords the greatest certainty of the facts Elena filed her reply46 and posited that she has legal standing to file the petition for review
in dispute since no man would declare anything against himself unless such declaration is true. because she isthe owner/proprietress of Stanley Fine.47 In addition, she argued that Victor and
Thus, an admission against interest binds the person who makes the same, and absent any Enriquito knew that she, Elena, is the real party-in-interest because during the pendency of the
showing that this was made thru palpable mistake, no amount of rationalization can offset it. 25 labor case, she filed an ex-parte manifestation, attaching her Department of Trade and Industry
certificate of registration of business name,48 showing that the registration is under her maiden
The Court of Appeals also held that the immediate amendment of Victor and Enriquito’s
name, Elena Y. Briones. As per the Department of Trade and Industry’s certification, 49 Stanley
complaint negated their alleged abandonment.26
Fine is a sole proprietorship owned by "Elena Briones Yam-Wang." Thus, this court is asked to
With regard to the National Labor Relations Commission’s deletion of the monetary award, the resolve procedural and substantive issues in this petition as follows:>
Court of Appeals ruled that:
1. Whether Elena Briones has standing to file this petition for review on certiorari;
Notably, private respondents’ claim of payment is again belied by their own admission in their
2. Whether the Court of Appeals erred in ruling that Victor Gallano and Enriquito Siarez were
position paper that they failed to pay petitioners their ECOLA and to ask for exemption from
illegally dismissed;
payment of said benefits to their employees. In any event, private respondents’ allegation of
payment of money claims is not supported by substantial evidence. The Labor Arbiter found 3. Whether the Court of Appeals erred when it agreed with the Labor Arbiter that the statement,
that the documents presented by private respondents were mere photocopies, with no "filing of an unmeritorious labor case," is an admission against interest and binding against
appropriate signatures of petitioners and could be easily subjected to interpolation and Stanley Fine Furniture; and
tampering.27
4. Whether the Court of Appeals erred in awarding the monetary claims and damages to Victor
The Court of Appeals, thus, granted the petition, set aside the resolutions of the National Labor Gallano and Enriquito Siarez, considering that they did not produce evidence to support their
Relations Commission, and reinstated the decision of the Labor Arbiter. 28 The dispositive claims.
portion of its decision reads:
I.
WHEREFORE, the assailed Resolutions dated June 18, 2007 and August 15, 2007 of public Petitioner Elena Briones has standing to file this case
respondent NLRC are set aside and the Labor Arbiter’s Decision dated August 2, 2006 is
reinstated. On this issue, petitioners claimed that Elena Briones is not the real party-in-interest; hence, the
decision of the Court of Appeals is final and executory since the petition for review was not
SO ORDERED.29 properly filed.50
In her reply, Elena argued that she is the sole proprietor of Stanley Fine, a fact known to The Court of Appeals found grave abuse of discretion on the part of the National Labor Relations
respondents.51 As the sole proprietor, she has standing to file this petition.52 Commission when it reversed the Labor Arbiter’s decision. The Court of Appeals held that
respondents were illegally dismissed because no valid causefor dismissal was shown. Also, there
Respondents cannot deny Elena Briones’ standing to file this petition considering that in their was no compliance withthe two-notice requirement.61
amended complaint filed before the Labor Arbiter, they wrote "Stanley Fine Furniture, Elina
[sic] Briones Wang as ownerand Carlos Wang" as their employers. 53 Elena admitted that no notices of dismissal were issued to respondents. However, memoranda
were given to respondents, requiring them to explain their absences. She claimed that the notices
Also, respondents did not refute Elena’s allegation that Stanley Fine is a sole proprietorship. In to explain disprove respondents’ allegation that there was intent to dismiss them.62
Excellent Quality Apparel, Inc. v. Win Multi-Rich Builders, Inc.,54 this court stated that:
Grounds for termination of employment are provided under the Labor Code. 63 Just causes for
A sole proprietorship does not possess a juridical personality separate and distinct from the termination ofan employee are provided under
personality of the owner of the enterprise. The law merely recognizes the existence of a sole
proprietorship as a form of business organization conducted for profit by a single individual and Article 282 of the Labor Code: ARTICLE 282. Termination by employer.- An employer may
requires its proprietor or owner to secure licenses and permits, register its business name, and terminate an employment for any of the following causes:
pay taxes to the national government. The law does not vest a separate legal personality on the
sole proprietorship or empower it to file or defend an action in court. 55 (Emphasis supplied) (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
Thus, Stanley Fine, being a sole proprietorship, does not have a personality separate and distinct employer or representative in connection with his work;
from its owner, Elena Briones. Elena, being the proprietress of Stanley Fine, can be considered
(b) Gross and habitual neglect by the employee of his duties;
as a real party-in-interest and has standing to file this petition for review.
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
II.
authorized representative;
Review of procedural parameters
(d) Commission of a crime or offense by the employee against the person of his employer or
In her petition for review, Elena raised the following issues: (a) whether "the filing of an
any immediate member of his family or his duly authorized representatives; and
Establishment Termination Report"56 is an act of dismissal; (b) whether counsel’s allegation that
an employee was dismissed due to the filing of an "unmeritorious" case against the employer is (e) Other causes analogous to the foregoing.
binding;57 (c) whether a Labor Arbiter can award monetary claims based on the allegations in
the complaint form;58 and (d) whether the award of moral and exemplary damages and Although abandonment of work is not included in the enumeration, this court has held that
attorney’s fees is proper even without supporting evidence.59 "abandonment is a form of neglect of duty."64 To prove abandonment, two elements must
concur:
In a Rule 45 petition for review of a Court of Appeals decision rendered under Rule 65, this
court is guided by the following rules: 1. Failure to report for work orabsence without valid or justifiable reason; and
[I]n a Rule 45 review (of the CA decision rendered under Rule 65), the question of law that 2. A clear intention to sever the employer-employee relationship.65
confronts the Court is the legal correctness of the CA decision – i.e., whether the CA correctly
determined the presence or absence of grave abuse of discretion in the NLRC decision before In Hodieng Concrete Products v. Emilia,66 this court held that:
it, and not on the basis of whether the NLRC decision on the merits of the case was correct. . . .
Specifically, in reviewing a CA labor ruling under Rule 45 of the Rules of Court, the Court’s Absence must be accompanied by overt acts unerringly pointing to the fact that the employee
review is limited to: simply does not want to work anymore. And the burden of proof to show that there was
unjustified refusal to go back to work rests on the employer.67
(1) Ascertaining the correctness of the CA’s decision in finding the presence or absence of a
grave abuse of discretion. This is done by examining, on the basis of the parties’ presentations, The Court of Appeals ruled that the alleged abandonment of work is negated by the immediate
whether the CA correctly determined that at the NLRC level, all the adduced pieces of evidence filing of the complaint for illegal dismissal on May 31, 2005. 68 The Court of Appeals further
were considered; no evidence which should not have been considered was considered; and the stated that:
evidence presented supports the NLRC findings; and Long standing is the rule that the filing of the complaint for illegal dismissal negates the
(2) Deciding any other jurisdictional error that attended the CA’s interpretation or application allegation of abandonment. Human experience dictates that no employee in his right mind would
of the law.60(Citation omitted) go through the trouble of filing a case unless the employer had indeed terminated the services
of the employee.69
Thus, the proper issue in this case is whether the Court of Appeals correctly determined the
presence of grave abuse of discretion on the part of the National Labor Relations Commission. In this case, Elena failed to pinpoint the overt acts of respondents that show they had abandoned
III. their work. There was a mere allegation that she was "forced to declare them dismissed dueto
their failure to report back to work for a considerable length of time"but no evidence to prove
There was no just cause in the dismissal of respondents the intent to abandon work.70 It is the burden of the employer to prove that the employee was
not dismissed or, if dismissed, that such dismissal was not illegal.71 Unfortunately for Elena, she remedies and reliefs already lost by operation of law. The only exception would be, where the
failed to do so. lawyer’s gross negligence would result in the grave injustice of depriving his client of the due
process of law.84 (Citations omitted)
IV.
Generally, errors of counsel bind the client There is not an iota of proof that the lawyer committed gross negligence in this case. That
counsel did not reflect his client’s true intentions is a bare allegation. It is not a mere afterthought
Elena’s position paper states the following: meant to escape liability for such illegal act. Elena’s counsel reflected the true reason for
dismissing respondents. Both position papers state that Elena dismissed respondents because of
5. Also, Stanley Fine was forced to declare them dismissed due to their failure to report back to
the filing of a labor complaint. Thus, the Court of Appeals did not err in affirming the Labor
work for a considerable length of time and also, due to the filing of an unmeritorious labor case
Arbiter’s ruling that the statement, "unmeritorious labor complaint," is an admission against
against itby the two complainants. . . . (Emphasis supplied)
interest.
....
V.
8. The main claim of the complainants is their allegation that they were dismissed. They were Non-compliance with procedural
NOT DISMISSED. Management was [sic] has only instructed them to submit a written due process supports the finding of
explanation for their absence before they would be allowed back to work. . . . 72 (Underscoring illegal dismissal
in the original)
Assuming that the statement, "filing of an unmeritorious labor case," is not an admission against
Elena argued that the use of the word "unmeritorious" should not be taken against her because interest, still, the Court of Appeals did not err in reinstating the Labor Arbiter’sdecision. Elena
it is commonly used in pleadings. Also, the use of the word "unmeritorious" came from her admitted85 that no notices of dismissal were issued.
previous counsel.73 In an effort to persuade this court, Elena further argued in her reply that the
Elena pointed out that there is no evidence showing that at the time she sent the memoranda,
statement "unmeritorious case" was a mistake committed by her former counsel which should
she already knew of the complaint for money claims filed by respondents. 86 The allegation that
not bind her, considering its grave consequence.74
she told respondents "Nag complain pa kayo sa Labor ha, sige tanggal na kayo"87 is hearsay and
On the other hand, respondents alleged in their position paper75 that they were requesting from inadmissible.88
their employer an increase in pay to comply with the minimum wage law.76 However, they were
In cases of termination of employment, Article 277(b) of the Labor Code provides that:
reprimanded and were told "not to work anymore."77
ARTICLE 277. Miscellaneous provisions. –
Respondents filed a reply78 to Elena’s position paper and argued that:
....
6. The words "Nag complain pa kayo sa Labor ha, tanggal na kayo" were clear, unequivocal and
categorical. These circumstances were sufficient to create the impression in the mind of (b) Subject to the constitutional right of workers to security of tenure and their right to be
complainants – and correctly so – that their services were being terminated. The acts of protected against dismissal except for a just and authorized cause and without prejudice to the
respondents were indicative of their intention to dismiss complainants from their employment. 79 requirement of notice under Article 283 of this Code, the employer shall furnish the worker
whose employment is sought to be terminated a written notice containing a statement of the
On this issue, the National Labor Relations Commission held that the phrase, "filing of an
causes for termination and shall afford the latter ample opportunity to be heard and to defend
unmeritorious labor complaint,"80 if read together with the other allegations in Elena’s position
himself with the assistance of his representative if he so desires in accordance with company
paper, would show that respondents were not dismissed but simply required to explain their
rules and regulations promulgated pursuant to guidelines set by the Department of Labor and
absences.81
Employment. Any decision taken by the employer shall be without prejudice to the right of the
On the other hand, the Court of Appeals agreed with the Labor Arbiter that Elena’s statement is worker to contest the validity or legality of his dismissal by filing a complaint with the regional
an admission against interest and binding upon her. The Court of Appeals explained that: branch of the National Labor Relations Commission. The burden of proving that the termination
was for a valid or authorized cause shall rest on the employer[.]
An admission against interest is the best evidence which affords the greatest certainty of the
facts in dispute since no man would declare anything against himself unless such declaration is Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor Code further
true. Thus, an admission against interest binds the person who makes the same, and absent any provides:
showing that this was made thru palpable mistake, no amount of rationalization can offset it.82
Section 2. Security of tenure. . . .
The general rule is that errors of counsel bind the client. The reason behind this rule was
....
discussed in Building Care Corporation v. Macaraeg:83
(d) In all cases of termination of employment, the following standards of due process shall be
It is however, an oft-repeated ruling that the negligence and mistakes of counsel bind the
substantially observed:
client.1âwphi1 A departure from this rule would bring about never-ending suits, so long as
lawyers could allege their own fault or negligence to support the client’scase and obtain For termination of employment based on just causes as defined in Article 282 of the Code:
(i) A written notice served on the employee specifying the ground or grounds for termination, objection thereto, we brush aside the defect in form and proceed to discuss the merits of the
and giving said employee reasonable opportunity within which to explain his side. motion.94 (Citation omitted)

(ii) A hearing or conference during which the employee concerned, with the assistance of A review of the decision in Lee v. Regional Trial Court of Quezon City, Branch 85 shows that
counsel if heso desires is given opportunity to respond to the charge, present his evidence, or the case involved an omnibus motion to cite Jose C. Lee and the other parties in indirect
rebut the evidence presented against him. contempt, and to impose disciplinary sanctions or disbar Jose C. Lee’s counsel.95 The statement
cited by Elena is not the controlling doctrine in that case. In addition, it appears that this court
(iii) A written notice of termination served on the employee, indicating that upon due brushed aside "the defect in form" in the exercise of its discretion and, thus, it should not be
consideration of all the circumstances, grounds have been established to justify his termination. taken as the controllingdoctrine. Hence, no error can be attributed to the Court of Appeals when
King of Kings Transport, Inc. v. Mamac89 extensively discussed the two-notice requirement and it agreed with the Labor Arbiter’s ruling that the photocopies of the memoranda have no
the procedure that must be observed in cases of termination, thus: probative value since they are mere photocopies.96
(1) The first written noticeto be served on the employees should contain the specific causes or Even if this court considers Annexes 1 to 5,97 these pieces of evidence would not save Elena’s
grounds for termination against them, and a directive that the employees are given the cause. Annexes 1 to 3 are the memoranda issued to Enriquito with a notation that he refused to
opportunity to submit their written explanation within a reasonable period. "Reasonable sign. Annex 2 is dated May 25, 2005, but the date when Enriquito allegedly refused to sign is
opportunity" under the Omnibus Rules means every kind of assistance that management must not indicated.98 Annex 3 is dated May 23, 2005, but again, the memorandum does not show
accord to the employees to enable them to prepare adequately for their defense. This should be when it was served upon Enriquito and the date he refused to sign.99 It is quite possible that
construed as a period of at least five (5) calendar days from receipt of the notice to give the these memoranda were antedated.
employees an opportunity to study the accusation against them, consult a union official or
lawyer, gather data and evidence, and decide on the defenses they will raise against the Annex 4 is dated June 1, 2005 and was sent to Enriquito Siarez via registered mail.100 Annex 5
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation is the memorandum issued to Victor Gallano and is likewise dated June 1, 2005. 101 Respondents
and defenses, the notice should contain a detailed narration of the facts and circumstances that were allegedly dismissed on May 26, 2005;102 hence, Annex 1 dated May 27, 2005,103 Annex 4
will serve as basis for the charge against the employees. A general description of the charge will dated June 1, 2005, and Annex 5 also dated June 1, 2005, were issued as a mere afterthought.
not suffice. Lastly, the notice should specifically mention which company rules, if any, are
violated and/or which among the grounds under Art. 282 is being charged against the employees. VI.
The Court of Appeals did not err in
(2) After serving the first notice, the employers should schedule and conduct a hearing or awarding money claims and damages
conference wherein the employees will be given the opportunity to: (1) explain and clarify their
defenses to the charge against them; (2) present evidence insupport of their defenses; and (3) With regard to the award of money claims,104 Elena likewise argues that the Labor Arbiter erred
rebut the evidence presented against them by the management. During the hearing or conference, in notadmitting Annexes 7 to 74, citing Lee v. Regional Trial Court of Quezon City, Branch 85.
the employees are given the chance to defend themselves personally, with the assistance of a On this matter, the Court of Appeals quoted the Labor Arbiter’s decision, stating that:
representative or counsel of their choice. Moreover, this conference or hearing could be used by
With respect to Annexes 7 to 74 to prove compliance of labor standards, the same cannot be
the parties as an opportunity to cometo an amicable settlement.
admissible in evidence because they are mere Xerox copies which are easily subjected to
(3) After determining that termination of employment is justified, the employers shall serve the interpolation and tampering.
employees a written notice of termination indicating that: (1) all circumstances involving the
Besides, Annex 69 which purports to be payment of 13th month pay for 2004 of complainant
charge against the employees have been considered; and (2) grounds have been established to
Gallano but no amount is indicated. Again, Annex 71 states 13th month pay for ₱4,500.00 for
justify the severance of their employment.90 (Emphasis in the original, citation omitted)
complainant Gallano yet there is no signature of Gallano acknowledging receipt thereof. If one
Elena presented photocopies of the memoranda to prove that notices to explain were sent to document is tainted with fraud, all other Xerox documents are fraudulent. 105
respondents. These photocopies were not considered by the Labor Arbiter, on the ground that
In their comment, respondents argued that Elena’s claim of payment is refuted by her own
they had no probative value. Elena argued that even if the annexes were mere photocopies, they
admission that she did not pay respondents’ ECOLA and she even asked for exemption from
formed part of the position paper, which is a verified pleading under oath.91 Elena also cited Lee
paying them.106
v. Regional Trial Court of Quezon City, Branch 8592 where this court allegedly ruled that
photocopies of documents attached to a verified motion, which have not been controverted, are The Court of Appeals found that, indeed, Elena admitted that respondents were not paid their
admissible.93 ECOLA and that she asked for exemption from doing so. 107 In addition, Elena’s allegations of
payment of the other monetary claims, such as 13th month pay, holiday pay, and premium for
In Lee v. Regional Trial Court of Quezon City, Branch 85, this court stated the following:
holiday pay, were not supported by substantial evidence. 108
Before we discuss the substance of private respondent’s motion, we note that attached to it
A review of the records reveals that even if the Court of Appeals considered the vouchers
weremere photocopies of the supporting documents and not "certified true copies of documents
marked as Annexes 7 to 74 and submitted by Elena, these would only disprove her claim of
or papers involved therein" as required by the Rules of Court. However, given that the motion
payment.
was verified and petitioners, who were given a chance to oppose or comment on it, made no
Annexes 7 to 74109 are vouchers showing payment of holiday pay, 13th month pay, and service ownership and titling, of cases reaching the Court and resulting in conflicting rulings, to wit:
incentive leave pay to respondents. However, not all vouchers were signed by them. Further, in
some of the vouchers, the amount given to respondents was not written. Hence, these vouchers 1. G.R. No. 91413, Fusilero, et al., v. Court of Appeals, et al., 2 July 1990, decreeing. that
do not prove Elena's claim of payment. Benito J. Lopez and Pepito Ng are innocent purchasers for value and in good faith of lands
registered under TCT Nos. S- 61176andS-61177;
As to the award of money claims, including moral and exemplary damages, Elena argued that
respondents did not present evidence to prove their entitlement to damages.110 2. G.R. No. 123751, Heirs of Irene Garcia v. Court of Appeals, et al., 21 October 1996,
which affirmed in toto the CA Decision dated 27 November 1995 in CA-G.R. CV No. 45297.
Considering the circumstances surrounding respondents' dismissal, the Court of Appeals did not
The Supreme Court held that TCT Nos. S-61176 and S-61177, cancelling TCT No. 31346, cover
err in upholding the Labor Arbiter's award of moral and exemplary damages. Indeed, there was
a property located in Almanza, Las Pinas, Metro Manila;
malice when, as a retaliatory measure, petitioners dismissed respondents because they filed a
labor complaint. Further, Elena violated respondents' rights to substantive and procedural due
3. G.R. No. 141145, Republic v. Wilson Orfinada, Sr., and Lucresia K. Orfinada, 12
process when she failed to issue notices to explain and notices of termination.
November 2004, which upheld the Spouses Orfinada's TCT No. 3 8910-A as a valid title
Gone are the days when workers were reduced to mendicant despondency by their including its antecedent title OCT No. 383 in the name of Guillermo Cruz, thereby denying the
employers.1âwphi1 Within our legal order, workers have legal rights and procedures to claim Republic's petition and affirming the "Joint Decision" of the appellate court in CA-G.R. CV No.
these rights. The only way for employers to avoid legal action from their workers is to give them 32815; .
what they may be due in law and.as human beings. Businesses thrive through the acumen of
their owners and entrepreneurs. But, none of them will exist without the outcome of the 4. G.R. No. 194029, Antonio V. Martel, Jr. and Spouses Pepito and Violeta Ng v. Wilson
sacrifices and toil of their workers. Our economy thrives through this partnership based upon Orfinada, Sr. represented by Alice Africa, 30 May 2011 which denied the petition of Antonio
mutual respect. At the very least, these are the values which are congealed in our present laws. V. Martel (Martel) and the Spouses Pepito and Violeta Ng (Spouses Ng), who all likewise claim
ownership over the subject property, specifically 185,317 sq m. thereof, and upheld the Decision
Apparently, in this case, the owners forgot that labor is not merely a factor of production. It is a of the appellate court ruling on procedural matters. Ultimately, this case dismissed the cross
human product no matter how modest it may seem to them. claim of Martel and the Spouses Ng against the Spouses Orfinada (all defendants in the suit for
annulment of title filed by ISIA against them), for failing to file a written motion for
WHEREFORE, premises considered, the Court of Appeals' decision dated July 28, 2009, and reconsideration of the trial court's order of dismissal. However, on motion for reconsideration
its resolution dated November 27, 2009, reinstating the Labor Arbiter's decision dated August of Martel and the Spouses Ng which we eventually denied via a Minute Resolution dated 1 April
2, 2006, are hereby AFFIRMED. 2014, we remanded the case to the Court of Appeals for the purpose of hearing and receiving
evidence to determine all parties' conflicting claims of ownership over the subject property.
SO ORDERED.

FIRST DIVISION We now proceed to the factual antecedents of this case before us. Herein respondent Insurance
Savings and Investment Agency, Inc. (ISIA) filed a Special Civil Action for Mandamus under
G.R. No. 206540, April 20, 2015 Rule 65 of the Rules of Court before the RTC, Las Pinas City, against the Register of Deeds of
Las Piñas City praying that the latter be commanded to: (a) cancel TCT No. 38910-A issued in
ALICE G. AFRICA, Petitioner, v. INSURANCE SAVINGS AND INVESTMENT the name of the Spouses Orfmada, and thereafter, (b) issue a new title to the subject property in
AGENCY, INC. (ISIA) REPRESENTED BY ITS PRESIDENT, DELIA DE BORJA; the name of ISIA.
ACTING REGISTER OF DEEDS, LAS PINAS CITY, ATTY. ABRAHAM N.
VERMUDEZ, Respondents. In its petition for mandamus, ISIA primarily alleged that in 1981, ISIA purchased from the
Spouses Orfmada, through their then attorney-in-fact, Modesto Jimenez (Jimenez), the subject
RESOLUTION property covered by TCT No. 38910-A. The sale is evidenced by a Deed of Absolute Sale
executed on 18 May 1981 signed by ISIA and Jimenez.
PEREZ, J.:

At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court brought For clarity, considering that the subject property in this case is likewise the subject matter in at
directly before us by petitioner Alice G. Africa on pure questions of law assailing the least four (4) other cases concerning the ownership and titling thereof, which has already
Decision1 dated 14 November 2012 and Order2 dated 26 March 2013 of the Regional Trial Court resulted in conflicting rulings used as basis by various opposing parties, we quote the trial court's
(RTC), Branch 275, Las Pinas City in SCA Case No. 12-0010. narration of antecedents to confine our holding herein to only the pertinent legal issues before
us:
The subject property of this case is a parcel of land located along Zapote Road, Almanza, Las
[T]he following taxes and fees were paid for purposes of the transfer of ownership, to wit:
Piñas City, with an area of 221, 688 square meters (sq. m.), covered by Transfer Certificate of
Title No. 38910-A registered in the name of the Spouses Wilson P. Orfmada and Lucresia
a. [R]eal estate taxes as shown by real property tax receipts (Annexes "H" to "H-5" of petition);
Kiocho (Spouses Orfinada). This same property is likewise the subject matter of litigation, its
b. [Cjapital gains tax in the amount of Php44,322,600.00 as shown by capital gains tax return
form no. 1706 (Annex "J") and Land Bank BIR tax payment deposit slip (Annex "J-l"); append thereto a copy of the alleged second owner's duplicate copy of the title. The omission is
quite telling of whether or not Africa is indeed in possession of the subject title.
c. [Documentary stamp tax in the amount of Phpl,385,550.00 as shown by the documentary
stamp tax declaration/return BIR form no. 2000-OT (Annex "K") and the Land Bank BIR Tax The Registry of Deeds gave too much faith on a mere claim in the affidavit of Alice Africa
payment deposit slip (Annex "K-P'); and annotated on the title connecting this to the 1993 Order of the Makati Court. Such reliance is
misplaced as the affidavit is self-serving and unsubstantiated. Atty. Joel Paner, the Registrar of
d. BIR certification fee of PhplOO as shown by BIR Payment Form No. 0605 (Annex "L"). Deeds, appears to have realized his misplaced reliance when he eventually corrected it in his
Comment by saying that the registration of the sale of the subject property in favor of ISIA can
On the basis of the foregoing payments made by [ISIA], the Bureau of Internal Revenue issued be effected. Significantly, the acting Registrar of Deeds, Atty. Abraham N. Vermudez, who
on 28 June 2012 a Certificate Authorizing Registration (CAR) and Tax Clearance Certificate replaced Atty. Paner did not adopt this misplaced reliance in his memorandum and opted not to
No. OCN 9TA0000219327 in favor of [ISIA] x x x. In addition, [ISIA] paid the amount of Phpl tackle this issue. Again, the 1993 Order of the Makati Court is mum on the authority of Africa
1,068,764.93 representing the transfer tax, surcharge, monthly interests and confirmation fee to take possession of the title.
assessed by the Office of the City Assessor of Las Pinas. Subsequently, a Confirmation of
Payment No. 014149 was issued by the Office of the Treasurer of Las Pifias City confirming Undeniably, the Registry of Deeds has a public duty towards [ISIA] to admit the sale documents
that [ISIA] paid the transfer tax due on the subject title x x x. for registration. The said office cannot assume that another copy of the title exists based merely
on the affidavit.
After completing all the necessary requirements for the transfer of title, [ISIA] then went to the
Registry of Deeds to submit for registration the Deed of Absolute Sale together with all WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED. The Registry
supporting documents including the surrender of the owner's duplicate copy of TCT No. 38910- of Deeds for Las Pifias City is hereby immediately commanded to proceed with the registration
A x x x. However, the then Registrar of Deeds, Atty. Joel Paner, denied the registration of the of the Deed of Absolute Sale dated 18 May 1981 executed by Sps. Wilso P. Orfmada and
sale on the ground that another owner's duplicate copy of the subject title is in possession of a Lucresia Kiocho and [respondent] ISIA together with all supporting documents and thereafter,
certain Alice Africa [herein respondent]. Atty. Paner further stated in his Notice of Denial dated to cancel Transfer Certificate of Title No. 38910-A issued in the name of the Sps. Wilson P.
24 August 2012 that the subject title bears the annotation of the affidavit of Alice Africa x x x. Orfmada and Lucresia Kiocho, and in lieu thereof, to issue a new title to the subject property in
the name of [ISIA].
Atty. Joel Paner filed his Comment on the Petition recognizing the validity of the sale of the
subject property by the Sps. Wilson Orfmada and Lucresia Kiocho in favor of ISIA by virtue of Anent the Urgent Motion for Recording of Attorney's Lien filed by movant Atty. Antonio M.
the Decision dated 12 November 2004 rendered by the Supreme Court in Republic of the Chavez, the same is hereby DENIED due course as this can be filed properly in a separate
Philippines v. Sps. Orfinada, G.R. No. 141145. Atty. Paner also aver that under normal action.4
circumstances, the transfer of title is immediately effected upon payment of the necessary
government taxes but in this case, registration of the sale can be done provided that the affidavit
of Alice Africa is carried over to the new title. Africa and the Register of Deeds filed separate motions for reconsideration of the RTC's
decision.
Although not impleaded as one of the respondents [therein], Alice Africa [herein petitioner]
filed a Vehement Opposition on the instant petition contending primarily that the sale between Both Africa and the Register of Deeds argued that the existence of the "owner's duplicate copy"
ISIA and Sps. Orfmada represented by their attorney-in-fact Modesto Jimenez is tainted with of TCT No. 38910-A, with annotation of Africa's affidavit thereon, claimed to be in Africa's
fraud hence not valid. [Africa] anchors her argument on the Order dated 3 December 1993 possession precludes the registration of the subject property in ISIA's name since it would result
rendered by Branch 150 of RTC in Makati City in LRC Case No. M-2917, directing defendant to double titling. On this score, the RTC noted that Africa failed to present and attach a'certified
Jimenez to surrender to the Register of Deeds of Las Pifias City the owner's duplicate copy of true copy of the purported "owner's duplicate copy" in her possession, in numerous instances,
TCT No. 38910-A (13674-A) based on the findings of the said court, among others, that the sale to wit: (1) The Affidavit in Entry No. 4115-28; (2) Africa's Vehement Comment/Opposition to
of the subject property between Jimenez and ISIA is void ab initio. The Order dated 3 December the Petition; (3) Africa's Urgent Motion for Reconsideration despite the trial court's observation
1993 was affirmed by the Court of Appeals in its Decision dated 14 March 1997 and by the that she failed to attach a copy of the supposed title to her Opposition; (4) Africa's Urgent Motion
Supreme Court in its Resolution dated 25 August 1997.3 for Voluntary Inhibition; and (5) the two hearings scheduled by the RTC, on 1 and 8 March
2013, for the sole purpose of having Africa present the title for examination by the Deeds and
the trial court.5
At this stage of the proceedings, with Africa as oppositor, the RTC rendered the assailed
decision, granting ISIA's petition for mandamus, thus ordering the Register of Deeds to: (a) Prior to the scheduled 8 March 2013 hearing, Africa filed an "Urgent Motion to Dispense with
register the Deed of Absolute Sale executed by ISIA and the Spouses Orfmada and its supporting the Appearance of Alice G. Afric to submit Owner's Duplicate Copy of TCT No. 38910-A" with
documents, (b) cancel TCT No. 38910-A, and (c) issue a new title to the subject property in the a condition for the RTC to order the National Bureau of Investigation (NBI) to escort her copy.
name of ISIA. The RTC disposed of the special civil action in this wise:
Curiously, Africa's counsel, on 5 March 2013, filed a motion attaching a photocopy of her
Alice. Africa could have supported her claim of being in possession of the subject title when she alleged "owner's duplicate copy." However, the Register of of Deeds, upon a preliminary
filed her opposition. While she attached several documents to her petition[,] x x x she failed to examination thereof on the scheduled 8 March 2013 hearing, found the document spurious.
copy of TCT No. 38910-A confirmed this [c]ourt['s] observation in its 14 November 2012
In the herein assailed Order6 dated 26 March 2013, the RTC denied the separate motions for Decision that reliance by the Register of Deeds on Ms. Africa's affidavit to prove existence of
reconsideration of Africa and the Register of Deeds, and Africa's Urgent Motion to dispense her owner's duplicate copy of TCT No. 38910-A is "misplaced" and "the said office cannot
with the Appearance of Alice G. Africa to submit the Owner's Duplicate Copy of TCT No. assume that another copy of the title exists based merely on the affidavit" and that "the Register
38910-A. of Deeds has a public duty towards [ISIA] to admit the sale documents for registration, x x x

The RTC gave no evidentiary weight whatsoever to the copy of the document belatedly x x x x
produced and presented by Africa's counsel:
WHEREFORE, the aforestated Motions for Reconsideration of the Decision dated 14 November
Court : Will you show that to the Register of Deeds. Are you familiar with 2012, respectively filed by the Register of Deeds of Las Pinas City and Alice Africa are
this TCT? DENIED for lack of merit. The Urgent Motion to Dispense with the Appearance of Alice G.
Africa to submit the Owner's Duplicate Copy of TCT No. 38910-A is likewise DENIED.
Atty. Vermudez : I haven't seen this, your Honor.

Court : You haven't seen that? The Register of Deeds of Las Pinas City is directed to cancel Entry No. 411528-28 in TCT No.
38910-A and thereafter comply with the [cjourt's disposition in its 14 November 2012 Decision.7
Atty. Vernudez : I haven't seen this. Since no transaction has been entered yet, your
Honor.
Feeling aggrieved by the trial court's rulings, Africa, still on behalf of the Spouses Orfmada,
Atty. Espiritu : Sa Amin Yan. filed the present petition for review on certiorari.

Atty. Vernudez : Is this the owner's copy? In this petition8 filed on 19 April 2013,-Africa alleged that her contract of agency with the
Spouses Orfmada is coupled with interest without explicitly stating her interest therein.
Atty. Espiritu : Yeah Conveniently, Africa failed to mention that both the Spouses Orfmada were already dead:
Atty. Vernudez : I haven't seen this. Wilson in the year 2000, Lucresia in 2012.

xxxx On 3 July 2013,9 we deferred action on Africa's petition and required her to submit proof of
authority to file it on behalf of the Spouses Orfmada who were the registered owners of the
subject property covered by TCT No. 38910-A, the title herein sought to be annulled by ISIA
But just the same, the certified true copy presented in [c]ourt on March 8 by Atty. Espiritu is and then titled in its name.
wanting in authenticity and credibility that [it] even failed to convince the Register of Deeds.
Africa filed a Compliance10 to our 3 July 2013 Resolution by maintaining that it has complied
Ms. Africa must realize that it is her obligation to present her copy arjd the [c]ourt cannot be with the requirements of Section 1, in relation to Sections 4 and 7, of Rule 45 of the Rules of
hoodwinked by her antics nor swayed by mere allegation. It is well-settled that the "party Court, and attaching the Special Power of Attorney (SPA) executed by the Spouses Orfmada in
alleging a fact has the burden of proving it as mere allegation not evidence, [sic]" The Africa's favor sometime in July 1997. Yet again, Africa failed to state the fact of the deaths of
[c]ourt needs proof and the Register of Deeds through his counsel agreed on this point when he the Spouses Orfmada.
stated that:
ISIA forthwith filed a Comment11 to Africa's compliance moving for the outright dismissal of
Atty. Abesamis: x x x It is crucial, Your Honor, please, that the Owner's Copy in the possession Africa's petition considering the deaths of the Spouses Orfmada, whose civil personalities were
ofOppositor Alice Africa will be likewise presented because that will give opportunity for the thereby extinguished and who carl no longer be represented in this petition by Africa.
court to compare the original copy on file with the Registry of Deeds, as well as the owner's
copy with the possession of Alice Africa, the new owner's copy, Your Honor, which was issued Africa filed a Reply12 to ISIA's Comment to her Compliance which now explicitly argues that
upon court directive. the contract of agency was not extinguished by the death of Africa's principals, the Spouses
Orfmada, since the agency is coupled with interest. For the first time, indirectly and
x x x x
collaterally, Africa claims ownership over the herein subject property. Africa alleged in her
Reply:
This [c]ourt finds and so holds that Alice Africa's and her counsel's, Atty. Renecio Espiritu's,
reasons for not presenting in court the subject owner's duplicate copy are not candid but evasive 8. [Africa] is "Agent with Interest" because [the] Spouses Orfmada, during their lifetime, had
and adroitly conjured, x x x. already sold to [Africa] the [subject property] containing an area of 221,688 square meters
located at Las Piflas City and covered by TCT No. (38910), 13674-A, the subject of this case.
x x x x The photocopy of the Deed of Sale is hereto attached as Annex "A".13

Accordingly, the failure of Alice Africa to prove her possession of a valid owner's duplicate
We take note that petitioners' [Martel's and the Spouses Ng's] right over the subject land has
The purported Deed of Sale between Africa and the Spouses Orfmada is dated 5 June 1997, been upheld by the Supreme Court in several cases and they were even considered as innocent
roughly a month prior to the Special Power of Attorney executed by the Spouses Orfmada in purchasers in good faith and for value. Nevertheless, taking into consideration that Orfinada's
Africa's favor.14 title was also upheld by no less than this Court in another Decision, we hold that the petitioners
and Orfinada's rights have been established separately, only that these were determined against
Subsequently, on 13 October 2014, Africa filed a Motion for Leave to Admit Compliance with their corresponding opposing parties in those cases. Pitted against each other, however, the
Motion to Consolidate Case with G.R. No. 194029, one of the cases mentioned herein involving petitioners and Orfinada would have to present evidence anew as this Court cannot cancel
conflicting claims of ownership over the subject property by opposing parties, ISIA against a Torrens title without a direct proceeding for that purpose. Section 48 of the Property
Martel and the Spouses Ng (other transferees of the Spouses Orfmada) and the Spouses Registration Decree provides: (Emphasis supplied)
Orfmada. Africa's basis for her motion to consolidate is that the subject property herein is the
same property involved in G.R. No. 194209. Section 48. Certificate not subject to collateral attack. A certificate of title shall not be subject
to collateral attack. It cannot be altered, modified, or cancelled except in a direct
Africa alleges, in pertinent part: proceeding in accordance with law.

9. Verily, the instant case should be consolidated with G.R. No. 194209 which, significantly, is Based on the evidence to be presented in appropriate proceedings, this Court may finally
an offshoot of a main case filed by ISIA, Inc. prior to the finality of the judgment of the Regional adjudicate whose title should be annulled. It must be borne in mind that the petition is but an
Trial Court of Makati City, Branch 150 in LRC Case No. M-2917 entitled: "Orfmada, Sr., offshoot of a main case, which might be improperly affected by any shortcut in the proceedings."
represented by Africa v. ISIA, Inc." x x x declaring the sale of the property subject of the instant [Considering that there are factual and legal issues that still need to be threshed out, and that this
litigation to ISIA, null and void. Consolidation of the two (2) cases will put to rest the conflicting Court is not a trier of facts, the appropriate action is to remand the case to the CA for further
claims of ownership by Orfmada, Sr., rep. by Alice Africa, ISIA, Inc., Martel, Jr. and the proceedings."19
Spouses Ng over the same lot.
Palpable, even in this case, is the existence of factual issues which we cannot pass
WHEREFORE, it is respectfully prayed that the Motion be GRANTED thereby admitting the
upon.20 However, such finding still does not translate to the sufficiency of Africa's petition to
attached Verification and Certification Against Forum Shopping, in the interest of justice,
litigate in her own name the issue here which is whether the Register of Deeds via a writ
and consolidating the instant case with G.R. No. 194029 entitled: "Martel, Jr. and Sps. Ng vs.
of mandamus may be compelled to cancel TCT No. 38910-A and issue a new title over the
Orfmada, Sr."15
subject property in the name of ISIA.

On 15 October 2014, ISIA filed a Respectful Motion to Dismiss the Petition 16 maintaining that Even without delving into the factual finding of the court a quo in this case that Africa, through
the death of the Spouses Orfmada prior to the filing of the present petition extinguished the subterfuge, never even presented a certified true copy of the "owner's duplicate copy" which she
contract of agency between them and Africa, thus, this petition filed by Africa on behalf of the claims to be in her possession, we deny due course to this petition, Africa not being a proper
Spouses Orfmada should be dismissed. party under Rule 3, Section 3 of the Rules of Court which reads:

Sec. 3. Representatives as parties.— Where the action is allowed to be prosecuted or defended


Pending before us then is the sufficiency of Africa's petition to litigate this case before us in her
by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included
own name. Effectively, Africa, without filing the appropriate registration proceedings, an
in the title of the case and shall be deemed to be the real party in interest. A representative may
original action, before a Regional Trial Court pursuant to law, 17 seeks to defend and protect
be a trustee of an express trust, a guardian, an executor or administrator, or a party authorized
herein the subject property covered by TCT No. 38910-A registered in the names of the Spouses
by law or these Rules. An agent acting in his own name and for the benefit of an undisclosed
Orfinada. Corollary thereto, as pending incidents resulting from Africa's oblique compliance to
principal may sue or be sued without joining the principal except when the contract involves
our 3 July 2013 Resolution, are: (1) the Motion to Consolidate this case with G.R. No. 194029
things belonging to the principal.
filed by Africa; and (2) Respectful Motion to Dismiss this petition filed by ISIA.

Before anything else, we note that in G.R. No. 194209, Africa is simply a representative of the In her Compliance, Africa quotes Sections 1,21 4,22 and 723 of Rule 45 of the Rules of Court,
Spouses Orfinada who were sued by herein respondent ISIA claiming ownership of the subject insisting that she has complied with the requisites for the filing of an appeal
property and seeking to annul TCT No. 38910-A. ISIA filed a case for annulment of title against by certiorari thereunder. Sticking out of the cited Rule, however, is the first section, first
the Republic of the Philippines and a Supplemental Complaint No. 9 against Wilson Orfinada, sentence which unequivocally states: "A partydesiring to appeal by certiorari from a judgment,
Martel and the Spouses Ng. final order or resolution x x x."
While we ultimately denied the petition in G.R. No. 194209 for absence of reversible error in In this instance, with the death of the Spouses Orfinada and despite the claim of ownership by
the assailed ruling of the appellate court, we remanded the case to the Court of Appeals for the Africa over the subject property, Africa is not the proper party to file an appeal
purpose of hearing and receiving evidence to adjudicate the conflicting claims of ownership by by certiorari from the adverse rulings of the trial court. Section 3 of Rule 3 of the Rules of Court
the opposing parties (given the overall factual milieu herein) over the subject property. In our 1 is explicit on the requirement that an agent as party may sue without joining the principal except
April 2014 Resolution18 in G.R. No. 194209, we noted, thus: when the contract involves things belonging to the principal. The herein subject property is
ostensibly owned by the Spouses Orfinada covered by TCT No. 38910-A registered in their G.R. No. 194209 involves the conflicting claims of ownership over the subject properties
names. This TCT No. 38910-A is one of the titles ISIA seeks to annul as part of its claim of initiated by ISIA against Wilson Orfmada, Martel and the Spouses Ng. The validity of TCT No.
ownership over vast tracts of land bounded by the Pasig River in the North, by the Tunisan River 38910-A is already part of G.R. No. 194209 and is a completely different legal issue from the
in the South, by Laguna de Bay in the East, and by the Manila de Bay in the West. The claim issue raised in this petition, involving a separate question of law, i.e., whether the court a
covers about 143,102,167 sq. m., more or less, comprising one-half of Metro Manila. ISIA's quo correctly issued the writ of mandamus to compel the Register of Deeds to register the
claim includes the subject parcel of land covered by TCT No. 38910-A, which ISIA seeks to subject property in ISIA's name and cancel TCT No. 38910-A, the title to the subject property
recover from herein parties resulting in all kinds of litigation between the opposing parties, in the Spouses Orfinada's name. The only commonality between G.R. No. 194209 and this
including this suit for mandamus before the court a quo.24Africa's belated claim of ownership petition is TCT No. 38910-A and the subject property itself.
via purchase cannot make her a proper party to this case and circumvent the requirements
for establishing ownership over the subject property. As a final caveat, our holding herein is only confined to Africa's preclusion from continuing to
litigate this appeal by certiorari. We do not rule on the correctness and propriety of the Decision
We can draw a parallel ruling from Tamondong v. Court of Appeals,25 where we specifically and Order of the RTC as such can only be questioned and assailed by the proper party.
ruled that the lack of authority of the representative from the real party-in-interest, results in the
complaint deemed as not filed. It does not make the representative as the actual plaintiff in the WHEREFORE, the petition is DENIED DUE COURSE, petitioner Alice Africa not being a
case. We held, thus: proper party to question the Regional Trial Court's Decision and Order dated 14 November 2012
and 26 March 2013, respectively, in SCA Case No. 12-0010.
If a complaint is filed for and in behalf of the plaintiff who is not authorized to do so, the
complaint is not deemed filed. An unauthorized complaint does not produce any legal effect. SO ORDERED.
Hence, the court should dismiss the complaint on the ground that it has no jurisdiction over the
complaint and the plaintiff. On the other hand, if a complaint is filed by an agent or plaintiff, Republic of the Philippines
for and in behalf of the principal, the plaintiff who is merely the agent is not the proper SUPREME COURT
party. The reason being that every action must be presented in the name of the real party- Manila
in-interest. The complaint may be dismissed on the ground that the plaintiff has no cause of
action against the defendants, conformably to Section l(g), Rule 16 of the 1997 Rules of Civil SECOND DIVISION
Procedure.26 (Emphasis supplied)
G.R. No. 186305 July 22, 2015

V-GENT, INC., Petitioner,


Moreover, it has not escaped our attention that while Africa claims to be a representative of the
vs.
Spouses Orfinada, armed with an SPA, she simultaneously claims filing and litigating this case
MORNING STAR TRAVEL and TOURS, INC., Respondent.
on her own. As we have already observed, Africa is using a shotgun approach to obliquely,
indirectly and collaterally, claim ownership over the subject property to ensure her continued DECISION
participation in this litigation.
BRION, J.:
Without meaning to point Africa to the appropriate remedies she should have taken or could
have availed of to protect and defend her claim over the subject property, 27 we mention the We resolve the petition for review on certiorari filed to challenge the November 11, 2008
following to accentuate the shortcomings of her present position: Decision and February 5, 2009 Resolution of the Court of Appeals (CA) in CA-G.R. SP No.
97032.1
1. With the deaths of the Spouses Orfmada, the subject property registered in their names
became part of their estate with the heirs, compulsory or otherwise, having inchoate right thereto ANTECEDENTS
where rights to the succession vests from the moment of death of the decedent. 28 Sometime in June and in September 1998, the petitioner V-Gent, Inc. (V-Gent) bought twenty-
six (26)2 two-way plane tickets (Manila-Europe-Manila) from the respondent Morning Star
2. As part of the decedents' estate, rights over property included therein is settled and litigated Travel and Tours, Inc. (Morning Star).
by the administrator or executor of the estate.29
On June 24, 1998 and September 28, 1998, V-Gent returned a total of fifteen (15) unused tickets
3. To establish her claim over the subject property and for the proper titling thereof, the Civil worth $8,747.50 to the defendant. Of the 15, Morning Star refunded only six (6) tickets worth
Code and the Property Registration Decree maps out the remedies of Africa. $3,445.62. Morning Star refused to refund the remaining nine (9) unused tickets despite repeated
demands.
Finally, despite the remand of G.R. No. 194209 to the Court of Appeals for hearing and
reception of evidence to finally adjudicate whose title over the subject property should be On December 15, 2000, petitioner V-Gent filed a money claim against Morning Star for
annulled, we cannot consolidate this petition filed in Africa's name with G.R. No. 194209, this payment of the unrefunded $5,301.88 plus attorney's fees. The complaint was raffled to Branch
petition being an offshoot of the mandamus case filed by ISIA against the Register of Deeds. 2 of the Metropolitan Trial Court (MeTC) of Manila and docketed as Civil Case No. 169296-
CV.
Morning Star countered that V-Gent was not entitled to a refund because the tickets were bought The MeTC dismissed V-Gent's complaint against Morning Star for failure to prove its claim.
on the airline company's "buy one, take one" promo. It alleged that there were only fourteen This dismissal meant that the plaintiff did not prove a violation of its right for which the
(14) unused tickets and only seven (7) of these were refundable; considering that it had already defendant should be held liable. This ruling was plainly a judgment in Morning Star's favor and
refunded six (6) tickets (which is more or less 50o/o of 14), then there was nothing else to refund. one that it had no cause to question. Indeed, it would be legally illogical for Morning Star to file
an appeal to question a ruling of dismissal in its favor.
Morning Star also questioned V-Gent's personality to file the suit. It asserted that the passengers,
in whose names the tickets were issued, are the real parties-in-interest. V-Gent also argues that it is a real party-in-interest with legal standing to institute the complaint
against Morning Star.1âwphi1 In the present petition, it states:
On January 27, 2006, after due proceedings, the MeTC dismissed the complaint for lack of a
cause of action. Citing Rule 3, Section 3 of the Rules of Court,3 the MeTC declared that, as 36. The Court of Appeals chose to ignore the fact that while the plane tickets bore the names of
agent of the passengers who paid for the tickets, V-Gent stood as the real party-in-interest. the individual passengers, the respondent admitted that it was the petitioner that transacted
Nevertheless, it still dismissed the complaint because V-Gent failed to prove its claim by a business with it concerning the purchase of these plane tickets. Both the purchase order and
preponderance of evidence. receipt of payments were under the name of the petitioner. Thus, since it was the petitioner who
purchased these plane tickets on behalf of the passengers, the respondent voluntarily refunded
V-Gent appealed to the Regional Trial Court (RTC) and the case was docketed as Civil Case to the former the value of six (6) unused return tickets in the total amount of US$3,445.62.
No. 06-115050.
Though, for reasons it did not reveal to petitioner, it refused to refund the rest. 4 (Emphasis
On September 25, 2006, the RTC granted the appeal after finding that V-Gent had established supplied.)
its claim by a preponderance of evidence. It set aside the MeTC's judgment and ordered Morning
Star to pay V-Gent the value of the nine (9) unrefunded tickets plus attorney's fees. Morning V-Gent admits that it purchased the plane tickets on behalf of the passengers as the latter's
Star filed a petition for review with the CA; the case was docketed as CA-G.R. SP No. 97032. agent.5 The tickets were issued in the name of the passengers and paid for with the passengers'
Morning Star questioned the RTC's appreciation of the evidence and factual conclusions. It also money. No dispute or conclusion in the lower courts' minds on this point; hence, both the
reiterated its question about V-Gent's legal standing, submitting once again that V-Gent is not MeTC6 and the CA7 commonly found that V-Gent acted as an agent of the passengers when it
the real party-in-interest. purchased the passengers' plane tickets.

On November 11, 2008, the CA granted the petition for review and dismissed V-Gent's However, while the MeTC held that V-Gent could sue as an agent acting in his own name on
complaint. The CA held that V-Gent is not a real party-in-interest because it merely acted as an behalf of an undisclosed principal, the CA held that it could not because the requirements for
agent of the passengers who bought the tickets from Morning Star with their own money. such a suit by the agent had not been satisfied.

V-Gent moved for reconsideration, which motion the CA denied on February 5, 2009, thus We agree with the Court of Appeals.
clearing the way for the present petition for review on certiorari.
Every action must be prosecuted or defended in the name of the real party-in-interest - the party
THE PETITION who stands to be benefited or injured by the judgment in the suit. 8 In suits where an agent
represents a party, the principal is the real party-in-interest; an agent cannot file a suit in his own
V-Gent argues that the CA erred in ruling that it is not the real party-in-interest. It asserts: (1) name on behalf of the principal.
that the issue of its legal standing to file the complaint has already become final because
Morning Star did not appeal the MeTC's ruling on the issue; (2) that it is a real party-in-interest Rule 3, Section 3 of the Rules of Court provides the exception when an agent may sue or be
in filing the complaint; and (3) that Morning Star is already estopped from questioning V-Gent's sued without joining the principal.
legal standing to file the complaint.
Section 3. Representatives as parties. - Where the action is allowed to be prosecuted and
In its Comment, Morning Star counters: (1) that it had no obligation to appeal the MeTC defended by a representative or someone acting in a fiduciary capacity, the beneficiary shall be
judgment dismissing the complaint in its favor; (2) that the MeTC did not specifically state that included in the title of the case and shall be deemed to be the real party-in-interest. A
V-Gent is the real party-in-interest; (3) that the real parties-in-interest are the passengers named representative may be a trustee of an express trust, a guardian, an executor or administrator, or
on the tickets; and (4) that it made no admissions that would estop it from denying the refund. a party authorized by law or these Rules. An agent acting in his own name and for the benefit
of an undisclosed principal may sue or be sued without joining the principal except when the
OUR RULING contract involves things belonging to the principal. (Emphasis supplied.)
V-Gent maintains that the MeTC determined that it was the real party-in-interest. It argues that Thus an agent may sue or be sued solely in its own name and without joining the principal when
since Morning Star did not appeal this specific finding with the RTC, then the MeTC's ruling the following elements concur: (1) the agent acted in his own name during the transaction; (2)
on this point had already become final and conclusive; therefore, Morning Star can no longer the agent acted for the benefit of an undisclosed principal; and (3) the transaction did not involve
revive the issue before the CA. the property of the principal.
We disagree with V -Gent. When these elements are present, the agent becomes bound as if the transaction were its own.
This rule is consistent with Article 1883 of the Civil Code which says:
Art. 1883. If an agent acts in his own name, the principal has no right of action against the JARDELEZA, J.:
persons with whom the agent has contracted; neither have such persons against the principal. In
such case, the agent is the one directly bound in favor of the person with whom he has contracted, In this petition, we emphasize that a partnership for the practice of law, constituted in accordance
as if the transaction were his own, except when the contract involves things belonging to the with the Civil Code provisions on partnership, acquires juridical personality by operation of law.
principal. Having a juridical personality distinct and separate from its partners, such partnership is the real
party-in-interest in a suit brought in connection with a contract entered into in its name and by
The provisions of this article shall be understood to be without prejudice to the actions between a person authorized to act on its behalf.
the principal and agent.
Petitioner Aniceto G. Saludo, Jr. (Saludo) filed this petition for review on certiorari1 assailing
In the present case, only the · first element is present; the purchase order and the receipt were in the February 8, 2010 Decision2 and August 2, 2010 Resolution3 issued by the Court of Appeals
the name of V-Gent. However, the remaining elements are absent because: (1) V-Gent disclosed (CA) in CA-G.R. SP No. 98898. The CA affirmed with modification the January 11, 2007
the names of the passengers to Morning Star - in fact the tickets were in their names; and (2) the Omnibus Order4 issued by Branch 58 of the Regional Trial Court (RTC) of Makati City in Civil
transaction was paid using the passengers' money. Therefore, Rule 3, Section 3 of the Rules of Case No. 06-678, and ruled that respondent Philippine National Bank's (PNB) counterclaims
Court cannot apply. against Saludo and the Saludo Agpalo Fernandez and Aquino Law Office (SAFA Law Office)
should be reinstated in its answer.
To define the actual factual situation, V-Gent, the agent, is suing to recover the money of its
principals - the passengers - who are the real parties-in-interest because they stand to be injured
Records show that on June 11, 1998, SAFA Law Office entered into a Contract of Lease 5 with
or benefited in case Morning Star refuses or agrees to grant the refund because the money
PNB, whereby the latter agreed to lease 632 square meters of the second floor of the PNB
belongs to them. From this perspective, V-Gent evidently does not have a legal standing to file
Financial Center Building in Quezon City for a period of three years and for a monthly rental
the complaint.
fee of P189,600.00. The rental fee is subject to a yearly escalation rate of 10%. 6 SAFA Law
Finally, V-Gent argues that by making a partial refund, Morning Star was already estopped from Office then occupied the leased premises and paid advance rental fees and security deposit in
refusing to make a full refund on the ground that V-Gent is not the real party-in-interest to the total amount of P1,137,600.00.7
demand reimbursement.9
On August 1, 2001, the Contract of Lease expired.8 According to PNB, SAFA Law Office
We find no merit in this argument. continued to occupy the leased premises until February 2005, but discontinued paying its
monthly rental obligations after December 2002.9 Consequently, PNB sent a demand
The power to collect and receive payments on behalf of the principal is an ordinary act of letter10 dated July 17, 2003 for SAFA Law Office to pay its outstanding unpaid rents in the
administration covered by the general powers of an agent.10 On the other hand, the filing of suits amount of P4,648,086.34. PNB sent another letter11demanding the payment of unpaid rents in
is an act of strict dominion. the amount of P5,856,803.53 which was received by SAFA Law Office on November 10, 2003.
Under Article 1878 (15) of the Civil Code, a duly appointed agent has no power to exercise any In a letter12 to PNB dated June 9, 2004, SAFA Law Office expressed its intention to negotiate.
act of strict dominion on behalf of the principal unless authorized by a special power of attorney. It claimed that it was enticed by the former management of PNB into renting the leased premises
An agent's authority to file suit cannot be inferred from his authority to collect or receive by promising to: (1) give it a special rate due to the large area of the place; (2) endorse PNB's
payments; the grant of special powers cannot be presumed from the grant of general powers. cases to the firm with rents to be paid out of attorney's fees; and (3) retain the firm as one of
Moreover, the authority to exercise special powers must be duly established by evidence, even PNB's external counsels. When new management took over, it allegedly agreed to uphold this
though it need not be in writing.11 agreement to facilitate rental payments. However, not a single case of significance was referred
By granting the initial refund, Morning Star recognized V-Gent's authority to buy the tickets to the firm. SAFA Law Office then asked PNB to review and discuss its billings, evaluate the
and collect refunds on behalf of the passengers. However, Morning Star's recognition of V- improvements in the area and agree on a compensatory sum to be applied to the unpaid rents,
Gent's authority to collect a refund for the passengers is not equivalent to recognition of V- make good its commitment to endorse or refer cases to SAFA Law Office under the intended
Gent's authority to initiate a suit on behalf of the passengers. Morning Star therefore, is not terms and conditions, and book the rental payments due as receivables payable every time
estopped from questioning V-Gent's legal standing to initiate the suit. attorney's fees are due from the bank on the cases it referred. The firm also asked PNB to give
a 50% discount on its unpaid rents, noting that while it was waiting for case referrals, it had paid
WHEREFORE, premises considered, we DENY the petition for lack of merit. a total amount of P13,457,622.56 from January 1999 to December 2002, which included the
accelerated rates of 10% per annum beginning August 1999 until July 2003.
SO ORDERED.
In February 2005, SAFA Law Office vacated the leased premises.13 PNB sent a demand
FIRST DIVISION letter14 dated July 7, 2005 requiring the firm to pay its rental arrears in the total amount of
P10,951,948.32. In response, SAFA Law Office sent a letter dated June 8, 2006, proposing a
G.R. No. 193138, August 20, 2018
settlement by providing a range of suggested computations of its outstanding rental obligations,
ANICETO G. SALUDO, JR., Petitioner, v. PHILIPPINE NATIONAL BANK, Respondent. with deductions for the value of improvements it introduced in the premises, professional fees
due from Macroasia Corporation, and the 50% discount allegedly promised by Dr. Lucio
DECISION Tan.15 PNB, however, declined the settlement proposal in a letter16 dated July 17, 2006, stating
that it was not amenable to the settlement's terms. Besides, PNB also claimed that it cannot WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Omnibus Order dated
assume the liabilities of Macroasia Corporation to SAFA Law Office as Macroasia Corporation 11 January 2007 and Order dated 8 March 2007, issued by respondent Court in Civil Case No.
has a personality distinct and separate from the bank. PNB then made a final demand for SAFA 06-678, respectively, are AFFIRMED with MODIFICATION in that petitioner's
Law Office to pay its outstanding rental obligations in the amount of P25,587,838.09. counterclaims should be reinstated in its Answer.

On September 1, 2006, Saludo, in his capacity as managing partner of SAFA Law Office, filed SO ORDERED.31
an amended complaint17 for accounting and/or recomputation of unpaid rentals and damages
against PNB in relation to the Contract of Lease. The CA ruled that an order granting Saludo's motion to dismiss counterclaim, being
interlocutory in nature, is not appealable until after judgment shall have been rendered on
On October 4, 2006, PNB filed a motion to include an indispensable party as plaintiff,18 praying Saludo's complaint. Since the Omnibus Order is interlocutory, and there was an allegation of
that Saludo be ordered to amend anew his complaint to include SAFA Law Office as principal grave abuse of discretion, a petition for certiorari is the proper remedy.32
plaintiff. PNB argued that the lessee in the Contract of Lease is not Saludo but SAFA Law
Office, and that Saludo merely signed the Contract of Lease as the managing partner of the law On the merits, the CA held that Saludo is estopped from claiming that SAFA Law Office is his
firm. Thus, SAFA Law Office must be joined as a plaintiff in the complaint because it is single proprietorship. Under the doctrine of estoppel, an admission or representation is rendered
considered an indispensable party under Section 7, Rule 3 of the Rules of Court. 19 conclusive upon the person making it, and cannot be denied or disproved as against the person
relying thereon. Here, SAFA Law Office was the one that entered into the lease contract and not
On October 13, 2006, PNB filed its answer.20 By way of compulsory counterclaim, it sought Saludo. In fact, the latter signed the contract as the firm's managing partner. The alleged
payment from SAFA Law Office in the sum of P25,587,838.09, representing overdue Memorandum of Understanding33 (MOU) executed by the partners of SAFA Law Office, .which
rentals.21 PNB argued that as a matter of right and equity, it can claim that amount from SAFA states, among others, that Saludo alone would be liable for the firm's losses and liabilities, and
Law Office in solidum with Saludo.22 the letter of Saludo to PNB confirming that SAFA Law Office is his single proprietorship did
not convert the firm to a single proprietorship. Moreover, SAFA Law Office sent a letter to PNB
On October 23, 2006, Saludo filed his motion to dismiss counterclaims, 23 mainly arguing that regarding its unpaid rentals which Saludo signed as a managing partner. The firm is also
SAFA Law Office is neither a legal entity nor party litigant. As it is only a relationship or registered as a partnership with the Securities and Exchange Commission (SEC). 34
association of lawyers in the practice of law and a single proprietorship which may only be sued
through its owner or proprietor, no valid counterclaims may be asserted against it. 24 On the question of whether SAFA Law Office is an indispensable party, the CA held that it is
not. As a partnership, it may sue or be sued in its name or by its duly authorized representative.
On January 11, 2007, the RTC issued an Omnibus Order denying PNB's motion to include an Saludo, as managing partner, may execute all acts of administration, including the right to sue.
indispensable party as plaintiff and granting Saludo's motion to dismiss counterclaims in this Furthermore, the CA found that SAFA Law Office is not a legal entity. A partnership for the
wise: practice of law is not a legal entity but a mere relationship or association for a particular purpose.
Thus, SAFA Law Office cannot file an action in court. Based on these premises, the CA held
The Court DENIES the motion of PNB to include the SAFA Law Offices. Plaintiff has shown that the RTC did not gravely abuse its discretion in denying PNB's motion to include an
by documents attached to his pleadings that indeed SAFA Law Offices is a mere single indispensable party as plaintiff.35
proprietorship and not a commercial and business partnership. More importantly, plaintiff has
admitted and shown sole responsibility in the affairs entered into by the SAFA Law Office. PNB Nonetheless, the CA ruled that PNB's counterclaims against SAFA Law Office should not be
has even admitted that the SAFA Law Office, being a partnership in the practice of law, is a dismissed. While SAFA Law Office is not a legal entity, it can still be sued under Section
non-legal entity. Being a non-legal entity, it cannot be a proper party, and therefore, it cannot 15,36 Rule 3 of the Rules of Court considering that it entered into the Contract of Lease with
sue or be sued. PNB.37

Consequently, plaintiff's Motion to Dismiss Counterclaims (claimed by defendant PNB) The CA further ruled that while it is true that SAFA Law Office's liability is not in solidum with
should be GRANTED. The counterclaims prayed for to the effect that the SAFA Law Offices Saludo as PNB asserts, it does not necessarily follow that both of them cannot be made parties
be made to pay in solidum with plaintiff the amounts stated in defendant's Answer is disallowed to PNB's counterclaims. Neither should the counterclaims be dismissed on the ground that the
since no counterclaims can be raised against a non-legal entity.25 nature of the alleged liability is solidary. According to the CA, the presence ofSAFA Law Office
is required for the granting of complete relief in the determination of PNB's counterclaim. The
PNB filed its motion for reconsideration26 dated February 5, 2007, alleging that SAFA Law court must, therefore, order it to be brought in as defendant since jurisdiction over it can be
Office should be included as a co-plaintiff because it is the principal party to the contract of obtained pursuant to Section 12,38 Rule 6 of the Rules of Court.39
lease, the one that occupied the leased premises, and paid the monthly rentals and security
deposit. In other words, it was the main actor and direct beneficiary of the contract. Hence, it is Finally, the CA emphasized that PNB's counterclaims are compulsory, as they arose from the
the real party-in-interest.27 The RTC, however, denied the motion for reconsideration in an filing of Saludo's complaint. It cannot be made subject of a separate action but should be asserted
Order28 dated March 8, 2007. in the same suit involving the same transaction. Thus, the Presiding Judge of the RTC gravely
abused his discretion in dismissing PNB's counterclaims as the latter may forever be barred from
Consequently, PNB filed a petition for certiorari29 with the CA. On February 8, 2010, the CA collecting overdue rental fees if its counterclaims were not allowed. 40
rendered its assailed Decision,30 the dispositive portion of which reads:
Saludo and PNB filed their respective motions for partial reconsideration dated February 25,
201041 and February 26, 2010.42 In a Resolution dated August 2, 2010, the CA denied both Contrary to Saludo's submission, SAFA Law Office is a partnership and not a single
motions on the ground that no new or substantial matters had been raised therein. Nonetheless, proprietorship.
the CA addressed the issue on the joining of SAFA Law Office as a defendant in PNB's
compulsory counterclaim. Pertinent portions of the CA Resolution read: Article 1767 of the Civil Code provides that by a contract of partnership, two or more persons
bind themselves to contribute money, property, or industry to a common fund, with the intention
The Private Respondent claims that a compulsory counterclaim is one directed against an of dividing the profits among themselves. Two or more persons may also form a partnership for
opposing party. The SAFA Law Office is not a party to the case below and to require it to be the exercise of a profession. Under Article 1771, a partnership may be constituted in any form,
brought in as a defendant to the compulsory counterclaim would entail making it a co-plaintiff. except where immovable property or real rights are contributed thereto, in which case a public
Otherwise, the compulsory counterclaim would be changed into a third-party complaint. The instrument shall be necessary. Article 1784, on the other hand, provides that a partnership begins
Private Respondent also argues that Section 15, Rule 3 of the Rules of Court (on entities without from the moment of the execution of the contract, unless it is otherwise stipulated.
juridical personality) is only applicable to initiatory pleadings and not to compulsory
counterclaims. Lastly, it is claimed that since the alleged obligations of the SAFA Law Office Here, absent evidence of an earlier agreement, SAFA Law Office was constituted as a
is solidary with the Private Respondent, there is no need to make the former a defendant to the partnership at the time its partners signed the Articles of Partnership 45 wherein they bound
counterclaim. themselves to establish a partnership for the practice of law, contribute capital and industry for
the purpose, and receive compensation and benefits in the course of its operation. The opening
We disagree with the reasoning of the Private Respondent. That a compulsory counterclaim can paragraph of the Articles of Partnership reveals the unequivocal intention of its signatories to
only be brought against an opposing party is belied by considering one of the requisites of a form a partnership, to wit:
compulsory counterclaim it does not require for its adjudication the presence of third parties of
whom the court cannot acquire jurisdiction. This shows that non-parties to a suit may be brought WE, the undersigned ANICETO G. SALUDO, JR., RUBEN E. AGPALO, FILEMON L.
in as defendants to such a counterclaim. x x x FERNANDEZ, AND AMADO D. AQUINO, all of legal age, Filipino citizens and members of
the Philippine Bar, have this day voluntarily associated ourselves for the purpose of forming a
xxxx partnership engaged in the practice of law, effective this date, under the terms and conditions
hereafter set forth, and subject to the provisions of existing laws[.] 46
In the case at bench, the trial court below can acquire jurisdiction over the SAFA Law Office The subsequent registration of the Articles of Partnership with the SEC, on the other hand, was
considering the amount and the nature of the counterclaim. Furthermore, the inclusion of the made in compliance with Article 1772 of the Civil Code, since the initial capital of the
SAFA Law Office as a defendant to the counterclaim will enable the granting of complete relief partnership was P500,000.00.47 Said provision states:
in view [of] the liability of a partner to the partnership's creditors under the law.43
Art. 1772. Every contract of partnership having a capital ofThree thousand pesos or more, in
Hence, this petition, where Saludo raises the following issues for our resolution: money or property, shall appear in a public instrument, which must be recorded in the Office of
the Securities and Exchange Commission.
(1)
xxxx
Whether the CA erred in including SAFA Law Office as defendant to PNB's counterclaim
despite its holding that SAFA Law Office is neither an indispensable party nor a legal entity; The other provisions of the Articles of Partnership also positively identify SAFA Law Office as
a partnership. It constantly used the words "partners" and "partnership." It designated petitioner
(2)
Saludo as managing partner,48 and Attys. Ruben E. Agpalo, Filemon L. Fernandez, and Amado
Whether the CA went beyond the issues in the petition for certiorari and prematurely dealt with D. Aquino as industrial partners.49 It also provided for the term of the partnership,50 distribution
the merits of PNB's counterclaim; and of net profits and losses, and management of the firm in which "the partners shall have equal
interest in the conduct of [its] affairs."51 Moreover, it provided for the cause and manner of
(3) dissolution of the partnership.52 These provisions would not have been necessary if what had
been established was a sole proprietorship. Indeed, it may only be concluded from the
Whether the CA erred when it gave due course to PNB's petition for certiorari to annul and set circumstances that, for all intents and purposes, SAFA Law Office is a partnership created and
aside the RTC's Omnibus Order dated January 11, 2007.44 organized in accordance with the Civil Code provisions on partnership.
The petition is bereft of merit. Saludo asserts that SAFA Law Office is a sole proprietorship on the basis of the MOU executed
by the partners of the firm. The MOU states in full:53
We hold that SAFA Law Office is a juridical entity and the real party-in-interest in the suit filed
with the RTC by Saludo against PNB. Hence, it should be joined as plaintiff in that case. MEMORANDUM OF UNDERSTANDING
I.
WHEREAS, the undersigned executed and filed with the SEC the Articles of Incorporation of
SALUDO, AGPALO, FERNANDEZ and AQUINO on March 13, 1997; [Sgd.]

WHEREAS, among the provisions of said Articles of Incorporation are the following: [Sgd.]

[Sgd.]
1. That partners R. E. Agpalo, F. L. Fernandez and A. D. Aquino shall be industrial partners,
and they shall not contribute capital to the partnership and shall not in any way be liable for RUBEN E. AGPALO
any loss or liability that may be incurred by the law firm in the course of its operation.
FILEMON L. FERNANDEZ
2. That the partnership shall be dissolved by agreement of the partners or for any cause as and
in accordance with the manner provided by law, in which event the Articles of Dissolution of AMADO D. AQUINO
said partnership shall be filed with the Securities and Exchange Commission. All remaining
assets upon dissolution shall accrue exclusively to A. G. Saludo, Jr. and all liabilities shall be The foregoing evinces the parties' intention to entirely shift any liability that may be incurred
solely for his account. by SAFA Law Office in the course of its operation to Saludo, who shall also receive all the
remaining assets of the firm upon its dissolution. This MOU, however, does not serve to convert
WHEREAS, the SEC has not approved the registration of the Articles of Incorporation and its SAFA Law Office into a sole proprietorship. As discussed, SAFA Law Office was manifestly
Examiner required that the phrase "shall not in any way be liable for any loss or liability that established as a partnership based on the Articles of Partnership. The MOU, from its tenor,
may be incurred by the law firm in the course of its operation" in Article VII be deleted; reinforces this fact. It did not change the nature of the organization of SAFA Law Office but
only excused the industrial partners from liability.
WHEREAS, the SEC Examiner likewise required that the sentence "All remaining assets upon
dissolution shall accrue exclusively to A. G. Saludo, Jr. and all liabilities shall be solely for his The law, in its wisdom, recognized the possibility that partners in a partnership may decide to
account" in Article X be likewise deleted; place a limit on their individual accountability. Consequently, to protect third persons dealing
with the partnership, the law provides a rule, embodied in Article 1816 of the Civil Code, which
WHEREAS, in order to meet the objections of said Examiner, the objectionable provisions have states:
been deleted and new Articles of Incorporation deleting said objectionable provisions have been Art. 1816. All partners, including industrial ones, shall be liable pro rata with all their property
executed by the parties and filed with the SEC. and after all the partnership assets have been exhausted, for the contract which may be entered
into in the name and for the account of the partnership, under its signature and by a person
NOW, THEREFORE, for and in consideration of the premises and the mutual covenant of the authorized to act for the partnership. However, any partner may enter into a separate obligation
parties, the parties hereby agree as follows: to perform a partnership contract.
1. Notwithstanding the deletion of the portions objected to by the said Examiner, by reason of The foregoing provision does not prevent partners from agreeing to limit their liability, but such
which entirely new Articles of Incorporation have been executed by the parties removing the agreement may only be valid as among them. Thus, Article 1817 of the Civil Code provides:
objected portions, the actual and real intent of the parties is still as originally envisioned,
namely: Art. 1817. Any stipulation against the liability laid down in the preceding article shall be void,
except as among the partners.
a) That partners R. E. Agpalo, F. L. Fernandez and A. D. Aquino shall not in any way be liable
for any loss or liability that may be incurred by the law firm in the course of its operation; The MOU is an agreement forged under the foregoing provision. Consequently, the sole liability
being undertaken by Saludo serves to bind only the parties to the MOU, but never third persons
like PNB.
b) That all remaining assets upon dissolution shall accrue exclusively to A. G. Saludo, Jr. and Considering that the MOU is sanctioned by the law on partnership, it cannot change the nature
all liabilities shall be solely for his account. of a duly-constituted partnership. Hence, we cannot sustain Saludo's position that SAFA Law
Office is a sole proprietorship.
2. That the parties hereof hereby bind and obligate themselves to adhere and observe the real II.
intent of the parties as above-stated, any provisions in the Articles of Incorporation as filed to
meet the objections of the SEC Examiner to the contrary notwithstanding.
Having settled that SAFA Law Office is a partnership, we hold that it acquired juridical
IN WITNESS WHEREOF, we have set our hands this _____ day of May, 1997 at Makati City, personality by operation of law. The perfection and validity of a contract of partnership brings
Philippines. about the creation of a juridical person separate and distinct from the individuals comprising the
partnership. Thus, Article 1768 of the Civil Code provides:
[Sgd.]

A.G. SALUDO, JR.


Art. 1768. The partnership has a juridical personality separate and distinct from that of each of of holding property."60 These are direct quotes from the US case of In re Crawford's
the partners, even in case of failure to comply with the requirements of Article 1772, first Estate.61 We hold, however, that our reference to this US case is an obiter dictum which cannot
paragraph. serve as a binding precedent.62

Article 44 of the Civil Code likewise provides that partnerships are juridical persons, to wit: An obiter dictum is an opinion of the court upon a question which was not necessary to the
decision of the case before it. It is an opinion uttered by the way, not upon the point or question
Art. 44. The following are juridical persons:
pending, as if turning aside from the main topic of the case to collateral subjects, or an opinion
(1) that does not embody the court's determination and is made without argument or full
consideration of the point. It is not a professed deliberate determination of the judge himself.63
The State and its political subdivisions;
The main issue raised for the court's determination in the Sycip case is whether the two petitioner
(2) law firms may continue using the names of their deceased partners in their respective firm
names. The court decided the issue in the negative on the basis of "legal and ethical
Other corporations, institutions and entities for public interest or purpose, created by law; their impediments."64 To be sure, the pronouncement that a partnership for the practice of law is not
personality begins as soon as they have been constituted according to law; a legal entity does not bear on either the legal or ethical obstacle for the continued use of a
(3) deceased partner's name, inasmuch as it merely describes the nature of a law firm. The
pronouncement is not determinative of the main issue. As a matter of fact, if deleted from the
Corporations, partnerships and associations for private interest or purpose to which the law judgment, the rationale of the decision is neither affected nor altered.
grants a juridical personality, separate and distinct from that of each shareholder, partner or
member.54 Moreover, reference of the Sycip case to the In re Crawford's Estate case was made without a
full consideration of the nature of a law firm as a partnership possessed with legal personality
It is this juridical personality that allows a partnership to enter into business transactions to fulfill under our Civil Code. First, we note that while the Court mentioned that a partnership for the
its purposes. Article 46 of the Civil Code provides that "[j]uridical persons may acquire and practice of law is not a legal entity, it also identified petitioner law firms as partnerships over
possess property of all kinds, as well as incur obligations and bring civil or criminal actions, in whom Civil Code provisions on partnership apply.65 The Court thus cannot hold that a
conformity with the laws and regulations of their organization." partnership for the practice of law is not a legal entity without running into conflict with Articles
44 and 1768 of the Civil Code which provide that a partnership has a juridical personality
SAFA Law Office entered into a contract of lease with PNB as a juridical person to pursue the separate and distinct from that of each of the partners.
objectives of the partnership. The terms of the contract and the manner in which the parties
implemented it are a glaring recognition of SAFA Law Office's juridical personality. Thus, the Second, our law on partnership does not exclude partnerships for the practice of law from its
contract stated that it is being executed by PNB as the lessor and "SALUDO AGPALO coverage. Article 1767 of the Civil Code provides that "[t]wo or more persons may also form a
FERNANDEZ & AQUINO, a partnership organized and existing under the laws of the partnership for the exercise of a profession." Article 1783, on the other hand, states that "[a]
Republic of the Philippines," as the lessee.55 It also provided that the lessee, i.e., SAFA Law particular partnership has for its object determinate things, their use or fruits, or a specific
Office, shall be liable in case of default.56 undertaking, or the exercise of a profession or vocation." Since the law uses the word
"profession" in the general sense, and does not distinguish which professional partnerships are
Furthermore, subsequent communications between the parties have always been made for or on covered by its provisions and which are not, then no valid distinction may be made.
behalf ofPNB and SAFA Law Office, respectively.57
Finally, we stress that unlike Philippine law, American law does not treat of partnerships as
In view of the above, we see nothing to support the position of the RTC and the CA, as well as forming a separate juridical personality for all purposes. In the case of Bellis v. United
Saludo, that SAFA Law Office is not a partnership and a legal entity. Saludo's claims that SAFA States,66 the US Supreme Court stated that law firms, as a form of partnership, are generally
Law Office is his sole proprietorship and not a legal entity fail in light of the clear provisions of regarded as distinct entities for specific purposes, such as employment, capacity to be sued,
the law on partnership. To reiterate, SAFA Law Office was created as a partnership, and as such, capacity to hold title to property, and more.67 State and federal laws, however, do not treat
acquired juridical personality by operation of law. Hence, its rights and obligations, as well as partnerships as distinct entities for all purposes.68
those of its partners, are determined by law and not by what the partners purport them to be.
Our jurisprudence has long recognized that American common law does not treat of partnerships
III. as a separate juridical entity unlike Philippine law. Hence, in the case of Campos Rueda & Co.
v. Pacific Commercial Co.,69 which was decided under the old Civil Code, we held:
In holding that SAFA Law Office, a partnership for the practice of law, is not a legal entity, the Unlike the common law, the Philippine statutes consider a limited partnership as a juridical
CA cited58the case of Petition for Authority to Continue Use of the Firm Name "Sycip, Salazar, entity for all intents and purposes, which personality is recognized in all its acts and contracts
Feliciano, Hernandez & Castillo"59 (Sycip case) wherein the Court held that "[a] partnership for (art. 116, Code of Commerce). This being so and the juridical personality of a limited
the practice of law is not a legal entity. It is a mere relationship or association for a particular partnership being different from that of its members, it must, on general principle, answer for,
purpose. x x x It is not a partnership formed for the purpose of carrying on trade or business or
and suffer, the consequence of its acts as such an entity capable of being the subject of rights In Aguila, Jr. v. Court of Appeals,77 a case for declaration of nullity of a deed of sale was filed
and obligations.70 x x x against a partner of A.C. Aguila & Sons, Co. We dismissed the complaint and held that it was
the partnership, not its partners, which should be impleaded for a cause of action against the
On the other hand, in the case of Commissioner of Internal Revenue v. Suter.71 which was partnership itself. Moreover, the partners could not be held liable for the obligations of the
decided under the new Civil Code, we held: partnership unless it was shown that the legal fiction of a different juridical personality was
being used for fraudulent, unfair, or illegal purposes. We held:
It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical
personality of its own, distinct and separate from that of its partners (unlike American and Rule 3, §2 of the Rules of Court of 1964, under which the complaint in this case was filed,
English law that does not recognize such separate juridical personality), the bypassing of the provided that "every action must be prosecuted and defended in the name of the real party in
existence of the limited partnership as a taxpayer can only be done by ignoring or disregarding interest." A real party in interest is one who would be benefited or injured by the judgment, or
clear statutory mandates and basic principles of our law.72 x x x who is entitled to the avails of the suit. This ruling is now embodied in Rule 3, §2 of the 1997
Revised Rules of Civil Procedure. Any decision rendered against a person who is not a real party
Indeed, under the old and new Civil Codes, Philippine law has consistently treated partnerships
in interest in the case cannot be executed. Hence, a complaint filed against such a person should
as having a juridical personality separate from its partners. In view of the clear provisions of the
be dismissed for failure to state a cause of action.
law on partnership, as enriched by jurisprudence, we hold that our reference to In re Crawford's
Estate in the Sycip case is an obiter dictum.
Under Art. 1768 of the Civil Code, a partnership "has a juridical personality separate and distinct
IV. from that of each of the partners." The partners cannot be held liable for the obligations of the
partnership unless it is shown that the legal fiction of a different juridical personality is being
used for fraudulent, unfair, or illegal purposes. In this case, private respondent has not shown
Having settled that SAFA Law Office is a juridical person, we hold that it is also the real party- that A.C. Aguila & Sons, Co., as a separate juridical entity, is being used for fraudulent, unfair,
in-interest in the case filed by Saludo against PNB. or illegal purposes. Moreover, the title to the subject property is in the name of A.C. Aguila &
Sons, Co. and the Memorandum of Agreement was executed between private respondent, with
Section 2, Rule 3 of the Rules of Court defines a real party-in-interest as the one "who stands to the consent of her late husband, and A.C. Aguila & Sons, Co., represented by petitioner. Hence,
be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit." it is the partnership, not its officers or agents, which should be impleaded in any litigation
In Lee v. Romillo, Jr.,73 we held that the "real [party-in-interest]-plaintiffis one who has a legal involving property registered in its name. A violation of this rule will result in the dismissal of
right[,] while a real[party-in-interest]-defendant is one who has a correlative legal obligation the complaint.78
whose act or omission violates the legal rights of the former."74
In this case, there is likewise no showing that SAFA Law Office, as a separate juridical entity,
SAFA Law Office is the party that would be benefited or injured by the judgment in the suit is being used for fraudulent, unfair, or illegal purposes. Hence, its partners cannot be held
before the RTC. Particularly, it is the party interested in the accounting and/or recomputation of primarily liable for the obligations of the partnership. As it was SAFA Law Office that entered
unpaid rentals and damages in relation to the contract of lease. It is also the party that would be into a contract of lease with respondent PNB, it should also be impleaded in any litigation
liable for payment to PNB of overdue rentals, if that claim would be proven. This is because it concerning that contract.
is the one that entered into the contract of lease with PNB. As an entity possessed of a juridical
personality, it has concomitant rights and obligations with respect to the transactions it enters Accordingly, the complaint filed by Saludo should be amended to include SAFA Law Office as
into. Equally important, the general rule under Article 1816 of the Civil Code is that partnership plaintiff. Section 11,79 Rule 3 of the Rules of Court gives power to the court to add a party to
assets are primarily liable for the contracts entered into in the name of the partnership and by a the case on its own initiative at any stage of the action and on such tenns as are just. We have
person authorized to act on its behalf. All partners, including industrial ones, are only liable pro also held in several cases80that the court has full powers, apart from that power and authority
rata with all their property after all the partnership assets have been exhausted. which are inherent, to amend processes, pleadings, proceedings, and decisions by substituting
as party-plaintiff the real party-in-interest.
In Guy v. Gacott,75 we held that under Article 1816 of the Civil Code, the partners' obligation
with respect to the partnership liabilities is subsidiary in nature. It is merely secondary and only In view of the above discussion, we find it unnecessary to discuss the other issues raised in the
arises if the one primarily liable fails to sufficiently satisfy the obligation. Resort to the petition. It is unfortunate that the case has dragged on for more than 10 years even if it involves
properties of a partner may be made only after efforts in exhausting partnership assets have an issue that may be resolved by a simple application of Civil Code provisions on partnership.
failed or if such partnership assets are insufficient to cover the entire obligation.76 Consequently, It is time for trial to proceed so that the parties' substantial rights may be adjudicated without
considering that SAFA Law Office is primarily liable under the contract of lease, it is the real further unnecessary delay.
party-in-interest that should be joined as plaintiff in the RTC case.
WHEREFORE, the petition is DENIED. Petitioner is hereby ordered to amend his complaint
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted or defended to include SAFA Law Office as plaintiff in Civil Case No. 06-678 pending before Branch 58 of
in the name of the real party-in-interest. As the one primarily affected by the outcome of the the Regional Trial Court of Makati City, it being the real party-in-interest.
suit, SAFA Law Office should have filed the complaint with the RTC and should be made to
respond to any counterclaims that may be brought in the course of the proceeding. SO ORDERED.
VI. Rule 3, Sections 4-6: Parties to a Civil Action Meanwhile, respondents filed a Motion to Admit Amended Complaint17 with attached Amended
Verified Complaint18 for annulment of foreclosure of mortgage, declaration of nullity of
FIRST DIVISION certificate of sale, and injunction.
G.R. No. 191170, September 14, 2016
On 17 October 2007, petitioner filed a Motion for Joinder of Party and/or Substitution. 19 It
CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC., Petitioner, v. FIDEL O. alleged that by virtue of a Deed of Absolute Sale dated 17 September 2003, 20 Metrobank sold
CHUA AND FILIDEN REALTY AND DEVELOPMENT CORP., Respondent. to Asia Recovery Corporation (ARC) its credit against respondents including all rights, interests,
claims and causes of action arising out of the loan and mortgage agreements between Metrobank
DECISION and respondents. ARC, in turn, specifically assigned the credit to petitioner through a Deed of
Assignment dated 31 March 2006.21Petitioner prayed that it be substituted in lieu of Metrobank
SERENO, C.J.: in the proceedings before RTC Branch 258.
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to nullify Aside from its conforme to the motion filed by petitioner, Metrobank also filed a
the Court of Appeals (CA) Decision1 and Resolution2 in CA-G.R. SP No. 103809. The CA Comment22 stating that the bank had no objection to its substitution by petitioner. Metrobank
Decision annulled the Orders3 of the Regional Trial Court of Parañaque City, Branch 258 (RTC explained that the account of respondents had been declared a nonperforming loan pursuant to
Branch 258), which joined petitioner as party-defendant in Civil Case No. 01-0207. The CA Republic Act No. 9182 (Special Purpose Vehicle Act of 2002 or SPV Act) and, as such, had
Resolution denied petitioner's motion for reconsideration. been included among the other accounts sold to ARC by virtue of the Deed of Absolute
FACTS Sale.23chanrobleslaw

The motion of petitioner was, however, vigorously opposed by respondents.24 They alleged that
In 1988, respondents obtained an initial loan of P4 million from the Metropolitan Bank and they were entitled to a full disclosure of the details of the sale, as well as of the transfer and
Trust Co. (Metrobank). The loan was secured by a real estate mortgage constituted over three assignment of their debt pursuant to their right of redemption under the SPV Act and Article
parcels of land located in Parañaque City (subject property).4 The real estate mortgage was 163425cralawred of the Civil Code.
amended several times to accommodate additional loans they incurred over the years. 5 On 13
January 2000, respondents and Metrobank restructured the obligation through a Debt Settlement RULING OF THE RTC
Agreement over the outstanding obligation of P88,101,093.98. 6chanrobleslaw
In an Order dated 28 December 2007,26 RTC Branch 258 granted the motion and ordered
For failure of respondents to pay, Metrobank sought the extrajudicial foreclosure of the real petitioner to be joined as party-defendant, but without dropping Metrobank as defendant.
estate mortgage over the subject property. On 4 May 2001, it sent them a Notice of Sale7 setting
the public auction on 31 May 2001. Seeking to stop the intended public auction, respondents In the Order dated 9 April 2008,27 RTC Branch 258 denied respondents' motion for
filed a Complaint8docketed as Civil Case No. 01-0207 for injunction with prayer for the issuance reconsideration. It ruled that petitioner was a necessary party to the final determination of the
of a temporary restraining order (TRO), preliminary injunction and damages. case.
The Regional Trial Court of Parañaque City, Branch 257 (RTC Branch 257), issued a Aggrieved, petitioners filed a special civil action for certiorari under Rule 65 of the Rules of
TRO.9 However, upon the expiration of the TRO, Metrobank scheduled another public auction Court before the CA.
on 8 November 2001. On the morning of that day, RTC Branch 257 issued an Order directing
Metrobank to reschedule the intended sale to a date after the resolution of the application for RULING OF THE CA
preliminary injunction.10 However, the latter allegedly received the Order only on 12 November
2001 and pushed through with the scheduled public auction on 8 November 2001. A Certificate
of Sale11 was thereafter issued in its favor on 9 November 2001. In the assailed Decision dated 26 August 2009,28 the CA granted the petition and annulled the
Orders of RTC Branch 258.
In an Order dated 6 March 2002,12 the application for preliminary injunction filed by
respondents was denied by RTC Branch 257 for mootness in view of the consummated public The CA ruled that if it was true that Metrobank had divested itself of any interest in respondents'
auction sale. When their motion for reconsideration was denied, 13 respondents filed a petition debt, then the trial court should have forthwith ordered the bank's exclusion from the
for certiorari before the CA. The appellate court reversed and set aside the Order dated 6 March proceedings.29 According to the CA, the trial court provided for a provisional
2002 issued by RTC Branch 257 and remanded Civil Case No. 01-0207 for further joinder/substitution of parties - a practice that cannot be countenanced due to the basic rule that
proceedings.14chanrobleslaw every action must be prosecuted or defended in the name of the real party in
interest.30chanrobleslaw
Upon motion of respondents, the presiding judge of RTC Branch 257 inhibited from further
hearing the case.15 The case was later re-raffled to RTC Branch 258.16chanrobleslaw The appellate court also doubted whether substitution was proper, because the Deed of Absolute
Sale between Metrobank and ARC did not specify whether respondents' debt was included in
the portfolio of nonperforming loans sold.31chanrobleslaw
At bottom, the CA ruled that petitioner could not substitute for Metrobank in the proceedings Nevertheless, "[w]hether or not the transferee should be substituted for, or should be joined with,
before the trial court without first disclosing the consideration paid by petitioner for the transfer the original party is largely a matter of discretion."42 That discretion is exercised in pursuance
of interest.32chanrobleslaw of the paramount consideration that must be afforded for the protection of the parties' interests
and right to due process.43chanrobleslaw
Petitioner filed a motion for reconsideration, which the CA denied in the challenged Resolution
dated 11 February 2010.33chanrobleslaw Notably, unless the exercise of that discretion is shown to be arbitrary, this Court is not inclined
to review acts committed by the courts a quo.44chanrobleslaw
ISSUE
In this case, part of the reason why the CA ascribed grave abuse of discretion to the trial court
was the latter's statement in the Order dated 28 December 2007 as
The issue to be resolved in this case is simple: whether petitioner may be joined as party-
follows:ChanRoblesVirtualawlibrary
defendant in Civil Case No. 01-0207.
Thus, the Court hereby grants that [petitioner] be joined as party defendant in this case without
OUR RULING
dropping Metrobank at this stage conditioned, however, that if in the course of the trial, the
Court finds that based on the testimonial and documentary evidence to be presented by
We grant the petition. Metrobank that it can be dropped, the same shall be effected pursuant to Section 11, Rule 3 of
the 1997 Rules of Civil Procedure.45chanroblesvirtuallawlibrary
As stated at the outset, the instant petition seeks a Rule 45 review of a Rule 65 decision of the
According to the CA, this statement allowed for a "provisional" joinder/substitution of parties.
CA. We stated in Montoya v. Transmed Manila Corp.34 that our task in these cases is not to
It is difficult to fathom how the above statement of the trial court could have constituted grave
determine the correctness of the ruling of the trial court, but to examine whether the CA correctly
abuse of discretion when the ruling was in accordance with Section 11, Rule 3 of the Rules of
determined the existence of grave abuse of discretion in the Orders of RTC Branch 258 allowing
Court. The rule provides that parties may be dropped or added by order of the court on motion
the joinder of petitioner in Civil Case No. 01-0207.
of any party or on the court's own initiative at any stage of the action and on such terms as are
just. For the CA to say that, as between Metrobank and petitioner, "only one of them is clothed
Section 6, Rule 3 of the Rules of Court, provides the rule on the joinder of
with the personality to actively participate in the proceedings below"46 is to show a regrettable
parties:ChanRoblesVirtualawlibrary
lack of understanding of the rules and an unwarranted restriction of the trial court's discretion.
Section 6. Permissive joinder of parties. — All persons in whom or against whom any right to
relief in respect to or arising out of the same transaction or series of transactions is alleged to Contrary to the finding of the CA, there is enough evidence in the records to support the fact of
exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these the transfer of interest between Metrobank and petitioner. The CA highlights only that it was
Rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law not clear whether respondents' debt was included in the portfolio of nonperforming loans sold
or fact common to all such plaintiffs or to all such defendants may arise in the action; but the to ARC. The appellate court then turned a blind eye to the representations of Metrobank before
court may make such orders as may be just to prevent any plaintiff or defendant from being the trial court confirming the fact of the transfer of interest to ARC and then later to petitioner.
embarrassed or put to expense in connection with any proceedings in which he may have no The admission by Metrobank sufficiently supplied whatever was omitted by the non-
interest. presentation of the entire portfolio of nonperforming loans. The non-presentation may be
understandable in view of the sensitive nature of the portfolio and its contents. At any rate, the
The rationale for allowing parties to join in a proceeding that delves on a common question of Deed of Assignment clearly spelled out that all of the rights, title, and interest over respondents'
law or fact concerning them is trial convenience; i.e., to save the parties unnecessary work, loan, which had an outstanding principal balance of P88,101,093.98, had been transferred by
trouble and expense.35In order to meet the requirements of justice and convenience, the rule on ARC to petitioner.
the joinder of parties is construed with considerable flexibility.36 Hence, courts are given broad
discretion in determining who may properly be joined in a proceeding. 37chanrobleslaw We observe that the CA effectively ruled that the disclosure of the consideration for the transfer
of rights was a condition precedent for the joinder of petitioner in the proceedings.
The rules also provide that in case of a transfer of interest, the court, upon motion, may direct
the person to whom the interest is transferred to be substituted in the action or joined with the In order not to preempt judgment or make a pronouncement as to any matter other than the
original party.38chanrobleslaw pertinent issue before it, this Court will simply remind the CA and the parties that a disclosure
of the consideration for the transfer of interest is not among the following requirements for a
Indeed, a transferee pendente lite is a proper party that stands exactly in the shoes of the party to be joined in a proceeding: (1) the right to relief arises out of the same transaction or
transferor, the original party.39 Transferees are bound by the proceedings and judgment in the series of transactions; (2) there is a question of law or fact common to all the parties; and (3) the
case, such that there is no need for them to be included or impleaded by name. 40 We have even joinder is not otherwise prohibited by the rules on jurisdiction and venue. 47chanrobleslaw
gone further and said that the transferee is joined or substituted in the pending action by
operation of law from the exact moment when the transfer of interest is perfected between the In fine, we find that the CA erred in ruling that RTC Branch 258 committed grave abuse of
original party and the transferee.41chanrobleslaw discretion when the latter allowed the joinder of petitioner as party-defendant in Civil Case No.
01-0207. Under the rules, the trial court is given wide discretion and enough leeway to determine Section VII of AO 10 was later amended by AO 66 series of 2000, 8 which provided that the
who may be joined in a proceeding, or whether a party may properly be substituted by another two-year accreditation period may be recalled, suspended or revoked only after due
due to a transfer of interest. Within the premises, the trial court's grant of the joinder cannot be deliberation, hearing and notice by the DOH Accreditation Committee, through its Chairman.
seriously assailed.
On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided for a list and
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision dated 26 August category of sanctions to be imposed on accredited government suppliers of pharmaceutical
2009 and Resolution dated 11 February 2010 in CA-G.R. SP No. 103809 products in case of adverse findings regarding their products (e.g. substandard, fake, or
are REVERSED and SET ASIDE. misbranded) or violations committed by them during their accreditation.

In line with Memorandum No. 171-C, the DOH, through former Undersecretary Ma. Margarita
The Orders dated 28 December 2007 and 9 April 2008 issued by the Regional Trial Court of
M. Galon (Galon), issued Memorandum No. 209 series of 2000,10 inviting representatives of 24
Parañaque City, Branch 258, are REINSTATED.
accredited drug companies, including herein respondent Phil Pharmawealth, Inc. (PPI) to a
meeting on October 27, 2000. During the meeting, Undersecretary Galon handed them copies
SO ORDERED
of a document entitled "Report on Violative Products"11 issued by the Bureau of Food and
Republic of the Philippines Drugs12 (BFAD), which detailed violations or adverse findings relative to these accredited drug
SUPREME COURT companies’ products. Specifically, the BFAD found that PPI’s products which were being sold
Manila to the public were unfit for human consumption.

SECOND DIVISION During the October 27, 2000 meeting, the 24 drug companies were directed to submit within 10
days, or until November 6, 2000, their respective explanations on the adverse findings covering
G.R. No. 182358 February 20, 2013 their respective products contained in the Report on Violative Products.

DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA. Instead of submitting its written explanation within the 10-day period as required, PPI belatedly
MARGARITA M. GALON, Petitioners, sent a letter13 dated November 13, 2000 addressed to Undersecretary Galon, informing her that
vs. PPI has referred the Report on Violative Products to its lawyers with instructions to prepare the
PHIL PHARMA WEALTH, INC., Respondent. corresponding reply. However, PPI did not indicate when its reply would be submitted; nor did
it seek an extension of the 10-day period, which had previously expired on November 6, 2000,
DECISION much less offer any explanation for its failure to timely submit its reply. PPI’s November 13,
2000 letter states:
DEL CASTILLO, J.:
Madam,
The state may not be sued without its consent. Likewise, public officials may not be sued for
acts done in the perfom1ance of their official functions or within the scope of their authority. This refers to your directive on 27 October 2000, on the occasion of the meeting with selected
accredited suppliers, during which you made known to the attendees of your requirement for
This Petition for Review on Certiorari1assails the October 25, 2007 Decision2
of the Court of
them to submit their individual comments on the Report on Violative Products (the "Report")
Appeals (CA) in CA-G.R. CV No. 85670, and its March 31, 2008 Reso1ution 3 denying
compiled by your office and disseminated on that date.
petitioners' Motion for Reconsideration.4
In this connection, we inform you that we have already instructed our lawyers to prepare on our
Factual Antecedents
behalf the appropriate reply to the Report furnished to us. Our lawyers in time shall revert to
On December 22, 1998, Administrative Order (AO) No. 27 series of 1998 5 was issued by then you and furnish you the said reply.
Department of Health (DOH) Secretary Alfredo G. Romualdez (Romualdez). AO 27 set the
Please be guided accordingly.
guidelines and procedure for accreditation of government suppliers of pharmaceutical products
for sale or distribution to the public, such accreditation to be valid for three years but subject to Very truly yours,
annual review.
(signed)
On January 25, 2000, Secretary Romualdez issued AO 10 series of 2000 6 which amended AO ATTY. ALAN A.B. ALAMBRA
27. Under Section VII7 of AO 10, the accreditation period for government suppliers of
pharmaceutical products was reduced to two years. Moreover, such accreditation may be Vice-President for Legal and Administrative Affairs14
recalled, suspended or revoked after due deliberation and proper notice by the DOH
Accreditation Committee, through its Chairman. In a letter-reply15 dated November 23, 2000 Undersecretary Galon found "untenable" PPI’s
November 13, 2000 letter and therein informed PPI that, effective immediately, its accreditation
has been suspended for two years pursuant to AO 10 and Memorandum No. 171-C.
In another December 14, 2000 letter16 addressed to Undersecretary Galon, PPI through counsel In a January 8, 2001 Order,23 the trial court partially granted PPI’s prayer for a temporary
questioned the suspension of its accreditation, saying that the same was made pursuant to restraining order, but only covering PPI’s products which were not included in the list of
Section VII of AO 10 which it claimed was patently illegal and null and void because it arrogated violative products or drugs as found by the BFAD.
unto the DOH Accreditation Committee powers and functions which were granted to the BFAD
under Republic Act (RA) No. 372017 and Executive Order (EO) No. 175.18 PPI added that its In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the dismissal of Civil
accreditation was suspended without the benefit of notice and hearing, in violation of its right Case No. 68200, claiming that the case was one against the State; that the Complaint was
to substantive and administrative due process. It thus demanded that the DOH desist from improperly verified; and lack of authority of the corporate officer to commence the suit, as the
implementing the suspension of its accreditation, under pain of legal redress. requisite resolution of PPI’s board of directors granting to the commencing officer – PPI’s Vice
President for Legal and Administrative Affairs, Alan Alambra, – the authority to file Civil Case
On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a No. 68200 was lacking. To this, PPI filed its Comment/Opposition.25
Complaint19 seeking to declare null and void certain DOH administrative issuances, with prayer
for damages and injunction against the DOH, former Secretary Romualdez and DOH Ruling of the Regional Trial Court
Undersecretary Galon. Docketed as Civil Case No. 68200, the case was raffled to Branch 160.
In a June 14, 2004 Order,26 the trial court dismissed Civil Case No. 68200, declaring the case to
On February 8, 2002, PPI filed an Amended and Supplemental Complaint, 20 this time
be one instituted against the State, in which case the principle of state immunity from suit is
impleading DOH Secretary Manuel Dayrit (Dayrit). PPI claimed that AO 10, Memorandum No.
applicable.
171-C, Undersecretary Galon’s suspension order contained in her November 23, 2000 letter,
and AO 14 series of 200121 are null and void for being in contravention of Section 26(d) of RA PPI moved for reconsideration,27 but the trial court remained steadfast.28
3720 as amended by EO 175, which states as follows:
PPI appealed to the CA.
SEC. 26. x x x
Ruling of the Court of Appeals
(d) When it appears to the Director [of the BFAD] that the report of the Bureau that any article
of food or any drug, device, or cosmetic secured pursuant to Section twenty-eight of this Act is Docketed as CA-G.R. CV No. 85670, PPI’s appeal centered on the issue of whether it was
adulterated, misbranded, or not registered, he shall cause notice thereof to be given to the person proper for the trial court to dismiss Civil Case No. 68200.
or persons concerned and such person or persons shall be given an opportunity to be heard before
the Bureau and to submit evidence impeaching the correctness of the finding or charge in The CA, in the herein assailed Decision,29 reversed the trial court ruling and ordered the remand
question. of the case for the conduct of further proceedings. The CA concluded that it was premature for
the trial court to have dismissed the Complaint. Examining the Complaint, the CA found that a
For what it claims was an undue suspension of its accreditation, PPI prayed that AO 10, cause of action was sufficiently alleged – that due to defendants’ (petitioners’) acts which were
Memorandum No. 171-C, Undersecretary Galon’s suspension order contained in her November beyond the scope of their authority, PPI’s accreditation as a government supplier of
23, 2000 letter, and AO 14 be declared null and void, and that it be awarded moral damages of pharmaceutical products was suspended without the required notice and hearing as required by
₱5 million, exemplary damages of ₱1 million, attorney’s fees of ₱1 million, and costs of suit. Section 26(d) of RA 3720 as amended by EO 175. Moreover, the CA held that by filing a motion
PPI likewise prayed for the issuance of temporary and permanent injunctive relief. to dismiss, petitioners were deemed to have hypothetically admitted the allegations in the
Complaint – which state that petitioners were being sued in their individual and personal
In their Amended Answer,22 the DOH, former Secretary Romualdez, then Secretary Dayrit, and capacities – thus negating their claim that Civil Case No. 68200 is an unauthorized suit against
Undersecretary Galon sought the dismissal of the Complaint, stressing that PPI’s accreditation the State.
was suspended because most of the drugs it was importing and distributing/selling to the public
were found by the BFAD to be substandard for human consumption. They added that the DOH The CA further held that instead of dismissing the case, the trial court should have deferred the
is primarily responsible for the formulation, planning, implementation, and coordination of hearing and resolution of the motion to dismiss and proceeded to trial. It added that it was
policies and programs in the field of health; it is vested with the comprehensive power to make apparent from the Complaint that petitioners were being sued in their private and personal
essential health services and goods available to the people, including accreditation of drug capacities for acts done beyond the scope of their official functions. Thus, the issue of whether
suppliers and regulation of importation and distribution of basic medicines for the public. the suit is against the State could best be threshed out during trial on the merits, rather than in
proceedings covering a motion to dismiss.
Petitioners added that, contrary to PPI’s claim, it was given the opportunity to present its side
within the 10-day period or until November 6, 2000, but it failed to submit the required The dispositive portion of the CA Decision reads:
comment/reply. Instead, it belatedly submitted a November 13, 2000 letter which did not even
constitute a reply, as it merely informed petitioners that the matter had been referred by PPI to WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004 of the
its lawyer. Petitioners argued that due process was afforded PPI, but because it did not timely Regional Trial Court of Pasig City, Branch 160, is hereby REVERSED and SET-
avail of the opportunity to explain its side, the DOH had to act immediately – by suspending ASIDE. ACCORDINGLY, this case is REMANDED to the trial court for further proceedings.
PPI’s accreditation – to stop the distribution and sale of substandard drug products which posed
a serious health risk to the public. By exercising DOH’s mandate to promote health, it cannot SO ORDERED.30
be said that petitioners committed grave abuse of discretion. Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence, they filed the
present Petition.
Issue government operate as a waiver of its non-suability; distinction must still be made between one
which is executed in the exercise of its sovereign function and another which is done in its
Petitioners now raise the following lone issue for the Court’s resolution: proprietary capacity.33
Should Civil Case No. 68200 be dismissed for being a suit against the State? 31 As a general rule, a state may not be sued. However, if it consents, either expressly or impliedly,
then it may be the subject of a suit.34 There is express consent when a law, either special or
Petitioners’ Arguments
general, so provides. On the other hand, there is implied consent when the state "enters into a
Petitioners submit that because PPI’s Complaint prays for the award of damages against the contract or it itself commences litigation."35 However, it must be clarified that when a state
DOH, Civil Case No. 68200 should be considered a suit against the State, for it would require enters into a contract, it does not automatically mean that it has waived its non-suability. 36 The
the appropriation of the needed amount to satisfy PPI’s claim, should it win the case. Since the State "will be deemed to have impliedly waived its non-suability [only] if it has entered into a
State did not give its consent to be sued, Civil Case No. 68200 must be dismissed. They add that contract in its proprietary or private capacity. [However,] when the contract involves its
in issuing and implementing the questioned issuances, individual petitioners acted officially and sovereign or governmental capacity[,] x x x no such waiver may be implied."37 "Statutory
within their authority, for which reason they should not be held to account individually. provisions waiving [s]tate immunity are construed in strictissimi juris. For, waiver of immunity
is in derogation of sovereignty."38
Respondent’s Arguments
The DOH can validly invoke state immunity.
Apart from echoing the pronouncement of the CA, respondent insists that Civil Case No. 68200
is a suit against the petitioners in their personal capacity for acts committed outside the scope of a) DOH is an unincorporated agency which performs sovereign or governmental functions.
their authority.
In this case, the DOH, being an "unincorporated agency of the government"39 can validly invoke
Our Ruling the defense of immunity from suit because it has not consented, either expressly or impliedly,
to be sued. Significantly, the DOH is an unincorporated agency which performs functions of
The Petition is granted. governmental character.

The doctrine of non-suability. The ruling in Air Transportation Office v. Ramos40 is relevant, viz:

The discussion of this Court in Department of Agriculture v. National Labor Relations An unincorporated government agency without any separate juridical personality of its own
Commission32 on the doctrine of non-suability is enlightening. enjoys immunity from suit because it is invested with an inherent power of sovereignty.
Accordingly, a claim for damages against the agency cannot prosper; otherwise, the doctrine of
The basic postulate enshrined in the constitution that ‘(t)he State may not be sued without its sovereign immunity is violated. However, the need to distinguish between an unincorporated
consent,’ reflects nothing less than a recognition of the sovereign character of the State and an government agency performing governmental function and one performing proprietary
express affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts. functions has arisen. The immunity has been upheld in favor of the former because its function
It is based on the very essence of sovereignty. x x x [A] sovereign is exempt from suit, not is governmental or incidental to such function; it has not been upheld in favor of the latter whose
because of any formal conception or obsolete theory, but on the logical and practical ground function was not in pursuit of a necessary function of government but was essentially a
that there can be no legal right as against the authority that makes the law on which the right business.41
depends. True, the doctrine, not too infrequently, is derisively called ‘the royal prerogative of
dishonesty’ because it grants the state the prerogative to defeat any legitimate claim against it b) The Complaint seeks to hold the DOH solidarily and jointly liable with the other defendants
by simply invoking its nonsuability. We have had occasion to explain in its defense, however, for damages which constitutes a charge or financial liability against the state.
that a continued adherence to the doctrine of non-suability cannot be deplored, for the loss of
governmental efficiency and the obstacle to the performance of its multifarious functions would Moreover, it is settled that if a Complaint seeks to "impose a charge or financial liability against
be far greater in severity than the inconvenience that may be caused private parties, if such the state,"42 the defense of non-suability may be properly invoked. In this case, PPI specifically
fundamental principle is to be abandoned and the availability of judicial remedy is not to be prayed, in its Complaint and Amended and Supplemental Complaint, for the DOH, together
accordingly restricted. with Secretaries Romualdez and Dayrit as well as Undersecretary Galon, to be held jointly and
severally liable for moral damages, exemplary damages, attorney’s fees and costs of
The rule, in any case, is not really absolute for it does not say that the state may not be sued suit.43 Undoubtedly, in the event that PPI succeeds in its suit, the government or the state through
under any circumstance. On the contrary, as correctly phrased, the doctrine only conveys, ‘the the DOH would become vulnerable to an imposition or financial charge in the form of damages.
state may not be sued without its consent;’ its clear import then is that the State may at times be This would require an appropriation from the national treasury which is precisely the situation
sued. The State’s consent may be given either expressly or impliedly. Express consent may be which the doctrine of state immunity aims to protect the state from.
made through a general law or a special law. x x x Implied consent, on the other hand, is
conceded when the State itself commences litigation, thus opening itself to a counterclaim or The mantle of non-suability extends to complaints filed against public officials for acts done
when it enters into a contract. In this situation, the government is deemed to have descended to in the performance of their official functions.
the level of the other contracting party and to have divested itself of its sovereign immunity.
As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and Undersecretary
This rule, x x x is not, however, without qualification. Not all contracts entered into by the
Galon, it must be stressed that the doctrine of state immunity extends its protective mantle also
to complaints filed against state officials for acts done in the discharge and performance of their the appropriate reply. PPI however failed to mention when it will submit its "appropriate reply"
duties.44 "The suability of a government official depends on whether the official concerned was or how long Undersecretary Galon should wait. In the meantime, PPI’s drugs which are included
acting within his official or jurisdictional capacity, and whether the acts done in the performance in the Report on Violative Products are out and being sold in the market. Based on the foregoing,
of official functions will result in a charge or financial liability against the we find PPI’s contention of denial of due process totally unfair and absolutely lacking in basis.
government."45 Otherwise stated, "public officials can be held personally accountable for acts At this juncture, it would be trite to mention that "[t]he essence of due process in administrative
claimed to have been performed in connection with official duties where they have acted ultra proceedings is the opportunity to explain one’s side or seek a reconsideration of the action or
vires or where there is showing of bad faith."46 Moreover, "[t]he rule is that if the judgment ruling complained of. As long as the parties are given the opportunity to be heard before
against such officials will require the state itself to perform an affirmative act to satisfy the same, judgment is rendered, the demands of due process are sufficiently met. What is offensive to due
such as the appropriation of the amount needed to pay the damages awarded against them, the process is the denial of the opportunity to be heard. The Court has repeatedly stressed that parties
suit must be regarded as against the state x x x. In such a situation, the state may move to dismiss who chose not to avail themselves of the opportunity to answer charges against them cannot
the [C]omplaint on the ground that it has been filed without its consent." 47 complain of a denial of due process."50

It is beyond doubt that the acts imputed against Secretaries Romualdez and Dayrit, as well as Incidentally, we find it inieresting that in the earlier case of Department q( Health v. Phil
Undersecretary Galon, were done while in the performance and discharge of their official Pharmawealth, Inc. 51respondent filed a Complaint against DOH anchored on the same
functions or in their official capacities, and not in their personal or individual capacities. issuances which it assails in the present case. In the earlier case of Department of Health v. Phil
Secretaries Romualdez and Dayrit were being charged with the issuance of the assailed orders. Pharmawealth, Jnc., 52 PPI submitted to the DOH a request for the inclusion of its products in
On the other hand, Undersecretary Galon was being charged with implementing the assailed the list of accredited drugs as required by AO 27 series of 1998 which was later amended by
issuances. By no stretch of imagination could the same be categorized as ultra vires simply AO 10 series of 2000. In the instant case, however, PPI interestingly claims that these issuances
because the said acts are well within the scope of their authority. Section 4 of RA 3720 are null and void.
specifically provides that the BFAD is an office under the Office of the Health Secretary. Also,
the Health Secretary is authorized to issue rules and regulations as may be necessary to WHEREFORE, premises considered, the Petition is GRANTED. Civil Case No. 68200 is
effectively enforce the provisions of RA 3720.48 As regards Undersecretary Galon, she is ordered DISMISSED.
authorized by law to supervise the offices under the DOH’s authority,49 such as the BFAD.
SO ORDERED.
Moreover, there was also no showing of bad faith on their part. The assailed issuances were not
directed only against PPI. The suspension of PPI’s accreditation only came about after it failed Republic of the Philippines
to submit its comment as directed by Undersecretary Galon. It is also beyond dispute that if SUPREME COURT
found wanting, a financial charge will be imposed upon them which will require an Manila
appropriation from the state of the needed amount. Thus, based on the foregoing considerations,
the Complaint against them should likewise be dismissed for being a suit against the state which THIRD DIVISION
absolutely did not give its consent to be sued. Based on the foregoing considerations, and
regardless of the merits of PPI’s case, this case deserves a dismissal. Evidently, the very G.R. No. 159402 February 23, 2011
foundation of Civil Case No. 68200 has crumbled at this initial juncture.
AIR TRANSPORTATION OFFICE, Petitioner,
PPI was not denied due process. vs.
SPOUSES DAVID* ELISEA RAMOS, Respondents.
However, we cannot end without a discussion of PPI’s contention that it was denied due process
when its accreditation was suspended "without due notice and hearing." It is undisputed that RESOLUTION
during the October 27, 2000 meeting, Undersecretary Galon directed representatives of
pharmaceutical companies, PPI included, to submit their comment and/or reactions to the Report BERSAMIN, J.:
on Violative Products furnished them within a period of 10 days. PPI, instead of submitting its The State’s immunity from suit does not extend to the petitioner because it is an agency of the
comment or explanation, wrote a letter addressed to Undersecretary Galon informing her that State engaged in an enterprise that is far from being the State’s exclusive prerogative.
the matter had already been referred to its lawyer for the drafting of an appropriate reply. Aside
from the fact that the said letter was belatedly submitted, it also failed to specifically mention Under challenge is the decision promulgated on May 14, 2003, 1 by which the Court of Appeals
when such reply would be forthcoming. Finding the foregoing explanation to be unmeritorious, (CA) affirmed with modification the decision rendered on February 21, 2001 by the Regional
Undersecretary Galon ordered the suspension of PPI’s accreditation for two years. Clearly these Trial Court, Branch 61 (RTC), in Baguio City in favor of the respondents. 2
facts show that PPI was not denied due process. It was given the opportunity to explain its side.
Prior to the suspension of its accreditation, PPI had the chance to rebut, explain, or comment on Antecedents
the findings contained in the Report on Violative Products that several of PPI’s products are not
fit for human consumption. However, PPI squandered its opportunity to explain. Instead of Spouses David and Elisea Ramos (respondents) discovered that a portion of their land registered
complying with the directive of the DOH Undersecretary within the time allotted, it instead under Transfer Certificate of Title No. T-58894 of the Baguio City land records with an area of
haughtily informed Undersecretary Galon that the matter had been referred to its lawyers. 985 square meters, more or less, was being used as part of the runway and running shoulder of
Worse, it impliedly told Undersecretary Galon to just wait until its lawyers shall have prepared the Loakan Airport being operated by petitioner Air Transportation Office (ATO). On August
11, 1995, the respondents agreed after negotiations to convey the affected portion by deed of
sale to the ATO in consideration of the amount of ₱778,150.00. However, the ATO failed to The petition for review has no merit.
pay despite repeated verbal and written demands.
The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-
Thus, on April 29, 1998, the respondents filed an action for collection against the ATO and some suability of the State, is expressly provided in Article XVI of the 1987 Constitution, viz:
of its officials in the RTC (docketed as Civil Case No. 4017-R and entitled Spouses David and
Elisea Ramos v. Air Transportation Office, Capt. Panfilo Villaruel, Gen. Carlos Tanega, and Section 3. The State may not be sued without its consent.
Mr. Cesar de Jesus).
The immunity from suit is based on the political truism that the State, as a sovereign, can do no
In their answer, the ATO and its co-defendants invoked as an affirmative defense the issuance wrong. Moreover, as the eminent Justice Holmes said in Kawananakoa v. Polyblank: 6
of Proclamation No. 1358, whereby President Marcos had reserved certain parcels of land that
The territory [of Hawaii], of course, could waive its exemption (Smith v. Reeves, 178 US 436,
included the respondents’ affected portion for use of the Loakan Airport. They asserted that the
44 L ed 1140, 20 Sup. Ct. Rep. 919), and it took no objection to the proceedings in the cases
RTC had no jurisdiction to entertain the action without the State’s consent considering that the
cited if it could have done so. xxx But in the case at bar it did object, and the question raised is
deed of sale had been entered into in the performance of governmental functions.
whether the plaintiffs were bound to yield. Some doubts have been expressed as to the source
On November 10, 1998, the RTC denied the ATO’s motion for a preliminary hearing of the of the immunity of a sovereign power from suit without its own permission, but the answer has
affirmative defense. been public property since before the days of Hobbes. Leviathan, chap. 26, 2. A sovereign is
exempt from suit, not because of any formal conception or obsolete theory, but on the logical
After the RTC likewise denied the ATO’s motion for reconsideration on December 10, 1998, and practical ground that there can be no legal right as against the authority that makes the law
the ATO commenced a special civil action for certiorari in the CA to assail the RTC’s orders. on which the right depends. "Car on peut bien recevoir loy d'autruy, mais il est impossible par
The CA dismissed the petition for certiorari, however, upon its finding that the assailed orders nature de se donner loy." Bodin, Republique, 1, chap. 8, ed. 1629, p. 132; Sir John Eliot, De
were not tainted with grave abuse of discretion.3 Jure Maiestatis, chap. 3. Nemo suo statuto ligatur necessitative. Baldus, De Leg. et Const. Digna
Vox, 2. ed. 1496, fol. 51b, ed. 1539, fol. 61. 7
Subsequently, February 21, 2001, the RTC rendered its decision on the merits, 4 disposing:
Practical considerations dictate the establishment of an immunity from suit in favor of the State.
WHEREFORE, the judgment is rendered ORDERING the defendant Air Transportation Office Otherwise, and the State is suable at the instance of every other individual, government service
to pay the plaintiffs DAVID and ELISEA RAMOS the following: (1) The amount of may be severely obstructed and public safety endangered because of the number of suits that the
₱778,150.00 being the value of the parcel of land appropriated by the defendant ATO as State has to defend against.8 Several justifications have been offered to support the adoption of
embodied in the Deed of Sale, plus an annual interest of 12% from August 11, 1995, the date of the doctrine in the Philippines, but that offered in Providence Washington Insurance Co. v.
the Deed of Sale until fully paid; (2) The amount of ₱150,000.00 by way of moral damages and Republic of the Philippines9 is "the most acceptable explanation," according to Father Bernas, a
₱150,000.00 as exemplary damages; (3) the amount of ₱50,000.00 by way of attorney’s fees recognized commentator on Constitutional Law,10 to wit:
plus ₱15,000.00 representing the 10, more or less, court appearances of plaintiff’s counsel; (4)
The costs of this suit. [A] continued adherence to the doctrine of non-suability is not to be deplored for as against the
inconvenience that may be caused private parties, the loss of governmental efficiency and the
SO ORDERED. obstacle to the performance of its multifarious functions are far greater if such a fundamental
principle were abandoned and the availability of judicial remedy were not thus restricted. With
In due course, the ATO appealed to the CA, which affirmed the RTC’s decision on May 14,
the well-known propensity on the part of our people to go to court, at the least provocation, the
2003,5 viz:
loss of time and energy required to defend against law suits, in the absence of such a basic
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby AFFIRMED, principle that constitutes such an effective obstacle, could very well be imagined.
with MODIFICATION that the awarded cost therein is deleted, while that of moral and
An unincorporated government agency without any separate juridical personality of its own
exemplary damages is reduced to ₱30,000.00 each, and attorney’s fees is lowered to ₱10,000.00.
enjoys immunity from suit because it is invested with an inherent power of sovereignty.
No cost. Accordingly, a claim for damages against the agency cannot prosper; otherwise, the doctrine of
sovereign immunity is violated.11 However, the need to distinguish between an unincorporated
SO ORDERED. government agency performing governmental function and one performing proprietary
functions has arisen. The immunity has been upheld in favor of the former because its function
Hence, this appeal by petition for review on certiorari. is governmental or incidental to such function;12 it has not been upheld in favor of the latter
whose function was not in pursuit of a necessary function of government but was essentially a
Issue business.13
The only issue presented for resolution is whether the ATO could be sued without the State’s Should the doctrine of sovereignty immunity or non-suability of the State be extended to the
consent. ATO?
Ruling In its challenged decision,14 the CA answered in the negative, holding:
On the first assignment of error, appellants seek to impress upon Us that the subject contract of xxx
sale partook of a governmental character. Apropos, the lower court erred in applying the High
Court’s ruling in National Airports Corporation vs. Teodoro (91 Phil. 203 [1952]), arguing that From the foregoing, it can be seen that the CAA is tasked with private or non-governmental
in Teodoro, the matter involved the collection of landing and parking fees which is a proprietary functions which operate to remove it from the purview of the rule on State immunity from suit.
function, while the case at bar involves the maintenance and operation of aircraft and air For the correct rule as set forth in the Teodorocase states:
navigational facilities and services which are governmental functions.
xxx
We are not persuaded.
Not all government entities, whether corporate or non-corporate, are immune from
Contrary to appellants’ conclusions, it was not merely the collection of landing and parking fees suits. Immunity from suits is determined by the character of the objects for which the entity was
which was declared as proprietary in nature by the High Court in Teodoro, but management and organized. The rule is thus stated in Corpus Juris:
maintenance of airport operations as a whole, as well. Thus, in the much later case of Civil
Suits against State agencies with relation to matters in which they have assumed to act in private
Aeronautics Administration vs. Court of Appeals (167 SCRA 28 [1988]), the Supreme Court,
or non-governmental capacity, and various suits against certain corporations created by the state
reiterating the pronouncements laid down in Teodoro, declared that the CAA (predecessor
for public purposes, but to engage in matters partaking more of the nature of ordinary business
of ATO) is an agency not immune from suit, it being engaged in functions pertaining to a private
rather than functions of a governmental or political character, are not regarded as suits against
entity. It went on to explain in this wise:
the state. The latter is true, although the state may own stock or property of such a corporation
xxx for by engaging in business operations through a corporation, the state divests itself so far of its
sovereign character, and by implication consents to suits against the corporation. (59 C.J., 313)
The Civil Aeronautics Administration comes under the category of a private entity. Although [National Airports Corporation v. Teodoro, supra, pp. 206-207; Italics supplied.]
not a body corporate it was created, like the National Airports Corporation, not to maintain a
necessary function of government, but to run what is essentially a business, even if revenues be This doctrine has been reaffirmed in the recent case of Malong v. Philippine National
not its prime objective but rather the promotion of travel and the convenience of the travelling Railways [G.R. No. L-49930, August 7, 1985, 138 SCRA 63], where it was held that the
public. It is engaged in an enterprise which, far from being the exclusive prerogative of state, Philippine National Railways, although owned and operated by the government, was not
may, more than the construction of public roads, be undertaken by private concerns. [National immune from suit as it does not exercise sovereign but purely proprietary and business functions.
Airports Corp. v. Teodoro, supra, p. 207.] Accordingly, as the CAA was created to undertake the management of airport operations which
primarily involve proprietary functions, it cannot avail of the immunity from suit accorded to
xxx government agencies performing strictly governmental functions.15

True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec. Order 365 In our view, the CA thereby correctly appreciated the juridical character of the ATO as an
(Reorganizing the Civil Aeronautics Administration and Abolishing the National Airports agency of the Government not performing a purely governmental or sovereign function, but was
Corporation). Republic Act No. 776 (Civil Aeronautics Act of the Philippines), subsequently instead involved in the management and maintenance of the Loakan Airport, an activity that
enacted on June 20, 1952, did not alter the character of the CAA’s objectives under Exec. Order was not the exclusive prerogative of the State in its sovereign capacity. Hence, the ATO had no
365. The pertinent provisions cited in the Teodoro case, particularly Secs. 3 and 4 of Exec. Order claim to the State’s immunity from suit. We uphold the CA’s aforequoted holding.
365, which led the Court to consider the CAA in the category of a private entity were retained
substantially in Republic Act 776, Sec. 32(24) and (25). Said Act provides: We further observe the doctrine of sovereign immunity cannot be successfully invoked to defeat
a valid claim for compensation arising from the taking without just compensation and without
Sec. 32. Powers and Duties of the Administrator. – Subject to the general control and the proper expropriation proceedings being first resorted to of the plaintiffs’ property. 16 Thus,
supervision of the Department Head, the Administrator shall have among others, the following in De los Santos v. Intermediate Appellate Court,17 the trial court’s dismissal based on the
powers and duties: doctrine of non-suability of the State of two cases (one of which was for damages) filed by
owners of property where a road 9 meters wide and 128.70 meters long occupying a total area
xxx of 1,165 square meters and an artificial creek 23.20 meters wide and 128.69 meters long
occupying an area of 2,906 square meters had been constructed by the provincial engineer of
(24) To administer, operate, manage, control, maintain and develop the Manila International
Rizal and a private contractor without the owners’ knowledge and consent was reversed and the
Airport and all government-owned aerodromes except those controlled or operated by the
cases remanded for trial on the merits. The Supreme Court ruled that the doctrine of sovereign
Armed Forces of the Philippines including such powers and duties as: (a) to plan, design,
immunity was not an instrument for perpetrating any injustice on a citizen. In exercising the
construct, equip, expand, improve, repair or alter aerodromes or such structures, improvement
right of eminent domain, the Court explained, the State exercised its jus imperii, as distinguished
or air navigation facilities; (b) to enter into, make and execute contracts of any kind with any
from its proprietary rights, or jus gestionis; yet, even in that area, where private property had
person, firm, or public or private corporation or entity; …
been taken in expropriation without just compensation being paid, the defense of immunity from
(25) To determine, fix, impose, collect and receive landing fees, parking space fees, royalties on suit could not be set up by the State against an action for payment by the owners.
sales or deliveries, direct or indirect, to any aircraft for its use of aviation gasoline, oil and
lubricants, spare parts, accessories and supplies, tools, other royalties, fees or rentals for the use
of any of the property under its management and control.
Lastly, the issue of whether or not the ATO could be sued without the State’s consent has been G.R. No. L-27058 January 17, 1973
rendered moot by the passage of Republic Act No. 9497, otherwise known as the Civil Aviation
Authority Act of 2008. AMERICAN EXPRESS COMPANY, INC., Plaintiff-Appellee, vs. CIRIO H.
SANTIAGO, Defendant-Appellant.
R.A. No. 9497 abolished the ATO, to wit:
William H. Quasha and Associates for plaintiff-appellee.
Section 4. Creation of the Authority. – There is hereby created an independent regulatory body
with quasi-judicial and quasi-legislative powers and possessing corporate attributes to be known Ernesto T. Zschornack, Jr. for defendant-appellant.
as the Civil Aviation Authority of the Philippines (CAAP), herein after referred to as the
MAKALINTAL, J.:
"Authority" attached to the Department of Transportation and Communications (DOTC) for the
purpose of policy coordination. For this purpose, the existing Air transportation Office This case is on appeal directly to this Court by the defendant from the decision of the Court of
created under the provisions of Republic Act No. 776, as amended is hereby abolished. First Instance of Manila in its Civil Case No. 48318, sentencing him to pay the plaintiff the
amount of $15,297.53, plus interest at the legal rate from the date the complaint was filed and
xxx
25% of the amount due by way of attorneys fees.chanroblesvirtualawlibrarychanrobles virtual
Under its Transitory Provisions, R.A. No. 9497 established in place of the ATO the Civil law library
Aviation Authority of the Philippines (CAAP), which thereby assumed all of the ATO’s powers,
The essential facts were the subject of stipulation in court below after the parties had filed their
duties and rights, assets, real and personal properties, funds, and revenues, viz:
respective pleadings and the court had scheduled the case for pre-
CHAPTER XII trial.chanroblesvirtualawlibrarychanrobles virtual law library
TRANSITORTY PROVISIONS
The plaintiff is a foreign corporation with main office in New York City and a branch office in
Section 85. Abolition of the Air Transportation Office. – The Air Transportation Office (ATO) the Philippines which is duly registered and licensed to transact business as a travel agent. As
created under Republic Act No. 776, a sectoral office of the Department of Transportation and part of such business and for convenience of its customers the plaintiff has adopted a credit
Communications (DOTC), is hereby abolished.1avvphi1 system known as the American Express Credit Card whereby upon application of a customer
the plaintiff may issue to him a credit card by means of which he may enjoy charge privileges
All powers, duties and rights vested by law and exercised by the ATO is hereby transferred in establishments all over the world listed in directories issued periodically by the company for
to the Authority. the guidance of its card holders. On November 6, 1959 the defendant applied for one such card
to the plaintiff at the latter's office in New York City and upon such application the
All assets, real and personal properties, funds and revenues owned by or vested in the corresponding American Express Credit Card was issued to him. Thereafter and before the card
different offices of the ATO are transferred to the Authority. All contracts, records and expired was cancelled as of June 20, 1961 the defendant used it in making purchases and
documents relating to the operations of the abolished agency and its offices and branches obtaining services on credit in various foreign countries, such as Hongkong in June of 1960, and
are likewise transferred to the Authority. Any real property owned by the national France, Switzerland, Germany, Spain, Italy and HongKong in May and June of 1961. The credit
government or government-owned corporation or authority which is being used and charges he obtained ran up to a total of $15,297.53. In September 1961 the plaintiff made
utilized as office or facility by the ATO shall be transferred and titled in favor of the demands for payment upon the defendant, and after the latter refused to pay filed the presented
Authority. suit for collection.chanroblesvirtualawlibrarychanrobles virtual law library
Section 23 of R.A. No. 9497 enumerates the corporate powers vested in the CAAP, including The main defense raised by the defendant in his answer to the complaint and now reiterated in
the power to sue and be sued, to enter into contracts of every class, kind and description, to his brief as appellant before this Court is that the appellee has no cause of action against him,
construct, acquire, own, hold, operate, maintain, administer and lease personal and real not being the real party in interest, the allegation that the credit card issued by the appellee was
properties, and to settle, under such terms and conditions most advantageous to it, any claim by merely to introduce the appellant to the different establishments from which he made purchases
or against it.18 and obtained services on credit and that it was these establishments who should properly have
brought the suit.chanroblesvirtualawlibrarychanrobles virtual law library
With the CAAP having legally succeeded the ATO pursuant to R.A. No. 9497, the obligations
that the ATO had incurred by virtue of the deed of sale with the Ramos spouses might now be The court below, however, found as a fact - and this is not disputed here - that the stores or
enforced against the CAAP. establishments which sold goods and services to the appellant on credit "bills the American
Express Corporation which settles the accounts directly and, in turn bills the customers who
WHEREFORE, the Court denies the petition for review on certiorari, and affirms the decision
possess the credit cards." The court added: "in other words, with the possession of the credit
promulgated by the Court of Appeals.
card, the possessor could purchase on credit from any store, and he could do that because the
No pronouncement on costs of suit. purchases on credit are backed-up by the American Express Corporation thru the credit card.
This corporation pays for the purchase and the defendant has to reimburse such payment to the
SO ORDERED. owner of the credit card; in this case to the plaintiff."chanrobles virtual law library

EN BANC
The appellant presented no evidence in his behalf, only relying on the stipulation of facts. On ... . The Philippine Consulate in New York by letter dated October 8, 1965 notified the
the other hand the appellee presented as evidence not only the application signed by the appellant undersigned of the transmission on said date of the deposition "through the Department of
for the issuance of the credit card, manifesting conformity to the condition therein stated but Foreign Affairs to the Clerk of Court; yet, it was verified from the Clerk of Court that as of
also the testimony, in the form of deposition upon written interrogatories, of its employee, November 19, 1965 the deposition was not yet received. Upon inquiry with the Department of
George R. de Salvio, who described the operation of the company's credit card system as Foreign Affairs, the latter advised the undersigned that it received the sealed envelope from the
follows: consulate on October 20, 1965 and turned it over on October 25, 1965, to its record section,
which until November 19, 1965, had done nothing towards transmitting the deposition to the
A.-6: We appoint service establishments who accept our credit card. They perform services or court. This prompted the Department of Foreign Affairs to request the undersigned to take care
deliver goods to our cardholders and in turn they bill American Express Company for these of having the deposition filed with the court, which the undersigned consented to do, and did by
goods and services. The American Express Company reimburses the establishments and in turn means of their letter to the Clerk of Court dated November 19, 1965 (Exh. G-1) only to expedite
bills the credit card holders for whom the goods were delivered or services performed. The credit filing of the deposition and "to accommodate the Department of Foreign Affairs." The
card holders are sent a statement once a month supported by all original charge forms. undersigned received the sealed envelope from the Department of Foreign Affairs and delivered
it in exactly the same condition to the Clerk of Court.chanroblesvirtualawlibrarychanrobles
xxx xxx xxx
virtual law library
A.-8 The service establishments submit charges and summaries to the American Express
xxx xxx xxx
Company and we pay for these summaries, less the discount, once a
week.chanroblesvirtualawlibrarychanrobles virtual law library We do not believe that the manner, in which the deposition was delivered to the Clerk of Court,
as above related, so affected its integrity as to render it inadmissible. After all there is no pretense
Question 9: After the cardholder's accounts are paid to the establishments concerned by plaintiff,
here that the appellant did not contract the indebtedness for the collection of which he is being
what obligation, if any, has the cardholder to plaintiff concerning the accounts thus paid by
sued or that the same has been paid, the only important issue posed in this appeal being whether
plaintiff?chanrobles virtual law library
or not the appellee is the real party in interest. On this score the finding of the lower court,
A.-9 He is obligated to pay the American Express Company upon receipt of this monthly billing. supported as it is by the evidence before it, is conclusive.chanroblesvirtualawlibrarychanrobles
virtual law library
On the same point the witness also stated that the charge orders of the appellant were in due
course of business submitted by the establishments concerned to the appellee for payment and WHEREFORE, the judgment appealed from is affirmed, with modification as to the principal
paid by the latter. There can be no doubt, therefore, that the appellee is the creditor of the amount to be paid by the appellant, which is reduced to US $14,952.31 in view of the waiver by
appellant and as such is the proper party to file this suit for the appellee of its claim to US $345.22, and the further modification that payment of the said
collection.chanroblesvirtualawlibrarychanrobles virtual law library amount, together with the attorneys fees and costs, both in this instance and below, should be
made in Philippine currency according to the prevailing rate of exchange at the time of such
The other points raised by the appellant in his brief have to do with certain objections of his to payment.
a number of questions directed by the appellee to its employee and witness, George R. de Salvio,
in the latter's deposition taken upon written interrogatories. The objections were mostly on
technical grounds, such as, for example, that the matter sought to be elicited from the witness
had already been admitted in the stipulation of facts, or that it was irrelevant and immaterial;
that the question was leading, or vague, or sought to obtain from the witness a conclusion. We
have considered the nature and the phrasing of the questions objected to and We find that the
objections are either groundless or have no material bearing on the merits of the
case.chanroblesvirtualawlibrarychanrobles virtual law library
Rule 3, Sections 7 to 12 (Parties to a Civil Action)
The appellant also objected to the admission of the aforesaid deposition as a whole on the ground
that the procedure prescribed in Section 20 of Rule 24 was not followed, particularly that portion SECOND DIVISION
which states that the officer who took the deposition shall "promptly file it with the court in
which the action is pending or send it by registered mail to the Clerk of Court thereof for filing." G.R. No. 159156 January 31, 2005
The non-compliance with this rule, according to the appellant, consists in the fact that it was the
appellee's counsel who picked up the deposition from the Department of Foreign Affairs and RAMON P. ARON, petitioner,
delivered it to the Clerk of Court instead of its being filed directly with the vs.
latter.chanroblesvirtualawlibrarychanrobles virtual law library FRANCISCO, DOMINGO REALON and FELIPE REALON, representing the HEIRS OF MARCIANO
REALON and ROMAN REALON, EMILIANO R. PURIFICACION, representing the HEIRS OF
The appellee's explanation in this regard, which stands uncontradicted and which the trial court ALFREDO REALON and ROMAN REALON, respondents.
considered satisfactory, is as follows:
DECISION
xxx xxx xxxchanrobles virtual law library
CALLEJO, SR., J.: On July 31, 1979, Alfredo also executed a Contract to Sell13 over his undivided share in Lot No.
1253 in favor of the petitioner, for and in consideration of ₱253,196.00. The latter made a
Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals2 (CA) in partial payment of ₱60,935.04 upon the execution of the contract. Alfredo obliged himself to
CA-G.R. CV No. 68979 which affirmed the Decision3 of the Regional Trial Court (RTC) of Bacoor, execute a final deed of sale over the property upon the petitioner’s payment of the balance of
Cavite, Branch 89, in Civil Case No. BCV 96-29. the purchase price on or before May 23, 1980, or as soon as the vendor shall have secured the
OCT over the property.14
The antecedents are as follows:
However, the vendors failed to file a petition for the registration of the property under the
Roman Realon was the owner of two (2) parcels of land, one of which was Lot No. 1253 4 of the
Torrens System. Consequently, the petitioner, as vendee, refused to pay the balance of the
Carmona Cadastre with 146,948 square meters, more or less, located in Barrio Lantik,
purchase price.
Carmona, Cavite, and covered by Tax Declaration No. 621. The other parcel of land, Lot No.
602,5 of the Carmona Cadastre, with an area of 3,105 square meters, is located in Barrio On November 11, 1983, the petitioner himself filed an application15 for the registration of Lot
Maduya, in the same town. No. 1253 under his name. He alleged therein that he was the owner of the property based on
a deed of sale executed by Alfredo and his nephews; the property was unoccupied; and to the
When he died intestate on April 4, 1946, Roman was survived by his son Alfredo and the
best of his knowledge and belief, there was never a mortgage or encumbrance of any kind,
children of his deceased son, Buenaventura, namely, Marciano, Joaquino, Florentino, Felipe,
affecting the said property, or any person having an interest therein, legal or equitable or in
Marcelo, Sesinando, and Montano.6
possession thereof. The petitioner appended to his application a copy 16 of the July 31, 1979
Emiliano Realon Purificacion, Alfredo’s grandson had worked on the property as a tenant since Contract to Sell executed in his favor by Alfredo and his nephews.
1970 and planted palay, pineapple, bananas and other fruit crops.7 On May 14, 1979, Alfredo,
The case was docketed as LRC Case No. 83-15. Notice of initial hearing of the case was issued
together with his nephews Marciano, Joaquino, Florentino, Felipe, Marcelo, Sesinando, and
to all concerned parties which included Alfredo and his nephews, who were the vendors.17
Montano, executed an Extrajudicial Settlement entitled "Manahan Sa Labas ng
Hukuman"8 wherein they adjudicated Lot No. 602 in its entirety to Alfredo, and that Lot No. On January 8, 1985, Marciano, and in behalf of his brothers, executed a Deed of Sale with
1253 was to be divided and adjudicated as follows: 84,632 square meters to Alfredo; and the Mortgage18 in favor of the petitioner over their undivided shares in Lot No. 1253, this time, for
remaining 62,316 square meters to Marciano, Joaquino, Florentino, Felipe, Marcelo, the price of ₱186,948.00, payable as follows:
Sesinando, and Montano.
a. The sum of NINETY-ONE THOUSAND SEVEN HUNDRED SEVENTEEN and FORTY-FOUR
On the same day, May 14, 1979, Felipe, Sesinando, Montano, Marcelo, Florentino and (₱91,717.44) PESOS inclusive of the earnest money and part payment which was paid before
Joaquino, constituted their brother Marciano Realon as their attorney-in-fact in selling hand and upon the signing of this documents and receipt of which is hereby acknowledged by
their pro-indiviso shares in Lot No. 1253.9 Thus, on July 31, 1979, Marciano, in his behalf and the VENDORS-MORTGAGEES.
in behalf of his brothers, executed a Contract to Sell10 covering Lot No. 1253 in favor of the
petitioner for the price of ₱186,948.00 payable as follows: ₱44,867.52 upon the execution of b. The sum of NINETY-FIVE THOUSAND TWO HUNDRED THIRTY and FIFTY-SIX PESOS
the deed; and ₱142,080.48 on or before May 23, 1980, or as soon as the vendees shall have (₱95,230.56) balance upon issuance of title to VENDEE-MORTGAGOR.
secured an original certificate of title (OCT) over the property under their names. The vendors
obliged themselves to execute a final deed of sale upon full payment of the purchase price of To secure the payment of the balance of the purchase price of the property, the petitioner
the property11 and to pay the tenant working on the land, Emiliano, the amount of ₱47,593.48 mortgaged the property to the vendor, thus:
upon receipt of ₱142,080.48 from the petitioner, to wit:
5. That to secure the full and complete payment of the sum of NINETY-FIVE THOUSAND TWO
That I and the other persons and whose behalf I have executed this instrument further bind HUNDRED THIRTY and FIFTY-SIX PESOS (₱95,230.56) in manner herein mentioned, the
ourselves to execute the final Deed of Sale upon receipt of the balance of ONE HUNDRED VENDEE-MORTGAGOR hereby CEDES, TRANSFERS and CONVEYS by way of first mortgage in
FORTY-TWO THOUSAND [PESOS] (₱142,000.00) to complete the amount of the consideration favor of the VENDORS-MORTGAGEES the pro-indivisointerests herein sold.
or selling price for the 62,316 square meters which is agreed to be ₱186,948.00;
On even date, Alfredo executed a similar Deed of Sale with Mortgage19 in favor of the
That furthermore, we bind ourselves to pay the tenant working on the land the amount of petitioner over his undivided share of 84,632 square meters over Lot No. 1253 in consideration
₱47,593.48 upon our receipt of the amount of the balance of ₱142,080.48, which payment is of ₱253,196.00, payable as follows:
to be taken from said balance;
a. The sum of ONE HUNDRED TWENTY-FOUR THOUSAND FIVE HUNDRED FORTY-SIX AND
Finally, we bind ourselves to execute the Final Deed of Sale on or before May 23, 1980, or SEVENTY-SEVEN (₱124,546.77) PESOS inclusive of the earnest money and part payment which
whenever we will be able to bring under the operations of the Torrens System of registration was paid before hand and upon the signing of this document and receipt of which is hereby
the portion of land with an area of 62,316 sq. meters, subject of this contract and upon our acknowledged by the VENDOR-MORTGAGEE.
receipt of the said balance of ₱142,080.48.12
b. The sum of ONE HUNDRED TWENTY-NINE THOUSAND THREE HUNDRED FORTY-NINE AND WHEREFORE, it is prayed that upon filing of this complaint, an order be issued allowing plaintiff
SEVENTY THREE (₱129,349.73) PESOS balance upon issuance of title of VENDEE-MORTGAGOR. to deposit the sum of ₱42,849.23 before this Court representing the balance due under both
Deeds of Sale with Mortgage, and that after notice and due consideration, judgment be
To secure the payment of the balance of the purchase price, the petitioner likewise mortgaged rendered, as follows:
the property to the vendor.
1. Declaring plaintiff’s obligation under the Deed of Sale discharged and/or released pursuant
5. That to secure the full and complete payment of the sum of ONE HUNDRED TWENTY-NINE to the first paragraph of Article 1260 of the Civil Code;
THOUSAND THREE HUNDRED FORTY-NINE AND SEVENTY THREE (₱129,349.73) PESOS in the
manner hereinafter mentioned, the VENDEE-MORTGAGOR hereby cedes, transfers and coveys 2. Ordering defendants to pay, jointly and severally, the sum of ₱15,000.00, as attorney’s fees
by way of first mortgage in favor of the VENDOR-MORTGAGEE the pro-indiviso interest herein and further sum of ₱1,000.00 as appearance fee per court attendance, the cost of consignation
sold. or litigation cost pursuant to Article 1259 of the New Civil Code.

The petitioner adduced in evidence the Contracts to Sell executed by Alfredo and his nephews 3. Other reliefs and remedies just and equitable in the premises are likewise prayed.28
in 197920 in LRC Case No. 83-15. Alfredo and Marciano testified for the petitioner.21 On January
24, 1985, the RTC rendered judgment in favor of the applicant, with the following dispositive The petitioner then deposited the amount of ₱42,849.23 with the Clerk of Court of the RTC.
portion: He adduced in evidence the Deed of Sale29 with Mortgage dated January 8, 1985 executed by
Alfredo and his nephews.
WHEREFORE, finding the application to be well-taken, applicants having presented the
required quantum of evidence to prove possession; this Court confirms applicant Ramon P. In their answer30 to the complaint, the defendants therein alleged that their predecessors-in-
Aron’s title to the parcel of land covered by Plan Ap-04-003288 (Exhibit "F") and described in interest did not sell the property to the petitioner.
its technical description (Exhibit "J") with his above-described personal circumstances, subject
On November 27, 1995, the trial court rendered its decision31 in Civil Case No. BCV 94-28. It
to the remaining balance of ₱129,349.73.1awphi1.nét
declared the consignation to be valid and released the petitioner from his obligation under the
Once this decision becomes final, let the corresponding decree of registration issue. Deed of Sale with Mortgage.32 The said decision became final and executory.1awphi1.nét

SO ORDERED.22 On March 18, 1996, Francisco Realon, Domingo Realon and Felipe Realon, allegedly
representing the heirs of Marciano and Roman Realon, together with Emiliano R. Purificacion,
The decision became final and executory. On March 12, 1985, the court ordered the issuance allegedly representing also the heirs of Alfredo and Roman Realon, filed a complaint for
of a decree.23 In the meantime, Alfredo died in 1989, while Marciano died intestate on June reconveyance and ownership against the petitioner with the RTC of Bacoor, Cavite. The case
22, 1990.24 On September 9, 1993, the Register of Deeds issued under the petitioner’s name was docketed as Civil Case No. BCV 96-29.33
OCT No. O-2348 covering Lot No.1253. Annotated therein was the following: "subject to such
encumbrances mentioned in Section 44 of said Decree as may be subsisting, and subject to the The plaintiffs alleged, inter alia, that they were representing the heirs of Marciano, Alfredo and
remaining balance of ₱129,349.73." Roman Realon; under the contracts to sell executed by their predecessors to the petitioner
over Lot No. 1253, the latter still had a balance of ₱379,908.96; contrary to the terms of the
Sometime in August 1994, the petitioner, through his attorney-in-fact25 Engr. Aldersen Ilaban, contracts to sell, the petitioner filed an application for the registration of the title over the land
filed an amended complaint26 for consignation against the heirs of Alfredo, namely, Ruperta in his name where he falsely claimed that he was the owner of the property, free of all liens
Mapanso, Florentino Purificacion, Emiliano Purificacion, Serafin Purificacion and Leonedes and encumbrances or claim of any person whatsoever; worse, the defendant induced Marcelo
Purificacion; the heirs of Marciano Realon, namely, Domingo Realon and Francisco Realon; and and his uncle, Alfredo, who were illiterates, to execute separate deeds of sale with real estate
the heirs of Marcelo Realon, namely, Ma. Luz R. Librado, Santiago Realon, Isidro R. Manabo, mortgage in his favor over the property on the promise that the title to the property will be
Rufina B. Mercado and Romel Realon, with the RTC of Imus, Cavite. 27 The complaint was under the names of all the vendors or their heirs as enumerated in the said deeds; the said
docketed as Civil Case No. BCV 94-28. deeds of sale with mortgage were not registered in the Office of the Register of Deeds; they
learned of the existence of OCT No. 0-2348 in the name of the petitioner, through the RTC’s
The petitioner alleged, inter alia, that pursuant to the two (2) deeds of sale with mortgage, he decision in the consignation case; the petitioner had never been in possession of the subject
had already paid Alfredo the total sum of ₱217,046.77, and to Marciano and his siblings, the property; realty taxes of the subject property were still being paid in the name of Roman
sum of ₱180,948.00; having paid a total of ₱397,994.77, his total balance of the purchase price Realon despite the issuance of the said title in the name of the petitioner; and the plans over
of the property was only ₱42,849.23; he learned about the death of Alfredo and Marciano in the property had been approved under the name of Roman Realon.
1993 when some persons claiming to be their heirs wanted to collect the money from him, but
none of them could present any authority to collect for and in behalf of the heirs of the The plaintiffs prayed that after notice and hearing, judgment be rendered in their favor:
vendors. The complaint contained the following prayer:
WHEREFORE, it is most respectfully prayed that, after notice and hearing the Honorable Court
render judgment in favor of the plaintiffs and against the defendants, as follows:
1). Declaring that the ownership of the land described in OCT No. O-2348 belongs to the heirs Marciano, in favor of the petitioner, had been cancelled since his cousin Francisco Realon had
of the late Roman Realon represented by the plaintiffs; written a letter to the petitioner to that effect.39

2). Ordering the defendants to surrender OCT No. O-2348 to effect the cancellation and Francisco Realon testified that being the son of Marciano, he was the great grandson of Roman
transfer thereof to herein plaintiffs, by way of reconveyance of ownership; Realon.40 He pointed out that all the tax declarations of the subject property were in the name
of Roman and that the corresponding taxes were duly paid.41 He, likewise, claimed to have
3). Ordering and authorizing the Register of Deeds for the Province of Cavite to cancel said OCT prepared a letter before Christmas of 1980, canceling the contracts to sell executed and duly
No. O-2348, and to issue a new Certificate of Title in the name of herein plaintiffs, in case of signed by Alfredo and Marciano. However, he could not present any copy of the letter as he
failure of the defendants to surrender to plaintiffs OCT No. O-2348; did not retain any copy thereof.42
4). Ordering the cancellation of the annotation on OCT No. O-2348 reading and stated "and to For his part, Felipe Realon declared that he was one of the heirs of Roman Realon and that he
the remaining balance of ₱129,349.73" and that the new Certificate of Title be free and clear executed a special power of attorney in favor of his brother, Marciano, to deal with their
from such encumbrance; and, inheritance.43 He stressed that the special power of attorney had never been revoked during
the lifetime of Marciano.44
5). Ordering defendants to pay to plaintiffs attorneys’ fees in the amount of ₱50,000.00,
appearance and costs of suit. The petitioner no longer testified and rested his case after the admission of his documentary
evidence.
Plaintiffs pray for such further reliefs just and equitable in the premises.34
On August 13, 1999, the trial court rendered its decision45 in favor of the plaintiffs. The decretal
In his answer to the complaint, the petitioner alleged, among others, that the contracts to sell
portion reads:
had been superseded and modified by the two (2) subsequent deeds of sale with mortgage
executed in his favor on January 8, 1985, in that the purchase price agreed upon had almost ACCORDINGLY, judgment is hereby rendered in favor of the plaintiffs and against the
been paid except for the balance of ₱42,849.23, which he consigned with the court in Civil Case defendant, to wit:
No. BCV 94-28. He also denied making false pretenses in his application for registration of title,
and interposed the following special and affirmative defenses: 1. Declaring that the ownership of the land described in Original Certificate of Title No. 0-2348
belongs to the plaintiffs;
14. That plaintiff has no cause of action against defendant absent any showing that plaintiffs
are authorized to sue in a representative capacity, there being no testate nor intestate 2. Ordering the defendant to surrender Original Certificate of Title No. 0-2348 to the plaintiffs
proceedings for the estate of the deceased whom they represent; to effect its cancellation and transfer it in favor of the latter by way of reconveyance.

15. That the property embraced by OCT 2348 were (sic) alienated during the lifetime of Alfredo 3. Ordering the Register of Deeds for the Province of Cavite to cancel Original Certificate of
and Marciano Realon, consequently, the rights of the plaintiffs or the heirs they represent have Title No. 0-2348 and issue a new one in favor of the plaintiffs;
been lost by such alienation;
4. Ordering the plaintiffs to reimburse the defendant the sum of ₱310,794.27, plus legal
15.1 Plaintiffs have, in fact, no right to sue under the contracts executed by the deceased interest, to be computed from the time it was received by plaintiffs’ predecessor-in-interest;
Alfredo and Marciano Realon during their lifetime. And should they have, the same has already
prescribed; 5. Ordering the defendant to pay plaintiffs attorneys’ fees in the amount of ₱50,000.00 plus
appearance fees of ₱1,000.00 per appearance, plus costs of suit.
16. That the registration proceedings filed by defendant Aron being a proceeding in rem, binds
the whole world so that the decree of registration and issuance of original certificate of title SO ORDERED.46
may not be invalidated or vitiated by any claim or interest of any person.1a\^/phi1.net
The trial court held that the petitioner falsely alleged in his application in LRC Case No. 83-15
17. That defendant had already paid the agreed purchase price including the balance through that he was the owner of the property based on a deed of sale, when in fact under the contracts
consignation (BCV No. 94-28); …35 to sell executed by Alfredo and his nephews, he would acquire title over the property only
upon payment of the full purchase price thereof and by the vendors’ execution of a final deed
Emiliano R. Purificacion testified that he was the great grandson of Roman Realon, being the of sale over the property. The trial court ruled that the petitioner had no right to file the
son of Beatriz Realon, a daughter of Alfredo Realon and Celestina Purificacion.36 He and the application in LRC Case No. 83-15. It held that the plaintiffs continued to be in the possession
other heirs inherited the property and had been paying the realty taxes therefore. 37 He also of the property and paid realty taxes therein under the name of Roman Realon, the original
testified that he had been a tenant on the property since 1970. He claimed that he had not owner of the property.
received any payment of the balance of the purchase price as stipulated in the contracts to
sell38 in favor of the petitioner. He claimed that the contracts to sell executed by Alfredo and The petitioner appealed the decision and assigned the following error, to wit:
THE TRIAL COURT ERRED IN HOLDING THAT THE ALLEGED FRAUD IN THE APPLICATION FOR dismiss on the ground that the plaintiff has no capacity to sue under Section 1(d) of Rule 16 of
THE REGISTRATION OF THE LAND IS THE KIND OF FRAUD CONTEMPLATED BY LAW TO the Rules of Court, that is, that he does not have the representative he claims.54
WARRANT RECONVEYANCE OF THE SUBJECT PROPERTY.47
Section 7, Rule 3 of the Rules of Court reads:
On November 26, 2002, the CA rendered judgment dismissing the appeal.48 The appellate
court agreed with the trial court that the petitioner employed fraud when he filed his SEC. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final
application in LRC Case No. 83-15, and falsely alleged that he was the owner of the property determination can be had of an action shall be joined either as plaintiffs or defendants.
subject thereof.
Thus, the presence of all indispensable parties is a condition sine qua non for the exercise of
The petitioner, thus, filed the instant petition for review on certiorari and assigned the judicial power. It is precisely when an indispensable party is not before the court that the action
following errors: should be dismissed. The plaintiff is mandated to implead all indispensable parties, and the
absence of one renders all subsequent actions of the court null and void for want of authority
I. to act, not only as to the absent parties, but even as to those present. 55 One who is a party to
a case is not bound by any decision of the court; otherwise, he will be deprived of his right to
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT AFFIRMED IN TOTO THE due process.
DECISION OF THE COURT A QUO AND RULED THAT RESPONDENTS ARE ENTITLED TO A
RECONVEYANCE OF THE SUBJECT PROPERTY CONSIDERING THAT THE LATTER FAILED TO The records show that when Roman Realon died intestate on April 4, 1946, he was survived by
PROVE THE EXISTENCE OF FRAUD UPON WHICH THE RELIEF SOUGHT WAS BASED. his son, Alfredo, and his nephews, who were the children of his deceased son, Buenaventura,
namely, Marciano, Joaquino, Florentino, Felipe, Marcelo, Sesinando and Montano, all
II. surnamed Realon. On the other hand, when Alfredo died intestate, he was survived by his
heirs, Ruperta Mapanso, Florentino Purificacion, Emiliano Purificacion, the son of his deceased
ASSUMING, ARGUENDO, THAT RESPONDENTS ARE ENTITLED TO THE RECONVEYANCE OF THE
daughter, Beatriz Realon, Serafin Purificacion and Leonedes Purificacion. Marcelo Realon was
SUBJECT PROPERTY, THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT RULED
survived by his heirs, namely, Ma. Luz Librado, Santiago Realon, Isidro R. Manabo, Rufina B.
THAT RESPONDENTS SHOULD ONLY REIMBURSE PETITIONER THE SUM OF PHP310,794.27,
Mercado and Romel Realon. Only Joaquino, Florentino, Felipe, Sesinando and Montano are
PLUS LEGAL INTEREST.
still alive.
III.
The four (4) respondents herein, who were the plaintiffs in the trial court, sought the
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT AFFIRMED IN TOTO THE nullification of the Contract to Sell in favor of the petitioner executed by Marciano and his
DECISION OF THE COURT A QUO AND RULED THAT RESPONDENTS ARE ENTITLED TO AN brothers, as well as the Contract to Sell executed by Alfredo over the undivided shares in Lot
AWARD OF ATTORNEY’S FEES.49 No. 1253, the deed of sale with mortgage executed by Marciano Realon and his brothers, and
the deed of sale with mortgage executed by Alfredo in favor of the petitioner. They likewise
The petition is granted. sought to nullify OCT No. O-2348 under the name of the petitioner and the reconveyance of
the said lot to the respondents, free from all liens and encumbrances on their allegation that
The settled rule is that every action must be prosecuted or defended in the name of the real the petitioner committed fraud in the execution of the said deeds and in receiving the said
party-in-interest.50Where the action is allowed to be prosecuted or defended by a title. Hence, all the surviving signatories to the said documents, namely, Joaquino, Francisco,
representative acting in a fiduciary capacity, the beneficiary must be included in the title of the Felipe, Sesinando and Montano, all surnamed Realon, and the other surviving heirs of Alfredo
case and shall be deemed to be the real party-in-interest.51 The name of such beneficiaries Realon and Marciano and Marcelo, were indispensable parties as plaintiffs. Moreover, if the
shall, likewise, be included in the complaint.52 trial court rendered judgment against the petitioner, ordering him to convey the property to
Section 4, Rule 8 of the Rules of Court further provides that facts showing the capacity of a the vendors, the latter, as the predecessor-in-interest of the vendors, would have to refund to
party to sue or be sued, or the authority of a party to sue or be sued in a representative capacity the vendee the amount they received from the latter. Hence, the respondents herein should
must be averred in the complaint. In order to maintain an action in a court of justice, the have impleaded them in their complaint. However, the only plaintiffs impleaded in the
plaintiff must have an actual legal existence, that is, he or she or it must be a person in law and complaint were the respondents herein, namely, Francisco, Domingo and Felipe, all surnamed
possessed of a legal entity as either a natural or an artificial person, and no suit can lawfully be Realon and Emiliano Purificacion. The surviving signatories of the assailed deeds and the other
prosecuted in the name of that person. The party bringing suit has the burden of proving the heirs of the deceased vendors were not impleaded as plaintiffs. Without the presence of all
sufficiency of the representative character that he claims. If a complaint is filed by one who the other heirs as plaintiffs, the trial court could not validly render judgment and grant relief
claims to represent a party as plaintiff but who, in fact, is not authorized to do so, such in favor of the respondents; it could, likewise, not rule in favor of the petitioner for the refund
complaint is not deemed filed and the court does not acquire jurisdiction over the complaint. of his payments made to the respondents as the successors-in-interest of the vendors. The
It must be stressed that an unauthorized complaint does not produce any legal failure of the respondents to implead the said signatories and all the other heirs as parties-
effect.53 Corollary, the defendant can assail the facts alleged therein through a motion to plaintiffs constituted a legal obstacle to the trial court and the appellate court’s exercise of
judicial power over the said case, and thereby rendered any orders or judgments made therein
a nullity.56 To reiterate, the absence of an indispensable party renders all subsequent actions In contrast to actual fraud, constructive fraud is construed as such because of its detrimental
of the court null and void for want of authority to act, not only as to the absent parties, but effect upon public interests, as well as public or private confidence in the Torrens System, even
even as to those present.57 Thus, the RTC should have ordered the dismissal of the complaint.58 though the act is not done or committed with an actual design to commit positive fraud or
injury upon other persons.
The Court notes that the respondents even failed to include the names of all the other heirs,
including the signatories to the assailed deeds in the complaint and in the title thereof, and The records show that in his application in LRC Case No. 83-15, the petitioner, who was the
appending thereto a copy of any special power of attorney authorizing the respondents to sue applicant, alleged that he was the owner of the property, having acquired the same based on
in their respective capacity for said heirs. Thus, the petitioner was prevented from questioning the Contract to Sell dated July 31, 1979, executed in his favor by Alfredo and Marciano Realon.
the capacity of the said heirs to sue in their respective capacity either in a motion to dismiss He also alleged that the property was unoccupied and that there was no lien or encumbrance
the complaint or in his answer to the complaint. of any kind whatsoever affecting the said land, and that he had no knowledge of any person
having any interest therein, legal or equitable.
We note that of the four (4) plaintiffs, Domingo Realon failed to sign the certification of non-
forum shopping. On the other hand, the three other plaintiffs who signed the certification The allegation that the petitioner was the owner of the property is admittedly incorrect
failed to append to the complaint a special power of attorney signed by all the surviving because the deeds executed by Marciano and Alfredo Realon on July 31, 1979 were
vendors and other heirs specifically authorizing them to sign the same for and in their behalf. the contracts to sell, under which the petitioner, as buyer, would acquire title over the
This is fatal to the complaint and warrants the dismissal thereof.59 property only upon his payment of the balance of the purchase price thereof on or before May
23, 1980; or the issuance of a torrens title in the names of the vendees and the execution by
In sum then, the trial court should have rendered judgment dismissing the respondents’ the seller of a final deed of sale. Also, the property was tenanted by respondent Emiliano
complaint, and the Court of Appeals should have reversed the appealed decision of the RTC. Purificacion.
Indeed, even if the complaint of the respondents did not suffer from any substantial defects, When he filed his application on November 11, 1983, the petitioner had not yet paid the
the appellate court should still have reversed the trial court’s decision on the ground that the balance of the purchase price of the property. The vendors themselves failed to file an
respondents failed to prove that the petitioner secured OCT No. O-2348 through actual or application for the issuance of a torrens title over the property in their names. Hence, the
extrinsic fraud; and that the Contracts to Sell and Deeds of Sale with Mortgage were petitioner had not yet acquired ownership over the property when he filed his application.
fraudulent. However, the Court believes that there was no intention on the part of the petitioner to
deceive Alfredo and Marciano Realon, and deprive them of their right to be heard on the said
As a ground for the nullification of the decision in LRC Case No. 83-15, and OCT No. O-2348
application because (a) the petitioner appended to his application and adduced in evidence
issued on the basis thereof, fraud must be extrinsic or actual, and not intrinsic. The Court
copies of the contracts to sell in favor of the petitioner executed by Alfredo and Marciano
elaborated on the distinction of the two species of frauds, thus:
Realon, the latter for and in his behalf, and those of this brothers; and (b) Alfredo and Marciano
Fraud may also be either extrinsic or intrinsic. Fraud is regarded as intrinsic where the Realon were served with copies of the notice of hearing of the said application, even testified
fraudulent acts pertain to an issue involved in the original action, or where the acts constituting for the petitioner and affirmed the validity of the said deeds. The respondents, as successors-
the fraud were or could have been litigated therein and is regarded as extrinsic where it in-interest of the vendees, can no longer assail the admissions of Alfredo and Marciano when
prevents a party from having a trial or from presenting his entire case to the court, or where it they testified for the petitioner in LRC Case No. 83-15.61
operates upon matters pertaining not to the judgment itself but to the manner in which it is
As gleaned from the decision of the trial court, the petitioner still had a balance on the
procured, so that there is no fair submission of the controversy. Extrinsic fraud is also actual
purchase price of the property due to the vendees amounting to ₱129,349.73.
fraud, but collateral to the transaction sued upon.
We agree with the appellate court that the RTC erred in its decision in LRC Case No. 83-15
The distinctions are significant because only actual fraud or extrinsic fraud has been accepted
declaring the petitioner, who was the applicant in the RTC, to be the legal owner of the
as grounds for a judgment to be annulled or, as in this case, a decree of registration reopened
property based on the contracts to sell executed in his favor by Alfredo and his nephews.
and reviewed. In the oft-cited Macabingkil v. People’s Homesite and Housing Corporation case,
However, there is no showing in the records that the decision was appealed to the Court of
the Court drew from American jurisprudence stating that "relief has been granted on the
Appeals. Indeed, the decision had become final and executory, and the court had issued a
ground that, by some fraud practiced directly upon the party seeking relief against the
decree based on its decision. In due course, the Register of Deeds issued OCT No. 1248 in favor
judgment or decree, (and) that party has been prevented from presenting all of his case to the
of the petitioner. Hence, even if erroneous, the decision can no longer be altered.
court." The "fraud" contemplated by the law in this case (Section 32, P.D. No. 1529) is actual
Consequently, the respondents were barred by the decision of the RTC in Civil Case No. BCV
and extrinsic, which includes an intentional omission of fact required by law. For fraud to justify
94-28 from impugning the deed of sale with mortgage executed in favor of the petitioner by
a review of a decree, it must be extrinsic or collateral, and the facts upon which it is based have
Alfredo and his nephews on January 8, 1985. In its decision in the said case, the RTC declared:
not been controverted or resolved in the case where the judgment sought to be annulled was
rendered. Persons who were fraudulently deprived of their opportunity to be heard in the At the trial, Engr. Aldersen Ilaban was called to the stand who testified that he is the authorized
original registration case are entitled to a review of a decree or registration. 60 representative of the plaintiff, having been designated as administrator of his properties (Exh.
"E"). He averred that his principal bought the parcel of land in question located at Carmona, On December 14, 1995 – and yearly thereafter until the year 2000 – 7J Maintenance and
Cavite, from its former owners, Alfredo Realon, Marciano Realon, in two (2) separate deeds of Janitorial Services ("7J") entered into a contract with private respondent to provide manpower
sale with mortgage (Exh. "A" & "B"). He further declared that the sellers undertook to deliver for needed maintenance, utility, janitorial and other services to the latter. In compliance with
to the plaintiff the title covering the subject property upon payment of the balance of the the terms and conditions of the service contract, and to accommodate the needs of private
purchase price. However, despite plaintiff’s offer to pay the entire consideration of the sale respondent for personnel/workers to do and perform "piece works," petitioners, among
after plaintiff exerted effort to secure the torrens title over the subject lot, defendants refused others, were hired and assigned to private respondent as repackers or sealers.
to accept the same in view of their demand for a higher consideration. This prompted plaintiff
to write a letter to defendants on October 15, 1993 whereby he tendered payment of the However, either in October, 1999 or on February 9, 2000, private respondent dispensed with
remaining balance (Exh. "C"). Four months thereafter, he again wrote defendants advising their services allegedly due to the expiration/termination of the service contract by respondent
them that if they would still refuse to accept the payment, he would deposit the amount of with 7J. They were either told "hwag muna kayong pumasok at tatawagan na lang kung may
₱42,849.23 directly in open court (Exh. "D").62 gawa"; or were asked to wait "pag magrereport sila sa trabaho." Unfortunately, petitioners
were never called back to work again.
Considering that the respondents, as defendants therein, failed to appeal the decision, it
became final and executory and can no longer be assailed. Aggrieved, petitioners lodged a labor complaint against both private respondent Lotte and 7J,
for illegal dismissal, regularization, payment of corresponding backwages and related
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed decision of the Court employment benefits, 13th month pay, service incentive leave, moral and exemplary damages
of Appeals in CA-G.R. CV No. 68979, and that of the Regional Trial Court, are SET ASIDE. No and attorney’s fees based on total judgment award.4
costs.
On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr., rendered judgment5 declaring 7J
SO ORDERED. as employer of respondents.6 The arbiter also found 7J guilty of illegal dismissal7 and ordered
to reinstate respondents,8 pay P2,374,710.00 as backwages, P713,648.00 as 13th month pay
Republic of the Philippines and P117,000.00 as service incentive leave pay.9
SUPREME COURT
Respondents appealed to the National Labor Relations Commission (NLRC) praying that Lotte
FIRST DIVISION be declared as their direct employer because 7J is merely a labor-only contractor. In its
decision10 dated April 24, 2002, the NLRC found no cogent reason to disturb the findings of the
G.R. No. 166302. July 28, 2005
labor arbiter and affirmed its ruling that 7J is the employer of respondents and solely liable for
LOTTE PHIL. CO., INC., Petitioners, their claims.
vs.
Respondents’ motion for reconsideration was denied by the NLRC in a resolution dated June
ERLINDA DELA CRUZ, LEONOR MAMAUAG, LOURDES CAUBA, JOSEPHINE DOMANAIS,
18, 2002.
ARLENE CAGAYAT, AMELITA YAM, VIVIAN DOMARAIS, MARILYN ANTALAN, CHRISTOPHER
RAMIREZ, ARNOLD SAN PEDRO, MARISSA SAN PEDRO, LORELI JIMENEZ, JEFFREY BUENO, Undaunted, they filed a petition for certiorari in the Court of Appeals11 against the NLRC and
CHRISTOPHER CAGAYAT, GERARD CABILES, JOAN ENRIQUEZ, JOSEPH DE LA CRUZ, NELLY Lotte, insisting that their employer is Lotte and not 7J.
CLERIGO, DULCE NAVARETTE, ROWENA BELLO, DANIEL RAMIREZ, AILEEN BAUTISTA and
BALTAZAR FERRERA, Respondents. Lotte, however, denied that respondents were its employees. It prayed that the petition be
dismissed for failure to implead 7J who is a party interested in sustaining the proceedings in
DECISION court, pursuant to Section 3, Rule 46 of the Revised Rules of Civil Procedure.
YNARES-SANTIAGO, J.: On July 9, 2004, the Court of Appeals reversed and set aside the rulings of the Labor Arbiter
and the NLRC. In its decision, the Court of Appeals declared Lotte as the real employer of
This petition for review on certiorari1
assails the July 9, 2004 decision2
of the Court of Appeals
respondents and that 7J who engaged in labor-only contracting was merely the agent of Lotte.
in CA-G.R. SP No. 72732 and its November 26, 2004 resolution3 denying reconsideration
Respondents who performed activities directly related to Lotte’s business were its regular
thereof.
employees under Art. 280 of the Labor Code. As such, they must be accorded security of tenure
The established facts of this case are as follows: and their services terminated only on "just" and "authorized" causes.

Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a domestic corporation. Lotte’s motion for reconsideration was denied, hence this petition, on the following issues:
Petitioners (respondents herein) are among those who were hired and assigned to the
8. Whether or not petitioner herein had the burden of proof to establish before the
confectionery facility operated by private respondent.
proceedings in the Court of Appeals that 7J Maintenance and Janitorial Service was not a labor-
only contractor.
8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is dismissible for failure to comply Republic of the Philippines
with Section 3, Rule 46 in relation to Section 5, Rule 65 of the 1997 Rules of Civil Procedure.12 SUPREME COURT
Manila
We first resolve the procedural issue raised by petitioner. Lotte asserts that 7J is an
indispensable party and should have been impleaded in respondents’ petition in the Court of SECOND DIVISION
Appeals. It claims that the petition before the Court of Appeals was dismissible for failure to
comply with Section 3,13 Rule 46 in relation to Section 514 of Rule 65 of the Revised Rules of G.R. No. L-34124 April 30, 1985
Civil Procedure.
MR. & MRS. TADEO P. DAEL, petitioners,
Petitioner’s contention is tenable. vs.
THE HON. BERNARDO TEVES, as Presiding Judge, Court of First Instance of Misamis
An indispensable party is a party in interest without whom no final determination can be had Oriental, Branch VIII and DIONISIO EDOROT, VIDAL EDOROT, PONCIANO EDOROT, PETRA
of an action,15 and who shall be joined either as plaintiffs or defendants.16 The joinder of EDOROT, DIOSDADA EDOROT, JUANA EDOROT, and the late HERMINIGILDO EDOROT,
indispensable parties is mandatory.17 The presence of indispensable parties is necessary to represented by his heirs. VICTOR EDOROT, PEDRITO EDOROT and JACOBO
vest the court with jurisdiction, which is "the authority to hear and determine a cause, the right EDOROT, respondents.
to act in a case".18 Thus, without the presence of indispensable parties to a suit or proceeding,
judgment of a court cannot attain real finality.19 The absence of an indispensable party renders
all subsequent actions of the court null and void for want of authority to act, not only as to the
CUEVAS, J.:
absent parties but even as to those present.20
Petition for Review on certiorari of the Order of the Hon. respondent Presiding Judge of the
In the case at bar, 7J is an indispensable party. It is a party in interest because it will be affected
Court of First Instance of Misamis Oriental-Branch VIII, issued on July 27, 1971 in Civil Case No.
by the outcome of the case. The Labor Arbiter and the NLRC found 7J to be solely liable as the
3531 entitled "Mr. & Mrs. Tadeo P. Dael versus Dionisio Edorot, et al", dismissing petitioners'
employer of respondents. The Court of Appeals however rendered Lotte jointly and severally
complaint; and his Honor's order of August 12, 1971 denying petitioners' motion for
liable with 7J who was not impleaded by holding that the former is the real employer of
reconsideration of the said order of dismissal.
respondents. Plainly, its decision directly affected 7J.
On October 19, 1970, petitioners filed with the then Court of First Instance of Misamis Oriental,
In Domingo v. Scheer,21 we held that the non-joinder of indispensable parties is not a ground
a complaint for: "Ownership, Recovery of Possession & Damages" against the private
for the dismissal of an action22 and the remedy is to implead the non-party claimed to be
respondents. The case was docketed in the said court as Civil Case No. 3531.
indispensable.23 Parties may be added by order of the court on motion of the party or on its
own initiative at any stage of the action and/or such times as are just. If the petitioner refuses The complaint, among others, alleged that petitioners, then plaintiffs, are the true and
to implead an indispensable party despite the order of the court, the latter may dismiss the absolute owners in fee simple of a parcel of land with an area of 18,000 square meters, more
complaint/petition for the petitioner/plaintiff’s failure to comply therefor.24 or less, situated at Aplaya, Jasaan, Misamis Oriental, having purchased the same from the late
Esteban Edorot on May 17 1962; and that sometime in the month of February 1964, after the
Although 7J was a co-party in the case before the Labor Arbiter and the NLRC, respondents
death of Esteban Edorot, the defendants (herein private respondents) by means of force,
failed to include it in their petition for certiorari in the Court of Appeals. Hence, the Court of
threats and intimidation surreptitiously occupied the said property.
Appeals did not acquire jurisdiction over 7J. No final ruling on this matter can be had without
impleading 7J, whose inclusion is necessary for the effective and complete resolution of the Private respondents, through counsel, filed their Answer with Counterclaim on January 18,
case and in order to accord all parties with due process and fair play. 1911, claiming that the property in question is owned by them pro-indiviso by inheritance from
their deceased parents.
In light of the foregoing, the Court sees no need to discuss the second issue raised by
petitioner. The issue having been joined, the case was set for pre-trial on various occasions in Branch VIII
of the Court of First Instance of Misamis Oriental then still presided by the Hon. Severo Malvar
WHEREFORE, the July 9, 2004 decision of the Court of Appeals in CA-G.R. SP No. 72732 and the
"to give the parties more chance to arrive at an amicable settlement." 1 In all these pre-trial
November 26, 2004 resolution, are SET ASIDE. Let the case be REMANDED to the Court of
conferences, counsel for private respondents and respondent Vidal Edorot appeared. The
Appeals to include 7J Maintenance and Janitorial Services as an indispensable party to the case
latter had a special power of attorney to appear for defendants Dionisio, Diosdada, Ponciano
for further proceedings.
and Juana. The two other defendants, Petra and Herminigildo, died long before the filing of
SO ORDERED. the complaint.

After June 2, 1971. Judge Severo Malvar was transferred to another judicial district and
respondent Judge Bernardo Teves was appointed to take his place.
On June 29, 1971 when the case was set for pre-trial for the first time before respondent Judge obtaining the relief demanded shall be joined as plaintiffs. All persons who claim an interest in
Bernardo Teves, an Order reading as follows- the controversy or the subject thereof adverse to the plaintiff, or who are necessary to
complete determination or settlement of the question involved therein shall be joined as
Considering that, as manifested before the Court, two of the defendants died before the filing defendants.
of this case; the plaintiffs are hereby given until July 15, 1971 within which to file an amended
complaint to include the heirs or representatives of said deceased defendants, furnishing copy Section 7. Compulsory joinder of indispensable parties.—Parties in interest without whom no
thereof to Atty. Dumlao. final determination can be had of an action shall be joined either as plaintiffs or defendants.

was issued by the respondent Judge. The heirs of deceased defendants in the case at bar being clearly indispensable parties,
respondent Judge acted properly in ordering the amendment of the complaint so as to include
On July 27, 1971, counsel for private respondents filed an Ex- Parte Manifestation, praying that the said heirs as defendants. Since the petitioners failed to comply with this Order, respondent
the case be dismissed pursuant to Section 3, Rule 17 of the Rules of Court for failure of Judge acted within his prerogative in dismissing the complaint 4 pursuant to Section 3, Rule 17
petitioners to comply with the aforequoted order of the Court to file an amended complaint. of the Rules of Court which provides that—
Acting thereon, the trial court on July 27, 1971 issued the order now assailed dismissing the
complaint, which reads- If the plaintiff fails to appear at the time of the trial, or to prosecute his action for unreasonable
length of time, or to comply with these rules or any order of the court the action maybe
As prayed for by the defendants, through counsel, Atty. Florentino Dumlao, Jr. in his ex-parte dismissed upon motion of the defendant or upon the court's own motion. This dismissal shall
manifestation of July 27, 1971, which the Court finds well-founded, this case is hereby have the effect of an adjudication upon the merits unless provided by the court. (Emphasis
dismissed for failure of the plaintiffs to comply with the Order of this Court dated June 29, supplied)
1971. No pronouncement as to costs.
Thus, it has been held that—
SO ORDERED.
Where the Court orders the plaintiff to amend its complaint within a certain period of time in
Petitioners' motion to reconsider the foregoing Order having been denied, they now come order to implead as party defendants one who is not a party to the case but who is an
before Us through the instant petition, contending that respondent Judge - indispensable party, plaintiff's refusal to comply with such order is a ground for the dismissal
of the complaint. (Garchitorena, et al. vs. de los Santos, et al. No. L-17045, June 30, 1962, 115
1. acted without jurisdiction or with grave abuse of discretion in ordering petitioners to file an
Phil. 490, citing Bautista vs. Teodoro, 54 O.G. 619; Dizon vs. Garcia, et al., G.R. No. L-14690,
amended complaint, to include the alleged heirs and/or representatives of respondents Petra
November 29, 1960)
Edorot and Herminigildo Edorot, deceased;
Petitioners now claim that their failure to amend the complaint was due to the fact that private
2. committed a legal error in admitting respondents' ex-parte motion to dismiss Civil Case No.
respondents' counsel failed to inform the Court of the names of the heirs and/or
3531 and in issuing the order dismissing Civil Case No. 3531; and
representatives of the deceased defendants (Herminigildo and Petra Edorot) pursuant to
3. acted without or in excess of its jurisdiction in denying petitioners' motion for Section 16, Rule 3, New Rules of Court which provides-
reconsideration.
Section 16. Duty of attorney upon death incapacity or incompetency of party.—Whenever
In their complaint, petitioners (then plaintiffs) claim that they are the owners of the parcel of a party to a pending case dies, becomes incapacitated, or incompetent, it shall be the duty of
land in question. 2Private respondents, on the other hand, in their Answer controvert such his attorney to inform the court promptly of such death, incapacity or incompetency and to
assertion. 3 They also claim to be the owners and possessors, pro-indiviso by inheritance from give the name and residence of his executor, administrator, guardian or other legal
their deceased parents, of the subject litigated parcel. Necessarily then, deceased defendants representative (Emphasis supplied)
Herminigildo Edorot and Petra Edorot have an undivided interest, right and participation
We find petitioners' reliance on the aforequoted provision as misplaced. Rule 3, Section 16 of
adverse to that of the petitioners' in the property in litigation. Since both of them are already
the Rules applies to a situation where a party (whether plaintiff or defendant) dies after the
dead (Herminigildo died on September 29, 1969 and Petra died on April 5, 1970) even prior to
filing of the complaint and during the pendency of the case. This is not the situation in the case
the filing of the complaint against them in the court below and their interest in the property in
at bar since the two defendants, whose heirs are to be impleaded died even before the filing
question having inured by intestacy to their heirs, the latter thereby became the real parties
of the complaint.
in interest who should be impleaded as defendants without whom no final determination of
Civil Case No. 3531 can be had. Decidedly then they are indispensable parties who should be The other contention of petitioners that there is no more necessity of amending the complaint
compulsory joined as defendants in the instant case. Sections 2 and 7, Rule 3 of the Rules of because allegedly an affidavit of waiver of rights have been executed by one Victor Edorot is
Court provides- also not meritorious. It is not disputed that said Victor Edorot is only one of the heirs of
deceased defendant Herminigildo Edorot. He is not the sole owner of the entire interest of
Section 2. Parties in interest. —Every action must be prosecuted and defended in the name of
Herminigildo. Neither is his waiver binding upon the other heirs of said deceased.
the real party in interest. All persons having an interest in the subject of the action and in
Finally, anent the contention of petitioners that private respondents "ex-parte manifestation" their true agreement on the mortgage, plaintiff Crisanta F. Seno agreed to the execution of a
did not comply with the required notice of motions pursuant to Sections 4, 5 and 6 of Rule 15 Deed of Absolute Sale over the subject property for a consideration of P5,000.00 in favor of
of the Rules of Court, suffice it to state that the said "manifestation" informing the Court that defendant Marcos Mangubat and certain Andres Evangelista and Bienvenido Mangubat on July
petitioners have not complied with the order to amend the complaint, is not a litigated or 17, 1961; 3 that defendant Marcos Mangubat was able to obtain a title in his name and the
contentious motion and may be acted upon even without proof of service on the adverse other alleged vendees Andres Evangelista and Bienvenido Mangubat; that on January 8, 1962
party. 5 In fact, under Section 3 of Rule 17, quoted earlier, the Court can motu proprio or on its Andres Evangelista and Bienvenido Mangubat executed a Deed of Absolute Sale transferring
own motion, dismiss the case for failure to comply with its order. their share in the subject property to defendant Marcos Mangubat; that defendant Marcos
Mangubat was able to obtain a title over the subject property in his name by virtue of this
Upon the foregoing facts, We find that respondent Judge committed no error in dismissing the latter sale; that plaintiff Crisanta F. Seno continued paying defendant Marcos Mangubat the
complaint. However, to avoid injustice, such dismissal should not operate as an adjudication usurious 2% interest per month; that sometime in 1963, when plaintiff Crisanta F. Seno failed
on the merits. 6 to pay the monthly interest of 2%, she was sued for ejectment by defendant Marcos Mangubat
alleging non-payment of rentals; that sometime in the later week of January 1969, plaintiff
WHEREFORE, the lower court's Order of dismissal, which should be understood to be without
Crisanta F. Seno learned that defendant Marcos Mangubat sold the subject property in favor
prejudice, is AFFIRMED. Cost against petitioners.
of spouses Francisco Luzame and Vergita Penaflor for the sum of P10,000.00 on January 14,
SO ORDERED. 1969;4 that defendant spouses Francisco Luzame and Vergita Penaflor bought the property in
bad faith since they had knowledge of the circumstances surrounding the transaction between
Republic of the Philippines plaintiff and defendant Marcos Mangubat; that defendant spouses Luzame filed an ejectment
SUPREME COURT case against plaintiff Crisanta Seno for alleged non-payment of rentals.
Manila
On motion of defendant spouses Luzame and Penaflor, the trial court ordered on October 20,
FIRST DIVISION 1975 the inclusion as defendants of Andres Evangelista and Bienvenido Mangubat on the
ground that they are indispensable parties, on December 29, 1971, plaintiffs filed their
G.R. No. L-44339 December 2, 1987 amended complaint in compliance with the court's order of October 20, impleading Andres
CRISANTA F. SENO, CAROLA SENO SANTOS, MANUEL SENO, JR., DIANA SENO CONDER, Evangelista and Bienvenido Mangubat as defendants.
EMILY SENO and WALTER SENO, plaintiffs, The newly impleaded defendants moved for the dismissal of the case against them on the
vs. ground of prescription which motion was granted by the court in its order of July 3, 1972, the
MARCOS MANGUBAT and Spouses FRANCISCO LUZAME and VERGITA PENAFLOR, ANDRES dispositive portion of which reads —
EVANGELISTA and BIENVENIDO MANGUBAT, defendants.
xxx xxx xxx

Considering that under Art. 1144 of the Civil Code of the Philippines, an action upon a written
GANCAYCO, J.: contract must be brought within 10 years from the time the right of action accrued, and
This is an appeal that was certified to this Court by the Court of Appeals 1 from the order of considering further the opposition of plaintiffs which we find to be justified and meritorious,
the Court of First Instance of Rizal, Branch 1, dated September 29,1972 in Civil Case No. 12205 this Court resolves to dismiss as it hereby dismisses the case only as against defendants Andres
dismissing the action for reformation of instrument and annulment of subsequent sale. 2 Evangelista and Bienvenido Mangubat.

This case stemmed from a complaint filed by plaintiffs on August 29, 1969 seeking 1) the xxx xxx xxx 5
reformation of a Deed of Sale executed in favor of defendant Marcos Mangubat and, 2) the Defendants Luzame and Penaflor in their motion for reconsideration represented by Atty. Jose
annulment of a subsequent sale to defendant spouses Francisco Luzame and Vergita Penaflor Manacop and defendant Marcos Mangubat in his Supplement to motion for reconsideration
of a parcel of land in Barrio Dongalo, Paranaque, Rizal covered by OCT No. 1197 of the Land or in support of Atty. Manacop's motion for reconsideration asked the court a quo to dismiss
Registry of Rizal. the case against all the defendants. The court a quo in its order of September 27, 1972
The material allegations of the complaint so far as they affect the present appeal are to the reconsidered its order of July 3rd and dismissed the case against all the defendants holding
following effect: that plaintiff Crisanta Seno, a widow, approached defendant Marcos that the court is no longer in a position to grant plaintiffs' demands, principally the reformation
Mangubat sometime in 1961 to negotiate with him a mortgage over the subject parcel of land of subject Deed of Absolute Sale.
so she can pay off a previous indebtedness; that she had herein defendant agreed on a The motion for reconsideration filed by the plaintiffs of the foregoing order was denied by the
mortgage for the sum of P15,000.00 with interest of 2% a month payable every month and trial court in its order of January 17, 1973; 6 hence, an appeal was brought before the Court of
that as long as the interest is being paid, the mortgage over the property will not be foreclosed; Appeals praying for the reversal of the orders of the court a quo dated September 27, 1972
that on the assurance of defendant Marcos Mangubat, a practicing lawyer, that he win respect
and January 17, 1973 and for the remand of the case to the court a quo for further equitable mortgage. If it be held that it is an equitable mortgage, then their right would be
proceedings. defeated and they would be held liable for warranty and eviction under the law to Casimiro
Mananghala This being so, it would seem clear that the presence of all the heirs of Vicente
The Court of Appeals certified the instant case to this Court holding that the assignment of Feliciano in this case is indispensable in order that they may protect their interests. They are
errors made by plaintiffs in their appeal raised purely legal questions, to wit — entitled to be heard. They may have a valid defense which may have the effect of defeating
the claim of the plaintiffs. This however, was not done, for some of the heirs of Vicente
1) Are defendants Andres Evangelista and Bienvenido Mangubat indispensable parties in the
Feliciano were not served with summons and consequently have not entered their
case without whom no action can be properly taken thereon?
appearance. This is in violation of Section 7, Rule 3 of the Rules of Court.
2) If they are such, has the action prescribed against them in view of Art. I 1 44, Civil Code?
xxx xxx xxx
3) If they are not, was the dismissal of said defendants a legal grounds for dismissal of the
We, however, find this case inapplicable to the case at bar.
complaint as against the other defendants? and
In the present case, there are no rights of defendants Andres Evangelista and Bienvenido
4) Was the dismissal of the case without a hearing on the merits in accordance with law? 7
Mangubat to be safeguarded if the sale should be held to be in fact an absolute sale nor if the
The first issue We need to resolve is whether or not defendants Andres Evangelista and sale is held to be an equitable mortgage. Defendant Marcos Mangubat became the absolute
Bienvenido Mangubat are indispensable parties. Plaintiffs contend that said defendants being owner of the subject property by virtue of the sale to him of the shares of the aforementioned
more dummies of defendant Marcos Mangubat and therefore not real parties in interest, there defendants in the property. Said defendants no longer have any interest in the subject
is no room for the application of Sec. 7, Rule 3 of the Revised Rules of Court. property. However, being parties to the instrument sought to be reformed, their presence is
necessary in order to settle all the possible issues of tile controversy. Whether the disputed
For the determination of this issue, We find it necessary to consider the distinction between sale be declared an absolute sale or an equitable mortgage, the rights of all the defendants will
indispensable and proper parties as clearly stated in Sections 7 and 8, Rule 3 of the Revised have been amply protected. Defendants-spouses Luzame in any event may enforce their rights
Rules of Court which provide: against defendant Marcos Mangubat.

Sec. 7. Compulsory joinder of indispensable parties. — Parties in interest without whom no In fact the plaintiffs were not after defendants Andres Evangelista and Bienvenido Mangubat
final determination can be had of an action shall be joined either as plaintiffs or defendants. as shown by their non-inclusion in the complaint and their opposition to the motion to include
said defendants in the complaint as indispensable parties. It was only because they were
Sec. 8. Joinder of proper parties. — When persons who are not indispensable but who ought ordered by the court a quo that they included the said defendants in the complaint. The lower
to be parties if complete relief is to be accorded as between those already parties, have not court erroneously held that the said defendants are indispensable parties.
been made parties and are subject to the jurisdiction of the court as to both service of process
and venue, the court shall order them summoned to appear in the action. But the court may, Notwithstanding, defendants Andres Evangelista and Bienvenido Mangubat not being
in its discretion, proceed in the action without making such persons parties, and the judgment indispensable parties but only proper parties, their joinder as parties defendants was correctly
rendered therein shall be without prejudice to the rights of such persons. ordered being in accordance with Sec. 8 of Rule 3.

Under Section 7, indispensable parties must always be joined either as plaintiffs or defendants, We, therefore, need to settle the next issue of whether the action against them has prescribed
for the court cannot proceed without them. Necessary parties 8 must be joined, under Section in view of Art. 1144, Civil Code, which provides:
8, in order to adjudicate the whole controversy and avoid multiplicity of suits. 9
The following actions must be brought ten years from the time the right of action accrues:
Indispensable parties are those with such an interest in the controversy that a final decree
would necessarily affect their rights, so that the courts cannot proceed without their presence. 1) Upon a written contract;
Necessary parties are those whose presence is necessary to adjudicate the whole controversy,
xxx xxx xxx
but whose interests are so far separable that a final decree can be made in their absence
without affecting them. 10 The complaint clearly alleged that the deed of sale executed on July 17, 1961 did not express
the true intention of the parties and should be reformed into the mortgage it actually was.
Defendants cite Alberto vs. Mananghala 11 to support their theory that defendants Andres
Such allegations are binding for purposes of determining the motion to dismiss (which
Evangelista and Bienvenido Mangubat are indispensable parties. Thus —
hypothetically admits the allegations in the complaint). The prescriptive period for such actions
xxx xxx xxx based upon a written contract and for reformation thereof is ten years as provided in Article
1144 of the Civil Code. Such right to reformation is expressly recognized in Article 1365 of the
One of the issues raised by the parties is whether the transactions carried out by and between same Code which provides:
Arcadio Ramos and the deceased Vicente Feliciano is a sale with pacto de retro or simply an
If two parties agree upon the mortgage or pledge of real or personal property, but the Section 3, Rule 16 relating to motion to dismiss , provides that "after hearing, the court may
instrument states that the property is sold absolutely or with a right of repurchase, reformation deny or grant the motion or allow amendment, or may defer the hearing and determination
of the instrument is proper. 12 of the motion until the trial if the ground alleged therein does not appear to be indubitable."

Article 1605 of the Civil Code 13 in conjunction with Article 1604 14 likewise allows the A motion to dismiss on the ground of prescription will be given due course only if the complaint
apparent vendor to ask for the reformation of the instrument. shows upon its face that the action has already prescribed. 18 If it does not so appear, the
determination of the motion to dismiss must be deferred until trial. 19
Plaintiffs argue that:
Under the circumstances of this case, the ground of prescription alleged by aforementioned
A grave and palpable error was committed by the court a quo in holding that the prescriptive defendants was apparent on the face of the complaint. As earlier pointed out in this decision,
period must be counted from the date of execution of the deed of sale on July 17, 1961 up to the action against said defendants has prescribed. The court a quo properly ordered its
the date of filing of the Amended Complaint on December 29, 1971. dismissal as what it originally did in its order of July 3, 1972.
The important reckoning point is the date of filing of the original complaint on August 29, 1969. The plaintiffs now maintain that assuming the action against defendants Andres Evangelista
It has been held that amendments in pleadings do not necessarily expunge those previously and Bienvenido Mangubat had already prescribed, this defense was personal to them and
filed; That amendments made, more so when ordered by the court, relate back to the date of could not legally encompass the position of defendant Marcos Mangubat; that the latter
the original complaint, as in the case at bar, the claim asserted in the amended pleading arose defendant, could be held solely responsible to plaintiffs, having become absolute owner of the
out of the same conduct, transaction or occurrence, and that amendment presupposes the property subject matter of the July 17, 1961 instrument, or in the least he could be held
existence of something to be amended, and, therefore, the tolling of the period should relate accountable for his 1/3 share of the property.20
back to the filing of the pleading sought to be amended (Philippine Independent Church v.
Mateo, et al., L-14793, April 28, 1961). 15 One case which the lower court particularly applied to justify dismissal of the case against the
other defendants was Pillado vs. Francisco. 21 In said case, plaintiffs filed an action for the
In the case of Pangasinan Transportation Co. vs. Philippine Farming Co., Ltd., 16 this Court held annulment of the contract of sale of a certain real estate executed by the Philippine National
that where the original complaint states a cause of action but does it imperfectly and Bank (PNB) in favor of the spouses Estela Francisco and Vivencio Lasala Defendant PNB
afterwards an amended complaint is filed correcting the defect, the plea of prescription will submitted an answer while defendant spouses filed a motion to dismiss on the ground that the
relate to the time of the filing of the original complaint. However, in the case of Aetna complaint stated no cause of action and that plaintiffs have no legal capacity to sue. Said
Insurance Co. vs. Luzon Stevedoring Corporation, 17 We held that this rule would not apply to defendant spouses subsequently filed an additional motion to dismiss on the ground that the
the party impleaded for the first time in the amended complaint. cause of action of plaintiff, if any, had prescribed. The court ordered the dismissal of the
complaint which dismissal became final. Plaintiffs then asked the court to continue the case
In Aetna, the defendant Barber Lines Far East Service was impleaded for the first time in the
against PNB but the latter moved for the dismissal on the ground that the court had lost, or
amended complaint which was filed after the one-year period for prescription. The order of
had been divested of its jurisdiction over the case through the release of the defendant
the lower court dismissing the amended complaint against the said defendant was affirmed by
spouses, who were indispensable parties. The court granted the motion to dismiss holding that
this Court.
defendant spouses who were the vendees were indispensable parties in an action for the
In the instant case, defendants Andres Evangelista and Bienvenido Mangubat were only rescission of the sale. From this order, the plaintiff appealed to this Court. This Court affirmed
impleaded in the amended complaint of December 29, 1971 or ten (10) years, five (5) months the order holding that the indispensable parties having been discharged by the trial court, the
and twelve (12) days from July 17, 1961 the date of execution of the subject Deed of Absolute Court is no longer in a position to grant the plaintiff's demands, principally the revocation of
Sale, clearly more than the ten (10) year prescriptive period. the Deed of Sale in their favor.

Anent the third and fourth issues, the theory of the plaintiffs is that the complaint should not As We have already held that defendants Andres Evangelista and Bienvenido Mangubat are
have been dismiss as against said defendants but instead the court a quo should have not indispensable but proper parties, Pillado cannot therefore, be applied to the case at bar.
proceeded with a trial on the merits because there is an issue of fact appearing on the In that case, the parties discharged were indispensable being the purchasers and the present
pleadings, that is, that defendants Andres Evangelista and Bienvenido Mangubat were mere holders of the subject property. In the instant case, the parties discharged were the original
dummies of defendant Marcos Mangubat. vendees who have since transferred their interest in the subject property to one of the original
co-vendees, and the latter after having been vested with absolute title over the subject
It should be remembereenvenidd that the court a quo dismissed the complaint against property sold the same to defendants spouses Luzame. Whereas in the former case, the court
defendants Andres Evangelista and Bio Mangubat upon their motion to dismiss on the ground was no longer in a position to grant the relief sought by the plaintiffs, in the latter, the trial
of prescription. court may still be able to grant plaintiffs' demands for reformation of the instrument and
annulment of subsequent sale if after trial on the merits, plaintiffs prove their allegations that
defendants Andres Evangelista and Bienvenido Mangubat were in fact were dummies of
Marcos Mangubat and that the sale executed on July 17, 1961 was in reality an equitable The essence of laches is not merely lapse of time. It is essential that there be also acquiescence
mortgage. in the alleged wrong or lack of diligence in seeking a remedy. 27 The doctrine of laches or of
"stale demands" is based on public policy which requires, for the peace of society, the
By the dismissal of the case against defendants Andres Evangelista and Bienvenido Mangubat, discouragement of stale claims and, unlike the statute of limitations not a mere question of
the court a quo had lost jurisdiction over them. We have already pointed out that the joinder time but is principally a question of the inequity or unfairness of permitting a right or claim to
of proper parties is necessary in order to determine all the possible issues of the controversy; be enforced or asserted. 28
but if for some reason or another it is not possible to join them, as when they are out of the
jurisdiction of the Court, the court may proceed without them, and the judgment that may be By the negligence of plaintiffs in asserting their rights for an unreasonable length of time, they
rendered shall be without prejudice to their rights. 22 Hence, notwithstanding the absence of are now forever precluded from enforcing whatever right they may have against defendants.
said defendants, the court could still proceed with the trial of the case as against the remaining Indeed, it is an indicia of the infirmity of their claim.
defendants in accordance with Sec. 8 of Rule 3.
Moreover, as against plaintiff's allegation that the defendant spouses Luzame are purchasers
Nevertheless, the court is constrained to affirm the dismissal of the complaint against all the in bad faith. We hold that the legal presumption of good faith on the part of said defendant
defendants as there is merit in the argument raised by defendants-appellees that plaintiffs are spouses must prevail.
barred by laches to bring suit against them.
Plaintiffs would have Us believe that defendant spouses being their erstwhile neighbors and
Laches (or estoppel by laches) is unreasonable delay in the bringing of a cause of action before friends had knowledge of the circumstances surrounding the transaction between plaintiff
the courts of justice. 23 As defined by this Court, "laches is failure or neglect for an Crisanta Seno and Defendant Marcos Mangubat which therefore makes them purchasers in
unreasonable and unexplained length of time, to do that which by exercising due diligence, bad faith.
could or should have been done earlier, it is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled thereto either has Defendant spouses, however, claim that they came to know of the existence of the original
abandoned it or declined to assert it.24 title of plaintiff Crisanta Seno only when they verified the title to the land in 1969 when it was
being offered to them by co-defendant Marcos Mangubat. They deny that they are neighbors
A perusal of the records shows that from t he time of the execution of the deed of sale on July much less friends of plaintiffs,
17, 1961 to the time of the filing of the present complaint on August 29, 1969 or a period of 8
years, I month and 12 days, plaintiffs never took any step to enforce their rights which they In order that a purchaser of land with a Torrens title may be considered as a purchaser in good
claim to have despite the several opportunities available to them. faith, it is enough that he examines the latest certificate of title which in this case is that issued
in the name of the immediate transferor. 29 The purchaser is not bound by the original
Defendant Marcos Mangubat filed an ejectment suit against plaintiff Crisanta Seno in 1963 and certificate of title but only by the certificate of title of the person from whom he has purchased
this fact was admitted by the plaintiffs in their complaint. For failure of plaintiff to appear in the property. 30
the case, a decision was rendered by the trial court ordering plaintiffs to vacate the subject
property 25 which decision was duly executed. 26 Good faith, while it is always to be presumed in the absence of proof to the contrary, requires
a well-founded belief that the person from whom title was received was himself the owner of
It further appears from the complaint that plaintiffs were well aware of the transfer of the title the land, with the right to convey it. 31 In this regard, a buyer of real estate should exercise
from the name of plaintiff Crisanta Seno to the names of defendants Marcos Mangubat, Andres ordinary care in purchasing land, 32 so that one who purchases real property should make
Evangelista and Bienvenido Mangubat and subsequently to the name of defendant Marcos inquiries about the right of those in possession thereof. 33
Mangubat alone as early as 1963 when the ejectment case was filed against plaintiffs, and also
they did not do anything about it. The well-known rule in this jurisdiction is that a person dealing with a registered land has a
right to rely upon the face of the Torrens Certificate of Title and to dispense with the need of
In January 1969, plaintiffs learned of the sale of the subject property to defendants-spouses inquiring further, except when the party concerned has actual knowledge of facts and
Luzame. but it was only on August 29, 1969 when plaintiffs brought this action and only after circumstances that would impel a reasonably cautious man to make such inquiry. 34
an ejectment case was filed by said defendant spouses against plaintiff Crisanta Seno before
the Municipal Court of Paranaque, Rizal on August 4, 1969. It is true that by the possession of plaintiffs of the subject property, defendant spouses Luzame
should have been put on their guard and should have taken precautionary steps in ascertaining
As defendants-appellees contend, before the nine-year period lapsed, plaintiffs never raised a the interest of the possessors of the land. The defendant spouses did verify the title to the
voice to protest against all these proceedings. They chose to sleep on their rights and to rely property with the Register of Deeds and finding that the latest title was in the name of
on defendants' alleged word that their true agreement would be respected rather than bring defendant Marcos Mangubat, they, had every reason to rely on such title. Besides, there was
their grievances to a court of law. However, when an ejectment case was filed against them the ejectment suit filed by defendant Marcos Mangubat against plaintiff Crisanta Seno which
just when the 10-year prescriptive period for bringing of their suit was nearly over, they finally was decided in favor of the former. The defendant spouses could not be faulted for believing
decided to stake their claim against the defendants. that the possession of the plaintiffs was in the concept of lessee; in fact said defendant spouses
also filed an ejectment suit against plaintiffs.
This Court had occasion to rule that possession by the appellees, either by themselves or 1983, whereby Nicencio Tan Quiombing and Dante Biscocho, as the First Party, jointly and
through their predecessors in interest, if there was such possession at all, would be unavailing severally bound themselves to construct a house for private respondents Francisco and
against the holder of a Torrens Certificate of Title covering the parcels of land now in Manuelita Saligo, as the Second Party, for the contract price of P137,940.00, which the latter
question. 35 agreed to pay.

Thus, where innocent third persons relying on the correctness of the certificate of title issued, On October 10, 1984, Quiombing and Manuelita Saligo entered into a second written
acquire rights over the property, the court cannot disregard such rights and order the total agreement 2 under which the latter acknowledged the completion of the house and undertook
cancellation of the certificate for that would impair public confidence in the certificate of title; to pay the balance of the contract price in the manner prescribed in the said second
otherwise everyone dealing with property registered under the torrens system would have to agreement.
inquire in every instance as to whether the title had been regularly or irregularly issued by the
court. Indeed, this is contrary to the evident purpose of the law. Every person dealing with On November 19, 1984, Manuelita Saligo signed a promissory note for P125,363.50
registered land may safely rely on the correctness of the certificate of title issued therefore representing the amount still due from her and her husband, payable on or before December
and the law will in no way oblige him to go behind the certificate to determine the condition 31, 1984, to Nicencio Tan Quiombing. 3
of the property. Stated differently, an innocent purchaser for value relying on a torrens title
issued is protected . 36 On October 9, 1986, Quiombing filed a complaint for recovery of the said amount, plus charges
and interests, which the private respondents had acknowledged and promised to pay — but
We therefore hold and find that defendants spouses Luzame are purchasers in good faith and
had not, despite repeated demands — as the balance of the contract price for the construction
for value of the questioned property.
of their house. 4
IN VIEW OF THE FOREGOING CONSIDERATIONS, the order of dismissal dated September 29,
1972 and the order denying the motion for reconsideration dated January 13, 1973 of the Instead of filing an answer, the defendants moved to dismiss the complaint on February 4,
Court of First Instance of Rizal, Branch I, are hereby AFFIRMED. No costs. 1987, contending that Biscocho was an indispensable party and therefore should have been
included as a co-plaintiff. The motion was initially denied but was subsequently reconsidered
SO ORDERED. and granted by the trial court. The complaint was dismissed, but without prejudice to the filing
of an amended complaint to include the other solidary creditor as a co-plaintiff. 5
FIRST DIVISION
Rather than file the amended complaint, Quiombing chose to appeal the order of dismissal to
[G.R. No. 93010. August 30, 1990.] the respondent court, where he argued that as a solidary creditor he could act by himself alone
in the enforcement of his claim against the private respondents. Moreover, the amounts due
NICENCIO TAN QUIOMBING, Petitioner, v. COURT OF APPEALS, and Sps. FRANCISCO and were payable only to him under the second agreement, where Biscocho was not mentioned at
MANUELITA A. SALIGO, Respondents. all.cralawnad

M.B. Tomacruz Law Office for Petitioner. The respondent court sustained the trial court and held that it was not correct at that point to
assume that Quiombing and Biscocho were solidary obligees only. It noted that as they had
Jose J. Francisco for Private Respondents. also assumed the reciprocal obligation of constructing the house, they should also be
DECISION considered obligors of the private respondents under the contract. If, as was possible, the
answer should allege a breach of the agreement, "the trial court cannot decide the dispute
CRUZ, J.: without the involvement of Biscocho whose rights will necessarily be affected since he is a part
of the First Party.
May one of the two solidary creditors sue by himself alone for the recovery of amounts due to
both of them without joining the other creditor as a co-plaintiff? In such a case, is the Refuting the petitioner’s second contention, the respondent court declared that the "second
defendant entitled to the dismissal of the complaint on the ground of non-joinder of the agreement referred to the Construction and Service Agreement as its basis and specifically
second creditor as an indispensable party? More to the point, is the second solidary creditor stated that it (was) merely a `part of the original agreement.’" 6
an indispensable party?
The concept of the solidary obligation requires a brief restatement.
These questions were raised in the case at bar, with both the trial and respondent courts ruling
in favor of the defendants. The petitioner is now before us, claiming that the said courts Distinguishing it from the joint obligation, Tolentino makes the following observations in his
committed reversible error and misread the applicable laws in dismissing his complaint. distinguished work on the Civil Code:

This case stemmed from a "Construction and Service Agreement" 1 concluded on August 30, A joint obligation is one in which each of the debtors is liable only for a proportionate part of
the debt, and each creditor is entitled only to a proportionate part of the credit. A solidary right of recourse against Biscocho.
obligation is one in which each debtor is liable for the entire obligation, and each creditor is
entitled to demand the whole obligation. Hence, in the former, each creditor can recover only The respondent court was correct in ruling that the second agreement, which was concluded
his share of the obligation, and each debtor can be made to pay only his part; whereas, in the alone by the petitioner with the private respondents, was based on the original Construction
latter, each creditor may enforce the entire obligation, and each debtor may be obliged to pay and Service Agreement. So too in fact was the promissory note later signed by Manuelita Saligo
it in full. 7 since it was for the amount owing on the construction cost. However, this matter is not really
that important now in view of our conclusion that the complaint could have been filed alone
The same work describes the concept of active solidarity thus: by the petitioner.

The essence of active solidarity consists in the authority of each creditor to claim and enforce The rest of the pieces should easily fall into place.
the rights of all, with the resulting obligation of paying every one what belongs to him; there
is no merger, much less a renunciation of rights, but only mutual representation. 8 Section 7, Rule 3 of the Rules of Court mandates the inclusion of indispensable parties as
follows:
It would follow from these observations that the question of who should sue the private Sec. 7. Compulsory joinder of indispensable parties. — Parties in interest without whom no
respondents was a personal issue between Quiombing and Biscocho in which the spouses final determination can be had of an action shall be joined either as plaintiffs or defendants.
Saligo had no right to interfere. It did not matter who as between them filed the complaint
because the private respondents were liable to either of the two as a solidary creditor for the Indispensable parties are those with such an interest in the controversy that a final decree
full amount of the debt. Full satisfaction of a judgment obtained against them by Quiombing would necessarily affect their rights, so that the court cannot proceed without their presence.
would discharge their obligation to Biscocho, and vice versa; hence, it was not necessary for Necessary parties are those whose presence is necessary to adjudicate the whole controversy,
both Quiombing and Biscocho to file the complaint. Inclusion of Biscocho as a co-plaintiff, but whose interests are so far separable that a final decree can be made in their absence
when Quiombing was competent to sue by himself alone, would be a useless formality. without affecting them. 9 (Necessary parties are now called proper parties under the 1964
amendments of the Rules of Court.) 10
Article 1212 of the Civil Code provides:
According to Justice Jose Y. Feria, "where the obligation of the parties is solidary, either one of
Each one of the solidary creditors may do whatever may be useful to the others, but not the parties is indispensable, and the other is not even necessary (now proper) because
anything which may be prejudice to the latter. complete relief may be obtained from either." 11

Suing for the recovery of the contract price is certainly a useful act that Quiombing could do We hold that, although he signed the original Construction and Service Agreement, Biscocho
by himself alone. need not be included as a co-plaintiff in the complaint filed by the petitioner against the private
respondents. Quiombing as solidary creditor can by himself alone enforce payment of the
Parenthetically, it must be observed that the complaint having been filed by the petitioner, construction costs by the private respondents and as a solidary debtor may by himself alone
whatever amount is awarded against the debtor must be paid exclusively to him, pursuant to be held liable for any possible breach of contract that may be proved by the private
Article 1214. This provision states that "the debtor may pay any of the solidary creditors; but respondents. In either case, the participation of Biscocho is not at all necessary, much less
if any demand, judicial or extrajudicial, has been made by any one of them, payment should indispensable.
be made to him."
WHEREFORE, the petition is GRANTED. The decision of the respondent court dated March 27,
If Quiombing eventually collects the amount due from the solidary debtors, Biscocho may later 1990, is SET ASIDE, and the Regional Trial Court of Antipolo, Rizal, is directed to REINSTATE Civil
claim his share thereof, but that decision is for him alone to make. It will affect only the Case No. 913-A. Costs against the private respondents.
petitioner as the other solidary creditor and not the private respondents, who have absolutely
nothing to do with this matter. As far as they are concerned, payment of the judgment debt to SO ORDERED.
the complainant will be considered payment to the other solidary creditor even if the latter
was not a party to the suit. SECOND DIVISION

G.R. No. 154745 January 29, 2004


Regarding the possibility that the private respondents might plead breach of contract in their
answer, we agree with the petitioner that it is premature to consider this conjecture — for COMMISSIONER ANDREA D. DOMINGO, BUREAU OF IMMIGRATION, Petitioner,
such it is — at this stage. The possibility may seem remote, indeed, since they have actually vs.
acknowledged the completion of the house in the second agreement, where they also agreed HERBERT MARKUS EMIL SCHEER, Respondent.
to pay the balance of the contract price. At any rate, the allegation, if made and proved, could
still be enforceable against the petitioner alone as one of the solidary debtors, subject to his DECISION
CALLEJO, SR., J.: custody of the Bureau until his turnover to the proper authorities in case he has to serve
imprisonment or in case of pendency of civil or criminal administrative action, he shall remain
This is a petition for review under Rule 45 of the Rules of Court, as amended, of the Decision1 of in the custody of the Bureau until such time that his pending cases shall have been decided,
the Court of Appeals in CA-G.R. SP No. 71094 granting the respondent’s petition for certiorari terminated or settled, as the case may be, unless circumstances demand the immediate
and prohibition annulling the order of arrest issued by the petitioner, and permanently implementation of this summary deportation.
enjoining her from deporting the respondent from the Philippines. Through its decision, the
CA virtually reversed the Summary Deportation Order2 of the Board of Commissioners (BOC) ...
and its Omnibus Resolution3 denying the respondent’s Urgent Motion for Reconsideration of
said Order, and enjoining the petitioner from deporting the respondent. SO ORDERED.13

The facts as culled from the records are as follows: In issuing the said order, the BOC relied on the correspondence from the German Vice Consul
on its speculation that it was unlikely that the German Embassy will issue a new passport to
Respondent Herbert Markus Emil Scheer, a native of Ochsenfurt, Germany, was a frequent the respondent; on the warrant of arrest issued by the District Court of Germany against the
visitor of the Philippines. On July 18, 1986, his application for permanent resident status was respondent for insurance fraud; and on the alleged illegal activities of the respondent in
granted.4 The Bureau of Immigration and Deportation (BID) issued in favor of the respondent Palawan.14 The BOC concluded that the respondent was not only an undocumented but an
Alien Certificate of Registration No. B-396907 dated September 16, 19875 and Immigration undesirable alien as well.
Certificate of Residence No. 256789 dated February 24, 1988.6 The Commissioner stated that
the granting of the petition would redound to the benefit of the Filipino people. 7 During his When the respondent was apprised of the deportation order, he forthwith aired his side to
sojourn in the Philippines, the respondent married widowed Edith delos Reyes8 with whom he then BID Commissioner Leandro T. Verceles. The Commissioner allowed the respondent to
had two daughters. They had a son, Herbert Scheer, Jr., but he passed away on November 13, remain in the Philippines, giving the latter time to secure a clearance and a new passport from
1995.9 They resided in Puerto Princesa City, Palawan, where the respondent established and the German Embassy.15 Then Presidential Assistant Teodorico K. Imperial wrote a Testimonial
managed the Bavaria Restaurant. On May 21, 1991, he was appointed Confidential Agent by dated November 24, 1995, in behalf of the respondent addressed to Commissioner Verceles.
then NBI Director Alfredo S. Lim.10 Nonetheless, the respondent, through counsel, filed on December 5, 1995 an Urgent Motion
for Reconsideration of the Summary Deportation Order of the BOC. 16 In his motion, the
In a Letter dated June 29, 1995, Vice Consul Jutta Hippelein informed the Philippine respondent alleged, inter alia, that:
Ambassador to Bonn, Germany, that the respondent had police records and financial liabilities
in Germany.11 1. The elementary rules of due process require notice and opportunity to be heard before a
person can be lawfully deprived of his right (Ute Paterok vs. Bureau of Customs, 193 SCRA 132).
The Department of Foreign Affairs received from the German Embassy in Manila Note Verbale In the instant case, although it is acknowledged that the Honorable Office may conduct
No. 369/95 dated July 26, 1995, informing it that the respondent was wanted by the German summary deportation proceedings, respondent was not given notice and opportunity to be
Federal Police; that a warrant of arrest had been issued against him; and that the respondent heard before said Summary Deportation Order was issued. Respondent’s right to procedural
will be served with an official document requesting him to turn over his German passport to due process was therefore violated. Consequently, the Summary Deportation Order is invalid.
the Embassy which was invalidated on July 2, 1995.12 The Embassy requested the Department
of Foreign Affairs to inform the competent Philippine authorities of the matter. The BOC 2. In issuing, the Summary Deportation Order, this Honorable Office relied on Note Verbal No.
thereafter issued a Summary Deportation Order dated September 27, 1997. The penultimate 369/95 issued by the Embassy of the Federal Republic of Germany, Manila, notifying the
paragraph of the Order reads: Department of Foreign Affairs and this Honorable Office about the warrant of arrest against
respondent for alleged illegal insurance fraud and illegal activities. However, a close scrutiny
WHEREFORE, the foregoing considered, the Board of Commissioners hereby orders the of said note verbal shows that nowhere therein does it state that respondent was involved in
following: insurance fraud or in any kind of illegal activities in Germany or anywhere else in the world,
such as in Palawan. Therefore, the main basis of the Summary Deportation Order is
1. Cancellation of respondent’s permanent residence visa; incompetent as evidence against respondent who is, like every Filipino, presumed to be
innocent until his guilt is proven beyond reasonable doubt.
2. Respondent’s summary deportation and permanent exclusion from the Philippines; and
3. The power to deport alien is a police power measure necessary against undesirable alien
3. Inclusion of his name on the Bureau’s Blacklist.
whose presence in the country is injurious to the public good and domestic tranquility of the
PROVIDED, however that said summary deportation should be held in abeyance in case said country (Board of Commissioner Commission on Immigration vs. De la Rosa, 197 SCRA 853). It
alien has a pending final and executory criminal conviction where the imposed penalty is is respectfully submitted that respondent is not an undesirable alien. He has stayed in the
imprisonment, in which case, he has to serve first such imposed penalty, and/or has a pending Philippines for more or less than (10) years. He has married a Filipina and has three (3) minor
criminal, civil or administrative action and a Hold Departure Order has been issued or that his children. He has established his business in Palawan and he has no police record whatsoever.
presence in said action is indispensable. In such instances, the alien should remain in the Respondent has considered the Philippines his second home and he has nowhere else to go
back to in Germany. Under the circumstances and for humanitarian considerations,
respondent is not an undesirable alien whose deportation is warranted. Likewise, the mere 2. After due hearing, a writ of preliminary and mandatory injunction be correspondingly issued
fact that his passport was not renewed by the German Embassy does not also automatically to maintain the status quo pending resolution of the Petition on the merits.
justify the deportation of respondent.17
3. After hearing, judgment be rendered:
However, the BOC did not resolve the respondent’s motion. The respondent was neither
arrested nor deported. a) Directing and mandating respondent Commissioner and the body she heads to resolve the
Motion for Reconsideration filed in 1995, in his favor, and nullifying or suspending the
Meanwhile, on February 15, 1996, the District Court of Straubing rendered a Decision implementation of any order, oral or written, she may have issued or issue to deport
dismissing the criminal case against the respondent for physical injuries.18 The German petitioner; and
Embassy in Manila, thereafter, issued a temporary passport to the respondent.
b) Making the injunction in petitioner’s favor permanent.
In a Letter dated March 1, 1996, the respondent informed Commissioner Verceles that his
passport had been renewed following the dismissal of the said criminal case. He reiterated his Petitioner likewise prays for such other and further relief as may be deemed just and equitable
request for the cancellation of the Summary Deportation Order dated September 27, 1995 and in the premises, such as directing respondent, if Herbert Scheer is deported before the matter
the restoration of his permanent resident status. 19Subsequently, on March 12, 1996, the is heard on notice, to authorize his return.25
German Embassy issued to the respondent a regular passport, to expire on March 11, 2006.
The BOC ruled that its September 27, 1995 Order had become final and executory after the
The BOC still failed to resolve the respondent’s Urgent Motion for Reconsideration. lapse of one year, citing our rulings in Sy vs. Vivo,26 and Lou vs. Vivo.27 The BOC also held that
Commissioner Verceles did not respond to the respondent’s March 1, 1996 Letter. The it was not competent to reverse the September 27, 1995 Order, citing our ruling in Immigration
respondent remained in the Philippines and maintained his business in Palawan. On March 20, Commissioner vs. Fernandez.28 It declared that the respondent may seek the waiver of his
1997, the Department of Labor and Employment approved his application for Alien exclusion via deportation proceedings through the exceptions provided by Commonwealth Act
Employment Registration Certificate as manager of the Bavaria Restaurant in Puerto Princesa No. 613,29 Section 29 (a)(15), but that his application for the waiver presupposes his prior
City. removal from the Philippines.

In the meantime, petitioner Immigration Commissioner Andrea T. Domingo assumed office. In a parallel development, the respondent procured a letter from the National Bureau of
She wrote the German Embassy and inquired if the respondent was wanted by the German Investigation (NBI) in Puerto Princesa City certifying that he had no pending criminal
police. On April 12, 2002, the German Embassy replied that the respondent was not so record.30 The Puerto Princesa City Philippine National Police (PNP) also issued a certification
wanted.20 At about midnight on June 6, 2002, Marine operatives and BID agents apprehended that the respondent had no pending criminal or derogatory records in the said office.31
the respondent in his residence on orders of the petitioner. He was whisked to the BID Manila
Meanwhile, on June 26, 2002, the Court of Appeals issued a status quo order restraining the
Office and there held in custody while awaiting his deportation. Despite entreaties from the
petitioner from deporting the respondent on a bond of ₱100,000.00. 32 On July 18, 2002, the
respondent’s wife21 and his employees, the petitioner refused to release the respondent.22
BOC issued an Omnibus Resolution dated June 14, 2002, pendente lite denying the
Shocked at the sudden turn of events, the respondent promptly communicated with his respondent’s Urgent Motion for Reconsideration, Motion for Bail/Recognizance, and the
lawyer. The latter filed with the BID a motion for bail to secure the respondent’s temporary Letter dated June 11, 2002. The decretal portion of the resolution reads:
liberty. On June 11, 2002, the respondent’s counsel filed with the Court of Appeals a petition
Wherefore, in view of the foregoing circumstances, we deny the prayers of the Urgent Motion
for certiorari, prohibition and mandamus with a prayer for temporary restraining order and
for Reconsideration of 5 December 1995, the Motion for Bail/Recognizance dated 7 June 2002
writ of preliminary injunction, to enjoin the petitioner from proceeding with the respondent’s
and the Letter of 11 June 2002. Further, we hereby order the following:
deportation.23 The respondent (petitioner therein) alleged, inter alia, that his arrest and
detention were premature, unjust, wrongful, illegal and unconstitutional, effected without 1. Subject to the submission of appropriate clearances, the summary deportation order the
sufficient cause and without jurisdiction or with grave abuse of discretion. He asserted that respondent Herbert Scheer, German, under BI Office Memorandum Order No. 34 (series of
there was no speedy remedy open to him in the ordinary course of law 24 and that his Urgent 1989) and the BOC Summary Deportation Order of 27 September 1995;
Motion for Reconsideration of the Summary Deportation Order of the BOC had not yet been
resolved despite the lapse of more than six years. The respondent averred that he was a fully 2. Permanent exclusion of Herbert Scheer from the Philippines under C.A. No. 613, Section 40
documented alien, a permanent resident and a law-abiding citizen. He, thus, prayed as follows: (a)(15).

PRAYER 3. Inclusion of the name of Herbert Scheer in the Immigration Black List; and

WHEREFORE, it is most respectfully prayed of this Honorable Court that: 4. Forfeiture of the bail bond, if any, of Herbert Scheer under C.A. No. 613, Section 40 (a)(15).

1. Upon the filing of this Petition, this Honorable Court issue a Temporary Restraining Order to ...
enjoin respondent Commissioner from enforcing any order to deport petitioner;
IT IS SO ORDERED.33 3. The Temporary Restraining Order of June 26, 2002 be converted into a permanent injunction
or writ of prohibition.
During the hearing of the respondent’s plea for a writ of preliminary mandatory injunction
before the CA on July 22, 2002, the Office of the Solicitor General (OSG) manifested that the Petitioner likewise prays for such other and further relief as may be deemed just and equitable
State had no opposition to the respondent’s re-entry and stay in the Philippines, provided that in the premises.35
he leave the country first and re-apply for admission and residency status with the assurance
that he would be re-admitted.34 The respondent’s counsel manifested to the appellate court Surprisingly, the respondent’s counsel received on July 24, 2003 a Letter from the petitioner
that he had just been informed by the OSG of the Omnibus Resolution of the BOC dated June dated July 16, 2002 stating that, "the BOC was in the course of reviewing the deportation case
14, 2002. against Mr. Scheer, and that its findings would be given in due time."36

In her Comment on the Petition, the petitioner (the respondent therein) alleged, inter alia, the On August 20, 2002, the Court of Appeals rendered a Decision in favor of the respondent
following: granting his petition for certiorari and prohibition and permanently enjoining the petitioner
from deporting the respondent. The decretal portion of the Decision reads:
1) that the BOC was an indispensable party to the petition;
WHEREFORE, premises considered, the petitions for certiorari and prohibition are hereby
2) the petitioner’s failure to implead the BOC warranted the denial of the petition; GRANTED. Accordingly, any order, oral or written, issued by respondent Commissioner
Domingo against petitioner, in relation to his deportation, is hereby ANNULLED, and
3) the allowance by then Immigration Commissioner Leandro Verceles for the petitioner respondent Commissioner Domingo is hereby permanently enjoined/prohibited from
therein to renew his passport and secure clearances, even if proved, was not binding on the deporting petitioner, in so far as this case is concerned.
BOC;
It is likewise ordered that petitioner be released from his confinement/detention in the Bureau
4) the September 27, 1995 Order of the BOC was already executory when the respondent filed of Immigration UNLESS there is/are fresh new grounds/cases that will warrant his continued
her petition in the CA; detention.
5) the German Embassy’s issuance of a new passport did not legalize the respondent’s stay in SO ORDERED.37
this country, which became illegal on July 2, 1995 when his passport expired;
The Court of Appeals ruled that the German Embassy’s subsequent issuance of passport to the
6) the respondent therein did not act with abuse of discretion in causing the arrest and respondent before the BOC’s issuance of its Omnibus Resolution had mooted the September
detention of the respondent based on the BOC’s Summary Deportation Order; and 27, 1995 Summary Deportation Order, as well as the arrest and detention of the respondent.
According to the court, it made no sense to require the respondent to leave the country and
7) the BOC did not act with grave abuse of discretion in issuing its Summary Deportation Order
thereafter re-apply for admission with the BOC. Furthermore, since the grounds cited by the
and Omnibus Resolution and such order and resolution were not mooted by the German
BOC in its Summary Deportation Order no longer existed, there was no factual and legal basis
Embassy’s issuance of a new passport in favor of the respondent.
to disqualify the respondent from staying in the country.
In view of the Omnibus Resolution of the BOC, the respondent (petitioner therein) in his
On the issue of whether the members of the BOC were indispensable parties, the CA ruled as
Memorandum prayed for the nullification of the BOC’s Order, as well as its Omnibus Resolution
follows:
denying his Urgent Motion for Reconsideration considering that with the issuance of a new
passport, there was no more basis for his deportation, thus: a) There are quite a number of cases in relevant jurisprudence wherein only the Immigration
Commissioner was impleaded to decide whether an alien may stay or be deported, such as in
RELIEF
the case of Vivo vs. Arca (19 SCRA 878) and Vivo vs. Cloribel (22 SCRA 159).
WHEREFORE, it is most respectfully prayed of this Honorable Court that:
b) In the case of Caruncho III vs. COMELEC (315 SCRA 693), it was pronounced that: "Ordinarily,
1. Upon the filing of this Memorandum, this Honorable Court forthwith direct and authorize the nonjoinder of an indispensable party or the real party interest is not by itself a ground for
the immediate release of petitioner, even on undersigned’s recognizance, until further orders the dismissal of the petition. The court before which the petition is filed must first require the
from this Honorable Court; joinder of such party. It is the noncompliance with said order that would be a ground for the
dismissal of the petition."
2. The Summary Deportation Order of September 27, 19[9]5, affirmed by respondent allegedly
on June 14, 2002 and made known only yesterday, be nullified to the extent that it directs the thus, c) respondent may be estopped for not raising such issue earlier.38
deportation of petitioner, who has removed the very basis of said Order of not having a valid
Aggrieved, the respondent therein, now the petitioner, through the Office of the Solicitor
passport, and that the Resolution of June 14, 2002 be nullified in toto; and,
General, appealed to us for relief. The petitioner contends that the Court of Appeals erred on
a question of law in granting the respondent’s petition in CA-G.R. SP No. 71094.39
In support of his contention, the Solicitor General has submitted the following arguments: In Caruncho III v. Comelec, it was held that-

I. THE WRIT OF MANDAMUS DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF [O]rdinarily, the nonjoinder of an indispensable party or real party in interest is not by itself a
IMMIGRATION TO RESOLVE RESPONDENT’S URGENT MOTION FOR RECONSIDERATION OF THE ground for the dismissal of the petition. The court before which the petition is filed must first
SUMMARY DEPORTATION ORDER, CONSIDERING THAT IT IS THE BOARD OF COMMISSIONERS, require the joinder of such party. It is the noncompliance with said order that would be a
AND NOT THE COMMISSIONER ALONE, WHICH HAS AUTHORITY TO MAKE SAID RESOLUTION. ground for the dismissal of the petition.

II. THE WRIT OF CERTIORARI DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF But even as the Court of Appeals did not require respondent of such joinder of parties, the
IMMIGRATION, CONSIDERING THAT IT IS THE BOARD OF COMMISSIONERS, AND NOT THE respondent, in fact, begged leave, ad cautelam, in its Reply Memorandum dated July 31, 2002
COMMISSIONER ALONE, WHICH ISSUED THE SUMMARY DEPORTATION ORDER AND THE to implead the Board which speaks with a single voice anyway in this case, and therefore, no
OMNIBUS RESOLUTION. claim can be made that a valid point of view has not been heard… 42

III. THE WRIT OF PROHIBITION DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU Moreover, according to the respondent, the petitioner is clearly the BID’s chosen
OF IMMIGRATION, PROHIBITING THE IMPLEMENTATION OF THE SUMMARY DEPORTATION instrumentality for the relevant purpose. What the respondent ultimately questioned are the
ORDER AND THE OMNIBUS RESOLUTION, CONSIDERING THAT THE BOARD OF acts or orders of the petitioner for the arrest and immediate deportation of the respondent by
COMMISSIONERS WAS NOT IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R. way of implementing the BOC’s Summary Deportation Order.
SP NO. 71094.
By way of reply, the Office of the Solicitor General asserted that the Summary Deportation
IV. ASSUMING BUT WITHOUT ADMITTING THAT THE BOARD OF COMMISSIONERS WAS Order and Omnibus Resolution were collegial actions of the BOC and not of the petitioner
PROPERLY IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094, alone. Although its Chairperson, the petitioner, is merely a member thereof, her decisions and
NEVERTHELESS, THE SUMMARY DEPORTATION ORDER AND THE OMNIBUS RESOLUTION WERE actions are still subject to the collective will of the majority.43
NOT ISSUED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION. The Ruling of the Court
The BOC is an
V. FURTHER ASSUMING BUT WITHOUT ADMITTING THAT THE BOARD OF COMMISSIONERS Indispensable
WAS PROPERLY IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R. SP NO. Party
71094, THE COMMISSIONER OF THE BUREAU OF IMMIGRATION DID NOT ACT WITHOUT OR IN
EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR We agree with the petitioner’s contention that the BOC was an indispensable party to the
EXCESS OF JURISDICTION IN IMPLEMENTING THE SUMMARY DEPORTATION ORDER AND THE respondent’s petition for certiorari, prohibition and mandamus in the Court of Appeals. The
OMNIBUS RESOLUTION.40 respondent was arrested and detained on the basis of the Summary Deportation Order of the
BOC. The petitioner caused the arrest of the respondent in obedience to the said Deportation
Elucidating on his first three arguments, the petitioner maintains that the respondent’s Order. The respondent, in his Memorandum, prayed that the CA annul not only the Summary
petition for certiorari, prohibition and mandamus before the Court of Appeals should have Deportation Order of the BOC but also the latter’s Omnibus Resolution, and, thus, order the
been dismissed because he failed to implead the real party-in-interest as mandated by Rule 3, respondent’s immediate release. The respondent also prayed that the CA issue a writ of
Section 7 of the Rules of Court, as amended; in this case, the BOC. According to the Solicitor mandamus for the immediate resolution of his Urgent Motion for Reconsideration. The said
General, this was a fatal procedural error. The inclusion of the BOC as respondent in the case motion had to be resolved by the BOC as the order sought to be resolved and reconsidered
was necessary in order that its actions could be directly attacked and for the court to acquire was issued by it and not by the petitioner alone. The powers and duties of the BOC may not be
jurisdiction over it. The fact that Immigration Commissioner Andrea T. Domingo was impleaded exercised by the individual members of the Commission.44
as the sole respondent was not enough, as she is only one of the four Commissioners.
Furthermore, the assailed Orders were issued by the Board, and not by the Immigration Section 7, Rule 3 of the Rules of Court, as amended, requires indispensable parties to be joined
Commissioner alone. as plaintiffs or defendants. The joinder of indispensable parties is mandatory. Without the
presence of indispensable parties to the suit, the judgment of the court cannot attain real
The respondent counters that the petitioner is already estopped from raising this issue. He finality.45 Strangers to a case are not bound by the judgment rendered by the court.46 The
argues that - absence of an indispensable party renders all subsequent actions of the court null and void.
Lack of authority to act not only of the absent party but also as to those present.47 The
In quite a number of jurisprudence, only the Immigration Commissioner is impleaded to decide responsibility of impleading all the indispensable parties rests on the petitioner/plaintiff.48
whether an alien may stay here or not. The bottom line is petitioner, head of the Bureau of
Immigration, was more than fully heard on its institutional position, a Bureau which speaks However, the non-joinder of indispensable parties is not a ground for the dismissal of an action.
with a single voice in this case. She is in estoppel for not raising the issue earlier, either in a Parties may be added by order of the court on motion of the party or on its own initiative at
timely Comment or during the oral argument…41 any stage of the action and/or such times as are just. 49 If the petitioner/plaintiff refuses to
implead an indispensable party despite the order of the court, the latter may dismiss the
complaint/petition for the petitioner/plaintiff’s failure to comply therefor.50 The remedy is to according to the regulations so established, except in so far as the judicial department has
implead the non-party claimed to be indispensable.51 In this case, the CA did not require the been authorized by treaty or by statute, or is required by the Constitution to intervene. 59 The
respondent (petitioner therein) to implead the BOC as respondent, but merely relied on the judicial department cannot properly express an opinion upon the wisdom or the justice of the
rulings of the Court in Vivo v. Arca,52 and Vivo v. Cloribel.53 The CA’s reliance on the said rulings measures executed by Congress in the exercise of the power conferred on it,60 by statute or as
is, however, misplaced. The acts subject of the petition in the two cases were those of the required by the Constitution. Congress may, by statute, allow the decision or order of the
Immigration Commissioner and not those of the BOC; hence, the BOC was not a necessary nor Immigration Commissioner or the BOC to be reviewed by the President of the Philippines or
even an indispensable party in the aforecited cases. by the courts, on the grounds and in the manner prescribed by law.

The Non-joinder of an Article VIII, Section 1 of the Constitution has vested judicial power in the Supreme Court and
the lower courts such as the Court of Appeals, as established by law. Although the courts are
Indispensable Party is not without power to directly decide matters over which full discretionary authority has been
a Ground for the Dismissal delegated to the legislative or executive branch of the government and are not empowered to
of the Petition execute absolutely their own judgment from that of Congress or of the President, 61 the Court
may look into and resolve questions of whether or not such judgment has been made with
The Court may be curing the defect in this case by adding the BOC as party-petitioner. The
grave abuse of discretion, when the act of the legislative or executive department violates the
petition should not be dismissed because the second action would only be a repetition of the
law or the Constitution. In Harvy Bridges v. I.F. Wixon,62 the United States Federal Supreme
first.54 In Salvador, et al., v. Court of Appeals, et al.,55 we held that this Court has full powers,
Court reversed an Order of Deportation made by the Attorney General for insufficiency of
apart from that power and authority which is inherent, to amend the processes, pleadings,
evidence and for "improper admission of evidence." In Nging v. Nagh,63 the United States Court
proceedings and decisions by substituting as party-plaintiff the real party-in-interest. The Court
of Appeals (9th Circuit Court) held that conclusions of administrative offices on the issues of
has the power to avoid delay in the disposition of this case, to order its amendment as to
facts are invulnerable in courts unless when they are not rendered by fair-minded men; hence,
implead the BOC as party-respondent. Indeed, it may no longer be necessary to do so taking
are arbitrary. In Toon v. Stump,64 the Court ruled that courts may supervise the actions of the
into account the unique backdrop in this case, involving as it does an issue of public
administrative offices authorized to deport aliens and reverse their rulings when there is no
interest.56 After all, the Office of the Solicitor General has represented the petitioner in the
evidence to sustain them. When acts or omissions of a quasi-judicial agency are involved, a
instant proceedings, as well as in the appellate court, and maintained the validity of the
petition for certiorari or prohibition may be filed in the Court of Appeals as provided by law or
deportation order and of the BOC’s Omnibus Resolution. It cannot, thus, be claimed by the
by the Rules of Court, as amended.65
State that the BOC was not afforded its day in court, simply because only the petitioner, the
Chairperson of the BOC,57 was the respondent in the CA, and the petitioner in the instant In this case, the respondent alleges that the petitioner acted arbitrarily, contrary to law and
recourse. In Alonso v. Villamor,58 we had the occasion to state: with grave abuse of discretion in causing his arrest and detention at a time when his Urgent
Motion for Reconsideration of the BOC’s Summary Deportation Order had yet to be resolved.
There is nothing sacred about processes or pleadings, their forms or contents.1âwphi1 Their
There was no factual or legal basis for his deportation considering that he was a documented
sole purpose is to facilitate the application of justice to the rival claims of contending parties.
alien and a law-abiding citizen; the respondent, thus, prayed for a writ of mandamus to compel
They were created, not to hinder and delay, but to facilitate and promote, the administration
the petitioner, the Chairperson of the BOC, to resolve the said motion. The petition before the
of justice. They do not constitute the thing itself, which courts are always striving to secure to
CA did not involve the act or power of the President of the Philippines to deport or exclude an
litigants. They are designed as the means best adapted to obtain that thing. In other words,
alien from the country. This being so, the petition necessarily did not call for a substitution of
they are a means to an end. When they lose the character of the one and become the other,
the President’s discretion on the matter of the deportation of the respondent with that of the
the administration of justice is at fault and courts are correspondingly remiss in the
judgment of the CA.
performance of their obvious duty.
Irrefragably, the CA had jurisdiction over the petition of the respondent.
The CA had Jurisdiction
The BOC Committed a Grave
Over the Petition for
Abuse of Discretion Amounting
Certiorari, Prohibition
To Lack or Excess of Jurisdiction
and Mandamus
In Issuing its Summary Deportation
We do not agree with the petitioner’s contention that the issue before the CA, as to the power Order and Omnibus Resolution; The
of the President to determine whether an alien may remain or be deported from the Petitioner Committed a Grave Abuse
Philippines, is beyond the appellate court’s competence to delve into and resolve. The Of Her Discretion Amounting to
contention of the petitioner is based on a wrong premise. Lack or Excess of Jurisdiction in
Causing the Arrest and Detention
The settled rule is that the authority to exclude or expel aliens by a power affecting Of The Private Respondent
international relation is vested in the political department of the government, and is to be
regulated by treaty or by an act of Congress, and to be executed by the executive authority
On the Solicitor General’s fourth and fifth arguments, we are convinced that the BOC Under paragraphs 4 and 5 of Office Memorandum Order No. 34, an alien cannot be deported
committed a grave abuse of discretion amounting to excess or lack of jurisdiction in issuing its unless he is given a chance to be heard in a full deportation hearing, with the right to adduce
Summary Deportation Order and Omnibus Resolution, and that the petitioner committed evidence in his behalf, thus:
grave abuse of discretion amounting to excess or lack of jurisdiction in causing the arrest and
detention of the private respondent. 4. All other cases shall be tried in full deportation hearing, with due observance of the pertinent
provisions of Law Instruction No. 39.
The settled rule is that the entry or stay of aliens in the Philippines is merely a privilege and a
matter of grace; such privilege is not absolute nor permanent and may be revoked. However, 5. In all cases, the right of the alien to be informed of the charges against him, to be notified
aliens may be expelled or deported from the Philippines only on grounds and in the manner of the time and place of hearing, when necessary, to examine the evidence against him, and
provided for by the Constitution, the Immigration Act of 1940, as amended, and administrative to present evidence in his own behalf, where appropriate, shall be observed.
issuances pursuant thereto. In Mejoff v. Director of Prisons,66 we held, thus:
The respondent was not afforded any hearing at all. The BOC simply concluded that the
Moreover, by its Constitution (Art. II, Sec. 3) the Philippines "adopts the generally accepted respondent committed insurance fraud and illegal activities in Palawan without any evidence.
principles of international law a part of the law of Nation." And in a resolution entitled The respondent was not afforded a chance to refute the charges. He cannot, thus, be arrested
"Universal Declaration of Human Rights" and approved by the General Assembly of the United and deported without due process of law as required by the Bill of Rights of the Constitution.
Nations of which the Philippines is a member, at its plenary meeting on December 10, 1948, In Lao Gi v. Court of Appeals,67 we held that:
the right to life and liberty and all other fundamental rights as applied to all human beings
Although a deportation proceeding does not partake of the nature of a criminal action,
were proclaimed. It was there resolved that "All human beings are born free and equal in
however, considering that it is a harsh and extraordinary administrative proceeding affecting
degree and rights" (Art. 1); that "Everyone is entitled to all the rights and freedom set forth in
the freedom and liberty of a person, the constitutional right of such person to due process
this Declaration, without distinction of any kind, such as race, color, sex, language, religion,
should not be denied. Thus, the provisions of the Rules of Court of the Philippines particularly
political or other opinion, nationality or social origin, property, birth, or other status" (Art. 2);
on criminal procedure are applicable to deportation proceedings.
that "Every one has the right to an effective remedy by the competent national tribunals for
acts violating the fundamental rights granted him by the Constitution or by law" (Art. 8); that It must be noted that the respondent was a permanent resident before his passport expired
"No one shall be subjected to arbitrary arrest, detention or exile" (Art. 9); etc. on July 2, 1995. In Chew v. Colding,68 the United States Federal Supreme Court ruled:
In this case, the BOC ordered the private respondent’s deportation on September 27, 1995 It is well established that if an alien is a lawful permanent resident of the United States and
without even conducting summary deportation proceedings. The BOC merely relied on the remains physically present there, he is a person within the protection of the Fifth Amendment.
June 29, 1995 Letter of the German Vice Consul and of the German Embassy’s Note Verbale He may not be deprived of his life, liberty or property without due process of law. Although it
No. 369/95 dated July 26, 1995. It issued the Summary Deportation Order on September 27, later may be established, as respondents contend, that petitioner can be expelled and
1995 allegedly under paragraph 3 of Office Memorandum Order No. 34 dated August 21, 1989 deported, yet before his expulsion, he is entitled to notice of the nature of the charge and a
which reads: hearing at least before an executive or administrative tribunal. Although Congress may
prescribe conditions for his expulsion and deportation, not even Congress may expel him
3. If a foreign embassy cancels the passport of the alien or does not reissue a valid passport to
without allowing him a fair opportunity to be heard.
him, the alien loses the privilege to remain in the country, under the Immigration Act, Sections
10 and 15 (Schonemann vs. Santiago, et al., G.R. No. 81461, 30 May 1989). The automatic loss As Mr. Justice Murphy said in his concurring opinion in Bridges v. Wixon:69
of the privilege obviates deportation proceedings. In such instance, the Board of
Commissioners may issue summary judgment of deportation which shall be immediately The Bill of Rights belongs to them as well as to all citizens. It protects them as long as they
executory. reside within the boundaries of our land. It protects them in the exercise of the great individual
rights necessary to a sound political and economic democracy.
However, as gleaned from the Summary Deportation Order, the respondent was ordered
deported not only because his passport had already expired; the BOC speculated that the According to Vattal,70 an alien who is a permanent resident in a country is a member of the
respondent committed insurance fraud and illegal activities in the Philippines and would not, new society, at least as a permanent inhabitant, and is a kind of citizen of inferior order from
thus, be issued a new passport. This, in turn, caused the BOC to conclude that the respondent the native citizens; but is, nevertheless, limited and subject to the society, without participating
was an undesirable alien. Section 37(c) of Commonwealth Act No. 613, as amended, provides in all its advantages. Sir Robert Philconse called them "de facto," though not de jure citizens of
that: the country of their domicile.71

No alien shall be deported without being informed of the specific grounds for deportation or Such permanent resident72 may be classified as a "denizen," a kind of middle state between
without being given a hearing under rules of procedure to be prescribed by the Commissioner alien and a natural-born subject and partakes of both. Paraphrasing Justice Brewer in his
of Immigration. dissenting opinion in Fong Yue Ting v. United States,73 when the right to liberty and residence
is involved, some other protection than the mere discretion of the petitioner or the BOC is mentioned in Note Verbale No. 369/95 had been lifted, and that the respondent was not
required. We recall the warning of the United States Supreme Court in Boyd v. United States: 74 involved in any illegal activities in Germany. The criminal case against the respondent for
physical injuries, which does not involve moral turpitude, was dismissed by the German District
Illegitimate and unconstitutional practices get their first footing in that way, namely, by silent Court. Furthermore, there was no evidence of insurance fraud against the respondent.
approaches and slight deviations from legal modes of procedure. This can only be obviated by
adhering to the rule that constitutional provisions for the security of person and property The BOC issued its Summary Deportation Order without affording the respondent the right to
should be liberally construed. A close and literal construction deprives them of half their be heard on his motion and adduce evidence thereon. It merely concluded that the respondent
efficacy, and leads to a gradual depreciation of the right, as if it consisted more in sound than was involved in "illegal activities in Palawan." What made matters worse was that the BOC
in substance. It is the duty of the courts to be watchful for the constitutional rights of the indulged in sheer speculation, that the German Embassy is unlikely to issue a new passport to
citizen, and against any stealthy encroachments thereon. Their motto should be obsta the respondent. The deportation of aliens should not be based on mere speculation or a mere
principiis. product of procrastinations as in this case. As it turned out, the German Embassy re-issued the
respondent’s passport; he was issued a temporary passport, and, thereafter, a regular
In sum, the arrest and detention of the respondent and his deportation under the Summary passport, yet to expire on March 12, 2006. The petitioner cannot feign ignorance of this matter
Deportation Order of the BOC for insurance fraud and illegal activities in Palawan violated his because the respondent himself, six years before he was arrested, informed then Immigration
constitutional and statutory rights to due process. Commissioner Verceles in a Letter dated March 1, 1996. The respondent’s letter forms part of
the records of the BOC. There is no evidence on record that the respondent committed any
The Respondent’s Arrest and
illegal activities in Palawan. He was even designated as special agent of the NBI, and was, in
Detention was Premature,
fact, issued clearances by the PNP and the NBI no less. Despite all the foregoing, the petitioner
Unwarranted and Arbitrary
ordered and caused the arrest and detention of the respondent.
We agree that the Immigration Commissioner is mandated to implement a legal and valid
What is most nettlesome is the apparent antedating of the BOC Omnibus Resolution. The
Summary Deportation Order within a reasonable time. But in this case, the arrest of the
records show that the petitioner sought to assuage the respondent’s concern on the belated
respondent in his house, at near midnight, and his subsequent detention was premature,
resolution of his pending urgent motion for reconsideration in a Letter to the latter’s counsel
unwarranted and arbitrary. Like a thunderbolt in the sky, the BID agents and marines arrested
dated July 18, 2002 in which the petitioner assured the respondent that the BOC will provide
the respondent on June 6, 2002, on orders of the petitioner based on the September 27, 1995
him of its action on the said motion:
Summary Deportation Order. Under the basic rudiments of fair play and due process, the
petitioner was required to first resolve the respondent’s Urgent Motion for Reconsideration of Dear Atty. Sagisag,
the said Order, which was filed more than six years before or on December 5, 1995.
We respond to your letter of 17 June 2002 by informing you that the case of Mr. Herbert Scheer
It may be argued that respondent’s filing of an Urgent Motion for Reconsideration did not ipso is being evaluated by the Board of Commissioners (BOC). The BOC will provide you of the
facto suspend the efficacy of the BOC’s deportation order. However, such an argument cannot results of its collegial action in due time.
be sustained in this case because of the extant and peculiar factual milieu. It bears stressing
that more than six years had elapsed, from the time the Summary Deportation Order was Very truly yours,
issued, until the respondent was finally arrested. Supervening facts and circumstances
rendered the respondent’s arrest and detention unjust, unreasonable, barren of factual and (Sgd.) ANDREA D. DOMINGO
legal basis. The BOC should have set the respondent’s motion for hearing to afford him a Commissioner75
chance to be heard and adduce evidence in support thereon. It was bad enough that the BOC
However, the Omnibus Resolution of the BOC was dated June 14, 2002, although on its face it
issued its Summary Deportation Order without a hearing; the BOC dealt the respondent a more
was filed with the Records Division of the BID only on July 18, 2002.
severe blow when it refused to resolve his motion for reconsideration before causing his arrest
on June 6, 2002. The foregoing gave reason for the CA to suspect that the Omnibus Resolution of the BOC was
antedated.76 The petition of the respondent in the CA must have jolted the petitioner and the
As aforestated, the BOC ordered the deportation of the respondent after a summary
BOC from its stupor because it came out with its Omnibus Resolution on July 18, 2002, which
proceeding without prior notice on the following grounds: (a) the respondent’s German
was, however, dated as early as June 14, 2002. The respondent had to wait in anxiety for the
passport had expired; (b) there was a pending criminal case for physical injuries against him in
BOC to quench his quest for justice. The BOC’s wanton acts amounted to an abdication of its
Germany; (c) the respondent indulged in illegal activities in Palawan; (d) that in all likelihood,
duty to act and/or resolve cases/incidents with reasonable dispatch. To recall our ruling in
the respondent’s passport will not be renewed by the German Embassy as he was wanted for
Board of Commissioners v. De la Rosa,77 citing Sheor v. Bengson,78 thus:
insurance fraud in Germany; and, (e) he was an undesirable alien. But then, in response to the
written query of no less than the petitioner herself, the German Embassy declared that the This inaction or oversight on the part of the immigration officials has created an anomalous
respondent was not wanted by the German police for any crime, including insurance fraud. situation which, for reasons of equity, should be resolved in favor of the minor herein involved.
This could only mean that the warrant of arrest issued by the German Federal police
The petitioner and the BOC should have taken to heart the following pronouncement in should be made in accordance with the procedure established by law, with a view to protecting
Commissioner of Immigration v. Fernandez:79 the rights of individuals."87

In the face of the disclosure that Teban Caoili had been all along working in the Avenue In this case, the Summary Deportation Order was issued by the BOC in the exercise of its
Electrical Supply Co. (Avesco), located at No. 653 Rizal Avenue, Manila, until his arrest, and the authority under Office Memorandum Order No. 34, and not in the exercise of its appellate
documentary evidence showing that he had been issued a Philippine Passport; had regularly jurisdiction of BSI decisions. There is no law nor rule which provides that a Summary
paid his Residence Tax Certificates (A & B), and filed Income Tax Returns, a finding of fact is Deportation Order issued by the BOC in the exercise of its authority becomes final after one
necessary whether the Commissioner really had intended to notify Teban Caoili of the year from its issuance,88 or that the aggrieved party is barred from filing a motion for a
exclusion proceedings the Board had conducted in his absence. While it may be true that the reconsideration of any order or decision of the BOC. The Rules of Court may be applied in a
proceedings is purely administrative in nature, such a circumstance did not excuse the serving suppletory manner to deportation proceedings89 and under Rule 37, a motion for
of notice. There are cardinal primary rights which must be respected even in proceedings of reconsideration of a decision or final order may be filed by the aggrieved party.
administrative character, the first of which is the right of the party interested or affected to
present his own case and submit evidence in support thereof.80 Neither is there any law nor rule providing that the BOC, composed of new members, cannot
revise a Summary Deportation Order previously issued by a different body of Commissioners.
... The BOC that issued the Summary Deportation Order and the BOC which resolved the
respondent’s Urgent Motion for Reconsideration are one and the same government entity,
Since the proceedings affected Caoili’s status and liberty, notice should have been given. And with the same powers and duties regardless of its membership. Similarly, an RTC judge who
in the light of the actuations of the new Board of Commissioners, there is a necessity of replaces another judge who presided over a case may review the judgment or order of his
determining whether the findings of the Board of Special Inquiry and the old Board of predecessor as long as the said judgment or order has not as yet become final or executory.
Commissioners are correct or not. This calls for an examination of the evidence, and, the law The act subject of review is not the act of the judge but the act of the court.
on the matter.81
The petitioner’s contention that it failed to resolve the respondent’s motion for
Apparently, the BOC did not bother to review its own records in resolving the respondent’s reconsideration because of the change of administration in the BOC was branded by the CA as
Urgent Motion for Reconsideration. It anchored its Omnibus Resolution only on the following: flimsy, if not bordering on the absurd:
the membership of the BOC had changed when it issued its September 27, 1995 Summary
Deportation Order and under Commonwealth Act No. 613, Section 27(b); the BOC is precluded Firstly, it was issued three days (June 14, 2002) after petitioner filed this instant petition on
from reversing a previous order issued by it;82 and, the September 27, 1995 Order of the BOC June 11, 2002 or almost seven years from the time the motion for reconsideration was filed;
had become final and could no longer be reviewed and reversed by it after the lapse of one
year.83 However, the rulings cited by the petitioner are not applicable in the instant case, as Secondly, respondent’s counsel’s excuse that it took such time to resolve it because it was only
the said cases cited involve appeals to the BOC from the decisions of the Board of Special later that the motion for reconsideration was discovered because of change of administration,
Inquiry (BSI). In Sy v. Vivo84 and Lou v. Vivo,85 we ruled that under Section 27(b) of is flimsy, if not bordering on the absurd;90
Commonwealth Act No. 613, as amended, the Decision of the BOC on appeal from the decision
The Issuance of a New and Regular
of the BSI becomes final and executory after one year:
Passport to the Respondent
(b) A board of special inquiry shall have authority (1) to determine whether an alien seeking to Rendered the Summary
enter or land in the Philippines shall be allowed to enter or land or shall be excluded, and (2) Deportation Order Moot and
to make its findings and recommendations in all the cases provided for in section twenty-nine Academic, and the Omnibus
of this Act wherein the Commissioner of Immigration may admit an alien who is otherwise Resolution of the BOC Lacking
inadmissible. For this purpose, the board or any member thereof, may administer oaths and in Legal Basis
take evidence and in case of necessity may issue subpoena and/or subpoena duces tecum. The
We agree with the petitioner that a foreign embassy’s cancellation of the passport it had issued
hearing of all cases brought before a board of special inquiry shall be conducted under rules of
to its citizens, or its refusal to issue a new one in lieu of a passport that has expired, will result
procedure to be prescribed by the Commissioner of Immigration. The decision of any two
in the loss of the alien’s privilege to stay in this country and his subsequent deportation
members of the board shall prevail and shall be final unless reversed on appeal by the Board
therefrom. But even the BOC asserted in its Summary Deportation Order that an embassy’s
of Commissioners as hereafter stated, or in the absence of an appeal, unless reversed by the
issuance of a new passport to any of its citizens may bar the latter’s deportation, citing the
Board of Commissioners after a review by it, motu propio, of the entire proceedings within one
resolution of this Court in Schonemann v. Commissioner Santiago.91
year from the promulgation of the decision.
Irrefragably, Commissioner Verceles was mandated to cause the arrest of the respondent
In Commissioner of Immigration v. Fernandez,86 we held that the BOC composed of new
preparatory to his deportation from the Philippines. However, there was no fixed period in the
members is precluded from reversing, motu proprio, the decision of the BOC on appeal from
Order within which to comply with the same. The Commissioner is not mandated to deport an
a BSI decision. But not to be ignored was our ruling that "at any rate, the issue of authority
alien immediately upon receipt of the BOC’s deportation order. It is enough that the
Commissioner complies with the Order within a "reasonable time," which, in Mejoff v. Director The power to deport is a police matter against undesirable aliens, whose presence in the
of Prisons,92 we held to connote as follows: country is found to be injurious to the public good. We believe that the deportation of the
respondent late in the day did not achieve the said purpose. The petitioner admitted that there
The meaning of "reasonable time" depends upon the circumstances, specially the difficulties is no longer a factual and legal basis to disqualify the respondent from staying in the country.
of obtaining a passport, the availability of transportation, the diplomatic arrangements with He is not an undesirable alien; nor is his presence in the country injurious to public good. He is
the governments concerned and the efforts displayed to send the deportee away; but the even an entrepreneur and a productive member of society.
Court warned that "under established precedents, too long a detention may justify the
issuance of a writ of habeas corpus. Arrest, detention and deportation orders of aliens should not be enforced blindly and
indiscriminately, without regard to facts and circumstances that will render the same unjust,
In this case, the BOC had yet to act on the respondent’s Urgent Motion for Reconsideration. unfair or illegal.94 To direct the respondent to leave the country first before allowing him re-
The respondent was also given a chance to secure a clearance and a new passport with the entry is downright iniquitous.95 If the respondent does leave the country, he would thereby be
German Embassy. After all, the possibility that the German Embassy would renew the accepting the force and effect of the BOC’s Summary Deportation Order with its attendant
respondent’s passport could not be ruled out. This was exactly what happened: the German infirmities. He will thereby lose his permanent resident status and admit the efficacy of the
Embassy issued a new passport to the respondent on March 12, 1996 after the German District cancellation of his permanent resident visa. Moreover, his entry into the country will be subject
Court dismissed the case for physical injuries. Thus, the respondent was no longer an to such conditions as the petitioner may impose.
undocumented alien; nor was he an undesirable one for that matter.
The deportation of an alien is not intended as a punishment or penalty.1âwphi1 But in a real
The petitioner even admits that there is no longer a legal or factual basis to disqualify the sense, it is. In Bridges v. Wixon,96 Mr. Justice Murphy declared that the impact of deportation
respondent from remaining in the country as a permanent resident. Yet, the OSG insists that upon the life of an alien is often as great if not greater than the imposition of a criminal
he has to be deported first so that the BOC’s Summary Deportation Order could be sentence. In dealing with deportation, there is no justifiable reason for disregarding the
implemented. This contention was rejected by the CA, thus: democratic and human tenets of our legal system and descending to the practices of
despotism. As Justice Brewer opined in Fong Yue Ting v. United States,97 deportation is a
During the hearing of petitioner’s prayer for issuance of a writ of preliminary injunction before
punishment because it requires first, an arrest, a deprivation of liberty and second, a removal
Us, respondent’s counsel from the Office of the Solicitor General had the occasion to manifest
from home, from family, from business, from property. To be forcibly taken away from home,
in open court that the State has no opposition to petitioner’s stay in the country provided he
family, business and property and sent across the ocean to a distant land is punishment; and
first leave and re-enter and re-apply for residency if only to comply with the Summary
that oftentimes is most severe and cruel. It would be putting salt on the respondent’s woes
Deportation Order of 1995. That, to Our mind, seems preposterous, if not ridiculous. An
occasioned by the BOC’s ineptitude. Considering the peculiar backdrop and the equities in this
individual’s human rights and rights to freedom, liberty and self-determination recognize no
case, the respondent’s deportation and the cancellation of his permanent resident visa as a
boundaries in the democratic, free and civilized world. Such rights follow him wherever he may
precondition to his re-entry into this country is severe and cruel; it is a form of punishment.
be. If presently, there is no factual or legal impediment to disqualify petitioner in his stay in
the country, other than allegedly those relied upon in the Summary Deportation Order of 1995 Our ruling in Vivo v. Cloribel,98 has no application in this case, precisely because the factual
(as hereinbefore discussed, had ceased to exist), requiring petitioner to leave the country and milieu here is entirely different. In that case, the Commissioner of Immigration required the
re-enter and re-apply for residency makes little sense or no sense at all, more so, in the case respondents to leave the country on or before September 12, 1962, because their stay in the
of petitioner who, for many years past, had lived herein and nurtured a family that is Filipino. country as approved by the Secretary of Justice had been cancelled. Our ruling in Bing v.
Commission on Immigration,99 even buttresses the case for the respondent since we ruled
Thus, opined, We, therefore, believe and hereby rule, that there is presently every reason to
therein that an alien entitled to a permanent stay cannot be deported without being accorded
enjoin/prohibit the Bureau of Immigration, respondent Commissioner Domingo in particular,
due notice and hearing.
from presently deporting petitioner.93
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision of the Court of Appeals
We agree with the Court of Appeals. The Summary Deportation Order had been rendered moot
is AFFIRMED.
and academic upon the German Embassy’s issuance of a new passport to the respondent. The
respondent had been in the Philippines as a permanent resident since July 18, 1986, and had SO ORDERED.
married a Filipino citizen, with whom he has two children. He is not a burden to the country
nor to the people of Palawan. He put up, and has been managing, the Bavaria Restaurant with Republic of the Philippines
about 30 employees. He has no pending criminal case; nor does he have any derogatory record. SUPREME COURT
The respondent was allowed by then Immigration Commissioner Verceles to renew his
passport and was given time to secure a clearance from the German Embassy. The respondent SECOND DIVISION
was able to do so. The case against him for physical injuries was dismissed by the German
G.R. No. 151900 August 30, 2005
District Court. Thus, the inceptual basis for the respondent’s deportation had ceased to exist.
CHRISTINE CHUA, Petitioners, certification against forum-shopping, although petitioner did sign an attestation, wherein she
vs. identified herself as "the principal plaintiff".8
JORGE TORRES and ANTONIO BELTRAN, Respondents.
Upon motion of respondents, the RTC ordered the dismissal of the complaint9 on the ground
DECISION that Jonathan Chua had not executed a certification against forum-shopping. The RTC stressed
that Section 5, Rule 7 of the Rules of Civil Procedure, the rule requiring the
Tinga, J.:
certification, makes no distinction whether the plaintiff required to execute the certification is
The Court settles an issue, heretofore undecided, on whether the absence of the signature in a principal party, a nominal party or a necessary party. Instead, the provision requires that a
the required verification and certification against forum-shopping of a party misjoined as a plaintiff or principal party who files a complaint or initiatory pleading execute such
plaintiff is a valid ground for the dismissal of the complaint. We rule in the negative. certification. Jonathan Chua, being a plaintiff in this case, was obliged to execute or sign such
certification.10 Hence, his failure to do so in violation of the mandatory rule requiring the
The relevant facts in this Petition for Review are culled from the records.
certification against forum-shopping constituted valid cause for the dismissal of the petition.11
On 24 October 2001, a complaint for damages was lodged before the Regional Trial Court (RTC)
After the RTC denied the motion for reconsideration12 lodged by petitioner, the matter was
of Caloocan City, Branch 126.1 The complaint was filed by Christine Chua, herein petitioner,
elevated directly to this Court by way of petition for review under Rule 45, raising a purely legal
impleading her brother Jonathan Chua as a necessary co-plaintiff. Named as defendants in the
question,13 cast, if somewhat unwieldily, as "whether or not a co-plaintiff impleaded only as a
suit were herein respondents Jorge Torres and Antonio Beltran. Torres was the owner of the
necessary party, who however has no claim for relief or is not asserting any claim for relief in
9th Avenue Caltex Service Center (Caltex Service Center), while Beltran was an employee of
the complaint, should also make a certification against forum shopping."14
the said establishment as the head of its Sales and Collection Division.2
Preliminarily, it bears noting that Jonathan Chua did not sign as well any verification to the
The complaint alleged that on 3 April 2000, Jonathan Chua issued in favor of the Caltex Service
complaint, ostensibly in violation of Section 7, Rule 4 of the Rules of Civil Procedure. The RTC
Center his personal Rizal Commercial Banking Corporation (RCBC) Check No. 0412802 in the
failed to mention such fact, as does petitioner in her present petition. In their arguments
amount of Nine Thousand Eight Hundred Forty Nine Pesos and Twenty Centavos (₱9,849.20)
before this Court, respondents do refer in passing to the verification requirement15 , but do
in payment for purchases of diesel oil. However, the check was dishonored by the drawee bank
not place any particular focus thereto. The verification requirement is separate from the
when presented for payment on the ground that the account was closed. Beltran then sent
certification requirement.16 It is noted that as a matter of practice, the verification is usually
petitioner a demand letter informing her of the dishonor of the check and demanding the
accomplished at the same time as the certification against forum-shopping; hence the
payment thereof. Petitioner ignored the demand letter on the ground that she was not the
customary nomenclature, "Verification and Certification of Non Forum-Shopping" or its
one who issued the said check.
variants. For this reason, it is quite possible that the RTC meant to assail as well the failure of
Without bothering to ascertain who had actually issued the check, Beltran instituted against Jonathan Chua to verify the complaint.
petitioner a criminal action for violation of Batas Pambansa Bilang 22 (B.P. 22). Subsequently,
The verification requirement is significant, as it is intended to secure an assurance that the
a criminal information was filed against petitioner with the Metropolitan Trial Court (MTC) of
allegations in the pleading are true and correct and not the product of the imagination or a
Caloocan City, Branch 50.3 The MTC then issued a warrant of arrest against petitioner. The
matter of speculation, and that the pleading is filed in good faith.17 The absence of a proper
police officers tasked with serving the warrant looked for her in her residence, in the auto
verification is cause to treat the pleading as unsigned and dismissible.18 It would be as well that
repair shop of her brother, and even at the Manila Central University were she was enrolled as
the Court discuss whether under the circumstances, Jonathan Chua is also required to execute
a medical student, all to the alleged embarrassment and "social humiliation" of petitioner.4
a verification in respect to petitioner’s complaint.
Beltran’s purported negligence amounted to either malicious prosecution or serious
Having established the proper parameters of the petition, we proceed to the core issues. We
defamation in prosecuting petitioner resulting from the issuance of a check she herself did not
find the petition has merit, although we appreciate the situation differently from petitioner.
draw, and served cause for a claim of moral damages. On the other hand, Torres, as employer
Our decision proceeds from the fundamental premise that Jonathan Chua was misjoined as a
of Beltran, was alleged to have failed to observe the diligence of a good father of the family to
party plaintiff in this case.
prevent the damage suffered by petitioner. Exemplary damages and attorney’s fees were
likewise sought, thus bringing the It is elementary that it is only in the name of a real party in interest that a civil suit may be
aggregate total of damages claimed to Two Million Pesos (₱2,000,000.00), plus costs of suit. 5 prosecuted.19 Under Section 2, Rule 3 of the Rules of Civil Procedure, a real party in interest is
the party who stands to be benefited or injured by the judgment in the suit, or the party
Significantly, while Jonathan Chua was named as a plaintiff to the suit, it was explicitly qualified
entitled to the avails of the suit. "Interest" within the meaning of the rule means material
in the second paragraph of the complaint that he was being "impleaded here-in as a necessary
interest, an interest in issue and to be affected by the decree, as distinguished from mere
party-plaintiff".6 There was no allegation in the complaint of any damage or injury sustained
interest in the question involved, or a mere incidental interest.20 One having no right or interest
by Jonathan, and the prayer therein expressly named petitioner as the only party to whom
to protect cannot invoke the jurisdiction of the court as a party plaintiff in an action.21 To
respondents were sought to recompense.7 Neither did Jonathan Chua sign any verification or
qualify a person to be a real party in interest in whose name an action must be prosecuted, he In contrast, Jonathan Chua does not stand to be affected should the RTC rule either favorably
must appear to be the present real owner of the right sought to enforced.22 or unfavorably of the complaint. This is due to the nature of the cause of action of the
complaint, which alleges an injury personal to petitioner, and the relief prayed for, which is to
The subject complaint does not allege any rights of Jonathan Chua violated by respondents, be adjudicated solely to petitioner. There is no allegation in the complaint alleging any violation
present any rights of his to be enforced, or seek in his behalf any rights to the avails of suit. In or omission of any right of Jonathan, either arising from contract or from law.
short, Jonathan claims nothing, and for nothing, in the subject complaint. If he alone filed the
complaint, it would have been dismissed on the ground that the complaint states no cause of It may be so that Jonathan may be called to testify by his sister, in order to prove the essential
action, instituted as it was by a person who was not a real party in interest. allegation that she did not issue the check in question, and perhaps such testimony would be
vital to petitioner’s cause of action. But this does not mean that Jonathan should be deemed
But was it proper for petitioner to have even impleaded Jonathan as a co-plaintiff in the first a necessary party, as such circumstance would merely place him in the same class as those
place? Petitioner alleged in her complaint that Jonathan was a necessary party, and remains witnesses whose testimony would be necessary to prove the allegations of the complaint. But
consistent to that claim even before this Court. She however fails to demonstrate how the fact remains that Jonathan would stand unaffected by the final ruling on the complaint.
Jonathan can be considered as a necessary party, other than by noting that he was "the one The judicial confirmation or rejection of the allegations therein, or grant or denial of the reliefs
who really prayed for will not infringe on or augment any of his rights under the law. If there would be
issued the check in controversy."23 Such fact, if proven, may establish the malice of any effect to Jonathan of the RTC’s ultimate decision on the complaint, it would be merely
respondents in filing the criminal case against petitioner for violation of B.P. 22, but does not emotional, arising from whatever ties of kinship he may retain towards his sister, and no
create the need to require Jonathan’s participation as a necessary party. different from whatever effects that may be similarly sustained on petitioner’s immediate
family.
Section 8, Rule 7 of the Rules of Civil Procedure defines a necessary party as "one who is not
indispensable but who ought to be joined as a party if complete relief is to be accorded as to Since we are unconvinced by petitioner’s basic premise that Jonathan was a necessary party,
those already parties, or for a complete determination or settlement of the claim subject of it is unnecessary to directly settle the issue as couched by petitioner of "whether or not a co-
the action."24 Necessary parties are those whose presence is necessary to adjudicate the whole plaintiff impleaded only as a necessary party, who however has no claim for relief or is not
controversy, but whose interests are so far separable that a final decree can be made in their asserting any claim for relief in the complaint, should also make a certification against forum
absence without affecting them.25 shopping."28 We can note, as the RTC did, that Section 5, Rule 7 of the 1997 Rules of Civil
Procedure makes no distinctions that would expressly exempt a necessary party from
An example of a necessary party may be found in Seno v. Mangubat.26 Petitioner therein sold
executing the certification against forum shopping. Nonetheless, there are dimensions to the
her property through a deed of sale to three vendees. Two of the vendees then sold their
matter, heretofore unraised, that may unsettle a strict application of the rule, such as if the
shares to the third buyer, who then sold the property to another set of persons. Thereafter,
necessary party is impleaded as a plaintiff or counterclaimant without his knowledge or against
petitioner, who claimed that the true intent of the first sale was an equitable mortgage, filed
his will.29 But these circumstances relevant to a necessary party are not present in this case,
a complaint seeking the reformation of the deed of sale and the annulment of the second sale.
and thus require no further comment upon for now.
The question arose whether the two vendees who had since disposed of their shares should
be considered as indispensable parties or necessary parties. In concluding that they were only Instead, what the Court may rule upon is whether the absence of the signature of the person
necessary parties, the Court reasoned: misjoined as a party-plaintiff in either the verification page or certification against forum-
shopping is ground for the dismissal of the action. We rule that it is not so, and that the RTC
In the present case, there are no rights of defendants Andres Evangelista and Bienvenido
erred in dismissing the instant complaint. There is no judicial precedent affirming or rejecting
Mangubat to be safeguarded if the sale should be held to be in fact an absolute sale nor if the
such a view, but we are comfortable with making such a pronouncement. A misjoined party
sale is held to be an equitable mortgage. Defendant Marcos Mangubat became the absolute
plaintiff has no business participating in the case as a plaintiff in the first place, and it would
owner of the subject property by virtue of the sale to him of the shares of the aforementioned
make little sense to require the misjoined party in complying with all the requirements
defendants in the property. Said defendants no longer have any interest in the subject
expected of plaintiffs.
property. However, being parties to the instrument sought to be reformed, their presence is
necessary in order to settle all the possible issues of the controversy. Whether the disputed At the same time, Section 11, Rule 3 of the 1997 Rules of Civil Procedure states:
sale be declared an absolute sale or an equitable mortgage, the rights of all the defendants will
have been amply protected. Defendants-spouses Luzame in any event may enforce their rights Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may
against defendant Marcos Mangubat.27 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
In Seno, the persons deemed by the Court as necessary parties may have had already disposed be severed and proceeded with separately.30
of their interests in the property. However, should the lower court therein grant the prayer for
the reformation of the deed of sale, the ruling will undoubtedly have an effect on such parties, Clearly, misjoinder of parties is not fatal to the complaint. The rule prohibits dismissal of a suit
on matters such as the purchase price which they may have received, and on whatever on the ground of non-joinder or misjoinder of parties. 31 Moreover, the dropping of misjoined
transmission of rights that may have occurred between them and the vendor. parties from the complaint may be done motu proprio by the court, at any stage, without need
for a motion to such effect from the adverse party.32 Section 11, Rule 3 indicates that the Apostol, Bernas, Gumaru & Ora for private respondents.
misjoinder of parties, while erroneous, may be corrected with ease through amendment,
without further hindrance to the prosecution of the suit.

It should then follow that any act or omission committed by a misjoined party plaintiff should GUTIERREZ, JR., J.:
not be cause for impediment to the prosecution of the case, much less for the dismissal of the
The petitioner charges the Sandiganbayan with grave abuse of discretion amounting to lack or
suit. After all, such party should not have been included in the first place, and no efficacy should
excess of jurisdiction in denying its motion to drop Jose D. Campos, Jr. as defendant in its
be accorded to whatever act or omission of
complaint for reconveyance, reversion, accounting, restitution and damages filed against Jose
the party.33 Since the misjoined party plaintiff receives no recognition from the court as either D. Campos, Jr. and the other defendants in Civil Case No. 0010. The antecedent facts are stated
an indispensable or necessary party-plaintiff, it then follows that whatever action or inaction by the Solicitor General as follows:
the misjoined party may take on the verification or certification against forum-shopping is
1. On July 22, 1987, petitioner filed with respondent Court a complaint for reconveyance,
inconsequential. Hence, it should not have mattered to the RTC that Jonathan Chua had failed
reversion, accounting, restitution and damages against Alfredo (Bejo) T. Romualdez, Ferdinand
to sign the certification against forum-shopping, since he was misjoined as a plaintiff in the
E. Marcos, Imelda R. Marcos, Jose D. Campos, Jr. and forty five (45) other defendants including
first place. The fact that Jonathan was misjoined is clear on the face of the complaint itself, and
the above-named private respondents, docketed thereat as Civil Case No. 0010 (PCGG 11),
the error of the RTC in dismissing the complaint is not obviated by the fact that the adverse
seeking to 'recover from them ill-gotten wealth consisting of funds and other property which
party failed to raise this point. After all, the RTC could have motu proprio dropped Jonathan as
they [acting singly or collectively and] in unlawful concert with one another, had acquired and
a plaintiff, for the reasons above-stated which should have been evident to it upon
accumulated in flagrant breach of trust and of their fiduciary obligations as public officers, with
examination of the complaint.
grave abuse of right and power and in brazen violation of the Constitution and laws of the
There may be a school of thought that would nonetheless find some satisfaction in petitioner’s Republic of the Philippines', including the misappropriation and theft of public funds, plunder
woes before the RTC, as it was her error in the first place of wrongfully impleading her brother of the nations wealth, extortion, blackmail, bribery, embezzlement and other acts of
as a party plaintiff which ultimately served as cause for the dismissal of the complaint. The corruption, betrayal of public trust and brazen abuse of power, as more fully described in the
blame may in the final analysis lie with petitioner, yet we should not construe the rules of Complaint thus 'resulting in their unjust enrichment during defendant Ferdinand E. Marcos' 20
procedure to quench an unnecessary thirst to punish at the expense of the intellectual integrity years of rule from December 30, 1965 to February 25, 1986, first as President of the Republic
of the rules. For our Rules of Court do not regard the misjoinder of parties as an error of fatal of the Philippines under the 1935 Constitution and, therafter, as one-man ruler under martial
consequence, and the logical extension of this principle is to consider those procedural acts or law and Dictator under the 1973 Marcos promulgated Constitution ... at the expense and to
omissions of misjoined parties as of similar import. the grave and irreparable damage of Plaintiff and the Filipino people. (pp. 2-3, complaint).

WHEREFORE, the Petition is GRANTED. The Orders dated 3 December 2001 and 15 January 2. Summonses were subsequently issued in due time by there-respondent Court against
2002 of the Regional Trial Court of Caloocan City, Branch 126, in Civil Case No. C-19863 are SET defendants therein.
ASIDE, and the Complaint in the aforementioned case is REINSTATED. The lower court is
3. Some time in the later part of August 1987, defendant Jose D, Campos, Jr., having been
enjoined to hear and decide the case with deliberate dispatch. No pronouncement as to costs.
served with summons on August 5, 1987, filed with the respondent Court an undated
SO ORDERED. 'Manifestation and Motion to Dismiss Complaint with Respect to Jose D. Campos' praying that
he be removed as party defendant from the complaint on the grounds that he had 'voluntarily
Republic of the Philippines surrendered or turned over [any share in his name on any of the corporations referred to, aside
SUPREME COURT from claiming any interest, ownership or right thereon] to the Government of the Republic of
Manila the Philippines' and that he was 'entitled to the immunity granted by the Presidential
Commission on Good Government pursuant to Executive Order No. 14, under the
EN BANC Commission's Resolution dated May 28, 1986 ... to Mr. Jose Y. Campos (and) his family he
'being a member of the immediate family of Jose Y. Campos.' Xerox copy of said Manifestation
G.R. No. 84895 May 4, 1989
and Motion, etc., is hereto attached as Annex "C" hereof.
REPUBLIC OF THE PHILIPPINES, petitioner, JOSE D. CAMPOS, JR., petitioner-intervenor,
4. On September 23, 1987, petitioner filed with the respondent Court a 'Motion' seeking to
vs.
drop defendant Jose D. Campos, Jr. from the Complaint on the ground that the Presidential
THE HONORABLE SANDIGANBAYAN, FIRST DIVISION, TEODORO Q. PEÑA, GORGONIO
Commission on Good Government (PCGG for short) had, in a Resolution dated May 28, 1986,
MACARIOLA, ORLANDO PACIENCIA, JESUS TUPALAR SEVERINO DELA CRUZ, and FE
granted immunity to Mr. Jose Y. Campos and his family, which immunity necessarily extends
CORTEZO, respondents.
to defendant Jose D. Campos, Jr. who is the son of said Mr. Jose Y. Campos. Xerox copy of said
Napoleon M. Gamo for respondent Teodoro Pena. Motion is hereto attached as Annex 'D' hereof.
5. The private respondents opposed petitioner's motion. Defendant Jose D. Campos, Jr. filed The petitioner contends otherwise. The Solicitor General asserts that the name of Jose D.
his reply. Campos, Jr. was included as defendant in the complaint through mistake or oversight and that
pursuant to Section 11, Rule 3 of the Revised Rules of Court it has a right to drop him as
6. Meanwhile, on January 28, 1988, petitioner filed with the respondent Court an defendant without prior consent of any party. The Solicitor General also maintains that
Amended/Expanded Complaint, xerox copy of which is hereto attached as Annex 'E' hereof. although the defendants in the case were charged solidarily, Campos, Jr. was not an
indispensable party since Article 1216 of the Civil Code allows the petitioner as solidary
7. On February 8, 1988, respondent Court issued a Resolution (Annex 'A' hereof) which, as
creditor to choose among the solidary debtors against whom it win enforce collection.
abovestated, denied petitioner's and Jose D. Campos, Jr.'s motions to drop him from the
complaint. Jose Campos, Jr. adds that the petitioner's motion to drop him as defendant should be
considered as one filed under section 1, Rule 17 of the Revised Rules of Court thus giving it the
8. On March 7, 1988, defendant Jose D. Campos, Jr. filed a 'Motion for Reconsideration of the
absolute right to dismiss the action by mere notice of dismissal.
Resolution Dated February 8, 1988', xerox copy of which is hereto attached as Annex 'F' hereof.
Above all these technicalities, the petitioner maintains that the resolutions of the
9. On March 10, 1988, petitioner also filed its separate 'Motion for Reconsideration of the
Sandiganbayan which ruled that the PCGG does not have the power to grant civil immunity
Resolution of February 8, 1988, xerox copy of which is hereto attached as Annex 'G' hereof.
frustrated the earnest efforts at recovery of ill-gotten wealth recognized in the Constitution,
10. On August l8, 1988, respondent Court issued a Resolution Annex 'B' hereof) denying and Executive Orders Numbers 1, 2, 14 and 14-A. The petitioner contends that the non-
petitioner's and defendant Jose D. Campos, Jr.'s motions for reconsideration. A copy of the observance of the immunity provision granted by the PCGG will hinder the voluntary
Resolution was received by the Office of the Solicitor General on August 24, 1988. (pp. 4-8 cooperation of known Marcos cronies to enter into amicable settlements or compromises with
Rollo) respect to the recovery of ill-gotten wealth. The petitioner also argues that the PCGG's power
to grant criminal immunity under Section 5 of Executive Order No. 14 carries with it the implied
The original petition was against the Sandiganbayan and six private respondents who opposed power to enter into compromises and amicable settlements in line with its duty to recover ill-
the motion to drop Campos, Jr. from the complaint. gotten wealth expeditiously, efficiently and effectively.

Upon motion, we allowed Jose D. Campos, Jr. to file a petition in intervention. Given these considerations, the petitioner insists that the May 28, 1986 resolution of the PCGG
which granted immunity from both civil and criminal prosecution to Jose Y. Campos and his
In a resolution dated March 29, 1988, we issued a temporary restraining order ordering the family is a valid official act of the PCGG and since Jose Campos, Jr. is a legitimate son of Jose Y.
Sandiganbayan to cease and desist from proceeding with Civil Case No. 0010. Campos, he must be deemed covered by the grant of immunity.
The main issue in the instant petition hinges on whether or not the petitioner can validly drop Furthermore, petitioner-intervenor Campos, Jr. states that the Sandiganbayan has no
Jose D. Campos, Jr. as party defendant in Civil Case No. 0010 by virtue of the PCGG's grant of jurisdiction to determine the validity of the grant of immunity and release from civil liability to
immunity in favor of his father Jose Y. Campos and the latter's family. the intervenor as there is no dispute between him and the PCGG. Thus, Campos, Jr. argues that
The Sandiganbayan ruled in the negative. It denied the Republic's and petitioner Jose D. "Except in a litigation arising from a disagreement between the one claiming to be a beneficiary
Campos, Jr.'s motions for reconsideration on the following grounds. and the PCGG/Republic, the Sandiganbayan is without competence to review the validity or
extent of the PCGG granted and the Republic supported grant of immunity from criminal
1) The PCGG did not then and does not now have the power to grant civil immunity; prosecution and release from civil liability." (p. 216, Rollo)

2) Even if it did, the grant of immunity itself rendered in the PCGG's resolution dated May 28, We first ascertain whether or not the Sandiganbayan has jurisdiction to look into the validity
1986 has not been shown to cover the transactions involving the corporations and or of the immunity granted by the PCGG to Jose Y. Campos which was extended to his son,
properties for which Jose D. Campos, Jr., is now sought to be held accountable, i.e., Metroport petitioner-intervenor herein, Jose Campos, Jr.
Services, Inc.;
Executive Order No. 14 defines "the jurisdiction over cases involving the ill-gotten wealth of
3) The fact is that nowhere, either in the original motions or in the Motion for Reconsideration former President Ferdinand E. Marcos, Mrs. Imelda R. Marcos, members of their immediate
before this Court has it been shown that, save for the alleged unqualified immunity, there no family, close relatives, subordinates, close and/or business associates, dummies, agents and
longer exists any demandable claim against Jose D. Campos, Jr., arising from the transactions nominees." Section 2 thereof provides that the PCGG shall file all such cases, whether civil or
resulting in his being impleaded thereon. In other words, were it not for the supposed grant of criminal, with the Sandiganbayan, which shall have exclusive and original jurisdiction thereof "
immunity, Jose D. Campos, Jr., would remain liable in the matter of Metroport Services, Inc., In the case of Presidential Commission on Good Goverment v. Pena (159 SCRA 556 [1988]), the
and for the 60% which Alfredo (Bejo) Romualdez acquired therein according to paragraph 14 court interpreted the Sandiganbayan's jurisdiction under this statute to extend to "all cases of
(c) of the Complaint (supra) which does not appear to have been restored or compensated for. the commission ... , and all incidents arising from, incidental to, or related to (them), such cases
(p. 54, Rollo) necessarily fall likewise under the Sandiganbayan's exclusive and original jurisdiction subject
to review on certiorari exclusively by the Supreme Court." (pp. 561-562; Emphasis supplied).
Likewise, in the case of Bataan Shipyard & Engineering Co., Inc. v. Presidential Commission on ...Legislative intent must be ascertained from a consideration of the statute as a whole.
Good Government, (150 SCRA 181 [1987]), we said: The0particular words, clauses and phrases should not be studied as detached and isolated
expressions, but the whole and every part of the statute must be considered in fixing the
It should also by now be reasonably evident from what has thus far been said that the PCGG is meaning of any of its parts and in order to produce a harmonious whole (Araneta v.
not, and was never intended to act as, a judge. Its general function is to conduct investigations Concepcion, 99 Phil. 709; Tamayo v. Gsell, 35 Phil. 953; Lopez v. El Hogar Filipino, 47 Phil, 249;
in order to collect evidence establishing instances of 'ill-gotten wealth;' issue sequestration, Chartered Bank v. Imperial, 48 Phil. 931). A statute must be so construed as to harmonize and
and such orders as may be warranted by the evidence thus collected and as may be necessary give effect to all its provisions whenever possible (People v. Polmon, 86 Phil. 350). The meaning
to preserve and conserve the assets of which it takes custody and control and prevent their of the law, it must be borne in mind, is not to be extracted from any single part, portion or
disappearance, loss or dissipation; and eventually file and prosecute in the proper court of section or from isolated words and phrases, clauses or sentences but from a general
competent jurisdiction all cases investigated by it as may be warranted by its findings. It does consideration or view of the act as a whole (82 C.J.S., Section 345, pp. 699-700). Every part of
not try and decide, or hear and determine, or adjudicate with any character of finality or the statute must be interpreted with reference to the context. This means that every part of
compulsion, cases involving the essential issue of whether or not property should be forfeited the statute must be considered together with the other parts, and kept subseivient to the
and transferred to the State because 'ill-gotten' within the meaning of the Constitution and general intent of the whole enactment, not separately and independently (Tamayo v. Gsell, 35
the executive orders. This function is reserved to the designated court, in this case, the Phil, 953). More importantly, the doctrine of associated words (Noscitur a Sociis) provides that
Sandiganbayan. (Ex. Ord. No. 14) where a particular word or phrase in a statement is ambiguous in itself or is equally susceptible
of various meanings, its true meaning may be made clear and specific by considering the
The powers of the PCGG are not unlimited. Its jurisdiction over cases involving ill-gotten wealth
company in which it is found or with which it is associated (Co Kim Cham v. Valdez Tan Keh &
must be within the parameters stated in Executive Order No. 14. Necessarily, the jurisdiction
Dizon, 75 Phil. 371). (Aisporna v. The Court of Appeals, 113 SCRA 459 [1982])
of the Sandiganbayan which is tasked to handle the ill-gotten wealth cases must include the
jurisdiction to determine whether or not the PCGG exceeded its power to grant immunity It is crystal clear from the law that the PCGG may file an independent civil action separate from
pursuant to the provisions of Executive Order No. 14. the criminal action. Hence, section 5 thereof which empowers the PCGG to grant criminal
immunity must be interpreted to relate only to a criminal action and not to a civil action. In
We now decide the pivotal issue which is the extent, if any, of . 1 the PCGG's power to grant
case of a civil action, the power to grant immunity or the making of the decision not to file a
civil immunity. Section 5 of Executive Order No. 14 provides:
civil case or to drop one already in progress must be related to section 3 of the law which
SECTION 5. The Presidential Commission on Good Government is authorized to grant immunity specifically provides for the procedures and the applicable laws in the prosecution of civil suits.
from criminal prosecution to any person who testifies to the unlawful manner in which any
The well-settled doctrine is that amicable settlements and/or compromises are not only
respondent, defendant or accused has acquired or accumulated the property or properties in
allowed but actually encouraged in civil cases. Article 2028 of the Civil Code categorically
question in cases where such testimony is necessary to prove violation of existing laws.
states: "A compromise is a contract whereby the parties, by making reciprocal concessions,
Since the aforecited provision mentions the grant of immunity only in criminal prosecutions avoid a litigation or put an end to one already commenced." On the other hand, there is no
and under certain circumstances, the Sandiganbayan concluded that the PCGG does not have similar general rule in criminal prosecutions. Immunity must be specifically granted.
the power to grant civil immunity much less extend the civil immunity granted to Jose Y.
In the instant case, the PCGG issued a resolution dated May 28, 1986, granting immunity from
Campos to his son Jose Campos, Jr.
both civil and criminal prosecutions to Jose Y. Campos and his family. The pertinent provisions
The conclusion is erroneous. of the resolution read as follows:

A cursory reading of Executive Order No. 14 shows that the PCGG is authorized to file both 3.0. In consideration of the full cooperation of Mr. Jose Y. Campos to this Commission, his
criminal and civil cases against persons suspected of having acquired ill-gotten wealth. Section voluntary surrender of the properties and asset. disclosed and declared by him to belong to
3 thereof provides: deposed President Ferdinand E. Marcos to the Government of the Republic of the Philippines,
his full, complete and truthful disclosures, and his commitment to pay a sum of money as
SECTION 3. Civil suits for restitution, reparation of damages, or indemnification for determined by the Philippine Government, this Commission has decided and agreed:
consequential damages, forfeiture proceedings provided for under Republic Act No. 1379, or
any other civil actions under the Civil Code or other existing laws, in connection with Executive 3.1. To grant to Mr. Jose Y. Campos, his family, Mariano K. Tan and Francisco de Guzman
Order No. 1 dated February 28, 1986 and Executive Order No. 2 dated March 12, 1986, may be immunity from criminal prosecutions, as provided in Section 5 of Executive Order No. 14.
filed separately from and proceed independently of any criminal proceedings and may be
3.2. To release Mr. Jose Y. Campos, his family, Mariano K Tan and Francisco de Guzman from
proved by a preponderance of evidence.
any and all civil liabilities with respect to all matters arising from his/their past relationship
This provision, together with section 5 of the law in relation to the purposes for which the with deposed President Ferdinand E. Marcos.
PCGG was created must be taken into consideration in determining whether or not the PCGG
3.3. To exclude Jose Y. Campos, his family, Mariano K. Tan and Francisco de Guzman from the
has authority to grant civil immunity.
complaint filed by the Solicitor General with the Commission docketed as Republic of the
Philippines v. Ferdinand E. Marcos, et al., PCGG I.S. No. 1 for graft and corrupt practices and On this score alone, the Sandiganbayan's rejection of the petitioner's motion on the ground
other issues related to public service. .... (Emphasis supplied.) (pp18-19, Rollo) that dropping Campos, Jr. as defendant in the civil case would amount to a violation of the
Rules of Court is based on shaky ground.
Undoubtedly, this resolution embodies a compromise agreement between the PCGG on one
hand and Jose Y. Campos on the other. Hence, in exchange for the voluntary surrender of the The Sandiganbayan's objections will hamper PCGG efforts in this similar cases.
ill-gotten properties acquired by the then President Ferdinand E. Marcos and his family which
were in Jose Campos' control, the latter and his family were given full immunity in both civil By virtue of the PCGG's May 28, 1986 resolution, Jose Campos, Jr. was given full immunity from
and criminal prosecutions. In the absence of an express prohibition, the rule on amicable both civil and criminal prosecutions in exchange for the "full cooperation from Jose Y Campos
settlements and/or compromises on civil cases under the Civil Code is applicable to PCGG to this Commission, his voluntary surrender of the properties and assets disclosed and declared
cases. This is the proper interpretation of the law in the light of the purposes enumerated in by him to belong to deposed President Ferdinand E. Marcos to the Government Of the Republic
Executive Order No. 14, to wit: of the Philippines, his full, complete and truthful disclosures, and his commitment to pay a sum
of money as determined by the Philippine Government." In addition, Campos, Jr. had already
... the vital task of the Commission involves the just and expeditious recovery of such ill-gotten waived and surrendered to the Republic his registered equity interest in the
wealth in order that the finds assets and other properties may be used to hasten national Marcos/Romualdez corporations involved in the civil case. Thus, as far as the petitioner is
economic recovery; concerned, it had already released Campos. Jr. from an criminal and civil liabilities in
connection with his association with the said corporations. Under the law, civil liabilities would
... the overriding considerations of national interest and national survival require that the include restitution and damages in favor of the government.
Presidential Commission on Good Government achieve its vital task efficiently and effectively,
with due regard to the requirements of fairness and due process; It is immaterial whether or not Campos, Jr. was given specific or individual immunity from his
liabilities as regards the Marcos/Romualdez corporations, the subject matter of Civil Case No.
Since petitioner-intervenor Jose Campos, Jr. is a legitimate son of Jose Y. Campos, the full 0010. The grant of full immunity to Campos, Senior and his family covers all of Campos, Jr.'s
immunity granted to the latter and his family must also extend to the former pursuant to the liabilities, criminal or civil, arising from association with the Marcoses including transactions
May 28, 1986 resolution of the PCGG. with the corporations involved in the said civil case.
We note that the law governing the issues raised in this petition calls for the setting aside of Even from the viewpoint of procedure, the PCGG was right when it filed a motion to drop Jose
technical rules when necessary to achieve the purposes behind the PCGUs creation. Campos, Jr. as defendant in the civil case. Section 11, Rule 3 of the Rules of Court states:
It is to be reiterated that paragraph 2 of section 3, of Executive Order No. 14 reads: SECTION 11, RULE 3. Misjoinder and non-joinder of parties Misjoinder of parties.-is not ground
for dismissal of an action. Parties may be dropped or added by order of the court on motion of
xxx xxx xxx
any patty or of its own initiative at any stage of the action and on such terms as are just. ...
The technical rules of procedure and evidence shag not be strictly applied to the civil cases (Emphasis supplied)
filed hereunder.
We interpreted this rule in the case of Lim Tanhu v. Ramolete 66 SCRA 425 (l975):
Section 7 thereof also provides:
... the latter rule does not comprehend whimsical and irrational dropping or adding of parties
SECTION 7. The provision of this Executive Order shall prevail over any and all laws, or parts in a complaint. that it really contemplates is erroneous or mistaken non-joinder and misjoinder
thereof, as regards the investigation, prosecution, and trial of cases for violations of laws of parties. No one is free to join anybody in a complaint in court only to drop him
involving the acquisition and accumulation of ill-gotten wealth as mentioned in Executive unceremoniously later at the pleasure of the plaintiff. The rule presupposes that the original
Order Nos. 1 and 2. inclusion had been made in the honest conviction that it was proper and the subsequent
dropping is requested because it turned out that such inclusion was a mistake. And this is the
A settled rule on construction is found in the case of Leveriza v. Intermediate Appellate Court, reason why the rule ordains that the dropping be 'on such terms as are just-just to all the other
(157 SCRA 282 [1988]): parties.

... that another basic principle of statutory construction mandates that general legislation must There is nothing whimsical or capricious in dropping the petitioner-intervenor from the
give way to special legislation on the same subject, and generally be so interpreted as to complaint. Quite the contrary, it is based on sound and salutary reasons.
embrace only cases in which the special provisions are not applicable (Sto. Domingo v. De los
Angeles, 96 SCRA 139), that a specific statute prevails over a general statute (De Jesus v. As discussed earlier, the PCGG's motion to drop Campos, Jr. as defendant in Civil Case No. 0010
People, 120 SCRA 760) and that where two statutes are of equal theoretical application to a has legal basis under Executive Order No. 14. The fact that Campos, Jr. and all the other
particular case, the one designed therefor specially should prevail (Wil Wilhensen Inc. v. defendants were charged solidarily in the complaint does not make him an indispensable
Baluyot, 83 SCRA 38). party. We have ruled in the case of Operators Incorporated v. American Biscuit Co., Inc., [154
SCRA 738 (1987)] that "Solidarity does not make a solidary obligor an indispensable party in a
suit filed by the creditor. Article 1216 of the Civil Code says that the creditor 'may proceed COURT OF APPEALS (Special Former Ninth Division), DOMINADOR LUMEN, and AURORA
against anyone of the solidary debtors or some or all of them simultaneously." AUNZO,Respondents.

There is no showing that the dropping of Jose Campos, Jr. as in defendant would be unjust to DECISION
the other defendants in the civil case because, the other defendants can still pursue the case
and put up their defenses. In the case of Lim Tanhu v. Ramolete, (supra), the main reason why NACHURA, J.:
we did not allow the dropping of two defendants who were charged solidarily with the other
Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court are the
remaining defendants, despite the motion of the plaintiff, is the fact that the latter filed such
May 12, 2004 Decision1of the Court of Appeals (CA) in CA-G.R. CV No. 43085 and the December
motion after the two remaining defendants defaulted. Thus, we said:
1, 2004 Resolution2 denying reconsideration of the challenged decision.
... In the case at bar, there is nothing in the record to legally justify the dropping of the non-
The pertinent facts and proceedings follow.
defaulted defendants, Lim and Leonardo. The motion of October 18, 1974 cites none. From all
appearances, plaintiff just decided to ask for it, without any relevant explanation at all. Usually, In 1974, petitioners3 filed a complaint for recovery of title to property with damages before
the court in granting such a motion inquires for the reasons and in the appropriate instances the Court of First Instance (now, Regional Trial Court [RTC]) of Maasin, Southern Leyte against
directs the granting of some form of compensation for the trouble undergone by the defendant respondents. The case was docketed as Civil Case No. R-1949. The property subject of the case
in answering the complaint, preparing for or proceeding partially to trial, hiring counsel and was a parcel of coconut land in Canturing, Maasin, Southern Leyte, declared under Tax
making corresponding expenses in the premises. Nothing of these, appears in the order in Declaration No. 3587 in the name of petitioner Nieves with an area of 2.6360 hectares. 4In their
question. Most importantly, His Honor ought to have considered that the outright dropping of complaint, petitioners prayed that judgment be rendered confirming their rights and legal title
the non-defaulted defendants Lim and Leonardo, over their objection at that, would certainly to the subject property and ordering the defendants to vacate the occupied portion and to pay
be unjust not only to the petitioners, their own parents, who would in consequence be entirely damages.5
defenseless, but also to Lim and Leonardo themselves who would naturally correspondingly
suffer from the eventual judgment againts their parents. Respondent court paid no heed at all Respondents, for their part, denied petitioners’ allegation of ownership and possession of the
to the mandate that such dropping must be on such terms as are just meaning'-to all concerned premises, and interposed, as their main defense, that the subject land was inherited by all the
with its legal and factual effects. parties from their common ancestor, Francisco Plasabas.6

There is no similar reason in this case. Revealed in the course of the trial was that petitioner Nieves, contrary to her allegations in the
complaint, was not the sole and absolute owner of the land. Based on the testimonies of
Moreover, as correctly stated by the herein petitioner: "Under the law, the solidary debtor petitioners’ witnesses, the property passed on from Francisco to his son, Leoncio; then to
who pays shall have a right of action against the others for the amount of their respective Jovita Talam, petitioner Nieves’ grandmother; then to Antonina Talam, her mother; and then
shares. And, with the dropping of a defendant who pays his share, the other solidary co- to her and her siblings—Jose, Victor and Victoria.7
defendants are also benefited to the extent of that paid share. Truly, each solidary debtor ends
up paying his own share, including the defendant who had been dropped. Hence, there is no After resting their case, respondents raised in their memorandum the argument that the case
justice." (p. 28, Rollo) should have been terminated at inception for petitioners’ failure to implead indispensable
parties, the other co-owners – Jose, Victor and Victoria.
WHEREFORE, the instant petition is hereby GRANTED. The questioned resolutions of the
Sandiganbayan are REVERSED and SET ASIDE. The Sandiganbayan is ordered to drop Jose In its April 19, 1993 Order,8 the trial court, without ruling on the merits, dismissed the case
Campos, Jr. as defendant in Civil Case No. 0010. The temporary restraining order issued on without prejudice, thus:
November 29, 1988 is made permanent insofar as Jose D. Campos, Jr. is concerned. No costs.
This Court, much as it wants to decide the instant case on the merits, being one of the old
SO ORDERED. inherited cases left behind, finds difficulty if not impossibility of doing so at this stage of the
proceedings when both parties have already rested their cases. Reluctantly, it agrees with the
Republic of the Philippines defendants in the observation that some important indispensable consideration is
SUPREME COURT conspicuously wanting or missing.
Manila
It is not the Court’s wish to turn its back on the crucial part of the case, which is the
THIRD DIVISION pronouncement of the judgment to settle the issues raised in the pleadings of the parties once
and for all, after all the time, effort and expense spent in going through the trial process.
G.R. No. 166519 March 31, 2009
But, rules are rules. They have to be followed, to arrive at a fair and just verdict. Section 7, Rule
NIEVES PLASABAS and MARCOS MALAZARTE, Petitioners,
3 of the Rules of Court provides:
vs.
"x x x Compulsory joinder of indispensable parties. – Parties in interest without whom no final and that Article 487 of the Civil Code could not be applied considering that the complaint was
determination can be had of an action shall be joined either as plaintiffs or defendants." not for ejectment, but for recovery of title or a reivindicatory action.11

What the Court wants to say here is that the instant case should have been dismissed without With their motion for reconsideration denied in the further assailed December 1, 2004
prejudice a long time ago for lack of cause of action as the plaintiffs spouses Marcos Malazarte Resolution,12 petitioners filed the instant petition.
and Nieves Plasabas Malazarte have no complete legal personality to sue by themselves alone
without joining the brothers and sisters of Nieves who are as INDISPENSABLE as the latter in The Court grants the petition and remands the case to the trial court for disposition on the
the final determination of the case. Not impleading them, any judgment would have no merits.
effectiveness.
Article 487 of the Civil Code provides that any one of the co-owners may bring an action for
They are that indispensable that a final decree would necessarily affect their rights, so that the ejectment.1avvphi1.zw+ The article covers all kinds of actions for the recovery of possession,
Court cannot proceed without their presence. There are abundant authorities in this regard. including an accion publiciana and a reivindicatory action. A co-owner may file suit without
Thus – necessarily joining all the other co-owners as co-plaintiffs because the suit is deemed to be
instituted for the benefit of all. Any judgment of the court in favor of the plaintiff will benefit
"The general rule with reference to the making of parties in a civil action requires the joinder the other co-owners, but if the judgment is adverse, the same cannot prejudice the rights of
of all indispensable parties under any and all conditions, their presence being a sine qua non the unimpleaded co-owners.13
of the exercise of judicial power. (Borlasa v. Polistico, 47 Phil. 345, 348) For this reason, our
Supreme Court has held that when it appears of record that there are other persons interested With this disquisition, there is no need to determine whether petitioners’ complaint is one for
in the subject matter of the litigation, who are not made parties to the action, it is the duty of ejectment or for recovery of title. To repeat, Article 487 of the Civil Code applies to both
the court to suspend the trial until such parties are made either plaintiffs or defendants. actions.
(Pobre, et al. v. Blanco, 17 Phil. 156). x x x Where the petition failed to join as party defendant
Thus, petitioners, in their complaint, do not have to implead their co-owners as parties. The
the person interested in sustaining the proceeding in the court, the same should be dismissed.
only exception to this rule is when the action is for the benefit of the plaintiff alone who claims
x x x When an indispensable party is not before the court, the action should be dismissed.
to be the sole owner and is, thus, entitled to the possession thereof. In such a case, the action
(People, et al. v. Rodriguez, et al., G.R. Nos. L-14059-62, September 30, 1959) (sic)
will not prosper unless the plaintiff impleads the other co-owners who are indispensable
"Parties in interest without whom no final determination can be had of an action shall be joined parties.14
either as plaintiffs or defendants. (Sec. 7, Rule 3, Rules of Court). The burden of procuring the
Here, the allegation of petitioners in their complaint that they are the sole owners of the
presence of all indispensable parties is on the plaintiff. (39 Amjur [sic] 885). The evident
property in litigation is immaterial, considering that they acknowledged during the trial that
purpose of the rule is to prevent the multiplicity of suits by requiring the person arresting a
the property is co-owned by Nieves and her siblings, and that petitioners have been authorized
right against the defendant to include with him, either as co-plaintiffs or as co-defendants, all
by the co-owners to pursue the case on the latter’s behalf.15Impleading the other co-owners
persons standing in the same position, so that the whole matter in dispute may be determined
is, therefore, not mandatory, because, as mentioned earlier, the suit is deemed to be instituted
once and for all in one litigation. (Palarca v. Baginsi, 38 Phil. 177, 178).
for the benefit of all.
"An indispensable party is a party who has such an interest in the controversy or subject matter
In any event, the trial and appellate courts committed reversible error when they summarily
that a final adjudication cannot be made, in his absence, without inquiring or affecting such
dismissed the case, after both parties had rested their cases following a protracted trial
interest; a party who has not only an interest of such a nature that a final decree cannot be
commencing in 1974, on the sole ground of failure to implead indispensable parties. The rule
made without affecting his interest or leaving the controversy in such a condition that its final
is settled that the non-joinder of indispensable parties is not a ground for the dismissal of an
determination may be wholly inconsistent with equity and good conscience. (67 C.J.S. 892).
action. The remedy is to implead the non-party claimed to be indispensable. Parties may be
Indispensable parties are those without whom no action can be finally determined." (Sanidad
added by order of the court on motion of the party or on its own initiative at any stage of the
v. Cabataje, 5 Phil. 204)
action and/or at such times as are just. If petitioner refuses to implead an indispensable party
WHEREFORE, IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, both the complaint and the despite the order of the court, the latter may dismiss the complaint/petition for the
counterclaim in the instant case are ordered DISMISSED without prejudice. No pronouncement plaintiff’s/petitioner's failure to comply therewith.16
as to costs.
WHEREFORE, premises considered, the instant petition is GRANTED, and the case is
SO ORDERED.9 REMANDED to the trial court for appropriate proceedings. The trial court is further DIRECTED
to decide on the merits of the civil case WITH DISPATCH.
Aggrieved, petitioners elevated the case to the CA. In the challenged May 12, 2004
Decision,10 the appellate court affirmed the ruling of the trial court. The CA, further, declared SO ORDERED.
that the non-joinder of the indispensable parties would violate the principle of due process,
Republic of the Philippines On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed Resolution No.
SUPREME COURT 08, series of 199910seeking assistance from the City Government of Parañaque for the
Manila construction of an access road along Cut-cut Creek located in the said barangay. The proposed
road, projected to be eight (8) meters wide and sixty (60) meters long, will run from Urma Drive
THIRD DIVISION to the main road of Vitalez Compound11 traversing the lot occupied by the respondents. When
the city government advised all the affected residents to vacate the said area, respondents
G.R. No. 178411 June 23, 2010
immediately registered their opposition thereto. As a result, the road project was temporarily
OFFICE OF THE CITY MAYOR OF PARAÑAQUE CITY, OFFICE OF THE CITY ADMINISTRATOR OF suspended.12
PARAÑAQUE CITY, OFFICE OF THE CITY ENGINEER OF PARAÑAQUE CITY, OFFICE OF THE
In January 2003, however, respondents were surprised when several officials from the
CITY PLANNING AND DEVELOPMENT COORDINATOR, OFFICE OF THE BARANGAY CAPTAIN
barangay and the city planning office proceeded to cut eight (8) coconut trees planted on the
AND SANGGUNIANG PAMBARANGAY OF BARANGAY VITALEZ, PARAÑAQUE CITY, TERESITA
said lot. Respondents filed letter-complaints before the Regional Director of the Bureau of
A. GATCHALIAN, ENRICO R. ESGUERRA, ERNESTO T. PRACALE, JR., MANUEL M. ARGOTE,
Lands, the Department of Interior and Local Government and the Office of the Vice
CONRADO M. CANLAS, JOSEPHINE S. DAUIGOY, ALLAN L. GONZALES, ESTER C. ASEHAN,
Mayor.13 On June 29, 2003, the Sangguniang Barangay of Vitalez held a meeting to discuss the
MANUEL A. FUENTES, and MYRNA P. ROSALES, Petitioners,
construction of the proposed road. In the said meeting, respondents asserted their opposition
vs.
to the proposed project and their claim of ownership over the affected property.14 On
MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, ARTURO V. EBIO, EDUARDO V. EBIO,
November 14, 2003, respondents attended another meeting with officials from the city
RENATO V. EBIO, LOURDES E. MAGTANGOB, MILA V. EBIO, and ARNEL V.
government, but no definite agreement was reached by and among the parties.15
EBIO, Respondents.
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents ordering
DECISION
them to vacate the area within the next thirty (30) days, or be physically evicted from the said
VILLARAMA, JR., J.: property.16 Respondents sent a letter to the Office of the City Administrator asserting, in sum,
their claim over the subject property and expressing intent for a further dialogue. 17 The
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil request remained unheeded.1avvphi1
Procedure, as amended, assailing the January 31, 2007 Decision1 and June 8, 2007
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 91350 allegedly for being contrary Threatened of being evicted, respondents went to the RTC of Parañaque City on April 21, 2005
to law and jurisprudence. The CA had reversed the Order 3 of the Regional Trial Court (RTC) of and applied for a writ of preliminary injunction against petitioners.18 In the course of the
Parañaque City, Branch 196, issued on April 29, 2005 in Civil Case No. 05-0155. proceedings, respondents admitted before the trial court that they have a pending application
for the issuance of a sales patent before the Department of Environment and Natural
Below are the facts. Resources (DENR).19

Respondents claim that they are the absolute owners of a parcel of land consisting of 406 On April 29, 2005, the RTC issued an Order20 denying the petition for lack of merit. The trial
square meters, more or less, located at 9781 Vitalez Compound in Barangay Vitalez, Parañaque court reasoned that respondents were not able to prove successfully that they have an
City and covered by Tax Declaration Nos. 01027 and 01472 in the name of respondent Mario established right to the property since they have not instituted an action for confirmation of
D. Ebio. Said land was an accretion of Cut-cut creek. Respondents assert that the original title and their application for sales patent has not yet been granted. Additionally, they failed
occupant and possessor of the said parcel of land was their great grandfather, Jose Vitalez. to implead the Republic of the Philippines, which is an indispensable party.
Sometime in 1930, Jose gave the land to his son, Pedro Vitalez. From then on, Pedro
continuously and exclusively occupied and possessed the said lot. In 1966, after executing an Respondents moved for reconsideration, but the same was denied.21
affidavit declaring possession and occupancy,4 Pedro was able to obtain a tax declaration over
Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31, 2007, the
the said property in his name.5 Since then, respondents have been religiously paying real
Court of Appeals issued its Decision in favor of the respondents. According to the Court of
property taxes for the said property.6
Appeals--
Meanwhile, in 1961, respondent Mario Ebio married Pedro’s daughter, Zenaida. Upon Pedro’s
The issue ultimately boils down to the question of ownership of the lands adjoining Cutcut
advice, the couple established their home on the said lot. In April 1964 and in October 1971,
Creek particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion beside RL 8.
Mario Ebio secured building permits from the Parañaque municipal office for the construction
of their house within the said compound.7 On April 21, 1987, Pedro executed a notarized The evidentiary records of the instant case, shows that RL 8 containing an area of 291 square
Transfer of Rights8 ceding his claim over the entire parcel of land in favor of Mario Ebio. meters is owned by Guaranteed Homes, Inc. covered by TCT No. S-62176. The same RL 8
Subsequently, the tax declarations under Pedro’s name were cancelled and new ones were appears to have been donated by the Guaranteed Homes to the City Government of Parañaque
issued in Mario Ebio’s name.9 on 22 March 1966 and which was accepted by the then Mayor FLORENCIO BERNABE on 5 April
1966. There is no evidence however, when RL 8 has been intended as a road lot.
On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed the accreted I. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT OF APPEALS
property since 1930 per his Affidavit dated 21 March 1966 for the purpose of declaring the THAT RESPONDENTS HAVE A RIGHT IN ESSE IS IN ACCORD WITH THE LAW AND ESTABLISHED
said property for taxation purposes. The property then became the subject of Tax Declaration JURISPRUDENCE[;]
No. 20134 beginning the year 1967 and the real property taxes therefor had been paid for the
years 1966, 1967, 1968, 1969, 1970, 1972, 1973, 1974, 1978, 1980, 1995, 1996, 1997, 1998, II. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT OF
1999, 2000, 2001, 2002, 2003, and 2004. Sometime in 1964 and 1971, construction permits APPEALS THAT THE SUBJECT LOT IS AVAILABLE FOR ACQUISITIVE PRESCRIPTION IS IN ACCORD
were issued in favor of Appellant MARIO EBIO for the subject property. On 21 April 1987, WITH THE LAW AND ESTABLISHED JURISPRUDENCE[;] AND
PEDRO VITALEZ transferred his rights in the accreted property to MARIO EBIO and his
III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE COMPLAINT … FILED BY
successors-in-interest.
RESPONDENTS IN THE LOWER COURT.23
Applying [Article 457 of the Civil Code considering] the foregoing documentary evidence, it
The issues may be narrowed down into two (2): procedurally, whether the State is an
could be concluded that Guaranteed Homes is the owner of the accreted property considering
indispensable party to respondents’ action for prohibitory injunction; and substantively,
its ownership of the adjoining RL 8 to which the accretion attached. However, this is without
whether the character of respondents’ possession and occupation of the subject property
the application of the provisions of the Civil Code on acquisitive prescription which is likewise
entitles them to avail of the relief of prohibitory injunction.
applicable in the instant case.
The petition is without merit.
xxxx
An action for injunction is brought specifically to restrain or command the performance of an
The subject of acquisitive prescription in the instant case is the accreted portion which [was]
act.24 It is distinct from the ancillary remedy of preliminary injunction, which cannot exist
duly proven by the Appellants. It is clear that since 1930, Appellants together with their
except only as part or as an incident to an independent action or proceeding. Moreover, in an
predecessor-in-interest, PEDRO VITALEZ[,] have been in exclusive possession of the subject
action for injunction, the auxiliary remedy of a preliminary prohibitory or mandatory injunction
property and starting 1964 had introduced improvements thereon as evidenced by their
may issue.25
construction permits. Thus, even by extraordinary acquisitive prescription[,] Appellants have
acquired ownership of the property in question since 1930 even if the adjoining RL 8 was In the case at bar, respondents filed an action for injunction to prevent the local government
subsequently registered in the name of Guaranteed Homes. x x x. of Parañaque City from proceeding with the construction of an access road that will traverse
through a parcel of land which they claim is owned by them by virtue of acquisitive
xxxx
prescription.
Further, it was only in 1978 that Guaranteed Homes was able to have RL 8 registered in its
Petitioners, however, argue that since the creek, being a tributary of the river, is classified as
name, which is almost fifty years from the time PEDRO VITALEZ occupied the adjoining
part of the public domain, any land that may have formed along its banks through time should
accreted property in 1930. x x x.
also be considered as part of the public domain. And respondents should have included the
xxxx State as it is an indispensable party to the action.

We likewise note the continuous payment of real property taxes of Appellants which bolster We do not agree.
their right over the subject property. x x x.
It is an uncontested fact that the subject land was formed from the alluvial deposits that have
xxxx gradually settled along the banks of Cut-cut creek. This being the case, the law that governs
ownership over the accreted portion is Article 84 of the Spanish Law of Waters of 1866, which
In sum, We are fully convinced and so hold that the Appellants [have] amply proven their right remains in effect,26 in relation to Article 457 of the Civil Code.
over the property in question.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over alluvial
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The challenged deposits along the banks of a creek. It reads:
Order of the court a quo is REVERSED and SET ASIDE.
ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams, rivers, and
SO ORDERED.22 lakes, by accessions or sediments from the waters thereof, belong to the owners of such
lands.27
On June 8, 2007, the appellate court denied petitioners’ motion for reconsideration. Hence,
this petition raising the following assignment of errors: Interestingly, Article 457 of the Civil Code states:

Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which they
gradually receive from the effects of the current of the waters.
It is therefore explicit from the foregoing provisions that alluvial deposits along the banks of a of land registration is not the acquisition of lands, but only the registration of title which the
creek do not form part of the public domain as the alluvial property automatically belongs to applicant already possessed over the land. Registration was never intended as a means of
the owner of the estate to which it may have been added. The only restriction provided for by acquiring ownership.37 A decree of registration merely confirms, but does not confer,
law is that the owner of the adjoining property must register the same under the Torrens ownership.38
system; otherwise, the alluvial property may be subject to acquisition through prescription by
third persons.28 Did the filing of a sales patent application by the respondents, which remains pending before
the DENR, estop them from filing an injunction suit?
In contrast, properties of public dominion cannot be acquired by prescription. No matter how
long the possession of the properties has been, there can be no prescription against the State We answer in the negative.
regarding property of public domain.29 Even a city or municipality cannot acquire them by
Confirmation of an imperfect title over a parcel of land may be done either through judicial
prescription as against the State.30
proceedings or through administrative process. In the instant case, respondents admitted that
Hence, while it is true that a creek is a property of public dominion,31 the land which is formed they opted to confirm their title over the property administratively by filing an application for
by the gradual and imperceptible accumulation of sediments along its banks does not form sales patent.
part of the public domain by clear provision of law.
Respondents’ application for sales patent, however, should not be used to prejudice or
Moreover, an indispensable party is one whose interest in the controversy is such that a final derogate what may be deemed as their vested right over the subject property. The sales patent
decree would necessarily affect his/her right, so that the court cannot proceed without their application should instead be considered as a mere superfluity particularly since ownership
presence.32 In contrast, a necessary party is one whose presence in the proceedings is over the land, which they seek to buy from the State, is already vested upon them by virtue of
necessary to adjudicate the whole controversy but whose interest is separable such that a final acquisitive prescription. Moreover, the State does not have any authority to convey a property
decree can be made in their absence without affecting them.33 through the issuance of a grant or a patent if the land is no longer a public land.39

In the instant case, the action for prohibition seeks to enjoin the city government of Parañaque Nemo dat quod dat non habet. No one can give what he does not have. Such principle is equally
from proceeding with its implementation of the road construction project. The State is neither applicable even against a sovereign entity that is the State.
a necessary nor an indispensable party to an action where no positive act shall be required
WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007 Decision, as well
from it or where no obligation shall be imposed upon it, such as in the case at bar. Neither
as the July 8, 2007 Resolution, of the Court of Appeals in CA-G.R. SP No. 91350 are hereby
would it be an indispensable party if none of its properties shall be divested nor any of its rights
AFFIRMED.
infringed.
With costs against petitioners.
We also find that the character of possession and ownership by the respondents over the
contested land entitles them to the avails of the action. SO ORDERED.
A right in esse means a clear and unmistakable right.34
A party seeking to avail of an injunctive FIRST DIVISION
relief must prove that he or she possesses a right in esse or one that is actual or existing.35 It
should not be contingent, abstract, or future rights, or one which may never arise.36 G.R. No. 160347 November 29, 2006

In the case at bar, respondents assert that their predecessor-in-interest, Pedro Vitalez, had ARCADIO and MARIA LUISA CARANDANG, Petitioners,
occupied and possessed the subject lot as early as 1930. In 1964, respondent Mario Ebio vs.
secured a permit from the local government of Parañaque for the construction of their family HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN, VICTOR DE GUZMAN,
dwelling on the said lot. In 1966, Pedro executed an affidavit of possession and occupancy REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and QUIRINO DE GUZMAN, JR., Respondents.
allowing him to declare the property in his name for taxation purposes. Curiously, it was also
in 1966 when Guaranteed Homes, Inc., the registered owner of Road Lot No. 8 (RL 8) which DECISION
adjoins the land occupied by the respondents, donated RL 8 to the local government of CHICO-NAZARIO, J.:
Parañaque.
This is a Petition for Review on Certiorari assailing the Court of Appeals Decision 1 and
From these findings of fact by both the trial court and the Court of Appeals, only one conclusion Resolution affirming the Regional Trial Court (RTC) Decision rendering herein petitioners
can be made: that for more than thirty (30) years, neither Guaranteed Homes, Inc. nor the Arcadio and Luisa Carandang [hereinafter referred to as spouses Carandang] jointly and
local government of Parañaque in its corporate or private capacity sought to register the severally liable for their loan to Quirino A. de Guzman.
accreted portion. Undoubtedly, respondents are deemed to have acquired ownership over the
subject property through prescription. Respondents can assert such right despite the fact that The Court of Appeals summarized the facts as follows:
they have yet to register their title over the said lot. It must be remembered that the purpose
[Quirino de Guzman] and [the Spouses Carandang] are stockholders as well as corporate I.
officers of Mabuhay Broadcasting System (MBS for brevity), with equities at fifty four percent
(54%) and forty six percent (46%) respectively. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
FAILING TO STRICTLY COMPLY WITH SECTION 16, RULE 3 OF THE 1997 RULES OF CIVIL
On November 26, 1983, the capital stock of MBS was increased, from ₱500,000 to P1.5 million PROCEDURE.
and ₱345,000 of this increase was subscribed by [the spouses Carandang]. Thereafter, on
March 3, 1989, MBS again increased its capital stock, from ₱1.5 million to ₱3 million, [the II.
spouses Carandang] yet again subscribed to the increase. They subscribed to ₱93,750 worth
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING
of newly issued capital stock.
THAT THERE IS AN ALLEGED LOAN FOR WHICH PETITIONERS ARE LIABLE, CONTRARY TO
[De Guzman] claims that, part of the payment for these subscriptions were paid by him, EXPRESS PROVISIONS OF BOOK IV, TITLE XI, OF THE NEW CIVIL CODE PERTAINING TO LOANS.
₱293,250 for the November 26, 1983 capital stock increase and ₱43,125 for the March 3, 1989
III.
Capital Stock increase or a total of ₱336,375. Thus, on March 31, 1992, [de Guzman] sent a
demand letter to [the spouses Carandang] for the payment of said total amount. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE RESPONDENTS WERE ABLE TO DISCHARGE THEIR BURDEN OF PROOF, IN COMPLETE
[The spouses Carandang] refused to pay the amount, contending that a pre-incorporation
DISREGARD OF THE REVISED RULES ON EVIDENCE.
agreement was executed between [Arcadio Carandang] and [de Guzman], whereby the latter
promised to pay for the stock subscriptions of the former without cost, in consideration for IV.
[Arcadio Carandang’s] technical expertise, his newly purchased equipment, and his skill in
repairing and upgrading radio/communication equipment therefore, there is no indebtedness WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
on their part [sic]. WHEN IT FAILED TO APPLY SECTIONS 2 AND 7, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
On June 5, 1992, [de Guzman] filed his complaint, seeking to recover the ₱336,375 together
with damages. After trial on the merits, the trial court disposed of the case in this wise: V.

"WHEREFORE, premises considered, judgment is hereby rendered in favor of [de Guzman]. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
Accordingly, [the spouses Carandang] are ordered to jointly and severally pay [de Guzman], to THE PURPORTED LIABILITY OF PETITIONERS ARE JOINT AND SOLIDARY, IN VIOLATION OF
wit: ARTICLE 1207 OF THE NEW CIVIL CODE.4

(1) ₱336,375.00 representing [the spouses Carandang’s] loan to de Guzman; Whether or not the RTC Decision is void for failing to comply with Section 16, Rule 3 of the
Rules of Court
(2) interest on the preceding amount at the rate of twelve percent (12%) per annum from June
5, 1992 when this complaint was filed until the principal amount shall have been fully paid; The spouses Carandang claims that the Decision of the RTC, having been rendered after the
death of Quirino de Guzman, is void for failing to comply with Section 16, Rule 3 of the Rules
(3) ₱20,000.00 as attorney’s fees; of Court, which provides:
(4) Costs of suit. SEC. 16. 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
The spouses Carandang appealed the RTC Decision to the Court of Appeals, which affirmed the
thirty (30) days after such death of the fact thereof, and to give the name and address of his
same in the 22 April 2003 assailed Decision:
legal representative or representatives. Failure of counsel to comply with this duty shall be a
WHEREFORE, in view of all the foregoing the assailed Decision is hereby AFFIRMED. No costs. 2 ground for disciplinary action.

The Motion for Reconsideration filed by the spouses Carandang was similarly denied by the The heirs of the deceased may be allowed to be substituted for the deceased, without
Court of Appeals in the 6 October 2003 assailed Resolution: requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
WHEREFORE, in view thereof, the motion for reconsideration is hereby DENIED and our
Decision of April 22, 2003, which is based on applicable law and jurisprudence on the matter The court shall forthwith order the legal representative or representatives to appear and be
is hereby AFFIRMED and REITERATED.3 substituted within a period of thirty (30) days from notice.

The spouses Carandang then filed before this Court the instant Petition for Review on If no legal representative is named by the counsel for the deceased party, or if the one so
Certiorari, bringing forth the following issues: named shall fail to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or administrator for the
estate of the deceased and the latter shall immediately appear for and on behalf of the Care should, however, be taken in applying the foregoing conclusions. In People v.
deceased. The court charges in procuring such appointment, if defrayed by the opposing party, Florendo,13 where we likewise held that the proceedings that took place after the death of the
may be recovered as costs. party are void, we gave another reason for such nullity: "the attorneys for the offended party
ceased to be the attorneys for the deceased upon the death of the latter, the principal x x x."
The spouses Carandang posits that such failure to comply with the above rule renders void the Nevertheless, the case at bar had already been submitted for decision before the RTC on 4
decision of the RTC, in adherence to the following pronouncements in Vda. de Haberer v. Court June 1998, several months before the passing away of de Guzman on 19 February 1999. Hence,
of Appeals5 and Ferreria v. Vda. de Gonzales6 : no further proceedings requiring the appearance of de Guzman’s counsel were conducted
before the promulgation of the RTC Decision. Consequently, de Guzman’s counsel cannot be
Thus, it has been held that when a party dies in an action that survives and no order is issued
said to have no authority to appear in trial, as trial had already ceased upon the death of de
by the court for the appearance of the legal representative or of the heirs of the deceased in
Guzman.
substitution of the deceased, and as a matter of fact no substitution has ever been effected,
the trial held by the court without such legal representatives or heirs and the judgment In sum, the RTC Decision is valid despite the failure to comply with Section 16, Rule 3 of the
rendered after such trial are null and void because the court acquired no jurisdiction over the Rules of Court, because of the express waiver of the heirs to the jurisdiction over their persons,
persons of the legal representatives or of the heirs upon whom the trial and judgment would and because there had been, before the promulgation of the RTC Decision, no further
be binding.7 proceedings requiring the appearance of de Guzman’s counsel.
In the present case, there had been no court order for the legal representative of the deceased Before proceeding with the substantive aspects of the case, however, there is still one more
to appear, nor had any such legal representative appeared in court to be substituted for the procedural issue to tackle, the fourth issue presented by the spouses Carandang on the non-
deceased; neither had the complainant ever procured the appointment of such legal inclusion in the complaint of an indispensable party.
representative of the deceased, including appellant, ever asked to be substituted for the
deceased. As a result, no valid substitution was effected, consequently, the court never Whether or not the RTC should have dismissed the case for failure to state a cause of action,
acquired jurisdiction over appellant for the purpose of making her a party to the case and considering that Milagros de Guzman, allegedly an indispensable party, was not included as a
making the decision binding upon her, either personally or as a representative of the estate of party-plaintiff
her deceased mother.8
The spouses Carandang claim that, since three of the four checks used to pay their stock
However, unlike jurisdiction over the subject matter which is conferred by law and is not subscriptions were issued in the name of Milagros de Guzman, the latter should be considered
subject to the discretion of the parties,9 jurisdiction over the person of the parties to the case an indispensable party. Being such, the spouses Carandang claim, the failure to join Mrs. de
may be waived either expressly or impliedly.10Implied waiver comes in the form of either Guzman as a party-plaintiff should cause the dismissal of the action because "(i)f a suit is not
voluntary appearance or a failure to object.11 brought in the name of or against the real party in interest, a motion to dismiss may be filed
on the ground that the complaint states no cause of action."14
In the cases cited by the spouses Carandang, we held that there had been no valid substitution
by the heirs of the deceased party, and therefore the judgment cannot be made binding upon The Court of Appeals held:
them. In the case at bar, not only do the heirs of de Guzman interpose no objection to the
jurisdiction of the court over their persons; they are actually claiming and embracing such We disagree. The joint account of spouses Quirino A de Guzman and Milagros de Guzman from
jurisdiction. In doing so, their waiver is not even merely implied (by their participation in the which the four (4) checks were drawn is part of their conjugal property and under both the
appeal of said Decision), but express (by their explicit espousal of such view in both the Court Civil Code and the Family Code the husband alone may institute an action for the recovery or
of Appeals and in this Court). The heirs of de Guzman had no objection to being bound by the protection of the spouses’ conjugal property.
Decision of the RTC.
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that "x x x Under the New
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal defense which Civil Code, the husband is the administrator of the conjugal partnership. In fact, he is the sole
can only be asserted by the party who can thereby waive it by silence. administrator, and the wife is not entitled as a matter of right to join him in this endeavor. The
husband may defend the conjugal partnership in a suit or action without being joined by the
It also pays to look into the spirit behind the general rule requiring a formal substitution of wife. x x x Under the Family Code, the administration of the conjugal property belongs to the
heirs. The underlying principle therefor is not really because substitution of heirs is a husband and the wife jointly. However, unlike an act of alienation or encumbrance where the
jurisdictional requirement, but because non-compliance therewith results in the undeniable consent of both spouses is required, joint management or administration does not require that
violation of the right to due process of those who, though not duly notified of the proceedings, the husband and wife always act together. Each spouse may validly exercise full power of
are substantially affected by the decision rendered therein.12 Such violation of due process can management alone, subject to the intervention of the court in proper cases as provided under
only be asserted by the persons whose rights are claimed to have been violated, namely the Article 124 of the Family Code. x x x."
heirs to whom the adverse judgment is sought to be enforced.
The Court of Appeals is correct. Petitioners erroneously interchange the terms "real party in
interest" and "indispensable party." A real party in interest is the party who stands to be
benefited or injured by the judgment of the suit, or the party entitled to the avails of the The non-inclusion of a necessary party does not prevent the court from proceeding in the
suit.15 On the other hand, an indispensable party is a party in interest without whom no final action, and the judgment rendered therein shall be without prejudice to the rights of such
determination can be had of an action,16 in contrast to a necessary party, which is one who is necessary party.
not indispensable but who ought to be joined as a party if complete relief is to be accorded as
to those already parties, or for a complete determination or settlement of the claim subject of Non-compliance with the order for the inclusion of a necessary party would not warrant the
the action.17 dismissal of the complaint. This is an exception to Section 3, Rule 17 which allows the dismissal
of the complaint for failure to comply with an order of the court, as Section 9, Rule 3 specifically
The spouses Carandang are indeed correct that "(i)f a suit is not brought in the name of or provides for the effect of such non-inclusion: it shall not prevent the court from proceeding in
against the real party in interest, a motion to dismiss may be filed on the ground that the the action, and the judgment rendered therein shall be without prejudice to the rights of such
complaint states no cause of action."18 However, what dismissal on this ground entails is an necessary party. Section 11, Rule 3 likewise provides that the non-joinder of parties is not a
examination of whether the parties presently pleaded are interested in the outcome of the ground for the dismissal of the action.
litigation, and not whether all persons interested in such outcome are actually pleaded. The
latter query is relevant in discussions concerning indispensable and necessary parties, Other than the indispensable and necessary parties, there is a third set of parties: the pro-
but not in discussions concerning real parties in interest. Both indispensable and necessary forma parties, which are those who are required to be joined as co-parties in suits by or against
parties are considered as real parties in interest, since both classes of parties stand to be another party as may be provided by the applicable substantive law or procedural rule. 25 An
benefited or injured by the judgment of the suit. example is provided by Section 4, Rule 3 of the Rules of Court:

Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3 Sec. 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided
August 1988. As they did not execute any marriage settlement, the regime of conjugal by law.
partnership of gains govern their property relations.19
Pro-forma parties can either be indispensable, necessary or neither indispensable nor
All property acquired during the marriage, whether the acquisition appears to have been necessary. The third case occurs if, for example, a husband files an action to recover a property
made, contracted or registered in the name of one or both spouses, is presumed to be conjugal which he claims to be part of his exclusive property. The wife may have no legal interest in
unless the contrary is proved.20 Credits are personal properties,21 acquired during the time the such property, but the rules nevertheless require that she be joined as a party.
loan or other credit transaction was executed. Therefore, credits loaned during the time of the
In cases of pro-forma parties who are neither indispensable nor necessary, the general rule
marriage are presumed to be conjugal property.
under Section 11, Rule 3 must be followed: such non-joinder is not a ground for dismissal.
Consequently, assuming that the four checks created a debt for which the spouses Carandang Hence, in a case concerning an action to recover a sum of money, we held that the failure to
are liable, such credits are presumed to be conjugal property. There being no evidence to the join the spouse in that case was not a jurisdictional defect.26 The non-joinder of a spouse does
contrary, such presumption subsists. As such, Quirino de Guzman, being a co-owner of specific not warrant dismissal as it is merely a formal requirement which may be cured by
partnership property,22 is certainly a real party in interest. Dismissal on the ground of failure amendment.27
to state a cause of action, by reason that the suit was allegedly not brought by a real party in
Conversely, in the instances that the pro-forma parties are also indispensable or necessary
interest, is therefore unwarranted.
parties, the rules concerning indispensable or necessary parties, as the case may be, should be
So now we come to the discussion concerning indispensable and necessary parties. When an applied. Thus, dismissal is warranted only if the pro-forma party not joined in the complaint is
indispensable party is not before the court, the action should likewise be dismissed. 23 The an indispensable party.
absence of an indispensable party renders all subsequent actuations of the court void, for want
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to
of authority to act, not only as to the absent parties but even as to those present. 24 On the
the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an
other hand, the non-joinder of necessary parties do not result in the dismissal of the case.
indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is
Instead, Section 9, Rule 3 of the Rules of Court provides for the consequences of such non-
not warranted, whether or not there was an order for her inclusion in the complaint pursuant
joinder:
to Section 9, Rule 3.
Sec. 9. Non-joinder of necessary parties to be pleaded. – Whenever in any pleading in which a
Article 108 of the Family Code provides:
claim is asserted a necessary party is not joined, the pleader shall set forth his name, if known,
and shall state why he is omitted. Should the court find the reason for the omission Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership
unmeritorious, it may order the inclusion of the omitted necessary party if jurisdiction over his in all that is not in conflict with what is expressly determined in this Chapter or by the spouses
person may be obtained. in their marriage settlements.
The failure to comply with the order for his inclusion, without justifiable cause, shall be This provision is practically the same as the Civil Code provision it superceded:
deemed a waiver of the claim against such party.
Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership [The spouses Carandang] aver in its ninth assigned error that [the de Guzmans] failed to prove
in all that is not in conflict with what is expressly determined in this Chapter. by preponderance of evidence, either the existence of the purported loan or the non-payment
thereof.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with
the other partners of specific partnership property." Taken with the presumption of the Simply put, preponderance of evidence means that the evidence as a whole adduced by one
conjugal nature of the funds used to finance the four checks used to pay for petitioners’ stock side is superior to that of the other. The concept of preponderance of evidence refers to
subscriptions, and with the presumption that the credits themselves are part of conjugal funds, evidence that is of greater weight, or more convincing, than that which is offered in opposition
Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit. to it; it means probability of truth.

Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring [The spouses Carandang] admitted that it was indeed [the de Guzmans] who paid their stock
an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular28 and Adlawan subscriptions and their reason for not reimbursing the latter is the alleged pre-incorporation
v. Adlawan,29 we held that, in a co-ownership, co-owners may bring actions for the recovery agreement, to which they offer no clear proof as to its existence.
of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs
because the suit is presumed to have been filed for the benefit of his co-owners. In the latter It is a basic rule in evidence that each party must prove his affirmative allegation. Thus, the
case and in that of De Guia v. Court of Appeals,30 we also held that Article 487 of the Civil Code, plaintiff or complainant has to prove his affirmative allegations in the complaints and the
which provides that any of the co-owners may bring an action for ejectment, covers all kinds defendant or respondent has to prove the affirmative allegations in his affirmative defenses
of action for the recovery of possession.31 and counterclaims.33

In sum, in suits to recover properties, all co-owners are real parties in interest. However, The spouses Carandang, however, insist that the de Guzmans have not proven the loan itself,
pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring having presented evidence only of the payment in favor of the Carandangs. They claim:
an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of
It is an undeniable fact that payment is not equivalent to a loan. For instance, if Mr. "A" decides
the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned
to pay for Mr. "B’s" obligation, that payment by Mr. "A" cannot, by any stretch of imagination,
property, is an indispensable party thereto. The other co-owners are not indispensable parties.
possibly mean that there is now a loan by Mr. "B" to Mr. "A". There is a possibility that such
They are not even necessary parties, for a complete relief can be accorded in the suit even
payment by Mr. "A" is purely out of generosity or that there is a mutual agreement between
without their participation, since the suit is presumed to have been filed for the benefit of all
them. As applied to the instant case, that mutual agreement is the pre-incorporation
co-owners.32
agreement (supra) existing between Mr. de Guzman and the petitioners --- to the effect that
We therefore hold that Milagros de Guzman is not an indispensable party in the action for the the former shall be responsible for paying stock subscriptions of the latter. Thus, when Mr. de
recovery of the allegedly loaned money to the spouses Carandang. As such, she need not have Guzman paid for the stock subscriptions of the petitioners, there was no loan to speak of, but
been impleaded in said suit, and dismissal of the suit is not warranted by her not being a party only a compliance with the pre-incorporation agreement.34
thereto.
The spouses Carandang are mistaken. If indeed a Mr. "A" decides to pay for a Mr. "B’s"
Whether or not respondents were able to prove the loan sought to be collected from obligation, the presumption is that Mr. "B" is indebted to Mr. "A" for such amount that has
petitioners been paid. This is pursuant to Articles 1236 and 1237 of the Civil Code, which provide:

In the second and third issues presented by the spouses Carandang, they claim that the de Art. 1236. The creditor is not bound to accept payment or performance by a third person who
Guzmans failed to prove the alleged loan for which the spouses Carandang were held liable. has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
As previously stated, spouses Quirino and Milagros de Guzman paid for the stock subscriptions
Whoever pays for another may demand from the debtor what he has paid, except that if he
of the spouses Carandang, amounting to ₱336,375.00. The de Guzmans claim that these
paid without the knowledge or against the will of the debtor, he can recover only insofar as
payments were in the form of loans and/or advances and it was agreed upon between the late
the payment has been beneficial to the debtor.
Quirino de Guzman, Sr. and the spouses Carandang that the latter would repay him.
Petitioners, on the other hand, argue that there was an oral pre-incorporation agreement Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of
wherein it was agreed that Arcardio Carandang would always maintain his 46% equity the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from
participation in the corporation even if the capital structures were increased, and that Quirino a mortgage, guarantee, or penalty.
de Guzman would personally pay the equity shares/stock subscriptions of Arcardio Carandang
with no cost to the latter. Articles 1236 and 1237 are clear that, even in cases where the debtor has no knowledge of
payment by a third person, and even in cases where the third person paid against the will of
On this main issue, the Court of Appeals held: the debtor, such payment would produce a debt in favor of the paying third person. In fact,
the only consequences for the failure to inform or get the consent of the debtor are the
following: (1) the third person can recover only insofar as the payment has been beneficial to
the debtor; and (2) the third person is not subrogated to the rights of the creditor, such as I’m showing to you these receipts so marked by the plaintiff as their exhibits which were issued
those arising from a mortgage, guarantee or penalty.35 in the name of Ma. Luisa Carandang, your wife; and also, Arcadio M. Carandang. Will you please
go over this Official Receipt and state for the records, who made for the payment stated in
We say, however, that this is merely a presumption. By virtue of the parties’ freedom to these receipts in your name?
contract, the parties could stipulate otherwise and thus, as suggested by the spouses
Carandang, there is indeed a possibility that such payment by Mr. "A" was purely out of A: I paid for those shares."42
generosity or that there was a mutual agreement between them. But such mutual agreement,
being an exception to presumed course of events as laid down by Articles 1236 and 1237, must There being no testimony or documentary evidence proving the existence of the pre-
be adequately proven. incorporation agreement, the spouses Carandang are forced to rely upon an alleged admission
by the original plaintiff of the existence of the pre-incorporation agreement.
The de Guzmans have successfully proven their payment of the spouses Carandang’s stock
subscriptions. These payments were, in fact, admitted by the spouses Carandang. Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the existence of the pre-
Consequently, it is now up to the spouses Carandang to prove the existence of the pre- incorporation agreement by virtue of paragraphs 13 and 14 of their Answer and paragraph 4
incorporation agreement that was their defense to the purported loan. of private respondents’ Reply.

Unfortunately for the spouses Carandang, the only testimony which touched on the existence Paragraphs 13 and 14 of petitioners’ Answer dated 7 July 1992 state in full:
and substance of the pre-incorporation agreement, that of petitioner Arcardio Carandang, was
13. Sometime in November, 1973 or thereabout, herein plaintiff invited defendant Arcadio M.
stricken off the record because he did not submit himself to a cross-examination of the
Carandang to a joint venture by pooling together their technical expertise, equipments,
opposing party. On the other hand, the testimonies of Romeo Saavedra, 36 Roberto S.
financial resources and franchise. Plaintiff proposed to defendant and mutually agreed on the
Carandang,37 Gertrudes Z. Esteban,38 Ceferino Basilio,39 and Ma. Luisa Carandang40touched on
following:
matters other than the existence and substance of the pre-incorporation agreement. So aside
from the fact that these witnesses had no personal knowledge as to the alleged existence of 1. That they would organize a corporation known as Mabuhay Broadcasting Systems, Inc.
the pre-incorporation agreement, the testimonies of these witnesses did not even mention
the existence of a pre-incorporation agreement. 2. Considering the technical expertise and talent of defendant Arcadio M. Carandang and his
new equipments he bought, and his skill in repairing and modifying radio/communication
Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa Carandang even equipments into high proficiency, said defendant would have an equity participation in the
contradicted the existence of a pre-incorporation agreement because when they were asked corporation of 46%, and plaintiff 54% because of his financial resources and franchise.
by their counsel regarding the matter of the check payments made by the late Quirino A. de
Guzman, Sr. in their behalf, they said that they had already paid for it thereby negating their 3. That defendant would always maintain his 46% equity participation in the corporation even
own defense that there was a pre-incorporation agreement excusing themselves from paying if the capital structures are increased, and that plaintiff would personally pay the equity
Mr. de Guzman the amounts he advanced or loaned to them. This basic and irrefutable fact shares/stock subscriptions of defendant with no cost to the latter.
can be gleaned from their testimonies which the private respondents are quoting for easy
reference: 4. That because of defendant’s expertise in the trade including the marketing aspects, he
would be the President and General Manager, and plaintiff the Chairman of the Board.
a. With respect to the testimony of Ma. Luisa Carandang
5. That considering their past and trustworthy relations, they would maintain such relations in
Q: Now, can you tell this Honorable Court how do you feel with respect to the Complaint of the joint venture without any mental reservation for their common benefit and success of the
the plaintiff in this case charging you that you paid for this year and asking enough to paid (sic) business.
your tax?
14. Having mutually agreed on the above arrangements, the single proprietorship of plaintiff
A: We have paid already, so, we are not liable for anything payment (sic).41 was immediately spun-off into a corporation now known as Mabuhay Broadcasting System,
Inc. The incorporators are plaintiff and his family members/nominees controlling jointly 54%
b. With respect to the testimony of Arcadio Carandang of the stocks and defendant Arcadio M. Carandang controlling singly 46% as previously
agreed.43
"Q: How much?
Meanwhile, paragraphs 3 and 4 of private respondents’ Reply dated 29 July 1992 state in full:
A: ₱40,000.00 to ₱50,000.00 per month.
3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer only insofar the plaintiff and
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there were receipts issued for the
defendant Arcadio M. Carandang organized a corporation known as Mabuhay Broadcasting
payment of your shares; which receipts were marked as Exhibits "G" to "L" (Plaintiff).
Systems, Inc. Plaintiff specifically denies the other allegations in paragraph 13 of the Answer,
the same being devoid of any legal or factual bases. The truth of the matter is that defendant
Arcadio M. Carandang was not able to pay plaintiff the agreed amount of the lease for a It is apparent from the facts of the case that [the spouses Carandang] were married way before
number of months forcing the plaintiff to terminate lease. Additionally, the records would the effectivity of the Family Code hence; their property regime is conjugal partnership under
show that it was the defendant Arcadio M. Carandang who proposed a joint venture with the the Civil Code.
plaintiff.
It must be noted that for marriages governed by the rules of conjugal partnership of gains, an
It appears that plaintiff agreed to the formation of the corporation principally because of a obligation entered into by the husband and wife is chargeable against their conjugal
directive of then President Marcos indicating the need to broaden the ownership of radio partnership and it is the partnership, which is primarily bound for its repayment. Thus, when
broadcasting stations. The plaintiff owned the franchise, the radio transmitter, the antenna the spouses are sued for the enforcement of the obligation entered into by them, they are
tower, the building containing the radio transmitter and other equipment. Verily, he would be being impleaded in their capacity as representatives of the conjugal partnership and not as
placed in a great disadvantage if he would still have to personally pay for the shares of independent debtors, such that the concept of joint and solidary liability, as between them,
defendant Arcadio M. Carandang. does not apply.47

4. Plaintiff admits the allegations in paragraph 14 of the Answer.44 The Court of Appeals is correct insofar as it held that when the spouses are sued for the
enforcement of the obligation entered into by them, they are being impleaded in their capacity
In effect, the spouses Carandang are relying on the fact that Quirino de Guzman stated that he as representatives of the conjugal partnership and not as independent debtors. Hence, either
admitted paragraph 14 of the Answer, which incidentally contained the opening clause of them may be sued for the whole amount, similar to that of a solidary liability, although the
"(h)aving mutually agreed on the above arrangements, x x x." amount is chargeable against their conjugal partnership property. Thus, in the case cited by
the Court of Appeals, Alipio v. Court of Appeals,48 the two sets of defendant-spouses therein
Admissions, however, should be clear and unambiguous. This purported admission by Quirino
were held liable for ₱25,300.00 each, chargeable to their respective conjugal partnerships.
de Guzman reeks of ambiguity, as the clause "(h)aving mutually agreed on the above
arrangements," seems to be a mere introduction to the statement that the single WHEREFORE, the Decision of the Court of Appeals, affirming the judgment rendered against
proprietorship of Quirino de Guzman had been converted into a corporation. If Quirino de the spouses Carandang, is hereby AFFIRMED with the following MODIFICATION: The spouses
Guzman had meant to admit paragraph 13.3, he could have easily said so, as he did the other Carandang are ORDERED to pay the following amounts from their conjugal partnership
paragraphs he categorically admitted. Instead, Quirino de Guzman expressly stated the properties:
opposite: that "(p)laintiff specifically denies the other allegations of paragraph 13 of the
Answer."45 The Reply furthermore states that the only portion of paragraph 13 which Quirino (1) ₱336,375.00 representing the spouses Carandang’s loan to Quirino de Guzman; and
de Guzman had admitted is paragraph 13.1, and only insofar as it said that Quirino de Guzman
and Arcardio Carandang organized Mabuhay Broadcasting Systems, Inc.46 (2) Interest on the preceding amount at the rate of twelve percent (12%) per annum from 5
June 1992 when the complaint was filed until the principal amount can be fully paid; and
All the foregoing considered, we hold that Quirino de Guzman had not admitted the alleged
pre-incorporation agreement. As there was no admission, and as the testimony of Arcardio (3) ₱20,000.00 as attorney’s fees.
Carandang was stricken off the record, we are constrained to rule that there was no pre-
No costs.
incorporation agreement rendering Quirino de Guzman liable for the spouses Carandang’s
stock subscription. The payment by the spouses de Guzman of the stock subscriptions of the SO ORDERED.
spouses Carandang are therefore by way of loan which the spouses Carandang are liable to
pay.1âwphi1 FIRST DIVISION

Whether or not the liability of the spouses Carandang is joint and solidary March 11, 2015

Finally, the Court of Appeals also upheld the RTC Decision insofar as it decreed a solidary G.R. No. 196750
liability. According to the Court of Appeals:
MA. ELENA R. DIVINAGRACIA, as Administratrix of the ESTATE OF THE LATE SANTIAGO C.
With regards (sic) the tenth assigned error, [the spouses Carandang] contend that: DIVINAGRACIA, Petitioner,
vs.
"There is absolutely no evidence, testimonial or documentary, showing that the purported CORONACION PARILLA, CELESTIAL NOBLEZA, CECILIA LELINA, CELEDONIO NOBLEZA,
obligation of [the spouses Carandang] is joint and solidary. x x x MAUDE NOBLEZA, Respondents.
"Furthermore, the purported obligation of [the spouses Carandang] does not at all qualify as DECISION
one of the obligations required by law to be solidary x x x."
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated March 26, 2009 and not validly acquire Mateo, Sr.’s share over the subject land, considering that Felcon admitted
the Resolution3 dated April 6, 2011 of the Court of Appeals (CA) in CA-G.R. CV. No. 80167, the lack of authority to bind his siblings with regard to Mateo, Sr.’s share thereon. 20
which set aside the Decision4 dated November 29, 2002 and the Order5 dated April 4, 2003 of
the Regional Trial Court of Iloilo City, Branch 31 (RTC) in Civil Case No. 19003 and, On reconsideration21 of Ceruleo and herein respondents Celedonio, Maude, Celestial,
consequently, dismissed Santiago C. Divinagracia's (Santiago) complaint for judicial partition. Coronacion, and Cecilia (respondents), the RTC issued an Order22 dated April 4, 2003 further
ordering Santiago to comply with the provisions of the Supplemental Contract dated December
The Facts 22, 1989 by paying the amount of 337,887.73 upon the partition of the subject land.

Conrado Nobleza, Sr. (Conrado, Sr.) owned a 313-square meter parcel of land located at Cor. Dissatisfied, respondents appealed23 to the CA. Records are bereft of any showing that the
Fuentes-Delgado Streets, Iloilo City denominated as Lot 133-B-1-A and covered by Transfer other heirs made similar appeals thereto.
Certificate of Title (TCT) No. T- 12255 (subject land).6 During his lifetime, he contracted two
marriages: (a) the first was with Lolita Palermo with whom he had two (2) children, namely, The CA Ruling
Cresencio and Conrado, Jr.; and (b) the second was with Eusela Niangar with whom he had
In a Decision24 dated March 26, 2009, the CA set aside the RTC Rulings and, consequently,
seven (7) children, namely, Mateo, Sr., Coronacion, Cecilia, Celestial, Celedonio, Ceruleo,7 and
dismissed Santiago’s complaint for judicial partition.25 It held that Felcon’s siblings, as well as
Cebeleo, Sr. Conrado, Sr. also begot three (3) illegitimate children, namely, Eduardo, Rogelio,
Maude’s children, are indispensable parties to the judicial partition of the subject land and,
and Ricardo.8 Mateo, Sr. pre-deceased Conrado, Sr. and was survived by his children Felcon,
thus, their non-inclusion as defendants in Santiago’s complaint would necessarily result in its
Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and Gaylord. Cebeleo, Sr. also pre-deceased his
dismissal.26
father and was survived by his wife, Maude, and children Cebeleo, Jr. and Neobel.9
Aggrieved, the heirs of Santiago27 moved for reconsideration28 which was, however, denied in
According to Santiago, upon Conrado, Sr.’s death, Cresencio, Conrado, Jr., Felcon (in
a Resolution29 dated April 6, 2011, hence, this petition instituted by herein petitioner, Ma.
representation of his father, Mateo, Sr., and his siblings), Coronacion, Celestial, Cecilia, Rogelio,
Elena R. Divinagracia, as administratrix of Santiago’s estate.
Eduardo, and Ricardo sold their respective interests over the subject land to Santiago for a
consideration of 447,695.66, as embodied in a Deed of Extrajudicial Settlement or Adjudication The Issues Before the Court
with Deed of Sale10 dated November 22, 1989 (subject document),11 which was, however, not
signed by the other heirs who did not sell their respective shares, namely, Ceruleo, Celedonio, The issues for the Court’s resolution are whether or not the CA correctly: (a) ruled that Felcon’s
and Maude (in representation of his husband, Cebeleo, Sr., and their children).12 On December siblings and Cebeleo, Sr. and Maude’s children are indispensable parties to Santiago’s
22, 1989, the same parties executed a Supplemental Contract13 whereby the vendors-heirs and complaint for judicial partition; and (b) dismissed Santiago’s complaint for his failure to
Santiago agreed that out of the aforesaid consideration, only 109,807.93 will be paid up front, implead said omitted heirs.
and that Santiago will only pay the remaining balance of 337,887.73 upon the partition of the
subject land.14 However, Santiago was not able to have TCT No. T-12255 cancelled and the The Court’s Ruling
subject document registered because of Ceruleo, Celedonio, and Maude’s refusal to surrender The petition is partly meritorious.
the said title. This fact, coupled with Ceruleo, Celedonio, and Maude’s failure to partition the
subject land, prompted Santiago to file a Complaint 15 dated January 3, 1990 for judicial An indispensable party is one whose interest will be affected by the court’s action in the
partition and for receivership.16 litigation, and without whom no final determination of the case can be had. The party’s interest
in the subject matter of the suit and in the relief sought are so inextricably intertwined with
For their part, Ceruleo, Celedonio, and Maude maintained that Santiago had no legal right to the other parties’ that his legal presence as a party to the proceeding is an absolute necessity.
file an action for judicial partition nor compel them to surrender TCT No. T-12255 because, In his absence, there cannot be a resolution of the dispute of the parties before the court which
inter alia: (a) Santiago did not pay the full purchase price of the shares sold to him; and (b) the is effective, complete, or equitable.30 Thus, the absence of an indispensable party renders all
subject land is a conjugal asset of Conrado Sr. and Eusela Niangar and, thus, only their subsequent actions of the court null and void, for want of authority to act, not only as to the
legitimate issues may validly inherit the same.17 absent parties but even as to those present.31
The RTC Ruling With regard to actions for partition, Section 1, Rule 69 of the Rules of Court requires that all
In a Decision18 dated November 29, 2002, the RTC ordered, among others, the partition of the persons interested in the property shall be joined as defendants, viz.:
subject land between Santiago on the one hand, and Ceruleo, Celedonio, Maude, and the heirs SEC. 1. Complaint in action for partition of real estate. – A person having the right to compel
of Mateo, Sr. (i.e., Felcon, et al.) on the other hand and, consequently, the cancellation of TCT the partition of real estate may do so as provided in this Rule, setting forth in his complaint the
No. T- 12255 and the issuance of a new owner’s duplicate certificate in favor of Santiago and nature and extent of his title and an adequate description of the real estate of which partition
the group of Ceruleo, Celedonio, Maude, and the heirs of Mateo, Sr. 19 The RTC found that is demanded and joining as defendants all other persons interested in the property. (Emphasis
through the subject document, Santiago became a co-owner of the subject land and, as such, and underscoring supplied)
has the right to demand the partition of the same. However, the RTC held that Santiago did
Thus, all the co-heirs and persons having an interest in the property are indispensable parties; implead an indispensable party despite the order of the court, that court may dismiss the
as such, an action for partition will not lie without the joinder of the said parties.32 complaint for the plaintiff’s failure to comply with the order.

In the instant case, records reveal that Conrado, Sr. has the following heirs, legitimate and The remedy is to implead the non-party claimed to be indispensable. x x x40 (Underscoring
illegitimate, who are entitled to a pro-indiviso share in the subject land, namely: Conrado, Jr., supplied; emphases in the original)
Cresencio, Mateo, Sr., Coronacion, Cecilia, Celestial, Celedonio, Ceruleo, Cebeleo, Sr., Eduardo,
Rogelio, and Ricardo. However, both Mateo, Sr. and Cebeleo, Sr. pre-deceased Conrado, Sr. In view of the foregoing, the correct course of action in the instant case is to order its remand
and, thus, pursuant to the rules on representation under the Civil Code,33 their respective to the RTC for the inclusion of those indispensable parties who were not impleaded and for
interests shall be represented by their children, namely: (a) for Mateo, Sr.: Felcon, Landelin, the disposition of the case on the merits.41
Eusela, Giovanni, Mateo, Jr., Tito, and Gaylord; and (b) for Cebeleo, Sr.: Cebeleo, Jr. and
WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the Decision dated March 26, 2009
Neobel.34
and the Resolution dated April 6, 2011 of the Court of Appeals in CA-G.R. CV. No. 80167, setting
The aforementioned heirs – whether in their own capacity or in representation of their direct aside the Decision dated November 29, 2002 and the Order dated April 4, 2003 of the Regional
ascendant – have vested rights over the subject land and, as such, should be impleaded as Trial Court of Iloilo City, Branch 31 in Civil Case No. 19003, are hereby AFFIRMED with
indispensable parties in an action for partition thereof. However, a reading of Santiago’s MODIFICATION REMANDING the instant case to the court a quo, which is hereby DIRECTED to
complaint shows that as regards Mateo, Sr.’s interest, only Felcon was impleaded, excluding implead all indispensable parties and, thereafter, PROCEED with the resolution of the case on
therefrom his siblings and co-representatives. Similarly, with regard to Cebeleo, Sr.’s interest the merits WITH DISPATCH.
over the subject land, the complaint impleaded his wife, Maude, when pursuant to Article
SO ORDERED.
97235 of the Civil Code, the proper representatives to his interest should have been his
children, Cebeleo, Jr. and Neobel. Verily, Santiago’s omission of the aforesaid heirs renders his SPECIAL THIRD DIVISION
complaint for partition defective.
March 6, 2017
Santiago’s contention that he had already bought the interests of the majority of the heirs and,
thus, they should no longer be regarded as indispensable parties deserves no merit. As G.R. No. 180654
correctly noted by the CA, in actions for partition, the court cannot properly issue an order to
divide the property, unless it first makes a determination as to the existence of co- ownership. NATIONAL POWER CORPORATION, Petitioner
The court must initially settle the issue of ownership, which is the first stage in an action for vs
partition.36 Indubitably, therefore, until and unless this issue of co-ownership is definitely and PROVINCIAL GOVERNMENT OF BATAAN, SANGGUNIANG PANLALAWIGAN OF BATAAN,
finally resolved, it would be premature to effect a partition of the disputed properties.37 PASTOR B. VICHUACO (IN HIS OFFICIAL CAPACITY AS PROVINCIAL TREASURER OF BATAAN)
and THE REGISTER OF DEEDS OF THE PROVINCE OF BATAAN, Respondents
In this case, while it is conceded that Santiago bought the interests of majority of the heirs of
Conrado, Sr. as evidenced by the subject document, as a vendee, he merely steps into the RESOLUTION
shoes of the vendors-heirs. Since his interest over the subject land is merely derived from that LEONEN, J.:
of the vendors- heirs, the latter should first be determined as co-owners thereof, thus
necessitating the joinder of all those who have vested interests in such land, i.e., the aforesaid For resolution is respondents' Motion for Reconsideration1 of this Court's April 21, 2014
heirs of Conrado, Sr., in Santiago’s complaint. Decision,2 which granted the petition of National Power Corporation (Napocor), and set aside
the Court of Appeals' Resolution3 dated November 27, 2007. The Decision further remanded
In fine, the absence of the aforementioned indispensable parties in the instant complaint for "the case to the Regional Trial Court so that the Power Sector Assets and Liabilities
judicial partition renders all subsequent actions of the RTC null and void for want of authority Management Corporation [PSALM Corporation] and the National Transmission Corporation
to act, not only as to the absent parties, but even as to those present. 38 Therefore, the CA [TRANSCO] may be impleaded as proper parties."4
correctly set aside the November 29, 2002 Decision and the April 4, 2003 Order of the RTC.
Recalling the facts of this case:
However, the CA erred in ordering the dismissal of the complaint on account of Santiago’s
failure to implead all the indispensable parties in his complaint.1âwphi1 In Heirs of Mesina v. On March 28, 2003, petitioner National Power Corporation (NPC) received a notice of franchise
Heirs of Fian, Sr.,39 the Court definitively explained that in instances of non-joinder of tax delinquency from the respondent Provincial Government of Bataan (the Province) for
indispensable parties, the proper remedy is to implead them and not to dismiss the case, to ₱45.9 million covering the years 2001, 2002, and 2003. The Province based its assessment on
wit: [Napocor's] sale of electricity that it generated from two power plants in Bataan. Rather than
pay the tax or reject it, [Napocor] chose to reserve its right to contest the [amounts of franchise
The non-joinder of indispensable parties is not a ground for the dismissal of an action. At any tax stated in the notice, including the] computation pending the decision of the Supreme Court
stage of a judicial proceeding and/or at such times as are just, parties may be added on the
motion of a party or on the initiative of the tribunal concerned. If the plaintiff refuses to
in National Power Corporation v. City of Cabanatuan, a case [where] the issue of [Napocor's] CA granted the Province's motion and dismissed the petition on the ground cited. 7 (Citation
exemption from the payment of local franchise tax was then pending. omitted)

On May 12 and 14, 2003 the Province again sent notices of tax due to [Napocor], calling its On January 18, 2008, Napocor filed by registered mail a Petition for Review
attention to the Court's decision in National Power Corporation v. City of Cabanatuan that held on Certiorari,8 assailing the correctness of the Court of Appeals' dismissal of its appeal for lack
[Napocor] liable for the payment of local franchise tax. [Napocor] replied, however, that it had of jurisdiction. Napocor prayed that "judgment be rendered reversing and setting aside the
ceased to be liable for the payment of that tax after Congress enacted Court of Appeals' Resolution dated November 27, 2007 and in lieu thereof, directing said Court
to reinstate and give due course to petitioner's appeal in CA-G.R. CV No. 87218."9
Republic Act (R.A.) 9136, also known as the Electric Power Industry Reform Act (EPIRA) that
took effect on June 26, 2001. The new law relieved [Napocor] of the function of [transmitting In a Decision dated April 21, 2014, this Court granted the petition and set aside the resolution
electricity] beginning that year. Consequently, the Province has no right to further assess it for of the Court of Appeals. This Court ruled that with the transfer of Napocor's power
the 2001, 2002, and 2003 local franchise tax. transmission and generation functions, and their associated facilities by operation of the
Electric Power Industry Reform Act (EPIRA) in June 2001, Napocor was not the proper party
Ignoring [Napocor's] view, the Province issued a "Warrant of Levy" [dated January 29, subject to the local franchise tax.10 The Province also could not levy on the transmission
2004]5 on 14 real properties that it used to own in Limay, Bataan. [Through a letter dated facilities to satisfy the tax assessment against Napocor.11 This Court further found the
February 17, 2004, Napocor requested a "deferment of [the Province's] chosen course of proceedings in the court a quo a nullity for failure to include PSALM Corporation and TRANSCO,
action and give [Napocor] Management and Board of Directors, as well as the OSG, to companies which were indispensable parties to the case.12 At this point, this Court opined that
reconsider the matter at hand."]6 In March 2004 the Province caused their sale at public it did not matter where the Regional Trial Court decision was appealed, whether before the
auction with itself as the winning bidder. Shortly after, [Napocor] received a copy of the Court of Appeals or the Court of Tax Appeals,13 and remanded the case to the Regional Trial
Certificate of Sale of Real Property covering the auctioned properties for ₱60,477,285.22, the Court so that PSALM Corporation and TRANSCO may be impleaded as proper parties.14
amount of its franchise tax delinquency, [including surcharges and interest].
Hence, this Motion for Reconsideration15 was filed by the respondents. The issues raised in the
On July 7, 2004, [Napocor] filed with the Regional Trial Court (RTC) of Mariveles, Bataan, a motion are:
petition for declaration of nullity of the foreclosure sale with prayer for preliminary mandatory
injunction against the Province, the provincial treasurer, and the Sangguniang Panlalawigan. 1. Whether Napocor is the real party in interest; and

[Napocor] alleged that the foreclosure had no legal basis since R.A. 7160 which authorized the 2. Whether the foreclosure sale on March 2, 2004 is valid.
collection of local franchise tax had been modified by the EPIRA. The latter law provided that
power generation is not a public utility operation requiring a franchise, hence, not taxable. Respondents argue that from this Court's disquisition on the purported transfer of Napocor's
What remains subject to such tax is the business of transmission and distribution of electricity power generation and transmission functions to PSALM Corporation, and its corresponding
since these required a national franchise. As it happened, [Napocor] had ceased by operation generation and transmission facilities to TRANSCO, it follows that petitioner was not the real
of the EPIRA in 2001 to engage in power transmission, given that all its facilities for this party in interest and had no legal personality to file the complaint before the Regional Trial
function, including its nationwide franchise, had been transferred to the National Transmission Court in the first place.16 Accordingly, they pray that instead of remanding the case to the trial
Corporation (TRANSCO). court for the inclusion of indispensable parties, the complaint should be ordered dismissed for
lack of cause of action.17
Thus, [Napocor] asked the RTC to issue a preliminary injunction, enjoining the transfer of title
and the sale of the foreclosed lands to Bataan and, after trial, to make the injunction Respondents further contend that Napocor was estopped from invoking the EPIRA as a shield
permanent, declare [Napocor] exempt from the local franchise tax and annul the foreclosure against the franchise tax impositions.18 They assert that Napocor could have raised the EPIRA
sale. provisions at the earliest instance when it received the notice of franchise tax delinquency on
March 28, 2003, close to two (2) years after the effectivity of EPIRA. Instead, Napocor merely
On November 3, 2005 the RTC dismissed [Napocor's] petition, stating that the franchise tax chose to reserve its right to contest the franchise tax assessment and suspend its payment
was not based on ownership of property but on [Napocor's] exercise of the privilege of doing pending the decision of this Court in NPC v. City of Cabanatuan.19
business within Bataan. Further, [Napocor] presented no evidence that it had ceased to
operate its power plants in that jurisdiction. Respondents lastly argue that EPIRA was not self-executing and the transfer of the
transmission functions and assets to TRANSCO was not made to take place by operation of
[Napocor] appealed the RTC Decision to the Court of Appeals (CA) but the Province moved to law.20 It cites Section 8 of EPIRA, which provides that "[w]ithin six (6) months from the
dismiss the same for lack of jurisdiction of that court over the subject matter of the case. The effectivity of this Act, the transmission and subtransmission facilities of [Napocor] and all other
Province pointed out that, although [Napocor] denominated its suit before the RTC as one for assets related to transmission operations, including the nationwide franchise of [Napocor] for
declaration of nullity of foreclosure sale, it was essentially a local tax case questioning the the operation of the transmission system and the grid, shall be transferred to the TRANSCO."
validity of the Province's imposition of the local franchise tax. Any appeal from the action It also renders that "[p]rior to the transfer of the transmission functions by [Napocor] to
should, therefore, be lodged with the Court of Tax Appeals (CTA). On November 27, 2007 the TRANSCO, and before promulgation of the Grid Code, ERC shall ensure that [Napocor] shall
provide to all electric power industry participants open and nondiscriminatory access to its preliminary mandatory injunction, a reading of the petition shows that it essentially assails the
transmission system."21 Similarly, respondents assert that the transfer of the generation assets correctness of the local franchise tax assessments by the Provincial Government of Bataan.
to PSALM Corporation did not take place upon the effectivity of EPIRA, citing Section 4 7 of the Indeed, one of the prayers in the petition is for the court a quo to declare Napocor "as exempt
law.22 Thus, the court a quo correctly dismissed Napocor's complaint on the latter's failure "to from payment of local franchise taxes."33 Basic is the rule that allegations in the complaint and
present evidence that it no longer owned [the property] or operated the business subject to the character of the relief sought determine the nature of an action.34 In order for the trial
local franchise tax."23 court to resolve the complaint, the issues regarding the correctness of the tax assessment and
collection must also necessarily be dealt with. As correctly ruled by the Court of Appeals, "the
In its Comment,24 petitioner partially agrees with the respondents that the case should not be issue of the validity and legality of the foreclosure sale is essentially related to the issue of the
ordered remanded to the court of origin. According to petitioner, the trial court will then be demandability of the local franchise tax."35
"confronted with a bizarre situation of ordering PSALM and the TRANSCO to be party-
plaintiffs/petitioners when, in truth and in fact, there is no actual controversy confronting Therefore, the dismissal of Napocor's appeal by the Court of Appeals was in order. Napocor's
them at the moment" as no assessments have yet been issued to these corporations.25 procedural lapse would have been sufficient to reconsider this Court's decision and instead
deny the instant petition. However, the substantial merits of the case and the patent error
However, contrary to respondents' submissions, petitioner avers that "the instant case is not committed by the Bataan Regional Trial Court compels this Court to exercise its power of
dismissible on the ground of lack of cause of action." 26 Petitioner asserts that it "has a valid judicial review for purposes of judicial economy.
cause of action against respondents for the nullification of the foreclosure sale" since, as found
by this Court, it is not the proper party subject to the local franchise tax being imposed by II
respondents.27
"A real party in interest is the party who stands to be benefited or injured by the judgment in
On respondents' claim of estoppel, petitioner submits that as a government-owned and the suit, or the party entitled to the avails of the suit."36 In the instant case, petitioner's
controlled corporation, it is "protected by the principle that estoppel does not lie against the complaint has sought not only the nullification of the foreclosure sale but also a declaration
government as it is not bound by the errors committed by its agents." 28 Moreover, petitioner from the trial court that it is exempt from the local franchise tax. The action began when
maintains that it has consistently invoked that it is not liable for the local franchise tax being respondent ignored petitioner's claim for exemption from franchise tax, and pursued its
collected by respondents because "it has ceased to operate its electric transmission functions collection of the franchise tax delinquency by issuing the warrant of levy and conducting the
upon effectivity of the EPIRA in 200 l ."29 Allegedly, this has been its stand from the time it filed sale at public auction - where the Provincial Government of Bataan was declared as purchaser
its complaint with the Regional Trial Court.30 - of the transmission assets, despite the purported prior mutual agreement to suspend
administrative remedies for the collection of taxes. The assets were sold to enforce collection
Lastly, petitioner counters that it does not need to present "evidence to prove its position that of a franchise tax delinquency against the petitioner. Petitioner thus had to assail the
it no longer owned or operated the business subject to local franchise tax," and that the correctness of the local franchise tax assessments made against it by instituting the complaint
properties, which respondent Provincial Government of Bataan levied on, did not belong to with the Regional Trial Court; otherwise, the assessment would become conclusive and
it.31 unappealable.37 Certainly, petitioner is a real party in interest, which stands to gain or lose
from the judgment that the trial court may render.
We partially grant the motion for reconsideration.
III
I
The main issue for the court a quo was a legal issue38 on whether Napocor was liable to pay
The Court of Appeals correctly dismissed the appeal for lack of jurisdiction. We deem it proper
the assessed franchise tax imposed under Section 137 of Republic Act No. 7160 (the Local
to clarify the last sentence in the decision that "[i]t did not matter where the RTC decision was
Government Code of 1991) by virtue of EPIRA.
appealed, whether before the C[ourt of A[ppeals] or the C[ourt of T[ax] A[ppeals]."32
Section 137 of the Local Government Code provides:
Republic Act No. 9282, which amended Republic Act No. 1125, took effect on April 23, 2004,
and significantly expanded the extent and scope of the cases that the Court of Tax Appeals was Section 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other
tasked to hear and adjudicate. Under Section 7, paragraph (a)(3), the Court of Tax Appeals is special law, the province may impose a tax on businesses enjoying a franchise, at a rate not
vested with the exclusive appellate jurisdiction over, among others, appeals from the exceeding fifty percent (50%) of one percent (1% ) of the gross annual receipts for the
"decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided preceding calendar year based on the incoming receipt, or realized, within its territorial
or resolved by them in the exercise of their original or appellate jurisdiction." jurisdiction.
The case a quo is a local tax case that is within the exclusive appellate jurisdiction of the Court In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one
of Tax Appeals. Parenthetically, the case arose from the dispute between Napocor and percent (1 %) of the capital investment. In the succeeding calendar year, regardless of when
respondents over the purported franchise tax delinquency of Napocor. Although the complaint the business started to operate, the tax shall be based on the gross receipts for the preceding
filed with the trial court is a Petition for declaration of nullity of foreclosure sale with prayer for calendar year, or any fraction thereon, as provided herein.
Section 137 is categorical in stating that franchise tax can only be imposed on businesses collected by the Provincial Government of Bataan for the latter part of 2001 up to 2003 are
enjoying a franchise. This goes without saying that without a franchise, a local government unit devoid of any statutory basis.
cannot impose franchise tax.
As regards Napocor's electric transmission function, under Section 8 of the same law, all
The Regional Trial Court relied heavily on the ruling in NPC v. City of Cabanatuan39 in transmission assets of Napocor were to be transferred to TRANSCO within six (6) months from
concluding that Napocor "is a commercial enterprise enjoying a franchise under Section 137 of the effectivity of EPIRA,46 or by December 26, 2001. The EPIRA Implementing Rules and
the Local Government Code."40 It held that Napocor was "enjoying the privilege of doing Regulations further required Napocor, PSALM Corporation, and TRANSCO to -
business within the territory of the Province of Bataan[;] hence, it is liable to the franchise
tax."41 The Regional Trial Court further held that Napocor was subject to franchise tax even take such measures and execute such documents to effect the transfer of the ownership and
granting the transfer of its power transmission function to TRANSC0.42 The court a quo found possession of the transmission and subtransmission facilities of [Napocor] and all other assets
that "no evidence was adduced showing that [Napocor] is no longer operating the [power related to transmission operations.1âwphi1 Upon such transfer, the nationwide franchise of
plants in Bataan], or that it already ceased generating electricity" from it.43 Napocor for the operation of the transmission system and the Grid shall transfer from Napocor
to TRANSCO.47
The court a quo's reliance on the ruling in NPC v. City of Cabanatuan44 was misplaced. That
case involved franchise taxes, which became due to the local government unit concerned prior Hence, until the transfer date of the transmission assets, which by express provision of
to the passage of Republic Act No. 9136 or the EPIRA, and the issue of exemption from EPIRA shall not be later than December 26, 2001, these assets, as well as the franchise, belong
payment of franchise tax under EPIRA was not discussed. to and are operated by N apocor, and the latter is consequently subject to the local franchise
tax.1âwphi1
Indeed, the enactment of EPIRA separated the transmission and sub-transmission functions of
the state-owned Napocor from its generation function, and transferred all its transmission Even so, it is quite apparent that at the time of the levy and auction of the 14 properties
assets to the then newly-created TRANSCO, which was wholly owned by PSALM Corporation sometime in January 2004 and March 2004, respectively, the properties were by virtue of
at that time.45 Power generation is no longer considered a public utility operation, and EPIRA already owned by TRANSCO. Thus, the foreclosure sale of the properties must be
companies which shall engage in power generation and supply of electricity are no longer declared null and void.
required to secure a national franchise. This is expressly provided under Section 6 of EPIRA,
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED. The decision dated April
which reads:
21, 2014 insofar as it ordered the remand of the case to the Regional Trial Court is SET
Section 6. Generation Sector. - Generation of electric power, a business affected with public ASIDE. The foreclosure sale of the 14 properties in Limay, Bataan is hereby declared NULL and
interest, shall be competitive and open. VOID.

Upon the effectivity of this Act, any new generation company shall, before it operates, secure SO ORDERED.
from the Energy Regulatory Commission (ERC) a certificate of compliance pursuant to the
FIRST DIVISION
standards set forth in this Act, as well as health, safety and environmental clearances from the
appropriate government agencies under existing laws. February 3, 2016
Any law to the contrary notwithstanding, power generation shall not be considered a public G.R. No. 208343
utility operation. For this purpose, any person or entity engaged or which shall engage in power
generation and supply of electricity shall not be required to secure a national franchise. SPOUSES CEFERINO C. LAUS and MONINA P. LAUS, and SPOUSES ANTONIO O. KOH and
ELISA T. KOH, Petitioners
Upon implementation of retail competition and open access, the prices charged by a vs.
generation company for the supply of electricity shall not be subject to regulation by the ERC OPTIMUM SECURITY SERVICES, INC., Respondent.
except as otherwise provided in this Act.
DECISION
Pursuant to the objective of lowering electricity rates to end-users, sales of generated power
by generation companies shall be value added tax zero-rated. PERLAS-BERNABE, J.:

The ERC shall, in determining the existence of market power abuse or anti-competitive Before the Court is a petition for review on certiorari1assailing the Decision2 dated March 25,
behavior, require from generation companies the submission of their financial 2013 and the Resolution3 dated July 22, 2013 of the Court of Appeals (CA) in CA-G.R. SP No.
statements.1avvphi1 (Emphasis supplied) 122258, which lifted the writ of preliminary injunction (WPI) issued by the Regional Trial Court
of Angeles City, Branch 62 (RTC) in Civil Case No. 12307 in favor of petitioners Spouses Ceferino
EPIRA effectively removed power generation from the ambit of local franchise taxes. Hence, C. Laus and Monina P. Laus, and Spouses Antonio O. Koh and Elisa T. Koh (petitioners), and
as regards Napocor's business of generating electricity, the franchise taxes sought to be
dismissed their complaint for damages against respondent Optimum Security Services, Inc. Dissatisfied, respondent and TIPCO separately moved for reconsideration,27 but were denied
(respondent). in an Order28 dated August 31, 2011. Consequently, respondent elevated the case to the
CA via a petition for certiorari and prohibition, docketed as CA-G.R. SP No. 122258.29
The Facts
The CA Ruling
On October 3, 2005, petitioners filed a complaint,4 denominated as one for "Damages with
Application for a Temporary Restraining Order [(TRO)] and [WPI]," docketed as Civil Case No. In a Decision30 dated March 25, 2013, the CA reversed the RTC ruling and thereby, lifted the
12307, against respondent, several security guards employed by it, including Ronnie Marivalles WPI and ordered the dismissal of petitioners' complaint.
(Marivalles) and Rodrigo Olivette, and TIPCO Estate Corporation (TIPCO; collectively, other
defendants). Petitioners alleged that on three (3) separate occasions in August 2005, they were In so ruling, the CA observed, inter alia, that the WPI was intended to oust respondent and the
prevented by armed security guards working for respondent and TIPCO from entering the eight other defendants from the subject properties, which, under prevailing jurisprudence, is not
(8) parcels of land in Mabalacat, Pampanga belonging to them, covered by Transfer Certificates allowed where the claimant's title has not been clearly established by law, as in this case where
of Title (TCT) Nos. 576602-R,5 578037-R,6 578038-R,7 578039-R,8 575138-R,9 575112- petitioners' titles are under contest and they have failed to establish their prior possession of
R,10 576601-R,11 and 576603-R12 (subject properties).13 Thus, petitioners prayed the subject properties.31 To this, it emphasized that the purpose of a WPI is to preserve
that: (a) moral, exemplary, and liquidated damages be awarded to them; (b) a TRO and WPI the status quo ante or the last actual, peaceful, and uncontested status prior to the
be issued directing the respondent and the other defendants to refrain from interfering with controversy; but in this case, the injunctive writ created another situation by transferring the
the exercise of their rights as owners of the subject properties; and (c) after trial, the injunction possession of the subject properties to the petitioners.32
be made permanent.14
Further, the CA held that respondent was not a real party in interest as it was merely
Opposing petitioners' application for TRO and WPI, respondent and Marivalles contracted to secure the subject properties under the Security Service Contract, which had
countered15 that petitioners are not entitled to the TRO and WPI prayed for because they do since lapsed without being renewed.33 In this relation, it opined that the alleged real owners
not own the subject properties. They maintained that Margarita dela Rosa, Manuel dela Pefia, of the subject properties are the real parties in interest, without whom there can be no final
Michael Pineda, Fermin Dizon, William Lee, and Odon Sibug are the real owners thereof, who determination of the issues involved.34 Thus, the CA ordered the dismissal of petitioners'
authorized16 Mr. Ranilo M. Arceo (Mr. Arceo) to enter into the Security Service Contract17 with complaint.
respondent to secure the subject properties.18 Respondent and Marivalles further insisted that
Aggrieved, petitioners filed a motion for reconsideration,35 which was, however, denied in a
they acted in good faith in denying petitioners and their agents access to the subject properties
Resolution36 dated July 22, 2013; hence, the present petition.
as they were merely complying with a contractual obligation.19 Moreover, they claimed that
the signatures appearing on the Deeds of Sale, which were the source of petitioners' titles, The Issue Before the Court
were forged and, in fact, a petition for cancellation of petitioners' titles was filed by Jose
Bermudo, one of the original holders of the emancipation patent over three (3) parcels of land The essential issue for the Court's resolution is whether or not the CA erred in lifting the WPI
in the subject properties, which was still pending before another court.20 issued by the R TC and in dismissing petitioners' complaint.

Respondent and Marivalles subsequently filed their Answer21 where they added that The Court's Ruling
petitioners did not suffer any injury as no wrongful act was committed against
them.22 Accordingly, they prayed that the complaint be dismissed for lack of merit, and that The petition is partly meritorious.
damages and attorney's fees be awarded to them.23 I.
On the other hand, TIPCO denied preventing petitioners from entering the subject properties. To be entitled to an injunctive writ, the right to be protected and the violation against that
It pointed out that it did not claim ownership or possession thereof, and, as such, did not hire right must be shown. A writ of preliminary injunction may be issued only upon clear showing
the armed security guards who prevented petitioners from entering the subject properties.24 of an actual existing right to be protected during the pendency of the principal action. When
The RTC Ruling the complainant's right or title is doubtful or disputed, he does not have a clear legal right and,
therefore, the issuance of injunctive relief is not proper.37 Corollarily, preliminary injunction is
In an Order25 dated October 6, 2010, the R TC granted the application for WPI based on its not a proper remedy to take property out of the possession and control of one party and to
finding that petitioners had presented sufficient evidence to establish that they are the deliver the same to the other party where such right is being disputed.38After all, a writ of
registered owners of the subject properties and thereby, have the right to possess the same. preliminary injunction is issued to preserve the status quo or the last actual, peaceable, and
It found no merit in respondent's defense that petitioners were not the real owners of the said uncontested situation which precedes a controversy.39
properties, observing that the former failed to ·present the alleged real owners of the subject
properties to support its claim. Accordingly, it enjoined respondent and the other defendants While it is a general rule that a trial court's discretion in issuing injunctive writs should not be
from interfering with petitioners' exercise of acts of ownership over the same.26 interfered with,40 the Court finds the CA's lifting of the WPI issued by the RTC in this case to be
proper, considering that the foregoing parameters were not observed, thus, tainting the trial A real party in interest is the party who stands to be benefited or injured by the judgment of
court's issuance with grave abuse of discretion 'amounting to lack or excess of jurisdiction. the suit, or the party entitled to the avails of the suit. On the other hand, an indispensable
party is a party in interest without whom no final determination can be had of an action, in
As aptly pointed out by the CA, although petitioners appear to be the registered owners of the contrast to a necessary party, which is one who is not indispensable but who ought to be joined
subject properties, they nonetheless failed to establish that they were in actual physical as a party if complete relief is to be accorded as to those already parties, or for a complete
possession of the same at the time the incidents in August 2005 transpired. In fact, a cursQry determination or settlement of the claim subject of the action.
perusal of the complaint readily shows that petitioners never alleged that they were in prior
possession of the subject properties. All that was stated therein is that respondent and the x x x "[I]f a suit is not brought in the name of or against the real party in interest, a motion
other defendants "[refuse] to recognize and respect [their] ownership and peaceful to dismiss may be filed on the ground that the complaint states no cause of action." However,
possession" of the subject properties.41 Meanwhile, respondent alleged in its Opposition and [the dismissal on this ground entails] an examination of whether the parties presently pleaded
Answer that petitioners were not in possession of the subject properties, and that the real are interested in the outcome of the litigation, and not whether all persons interested in such
owners thereof have been in possession of the subject properties since 1996 and 1997. 42 The outcome are actually pleaded. The latter query is relevant in discussions concerning
dispute concerning the ownership of the subject properties was detailed by the CA as follows: indispensable and necessary parties, but not in discussions concerning real parties in interest.
Both indispensable and necessary parties are considered as real parties in interest, since both
As alleged by [respondent], these subject parcels ofland were from four (4) original classes of parties stand to be benefited or injured by the judgment of the suit. 50 (Emphases
emancipation patent holders, namely: Marciano Lansangan, Vivencio Mercado, Crisencio and underscoring supplied)
Pineda[,] and Jose Bermudo. Said persons sold the same in 1996 and 1997 to certain
individuals, namely: Margarita dela Rosa, Manuel dela Pefia, Michael Pineda, Fermin Dizon, Meanwhile, in Plasabas v. CA,51it was held that "the non-joinder of indispensable parties is
William Lee[,] and Odon Sibug, whom [respondent] pointed to as its principals. These not a ground for the dismissal of an action. The remedy is to implead the non-party claimed
aforementioned buyers were among those who authorized [Mr. Arceo] as their Attomey-in- to be indispensable. Parties may be added by order of the court on motion of the party or on
[F]act to enter into a Security Service Contract with [respondent]. True to their claim of its own initiative at any stage of the action and/or at such times as are just. If petitioner refuses
ownership over [the subject properties], Alexander Bermudo, one of the alleged patent to implead an indispensable party despite the order of the court, the latter may dismiss the
holders, filed a Petition for Annulment of Title with Damages against [petitioners]. Likewise, complaint/getition for the plaintiff's/petitioner's failure to comply therewith."52
Margarita dela Rosa[,] one of [respondent's] alleged principals, also filed a case against
[petitioners] involving Lot 61 which is also claimed by them, and which case is still pending In this case, while the alleged real owners of the subject properties may be considered as real
before the same lower court.43 parties in interest for the reason that their supposed rights over these properties stand to be
prejudiced, they are not indispensable parties to the instant suit. Despite its denomination as
To reiterate, preliminary injunction is not a proper remedy to take property out of the an action for "damages' in the complaint's caption,53 the action, as may be gleaned from the
possession and control of one party and to deliver the same to the other party where such pleading's allegations,54 is really one for injunction as it ultimately seeks to permanently enjoin
right is being disputed, as in this case. As earlier intimated, preliminary injunction is a respondent and the other defendants, from restricting petitioners' access to the subject
preservative remedy. Therefore, it should not create new relations between the parties, but properties.55 The crux of the main case, therefore, is whether or not respondent and said
must only maintain the status quo until the merits of the case is fully heard.44 Hence, for these defendants were justified in preventing petitioners from conducting the relocation survey on
reasons, the RTC gravely abused its discretion in issuing the WPI involved herein. the subject properties. Damages are also sought as ancillary relief for the acts complained of.
These issues can be resolved independent of the participation of the alleged real owners of
Besides, as the CA further observed, the WPI issued by the RTC no longer serves any purpose, the subject properties. Hence, they are not indispensable parties, without whom no final
considering that respondent already vacated the subject properties since the Security Service determination can be had.
Contract with Mr. Arceo had already expired.45 Time and again, the Court has repeatedly held
that when the act sought to be enjoined has become fait accompli, the prayer for preliminary In any event, even on the assumption that they are indispensable parties, the non-joinder of
injunction should be denied.46 Indeed, when the events sought to be prevented by injunction indispensable parties is, as above-discussed, still not a ground for the dismissal of the suit. The
or prohibition had already happened, nothing more could be enjoined or prohibited. 47 An proper course of action is for the court to order that they be impleaded. Only upon refusal of
injunction will not issue to restrain the performance of an act already done.48 or non-compliance with such directive, may the complaint be dismissed.

II. In view of the nature of the case as above-explained, respondent and the other defendants are
real parties in interest.1âwphi1 Clearly, they stand to be directly injured by an adverse
While the CA was correct in lifting the WPI, it, however, ened in ordering the dismissal of the judgment. They are the parties against whom the prayed for injunction is directed and are also
complaint.1âwphi1 The error springs from the CA's misconception that the alleged real owners alleged to be liable for the resultant damage.
of the subject properties, while real parties in interest, are indispensable parties to the case.
The distinction between the two and the operational parameters as to each are well-settled in In fine, the petition is partially granted. While the CA's lifting of the WPI is affirmed, its order
jurisprudence. dismissing the complaint is reversed. As a consequence, the complaint should be reinstated

As held in Carandang v. Heirs of de Guzman,49the Court clarified that:


and the main case should be remanded to the RTC for further proceedings. With this sisters will sell the property containing Kairuz Spring and other improvements to BIRI for
pronouncement, there is no need to delve on the ancillary issues raised herein. P115,000,000.00. Eventually, the Kairuz family sold the property, including the bottling
building, Kairuz Spring, machineries, equipment, and other facilities following the terms of the
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated March 25, 2013 and the MOA. BIRI took full possession over the property and caused new certificates of title 10 to be
Resolution dated July 22, 2013 of the Court of Appeals in CA-G.R. SP No. 122258 are issued. BIRI is 30% owned by the Kairuz family and 70% owned by BWSI and its allied company,
hereby AFFIRIMED with MODIFICATION in that the complaint is REINSTATED. The main case PASUDECO. Its Board of Directors is composed of seven members, with a three-person
is REMANDED to the Regional Trial Court of Angeles City, Branch 62 for further proceedings. Management Committee (ManCom) handling its day-to-day operations. The one seat
accorded to the Kairuz family in the ManCom was initially occupied by Laurence, while the two
SO ORDERED.
other seats in the ManCom were occupied by John and one Victor Hontiveros. Petitioners
FIRST DIVISION alleged that Mariam was aware of the MOA, the ManCom, and of the operations of the BIRI
properties precisely because she succeeded Laurence's seat in the Board of Directors and
G.R. No. 198124, September 12, 2018 ManCom after his death.11

JOHN CARY TUMAGAN, ALAM HALIL, AND BOT PADILLA, Petitioners, v. MARIAM K. Petitioners also asserted that under the MOA, the Kairuz family assigned their Baguio Spring
KAIRUZ, Respondent. Mineral Water Corporation (BSMWC) shares and water rights through the BSMWC water
DECISION permit. The MOA also stipulated the continued operation of the truck water business by the
Kairuzes and this was honored by BIRI. However, this privilege enjoyed by the Kairuzes is
JARDELEZA, J.: contingent on their compliance with their own obligations and conditions as set forth in the
MOA. Unfortunately, upon Mariam's assumption of the truck water business as well as Lexber
This is a petition for review on certiorari1 seeking to set aside the Decision2 dated December Subdivision water service, she started to commit actions in conflict with the best interest of
21, 2010 and Resolution3 dated July 22, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. BIRI, such as: (a) she opposed the required transfer of the BSMWC water permit to BIRI before
112613. The CA granted respondent's petition and reversed the Decision4 dated December 11, the National Water Resources Board; (b) she intervened in the case filed by Baguio Water
2009 of Branch 10 of the Regional Trial Court (RTC), La Trinidad, Benguet, which affirmed the District against BIRI, weakening BIRI's position; (c) she filed a complaint before the RTC of
dismissal of the complaint for ejectment on the ground of failure to implead an indispensable Angeles City questioning the Deed of Assignment of the BSMWC shares executed by the Kairuz
party rendered by the 5th Municipal Circuit Trial Court (MCTC), Tuba-Sablan, Benguet.5 family in favor of BIRI; and (d) she asked the barangay officials at Tadiangan, Tuba
and Sangguniang Bayan Members of Tuba to deny BIRI's offer to service the water
I.
requirements of Tuba residents.12 This prompted BIRI's shareholders to write Mariam
regarding her default on the provisions of the MOA, warning her that unless appropriate
remedies are fulfilled, the MOA will be terminated.13 Mariam refused to receive the registered
In her complaint for ejectment filed before the MCTC, respondent Mariam K. Kairuz (Mariam) mail sent by BIRI14 and ignored their official communications, choosing instead to file the
alleged that she had been in actual and physical possession of a 5.2-hectare property located present ejectment complaint against petitioners.15
at Tadiangan, Tuba, Benguet (property) until May 28, 2007. She alleged that in the afternoon
of May 28, 2007, petitioners John Cary Tumagan (John), Alam Halil (Alam), and Bot Padilla (Bot) Furthermore, petitioners claimed that contrary to Mariam's allegations, on May 28, 2007, BIRI,
conspired with each other and took possession of the property by means of force, intimidation, as a corporation and owner of the spring property, merely exercised its legal right to prevent
strategy, threat, and stealth with the aid of armed men. After forcibly gaining entry into the unauthorized persons from entering its property. The deployment of licensed security guards
property, petitioners then padlocked its three gates, posted armed men, and excluded Mariam was intended to secure its property and prevent forcible entry into the area, specifically by
from the property.6 Mariam likewise sought the issuance of a temporary restraining order people who are "persona non-grata" to the company.16
(TRO) and/or a writ of preliminary injunction (WPI) against petitioners. 7
Petitioners claim that the MCTC has no jurisdiction over the action filed by Mariam because
In their answer, petitioners averred that Mariam could not bring the present action for forcible the same is an intra-corporate dispute which falls under the jurisdiction of the appropriate
entry because she was never the sole owner or possessor of the property. 8 They alleged that RTC. They further assert that BIRI's actions in terminating the MOA, disallowing entry of
Mariam is the spouse of the late Laurence Ramzy Kairuz (Laurence), who co-owned the unauthorized persons, and the continuance of Mariam's truck water business are all pursuant
property with his sisters, Vivien Kairuz (Vivien) and Elizabeth D' Alessandri (Elizabeth). to the MOA, which is the law between the parties. Thus, petitioners prayed for the dismissal
Petitioners claimed that the property is a good source of potable water and is publicly known of the complaint.17
as Kairuz Spring. During his lifetime, Laurence, in his own capacity and as attorney-in-fact for
his sisters, entered into a Memorandum of Agreement 9 (MOA) with Balibago Waterworks On March 9, 2009, the MCTC dismissed the case due to Mariam's failure to implead BIRI, an
System Incorporated (BWSI) and its affiliate company, PASUDECO, to establish a new indispensable party.18 It ruled that the joinder of all indispensable parties must be made under
corporation, Bali Irisan Resources, Inc. (BIRI). As stipulated in the MOA, Laurence and his two any and all conditions, their presence being sine qua non to the exercise of judicial power.
Thus, although it made a finding on Mariam's prior physical possession of the property,
ultimately, the MCTC ruled that if an indispensable party is not impleaded, as in this case, there
can be no final determination of the action.19
SO ORDERED.23
On appeal, the RTC upheld the MCTC's dismissal of the case. It ruled that since petitioners were
able to establish that they acted as mere employees or agents of BIRI, the issue of possession
cannot be resolved without the court first acquiring jurisdiction over BIRI. The defendants in
the complaint for ejectment are John, the branch manager of BIRI who carried out BIRI 's order Hence, this petition for review where petitioners argue that the CA gravely erred in: (1)
to secure the property with the assistance of security guards, Alam, and Bot, who are both reversing the Decisions of the MCTC and the RTC dismissing the complaint for failure to
licensed geodetic engineers hired by BIRI to conduct a location survey of the property. The implead BIRI, an indispensable party; (2) agreeing with Mariam's baseless claim of possession;
facts clearly show that they all acted in behalf of BIRI which was, in tum, allegedly exercising and (3) not finding that the issues are intra-corporate in nature which should be best resolved
its right of possession as the owner of the property that would be benefited or injured by the before the RTC in Angeles City.24
judgment.20
The petition is meritorious.
Aggrieved, Mariam filed a petition for review before the CA.
An indispensable party is a party in interest without whom no final determination can be had
On December 21, 2010, the CA granted the petition and reversed the RTC Decision. It ruled of an action and who shall be joined either as plaintiffs or defendants. The presence of
that the MCTC and the RTC should have limited the issue to who had prior physical possession indispensable parties is necessary to vest the court with jurisdiction.25
of the disputed land. It ruled that the MCTC erred in dismissing Mariam's complaint because
of a technical rule of failure to implead an indispensable party, BIRI. It pointed out that Rule 3, Here, as correctly held by the MCTC and the RTC, it is indisputable that BIRI is an indispensable
Section 11 of the Rules of Court provides that neither misjoinder nor non-joinder of parties is party, being the registered owner of the property and at whose behest the petitioner-
a ground for the dismissal of an action. The remedy is to implead the non-party claimed to be employees acted.26 Thus, without the participation of BIRI, there could be no full
indispensable either by order of the court on motion of the party or on its own initiative at any determination of the issues in this case considering that it was sufficiently established that
stage of the action. If the party refuses to implead the indispensable party despite order of the petitioners did not take possession of the property for their own use but for that of BIRI's.
court, then the latter may dismiss the complaint/petition for the plaintiffs failure to comply Contrary to the CA's opinion, the joinder of indispensable parties is not a mere technicality.
therewith. Here, the CA held that the records do not disclose that there was such an order for We have ruled that the joinder of indispensable parties is mandatory and the responsibility of
petitioners to implead the supposed indispensable party, thus, dismissal of the case for failure impleading all the indispensable parties rests on the plaintiff.27 In Domingo v. Scheer,28 we
to implead BIRI is improper.21 Furthermore, since BIRI owns the property and pursuant to the ruled that without the presence of indispensable parties to the suit, the judgment of the court
MOA, the Kairuzes own 30% of BIRI, then Mariam, who was unlawfully ousted from the cannot attain real finality. Otherwise stated, the absence of an indispensable party renders all
property by mere employees of BIRI, may file the case for ejectment. Furthermore, under subsequent actions of the court null and void for want of authority to act not only as to the
Article 487 of the Civil Code, any one of the co-owners may bring an action for ejectment absent party but even as to those present.29
without necessarily joining all other co-owners. The CA, thus, upheld Mariam's right to possess
the property concurrently with her co-owners.22 The dispositive portion of the CA Decision In this case, while the CA correctly pointed out that under Rule 3, Section 11 of the Rules of
reads: Court, failure to implead an indispensable party is not a ground for the dismissal of an action,
it failed to take into account that it remains essential that any indispensable party be
WHEREFORE, the Decision of the Regional Tr[ia]l Court dated December 11, 2009 impleaded in the proceedings before the court renders judgment.30 Here, the CA simply
is REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered, ordering: proceeded to discuss the merits of the case and rule in Mariam's favor, recognizing her prior
physical possession of the subject property. This is not correct. The Decision and Resolution of
a) Respondents, their agents, deputies and employees and all persons under them, to the CA in this case is, therefore, null and void for want of jurisdiction, having been rendered in
allow petitioner's entry to the subject premises; and the absence of an indispensable party, BIRI.31

Nonetheless, while a remand of the case to the MCTC for the inclusion of BIRI, the non-party
claimed to be indispensable, seems to be a possible solution, a review of the records reveals
that the remand to the MCTC is not warranted considering that the MCTC itself did not acquire
jurisdiction over Mariam's complaint for forcible entry.

From the beginning, petitioners were consistent in their position that the MCTC has no
b) Respondents to pay petitioner the amount of P25,000.00 as attorney's fees. jurisdiction over the action filed by Mariam. They claim that Mariam is not only a shareholder
of BIRI, she is also the successor of her late husband, Laurence, and the case involves
management of corporate property, an intra-corporate dispute which falls under the
jurisdiction of the appropriate commercial court. Thus, pursuant to Article XII of the the owners of corporate property, which is owned by the corporation as a distinct legal
MOA,32 Mariam should have brought the case before the RTC of Angeles, person.43 At most, Mariam's interest as a shareholder is purely inchoate, or in sheer
Pampanga.33 Petitioners also argue that Mariam has already filed a case earlier against BIRI for expectancy of a right, in the management of the corporation and to share in its profits, and in
annulment of the Deed of Assignment before the RTC of Angeles City, that this case is merely its properties and assets on dissolution after payment of the corporate debts and obligations.44
an attempt to split causes of action, and that Mariam purposely did not mention material facts
in order to obtain a favorable judgment. Petitioners likewise point out that Mariam cannot While Mariam insists that the case is one for forcible entry where the only issue is the physical
feign ignorance that petitioners were merely acting on the orders of BIRI considering that both possession and not ownership of the property, her prior physical possession has not been
Mariam and John are members of the same ManCom which oversaw the day-to-day business established in the courts below. In fact, the MCTC found that prior to the events of May 28,
operations of BIRI.34 2007, both petitioners and respondent were in actual possession of the property: petitioners,
on behalf of BIRI as the owner of the property, and respondent Mariam, by virtue of the
In Matling Industrial and Commercial Corporation v. Coros, 35 the Court summarized the accommodation granted to her by BIRI under the MOA allowing her to continue her water
guidelines for determining whether a dispute constitutes an intra-corporate controversy or reloading business on the property even after the transfer of its ownership to BIRI. 45
not. There, we held that in order that the SEC (now the RTC) 36 can take cognizance of a case,
the controversy must pertain to any of the following relationships: (a) between the In sum, what appears on record as the true nature of the controversy is that of a shareholder
corporation, partnership, or association and the public; (b) between the corporation, seeking relief from the court to contest the management's decision to: (1) post guards to
partnership, or association and its stockholders, partners, members, or officers; (c) between secure the premises of the corporate property; (2) padlock the premises; and (3) deny her
the corporation, partnership, or association and the State as far as its franchise, permit, or access to the same on May 28, 2007 due to her alleged default on the provisions of the MOA.
license to operate is concerned; and (d) among the stockholders, partners, or associates
themselves. However, not every conflict between a corporation and its stockholders involves Thus, we agree with petitioners that while the case purports to be one for forcible entry filed
corporate matters. Concurrent factors, such as the status or relationship of the parties, or the by Mariam against BIRI's employees and contractors in their individual capacities, the true
nature of the question that is the subject of their controversy, must be considered in nature of the controversy is an intra-corporate dispute between BIRI and its shareholder,
determining whether the SEC (now the RTC) has jurisdiction over the controversy. 37 Mariam, regarding the management of, and access to, the corporate property subject of the
MOA. We therefore find that the MCTC never acquired jurisdiction over the ejectment case
Here, the Court considers two elements in determining the existence of an intra-corporate filed by Mariam.
controversy, namely: (a) the status or relationship of the parties; and (b) the nature of the
question that is the subject of their controversy.38 WHEREFORE, the petition is GRANTED. The Decision dated December 21, 2010 and Resolution
dated July 22, 2011 of the Court of Appeals in CA-G.R. SP No. 112613 are REVERSED and SET
As discussed earlier, the parties involved in the controversy are respondent Mariam (a ASIDE. The complaint for ejectment in Civil Case No. 272 filed before the 5th Municipal Circuit
shareholder of BIRI and successor to her late husband's position on the ManCom), petitioner Trial Court, Tuba-Sablan, Benguet, is DISMISSED for lack of jurisdiction.
John (then the branch manager, shareholder, and part of the BIRI ManCom), and petitioners
Bot and Alam (licensed geodetic engineers engaged by BIRI for a contract to survey the SO ORDERED.
property subject of the dispute). The controversy also involves BIRI itself, the corporation of
which Mariam is a shareholder, and which through Board Resolutions No. 2006-0001,39 2007- Rule 3, Sections 13 to 19: Parties to a Civil Action
000440 and 2007-000541 authorized John, its branch manager, to do all acts fit and necessary
Republic of the Philippines
to enforce its corporate rights against the Kairuz family, including the posting of guards to
SUPREME COURT
secure the property. The controversy is thus one between corporation and one of its
Manila
shareholders.
FIRST DIVISION
Moreover, the CA erred in characterizing the action as an ejectment case filed by a co-owner
who was illegally deprived of her right to possess the property by the presence of armed men. G.R. No. L-58028 April 18, 1989

TheCA ruled that since the Kairuzes own 30% of the shares of stocks of BIRI, Mariam, as a co- CHIANG KAI SHEK SCHOOL, petitioner,
owner who was unlawfully ousted from BIRI property by its employees, may bring an action vs.
for ejectment against the employees. This is not correct. COURT OF APPEALS and FAUSTINA FRANCO OH, respondents.

CRUZ, J.:
Here, it is undisputed that the property has already been transferred to BIRI and registered in
its name.42 It is likewise undisputed that based on the MOA, the Kairuzes own 30% of the An unpleasant surprise awaited Fausta F. Oh when she reported for work at the Chiang Kai
outstanding capital stock of BIRI. This, however, does not make Mariam a co-owner of the Shek School in Sorsogon on the first week of July, 1968. She was told she had no assignment
property of BIRI, including the property subject of this case. Shareholders are in no legal sense for the next semester. Oh was shocked. She had been teaching in the school since 1932 for a
continuous period of almost 33 years. And now, out of the blue, and for no apparent or given it. According to Article 1431 of the Civil Code, "through estoppel an admission or
reason, this abrupt dismissal. representation is rendered conclusive upon the person making it and cannot be denied or
disproved as against the person relying on it."
Oh sued. She demanded separation pay, social security benefits, salary differentials, maternity
benefits and moral and exemplary damages. 1 The original defendant was the Chiang Kai Shek As the school itself may be sued in its own name, there is no need to apply Rule 3, Section 15,
School but when it filed a motion to dismiss on the ground that it could not be sued, the under which the persons joined in an association without any juridical personality may be sued
complaint was amended. 2 Certain officials of the school were also impleaded to make them with such association. Besides, it has been shown that the individual members of the board of
solidarily liable with the school. trustees are not liable, having been appointed only after the private respondent's dismissal. 6

The Court of First Instance of Sorsogon dismissed the complaint. 3 On appeal, its decision was It is clear now that a charitable institution is covered by the labor laws 7 although the question
set aside by the respondent court, which held the school suable and liable while absolving the was still unsettled when this case arose in 1968. At any rate, there was no law even
other defendants. 4 The motion for reconsideration having been denied, 5 the school then then exempting such institutions from the operation of the labor laws (although they were
came to this Court in this petition for review on certiorari. exempted by the Constitution from ad valorem taxes). Hence, even assuming that the
petitioner was a charitable institution as it claims, the private respondent was nonetheless still
The issues raised in the petition are: entitled to the protection of the Termination Pay Law, which was then in force.
1. Whether or not a school that has not been incorporated may be sued by reason alone of its While it may be that the petitioner was engaged in charitable works, it would not necessarily
long continued existence and recognition by the government, follow that those in its employ were as generously motivated. Obviously, most of them would
not have the means for such charity. The private respondent herself was only a humble school
2. Whether or not a complaint filed against persons associated under a common name will
teacher receiving a meager salary of Pl80. 00 per month.
justify a judgment against the association itself and not its individual members.
At that, it has not been established that the petitioner is a charitable institution, considering
3. Whether or not the collection of tuition fees and book rentals will make a school profit-
especially that it charges tuition fees and collects book rentals from its students. 8 While this
making and not charitable.
alone may not indicate that it is profit-making, it does weaken its claim that it is a non-profit
4. Whether or not the Termination Pay Law then in force was available to the private entity.
respondent who was employed on a year-to-year basis.
The petitioner says the private respondent had not been illegally dismissed because her
5. Whether or not the awards made by the respondent court were warranted. teaching contract was on a yearly basis and the school was not required to rehire her in 1968.
The argument is that her services were terminable at the end of each year at the discretion of
We hold against the petitioner on the first question. It is true that Rule 3, Section 1, of the the school. Significantly, no explanation was given by the petitioner, and no advance notice
Rules of Court clearly provides that "only natural or juridical persons may be parties in a civil either, of her relief after teaching year in and year out for all of thirty-two years, the private
action." It is also not denied that the school has not been incorporated. However, this omission respondent was simply told she could not teach any more.
should not prejudice the private respondent in the assertion of her claims against the school.
The Court holds, after considering the particular circumstance of Oh's employment, that she
As a school, the petitioner was governed by Act No. 2706 as amended by C.A. No. 180, which had become a permanent employee of the school and entitled to security of tenure at the time
provided as follows: of her dismissal. Since no cause was shown and established at an appropriate hearing, and the
notice then required by law had not been given, such dismissal was invalid.
Unless exempted for special reasons by the Secretary of Public Instruction, any private school
or college recognized by the government shall be incorporated under the provisions of Act No. The private respondent's position is no different from that of the rank-and-file employees
1459 known as the Corporation Law, within 90 days after the date of recognition, and shall file involved in Gregorio Araneta University Foundation v. NLRC, 9 of whom the Court had the
with the Secretary of Public Instruction a copy of its incorporation papers and by-laws. following to say:

Having been recognized by the government, it was under obligation to incorporate under the Undoubtedly, the private respondents' positions as deans and department heads of the
Corporation Law within 90 days from such recognition. It appears that it had not done so at petitioner university are necessary in its usual business. Moreover, all the private respondents
the time the complaint was filed notwithstanding that it had been in existence even earlier have been serving the university from 18 to 28 years. All of them rose from the ranks starting
than 1932. The petitioner cannot now invoke its own non-compliance with the law to as instructors until they became deans and department heads of the university. A person who
immunize it from the private respondent's complaint. has served the University for 28 years and who occupies a high administrative position in
addition to teaching duties could not possibly be a temporary employee or a casual.
There should also be no question that having contracted with the private respondent every
year for thirty two years and thus represented itself as possessed of juridical personality to do The applicable law is the Termination Pay Law, which provided:
so, the petitioner is now estopped from denying such personality to defeat her claim against
SECTION 1. In cases of employment, without a definite period, in a commercial, industrial, or The Court takes this opportunity to pay a sincere tribute to the grade school teachers, who are
agricultural establishment or enterprise, the employer or the employee may terminate at any always at the forefront in the battle against illiteracy and ignorance. If only because it is they
time the employment with just cause; or without just cause in the case of an employee by who open the minds of their pupils to an unexplored world awash with the magic of letters
serving written notice on the employer at least one month in advance, or in the case of an and numbers, which is an extraordinary feat indeed, these humble mentors deserve all our
employer, by serving such notice to the employee at least one month in advance or one-half respect and appreciation.
month for every year of service of the employee, whichever, is longer, a fraction of at least six
months being considered as one whole year. WHEREFORE, the petition is DENIED. The appealed decision is AFFIRMED except for the award
of separation pay, which is reduced to P2,880.00. All the other awards are approved. Costs
The employer, upon whom no such notice was served in case of termination of employment against the petitioner.
without just cause may hold the employee liable for damages.
This decision is immediately executory.
The employee, upon whom no such notice was served in case of termination of employment
without just cause shall be entitled to compensation from the date of termination of his SO ORDERED.
employment in an I amount equivalent to his salaries or wages correspond to the required
Republic of the Philippines
period of notice. ... .
SUPREME COURT
The respondent court erred, however, in awarding her one month pay instead of only one-half Manila
month salary for every year of service. The law is quite clear on this matter. Accordingly, the
FIRST DIVISION
separation pay should be computed at P90.00 times 32 months, for a total of P2,880.00.
G.R. Nos. L-42699 to L-42709 May 26, 1981
Parenthetically, R.A. No. 4670, otherwise known as the Magna Carta for Public School
Teachers, confers security of tenure on the teacher upon appointment as long as he possesses THE HEIRS OF THE LATE FLORENTINA NUGUID VDA. DE HABERER, petitioner,
the required qualification. 10 And under the present policy of the Department of Education, vs.
Culture and Sports, a teacher becomes permanent and automatically acquires security of COURT OF APPEALS, ** FEDERICO MARTINEZ, BALDOMERO MANALO, FAUSTINO
tenure upon completion of three years in the service. 11 BAGALAWIS, FEDERICO STA. TERESA, ANGELITO KING, GREGORIO DEL ROSARIO,
LEODOVICO TORRES, LEON SORIANO, SANTIAGO TUMANG, LUIS PASTOR and CRISTINO
While admittedly not applicable to the case at bar, these I rules nevertheless reflect the
LIBRAMANTE, respondents.
attitude of the government on the protection of the worker's security of tenure, which is now
guaranteed by no less than the Constitution itself. 12

We find that the private respondent was arbitrarily treated by the petitioner, which has shown TEEHANKEE, J
no cause for her removal nor had it given her the notice required by the Termination Pay Law.
As the respondent court said, the contention that she could not report one week before the The Court grants the petition for review by way of appeal from the Resolutions of respondent
start of classes is a flimsy justification for replacing her. 13 She had been in its employ for all of Court of Appeals dated November 24, 1975 and January 15, 1976 dismissing the appeal of the
thirty-two years. Her record was apparently unblemished. There is no showing of any previous late Florentino Nuguid Vda. de Haberer in CA-G. R. No. 53680—90-R and ordering all pleadings
strained relations between her and the petitioner. Oh had every reason to assume, as she had filed in said cases after the death of said appellant stricken off the records, for having been
done in previous years, that she would continue teaching as usual. issued with grave error of law if not with grave abuse of discretion and remands the case for
proper proceedings and determination of the appeal on the merits.
It is easy to imagine the astonishment and hurt she felt when she was flatly and without
warning told she was dismissed. There was not even the amenity of a formal notice of her This case originated from the Court of First Instance of Rizal where the late Florentina Nuguid
replacement, with perhaps a graceful expression of thanks for her past services. She was simply Vda. de Haberer as the duly registered owner filed in 1964 and 1965 (11) complaints for
informed she was no longer in the teaching staff. To put it bluntly, she was fired. recovery of possession of the parcel of land evidenced by Transfer Certificate of Title No. 15043
of the Register of Deeds of Rizal issued in her name, situated at Mandaluyong, Rizal, alleging
For the wrongful act of the petitioner, the private respondent is entitled to moral that private respondents had surreptitiously entered the land and built their houses thereon.
damages. 14 As a proximate result of her illegal dismissal, she suffered mental anguish, serious
anxiety, wounded feelings and even besmirched reputation as an experienced teacher for The lower court, after trial on the merits, rendered a consolidated decision, dated May 26, 197
more than three decades. We also find that the respondent court did not err in awarding her l, dismissing all the complaints. On motion of the late Florentina Nuguid Vda. de Haberer the
exemplary damages because the petitioner acted in a wanton and oppressive manner when it cases were reopened and retried on grounds of newly discovered evidence. On September 15,
dismissed her. 15 1972, the lower court issued an order reviving its decision of May 26, 1971. The decision was
thus appealed to the Court of Appeals.
In the Court of Appeals, the cases were erroneously dismissed once before, on the ground that and considering that appellant has already been given a total of one hundred ninety-five (195)
the appeal was allegedly filed out of time. The issue was brought to this Court in Cases Nos. L- days within which to file brief, the Court Resolved to deny the motion for another extension
39366 and L-39620-29, entitled "Florentina Nuguid Vda. de Haberer vs. Federico Martinez, et to file brief and to dismiss the appeal.
al., 1 On January 29, 1975, this Court rendered its judgment setting aside the appellate court's
dismissal of the appeal and ordering the reinstatement of the same for proper disposition on Counsel for the deceased appellant forthwith filed their urgent motion for reconsideration of
the merits, having found "that contrary to respondent court's erroneous premises and December 8, 1975 explaining their predicament that the requests for extension/suspension of
computation, petitioner duly and timely perfected her appeal within the reglementary period period to file brief was due to the uncertainty that their services may no longer be retained by
and in compliance with the material data rule requiring that the Record on Appeal state such the heirs or legal representatives of their deceased client but they felt obligated to preserve
data as will show that the appeal was perfected on time. " the right of such heirs/successors to continue the appeal pursuant to Rule 3, Section 17 of the
Rules of Court, pending the settlement of the question of who among them should be the
The cases were remanded to the Court of Appeals where appellant was required to file printed executor of the deceased's estate and presented therewith, for admission, the printed "brief
brief within forty-five days from her receipt of notice. Three days before the period was to for the appellant" the printing of which they had deferred "for professional ethical
expire, or on June 18, 1975, appellant's counsel requested for an extension of time within considerations," pending respondent court's action on their request for suspension of the
which to file appellant's brief. Respondent court in a resolution dated June 23, 1975 granted period. They further submitted therewith copies of 2 separate orders of September 3, 1975
the request and gave appellant a 90-day extension (with warning of no further extension) from and August 26, 1975 issued by the Court of Agrarian Relations and the Court of First Instance
receipt on June 27, 1975 or up to September 25, 1975 within which to file the appellant's both at Guimba, Nueva Ecija, respectively, wherein the deceased Florentina Nuguid Vda. de
printed brief. On June 23, 1975, private respondent opposed the extension by filing a "Motion Haberer was party-defendant, granting the deceased's counsel's prayer to hold in abeyance
to Set Aside Order Granting Extension of Time to File Brief." Appellant was directed by further proceedings therein pending the appointment of an administrator for the estate of the
respondent court to comment on the said opposition and appellant's counsel complied by deceased.
submitting its comments on July 15, 1975.
Respondent court, however, denied reconsideration, per its Resolution of January 15, 1976
In the meantime, appellant Florentina Nuguid Vda. de Haberer had died on May 26, 1975. citing the general principle that "litigants have no right to assume that such extensions will be
Appellant's counsel Attorneys Bausa, Ampil and Suarez accordingly gave respondent court granted as a matter of course." But respondent court erred in applying this general principle
notice of the death of their client in their motion of June 28, 1975 and asked for the suspension and summarily denying reconsideration and denying admission of the appellant's brief
of the running of the period within which to file the appellant's brief pending the appointment conditioned upon the administrator of the deceased's estate making his appearance upon his
of an executor of the estate left by their client in the Court of First Instance of Quezon City (Sp. appointment and being granted leave to file his supplemental brief/memorandum, 3 in view of
Proc. No. Q-2026) where a petition for the probate of the alleged will of the deceased had been the intervening event of appellant's death and the interposition of the equally established
filed by another lawyer, Atty. Sergio Amante. Respondents in turn contended that the lawyers principle that the relation of attorney and client is terminated by the death of the client, as
of he deceased had "no longer any legal standing and her atorneys could no longer act for and acknowledged by respondent court itself as well as respondents. ln the absence of a retainer
in her behalf for the reason that their client-attorney relationship had been automatically from the heirs or authorized representatives of his deceased client, the attorney would
erminated or severed" and asked that the appeal be dismissed for failure to prosecute." 2 thereafter have no further power or authority to appear or take any further action in the case,
save to inform the court of the client's death and take the necessary steps to safeguard the
Since their motion of June 28, 1975 remained unacted upon and the original extension granted deceased's rights in the case.
by the respondent court for the deceased appellant to file her printed brief was about to
expire, her counsel filed on September 18, 1975 a manifestation and/or motion asking either This is what the deceased's counsel did in the case at bar. They properly informed respondent
for an extension of sixty (60) days and/or resolution suspending the running of the period court of the death of the appellant and sought suspension of the proceedings and of the period
within which to submit appellant's printed brief. Still, respondent, court remained silent. for filing appeliant's brief pending the appointment of the executor of the deceased's estate in
the proper probate proceedings filed with the Court of First Instance of Quezon City. Section
Not certain whether their services would still be retained by the heirs of the deceased, counsel 17, Rule 3 of the Rules of Court 4 sets the rule on substitution of parties in case of death of any
for the late Florentina Nuguid Vda. de Haberer reiterated their request in a motion dated of the parties. Under the Rule, it is the court that is called upon, after notice of a party's death
November 14, 1975 either for an extension of time to file appellant's brief or for the issuance and the claim is not thereby extinguished, to order upon proper notice the legal representative
of a resolution suspending the running of the period for filing the same, pending the of the deceased to appear within a period of 30 days or such tlnie as it may grant. Since no
appointment of an administrator or executor of the estate of the deceased appellant. administrator of the estate of the deceased appellant had yet been appointed as the same was
still pending determination in the Court of First Instance of Quezon City, the motion of the
Finally, acting on counsel's motion of November 14, 1975, respondent court denied the
deceased's counsel for the suspension of the running of the period within which to file
request for extension and at the same time dismissed the appeal, ruling in its resolution dated
appellant's brief was well-taken. More, under the Rule, it should have set a period for the
November 24, 1975 as follows:1äwphï1.ñët
substitution of the deceased party with her legal representative or heirs, failing which, the
Upon consideration of the manifestation and/or for another extension to file appellant's brief court is called upon to order the opposing party to procure the appointment of a legal
dated November 14, 1975, filed by counsel for the appellant on the grounds therein stated,
representative of the deceased at the cost of the deceased's estate, and such representative circumstances. 13 The failure of an appellant to file his brief within the time prescribed does
shall then "immediately appear for and on behalf of the interest of the deceased." not have the effect of dismissing the appeal automatically. 14 Rather, the Court of Appeals has
the discretion to dismiss or not to dismiss appellant's appeal, which discretion must be a sound
Respondent court gravely erred in not following the Rule and requiring the appearance of the one to be exercised in accordance with the tenets of justice and fair play having in mind the
legal representative of the deceased and instead dismissing the appeal of the deceased who circumstances obtaining in each case. l5
yet had to be substituted in the pending appeal. Thus, it has been held that when a party dies
in an action that survives, and no order is issued by the court for the appearance of the legal Paraphrasing what the Court stressed in the leading case of Berkenkotter vs. Court of
representative or of the heirs of the deceased in substitution of the deceased, and as a matter Appeals, 16 a reading of the appellant's brief discloses that petitioners-appellants have a prima
of fact no such substitution has ever been effected, the trial held by the court without such facie meritorious case which should be properly determined on the merits and "the element
legal representatives or heirs and the judgment rendered after such trial are null and void of rigidity should not be affixed to procedural concepts and made to cover the matter," 17 for
because the court acquired no jurisdiction over the persons of the legal representatives or of to dismiss the appeal would not serve the ends of justice.
the heirs upon whom the trial and the judgment would be binding. 5
A final note: On March 19, 1976, counsels submitted with their Manifestation the written
Respondent court therefore erred in ruling that since upon the demise of the party-appellant, authority dated January 20, 1976 individually signed by instituted heirs and/or legal
the attorney-client relationship between her and her counsels "was automatically severed and representatives of the testate estate of the deceased Florentina Nuguid Vda. de Haberer
terminated," whatever pleadings filed by said counsel with it after the death of said appellant granting said counsels full authority to file and prosecute the case and any other incidental
"are mere scraps of paper." 6 If at all, due to said death on May 25, 1975 and severance of the cases for and in their behalf, 18 which was duly noted in the Court's Resolution of March 26,
attorney-client relationship, further proceedings and specifically the running of the original 45- 1976. Such manifestation and authority may be deemed the formal substitution of the
day period for filing the appellnt's brief should be legally deemed as having been automatically deceased by her heirs, as in fact they appear as petitioners in the title of the case at bar. Hence,
suspended, until the proper substitution of the deceased appellant by her executor or the proper determination of the pending appeal may now proceed, as herein directed.
administrator or her heirs shall have been effected within the time set by respondent court
pursuant to the cited Rule. ACCORDINGLY, the petition is granted and respondent court's resolutions of November 24,
1975 and January 15, 1976 are set aside. The appellant's brief filed with respondent court in
Respondent court likewise gravely erred in dismissing the appeal on "(its) belief that the the pending appeal in CA-G.R. Nos. 53680-90-R is ordered admitted and the cases are
supervening death of the appellant Florentina Nuguid Vda. de Haberer rendered the remanded to respondent, Court of Appeals for further proceedings and proper determination
continuance of the appeal unnecessary" on the basis of a totally inapplicable citation of a ruling of the appeal on the merits. With costs against private respondents.
in Velasco vs. Rosenberg, 29 Phil. 212, 214 that "If pending appeal, an event occurs which
renders it impossible for the appellate court to grant any relief, the appeal will be dismissed." The Court has noted that upon recommendation of the Solicitor General in Adm. Case No. 2148
Manifestly, the appenant's death in no way impedes that the deceased's appeal to recover the entitled "Francisco Ortigas, Jr., et al. vs. Atty. Felipe C. Navarro" that counsel for respondents
parcel of land registered in her name be continued and determined for the benefit of her estate Felipe C. Navarro be disbarred for "gross misconduct and/or malpractice," he has been
and heirs. suspended from the practice of law during the pendency of said proceedings. The Court,
however, directs that copy of this decision be served on said counsel for the sole purpose of
Prescinding from the foregoing, justice and equity dictate under the circumstances of the case apprising private respondents through him of the promulgation of this judgment and to require
at bar that the rules, while necessary for the speedy and orderly administration of justice, respondents (1) to inform the Court of their new counsel, if any, and to direct him to enter his
should not be applied with the rigidity and inflexibility of respondent court's appearance or (2) if they have no new or other counsel, to inform the Court of their respective
resolutions. 7 What should guide judicial action is the principle that a party litigant is to be addresses for purposes of service of the Court's processes, within ten (10) days from notice
given the fullest opportunity to establish the merits of his complaint or defense rather than for hereof.
him to lose life, liberty, honor or property on technicalities. 8 A liberal, rather than a strict and
inflexible adherence to the Rules, is justified not only because appellant (in this case, her estate Republic of the Philippines
and/or heirs) should be given every opportunity to be heard but also because no substantial SUPREME COURT
injury or prejudice can well be caused to the adverse parties principally, since they are in actual Manila
possession of the disputed land. 9 The better and certainly the more prudent course of action
FIRST DIVISION
in every judicial proceeding is to hear both sides and decide on the merits rather than dispose
of a case on technicalities, 10 especially where no substantial prejudice is caused to the adverse G.R. No. 121510 November 23, 1995
party. 11
FABIANA C. VDA. DE SALAZAR, petitioner,
The dismissal of an appeal based on the appellant's failure to file brief is based on a power vs.
granted to respondent Court of Appeals and not on a specific and mandatory duty imposed COURT OF APPEALS, PRIMITIVO NEPOMUCENO and EMERENCIANA
upon it by the Rules. 12 Since the power or authority is not mandatory but merely directory, NEPOMUCENO, respondents.
the exercise thereof requires a great deal of circumspection, considering all the attendant
HERMOSISIMA, JR., J.: We are not unaware of several cases10 where we have ruled that a party having died in an
action that survives, the trial held by the court without appearance of the deceased's legal
Where the defendant in an ejectment case dies before the rendition by the trial court of its representative or substitution of heirs and the judgment rendered after such trial, are null and
decision therein, does the trial court's failure to effectuate a substitution of heirs before its void because the court acquired no jurisdiction over the persons of the legal representatives
rendition of judgment render such judgment jurisdictionally infirm? or of the heirs upon whom the trial and the judgment would be binding. This general rule
notwithstanding, in denying petitioner's motion for reconsideration, the Court of Appeals
On July 23, 1970, both private respondents Primitive Nepomuceno and Emerenciana
correctly ruled that formal substitution of heirs is not necessary when the heirs themselves
Nepomuceno filed separate complaints1 with the then Court of Agrarian Relations of Malolos,
voluntarily appeared, participated in the case and presented evidence in defense of deceased
Bulacan, for ejectment on the ground of personal cultivation and conversion of land for useful
defendant. Attending the case at bench, after all, are these particular circumstances which
non-agricultural purposes against petitioner's deceased husband, Benjamin Salazar. After
negate petitioner's belated and seemingly ostensible claim of violation of her rights to due
protracted proceedings in the agrarian court and then the Regional Trial Court2 spanning from
process. We should not lose sight of the principle underlying the general rule that formal
1970 to 1993, the trial court rendered its joint decision3 in favor of private respondents. An
substitution of heirs must be effectuated for them to be bound by a subsequent judgment.
appeal4 therefrom was interposed in the name of petitioner's deceased husband on the
Such had been the general rule established not because the rule on substitution of heirs and
ground that private respondents herein failed to satisfy the requirements pertaining to
that on appointment of a legal representative are jurisdictional requirements per se but
personal cultivation and conversion of the landholdings into non-agricultural uses. The Court
because non-compliance therewith results in the undeniable violation of the right to due
of Appeals rejected such contention upon finding that the record was replete with evidence
process of those who, though not duly notified of the proceedings, are substantially affected
justifying private respondents' assertion of their right of cultivation and conversion of their
by the decision rendered therein. Viewing the rule on substitution of heirs in this light, the
landholdings.5
Court of Appeals, in the resolution denying petitioner's motion for reconsideration, thus
Almost a year after the termination of that appeal, the same trial court decision subject thereof expounded:
was once again assailed before the Court of Appeals through a petition6 for annulment of
Although the jurisprudential rule is that failure to make the substitution is a jurisdictional
judgment. Herein petitioner assailed the same trial court decision as having been rendered by
defect, it should be noted that the purpose of this procedural rule is to comply with due
a court that did not have jurisdiction over her and the other heirs of her deceased husband
process requirements. The original party having died, he could not continue to defend himself
because notwithstanding the fact that her husband had already died on October 3, 1991, the
in court despite the fact that the action survived him. For the case to continue, the real party
trial court still proceeded to render its decision on August 23, 1993 without effecting the
in interest must be substituted for the deceased. The real party in interest is the one who
substitution of heirs in accordance with Section 17, Rule 3, of the Rules of Court thereby
would be affected by the judgment. It could be the administrator or executor or the heirs. In
depriving her of her day in court.
the instant case, the heirs are the proper substitutes. Substitution gives them the opportunity
Petitioner, not having asserted the matter of fraud or collusion in her petition for annulment to continue the defense for the deceased. Substitution is important because such opportunity
of judgment, the Court of Appeals decided the same on the basis of the sole issue of non- to defend is a requirement to comply with due process. Such substitution consists of making
jurisdiction resulting from the alleged deprivation of petitioner's right to due process and ruled the proper changes in the caption of the case which may be called the formal aspect of it. Such
in favor of the validity of the challenged decision.7 Petitioner filed a motion for reconsideration substitution also includes the process of letting the substitutes know that they shall be bound
of the decision of the appellate court reiterating the trial court's lack of jurisdiction over the by any judgment in the case and that they should therefore actively participate in the defense
heirs of petitioner's deceased husband as a consequence of the failure of the trial court to of the deceased. This part may be called the substantive aspect. This is the heart of the
effectuate a valid substitution of heirs. Said motion was denied in a resolution promulgated on procedural rule because this substantive aspect is the one that truly embodies and gives effect
August 14, 1995. Hence this petition. to the purpose of the rule. It is this court's view that compliance with the substantive aspect
of the rule despite failure to comply with the formal aspect may be considered substantial
The petition is bereft of merit. compliance. Such is the situation in the case at bench because the only inference that could be
deduced from the following facts was that there was active participation of the heirs in the
The need for substitution of heirs is based on the right to due process accruing to every party defense of the deceased after his death:
in any proceeding.8The rationale underlying this requirement in case a party dies during the
pendency of proceedings of a nature not extinguished by such death, is that 1. The original lawyer did not stop representing the deceased. It would be absurd to think that
the lawyer would continue to represent somebody if nobody is paying him his fees. The lawyer
. . . the exercise of judicial power to hear and determine a cause implicitly presupposes in the continued to represent him in the litigation before the trial court which lasted for about two
trial court, amongst other essentials, jurisdiction over the persons of the parties. That more years. A dead party cannot pay him any fee. With or without payment of fees, the fact
jurisdiction was inevitably impaired upon the death of the protestee pending the proceedings remains that the said counsel was allowed by the petitioner who was well aware of the instant
below such that unless and until a legal representative is for him duly named and within the litigation to continue appearing as counsel until August 23, 1993 when the challenged decision
jurisdiction of the trial court, no adjudication in the cause could have been accorded any was rendered;
validity or binding effect upon any party, in representation of the deceased, without trenching
upon the fundamental right to a day in court which is the very essence of the constitutionally
enshrined guarantee of due process.9
2. After the death of the defendant, his wife, who is the petitioner in the instant case, even It appears that petitioners are heirs of Adela Salindon. In fact, it was because of this
testified in the court and declared that her husband is already deceased. She knew therefore relationship that the petitioners were able to transfer the title of Adela Salindon over the
that there was a litigation against her husband and that somehow her interest and those of subject lot to their names. . . . Considering all this, the appellate decision is binding and
her children were involved; enforceable against the petitioners as successors-in-interest by title subsequent to the
commencement of the action (Section 49 [b] Rule 39, Rules of Court). Furthermore, . . .
3. This petition for annulment of judgment was filed only after the appeal was decided against judgment in an ejectment case may be enforced not only against defendants therein but also
the defendant on April 3, 1995, more than one and a half year (sic) after the decision was against the members of their family, their relatives, or privies who derive their right of
rendered (even if we were to give credence to petitioner's manifestation that she was not possession from the defendants (Ariem v. De los Angeles, 49 SCRA 343). Under the
aware that an appeal had been made); circumstances of this case, the same rule should apply to the successors-in-interest . . . .15
4. The Supreme Court has already established that there is such a thing as jurisdiction by While it is true that a decision in an action for ejectment is enforceable not only against the
estoppel. This principle was established even in cases where jurisdiction over the subject defendant himself but also against members of his family, his relatives, and his privies who
matter was being questioned. In the instant case, only jurisdiction over the person of the heirs derived their right of possession from the defendant and his successors-in-interest,16 it had
is in issue. Jurisdiction over the person may be acquired by the court more easily than been established that petitioner had, by her own acts, submitted to the jurisdiction of the trial
jurisdiction over the subject matter. Jurisdiction over the person may be acquired by the simple court. She is now estopped to deny that she had been heard in defense of her deceased
appearance of the person in court as did herein petitioner appear; husband in the proceedings therein. As such, this petition evidently has no leg to stand on.
5. The case cited by the herein petitioner (Ferreria et al. vs. Manuela Ibarra vda. de Gonzales, WHEREFORE, the instant petition is dismissed for lack of merit. Costs against petitioner.
et al.) cannot be availed of to support the said petitioner's contention relative to non-
acquisition of jurisdiction by the court. In that case, Manolita Gonzales was not served notice SO ORDERED.
and, more importantly, she never appeared in court, unlike herein petitioner who appeared
and even testified regarding the death of her husband.11 THIRD DIVISION

Consequently, we rule that, as in the case at bench, the defendant in an ejectment case having G.R. No. 131889 March 12, 2001
died before the rendition by the trial court of its decision therein, its failure to effectuate a
VIRGINIA O. GOCHAN, FELIX Y. GOCHAN III, MAE GOCHAN EFANN, LOUISE Y. GOCHAN,
formal substitution of heirs before its rendition of judgment, does not invalidate such
ESTEBAN Y. GOCHAN JR., DOMINIC Y.GOCHAN, FELIX 0. GOCHAN III, MERCEDES R.
judgment where the heirs themselves appeared before the trial court, participated in the
GOCHAN, ALFREDO R. GOCHAN, ANGELINA R. GOCHAN-HERNAEZ, MARIA MERCED R.
proceedings therein, and presented evidence in defense of deceased defendant, it undeniably
GOCHAN, CRISPO R. GOCHAN JR., MARION R. GOCHAN, MACTAN REALTY DEVELOPMENT
being evident that the heirs themselves sought their day in court and exercised their right to
CORPORATION and FELIX GOCHAN & SONS REALTY CORPORATION, petitioner,
due process.
vs.
Respondent Court of Appeals also correctly ruled that ejectment, being an action involving RICHARD G. YOUNG, DAVID G. YOUNG, JANE G. YOUNG-LLABAN, JOHN D. YOUNG JR.,
recovery of real property, is a real action which as such, is not extinguished by the defendant's MARY G. YOUNG-HSU and ALEXANDER THOMAS G. YOUNG as heirs of Alice Gochan; the
death. INTESTATE ESTATE OF JOHN D. YOUNG SR.; and CECILIA GOCHAN-UY and MIGUEL C. UY, for
themselves and on behalf and for the benefit of FELIX GOCHAN & SONS REALTY
. . . The question as to whether an action survives or not depends on the nature of the action CORPORATION, respondents.
and the damage sued for. In the causes of action which survive, the wrong complained affects
primarily and principally property and property rights, the injuries to the person being merely PANGANIBAN, J.:
incidental, while in the causes of action which do not survive, the injury complained of is to the
A court or tribunal's jurisdiction over the subject matter is determined by the allegations in the
person, the property and rights of property affected being incidental.12
complaint. The fact that certain persons are not registered as stockholders in the books of the
There is no dispute that an ejectment case survives the death of a party, which death did not corporation will not bar them from filing a derivative suit, if it is evident from the allegations
extinguish the deceased's civil personality.13 More significantly, a judgment in an ejectment in the complaint that they are bona fide stockholders. In view of RA 8799, intra-corporate
case is conclusive between the parties and their successors in interest by title subsequent to controversies are now within the jurisdiction of courts of general jurisdiction, no longer of the
the commencement of the action.14 Thus, we have held that: Securities and Exchange Commission. 1âwphi1.nêt

. . . In such a case and considering that the supervening death of appellant did not extinguish The Case
her civil personality, the appellate court was well within its jurisdiction to proceed as it did with
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. The Petition
the case. There is no showing that the appellate court's proceedings in the case were tainted
assails the February 28, 1996 Decision1 of the Court of Appeals (CA), as well as its December
with irregularities.
18, 1997 Resolution denying petitioner's Motion for Reconsideration. The dispositive part of "The motion was opposed by herein [respondents].
the CA Decision reads as follows:
"On 29 March 1994, [petitioners'] filed a Motion for cancellation of Notice of Lis Pendens.
"WHEREFORE, the petition as far as the heirs of Alice Gochan, is DISMISSED, without prejudice [Respondents] opposed the said motion.
to filing the same in the regular courts.
"On 9 December 1994, the SEC, through its Hearing Officer, granted the motion to dismiss and
SO ORDERED."2 ordered the cancellation of the notice of lis pendens annotated upon the titles of the corporate
lands. In its order, the SEC opined:
In dismissing the Complaint before the SEC regarding only Alice Gochan's heirs but not the
other complainants, the CA effectively modified the December 9, 1994 Order of the hearing 'In the instant case, the complaint admits that complainants Richard G. Young, David G. Young,
officer3 of the Securities and Exchange Commission (SEC). The Order, which was affirmed in Jane G. Young Llaban, John D. Young, Jr., Mary G. Young Hsu and Alexander Thomas G. Young,
full by the SEC en banc, dismissed the entire case. who are the children of the late Alice T. Gochan and the late John D. Young, Sr. are suing in
their own right and as heirs of and/or as the beneficial owners of the shares in the capital stock
The Facts of FGSRC held in trust for them during his lifetime by the late John D. Young. Moreover, it has
been shown that said complainants ha[d] never been x x x stockholder[s] of record of FGSRC
The undisputed facts are summarized by the Court of Appeals as follows:
to confer them with the legal capacity to bring and maintain their action. Conformably, the
"Felix Gochan and Sons Realty Corporation (Gochan Realty, for brevity) was registered with the case cannot be considered as an intra-corporate controversy within the jurisdiction of this
SEC on June, 1951, with Felix Gochan, Sr., Maria Pan Nuy Go Tiong, Pedro Gochan, Tomasa Commission.
Gochan, Esteban Gochan and Crispo Gochan as its incorporators.
'The complainant heirs base what they perceived to be their stockholders' rights upon the fact
"Felix Gochan Sr.'s daughter, Alice, mother of [herein respondents], inherited 50 shares of of their succession to all the rights, property and interest of their father, John D. Young, Sr.
stock in Gochan Realty from the former. While their heirship is not disputed, their right to compel the corporation to register John D.
Young's Sr. shares of stock in their names cannot go unchallenged because the devolution of
"Alice died in 1955, leaving the 50 shares to her husband, John Young, Sr. property to the heirs by operation of law in succession is subject to just obligations of the
deceased before such property passes to the heirs. Conformably, until therefore the estate is
"In 1962, the Regional Trial Court of Cebu adjudicated 6/14 of these shares to her children, settled and the payment of the debts of the deceased is accomplished, the heirs cannot as a
herein [respondents] Richard Young, David Young, Jane Young Llaban, John Young Jr., Mary matter of right compel the delivery of the shares of stock to them and register such transfer in
Young Hsu and Alexander Thomas Young. the books of the corporation to recognize them as stockholders. The complainant heirs
"Having earned dividends, these stocks numbered 179 by 20 September 1979. succeed to the estate of [the] deceased John D. Young, Sr. but they do not thereby become
stockholders of the corporation.
"Five days later (25 September), at which time all the children had reached the age of majority,
their father John Sr., requested Gochan Realty to partition the shares of his late wife by 'Moreover, John D. [Young Sr.'s] shares of stocks form part of his estate which is the subject of
cancelling the stock certificates in his name and issuing in lieu thereof, new stock certificates Special Proceedings No. 3694-CEB in the Regional Trial Court of Cebu, Branch VIII, [par. 4 of
in the names of [herein respondents]. the complaint]. As complainants clearly claim[,] the Intestate Estate of John D. Young, Sr. has
an interest in the subject matter of the instant case. However, actions for the recovery or
"On 17 October 1979, respondent Gochan Realty refused, citing as reason, the right of first protection of the property [such as the shares of stock in question] may be brought or
refusal granted to the remaining stockholders by the Articles of Incorporation. defended not by the heirs but by the executor or administrator thereof.

"On 21, 1990, [sic] John, Sr. died, leaving the shares to the [respondents]. 'Complainants further contend that the alleged wrongful acts of the corporation and its
directors constitute fraudulent devices or schemes which may be detrimental to the
"On 8 February 1994, [respondents] Cecilia Gochan Uy and Miguel Uy filed a complaint with stockholders. Again, the injury [is] perceived[,] as is alleged[,] to have been suffered by
the SEC for issuance of shares of stock to the rightful owners, nullification of shares of stock, complainants as stockholders, which they are not. Admittedly, the SEC has no jurisdiction over
reconveyance of property impressed with trust, accounting, removal of officers and directors a controversy wherein one of the parties involved is not or not yet a stockholder of the
and damages against respondents. A Notice of Lis Pendens was annotated as [sic] real corporation. [SEC vs. CA, 201 SCRA 134].
properties of the corporation.
'Further, by the express allegation of the complaint, herein complainants bring this action as
"On 16 March 1994, [herein petitioners] moved to dismiss the complaint alleging that: (1) the [a] derivative suit on their own behalf and on behalf of respondent FGSRC.
SEC ha[d] no jurisdiction over the nature of the action; (2) the [respondents] [were] not the
real parties-in-interest and ha[d] no capacity to sue; and (3) [respondents'] causes of action 'Section 5, Rule III of the Revised Rules of Procedure in the Securities and Exchange Commission
[were] barred by the Statute of Limitations. provides:
'Section 5. Derivative Suit. No action shall be brought by stockholder in the right of a "C. Whether or not the intestate estate of John D. Young Sr. is an indispensable party in the
corporation unless the complainant was a stockholder at the time the questioned transaction SEC case considering that the individual heirs' shares are still in the decedent stockholder's
occurred as well as at the time the action was filed and remains a stockholder during the name.
pendency of the action. x x x.'
"D. Whether or not the cancellation of [the] notice of lis pendens was justified considering that
'The rule is in accord with well settled jurisprudence holding that a stockholder bringing a the suit did not involve real properties owned by Gochan Realty."6
derivative action must have been [so] at the time the transaction or act complained of [took]
place. (Pascual vs. Orozco, 19 Phil. 82; Republic vs. Cuaderno, 19 SCRA 671; San Miguel In addition, the Court will determine the effect of Republic Act No.87997 on this case.
Corporation vs. Khan, 176 SCRA 462-463) The language of the rule is mandatory, strict
The Court's Ruling
compliance with the terms thereof thus being a condition precedent, a jurisdictional
requirement to the filing of the instant action. The Petition has no merit. In view of the effectivity of RA 8799, however, the case should be
remanded to the proper regional trial court, not to the Securities and Exchange Commission.
'Otherwise stated, proof of compliance with the requirement must be sufficiently established
for the action to be given due course by this Commission. The failure to comply with this First Issue:
jurisdictional requirement on derivative action must necessarily result in the dismissal of the
instant complaint.' (pp. 77-79, Rollo) Personality of the Spouses Uy to File a Suit Before the SEC

"[Respondents] moved for a reconsideration but the same was denied for being pro-forma. Petitioners argue that Spouses Cecilia and Miguel Uy had no capacity or legal standing to bring
the suit before the SEC on February 8, 1994, because the latter were no longer stockholders at
"[Respondents] appealed to the SEC en banc, contending, among others, that the SEC ha[d] the time. Allegedly, the stocks had already been purchased by the corporation. Petitioners
jurisdiction over the case. further assert that, being allegedly a simple contract of sale cognizable by the regular courts,
the purchase by Gochan Realty of Cecilia Gochan Uy's 210 shares does not come within the
"[Petitioners], on the other hand, contend that the appeal was 97 days late, beyond the 30-
purview of an intra-corporate controversy.
day period for appeals.
As a general rule, the jurisdiction of a court or tribunal over the subject matter is determined
"On 3 March 1995, the SEC en banc ruled for the [petitioners,] holding that the [respondents']
by the allegations in the complaint.8 For purposes of resolving a motion to dismiss, Cecilia Uy's
motion for reconsideration did not interrupt the 30-day period for appeal because said motion
averment in the Complaint -that the purchase of her stocks by the corporation was null and
was pro-forma."4
void ab initio - is deemed admitted. It is elementary that a void contract produces no effect
Aggrieved, herein respondents then filed a Petition for Review with the Court of Appeals. either against or in favor of anyone; it cannot create, modify or extinguish the juridical relation
to which it refers.9 Thus, Cecilia remains a stockholder of the corporation in view of the nullity
Ruling of the Court of Appeals of the Contract of Sale. Although she was no longer registered as a stockholder in the corporate
records as of the filing of the case before the SEC, the admitted allegations in the Complaint
The Court of Appeals ruled that the SEC had no jurisdiction over the case as far as the heirs of made her still a bona fide stockholder of Felix Gochan & Sons Realty Corporation (FGSRC), as
Alice Gochan were concerned, because they were not yet stockholders of the corporation. On between said parties.
the other hand, it upheld the capacity of Respondents Cecilia Gochan Uy and her spouse,
Miguel Uy. It also held that the Intestate Estate of John Young Sr. was an indispensable party. In any event, the present controversy, whether intra-corporate or not, is no longer cognizable
by the SEC, in view of RA 8799, which transferred to regional trial courts the former's
The appellate court further ruled that the cancellation of the notice of lis pendens on the titles jurisdiction over cases involving intra-corporate disputes.
of the corporate real estate was not justified. Moreover, it declared that respondents' Motion
for Reconsideration before the SEC was not pro forma; thus, its filing tolled the appeal period. Action Has Not Prescribed

Hence, this Petition.5 Petitioners contend that the statute of limitations already bars the Uy spouses' action, be it
one for annulment of a voidable contract or one based upon a written contract. The Complaint,
The Issues however, contains respondents' allegation that the sale of the shares of stock was not merely
voidable, but was void ab initio. Below we quote its relevant portion:
These are the issues presented before us:
"38. That on November 21, 1979, respondent Felix Gochan & Sons Realty Corporation did not
"A. Whether or not the Spouses Uy have the personality to file an action before the SEC against
have unrestricted retained earnings in its books to cover the purchase price of the 208 shares
Gochan Realty Corporation.
of stock it was then buying from complainant Cecilia Gochan Uy, thereby rendering said
"B. Whether or not the Spouses Uy could properly bring a derivative suit in the name of Gochan purchase null and void ab initio for being violative of the trust fund doctrine and contrary to
Realty to redress wrongs allegedly committed against it for which the directors refused to sue. law, morals good customs, public order and public policy;"
Necessarily, petitioners' contention that the action has prescribed cannot be sustained. Third Issue:
Prescription cannot be invoked as a ground if the contract is alleged to be void ab initio. 10 It is
axiomatic that the action or defense for the declaration of nullity of a contract does not Capacity of the Intestate Estate of John D. Young Sr.
prescribe.11
Petitioners contend that the Intestate Estate of John D. Young Sr. is not an indispensable party,
Second Issue: as there is no showing that it stands to be benefited or injured by any court judgement.

Derivative Suit and the Spouses Uy It would be useful to point out at this juncture that one of the causes of action stated in the
Complaint filed with the SEC refers to the registration, in the name of the other heirs of Alice
Petitioners also contend that the action filed by the Spouses Uy was not a derivative suit, Gochan Young, of 6/14th of the shares still registered under the name of John D. Young Sr.
because the spouses and not the corporation were the injured parties. The Court is not Since all the shares that belonged to Alice are still in his name, no final determination can be
convinced. The following quoted portions of the Complaint readily shows allegations of injury had without his estate being impleaded in the suit. His estate is thus an indispensable party
to the corporation itself: with respect to the cause of action dealing with the registration of the shares in the names of
the heirs of Alice.
"16. That on information and belief, in further pursuance of the said conspiracy and for the
fraudulent purpose of depressing the value of the stock of the Corporation and to induce the Petitioners further claim that the Estate of John Young Sr. was not properly represented. They
minority stockholders to sell their shares of stock for an inadequate consideration as aforesaid, claim that "when the estate is under administration, suits for the recovery or protection of the
respondent Esteban T. Gochan . . ., in violation of their duties as directors and officers of the property or rights of the deceased may be brought only by the administrator or executor as
Corporation . . ., unlawfully and fraudulently appropriated [for] themselves the funds of the approved by the court."14 The rules relative to this matter do not, however, make any such
Corporation by drawing excessive amounts in the form of salaries and cash advances. . . and categorical and confining statement.
by otherwise charging their purely personal expenses to the Corporation."
Section 3 of Rule 3 of the Rules of Court, which is cited by petitioners in support of their
xxx xxx xxx position, reads:

"41. That the payment of P1,200,000.00 by the Corporation to complainant Cecilia Gochan Uy "Sec. 3. Representatives as parties. - Where the action is allowed to be prosecuted or defended
for her shares of stock constituted an unlawful, premature and partial liquidation and by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included
distribution of assets to a stockholder, resulting in the impairment of the capital of the in the title of the case and shall be deemed to be the real party in interest. A representative
Corporation and prevented it from otherwise utilizing said amount for its regular and lawful may be a trustee of an express trust, a guardian, an executor or administrator, or a party
business, to the damage and prejudice of the Corporation, its creditors, and of complainants authorized by law or these Rules. An agent acting in his own name and for the benefit of an
as minority stockholders;"12 undisclosed principal may sue or be sued without joining the principal except when the
contract involves things belonging to the principal."
As early as 1911, this Court has recognized the right of a single stockholder to file derivative
suits. In its words: Section 2 of Rule 87 of the same Rules, which also deals with administrators, states:

"[W]here corporate directors have committed a breach of trust either by their frauds, ultra "Sec. 2. Executor or administrator may bring or defend actions which survive. -For the recovery
vires acts, or negligence, and the corporation is unable or unwilling to institute suit to remedy or protection of the property or rights of the deceased, an executor or administrator may bring
the wrong, a single stockholder may institute that suit, suing on behalf of himself and other or defend, in the right of the deceased, actions for causes which survive."
stockholders and for the benefit of the corporation, to bring about a redress of the wrong done
directly to the corporation and indirectly to the stockholders."13 The above-quoted rules, while permitting an executor or administrator to represent or to bring
suits on behalf of the deceased, do not prohibit the heirs from representing the deceased.
In the present case, the Complaint alleges all the components of a derivative suit. The These rules are easily applicable to cases in which an administrator has already been
allegations of injury to the Spouses Uy can coexist with those pertaining to the corporation. appointed. But no rule categorically addresses the situation in which special proceedings for
The personal injury suffered by the spouses cannot disqualify them from filing a derivative suit the settlement of an estate have already been instituted, yet no administrator has been
on behalf of the corporation. It merely gives rise to an additional cause of action for damages appointed. In such instances, the heirs cannot be expected to wait for the appointment of an
against the erring directors. This cause of action is also included in the Complaint filed before administrator; then wait further to see if the administrator appointed would care enough to
the SEC. file a suit to protect the rights and the interests of the deceased; and in the meantime do
nothing while the rights and the properties of the decedent are violated or
The Spouses Uy have the capacity to file a derivative suit in behalf of and for the benefit of the dissipated.1âwphi1.nêt
corporation. The reason is that, as earlier discussed, the allegations of the Complaint make
them out as stockholders at the time the questioned transaction occurred, as well as at the The Rules are to be interpreted liberally in order to promote their objective of securing a just,
time the action was filed and during the pendency of the action. speedy and inexpensive disposition of every action and proceeding.15 They cannot be
interpreted in such a way as to unnecessarily put undue hardships on litigants. For the submitted for final resolution which should be resolved within one (1) year from the enactment
protection of the interests of the decedent, this Court has in previous instances 16 recognized of this Code. The Commission shall retain jurisdiction over pending suspension of
the heirs as proper representatives of the decedent, even when there is already an payments/rehabilitation cases filed as of 30 June 2000 until finally disposed."
administrator appointed by the court. When no administrator has been appointed, as in this
case, there is all the more reason to recognize the heirs as the proper representatives of the In the light of the Resolution issued by this Court in AM No. 00-8-10-SC,21 the Court
deceased. Since the Rules do not specifically prohibit them from representing the deceased, Administrator and the Securities and Exchange Commission should be directed to cause the
and since no administrator had as yet been appointed at the time of the institution of the transfer of the records of SEC Case No. 02-94-4674 to the appropriate court of general
Complaint with the SEC, we see nothing wrong with the fact that it was the heirs of John D. jurisdiction.
Young Sr. who represented his estate in the case filed before the SEC.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED, subject to
Fourth Issue the modification that the case be remanded to the proper regional trial court. The December
9, 1994 Order of Securities and Exchange Commission hearing officer dismissing the Complaint
Notice of Lis Pendens and directing the cancellation of the notice of lis pendens, as well as the March 3, 1995 Order
denying complainants' motion for reconsideration are REVERSED and SET ASIDE. Pursuant to
On the issue of the annotation of the Notice of Lis Pendens on the titles of the properties of AM No. 00-8-10-SC, the Office of the Court Administrator and the SEC are DIRECTED to cause
the corporation and the other respondents, we still find no reason to disturb the ruling of the the actual transfer of the records of SEC Case No.02-94-467 4 to the appropriate regional trial
Court of Appeals. court.
Under the third, fourth and fifth causes of action of the Complaint, there are allegations of SO ORDERED.
breach of trust and confidence and usurpation of business opportunities in conflict with
petitioners' fiduciary duties to the corporation, resulting in damage to the Corporation. Under Republic of the Philippines
these causes of action, respondents are asking for the delivery to the Corporation of possession SUPREME COURT
of the parcels of land and their corresponding certificates of title. Hence, the suit necessarily Manila
affects the title to or right of possession of the real property sought to be reconveyed. The
Rules of Court17 allows the annotation of a notice of lis pendens in actions affecting the title or SECOND DIVISION
right of possession of real property.18 Thus, the Court of Appeals was correct in reversing the
G.R. No. 149787 June 18, 2008
SEC Order for the cancellation of the notice of lis pendens.
JUDGE ANTONIO C. SUMALJAG, petitioner,
The fact that respondents are not stockholders of the Mactan Realty Development Corporation
vs.
and the Lapu-Lapu Real Estate Corporation does not make them non-parties to this case. To
SPOUSES DIOSDIDIT and MENENDEZ M. LITERATO; and MICHAELES MAGLASANG
repeat, the jurisdiction of a court or tribunal over the subject matter is determined by the
RODRIGO, respondents.
allegations in the Complaint. In this case, it is alleged that the aforementioned corporations
are mere alter egos of the directors-petitioners, and that the former acquired the properties DECISION
sought to be re conveyed to FGSRC in violation of the directors-petitioners' fiduciary duty to
FGSRC. The notion of corporate entity will be pierced or disregarded and the individuals CARPIO MORALES, J.:
composing it will be treated as identical19 if, as alleged in the present case, the corporate entity
is being used as a cloak or cover for fraud or illegality; as a justification for a wrong; or as an Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court
alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders. assailing the Decision1of the Court of Appeals ("CA") dated June 26, 2001 and its related
Resolution2 dated September 4, 2001 in CA-G.R. SP No. 59712. The assailed Decision dismissed
Effect of RA 8799 the petition for certiorari filed by petitioner Judge Antonio C. Sumaljag (the "petitioner") in the
interlocutory matter outlined below in Civil Cases B-1239 and B-1281 before the trial court.
While we sustain the appellate court, the case can no longer be remanded to the SEC. As earlier The challenged Resolution denied the petitioner's motion for reconsideration.
stated, RA 8799, which became effective on August 8, 2000, transferred SEC's jurisdiction over
cases involving intra-corporate disputes to courts of general jurisdiction or to the regional trial ANTECEDENT FACTS
courtS.20 Section 5.2 thereof reads as follows:
On November 16, 1993, Josefa D. Maglasang ("Josefa") filed with the Regional Trial Court
"5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential ("RTC"), Branch 14, Baybay, Leyte a complaint3 (docketed as Civil Case No. B-1239) for the
Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate nullity of the deed of sale of real property purportedly executed between her as vendor and
Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may the spouses Diosdidit and Menendez Literato (the "respondent spouses") as vendees. The
designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. complaint alleged that this deed of sale dated October 15, 1971 of Lot 1220-D is spurious.
The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes Josefa was the sister of Menendez Maglasang Literato ("Menendez"). They were two (2) of the
six (6) heirs who inherited equal parts of a 6.3906-hectare property (Lot 1220) passed on to The RTC subsequently denied the petitioner's motion for reconsideration in an order 12 dated
them by their parents Cristito and Inecita Diano Maglasang.4 Lot 1220-D was partitioned to May 25, 2000.
Josefa, while Lot 1220-E was given to Menendez.
The petitioner went to the CA on a petition for certiorari (docketed as CA-G.R. SP No. 59712)
The respondent spouses' response to the complaint was an amended answer with to question the above interlocutory orders. In a Decision13 dated June 26, 2001, the CA
counterclaim5 denying that the deed of sale was falsified. They impleaded the petitioner with dismissed the petition for lack of merit. The appellate court similarly denied the petitioner's
Josefa as counterclaim defendant on the allegation that the petitioner, at the instance of motion for reconsideration in its Resolution14 dated September 4, 2001.
Josefa, occupied Lot 1220-D and Lot 1220-E without their (the respondent spouses') authority;
Lot 1220-E is theirs by inheritance while 1220-D had been sold to them by Josefa. They also The present petition essentially claims that the CA erred in dismissing CA-G.R. No. SP 59712
alleged that the petitioner acted in bad faith in acquiring the two (2) lots because he prepared since: (a) the property under litigation was no longer part of Josefa's estate since she was no
and notarized on September 26, 1986 the contract of lease over the whole of Lot 1220 between longer its owner at the time of her death; (b) the petitioner had effectively been subrogated
all the Maglasang heirs (but excluding Josefa) and Vicente Tolo, with the lease running from to the rights of Josefa over the property under litigation at the time she died; (c) without an
1986 to 1991; thus, the petitioner then knew that Josefa no longer owned Lot 1220-D. estate, the heir who was appointed by the lower court no longer had any interest to represent;
(d) the notice of death was seasonably submitted by the counsel of Josefa to the RTC within
Civil Case No. 12816 is a complaint that Menendez filed on April 4, 1996 with the RTC for the the extended period granted; and (e) the petitioner is a transferee pendente lite who the
declaration of the inexistence of lease contract, recovery of possession of land, and damages courts should recognize pursuant to Rule 3, Section 20 of the Rules of Court.
against the petitioner and Josefa after the RTC dismissed the respondent spouses'
counterclaim in Civil Case No. 1239. The complaint alleged that Josefa, who had previously sold THE COURT'S RULING
Lot 1220-D to Menendez, leased it, together with Lot 1220-E, to the petitioner. Menendez
We resolve to deny the petition for lack of merit.
further averred that the petitioner and Josefa were in bad faith in entering their contract of
lease as they both knew that Josefa did not own the leased lots. Menendez prayed, among The Governing Rule.
others, that this lease contract between Josefa and the petitioner be declared null and void.
The rule on substitution in case of death of a party is governed by Section 16, Rule 3 of the
Josefa died on May 3, 1999 during the pendency of Civil Case Nos. B-1239 and B-1281. 1997 Rules of Civil Procedure, as amended, which provides:
On August 13, 1999, Atty. Zenen A. Puray ("Atty. Puray") - the petitioner's and Josefa's common Section 16. Death of a party; duty of counsel. -Whenever a party to a pending action dies, and
counsel - asked the RTC in Civil Case No. 1239 that he be given an extended period or up to the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court
September 10, 1999 within which to file a formal notice of death and substitution of party. within thirty (30) days after such death of the fact thereof, and to give the name and address
of his legal representative or representatives. Failure of counsel to comply with this duty shall
The RTC granted the motion in an order dated August 13, 1999. 7 On August 26, 1999, Atty.
be a ground for disciplinary action.
Puray filed with the RTC a notice of death and substitution of party, 8 praying that Josefa - in
his capacity as plaintiff and third party counterclaim defendant - be substituted by the The heirs of the deceased may be allowed to be substituted for the deceased, without
petitioner. The submission alleged that prior to Josefa's death, she executed a Quitclaim requiring the appointment of an executor or administrator and the court may appoint a
Deed9 over Lot 1220-D in favor of Remismundo D. Maglasang10 who in turn sold this property guardian ad litem for the minor heirs.
to the petitioner.
The court shall forthwith order said legal representative or representatives to appear and be
Menendez, through counsel, objected to the proposed substitution, alleging that Atty. Puray substituted within a period of thirty (30) days from notice.
filed the notice of death and substitution of party beyond the thirty-day period provided under
Section 16, Rule 3 of the 1997 Rules of Civil Procedure, as amended. She recommended instead If no legal representative is named by the counsel for the deceased party, or if the one so
that Josefa be substituted by the latter's full-blood sister, Michaeles Maglasang Rodrigo named shall fail to appear within the specified period, the court may order the opposing party,
("Michaeles"). within a specified time, to procure the appointment of an executor or administrator for the
estate of the deceased, and the latter shall immediately appear for and on behalf of the
The RTC denied Atty. Puray's motion for substitution and instead ordered the appearance of deceased. The court charges in procuring such appointment, if defrayed by the opposing party,
Michaeles as representative of the deceased Josefa. This Order provides: may be recovered as costs. (Emphasis ours)
WHEREFORE, in view of the foregoing, the motion is hereby DENIED for lack of merit and The purpose behind this rule is the protection of the right to due process of every party to the
instead order the appearance of Mrs. Mechailes Maglasang-Rodrigo of Brgy. Binulho, Albuera, litigation who may be affected by the intervening death. The deceased litigant is herself or
Leyte, as representative of the deceased Josefa Maglasang. himself protected as he/she continues to be properly represented in the suit through the duly
appointed legal representative of his estate.15
SO ORDERED.11
Application of the Governing Rule.
a. Survival of the pending action may be allowed to be substituted for the deceased, without requiring the appointment of an
executor or administrator . . .". Significantly, the person - now the present petitioner - that
A question preliminary to the application of the above provision is whether Civil Case Nos. B- counsel gave as substitute was not one of those mentioned under Section 16, Rule 3. Rather,
1239 and B-1281 are actions that survive the death of Josefa. We said in Gonzalez v. Pagcor:16 he is a counterclaim co-defendant of the deceased whose proferred justification for the
requested substitution is the transfer to him of the interests of the deceased in the litigation
"The criteria for determining whether an action survives the death of a plaintiff or petitioner
prior to her death.
was elucidated upon in Bonilla v. Barcena (71 SCRA 491 (1976). as follows:
Under the circumstances, both the lower court and the CA were legally correct in not giving
. . . The question as to whether an action survives or not depends on the nature of the action
effect to counsel's suggested substitute.
and the damage sued for. In the causes of action which survive, the wrong complained [of]
affects primarily and principally property and property rights, the injuries to the person being First, the petitioner is not one of those allowed by the Rules to be a substitute. Section 16, Rule
merely incidental, while in the causes of action which do not survive, the injury complained of 3 speaks for itself in this respect.
is to the person, the property and rights of property affected being incidental. . . .
Second, as already mentioned above, the reason for the Rule is to protect all concerned who
Since the question involved in these cases relate to property and property rights, then we are may be affected by the intervening death, particularly the deceased and her estate. We note
dealing with actions that survive so that Section 16, Rule 3 must necessarily apply. in this respect that the Notice that counsel filed in fact reflects a claim against the interest of
the deceased through the transfer of her remaining interest in the litigation to another party.
b. Duty of Counsel under the Rule.
Interestingly, the transfer is in favor of the very same person who is suggested to the court as
The duty of counsel under the aforecited provision is to inform the court within thirty (30) days the substitute. To state the obvious, the suggested substitution effectively brings to naught
after the death of his client of the fact of death, and to give the name and address of the the protection that the Rules intend; plain common sense tells us that the transferee who has
deceased's legal representative or representatives. Incidentally, this is the only representation his own interest to protect, cannot at the same time represent and fully protect the interest of
that counsel can undertake after the death of a client as the fact of death terminated any the deceased transferor.
further lawyer-client relationship.17
Third, counsel has every authority to manifest to the court changes in interest that transpire
In the present case, it is undisputed that the counsel for Josefa did in fact notify the lower in the course of litigation. Thus, counsel could have validly manifested to the court the transfer
court, although belatedly, of the fact of her death.18 However, he did as well inform the lower of Josefa's interests in the subject matter of litigation pursuant to Section 19, Rule 3.21 But this
court that - can happen only while the client-transferor was aliveand while the manifesting counsel was
still the effective and authorized counsel for the client-transferor, not after the death of the
"2. That before she died she executed a QUITCLAIM DEED in favor of REMISMUNDO D. client when the lawyer-client relationship has terminated. The fact that the alleged transfer
MAGLASANG over the land in question (Lot No. 1220-D of Benolho, Albuera, Leyte), evidenced may have actually taken place is immaterial to this conclusion, if only for the reason that it is
by a QUITCLAIM DEED, copy of which is hereto attached as Annex "B" who in turn sold it in not for counsel, after the death of his client, to make such manifestation because he then has
favor of JUDGE ANTONIO SUMALJAG, evidenced by a DEED OF ABSOLUTE SALE, copy of which lost the authority to speak for and bind his client. Thus, at most, the petitioner can be said to
is hereto attached as Annex "C"." be a transferee pendente lite whose status is pending with the lower court.

Further, counsel asked that "the deceased Josefa Maglasang in her capacity as plaintiff and as Lastly, a close examination of the documents attached to the records disclose that the subject
Third Party Counterclaim Defendant be substituted in the case at bar by JUDGE ANTONIO matter of the Quitclaim allegedly executed by Josefa in favor of Remismundo is Lot 1220-E,
SUMALJAG whose address is 38 Osmena Street, Ormoc City" pursuant to "Section 16, Rule 3 of while the subject matter of the deed of sale executed by Remismundo in the petitioner's favor
the 1997 Rules of Civil Procedure". is Lot 1220-D. This circumstance alone raises the possibility that there is more than meets the
eye in the transactions related to this case.
This notification, although filed late, effectively informed the lower court of the death of
litigant Josefa Maglasang so as to free her counsel of any liability for failure to make a report c. The Heirs as Legal Representatives.
of death under Section 16, Rule 3 of the Rules of Court. In our view, counsel satisfactorily
explained to the lower court the circumstances of the late reporting, and the latter in fact The CA correctly harked back to the plain terms of Section 16, Rule 3 in determining who the
granted counsel an extended period. The timeliness of the report is therefore a non-issue. appropriate legal representative/s should be in the absence of an executor or administrator.
The second paragraph of the Section 16, Rule 3 of the 1997 Rules of Court, as amended, is clear
The reporting issue that goes into the core of this case is whether counsel properly gave the - the heirs of the deceased may be allowed to be substituted for the deceased, without
court the name and address of the legal representative of the deceased that Section 16, Rule requiring the appointment of an executor or administrator. Our decisions on this matter have
3 specifies. We rule that he did not. The "legal representatives" that the provision speaks of, been clear and unequivocal. In San Juan, Jr. v. Cruz, this Court held:
refer to those authorized by law - the administrator, executor or guardian19 who, under the
rule on settlement of estate of deceased persons,20 is constituted to take over the estate of The pronouncement of this Court in Lawas v. Court of Appeals x x x that priority is given to the
the deceased. Section 16, Rule 3 likewise expressly provides that "the heirs of the dec