[G.R. No. 138497.
January 16, 2002] It was further alleged that defendant Lopez and petitioner Relucio,
IMELDA RELUCIO, petitioner, vs.
ANGELINA MEJIA LOPEZ, respondent.
The Case
The case is a petition for review on certiorari[1] seeking to set
aside the decision[2] of the Court of Appeals that denied a petition
for certiorari assailing the trial courts order denying petitioners
motion to dismiss the case against her inclusion as party defendant
therein.
The Facts
The facts, as found by the Court of Appeals, are as follows:
On September 15, 1993, herein private respondent Angelina Mejia
Lopez (plaintiff below) filed a petition for APPOINTMENT AS SOLE
ADMINISTRATRIX OF CONJUGAL PARTNERSHIP OF
PROPERTIES, FORFEITURE, ETC., against defendant Alberto Lopez
and petitioner Imelda Relucio, docketed as Spec. Proc. M-3630, in the
Regional Trial Court of Makati, Branch 141. In the petition, private-
respondent alleged that sometime in 1968, defendant Lopez, who is
legally married to the private respondent, abandoned the latter and
their four legitimate children; that he arrogated unto himself full and
exclusive control and administration of the conjugal properties,
spending and using the same for his sole gain and benefit to the total
exclusion of the private respondent and their four children; that
defendant Lopez, after abandoning his family, maintained an illicit
relationship and cohabited with herein petitioner since 1976.
during their period of cohabitation since 1976, have amassed a
fortune consisting mainly of stockholdings in Lopez-owned or
controlled corporations, residential, agricultural, commercial lots,
houses, apartments and buildings, cars and other motor vehicles,
bank accounts and jewelry. These properties, which are in the names
of defendant Lopez and petitioner Relucio singly or jointly or their
dummies and proxies, have been acquired principally if not solely
through the actual contribution of money, property and industry of
defendant Lopez with minimal, if not nil, actual contribution from
petitioner Relucio.
In order to avoid defendant Lopez obligations as a father and
husband, he excluded the private respondent and their four children
from sharing or benefiting from the conjugal properties and the
income or fruits there from. As such, defendant Lopez either did not
place them in his name or otherwise removed, transferred, stashed
away or concealed them from the private-respondent. He placed
substantial portions of these conjugal properties in the name of
petitioner Relucio.
It was also averred that in the past twenty five years since defendant
Lopez abandoned the private-respondent, he has sold, disposed of,
alienated, transferred, assigned, canceled, removed or stashed away
properties, assets and income belonging to the conjugal partnership
with the private-respondent and either spent the proceeds thereof
for his sole benefit and that of petitioner Relucio and their two
illegitimate children or permanently and fraudulently placed them
beyond the reach of the private-respondent and their four children.
On December 8, 1993, a Motion to Dismiss the Petition was filed by
herein petitioner on the ground that private respondent has no cause
of action against her.
An Order dated February 10, 1994 was issued by herein respondent
Judge denying petitioner Relucios Motion to Dismiss on the ground
that she is impleaded as a necessary or indispensable party because
some of the subject properties are registered in her name and
defendant Lopez, or solely in her name.
Subsequently thereafter, petitioner Relucio filed a Motion for
Reconsideration to the Order of the respondent Judge
dated February 10, 1994 but the same was likewise denied in the
Order dated May 31, 1994.[3]
On June 21, 1994, petitioner filed with the Court of Appeals a
petition for certiorari assailing the trial courts denial of her motion to
dismiss.[4]
On May 31, 1996, the Court of Appeals promulgated a decision
denying the petition.[5] On June 26, 1996, petitioner filed a motion for
reconsideration.[6] However, on April 6, 1999, the Court of Appeals
denied petitioners motion for reconsideration.[7]
Hence, this appeal.[8]
The Issues
1. Whether respondents petition for appointment as sole
administratrix of the conjugal property, accounting, etc.
against her husband Alberto J. Lopez established a
cause of action against petitioner.
2. Whether petitioners inclusion as party defendant is
essential in the proceedings for a complete adjudication
of the controversy.[9]
The Courts Ruling
We grant the petition. We resolve the issues in seriatim.
First issue: whether a cause of action exists against petitioner in
the proceedings below. A cause of action is an act or omission of one
party the defendant in violation of the legal right of the other.[10] The
elements of a cause of action are:
(1) a right in favor of the plaintiff by whatever means and
under whatever law it arises or is created;
(2) an obligation on the part of the named defendant to
respect or not to violate such right; and
(3) an act or omission on the part of such defendant in
violation of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff
for which the latter may maintain an action for recovery
of damages.[11]
A cause of action is sufficient if a valid judgment may be
rendered thereon if the alleged facts were admitted or proved. [12]
In order to sustain a motion to dismiss for lack of cause of
action, the complaint must show that the claim for relief does not
exist, rather than that a claim has been merely defectively stated or is
ambiguous, indefinite or uncertain.[13]
Hence, to determine the sufficiency of the cause of action
alleged in Special Proceedings M-3630, we assay its allegations.
In Part Two on the Nature of [the] Complaint, respondent
Angelina Mejia Lopez summarized the causes of action alleged in
the complaint below.
The complaint is by an aggrieved wife against her husband.
Nowhere in the allegations does it appear that relief is sought
against petitioner. Respondents causes of action were all against her
husband.
The first cause of action is for judicial appointment of
respondent as administratrix of the conjugal partnership or absolute
community property arising from her marriage to Alberto J.
Lopez. Petitioner is a complete stranger to this cause of
action. Article 128 of the Family Code refers only to spouses, to wit:
If a spouse without just cause abandons the other or fails to comply
with his or her obligations to the family, the aggrieved spouse may
petition the court for receivership, for judicial separation of property,
or for authority to be the sole administrator of the conjugal
partnership property xxx
The administration of the property of the marriage is entirely
between them, to the exclusion of all other persons. Respondent
alleges that Alberto J. Lopez is her husband. Therefore, her first
cause of action is against Alberto J. Lopez. There is no right-duty
relation between petitioner and respondent that can possibly
support a cause of action. In fact, none of the three elements of a
cause of action exists.
The second cause of action is for an accounting by respondent
husband.[14] The accounting of conjugal partnership arises from or is
an incident of marriage.
Petitioner has nothing to do with the marriage between
respondent Alberto J. Lopez. Hence, no cause of action can exist
against petitioner on this ground.
Respondents alternative cause of action is for forfeiture of
Alberto J. Lopez share in the co-owned property acquired during his
illicit relationship and cohabitation with [petitioner] [15] and for the
dissolution of the conjugal partnership of gains between him
[Alberto J. Lopez] and the [respondent].
The third cause of action is essentially for forfeiture of Alberto J.
Lopez share in property co-owned by him and petitioner. It does not
involve the issue of validity of the co-ownership between Alberto J.
Lopez and petitioner. The issue is whether there is basis in law to
forfeit Alberto J. Lopez share, if any there be, in property co-owned
by him with petitioner.
Respondents asserted right to forfeit extends to Alberto J. Lopez
share alone. Failure of Alberto J. Lopez to surrender such share,
assuming the trial court finds in respondents favor, results in a
breach of an obligation to respondent and gives rise to a cause of
action.[16] Such cause of action, however, pertains to Alberto J. Lopez,
not petitioner.
The respondent also sought support. Support cannot be
compelled from a stranger.
The action in Special Proceedings M-3630 is, to use respondent
Angelina M. Lopez own words, one by an aggrieved wife against her
husband.[17] References to petitioner in the common and specific
allegations of fact in the complaint are merely incidental, to set forth
facts and circumstances that prove the causes of action alleged
against Alberto J. Lopez.
Finally, as to the moral damages, respondents claim for moral
damages is against Alberto J. Lopez, not petitioner.
To sustain a cause of action for moral damages, the complaint
must have the character of an action for interference with marital or
family relations under the Civil Code.
A real party in interest is one who stands to be benefited or
injured by the judgment of the suit.[18] In this case, petitioner would
not be affected by any judgment in Special Proceedings M-3630.
If petitioner is not a real party in interest, she cannot be an
indispensable party. An indispensable party is one without whom
there can be no final determination of an action.[19]Petitioners
participation in Special Proceedings M-3630 is not
indispensable. Certainly, the trial court can issue a judgment
ordering Alberto J. Lopez to make an accounting of his conjugal
partnership with respondent, and give support to respondent and
their children, and dissolve Alberto J. Lopez conjugal partnership
with respondent, and forfeit Alberto J. Lopez share in property co-
owned by him and petitioner. Such judgment would be perfectly
valid and enforceable against Alberto J. Lopez.
 Nor can petitioner be a necessary party in Special Proceedings
M-3630. A necessary party as one who is not indispensable but who
ought to be joined as party if complete relief is to be accorded those
already parties, or for a complete determination or settlement of the
claim subject of the action.[20] In the context of her petition in the
lower court, respondent would be accorded complete relief if
Alberto J. Lopez were ordered to account for his alleged conjugal
partnership property with respondent, give support to respondent
and her children, turn over his share in the co-ownership with
petitioner and dissolve his conjugal partnership or absolute
community property with respondent.

The Judgment

WHEREFORE, the Court GRANTS the petition and REVERSES

the decision of the Court of Appeals.[21] The Court DISMISSES
Special Proceedings M-3630 of the Regional Trial Court, Makati,
Branch 141 as against petitioner.
No costs.
SO ORDERED.
G.R. No. 115838 July 18, 2002
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE
CASTRO, petitioners,
vs.
COURT OF APPEALS and FRANCISCO ARTIGO, respondents.
The Case
Before us is a Petition for Review on Certiorari1 seeking to annul the
Decision of the Court of Appeals2 dated May 4, 1994 in CA-G.R. CV
No. 37996, which affirmed in toto the decision3 of the Regional Trial
Court of Quezon City, Branch 80, in Civil Case No. Q-89-2631. The
trial court disposed as follows:
"WHEREFORE, the Court finds defendants Constante and
Corazon Amor de Castro jointly and solidarily liable to
plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorney's fees;
d) To pay the cost of this suit.
Quezon City, Metro Manila, December 20, 1991."
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo ("Artigo" for
brevity) sued petitioners Constante A. De Castro ("Constante" for
brevity) and Corazon A. De Castro ("Corazon" for brevity) to collect
the unpaid balance of his broker's commission from the De
Castros.4 The Court of Appeals summarized the facts in this wise:
"x x x. Appellants5 were co-owners of four (4) lots located at
EDSA corner New York and Denver Streets in Cubao,
Quezon City. In a letter dated January 24, 1984 (Exhibit "A-1,
p. 144, Records), appellee6 was authorized by appellants to
act as real estate broker in the sale of these properties for the
amount of P23,000,000.00, five percent (5%) of which will be
given to the agent as commission. It was appellee who first
found Times Transit Corporation, represented by its
president Mr. Rondaris, as prospective buyer which desired
to buy two (2) lots only, specifically lots 14 and 15.
Eventually, sometime in May of 1985, the sale of lots 14 and
15 was consummated. Appellee received from
appellants P48,893.76 as commission.
It was then that the rift between the contending parties soon
emerged. Appellee apparently felt short changed because
according to him, his total commission should
be P352,500.00 which is five percent (5%) of the agreed price
of P7,050,000.00 paid by Times Transit Corporation to
appellants for the two (2) lots, and that it was he who
introduced the buyer to appellants and unceasingly
facilitated the negotiation which ultimately led to the
consummation of the sale. Hence, he sued below to collect
the balance of P303,606.24 after having received P48,893.76
in advance.1âwphi1.nêt
On the other hand, appellants completely traverse appellee's
claims and essentially argue that appellee is selfishly asking
for more than what he truly deserved as commission to the
prejudice of other agents who were more instrumental in the
consummation of the sale. Although appellants readily
concede that it was appellee who first introduced Times
Transit Corp. to them, appellee was not designated by them
as their exclusive real estate agent but that in fact there were
more or less eighteen (18) others whose collective efforts in
the long run dwarfed those of appellee's, considering that
the first negotiation for the sale where appellee took active
 participation failed and it was these other agents who
successfully brokered in the second negotiation. But despite
this and out of appellants' "pure liberality, beneficence and
magnanimity", appellee nevertheless was given the largest
cut in the commission (P48,893.76), although on the principle
of quantum meruit he would have certainly been entitled to
less. So appellee should not have been heard to complain of
getting only a pittance when he actually got the lion's share
of the commission and worse, he should not have been
allowed to get the entire commission. Furthermore, the
purchase price for the two lots was only P3.6 million as
appearing in the deed of sale and not P7.05 million as
alleged by appellee. Thus, even assuming that appellee is
entitled to the entire commission, he would only be getting
5% of the P3.6 million, or P180,000.00."
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo
to act as agent in the sale of two lots in Cubao, Quezon City. The
handwritten authorization letter signed by Constante clearly
established a contract of agency between Constante and Artigo.
Thus, Artigo sought prospective buyers and found Times Transit
Corporation ("Times Transit" for brevity). Artigo facilitated the
negotiations which eventually led to the sale of the two lots.
Therefore, the Court of Appeals decided that Artigo is entitled to the
5% commission on the purchase price as provided in the contract of
agency.
Second. The Court of Appeals ruled that Artigo's complaint is not
dismissible for failure to implead as indispensable parties the other
co-owners of the two lots. The Court of Appeals explained that it is
not necessary to implead the other co-owners since the action is
exclusively based on a contract of agency between Artigo and
Constante.
Third. The Court of Appeals likewise declared that the trial court did
not err in admitting parol evidence to prove the true amount paid by
Times Transit to the De Castros for the two lots. The Court of
Appeals ruled that evidence aliunde could be presented to prove that
the actual purchase price was P7.05 million and not P3.6 million as
appearing in the deed of sale. Evidence aliunde is admissible
considering that Artigo is not a party, but a mere witness in the deed
of sale between the De Castros and Times Transit. The Court of
Appeals explained that, "the rule that oral evidence is inadmissible
to vary the terms of written instruments is generally applied only in
suits between parties to the instrument and strangers to the contract
are not bound by it." Besides, Artigo was not suing under the deed of
sale, but solely under the contract of agency. Thus, the Court of
Appeals upheld the trial court's finding that the purchase price was
P7.05 million and not P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -
I. NOT ORDERING THE DISMISSAL OF THE
COMPLAINT FOR FAILURE TO IMPLEAD
INDISPENSABLE PARTIES-IN-INTEREST;
II. NOT ORDERING THE DISMISSAL OF THE
COMPLAINT ON THE GROUND THAT ARTIGO'S CLAIM
HAS BEEN EXTINGUISHED BY FULL PAYMENT,
WAIVER, OR ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED
TESTIMONY;
 V. SANCTIONING AN AWARD OF MORAL DAMAGES
AND ATTORNEY'S FEES;
VI. NOT AWARDING THE DE CASTRO'S MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEY'S FEES.
The Court's Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for failure to
implead other co-owners as indispensable parties
The De Castros argue that Artigo's complaint should have been
dismissed for failure to implead all the co-owners of the two lots.
The De Castros claim that Artigo always knew that the two lots were
co-owned by Constante and Corazon with their other siblings Jose
and Carmela whom Constante merely represented. The De Castros
contend that failure to implead such indispensable parties is fatal to
the complaint since Artigo, as agent of all the four co-owners, would
be paid with funds co-owned by the four co-owners.
The De Castros' contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by the
court's action in the litigation, and without whom no final
determination of the case can be had.7 The joinder of indispensable
parties is mandatory and courts cannot proceed without their
presence.8 Whenever it appears to the court in the course of a
proceeding that an indispensable party has not been joined, it is the
duty of the court to stop the trial and order the inclusion of such
party.9
However, the rule on mandatory joinder of indispensable parties is
not applicable to the instant case.
There is no dispute that Constante appointed Artigo in a
handwritten note dated January 24, 1984 to sell the properties of the
De Castros for P23 million at a 5 percent commission. The authority
was on a first come, first serve basis. The authority reads in full:
"24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is authorized as our
real estate broker in connection with the sale of our property
located at Edsa Corner New York & Denver, Cubao, Quezon
City.
Asking price P 23,000,000.00 with 5% commission as agent's
fee.
C.C. de Castro
owner & representing
co-owners
This authority is on a first-come
First serve basis –CAC"
Constante signed the note as owner and as representative of the
other co-owners. Under this note, a contract of agency was clearly
constituted between Constante and Artigo. Whether Constante
appointed Artigo as agent, in Constante's individual or
representative capacity, or both, the De Castros cannot seek the
dismissal of the case for failure to implead the other co-owners as
indispensable parties. The De Castros admit that the other co-
owners are solidarily liable under the contract of agency,10 citing
Article 1915 of the Civil Code, which reads:
 Art. 1915. If two or more persons have appointed an agent
for a common transaction or undertaking, they shall be
solidarily liable to the agent for all the consequences of the
agency.
The solidary liability of the four co-owners, however, militates
against the De Castros' theory that the other co-owners should be
impleaded as indispensable parties. A noted commentator explained
Article 1915 thus –
"The rule in this article applies even when the appointments
were made by the principals in separate acts, provided that
they are for the same transaction. The solidarity arises from
the common interest of the principals, and not from the act
of constituting the agency. By virtue of this solidarity, the
agent can recover from any principal the whole
compensation and indemnity owing to him by the
others. The parties, however, may, by express agreement,
negate this solidary responsibility. The solidarity does not
disappear by the mere partition effected by the principals
after the accomplishment of the agency.
If the undertaking is one in which several are interested, but
only some create the agency, only the latter are solidarily
liable, without prejudice to the effects of negotiorum
gestio with respect to the others. And if the power granted
includes various transactions some of which are common
and others are not, only those interested in each transaction
shall be liable for it."11
When the law expressly provides for solidarity of the obligation, as
in the liability of co-principals in a contract of agency, each obligor
may be compelled to pay the entire obligation.12 The agent may
recover the whole compensation from any one of the co-principals,
as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor may
sue any of the solidary debtors. This article reads:
Art. 1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously. The
demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the
others, so long as the debt has not been fully collected.
Thus, the Court has ruled in Operators Incorporated vs. American
Biscuit Co., Inc.13 that –
"x x x 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
against anyone of the solidary debtors or some or all of them
simultaneously'." (Emphasis supplied)
Second Issue: whether Artigo's claim has been extinguished by full
payment, waiver or abandonment
The De Castros claim that Artigo was fully paid on June 14, 1985,
that is, Artigo was given "his proportionate share and no longer
entitled to any balance." According to them, Artigo was just one of
the agents involved in the sale and entitled to a "proportionate share"
in the commission. They assert that Artigo did absolutely nothing
during the second negotiation but to sign as a witness in the deed of
sale. He did not even prepare the documents for the transaction as
an active real estate broker usually does.
The De Castros' arguments are flimsy.
A contract of agency which is not contrary to law, public order,
public policy, morals or good custom is a valid contract, and
constitutes the law between the parties.14 The contract of agency
entered into by Constante with Artigo is the law between them and
both are bound to comply with its terms and conditions in good
faith.
The mere fact that "other agents" intervened in the consummation of
the sale and were paid their respective commissions cannot vary the
terms of the contract of agency granting Artigo a 5 percent
commission based on the selling price. These "other agents" turned
out to be employees of Times Transit, the buyer Artigo introduced to
the De Castros. This prompted the trial court to observe:
"The alleged `second group' of agents came into the picture
only during the so-called `second negotiation' and it is
amusing to note that these (sic) second group, prominent
among whom are Atty. Del Castillo and Ms. Prudencio,
happened to be employees of Times Transit, the buyer of the
properties. And their efforts were limited to convincing
Constante to 'part away' with the properties because the
redemption period of the foreclosed properties is around the
corner, so to speak. (tsn. June 6, 1991).
xxx
To accept Constante's version of the story is to open the
floodgates of fraud and deceit. A seller could always pretend
rejection of the offer and wait for sometime for others to
renew it who are much willing to accept a commission far
less than the original broker. The immorality in the instant
case easily presents itself if one has to consider that the
alleged `second group' are the employees of the buyer, Times
Transit and they have not bettered the offer secured by Mr.
Artigo for P7 million.
It is to be noted also that while Constante was too particular
about the unrenewed real estate broker's license of Mr.
Artigo, he did not bother at all to inquire as to the licenses of
Prudencio and Castillo. (tsn, April 11, 1991, pp. 39-
40)."15 (Emphasis supplied)
In any event, we find that the 5 percent real estate broker's
commission is reasonable and within the standard practice in the
real estate industry for transactions of this nature.
The De Castros also contend that Artigo's inaction as well as failure
to protest estops him from recovering more than what was actually
paid him. The De Castros cite Article 1235 of the Civil Code which
reads:
Art. 1235. When the obligee accepts the performance,
knowing its incompleteness and irregularity, and without
expressing any protest or objection, the obligation is deemed
fully complied with.
The De Castros' reliance on Article 1235 of the Civil Code is
misplaced. Artigo's acceptance of partial payment of his commission
neither amounts to a waiver of the balance nor puts him in estoppel.
This is the import of Article 1235 which was explained in this wise:
"The word accept, as used in Article 1235 of the Civil Code,
means to take as satisfactory or sufficient, or agree to an
incomplete or irregular performance. Hence, the mere receipt
of a partial payment is not equivalent to the required
acceptance of performance as would extinguish the whole
obligation."16(Emphasis supplied)
There is thus a clear distinction between acceptance and
mere receipt. In this case, it is evident that Artigo merely received
the partial payment without waiving the balance. Thus, there is no
estoppel to speak of.
The De Castros further argue that laches should apply because
Artigo did not file his complaint in court until May 29, 1989, or
almost four years later. Hence, Artigo's claim for the balance of his
commission is barred by laches.
Laches means the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due
diligence 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 to assert it either has abandoned
it or declined to assert it.17
Artigo disputes the claim that he neglected to assert his rights. He
was appointed as agent on January 24, 1984. The two lots were
finally sold in June 1985. As found by the trial court, Artigo
demanded in April and July of 1985 the payment of his commission
by Constante on the basis of the selling price of P7.05 million but
there was no response from Constante.18 After it became clear that
his demands for payment have fallen on deaf ears, Artigo decided to
sue on May 29, 1989.
Actions upon a written contract, such as a contract of agency, must
be brought within ten years from the time the right of action
accrues.19 The right of action accrues from the moment the breach of
right or duty occurs. From this moment, the creditor can institute the
action even as the ten-year prescriptive period begins to run.20
The De Castros admit that Artigo's claim was filed within the ten-
year prescriptive period. The De Castros, however, still maintain that
Artigo's cause of action is barred by laches. Laches does not apply
because only four years had lapsed from the time of the sale in June
1985. Artigo made a demand in July 1985 and filed the action in
court on May 29, 1989, well within the ten-year prescriptive period.
This does not constitute an unreasonable delay in asserting one's
right. The Court has ruled, "a delay within the prescriptive period is
sanctioned by law and is not considered to be a delay that would
bar relief."21 In explaining that laches applies only in the absence of a
statutory prescriptive period, the Court has stated -
"Laches is recourse in equity. Equity, however, is applied
only in the absence, never in contravention, of statutory
law. Thus, laches, cannot, as a rule, be used to abate a
collection suit filed within the prescriptive period mandated
by the Civil Code."22
Clearly, the De Castros' defense of laches finds no support in law,
equity or jurisprudence.
Third issue: whether the determination of the purchase price was
made in violation of the Rules on Evidence
The De Castros want the Court to re-examine the probative value of
the evidence adduced in the trial court to determine whether the
actual selling price of the two lots was P7.05 million and not P3.6
million. The De Castros contend that it is erroneous to base the 5
percent commission on a purchase price of P7.05 million as ordered
by the trial court and the appellate court. The De Castros insist that
the purchase price is P3.6 million as expressly stated in the deed of
sale, the due execution and authenticity of which was admitted
during the trial.
The De Castros believe that the trial and appellate courts committed
a mistake in considering incompetent evidence and disregarding the
best evidence and parole evidence rules. They claim that the Court of
Appeals erroneously affirmed sub silentio the trial court's reliance on
the various correspondences between Constante and Times Transit
which were mere photocopies that do not satisfy the best evidence
rule. Further, these letters covered only the first negotiations
between Constante and Times Transit which failed; hence, these are
immaterial in determining the final purchase price.
The De Castros further argue that if there was an undervaluation,
Artigo who signed as witness benefited therefrom, and being equally
guilty, should be left where he presently stands. They likewise claim
that the Court of Appeals erred in relying on evidence which were
not offered for the purpose considered by the trial court. Specifically,
Exhibits "B", "C", "D" and "E" were not offered to prove that the
purchase price was P7.05 Million. Finally, they argue that the
courts a quo erred in giving credence to the perjured testimony of
Artigo. They want the entire testimony of Artigo rejected as a
falsehood because he was lying when he claimed at the outset that
he was a licensed real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as found by the
trial court and affirmed by the Court of Appeals, or P3.6 Million as
claimed by the De Castros, is a question of fact and not of law.
Inevitably, this calls for an inquiry into the facts and evidence on
record. This we can not do.
It is not the function of this Court to re-examine the evidence
submitted by the parties, or analyze or weigh the evidence
again.23 This Court is not the proper venue to consider a factual issue
as it is not a trier of facts. In petitions for review on certiorari as a
mode of appeal under Rule 45, a petitioner can only raise questions
of law. Our pronouncement in the case of Cormero vs. Court of
Appeals24 bears reiteration:
"At the outset, it is evident from the errors assigned that the
petition is anchored on a plea to review the factual
conclusion reached by the respondent court. Such task
however is foreclosed by the rule that in petitions for
certiorari as a mode of appeal, like this one, only questions
of law distinctly set forth may be raised. These questions
have been defined as those that do not call for any
examination of the probative value of the evidence
presented by the parties. (Uniland Resources vs.
Development Bank of the Philippines, 200 SCRA 751 [1991]
citing Goduco vs. Court of appeals, et al., 119 Phil. 531;
Hernandez vs. Court of Appeals, 149 SCRA 67). And when
this court is asked to go over the proof presented by the
parties, and analyze, assess and weigh them to ascertain if
the trial court and the appellate court were correct in
according superior credit to this or that piece of evidence
and eventually, to the totality of the evidence of one party or
the other, the court cannot and will not do the same. (Elayda
vs. Court of Appeals, 199 SCRA 349 [1991]). Thus, in the
absence of any showing that the findings complained of are
totally devoid of support in the record, or that they are so
glaringly erroneous as to constitute serious abuse of
discretion, such findings must stand, for this court is not
expected or required to examine or contrast the oral and
documentary evidence submitted by the parties. (Morales
vs. Court of Appeals, 197 SCRA 391 [1991] citing Santa Ana
vs. Hernandez, 18 SCRA 973 [1966])."
We find no reason to depart from this principle. The trial and
appellate courts are in a much better position to evaluate properly
the evidence. Hence, we find no other recourse but to affirm their
finding on the actual purchase price.1âwphi1.nêt
Fourth Issue: whether award of moral damages and attorney's fees
is proper
The De Castros claim that Artigo failed to prove that he is entitled to
moral damages and attorney's fees. The De Castros, however, cite no
concrete reason except to say that they are the ones entitled to
damages since the case was filed to harass and extort money from
them.
Law and jurisprudence support the award of moral damages and
attorney's fees in favor of Artigo. The award of damages and
attorney's fees is left to the sound discretion of the court, and if such
discretion is well exercised, as in this case, it will not be disturbed on
appeal.25 Moral damages may be awarded when in a breach of
contract the defendant acted in bad faith, or in wanton disregard of his
contractual obligation.26 On the other hand, attorney's fees are
awarded in instances where "the defendant acted in gross and
evident bad faith in refusing to satisfy the plaintiff's plainly valid,
just and demandable claim."27 There is no reason to disturb the trial
court's finding that "the defendants' lack of good faith and unkind
treatment of the plaintiff in refusing to give his due commission
deserve censure." This warrants the award of P25,000.00 in moral
damages and P 45,000.00 in attorney's fees. The amounts are, in our
view, fair and reasonable. Having found a buyer for the two lots,
Artigo had already performed his part of the bargain under the
contract of agency. The De Castros should have exercised fairness
and good judgment in dealing with Artigo by fulfilling their own
part of the bargain - paying Artigo his 5 percent broker's commission
based on the actual purchase price of the two lots.
WHEREFORE, the petition is denied for lack of merit. The Decision
of the Court of Appeals dated May 4, 1994 in CA-G.R. CV No. 37996
is AFFIRMED in toto.
SO ORDERED.
CASE DIGEST:
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE
CASTRO, petitioners,
vs.
COURT OF APPEALS and FRANCISCO ARTIGO, respondents.
The Antecedent Facts
Appellants were co-owners of four (4) lots. In a letter, appellee was
authorized by appellants to act as real estate broker in the sale of
these properties, five percent (5%) of which will be given to the agent
as commission. It was appellee who first found Times Transit
Corporation as prospective buyer which desired to buy two (2) lots
only. Eventually, the sale of lots was consummated. Appellee
received from appellants P48,893.76 as commission.
Appellee apparently felt short changed because according to him, his
total commission should be P352,500.00 which is five percent (5%)
of the agreed price paid by Times Transit Corporation to appellants.
Hence, he sued to collect the balance of P303,606.24 after having
received P48,893.76 in advance.1âwphi1.nêt
The Court of Appeals found that Constante authorized Artigo to act
as agent in the sale of two lots. The handwritten authorization letter
clearly established a contract of agency between Constante and
Artigo. Therefore, the Court of Appeals decided that Artigo is entitled
to the 5% commission on the purchase price as provided in the
contract of agency. The Court of Appeals likewise ruled that Artigo's
complaint is not dismissible for failure to implead as indispensable
parties the other co-owners of the two lots. The Court of Appeals
explained that it is not necessary to implead the other co-owners
since the action is exclusively based on a contract of agency
between Artigo and Constante.
The Issue
WHETHER OR NOT THE COMPLAINT MAY BE DISMISSED FOR
FAILURE TO IMPLEAD INDISPENSABLE PARTIES-IN-INTEREST;
The Court's Ruling
The De Castros' contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by the
court's action in the litigation, and without whom no final
determination of the case can be had. The joinder of indispensable
parties is mandatory and courts cannot proceed without their
presence. Whenever it appears to the court in the course of a
proceeding that an indispensable party has not been joined, it is the
duty of the court to stop the trial and order the inclusion of such
party.However, the rule on mandatory joinder of indispensable
parties is not applicable to the instant case.
There is no dispute that Constante appointed Artigo in a handwritten
note to sell the properties of the De Castros at a 5 percent
commission. Constante signed the note as owner and as
representative of the other co-owners. Under this note, a contract of
agency was clearly constituted between Constante and Artigo.
Whether Constante appointed Artigo as agent, in Constante's
individual or representative capacity, or both, the De Castros cannot
seek the dismissal of the case for failure to implead the other co-
owners as indispensable parties. The De Castros admit that the
other co-owners are solidarily liable under the contract of
agency, the solidary liability of the four co-owners, however,
militates against the De Castros' theory that the other co-owners
should be impleaded as indispensable parties.

When the law expressly provides for solidarity of the obligation, as in

the liability of co-principals in a contract of agency, each obligor may
be compelled to pay the entire obligation. The agent may recover the
whole compensation from any one of the co-principals, as in this
case. Indeed, Article 1216 of the Civil Code provides that a creditor
may sue any of the solidary debtors.

Thus, the Court has ruled in Operators Incorporated vs. American

Biscuit Co., Inc.that –"x x x 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
against anyone of the solidary debtors or some or all of them
simultaneously'."
[G.R. No. 141463. August 6, 2002]
VICTOR ORQUIOLA and HONORATA ORQUIOLA, petitioners,
vs. HON. COURT OF APPEALS, HON. VIVENCIO S.
BACLIG, Presiding Judge, Regional Trial Court, Branch 77,
Quezon City, THE SHERIFF OF QUEZON CITY and
HIS/HER DEPUTIES and PURA KALAW LEDESMA,
substituted by TANDANG SORA DEVELOPMENT
CORPORATION, respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the decision[1] of
the Court of Appeals dated January 28, 1999 in CA-G.R. SP No.
47422, which dismissed the petition to prohibit Judge Vivencio
Baclig of the Regional Trial Court of Quezon City, Branch 77, from
issuing a writ of demolition against petitioners, and the sheriff and
deputy sheriff of the same court from implementing an alias writ of
execution. Also assailed is the resolution[2] of the Court of Appeals
dated December 29, 1999 which denied petitioners motion for
reconsideration.
The facts are as follows:
Pura Kalaw Ledesma was the registered owner of Lot 689,
covered by TCT Nos. 111267 and 111266, in Tandang Sora, Quezon
City. This parcel of land was adjacent to certain portions of Lot 707
of the Piedad Estates, namely, Lot 707-A and 707-B, registered in the
name of Herminigilda Pedro under TCT Nos. 16951 and 16952,
respectively. On October 29, 1964, Herminigilda sold Lot 707-A and
707-B to Mariano Lising who then registered both lots and Lot 707-C
in the name of M.B. Lising Realty and subdivided them into smaller
lots.
Certain portions of the subdivided lots were sold to third
persons including herein petitioners, spouses Victor and Honorata
Orquiola, who purchased a portion of Lot 707-A-2, Lot 5, Block 1 of
the subdivision plan (LRC), Psd-42965. The parcel is now #33 Doa
Regina St., Regina Village, Tandang Sora, Quezon City. The other
portions were registered in the name of the heirs of Pedro, heirs of
Lising, and other third persons.
Sometime in 1969, Pura Kalaw Ledesma filed a complaint,
docketed as Civil Case No. Q-12918, with the Regional Trial Court of
Quezon City against Herminigilda Pedro and Mariano Lising for
allegedly encroaching upon Lot 689. During the pendency of the
action, Tandang Sora Development Corporation replaced Pura
Kalaw Ledesma as plaintiff by virtue of an assignment of Lot 689
made by Ledesma in favor of said corporation. Trial continued for
three decades.
On August 21, 1991, the trial court finally adjudged defendants
Pedro and Lising jointly and severally liable for encroaching on
plaintiffs land and ordered them:
(a) to solidarily pay the plaintiff Tandang Sora Dev. Corp. actual
damages in the amount of P20,000 with interest from date of filing of
the complaint;
(b) to remove all construction, including barbed wires and fences,
illegally constructed by defendants on plaintiffs property at
defendants expense;
(c) to replace the removed concrete monuments removed by
defendants, at their own expense;
(d) to pay attorneys fees in the amount of FIVE THOUSAND PESOS
(P5,000.00) with interest computed from the date of filing of the
complaint;
(e) to relocate the boundaries to conform with the Commissioners
Report, particularly, Annexes A and B thereof, at the expense of the
defendants.[3]
 As a result, in February 1998, the Deputy Sheriff of Quezon City
directed petitioners, through an alias writ of execution, to remove the
house they constructed on the land they were occupying.
On April 2, 1998, petitioners received a Special Order dated
March 30, 1998, from the trial court stating as follows:
Before the Court for resolution is the Ex-Parte Motion For The
Issuance of A Writ of Demolition, filed by plaintiff, through counsel,
praying for the issuance of an Order directing the Deputy Sheriff to
cause the removal and/or demolition of the structures on the
plaintiffs property constructed by defendants and/or the present
occupants. The defendants-heirs of Herminigilda Pedro filed their
comment on the said Motion.
Considering that the decision rendered in the instant case had
become final and executory, the Court, in its Order of November 14,
1997, directed the issuance of an alias writ of execution for the
enforcement of the said decision. However, despite the service of the
said writ to all the defendants and the present occupants of the
subject property, they failed to comply therewith, as per the Partial
Sheriffs Return, dated February 9, 1998, issued by the Deputy Sheriff
of this branch of the Court. Thus, there is now a need to demolish the
structures in order to implement the said decision.
WHEREFORE, the defendants are hereby directed to remove, at their
expense, all constructions, including barbed wires and fences, which
defendants constructed on plaintiffs property, within fifteen (15)
days from notice of this Order; otherwise, this Court will issue a writ
of demolition against them.
SO ORDERED.[4]
To prohibit Judge Vivencio Baclig of the Regional Trial Court of
Quezon City from issuing a writ of demolition and the Quezon City
sheriff from implementing the alias writ of execution, petitioners
filed with the Court of Appeals a petition for prohibition with prayer
for a restraining order and preliminary injunction on April 17,
1998.[5] Petitioners alleged that they bought the subject parcel of land
in good faith and for value, hence, they were parties in interest. Since
they were not impleaded in Civil Case No. Q-12918, the writ of
demolition issued in connection therewith cannot be enforced
against them because to do so would amount to deprivation of
property without due process of law.
The Court of Appeals dismissed the petition on January 28,
1999. It held that as buyers and successors-in-interest of Mariano
Lising, petitioners were considered privies who derived their rights
from Lising by virtue of the sale and could be reached by the
execution order in Civil Case No. Q-12918. Thus, for lack of merit,
the petition was ordered dismissed.[6]
Petitioners motion for reconsideration was denied. Hence, this
petition, where petitioners aver that:
I.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT THE DECISION IN CIVIL CASE NO. Q-12918 CAN ALSO BE
ENFORCED AGAINST THE PETITIONERS EVEN IF THEY WERE
NOT IMPLEADED AS PARTIES THERETO.
II.
THE HONORABLE COURT OF APPEALS ERRED IN NOT
UPHOLDING PETITIONERS TITLE DESPITE THEIR BEING
BUILDER IN GOOD FAITH AND INNOCENT PURCHASER AND
FOR VALUE.
III.
PETITIONERS ARE ENTITLED TO INJUNCTIVE RELIEF
CONSIDERING THAT THEY STAND TO SUFFER GRAVE AND
IRREPARABLE INJURY IF ALIAS WRIT OF EXECUTION AND
THE SPECIAL ORDER ISSUED BY THE COURT A QUO IN CIVIL
CASE NO. Q-12918 FOR THE DEMOLITION OF ALL THE
STRUCTURES ON THE DISPUTED PROPERTY WERE ENFORCED
AGAINST THE PETITIONERS WHO WERE NOT EVEN GIVEN
THEIR DAY IN COURT.[7]
For our resolution are the following issues: (1) whether
the alias writ of execution may be enforced against petitioners; and
(2) whether petitioners were innocent purchasers for value and
builders in good faith.
On the first issue, petitioners claim that the alias writ of
execution cannot be enforced against them. They argue that the
appellate court erred when it relied heavily on our ruling in Vda. de
Medina vs. Cruz[8] in holding that petitioners are successors-in-
interest of Mariano Lising, and as such, they can be reached by the
order of execution in Civil Case No. Q-12918 even though they were
not impleaded as parties thereto. Petitioners submit that Medina is
not applicable in this case because the circumstances therein are
different from the circumstances in the present case.
In Medina, the property in dispute was registered under Land
Registration Act No. 496 in 1916 and Original Certificate of Title No.
868 was issued in the name of Philippine Realty Corporation
(PRC). In 1949, Benedicta Mangahas and Francisco Ramos occupied
and built houses on the lot without the PRCs consent. In 1959, PRC
sold the lot to Remedios Magbanua.Mangahas and Ramos opposed
and instituted Civil Case No. C-120 to annul the sale and to compel
PRC to execute a contract of sale in their favor. The trial court
dismissed the complaint and ordered Mangahas and Ramos to
vacate the lot and surrender possession thereof to Magbanua. The
judgment became final and executory. When Magbanua had paid for
the land in full, PRC executed a deed of absolute sale in her favor
and a new title was consequently issued in her name. Magbanua
then sought the execution of the judgment in Civil Case No. C-
120.This was opposed by petitioner Medina who alleged that she
owned the houses and lot subject of the dispute. She said that she
bought the houses from spouses Ricardo and Eufrocinia de Guzman,
while she purchased the lot from the heirs of the late Don Mariano
San Pedro y Esteban. The latter held the land by virtue of a Titulo de
Composicion Con El Estado Num. 4136, dated April 29, 1894. In
opposing the execution, Medina argued that the trial court did not
acquire jurisdiction over her, claiming that she was not a party in
Civil Case No. C-120, thus, she could not be considered as a person
claiming under Ramos and Mangahas.
When Medina reached this Court, we held that the decision in
Civil Case No. C-120, which had long become final and executory,
could be enforced against petitioner even though she was not a party
thereto. We found that the houses on the subject lot were formerly
owned by Mangahas and Ramos who sold them to spouses de
Guzman, who in turn sold them to Medina. Under the
circumstances, petitioner was privy to the two judgment debtors
Mangahas and Ramos, and thus Medina could be reached by the
order of execution and writ of demolition issued against the two. As
to the lot under dispute, we sustained Magbanuas ownership over it,
she being the holder of a Torrens title. We declared that a Torrens
title is generally conclusive evidence of ownership of the land
referred to therein, and a strong presumption exists that a Torrens
title was regularly issued and valid. A Torrens title is
incontrovertible against any informacion possessoria, or other title
existing prior to the issuance thereof not annotated on the Torrens
title. Moreover, persons dealing with property covered by a Torrens
certificate of title are not required to go beyond what appears on its
face.
Medina markedly differs from the present case on major
points. First, the petitioner in Medina acquired the right over the
houses and lot subject of the dispute after the original action was
commenced and became final and executory. In the present case,
petitioners acquired the lot before the commencement of Civil Case
No. Q-12918. Second, the right over the disputed land of the
predecessors-in-interest of the petitioner in Medina was based on a
title of doubtful authenticity, allegedly a Titulo de Composicion Con El
Estado issued by the Spanish Government in favor of one Don
Mariano San Pedro y Esteban, while the right over the land of the
predecessors-in-interest of herein petitioners is based on a fully
recognized Torrens title.Third, petitioners in this case acquired the
registered title in their own names, while the petitioner
in Medina merely relied on the title of her predecessor-in-interest and
tax declarations to prove her alleged ownership of the land.
We must stress that where a case like the present one involves a
sale of a parcel of land under the Torrens system, the applicable rule
is that a person dealing with the registered property need not go
beyond the certificate of title; he can rely solely on the title and he is
charged with notice only of such burdens and claims as are
annotated on the title.[9] It is our view here that the petitioners,
spouses Victor and Honorata Orquiola, are fully entitled to the legal
protection of their lot by the Torrens system, unlike the petitioner in
the Medina case who merely relied on a mere Titulo de Composicion.
Coming now to the second issue, were petitioners purchasers in
good faith and for value? A buyer in good faith is one who buys the
property of another without notice that some other person has a
right to or interest in such property. He is a buyer for value if he
pays a full and fair price at the time of the purchase or before he has
notice of the claim or interest of some other person in the
property.[10] The determination of whether one is a buyer in good
faith is a factual issue which generally is outside the province of this
Court to determine in a petition for review. An exception is when the
Court of Appeals failed to take into account certain relevant facts
which, if properly considered, would justify a different
conclusion.[11] The instant case is covered by this exception to the
general rule. As found by the Court of Appeals and not refuted by
private respondent, petitioners purchased the subject land in 1964
from Mariano Lising.[12]Civil Case No. Q-12918 was commenced
sometime in 1969. The Court of Appeals overlooked the fact that the
purchase of the land took place prior to the institution of Civil Case
No. Q-12918. In other words, the sale to petitioners was made before
Pura Kalaw Ledesma claimed the lot. Petitioners could reasonably
rely on Mariano Lisings Certificate of Title which at the time of
purchase was still free from any third party claim. Hence,
considering the circumstances of this case, we conclude that
petitioners acquired the land subject of this dispute in good faith and
for value.
The final question now is: could we consider petitioners
builders in good faith? We note that this is the first time that
petitioners have raised this issue. As a general rule, this could not be
done. Fair play, justice, and due process dictate that parties should
not raise for the first time on appeal issues that they could have
raised but never did during trial and even during proceedings before
the Court of Appeals.[13] Nevertheless, we deem it proper that this
issue be resolved now, to avoid circuitous litigation and further
delay in the disposition of this case. On this score, we find that
petitioners are indeed builders in good faith.
A builder in good faith is one who builds with the belief that the
land he is building on is his, and is ignorant of any defect or flaw in
his title.[14] As earlier discussed, petitioner spouses acquired the land
in question without knowledge of any defect in the title of Mariano
Lising. Shortly afterwards, they built their conjugal home on said
land. It was only in 1998, when the sheriff of Quezon City tried to
execute the judgment in Civil Case No. Q-12918, that they had notice
of private respondents adverse claim. The institution of Civil Case
No. Q-12918 cannot serve as notice of such adverse claim to
petitioners since they were not impleaded therein as parties.
As builders in good faith and innocent purchasers for value,
petitioners have rights over the subject property and hence they are
proper parties in interest in any case thereon.[15]Consequently,
private respondents should have impleaded them in Civil Case No.
Q-12918. Since they failed to do so, petitioners cannot be reached by
the decision in said case. No man shall be affected by any proceeding
to which he is a stranger, and strangers to a case are not bound by
any judgment rendered by the court. In the same manner, a writ of
execution can be issued only against a party and not against one who
did not have his day in court. Only real parties in interest in an
action are bound by the judgment therein and by writs of execution
and demolition issued pursuant thereto.[16] In our view, the spouses
Victor and Honorata Orquiola have valid and meritorious cause to
resist the demolition of their house on their own titled lot, which is
tantamount to a deprivation of property without due process of law.
WHEREFORE, the petition is GRANTED. The decision of the
Court of Appeals dated January 28, 1999, and its resolution dated
December 29, 1999, in CA-G.R. SP No. 47422, are REVERSED and
SET ASIDE. Respondents are hereby enjoined from enforcing the
decision in Civil Case No. Q-12918 through a writ of execution and
order of demolition issued against petitioners. Costs against private
respondent.
SO ORDERED.
G.R. No. 135796 October 3, 2002
CHINA BANKING CORPORATION, petitioner,
vs.
MERCEDES M. OLIVER, respondent.
RESOLUTION
QUISUMBING, J.:
This petition for review1 seeks the reversal of the decision dated June
1, 1998, of the Court of Appeals in CA-G.R. SP No. 43836, dismissing
China Banking Corporation’s petition for certiorari to annul the two
orders of the Regional Trial Court of Muntinlupa City, Branch 276,
which earlier denied petitioner’s motion to dismiss and then
declared the bank in default in Civil Case No. 96-219. The appellate
court also denied petitioner’s motion for reconsideration in a
resolution dated September 30, 1998.
The facts of this case are culled from the records.
In August 1995, Pangan Lim, Jr. and a certain Mercedes M. Oliver
opened a joint account in China Banking Corporation (hereinafter
Chinabank) at EDSA Balintawak Branch. Lim introduced Oliver to
the bank’s branch manager as his partner in the rice and palay
trading business. Thereafter, Lim and Oliver applied for a P17
million loan, offering as collateral a 7,782 square meter lot located in
Tunasan, Muntinlupa and covered by TCT No. S-50195 in the name
of Oliver. The bank approved the application. On November 17,
1995, Lim and Oliver executed in favor of Chinabank a promissory
note for P16,650,000, as well as a Real Estate Mortgage on the
property. The mortgage was duly registered and annotated on the
original title under the custody of the Registry of Deeds of Makati
and on the owner’s duplicate copy in the bank’s possession. The
mortgage document showed Mercedes Oliver’s address to be No. 95
Malakas Street, Diliman, Quezon City. For brevity, she is hereafter
referred to as "Oliver One."
On November 18, 1996, respondent claiming that she is Mercedes M.
Oliver with postal office address at No. 40 J.P. Rizal St., San Pedro,
Laguna, filed an action for annulment of mortgage and cancellation
of title with damages against Chinabank, Register of Deeds Atty.
Mila G. Flores, and Deputy Register of Deeds Atty. Ferdinand P.
Ignacio. Respondent, whom we shall call as "Oliver Two," claimed
that she was the registered and lawful owner of the land subject of
the real estate mortgage; that the owner’s duplicate copy of the title
had always been in her possession; and that she did not apply for a
loan or surrender her title to Chinabank.2 She prayed that: (1) the
owner’s duplicate copy surrendered to Chinabank as well as the
original title with the Registry of Deeds be cancelled; (2) the
mortgage be declared null and void; and (3) the Registry of Deeds be
ordered to issue a new and clean title in her name. 3
On January 31, 1997, Chinabank moved to dismiss the case for lack
of cause of action and non-joinder of an indispensable party, the
mortgagor.
On March 13, 1997, Judge Norma C. Perello issued an order denying
the motion to dismiss, stating that:
A reading of the COMPLAINT which of course is hypothetically
admitted, will show that a valid judgment can be rendered against
defendant. Plaintiff having sufficiently averred that defendants
negligently failed to ascertain the genuineness or not (sic) of the title
of the land mortgaged to it upon the claim of ownership by the
mortgagors. Furthermore, the matters alleged in the MOTION TO
DISMISS are all evidentiary which Defendants may substantiate at
the appointed hours.4
On April 7, 1997, Chinabank filed with the Court of Appeals a
petition for certiorari with prayer for the issuance of a writ of
preliminary injunction and/or restraining order to enjoin
enforcement of the March 13, 1997 order and further action on the
case. The Court of Appeals directed respondent Oliver Two to file
her comment and deferred action on the prayer for the issuance of
the preliminary injunction pending submission of the comment.
On June 30, 1997, respondent Oliver Two moved to declare
petitioner Chinabank in default. She pointed out that since petitioner
received the order denying the motion to dismiss on March 21, 1997,
it had only until April 7, 1997 to file its answer to the complaint.
However, until the filing of the motion for default, no answer had
been filed yet. The trial court granted the motion and declared
petitioner in default in its order dated July 17, 1997, thus:
Acting on the Motion To Declare Defendant Bank in Default, and
finding the same to be legally tenable is granted.
Accordingly, the Defendant Bank is declared in default as summons
was served on It as early as December 16, 1996, but until date they
have not filed an Answer nor any responsive pleading and instead, It
filed a Motion to Dismiss, which was denied by this Court on March
13, 1997.
The filing of a CERTIORARI to question the Orders by this Court did
not toll the period for Defendants to answer the complaint.
Therefore, the reglementary period for the filing of responsive
pleading has long expired.
Let the case be submitted for Decision based on the complaint.
It is SO ORDERED.5
Consequently, petitioner Chinabank filed a supplemental petition on
August 11, 1997, seeking annulment of the July 17, 1997 order. It
argued that the special civil action for certiorari filed in the Court of
Appeals interrupted the proceedings before the trial court, thereby
staying the period for filing the answer.
On June 1, 1998, the Court of Appeals promulgated the assailed
decision, finding no grave abuse of discretion committed by the trial
judge in ruling that the Rules of Court provided the manner of
impleading parties to a case and in suggesting that petitioner file an
appropriate action to bring the mortgagor within the court’s
jurisdiction. The appellate court said that Rule 6, Section 11 of the
Rules of Court allows petitioner to file a third-party complaint
against the mortgagor. As to the judgment by default, the Court of
Appeals said that an order denying the motion to dismiss is
interlocutory and may not be questioned through a special civil
action for certiorari. The defendant must proceed with the case and
raise the issues in his motion to dismiss when he appeals to a higher
court. In this case, petitioner Chinabank should have filed its answer
when it received the March 13, 1997 order denying the motion to
dismiss. The special civil action for certiorari with the Court of
Appeals did not interrupt the period to file an answer, there being
no temporary restraining order or writ of preliminary injunction
issued.
The Court of Appeals denied petitioner’s motion for reconsideration.
Hence, this petition anchored on the following grounds:
I
SEC. 11, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE
DOES NOT APPLY WHERE THE PARTY WHO WAS NOT
IMPLEADED IS AN INDISPENSABLE PARTY; INSTEAD,
SECTION 7, RULE 3 THEREOF, APPLIES.
II
THE MORTGAGOR MERCEDES M. OLIVER IS AN
INDISPENSABLE PARTY UNDER SECTION 7, RULE 3, OF THE
1997 RULES OF CIVIL PROCEDURE, AND MUST THEREFORE
INDISPENSABLY BE JOINED AS A PARTY-DEFENDANT.
III
RESPONDENT’S CAUSE OF ACTION IS ANCHORED ON HER
CLAIM AS THE REGISTERED AND LAWFUL OWNER OF THE
PROPERTY IN QUESTION AND THAT HER OWNER’S
DUPLICATE COPY OF THE TITLE (ANNEX "A") IS THE TRUE
AND GENUINE TITLE. THUS, THE ACTION BEFORE THE
HONORABLE COURT-A-QUO IS A LAND DISPUTE BETWEEN
TWO (2) PERSONS CLAIMING OWNERSHIP.
IV
THE ANNULMENT OF THE MORTGAGE AND THE
CANCELLATION OF ANNEXES "B" AND "C" AS PRAYED FOR IN
THE COMPLAINT IN CIVIL CASE NO. 96-219 ARE
INEXTRICABLY INTERTWINED WITH THE ISSUE OF
OWNERSHIP. HENCE, THE LATTER MUST FIRST BE RESOLVED
TO DETERMINE THE FORMER.
V CONCLUSION THAT THE OWNER’S DUPLICATE COPY OF TCT
THE OWNER’S DUPLICATE COPY OF THE TITLE OF
MORTGAGOR MERCEDES M. OLIVER OWNER’S DUPLICATE
COPY CANNOT, IN HER ABSENCE, BE DECLARED NULL AND
VOID. CONSEQUENTLY, INASMUCH AS THE MORTGAGE IN
FAVOR OF PETITIONER IS DEPENDENT UPON THE OWNER’S
DUPLICATE COPY OF THE MORTGAGOR, THE COMPLAINT IN
CIVIL CASE NO. 96-219 CAN NOT RESOLVE THE
CONTROVERSY WITH FINALITY.
VI
THE CASE OF CHURCH OF CHRIST VS. VALLESPIN, G.R. NO.
53726, AUGUST 15, 1988, DOES NOT APPLY INASMUCH AS THE
USE OF TERM "INDISPENSABLE PARTY" IN SAID CASE WAS
LOOSELY USED AND IN TRUTH WAS INTENDED TO MEAN
"PARTIES-IN-INTEREST" AS CONTEMPLATED BY SECTION 2,
RULE 3 OF THE RULES OF COURT.
VII
THE HONORABLE COURT OF APPEALS GRAVELY ERRED
WHEN IT SANCTIONED THE TRIAL COURT’S ERROR IN
DECLARING DEFENDANT CBC IN DEFAULT FOR FAILURE TO
FILE AN ANSWER, NOTWITHSTANDING THE SETTLED
DOCTRINE THAT WHERE AN INDISPENSABLE PARTY IS NOT
IN COURT, THE TRIAL COURT SHOULD NOT PROCEED BUT
INSTEAD SHOULD DISMISS THE CASE.
VIII
THE DISMISSAL/WITHDRAWAL OF THE COMPLAINT
AGAINST DEFENDANTS REGISTER AND DEPUTY REGISTER OF
DEEDS NECESSARILY GIVE RISE TO, AND BOLSTERS, THE
NO. S-50195 OF MORTGAGOR MERCEDES M. OLIVER IS THE
GENUINE AND AUTHENTIC COPY.6
For a clearer discussion of the issues in this controversy, we may
state them as follows:
1. Is the mortgagor who goes by the name of Mercedes M.
Oliver, herein called Oliver One, an indispensable party in
Civil Case No. 96219?
2. Should Section 7 Rule 3 of the 1997 Rules of Civil
Procedure7 apply in this case?
 3. Did the Court of Appeals err when it sustained the trial
court’s declaration that petitioner was in default?
4. Were the withdrawal and consequent dismissal of the
complaint against the Registry of Deeds’ officials indicative
of the authenticity of mortgagor Oliver One’s copy of TCT
No. S-50195?
Petitioner Chinabank alleges that there are two owner’s duplicate
copies of TCT No. S-50195 involved in this case and two persons
claiming to be the real "MERCEDES MARAVILLA OLIVER." One is
the mortgagor, Oliver One. The other is the respondent, Oliver Two.
Respondent’s complaint before the trial court was one for
cancellation of the transfer certificate of title in petitioner’s
possession (Annex B). According to petitioner, the issue below is the
genuineness of the titles, which is intertwined with the issue of
ownership. This being the case, said the petitioner, the mortgagor
Oliver One must necessarily be impleaded for she is the registered
owner under Annex "B." Petitioner argues that mortgagor Oliver
One is in a better position to defend her title. She stands to suffer if it
is declared fake. Further, petitioner claims that the validity and
enforceability of the mortgage entirely depends on the validity and
authenticity of Annex "B." The mortgage cannot be declared a nullity
without the trial court declaring Annex "B" a nullity. Hence,
mortgagor Oliver One’s participation in the suit is indispensable,
according to petitioner. In brief, what petitioner Chinabank is saying
is that it was indispensable for respondent Oliver Two to implead
mortgagor Oliver One in the case before the trial court. Failing to do
that, the complaint of herein respondent Oliver Two should have
been dismissed.
Petitioner’s contention is far from tenable. An indispensable party is
a party in interest, without whom no final determination can be had
of an action.8 It is true that mortgagor Oliver One is a party in
interest, for she will be affected by the outcome of the case. She
stands to be benefited in case the mortgage is declared valid, or
injured in case her title is declared fake.9 However, mortgagor Oliver
One’s absence from the case does not hamper the trial court in
resolving the dispute between respondent Oliver Two and
petitioner. A perusal of Oliver Two’s allegations in the complaint
below shows that it was for annulment of mortgage due to
petitioner’s negligence in not determining the actual ownership of
the property, resulting in the mortgage’s annotation on TCT No. S-
50195 in the Registry of Deeds’ custody. To support said allegations,
respondent Oliver Two had to prove (1) that she is the real Mercedes
M. Oliver referred to in the TCT, and (2) that she is not the same
person using that name who entered into a deed of mortgage with
the petitioner. This, respondent Oliver Two can do in her complaint
without necessarily impleading the mortgagor Oliver One. Hence,
Oliver One is not an indispensable party in the case filed by Oliver
Two.
In Noceda vs. Court of Appeals, et al., 313 SCRA 504 (1999), we held
that a party is not indispensable to the suit if his interest in the
controversy or subject matter is distinct and divisible from the
interest of the other parties and will not necessarily be prejudiced by
a judgment which does complete justice to the parties in court. In
this case, Chinabank has interest in the loan which, however, is
distinct and divisible from the mortgagor’s interest, which involves
the land used as collateral for the loan.
Further, a declaration of the mortgage’s nullity in this case will not
necessarily prejudice mortgagor Oliver One. The bank still needs to
initiate proceedings to go after the mortgagor, who in turn can raise
other defenses pertinent to the two of them. A party is also not
indispensable if his presence would merely permit complete relief
between him and those already parties to the action, or will simply
avoid multiple litigation, as in the case of Chinabank and mortgagor
Oliver One.10 The latter’s participation in this case will simply enable
petitioner Chinabank to make its claim against her in this case, and
hence, avoid the institution of another action. Thus, it was the bank
who should have filed a third-party complaint or other action versus
the mortgagor Oliver One.
As to the second issue, since mortgagor Oliver One is not an
indispensable party, Section 7, Rule 3 of the 1997 Rules of Civil
Procedure, which requires compulsory joinder of indispensable
parties in a case, does not apply. Instead, it is Section 11, Rule 3, that
applies.11 Non-joinder of parties is not a ground for dismissal of an
action. Parties may be added by order of the court, either on its own
initiative or on motion of the parties.12 Hence, the Court of Appeals
committed no error when it found no abuse of discretion on the part
of the trial court for denying Chinabank’s motion to dismiss and,
instead, suggested that petitioner file an appropriate action against
mortgagor Oliver One. A person who is not a party to an action may
be impleaded by the defendant either on the basis of liability to
himself or on the ground of direct liability to the plaintiff. 13
Now, the third issue, did the Court of Appeals err when it sustained
the trial court’s ruling that petitioner Chinabank was in default? As
found by the Court of Appeals, petitioner did not file its answer,
although it received the March 13, 1997 order denying the motion to
dismiss. Instead, petitioner filed a petition for certiorari under Rule
65 of the Rules of Court. Said petition, however, does not interrupt
the course of the principal case unless a temporary restraining order
or writ of preliminary injunction is issued.14 No such order or writ
was issued in this case. Hence, Chinabank as defendant below was
properly declared in default by the trial court, after the 15-day
period to file its answer or other responsive pleading lapsed.
Lastly, were the withdrawal and consequent dismissal of the
complaint against officials of the Registry of Deeds conclusive of the
authenticity of mortgagor Oliver One’s copy of TCT No. S-50195?
This is a question of fact, which is not a proper subject for review in
this petition. Here, we are limited only to questions of law,15 as a
general rule. Petitioner failed to show that this case falls under any
of the exceptions to this rule. We need not tarry on this issue now.
WHEREFORE, the petition is DENIED for lack of merit. The assailed
decision dated June 1, 1998 and the resolution dated September 30,
1998 of the Court of Appeals in CA-G.R. SP No. 43836 are
AFFIRMED. Costs against petitioner.
SO ORDERED.
CASE DIGEST
CHINA BANKING CORPORATION, petitioner, vs. MERCEDES M.
OLIVER, respondent.
FACTS
In August 1995, Pangan Lim, Jr. and a certain Mercedes M.
Oliver opened a joint account in China Banking Corporation
(hereinafter Chinabank) at EDSA Balintawak Branch. Lim introduced
Oliver to the banks branch manager as his partner in the rice
and palay trading business. Thereafter, Lim and Oliver applied for a
P17 million loan, offering as collateral a 7,782 square meter lot
located in Tunasan, Muntinlupa and covered by TCT No. S-50195 in
the name of Oliver. The bank approved the application. On
November 17, 1995, Lim and Oliver executed in favor of Chinabank
a promissory note for P16,650,000, as well as a Real Estate
Mortgage on the property. The mortgage was duly registered and
annotated on the original title under the custody of the Registry of
Deeds of Makati and on the owners duplicate copy in the banks
possession. The mortgage document showed Mercedes Olivers
address to be No. 95 Malakas Street, Diliman, Quezon City. For
brevity, she is hereafter referred to as Oliver One.
On November 18, 1996, respondent claiming that she is
Mercedes M. Oliver with postal office address at No. 40 J.P. Rizal
St., San Pedro, Laguna, filed an action for annulment of mortgage
and cancellation of title with damages against Chinabank, Register of
Deeds Atty. Mila G. Flores, and Deputy Register of Deeds Atty.
Ferdinand P. Ignacio. Respondent, whom we shall call as Oliver
Two, claimed that she was the registered and lawful owner of the
land subject of the real estate mortgage; that the owners duplicate
copy of the title had always been in her possession; and that she did
 [2]
not apply for a loan or surrender her title to Chinabank. She prayed Petitioners contention is far from tenable. An indispensable
that: (1) the owners duplicate copy surrendered to Chinabank as well party is a party in interest, without whom no final determination can
[8]
as the original title with the Registry of Deeds be cancelled; (2) the be had of an action. It is true that mortgagor Oliver One is a party in
mortgage be declared null and void; and (3) the Registry of Deeds interest, for she will be affected by the outcome of the case. She
[3]
be ordered to issue a new and clean title in her name. stands to be benefited in case the mortgage is declared valid, or
[9]
injured in case her title is declared fake. However, mortgagor Oliver
On January 31, 1997, Chinabank moved to dismiss the case for Ones absence from the case does not hamper the trial court in
lack of cause of action and non-joinder of an indispensable party, the resolving the dispute between respondent Oliver Two and
mortgagor. petitioner. A perusal of Oliver Twos allegations in the complaint
ISSUE below shows that it was for annulment of mortgage due to petitioners
negligence in not determining the actual ownership of the property,
Whether or not the mortgagor who goes by the name of resulting in the mortgages annotation on TCT No. S-50195 in the
Mercedes M. Oliver, herein called Oliver One, an indispensable Registry of Deeds custody. To support said allegations, respondent
party? Oliver Two had to prove (1) that she is the real Mercedes M. Oliver
referred to in the TCT, and (2) that she is not the same person using
HELD
that name who entered into a deed of mortgage with the
YES.Petitioner Chinabank alleges that there are two owners petitioner.This, respondent Oliver Two can do in her complaint
duplicate copies of TCT No. S-50195 involved in this case and two without necessarily impleading the mortgagor Oliver One.Hence,
persons claiming to be the real MERCEDES MARAVILLA Oliver One is not an indispensable party in the case filed by Oliver
OLIVER. One is the mortgagor, Oliver One. The other is the Two.
respondent, Oliver Two. Respondents complaint before the trial court
was one for cancellation of the transfer certificate of title in
petitioners possession (Annex B). According to petitioner, the issue
below is the genuineness of the titles, which is intertwined with the
issue of ownership. This being the case, said the petitioner, the
mortgagor Oliver One must necessarily be impleaded for she is the
registered owner under Annex B.Petitioner argues that mortgagor
Oliver One is in a better position to defend her title. She stands to
suffer if it is declared fake. Further, petitioner claims that the validity
and enforceability of the mortgage entirely depends on the validity
and authenticity of Annex B. The mortgage cannot be declared a
nullity without the trial court declaring Annex B a nullity. Hence,
mortgagor Oliver Ones participation in the suit is indispensable,
according to petitioner. In brief, what petitioner Chinabank is saying
is that it was indispensable for respondent Oliver Two to implead
mortgagor Oliver One in the case before the trial court.Failing to do
that, the complaint of herein respondent Oliver Two should have
been dismissed.
[G.R. No. 166302. July 28, 2005]
LOTTE PHIL. CO., INC., petitioner, vs. ERLINDA DELA CRUZ,
LEONOR MAMAUAG, LOURDES CAUBA, JOSEPHINE
DOMANAIS, ARLENE CAGAYAT, AMELITA YAM,
VIVIAN DOMARAIS, MARILYN ANTALAN,
CHRISTOPHER RAMIREZ, ARNOLD SAN PEDRO,
MARISSA SAN PEDRO, LORELI JIMENEZ, JEFFREY
BUENO, CHRISTOPHER CAGAYAT, GERARD
CABILES, JOAN ENRIQUEZ, JOSEPH DE LA CRUZ,
NELLY CLERIGO, DULCE NAVARETTE, ROWENA
BELLO, DANIEL RAMIREZ, AILEEN BAUTISTA and
BALTAZAR FERRERA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari[1] assails the July 9, 2004
decision[2] of the Court of Appeals in CA-G.R. SP No. 72732 and its
November 26, 2004 resolution[3] denying reconsideration thereof.
The established facts of this case are as follows:
Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a
domestic corporation. Petitioners (respondents herein) are among
those who were hired and assigned to the confectionery facility
operated by private respondent.
On December 14, 1995 and yearly thereafter until the year 2000 7J
Maintenance and Janitorial Services (7J) entered into a contract with
private respondent to provide manpower for needed maintenance,
utility, janitorial and other services to the latter. In compliance with
the terms and conditions of the service contract, and to
accommodate the needs of private respondent for
personnel/workers to do and perform piece works, petitioners,
among others, were hired and assigned to private respondent as
repackers or sealers.
However, either in October, 1999 or on February 9, 2000, private
respondent dispensed with their services allegedly due to the
expiration/termination of the service contract by respondent with 7J.
They were either told hwag muna kayong pumasok at tatawagan na lang
kung may gawa; or were asked to wait pag magrereport sila sa trabaho.
Unfortunately, petitioners were never called back to work again.
Aggrieved, petitioners lodged a labor complaint against both private
respondent Lotte and 7J, for illegal dismissal, regularization,
payment of corresponding backwages and related employment
benefits, 13thmonth pay, service incentive leave, moral and
exemplary damages and attorneys fees based on total judgment
award.[4]
On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr.,
rendered judgment[5] declaring 7J as employer of respondents.[6] The
arbiter also found 7J guilty of illegal dismissal[7] and ordered to
reinstate respondents,[8] pay P2,374,710.00 as backwages, P713,648.00
as 13th month pay and P117,000.00 as service incentive leave pay. [9]
Respondents appealed to the National Labor Relations
Commission (NLRC) praying that Lotte be declared as their direct
employer because 7J is merely a labor-only contractor. In its
decision[10] dated April 24, 2002, the NLRC found no cogent reason
to disturb the findings of the labor arbiter and affirmed its ruling
that 7J is the employer of respondents and solely liable for their
claims.
Respondents motion for reconsideration was denied by the
NLRC in a resolution dated June 18, 2002.
Undaunted, they filed a petition for certiorari in the Court of
Appeals[11] against the NLRC and Lotte, insisting that their employer
is Lotte and not 7J.
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 court, pursuant to
Section 3, Rule 46 of the Revised Rules of Civil Procedure.
 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 respondents and
that 7J who engaged in labor-only contracting was merely the agent
of Lotte. Respondents who performed activities directly related to
Lottes business were its regular employees under Art. 280 of the
Labor Code. As such, they must be accorded security of tenure and
their services terminated only on just and authorized causes.
Lottes motion for reconsideration was denied, hence this
petition, on the following issues:
8. Whether or not petitioner herein had the burden of proof to
establish before the 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 with Section 3, Rule 46 in relation to
Section 5, Rule 65 of the 1997 Rules of Civil Procedure.[12]
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 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
5[14] of Rule 65 of the Revised Rules of Civil Procedure.
Petitioners contention is tenable.
An indispensable party is a party in interest without whom no
final determination can be had of an action, [15] and who shall be
joined either as plaintiffs or defendants.[16] The joinder of
indispensable parties is mandatory.[17] The presence of indispensable
parties is necessary to vest the court with jurisdiction, which is the
authority to hear and determine a cause, the right 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
absent parties but even as to those present.[20]
In the case at bar, 7J is an indispensable party. It is a party in
interest because it will be affected by the outcome of the case. The
Labor Arbiter and the NLRC found 7J to be solely liable as the
employer of respondents. The Court of Appeals however rendered
Lotte jointly and severally liable with 7J who was not impleaded by
holding that the former is the real employer of respondents. Plainly,
its decision directly affected 7J.
In Domingo v. Scheer,[21] we held that the non-joinder of
indispensable parties is not a ground for the dismissal of an
action[22] and the remedy is to implead the non-party claimed to be
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 to implead an
indispensable party despite the order of the court, the latter may
dismiss the complaint/petition for the petitioner/plaintiffs failure to
comply therefor.[24]
Although 7J was a co-party in the case before the Labor Arbiter
and the NLRC, respondents failed to include it in their petition
for certiorari in the Court of Appeals. Hence, the Court of 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 case and in order to
accord all parties with due process and fair play.
In light of the foregoing, the Court sees no need to discuss the
second issue raised by petitioner.
WHEREFORE, the July 9, 2004 decision of the Court of Appeals
in CA-G.R. SP No. 72732 and the November 26, 2004 resolution, are
SET ASIDE. Let the case be REMANDED to the Court of Appeals to
include 7J Maintenance and Janitorial Services as an indispensable
party to the case for further proceedings.
SO ORDERED.
G.R. No. 190823 April 4, 2011
DOMINGO CARABEO, Petitioner,
vs.
SPOUSES NORBERTO and SUSAN DINGCO, Respondents.
DECISION
CARPIO MORALES, J.:
On July 10, 1990, Domingo Carabeo (petitioner) entered into a
contract denominated as "Kasunduan sa Bilihan ng Karapatan sa
Lupa"1 (kasunduan) with Spouses Norberto and Susan Dingco
(respondents) whereby petitioner agreed to sell his rights over a 648
square meter parcel of unregistered land situated in Purok III,
Tugatog, Orani, Bataan to respondents for ₱38,000.
Respondents tendered their initial payment of ₱10,000 upon signing
of the contract, the remaining balance to be paid on September 1990.
Respondents were later to claim that when they were about to hand
in the balance of the purchase price, petitioner requested them to
keep it first as he was yet to settle an on-going "squabble" over the
land.
Nevertheless, respondents gave petitioner small sums of money
from time to time which totaled ₱9,100, on petitioner’s request
according to them; due to respondents’ inability to pay the amount
of the remaining balance in full, according to petitioner.
By respondents’ claim, despite the alleged problem over the land,
they insisted on petitioner’s acceptance of the remaining balance of
₱18,900 but petitioner remained firm in his refusal, proffering as
reason therefor that he would register the land first.
Sometime in 1994, respondents learned that the alleged problem
over the land had been settled and that petitioner had caused its
registration in his name on December 21, 1993 under Transfer
Certificate of Title No. 161806. They thereupon offered to pay the
balance but petitioner declined, drawing them to file a complaint
before the Katarungan Pambarangay. No settlement was reached,
however, hence, respondent filed a complaint for specific
performance before the Regional Trial Court (RTC) of Balanga,
Bataan.
Petitioner countered in his Answer to the Complaint that the sale
was void for lack of object certain, the kasunduan not having
specified the metes and bounds of the land. In any event, petitioner
alleged that if the validity of the kasunduan is upheld, respondents’
failure to comply with their reciprocal obligation to pay the balance
of the purchase price would render the action premature. For,
contrary to respondents’ claim, petitioner maintained that they failed
to pay the balance of ₱28,000 on September 1990 to thus constrain
him to accept installment payments totaling ₱9,100.
After the case was submitted for decision or on January 31,
2001,2 petitioner passed away. The records do not show that
petitioner’s counsel informed Branch 1 of the Bataan RTC, where the
complaint was lodged, of his death and that proper substitution was
effected in accordance with Section 16, Rule 3, Rules of Court. 3
By Decision of February 25, 2001,4 the trial court ruled in favor of
respondents, disposing as follows:
WHEREFORE, premises considered, judgment is hereby rendered
ordering:
1. The defendant to sell his right over 648 square meters of
land pursuant to the contract dated July 10, 1990 by
executing a Deed of Sale thereof after the payment of
P18,900 by the plaintiffs;
 2. The defendant to pay the costs of the suit.
SO ORDERED.5
Petitioner’s counsel filed a Notice of Appeal on March 20, 2001.
By the herein challenged Decision dated July 20, 2009, 6 the Court of
Appeals affirmed that of the trial court.
Petitioner’s motion for reconsideration having been denied by
Resolution of January 8, 2010, the present petition for review was
filed by Antonio Carabeo, petitioner’s son,7 faulting the appellate
court:
(A)
… in holding that the element of a contract, i.e., an object
certain is present in this case.
(B)
… in considering it unfair to expect respondents who are not
lawyers to make judicial consignation after herein petitioner
allegedly refused to accept payment of the balance of the
purchase price.
(C)
… in upholding the validity of the contract, "Kasunduan sa
Bilihan ng Karapatan sa Lupa," despite the lack of spousal
consent, (underscoring supplied)
and proffering that
(D)
[t]he death of herein petitioner causes the dismissal of the
action filed by respondents; respondents’ cause of action
being an action in personam. (underscoring supplied)
The petition fails.
The pertinent portion of the kasunduan reads:8
xxxx
Na ako ay may isang partial na lupa na matatagpuan sa Purok 111,
Tugatog, Orani Bataan, na may sukat na 27 x 24 metro kuwadrado,
ang nasabing lupa ay may sakop na dalawang punong santol at
isang punong mangga, kaya’t ako ay nakipagkasundo sa mag-
asawang Norby Dingco at Susan Dingco na ipagbili sa kanila ang
karapatan ng nasabing lupa sa halagang ₱38,000.00.
x x x x (underscoring supplied)
That the kasunduan did not specify the technical boundaries of the
property did not render the sale a nullity. The requirement that a
sale must have for its object a determinate thing is satisfied as long
as, at the time the contract is entered into, the object of the sale is
capable of being made determinate without the necessity of a new or
further agreement between the parties.9 As the above-quoted portion
of the kasunduan shows, there is no doubt that the object of the sale
is determinate.
Clutching at straws, petitioner proffers lack of spousal consent. This
was raised only on appeal, hence, will not be considered, in the
present case, in the interest of fair play, justice and due process. 10
Respecting the argument that petitioner’s death rendered
respondents’ complaint against him dismissible, Bonilla v.
Barcena11 enlightens:
The question as to whether an action survives or not depends on
the nature of the action 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 merely incidental, while in the causes of action which
do not survive, the injury complained of is to the person, the
property and rights of property affected being incidental. (emphasis
and underscoring supplied)

In the present case, respondents are pursuing a property right

arising from the kasunduan, whereas petitioner is invoking nullity of
the kasunduan to protect his proprietary interest.
Assuming arguendo, however, that the kasunduan is deemed void,
there is a corollary obligation of petitioner to return the money paid
by respondents, and since the action involves property rights, 12 it
survives.1avvphi1

It bears noting that trial on the merits was already concluded before
petitioner died. Since the trial court was not informed of petitioner’s
death, it may not be faulted for proceeding to render judgment
without ordering his substitution. Its judgment is thus valid and
binding upon petitioner’s legal representatives or successors-in-
interest, insofar as his interest in the property subject of the action is
concerned.13

In another vein, the death of a client immediately divests the counsel

of authority.14 Thus, in filing a Notice of Appeal, petitioner’s counsel
of record had no personality to act on behalf of the already deceased
client who, it bears reiteration, had not been substituted as a party
after his death. The trial court’s decision had thereby become final
and executory, no appeal having been perfected.

WHEREFORE, the petition is DENIED.

SO ORDERED.
 [G.R. No. 162788. July 28, 2005]
Spouses JULITA DE LA CRUZ and FELIPE DE
CRUZ, petitioners, vs. PEDRO JOAQUIN, respondent.
DECISION
PANGANIBAN, J.:
The Rules require the legal representatives of a dead litigant to
be substituted as parties to a litigation. This requirement is
necessitated by due process. Thus, when the rights of the legal
representatives of a decedent are actually recognized and protected,
noncompliance or belated formal compliance with the Rules cannot
affect the validity of the promulgated decision. After all, due process
had thereby been satisfied.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules
of Court, assailing the August 26, 2003 Decision [2] and the March 9,
2004 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No.
34702. The challenged Decision disposed as follows:
WHEREFORE, the foregoing considered, the appeal is DISMISSED
and the assailed decision accordingly AFFIRMED in toto. No costs. [4]
On the other hand, the trial courts affirmed Decision disposed
as follows:
WHEREFORE, judgment is hereby rendered:
a) declaring the Deed of Absolute Sale (Exh. D) and
Kasunduan (Exhibit B), to be a sale with right of
repurchase;
b) ordering the plaintiff to pay the defendants the sum
LA of P9,000.00 by way of repurchasing the land in
question;
c) ordering the defendants to execute a deed of reconveyance
of said land in favor of the plaintiff after the latter has
paid them the amount of P9,000.00 to repurchase the
land in question;
d) ordering the defendants to yield possession of the subject
land to the plaintiff after the latter has paid them the
amount of P9,000.00 to repurchase the property from
them; and
e) ordering the defendants to pay the plaintiff the amount
of P10,000.00 as actual and compensatory damages;
the amount of P5,000[.00] as exemplary damages; the
amount of P5,000.00 as expenses of litigation and the
amount of P5,000.00 by way of attorneys fees.[5]
The Facts
The case originated from a Complaint for the recovery of
possession and ownership, the cancellation of title, and damages,
filed by Pedro Joaquin against petitioners in the Regional Trial Court
of Baloc, Sto. Domingo, Nueva Ecija.[6] Respondent alleged that he
had obtained a loan from them in the amount of P9,000 on June 29,
1974, payable after five (5) years; that is, on June 29, 1979. To secure
the payment of the obligation, he supposedly executed a Deed of
Sale in favor of petitioners. The Deed was for a parcel of land in
Pinagpanaan, Talavera, Nueva Ecija, covered by TCT No. T-111802.
The parties also executed another document entitled Kasunduan. [7]
Respondent claimed that the Kasunduan showed the Deed of
Sale to be actually an equitable mortgage.[8] Spouses De la Cruz
contended that this document was merely an accommodation to
allow the repurchase of the property until June 29, 1979, a right that II. Public Respondent Twelfth Division of the Honorable Court of
he failed to exercise.[9] Appeals likewise erred in denying [petitioners] Motion for
Reconsideration given the facts and the law therein presented. [17]
On April 23, 1990, the RTC issued a Decision in his favor. The
trial court declared that the parties had entered into a sale with a
Succinctly, the issues are whether the trial court lost jurisdiction
right of repurchase.[10] It further held that respondent had made a
over the case upon the death of Pedro Joaquin, and whether
valid tender of payment on two separate occasions to exercise his
respondent was guilty of forum shopping.[18]
right of repurchase.[11] Accordingly, petitioners were required to
reconvey the property upon his payment.[12]

The Courts Ruling

Ruling of the Court of Appeals
The Petition has no merit.
Sustaining the trial court, the CA noted that petitioners had
given respondent the right to repurchase the property within five (5)
years from the date of the sale or until June 29, 1979. Accordingly, First Issue:
the parties executed the Kasunduan to express the terms and Jurisdiction
conditions of their actual agreement.[13] The appellate court also
found no reason to overturn the finding that respondent had validly
Petitioners assert that the RTCs Decision was invalid for lack of
exercised his right to repurchase the land.[14]
jurisdiction.[19] They claim that respondent died during the pendency
In the March 9, 2004 Resolution, the CA denied reconsideration of the case. There being no substitution by the heirs, the trial court
and ordered a substitution by legal representatives, in view of allegedly lacked jurisdiction over the litigation.[20]
respondents death on December 24, 1988.[15]
Hence, this Petition.[16]
Rule on Substitution

The Issues When a party to a pending action dies and the claim is not
extinguished,[21] the Rules of Court require a substitution of the
deceased. The procedure is specifically governed by Section 16 of
Petitioners assign the following errors for our consideration: Rule 3, which reads thus:

I. Public Respondent Twelfth Division of the Honorable Court of Section 16. Death of a party; duty of counsel. Whenever a party to a
Appeals seriously erred in dismissing the appeal and affirming in pending action dies, and the claim is not thereby extinguished, it
toto the Decision of the trial court in Civil Case No. SD-838; shall be the duty of his counsel to inform the court within thirty (30)
days after such death of the fact thereof, and to give the name and
address of his legal representative or representatives. Failure of
counsel to comply with this duty shall be a ground for disciplinary
action.
The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or
administrator and the court may appoint a guardian ad litem for the
minor heirs.
The court shall forthwith order said legal representative or
representatives to appear and be substituted within a period of thirty
(30) days from notice.
If no legal representative is named by the counsel for the deceased
party, or if the one so 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 deceased. The court charges in procuring
such appointment, if defrayed by the opposing party, may be
recovered as costs.
The rule on the substitution of parties was crafted to protect
every partys right to due process.[22] The estate of the deceased party
will continue to be properly represented in the suit through the duly
appointed legal representative.[23] Moreover, no adjudication can be
made against the successor of the deceased if the fundamental right
to a day in court is denied.[24]
The Court has nullified not only trial proceedings conducted
without the appearance of the legal representatives of the deceased,
but also the resulting judgments.[25] In those instances, the courts
acquired no jurisdiction over the persons of the legal representatives
or the heirs upon whom no judgment was binding.[26]
This general rule notwithstanding, a formal substitution by heirs
is not necessary when they themselves voluntarily appear,
participate in the case, and present evidence in defense of the
deceased.[27] These actions negate any claim that the right to due
process was violated.
The Court is not unaware of Chittick v. Court of Appeals,[28] in
which the failure of the heirs to substitute for the original plaintiff
upon her death led to the nullification of the trial courts Decision.
The latter had sought to recover support in arrears and her share in
the conjugal partnership. The children who allegedly substituted for
her refused to continue the case against their father and vehemently
objected to their inclusion as parties.[29] Moreover, because he died
during the pendency of the case, they were bound to substitute for
the defendant also. The substitution effectively merged the persons
of the plaintiff and the defendant and thus extinguished the
obligation being sued upon.[30]
Clearly, the present case is not similar, much less identical, to
the factual milieu of Chittick.
Strictly speaking, the rule on the substitution by heirs is not a
matter of jurisdiction, but a requirement of due process. Thus, when
due process is not violated, as when the right of the representative or
heir is recognized and protected, noncompliance or belated formal
compliance with the Rules cannot affect the validity of a
promulgated decision.[31] Mere failure to substitute for a deceased
plaintiff is not a sufficient ground to nullify a trial courts decision.
The alleging party must prove that there was an undeniable
violation of due process.
Substitution in
the Instant Case
The records of the present case contain a Motion for
Substitution of Party Plaintiff dated February 15, 2002, filed before
the CA. The prayer states as follows:
WHEREFORE, it is respectfully prayed that the Heirs of the
deceased plaintiff-appellee as represented by his daughter Lourdes
dela Cruz be substituted as party-plaintiff for the said Pedro Joaquin.
It is further prayed that henceforth the undersigned counsel[32] for
the heirs of Pedro Joaquin be furnished with copies of notices,
orders, resolutions and other pleadings at its address below.
Evidently, the heirs of Pedro Joaquin voluntary appeared and
participated in the case. We stress that the appellate court had
ordered[33] his legal representatives to appear and substitute for him.
The substitution even on appeal had been ordered correctly. In all
proceedings, the legal representatives must appear to protect the
interests of the deceased.[34] After the rendition of judgment, further
proceedings may be held, such as a motion for reconsideration or a
new trial, an appeal, or an execution.[35]
Considering the foregoing circumstances, the Motion for
Substitution may be deemed to have been granted; and the heirs, to
have substituted for the deceased, Pedro Joaquin. There being no
violation of due process, the issue of substitution cannot be upheld
as a ground to nullify the trial courts Decision.
Second Issue:
Forum Shopping
Petitioners also claim that respondents were guilty of forum
shopping, a fact that should have compelled the trial court to dismiss
the Complaint.[36] They claim that prior to the commencement of the
present suit on July 7, 1981, respondent had filed a civil case against
petitioners on June 25, 1979. Docketed as Civil Case No. SD-742 for
the recovery of possession and for damages, it was allegedly
dismissed by the Court of First Instance of Nueva Ecija for lack of
interest to prosecute.
Forum Shopping Defined
Forum shopping is the institution of two or more actions or
proceedings involving the same parties for the same cause of action,
either simultaneously or successively, on the supposition that one or
the other court would make a favorable disposition.[37] Forum
shopping may be resorted to by a party against whom an adverse
judgment or order has been issued in one forum, in an attempt to
seek a favorable opinion in another, other than by an appeal or a
special civil action for certiorari.[38]
Forum shopping trifles with the courts, abuses their processes,
degrades the administration of justice, and congests court
dockets.[39] Willful and deliberate violation of the rule against it is a
ground for the summary dismissal of the case; it may also constitute
direct contempt of court.[40]
The test for determining the existence of forum shopping is
whether the elements of litis pendentia are present, or whether a final
judgment in one case amounts to res judicata in another.[41] We note,
however, petitioners claim that the subject matter of the present case
has already been litigated and decided. Therefore, the applicable
doctrine is res judicata.[42]
Applicability of Res Judicata
Under res judicata, a final judgment or decree on the merits by a
court of competent jurisdiction is conclusive of the rights of the
parties or their privies, in all later suits and on all points and matters
determined in the previous suit.[43] The term literally means a matter
adjudged, judicially acted upon, or settled by judgment. [44] The
principle bars a subsequent suit involving the same parties, subject
matter, and cause of action. Public policy requires that controversies
must be settled with finality at a given point in time.
 The elements of res judicata are as follows: (1) the former
judgment or order must be final; (2) it must have been rendered on
the merits of the controversy; (3) the court that rendered it must have
had jurisdiction over the subject matter and the parties; and (4) there
must have been -- between the first and the second actions -- an
identity of parties, subject matter and cause of action.[45]

Failure to Support Allegation

The onus of proving allegations rests upon the party raising

them.[46] As to the matter of forum shopping and res judicata,
petitioners have failed to provide this Court with relevant and clear
specifications that would show the presence of an identity of parties,
subject matter, and cause of action between the present and the
earlier suits. They have also failed to show whether the other case
was decided on the merits. Instead, they have made only bare
assertions involving its existence without reference to its facts. In
other words, they have alleged conclusions of law without stating
any factual or legal basis. Mere mention of other civil cases without
showing the identity of rights asserted and reliefs sought is not
enough basis to claim that respondent is guilty of forum shopping,
or that res judicata exists.[47]
WHEREFORE, the Petition is DENIED and the assailed
Decision and Resolution are AFFIRMED. Costs against petitioners.
SO ORDERED
ROGER V. NAVARRO, Petitioner,
vs.
HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37,
Cagayan de Oro City, and KAREN T. GO, doing business under
the name KARGO ENTERPRISES, Respondents.
DECISION
BRION, J.:
This is a petition for review on certiorari1 that seeks to set aside the
Court of Appeals (CA) Decision2 dated October 16, 2001 and
Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA
rulings affirmed the July 26, 20004 and March 7, 20015 orders of the
Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City,
denying petitioner Roger V. Navarro’s (Navarro) motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two
complaints, docketed as Civil Case Nos. 98-599 (first complaint)6 and
98-598 (second complaint),7 before the RTC for replevin and/or sum
of money with damages against Navarro. In these complaints, Karen
Go prayed that the RTC issue writs of replevin for the seizure of two
(2) motor vehicles in Navarro’s possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal
age, married to GLENN O. GO, a resident of
Cagayan de Oro City and doing business under the
trade name KARGO ENTERPRISES, an entity duly
registered and existing under and by virtue of the
laws of the Republic of the Philippines, which has its
business address at Bulua, Cagayan de Oro City;
that defendant ROGER NAVARRO is a Filipino, of
legal age, a resident of 62 Dolores Street, Nazareth,
Cagayan de Oro City, where he may be served with
summons and other processes of the Honorable
Court; that defendant "JOHN DOE" whose real
name and address are at present unknown to
plaintiff is hereby joined as party defendant as he
may be the person in whose possession and custody
the personal property subject matter of this suit may
be found if the same is not in the possession of
defendant ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of,
among others, buying and selling motor vehicles,
including hauling trucks and other heavy
equipment;
3. That for the cause of action against defendant
ROGER NAVARRO, it is hereby stated that on
August 8, 1997, the said defendant leased [from]
plaintiff a certain motor vehicle which is more
particularly described as follows –
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO
PURCHASE entered into by and between KARGO ENTERPRISES,
then represented by its Manager, the aforementioned GLENN O.
GO, and defendant ROGER NAVARRO xxx; that in accordance with
the provisions of the above LEASE AGREEMENT WITH OPTION
TO PURCHASE, defendant ROGER NAVARRO delivered unto
plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX
THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS
(₱66,333.33) which were supposedly in payment of the agreed
rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK
OF COMMUNICATIONS – CAGAYAN DE ORO BRANCH
CHECKS NOS. 017112 and 017113, respectively dated January 8,
1998 and February 8, 1998, were presented for payment and/or
credit, the same were dishonored and/or returned by the drawee
bank for the common reason that the current deposit account against
which the said checks were issued did not have sufficient funds to
cover the amounts thereof; that the total amount of the two (2)
checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND
SIX HUNDRED SIXTY-SIX & 66/100 PESOS (₱132,666.66) therefore
represents the principal liability of defendant ROGER NAVARRO
unto plaintiff on the basis of the provisions of the above LEASE
AGREEMENT WITH RIGHT TO PURCHASE; that demands,
written and oral, were made of defendant ROGER NAVARRO to
pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND
SIX HUNDRED SIXTY-SIX & 66/100 PESOS (₱132,666.66), or to
return the subject motor vehicle as also provided for in the LEASE
AGREEMENT WITH RIGHT TO PURCHASE, but said demands
were, and still are, in vain to the great damage and injury of herein
plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the subject of
any tax assessment and/or fine pursuant to law, or seized under an
execution or an attachment as against herein plaintiff;
xxx
8. That plaintiff hereby respectfully applies for an order of the
Honorable Court for the immediate delivery of the above-described
motor vehicle from defendants unto plaintiff pending the final
determination of this case on the merits and, for that purpose, there
is attached hereto an affidavit duly executed and bond double the
value of the personal property subject matter hereof to answer for
damages and costs which defendants may suffer in the event that the
order for replevin prayed for may be found out to having not been
properly issued.
The second complaint contained essentially the same allegations as
the first complaint, except that the Lease Agreement with Option to
Purchase involved is dated October 1, 1997 and the motor vehicle
leased is described as follows:
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-
dated checks, each for the amount of ₱100,000.00, to Karen Go in
payment of the agreed rentals; however, the third check was
dishonored when presented for payment.8
On October 12, 19989 and October 14, 1998,10 the RTC issued writs of
replevin for both cases; as a result, the Sheriff seized the two vehicles
and delivered them to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense that
the two complaints stated no cause of action, since Karen Go was not
a party to the Lease Agreements with Option to Purchase
(collectively, the lease agreements) – the actionable documents on
which the complaints were based.
On Navarro’s motion, both cases were duly consolidated on
December 13, 1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground
that the complaints did not state a cause of action.
In response to the motion for reconsideration Karen Go filed dated
May 26, 2000,11 the RTC issued another order dated July 26, 2000
setting aside the order of dismissal. Acting on the presumption that
Glenn Go’s leasing business is a conjugal property, the RTC held that
Karen Go had sufficient interest in his leasing business to file the
action against Navarro. However, the RTC held that Karen Go
should have included her husband, Glenn Go, in the complaint
based on Section 4, Rule 3 of the Rules of Court (Rules). 12 Thus, the
lower court ordered Karen Go to file a motion for the inclusion of
Glenn Go as co-plaintiff.1avvphi1
When the RTC denied Navarro’s motion for reconsideration on
March 7, 2001, Navarro filed a petition for certiorari with the CA,
essentially contending that the RTC committed grave abuse of
discretion when it reconsidered the dismissal of the case and
directed Karen Go to amend her complaints by including her
husband Glenn Go as co-plaintiff. According to Navarro, a
complaint which failed to state a cause of action could not be
converted into one with a cause of action by mere amendment or
supplemental pleading.
On October 16, 2001, the CA denied Navarro’s petition and affirmed
the RTC’s order.13 The CA also denied Navarro’s motion for
reconsideration in its resolution of May 29, 2002, 14 leading to the
filing of the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in the name
of Kargo Enterprises, since it did not have the requisite juridical
personality to sue, the actual parties to the agreement are himself
and Glenn Go. Since it was Karen Go who filed the complaints and
not Glenn Go, she was not a real party-in-interest and the complaints
failed to state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment
of the complaint to include Glenn Go as a co-plaintiff, instead of
dismissing the complaint outright because a complaint which does
not state a cause of action cannot be converted into one with a cause
of action by a mere amendment or a supplemental pleading. In
effect, the lower court created a cause of action for Karen Go when
there was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-
plaintiff drastically changed the theory of the complaints, to his great
prejudice. Navarro claims that the lower court gravely abused its
discretion when it assumed that the leased vehicles are part of the
conjugal property of Glenn and Karen Go. Since Karen Go is the
registered owner of Kargo Enterprises, the vehicles subject of the
complaint are her paraphernal properties and the RTC gravely erred
when it ordered the inclusion of Glenn Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the
case in the same order that required Karen Go to amend her
complaints, claiming that by issuing this order, the trial court
violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action against him,
Navarro maintains that the complaints were premature because no
prior demand was made on him to comply with the provisions of the
lease agreements before the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were
issued based on flawed complaints, the vehicles were illegally seized
from his possession and should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro
to state that she has no real interest in the subject of the complaint,
even if the lease agreements were signed only by her husband,
Glenn Go; she is the owner of Kargo Enterprises and Glenn Go
signed the lease agreements merely as the manager of Kargo
Enterprises. Moreover, Karen Go maintains that Navarro’s insistence
that Kargo Enterprises is Karen Go’s paraphernal property is
without basis. Based on the law and jurisprudence on the matter, all
property acquired during the marriage is presumed to be conjugal
property. Finally, Karen Go insists that her complaints sufficiently
established a cause of action against Navarro. Thus, when the RTC
ordered her to include her husband as co-plaintiff, this was merely to
comply with the rule that spouses should sue jointly, and was not
meant to cure the complaints’ lack of cause of action.
 THE COURT’S RULING
We find the petition devoid of merit.
Karen Go is the real party-in-interest
The 1997 Rules of Civil Procedure requires that every action must be
prosecuted or defended in the name of the real party-in-interest, i.e.,
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.15
Interestingly, although Navarro admits that Karen Go is the
registered owner of the business name Kargo Enterprises, he still
insists that Karen Go is not a real party-in-interest in the case.
According to Navarro, while the lease contracts were in Kargo
Enterprises’ name, this was merely a trade name without a juridical
personality, so the actual parties to the lease agreements were
Navarro and Glenn Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave
abuse of discretion when it ordered the inclusion of Glenn Go as co-
plaintiff, since this in effect created a cause of action for the
complaints when in truth, there was none.
We do not find Navarro’s arguments persuasive.
The central factor in appreciating the issues presented in this case is
the business name Kargo Enterprises. The name appears in the title
of the Complaint where the plaintiff was identified as "KAREN T.
GO doing business under the name KARGO ENTERPRISES," and
this identification was repeated in the first paragraph of the
Complaint. Paragraph 2 defined the business KARGO
ENTERPRISES undertakes. Paragraph 3 continued with the
allegation that the defendant "leased from plaintiff a certain motor
vehicle" that was thereafter described. Significantly, the Complaint
specifies and attaches as its integral part the Lease Agreement that
underlies the transaction between the plaintiff and the defendant.
Again, the name KARGO ENTERPRISES entered the picture as this
Lease Agreement provides:
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx,
herein referred to as the LESSOR-SELLER; representing KARGO
ENTERPRISES as its Manager,
xxx
thus, expressly pointing to KARGO ENTERPRISES as the principal
that Glenn O. Go represented. In other words, by the express terms
of this Lease Agreement, Glenn Go did sign the agreement only as
the manager of Kargo Enterprises and the latter is clearly the real
party to the lease agreements.
As Navarro correctly points out, Kargo Enterprises is a sole
proprietorship, which is neither a natural person, nor a juridical
person, as defined by Article 44 of the Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for
public interest or purpose, created by law; their
personality begins as soon as they have been
constituted according to law;
(3) Corporations, partnerships and associations for
private interest or purpose to which the law grants a
juridical personality, separate and distinct from that
of each shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises
cannot be a party to a civil action. This legal reality leads to the
question: who then is the proper party to file an action based on a
contract in the name of Kargo Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza, 17
where we said:
Finally, there is no law authorizing sole proprietorships like
petitioner to bring suit in court. The law merely recognizes the
existence of a sole proprietorship as a form of business organization
conducted for profit by a single individual, and requires the
proprietor or owner thereof to secure licenses and permits, register
the business name, and pay taxes to the national government. It does
not vest juridical or legal personality upon the sole proprietorship
nor empower it to file or defend an action in court.
Thus, the complaint in the court below should have been filed in the
name of the owner of Juasing Hardware. The allegation in the body
of the complaint would show that the suit is brought by such person
as proprietor or owner of the business conducted under the name
and style Juasing Hardware. The descriptive words "doing business
as Juasing Hardware" may be added to the title of the case, as is
customarily done.18 [Emphasis supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of
the Rules, which states:
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 authorized
by law or these Rules, every action must be prosecuted or defended
in the name of the real party in interest.
As the registered owner of Kargo Enterprises, Karen Go is the party
who will directly benefit from or be injured by a judgment in this
case. Thus, contrary to Navarro’s contention, Karen Go is the real
party-in-interest, and it is legally incorrect to say that her Complaint
does not state a cause of action because her name did not appear in
the Lease Agreement that her husband signed in behalf of Kargo
Enterprises. Whether Glenn Go can legally sign the Lease Agreement
in his capacity as a manager of Kargo Enterprises, a sole
proprietorship, is a question we do not decide, as this is a matter for
the trial court to consider in a trial on the merits.
Glenn Go’s Role in the Case
We find it significant that the business name Kargo Enterprises is in
the name of Karen T. Go,19 who described herself in the Complaints
to be "a Filipino, of legal age, married to GLENN O. GO, a resident
of Cagayan de Oro City, and doing business under the trade name
KARGO ENTERPRISES."20 That Glenn Go and Karen Go are married
to each other is a fact never brought in issue in the case. Thus, the
business name KARGO ENTERPRISES is registered in the name of a
married woman, a fact material to the side issue of whether Kargo
Enterprises and its properties are paraphernal or conjugal properties.
To restate the parties’ positions, Navarro alleges that Kargo
Enterprises is Karen Go’s paraphernal property, emphasizing the
fact that the business is registered solely in Karen Go’s name. On the
other hand, Karen Go contends that while the business is registered
in her name, it is in fact part of their conjugal property.
The registration of the trade name in the name of one person – a
woman – does not necessarily lead to the conclusion that the trade
name as a property is hers alone, particularly when the woman is
married. By law, all property acquired during the marriage, whether
the acquisition appears to have been made, contracted or registered
in the name of one or both spouses, is presumed to be conjugal
unless the contrary is proved.21 Our examination of the records of
the case does not show any proof that Kargo Enterprises and the
properties or contracts in its name are conjugal. If at all, only the bare
allegation of Navarro to this effect exists in the records of the case.
As we emphasized in Castro v. Miat:22
Petitioners also overlook Article 160 of the New Civil Code. It
provides that "all property of the marriage is presumed to be
conjugal partnership, unless it be prove[n] that it pertains
exclusively to the husband or to the wife." This article does not
require proof that the property was acquired with funds of the
partnership. The presumption applies even when the manner in
which the property was acquired does not appear.23 [Emphasis
supplied.]
Thus, for purposes solely of this case and of resolving the issue of
whether Kargo Enterprises as a sole proprietorship is conjugal or
paraphernal property, we hold that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal
property, provides:
Art. 124. The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly. In case
of disagreement, the husband’s decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must be
availed of within five years from the date of the contract
implementing such decision.
xxx
This provision, by its terms, allows either Karen or Glenn Go to
speak and act with authority in managing their conjugal property,
i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the
consent of the other before performing an act of administration or
any act that does not dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is
governed by the rules on the contract of partnership in all that is not
in conflict with what is expressly determined in this Chapter or by
the spouses in their marriage settlements. In other words, the
property relations of the husband and wife shall be governed
primarily by Chapter 4 on Conjugal Partnership of Gains of the
Family Code and, suppletorily, by the spouses’ marriage settlement
and by the rules on partnership under the Civil Code. In the absence
of any evidence of a marriage settlement between the spouses Go,
we look at the Civil Code provision on partnership for guidance.
A rule on partnership applicable to the spouses’ circumstances is
Article 1811 of the Civil Code, which states:
Art. 1811. A partner is a co-owner with the other partners of specific
partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any
agreement between the partners, has an equal right with his
partners to possess specific partnership property for partnership
purposes; xxx
Under this provision, Glenn and Karen Go are effectively co-owners
of Kargo Enterprises and the properties registered under this name;
hence, both have an equal right to seek possession of these
properties. Applying Article 484 of the Civil Code, which states that
"in default of contracts, or special provisions, co-ownership shall be
governed by the provisions of this Title," we find further support in
Article 487 of the Civil Code that allows any of the co-owners to
bring an action in ejectment with respect to the co-owned property.
While ejectment is normally associated with actions involving real
property, we find that this rule can be applied to the circumstances
of the present case, following our ruling in Carandang v. Heirs of De
Guzman.24 In this case, one spouse filed an action for the recovery of
credit, a personal property considered conjugal property, without
including the other spouse in the action. In resolving the issue of
whether the other spouse was required to be included as a co-
plaintiff in the action for the recovery of the credit, we said:
Milagros de Guzman, being presumed to be a co-owner of the
credits allegedly extended to the spouses Carandang, seems to be
either an indispensable or a necessary party. If she is an
indispensable party, dismissal would be proper. If she is merely a
necessary party, dismissal is not warranted, whether or not there
was an order for her inclusion in the complaint pursuant to Section
9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on
the contract of partnership in all that is not in conflict with what is
expressly determined in this Chapter or by the spouses in their
marriage settlements.
This provision is practically the same as the Civil Code provision it
superseded:
Art. 147. The conjugal partnership shall be governed by the rules on
the contract of partnership in all that is not in conflict with what is
expressly determined in this Chapter.
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 conjugal nature of the
funds used to finance the four checks used to pay for petitioners’
stock subscriptions, and with the presumption that the credits
themselves are part of conjugal funds, Article 1811 makes Quirino
and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de
Guzman may separately bring an action for the recovery thereof. In
the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we
held that, in a co-ownership, co-owners may bring actions for the
recovery 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 case and
in that of De Guia v. Court of Appeals, we also held that Article 487 of
the Civil Code, which provides that any of the co-owners may bring
an action for ejectment, covers all kinds of action for the recovery of
possession.
In sum, in suits to recover properties, all co-owners are real parties in
interest. However, pursuant to Article 487 of the Civil Code and
relevant jurisprudence, any one of them may bring an action, any
kind of action, for the recovery of co-owned properties. Therefore,
only one of the co-owners, namely the co-owner who filed the suit
for the recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are
not even necessary parties, for a complete relief can be accorded in
the suit even without their participation, since the suit is presumed
to have been filed for the benefit of all co-owners.25 [Emphasis
supplied.]
Under this ruling, either of the spouses Go may bring an action
against Navarro to recover possession of the Kargo Enterprises-
leased vehicles which they co-own. This conclusion is consistent
with Article 124 of the Family Code, supporting as it does the
position that either spouse may act on behalf of the conjugal
partnership, so long as they do not dispose of or encumber the
property in question without the other spouse’s consent.
On this basis, we hold that since Glenn Go is not strictly an
indispensable party in the action to recover possession of the leased
vehicles, he only needs to be impleaded as a pro-forma party to the
suit, based on Section 4, Rule 4 of the Rules, which states:
Section 4. Spouses as parties. – Husband and wife shall sue or be
sued jointly, except as provided by law.
Non-joinder of indispensable parties not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action,
we have held in a number of cases26 that the misjoinder or non-
joinder of indispensable parties in a complaint is not a ground for
dismissal of action. As we stated in Macababbad v. Masirag: 27
Rule 3, Section 11 of the Rules of Court provides that neither
misjoinder nor nonjoinder of parties is a ground for the dismissal of
an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder
nor non-joinder of parties is ground for dismissal of an action.
Parties may be dropped or added by order of the court on motion of
any party or on its own initiative at any stage of the action and on
such terms as are just. Any claim against a misjoined party may be
severed and proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when
a party is left out is to implead the indispensable party at any stage
of the action. The court, either motu proprio or upon the motion of a
party, may order the inclusion of the indispensable party or give the
plaintiff opportunity to amend his complaint in order to include
indispensable parties. If the plaintiff to whom the order to include
the indispensable party is directed refuses to comply with the order
of the court, the complaint may be dismissed upon motion of the
defendant or upon the court's own motion. Only upon unjustified
failure or refusal to obey the order to include or to amend is the
action dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff
Karen Go to join her husband as a party plaintiff is fully in order.
Demand not required prior
to filing of replevin action
In arguing that prior demand is required before an action for a writ
of replevin is filed, Navarro apparently likens a replevin action to an
unlawful detainer.
For a writ of replevin to issue, all that the applicant must do is to file
an affidavit and bond, pursuant to Section 2, Rule 60 of the Rules,
which states:
Sec. 2. Affidavit and bond.
The applicant must show by his own affidavit or that of some other
person who personally knows the facts:
(a) That the applicant is the owner of the property
claimed, particularly describing it, or is entitled to
the possession thereof;
(b) That the property is wrongfully detained by the
adverse party, alleging the cause of detention
thereof according to the best of his knowledge,
information, and belief;
(c) That the property has not been distrained or
taken for a tax assessment or a fine pursuant to law,
or seized under a writ of execution or preliminary
attachment, or otherwise placed under custodia legis,
or if so seized, that it is exempt from such seizure or
custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party
in double the value of the property as stated in the affidavit
aforementioned, for the return of the property to the adverse party if
such return be adjudged, and for the payment to the adverse party of
such sum as he may recover from the applicant in the action.
We see nothing in these provisions which requires the applicant to
make a prior demand on the possessor of the property before he can
file an action for a writ of replevin. Thus, prior demand is not a
condition precedent to an action for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that
a prior demand is necessary, as he has already admitted in his
Answers that he had received the letters that Karen Go sent him,
demanding that he either pay his unpaid obligations or return the
leased motor vehicles. Navarro’s position that a demand is necessary
and has not been made is therefore totally unmeritorious.
WHEREFORE, premises considered, we DENY the petition for
review for lack of merit. Costs against petitioner Roger V. Navarro.
SO ORDERED.
FACTS:
Respondent Karen complaints before the RTC for replevin and/or
sum of money with damages against Navarro. Navarro alleged as a
special affirmative defense that the complaints stated no cause of
action, since Karen was not a party to the Lease Agreements with
Option to Purchase (collectively, the lease agreements) – the
actionable documents on which the complaints were based.
RTC dismissed the case on the ground that the complaints did not
state a cause of action. In response to the motion for reconsideration
Karen filed, RTC issued another order setting aside the order of
dismissal. Acting on the presumption that Glenn’s leasing business is
a conjugal property, the RTC held that Karen had sufficient interest
in his leasing business to file the action against Navarro. However,
the RTC held that Karen should have included her husband, Glenn,
in the complaint based on Section 4, Rule 3 of the Rules of Court
(Rules). Thus, the lower court ordered Karen to file a motion for the
inclusion of Glenn as co-plaintiff.
Navarro filed a petition for certiorari with the CA, essentially
contending that RTC committed grave abuse of discretion when it
reconsidered the dismissal of the case and directed Karen to amend
her complaints by including her husband Glenn as co-plaintiff.
According to Navarro, a complaint which failed to state a cause of
action could not be converted into one with a cause of action by
mere amendment or supplemental pleading. CA denied Navarro’s
petition and affirmed the RTC’s order.
ISSUE:
1. Whether a complaint which failed to state a cause of action could
not be converted into one with a cause of action by mere
amendment or supplemental pleading.
2. Whether Karen is the real party-in-interest.
RULING:
1. Yes
Non-joinder of indispensable parties not ground to dismiss action,
thus, even assuming that Glenn is an indispensable party to the
action, it was held in a number of cases that the misjoinder or non-
joinder of indispensable parties in a complaint is not a ground for
dismissal of action.
Rule 3, Section 11 of the Rules of Court provides that neither
misjoinder nor nonjoinder of parties is a ground for the dismissal of
an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither
misjoinder nor non-joinder of parties is ground for dismissal
of an action. Parties may be dropped or added by order of
the court on motion of any party or on its own initiative at any
stage of the action and on such terms as are just. Any claim
against a misjoined party may be severed and proceeded
with separately.
In these lights, the RTC Order requiring plaintiff Karen to join her Enterprises. Whether Glenn can legally sign the Lease Agreement in
husband as a party plaintiff is fully in order. As it was held in a prior his capacity as a manager of Kargo Enterprises, a sole
case, the proper remedy when a party is left out is to implead the proprietorship, is a question we do not decide, as this is a matter for
indispensable party at any stage of the action. The court, either motu the trial court to consider in a trial on the merits.
proprio or upon the motion of a party, may order the inclusion of the
indispensable party or give the plaintiff opportunity to amend his WHEREFORE, premises considered, we DENY the petition for
complaint in order to include indispensable parties. If the plaintiff to review for lack of merit.
whom the order to include the indispensable party is directed refuses
to comply with the order of the court, the complaint may be
dismissed upon motion of the defendant or upon the court's own
motion. Only upon unjustified failure or refusal to obey the order to
include or to amend is the action dismissed

2. Yes

The 1997 Rules of Civil Procedure requires that every action must be
prosecuted or defended in the name of the real party-in-interest, i.e.,
the party who stands to be benefited or injured by the judgment in
15
the suit, or the party entitled to the avails of the suit.

Section 2, Rule 3 of the Rules, states:

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 authorized by law or these Rules, every
action must be prosecuted or defended in the name of the
real party in interest.

Kargo Enterprises is a sole proprietorship, which is neither a natural

person, nor a juridical person. Thus, pursuant to Section 1, Rule 3 of
the Rules, Kargo Enterprises cannot be a party to a civil action.

As the registered owner of Kargo Enterprises, Karen is the party who

will directly benefit from or be injured by a judgment in this case.
Thus, contrary to Navarro’s contention, Karen is the real party-in-
interest, and it is legally incorrect to say that her Complaint does not
state a cause of action because her name did not appear in the
Lease Agreement that her husband signed in behalf of Kargo
G.R. No. 191667 April 17, 2013
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
EDUARDO M. CACAYURAN, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this Petition for Review on Certiorari1 is the March 26,
2010 Decision2 of the Court of Appeals (CA) in CA-G.R. CV. No.
89732 which affirmed with modification the April 10, 2007
Decision3 of the Regional Trial Court (RTC) of Agoo, La Union,
Branch 31, declaring inter alia the nullity of the loan agreements
entered into by petitioner Land Bank of the Philippines (Land Bank)
and the Municipality of Agoo, La Union (Municipality).
The Facts
From 2005 to 2006, the Municipality’s Sangguniang Bayan (SB)
passed certain resolutions to implement a multi-phased plan
(Redevelopment Plan) to redevelop the Agoo Public Plaza (Agoo
Plaza) where the Imelda Garden and Jose Rizal Monument were
situated.
To finance phase 1 of the said plan, the SB initially passed Resolution
No. 68-20054 on April 19, 2005, authorizing then Mayor Eufranio
Eriguel (Mayor Eriguel) to obtain a loan from Land Bank and
incidental thereto, mortgage a 2,323.75 square meter lot situated at
the southeastern portion of the Agoo Plaza (Plaza Lot) as collateral.
To serve as additional security, it further authorized the assignment
of a portion of its internal revenue allotment (IRA) and the monthly
income from the proposed project in favor of Land Bank. 5 The
foregoing terms were confirmed, approved and ratified on October
4, 2005 through Resolution No. 139-2005.6 Consequently, on
November 21, 2005, Land Bank extended a ₱4,000,000.00 loan in
favor of the Municipality (First Loan),7 the proceeds of which were
used to construct ten (10) kiosks at the northern and southern
portions of the Imelda Garden. After completion, these kiosks were
rented out.8
On March 7, 2006, the SB passed Resolution No. 58-2006,9 approving
the construction of a commercial center on the Plaza Lot as part of
phase II of the Redevelopment Plan. To finance the project, Mayor
Eriguel was again authorized to obtain a loan from Land Bank,
posting as well the same securities as that of the First Loan. All
previous representations and warranties of Mayor Eriguel related to
the negotiation and obtention of the new loan10were ratified on
September 5, 2006 through Resolution No. 128-2006.11 In
consequence, Land Bank granted a second loan in favor of the
Municipality on October 20, 2006 in the principal amount of
₱28,000,000.00 (Second Loan).12
Unlike phase 1 of the Redevelopment Plan, the construction of the
commercial center at the Agoo Plaza was vehemently objected to by
some residents of the Municipality. Led by respondent Eduardo
Cacayuran (Cacayuran), these residents claimed that the conversion
of the Agoo Plaza into a commercial center, as funded by the
proceeds from the First and Second Loans (Subject Loans), were
"highly irregular, violative of the law, and detrimental to public
interests, and will result to wanton desecration of the said historical
and public park."13 The foregoing was embodied in a
Manifesto,14 launched through a signature campaign conducted by
the residents and Cacayuran.
In addition, Cacayuran wrote a letter15 dated December 8, 2006
addressed to Mayor Eriguel, Vice Mayor Antonio Eslao (Vice Mayor
Eslao), and the members of the SB namely, Violeta Laroya-Balbin,
Jaime Boado, Jr., Rogelio De Vera, James Dy, Crisogono Colubong,
Ricardo Fronda, Josephus Komiya, Erwina Eriguel, Felizardo
Villanueva, and Gerard Mamuyac (Implicated Officers), expressing
the growing public clamor against the conversion of the Agoo Plaza
into a commercial center. He then requested the foregoing officers to
furnish him certified copies of various documents related to the
aforementioned conversion including, among others, the resolutions
approving the Redevelopment Plan as well as the loan agreements
for the sake of public information and transparency.
Unable to get any response, Cacayuran, invoking his right as a
taxpayer, filed a Complaint16 against the Implicated Officers and
Land Bank, assailing, among others, the validity of the Subject Loans
on the ground that the Plaza Lot used as collateral thereof is
property of public dominion and therefore, beyond the commerce of
man.17
Upon denial of the Motion to Dismiss dated December 27, 2006,18 the
Implicated Officers and Land Bank filed their respective Answers.
For its part, Land Bank claimed that it is not privy to the Implicated
Officers’ acts of destroying the Agoo Plaza. It further asserted that
Cacayuran did not have a cause of action against it since he was not
privy to any of the Subject Loans.19
During the pendency of the proceedings, the construction of the
commercial center was completed and the said structure later
became known as the Agoo’s People Center (APC).
On May 8, 2007, the SB passed Municipal Ordinance No. 02-
2007,20 declaring the area where the APC stood as patrimonial
property of the Municipality.
The Ruling of the RTC
In its Decision dated April 10, 2007,21 the RTC ruled in favor of
Cacayuran, declaring the nullity of the Subject Loans.22 It found that
the resolutions approving the said loans were passed in a highly
irregular manner and thus, ultra vires; as such, the Municipality is
not bound by the same.23 Moreover, it found that the Plaza Lot is
proscribed from collateralization given its nature as property for
public use.24
Aggrieved, Land Bank filed its Notice of Appeal on April 23,
2007.25 On the other hand, the Implicated Officers’ appeal was
deemed abandoned and dismissed for their failure to file an
appellants’ brief despite due notice.26 In this regard, only Land
Bank’s appeal was given due course by the CA.
Ruling of the CA
In its Decision dated March 26, 2010,27 the CA affirmed with
modification the RTC’s ruling, excluding Vice Mayor Eslao from any
personal liability arising from the Subject Loans.28
It held, among others, that: (1) Cacayuran had locus standi to file his
complaint, considering that (a) he was born, raised and a bona fide
resident of the Municipality; and (b) the issue at hand involved
public interest of transcendental importance;29 (2) Resolution Nos.
68-2005, 139-2005, 58-2006, 128-2006 and all other related resolutions
(Subject Resolutions) were invalidly passed due to the SB’s non-
compliance with certain sections of Republic Act No. 7160, otherwise
known as the "Local Government Code of 1991" (LGC); (3) the Plaza
Lot, which served as collateral for the Subject Loans, is property of
public dominion and thus, cannot be appropriated either by the State
or by private persons;30 and (4) the Subject Loans are ultra vires
because they were transacted without proper authority and their
collateralization constituted improper disbursement of public funds.
Dissatisfied, Land Bank filed the instant petition.
Issues Before the Court
The following issues have been raised for the Court’s resolution: (1)
whether Cacayuran has standing to sue; (2) whether the Subject
Resolutions were validly passed; and (3) whether the Subject Loans
are ultra vires.
The Court’s Ruling
The petition lacks merit.
A. Cacayuran’s standing to sue
Land Bank claims that Cacayuran did not have any standing to
contest the construction of the APC as it was funded through the
proceeds coming from the Subject Loans and not from public funds.
Besides, Cacayuran was not even a party to any of the Subject Loans
and is thus, precluded from questioning the same.
The argument is untenable.
It is hornbook principle that a taxpayer is allowed to sue where there
is a claim that public funds are illegally disbursed, or that public
money is being deflected to any improper purpose, or that there is
wastage of public funds through the enforcement of an invalid or
unconstitutional law. A person suing as a taxpayer, however, must
show that the act complained of directly involves the illegal
disbursement of public funds derived from taxation. In other words,
for a taxpayer’s suit to prosper, two requisites must be met namely,
(1) public funds derived from taxation are disbursed by a political
subdivision or instrumentality and in doing so, a law is violated or
some irregularity is committed; and (2) the petitioner is directly
affected by the alleged act.31
Records reveal that the foregoing requisites are present in the instant
case.
First, although the construction of the APC would be primarily
sourced from the proceeds of the Subject Loans, which Land Bank
insists are not taxpayer’s money, there is no denying that public
funds derived from taxation are bound to be expended as the
Municipality assigned a portion of its IRA as a security for the
foregoing loans. Needless to state, the Municipality’s IRA, which
serves as the local government unit’s just share in the national
taxes,32 is in the nature of public funds derived from taxation. The
Court believes, however, that although these funds may be posted as
a security, its collateralization should only be deemed effective
during the incumbency of the public officers who approved the
same, else those who succeed them be effectively deprived of its use.
In any event, it is observed that the proceeds from the Subject Loans
had already been converted into public funds by the Municipality’s
receipt thereof. Funds coming from private sources become
impressed with the characteristics of public funds when they are
under official custody.33
Accordingly, the first requisite has been clearly met.
Second, as a resident-taxpayer of the Municipality, Cacayuran is
directly affected by the conversion of the Agoo Plaza which was
funded by the proceeds of the Subject Loans. It is well-settled that
public plazas are properties for public use34 and therefore, belongs to
the public dominion.35 As such, it can be used by anybody and no
one can exercise over it the rights of a private owner. 36 In this light,
Cacayuran had a direct interest in ensuring that the Agoo Plaza
would not be exploited for commercial purposes through the APC’s
construction. Moreover, Cacayuran need not be privy to the Subject
Loans in order to proffer his objections thereto. In Mamba v. Lara, it
has been held that a taxpayer need not be a party to the contract to
challenge its validity; as long as taxes are involved, people have a
right to question contracts entered into by the government.37
Therefore, as the above-stated requisites obtain in this case,
Cacayuran has standing to file the instant suit.
B. Validity of the Subject Resolutions
Land Bank avers that the Subject Resolutions provided ample
authority for Mayor Eriguel to contract the Subject Loans. It posits
that Section 444(b)(1)(vi) of the LGC merely requires that the
municipal mayor be authorized by the SB concerned and that such
authorization need not be embodied in an ordinance. 38
A careful perusal of Section 444(b)(1)(vi) of the LGC shows that
while the authorization of the municipal mayor need not be in the
form of an ordinance, the obligation which the said local executive is
authorized to enter into must be made pursuant to a law or
ordinance, viz:
Sec. 444. The Chief Executive: Powers, Duties, Functions and
Compensation. -
xxxx
(b) For efficient, effective and economical governance the purpose of
which is the general welfare of the municipality and its inhabitants
pursuant to Section 16 of this Code, the municipal mayor shall:
xxxx
(vi) Upon authorization by the sangguniang bayan, represent the
municipality in all its business transactions and sign on its behalf all
bonds, contracts, and obligations, and such other documents made
pursuant to law or ordinance; (Emphasis and underscoring
supplied)
In the present case, while Mayor Eriguel’s authorization to contract
the Subject Loans was not contained – as it need not be contained –
in the form of an ordinance, the said loans and even the
Redevelopment Plan itself were not approved pursuant to any law
or ordinance but through mere resolutions. The distinction between
ordinances and resolutions is well-perceived. While ordinances are
laws and possess a general and permanent character, resolutions are
merely declarations of the sentiment or opinion of a lawmaking
body on a specific matter and are temporary in nature.39 As opposed
to ordinances, "no rights can be conferred by and be inferred from a
resolution."40 In this accord, it cannot be denied that the SB violated
Section 444(b)(1)(vi) of the LGC altogether.
Noticeably, the passage of the Subject Resolutions was also tainted
with other irregularities, such as (1) the SB’s failure to submit the
Subject Resolutions to the Sangguniang Panlalawigan of La Union
for its review contrary to Section 56 of the LGC;41 and (2) the lack of
publication and posting in contravention of Section 59 of the LGC.42
In fine, Land Bank cannot rely on the Subject Resolutions as basis to
validate the Subject Loans.
C. Ultra vires nature of the Subject
Loans
Neither can Land Bank claim that the Subject Loans do not constitute
ultra vires acts of the officers who approved the same.
Generally, an ultra vires act is one committed outside the object for
which a corporation is created as defined by the law of its
organization and therefore beyond the powers conferred upon it by
law.43 There are two (2) types of ultra vires acts. As held in
Middletown Policemen's Benevolent Association v. Township of
Middletown:44
There is a distinction between an act utterly beyond the jurisdiction
of a municipal corporation and the irregular exercise of a basic
power under the legislative grant in matters not in themselves
jurisdictional. The former are ultra vires in the primary sense and
void; the latter, ultra vires only in a secondary sense which does not
preclude ratification or the application of the doctrine of estoppel in
the interest of equity and essential justice. (Emphasis and
underscoring supplied)
In other words, an act which is outside of the municipality’s
jurisdiction is considered as a void ultra vires act, while an act
attended only by an irregularity but remains within the
municipality’s power is considered as an ultra vires act subject to
ratification and/or validation. To the former belongs municipal
contracts which (a) are entered into beyond the express, implied or
inherent powers of the local government unit; and (b) do not comply
with the substantive requirements of law e.g., when expenditure of
public funds is to be made, there must be an actual appropriation
and certificate of availability of funds; while to the latter belongs
those which (a) are entered into by the improper department, board,
officer of agent; and (b)do not comply with the formal requirements
of a written contract e.g., the Statute of Frauds.45
Applying these principles to the case at bar, it is clear that the Subject
Loans belong to the first class of ultra vires acts deemed as void.
Records disclose that the said loans were executed by the
Municipality for the purpose of funding the conversion of the Agoo
Plaza into a commercial center pursuant to the Redevelopment Plan.
However, the conversion of the said plaza is beyond the
Municipality’s jurisdiction considering the property’s nature as one
for public use and thereby, forming part of the public dominion.
Accordingly, it cannot be the object of appropriation either by the
State or by private persons.46 Nor can it be the subject of lease or any
other contractual undertaking.47 In Villanueva v. Castañeda,
Jr.,48 citing Espiritu v. Municipal Council of Pozorrubio,49 the Court
pronounced that:
x x x Town plazas are properties of public dominion, to be devoted
to public use and to be made available to the public in general. They
are outside the commerce of man and cannot be disposed of or even
leased by the municipality to private parties.1âwphi1
In this relation, Article 1409(1) of the Civil Code provides that a
contract whose purpose is contrary to law, morals, good customs,
public order or public policy is considered void50 and as such,
creates no rights or obligations or any juridical
relations.51 Consequently, given the unlawful purpose behind the
Subject Loans which is to fund the commercialization of the Agoo
Plaza pursuant to the Redevelopment Plan, they are considered as
ultra vires in the primary sense thus, rendering them void and in
effect, non-binding on the Municipality.
At this juncture, it is equally observed that the land on which the
Agoo Plaza is situated cannot be converted into patrimonial
property – as the SB tried to when it passed Municipal Ordinance
No. 02-200752 – absent any express grant by the national
government.53 As public land used for public use, the foregoing lot
rightfully belongs to and is subject to the administration and control
of the Republic of the Philippines.54 Hence, without the said grant,
the Municipality has no right to claim it as patrimonial property.
Nevertheless, while the Subject Loans cannot bind the Municipality
for being ultra vires, the officers who authorized the passage of the
Subject Resolutions are personally liable. Case law states that public
officials can be held personally accountable for acts claimed to have
been performed in connection with official duties where they have
acted ultra vires,55 as in this case.
WHEREFORE, the petition is DENIED. Accordingly, the March 26,
2010 Decision of the Court of Appeals in CA-G.R. CV. No. 89732 is
hereby AFFIRMED.
SO ORDERED.
G.R. No. 196750
MA. ELENA R. DIVINAGRACIA, as Administratrix of the
ESTATE OF THE LATE SANTIAGO C.
DIVINAGRACIA, Petitioner,
vs.
CORONACION PARILLA, CELESTIAL NOBLEZA, CECILIA
LELINA, CELEDONIO NOBLEZA, MAUDE
NOBLEZA, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated March 26, 2009 and the Resolution3 dated April 6,
2011 of the Court of Appeals (CA) in CA-G.R. CV. No. 80167, 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, consequently,
dismissed Santiago C. Divinagracia's (Santiago) complaint for
judicial partition.
The Facts
Conrado Nobleza, Sr. (Conrado, Sr.) owned a 313-square meter
parcel of land located at Cor. Fuentes-Delgado Streets, Iloilo City
denominated as Lot 133-B-1-A and covered by Transfer 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, Cresencio and Conrado, Jr.;
and (b) the second was with Eusela Niangar with whom he had
seven (7) children, namely, Mateo, Sr., Coronacion, Cecilia, Celestial,
Celedonio, Ceruleo,7 and Cebeleo, Sr. Conrado, Sr. also begot three
(3) illegitimate children, namely, Eduardo, Rogelio, and
Ricardo.8 Mateo, Sr. pre-deceased Conrado, Sr. and was survived by
his children Felcon, Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and
Gaylord. Cebeleo, Sr. also pre-deceased his father and was survived
by his wife, Maude, and children Cebeleo, Jr. and Neobel. 9
According to Santiago, upon Conrado, Sr.’s death, Cresencio,
Conrado, Jr., Felcon (in representation of his father, Mateo, Sr., and
his siblings), Coronacion, Celestial, Cecilia, Rogelio, 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 with Deed of Sale 10 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, and Maude (in representation of his
husband, Cebeleo, Sr., and their children).12 On December 22, 1989,
the same parties executed a Supplemental Contract13 whereby the
vendors-heirs and Santiago agreed that out of the aforesaid
consideration, only 109,807.93 will be paid up front, 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 subject document registered
because of Ceruleo, Celedonio, and Maude’s refusal to surrender the
said title. This fact, coupled with Ceruleo, Celedonio, and Maude’s
failure to partition the subject land, prompted Santiago to file a
Complaint15 dated January 3, 1990 for judicial partition and for
receivership.16
For their part, Ceruleo, Celedonio, and Maude maintained that
Santiago had no legal right to file an action for judicial partition nor
compel them to surrender TCT No. T-12255 because, inter alia: (a)
Santiago did not pay the full purchase price of the shares sold to
him; and (b) the subject land is a conjugal asset of Conrado Sr. and
Eusela Niangar and, thus, only their legitimate issues may validly
inherit the same.17
The RTC Ruling
In a Decision18 dated November 29, 2002, the RTC ordered, among
others, the partition of the subject land between Santiago on the one
hand, and Ceruleo, Celedonio, Maude, and the heirs of Mateo, Sr.
(i.e., Felcon, et al.) on the other hand and, consequently, the
cancellation of TCT No. T- 12255 and the issuance of a new owner’s
duplicate certificate in favor of Santiago and the group of Ceruleo,
Celedonio, Maude, and the heirs of Mateo, Sr. 19 The RTC found that
through the subject document, Santiago became a co-owner of the
subject land and, as such, has the right to demand the partition of the
same. However, the RTC held that Santiago did not validly acquire
Mateo, Sr.’s share over the subject land, considering that Felcon
admitted the lack of authority to bind his siblings with regard to
Mateo, Sr.’s share thereon.20
On reconsideration21 of Ceruleo and herein respondents Celedonio,
Maude, Celestial, 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 22, 1989 by paying the amount of 337,887.73 upon the
partition of the subject land.
Dissatisfied, respondents appealed23 to the CA. Records are bereft of
any showing that the other heirs made similar appeals thereto.
The CA Ruling
In a Decision24 dated March 26, 2009, the CA set aside the RTC
Rulings and, consequently, dismissed Santiago’s complaint for
judicial partition.25 It held that Felcon’s siblings, as well as Maude’s
children, are indispensable parties to the judicial partition of the
subject land and, thus, their non-inclusion as defendants in
Santiago’s complaint would necessarily result in its dismissal. 26
Aggrieved, the heirs of Santiago27 moved for reconsideration28 which
was, however, denied in a Resolution29 dated April 6, 2011, hence,
this petition instituted by herein petitioner, Ma. Elena R.
Divinagracia, as administratrix of Santiago’s estate.
The Issues Before the Court
The issues for the Court’s resolution are whether or not the CA
correctly: (a) ruled that Felcon’s siblings and Cebeleo, Sr. and
Maude’s children are indispensable parties to Santiago’s complaint
for judicial partition; and (b) dismissed Santiago’s complaint for his
failure to implead said omitted heirs.
The Court’s Ruling
The petition is partly meritorious.
An indispensable party is one whose interest will be affected by the
court’s action in the litigation, and without whom no final
determination of the case can be had. The party’s interest in the
subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties’ that his legal presence as a party
to the proceeding is an absolute necessity. In his absence, there
cannot be a resolution of the dispute of the parties before the court
which is effective, complete, or equitable.30 Thus, 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 absent
parties but even as to those present.31
With regard to actions for partition, Section 1, Rule 69 of the Rules of
Court requires that all persons interested in the property shall be
joined as defendants, viz.:
SEC. 1. Complaint in action for partition of real estate. – A person
having the right to compel the partition of real estate may do so as
provided in this Rule, setting forth in his complaint the nature and
extent of his title and an adequate description of the real estate of
which partition is demanded and joining as defendants all other
persons interested in the property. (Emphasis and underscoring
supplied)
Thus, all the co-heirs and persons having an interest in the property
are indispensable parties; as such, an action for partition will not lie
without the joinder of the said parties.32
In the instant case, records reveal that Conrado, Sr. has the following
heirs, legitimate and illegitimate, who are entitled to a pro-indiviso
share in the subject land, namely: Conrado, Jr., 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. and, thus, pursuant to the
rules on representation under the Civil Code,33 their respective
interests shall be represented by their children, namely: (a) for
Mateo, Sr.: Felcon, Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and
Gaylord; and (b) for Cebeleo, Sr.: Cebeleo, Jr. and Neobel. 34
The aforementioned heirs – whether in their own capacity or in
representation of their direct ascendant – have vested rights over the
subject land and, as such, should be impleaded as indispensable
parties in an action for partition thereof. However, a reading of
Santiago’s complaint shows that as regards Mateo, Sr.’s interest, only
Felcon was impleaded, excluding therefrom his siblings and co-
representatives. Similarly, with regard to Cebeleo, Sr.’s interest over
the subject land, the complaint impleaded his wife, Maude, when
pursuant to Article 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 complaint for partition defective.
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 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. The court must initially settle the issue of
ownership, which is the first stage in an action for
partition.36 Indubitably, therefore, until and unless this issue of co-
ownership is definitely and finally resolved, it would be premature
to effect a partition of the disputed properties.37
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 shoes of the
vendors-heirs. Since his interest over the subject land is merely
derived from that 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 heirs
of Conrado, Sr., in Santiago’s complaint.
In fine, the absence of the aforementioned indispensable parties in
the instant complaint for judicial partition renders all subsequent
actions of the RTC null and void for want of authority to act, not
only as to the absent parties, but even as to those
present.38 Therefore, the CA correctly set aside the November 29,
2002 Decision and the April 4, 2003 Order of the RTC.
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. Heirs of Fian, Sr.,39 the
Court definitively explained that in instances of non-joinder of
indispensable parties, the proper remedy is to implead them and not
to dismiss the case, to wit:
The non-joinder of indispensable parties is not a ground for the
dismissal of an action. At any 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 implead an indispensable party despite the order of the
court, that court may dismiss the complaint for the plaintiff’s failure
to comply with the order.
The remedy is to implead the non-party claimed to be indispensable.
x x x40 (Underscoring supplied; emphases in the original)
In view of the foregoing, the correct course of action in the instant
case is to order its remand to the RTC for the inclusion of those
indispensable parties who were not impleaded and for the
disposition of the case on the merits.41

WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the

Decision dated March 26, 2009 and the Resolution dated April 6,
2011 of the Court of Appeals in CA-G.R. CV. No. 80167, setting aside
the Decision dated November 29, 2002 and the Order dated April 4,
2003 of the Regional Trial Court of Iloilo City, Branch 31 in Civil
Case No. 19003, are hereby AFFIRMED with MODIFICATION
REMANDING the instant case to the court a quo, which is hereby
DIRECTED to implead all indispensable parties and, thereafter,
PROCEED with the resolution of the case on the merits WITH
DISPATCH.

SO ORDERED.