Motion to Dismiss (Rule 16) NO. Rule 139-B states in pertinent part: §12.
Review
1. HALIMAO vs VILLANUEVA
FACTS:
Reynaldo Halimao wrote to the Chief Justice alleging
that Attorneys Daniel Villanueva and Inocencio Ferrer,
Jr. (respondents) without lawful authority and armed
with armalites and handguns, forcibly entered the Oo
Kian Tiok Compound in Cainta, Rizal, of which
complainant was a care taker. Complainant prayed that
an investigation be conductied and respondetns
disbarred. Affidavits of alleged witnesses were
attached to the complaint, including that of Danilo
Hernandez, a security guard of the compound who had
filed a similar complaint against respondents.
In a resolution, the Court required respondents to
comment. Repondents filed a comment claiming that
the complaint is a mere dubplication of that filed by
Danilo Hernandez, having arisen from the same
incident and the same acts complained of, and that
Hernande was the same person whose affidavit was
attached to this case. Respondent Ferrer claimed that
he was nowhere near the compound when the incident
took place. He submitted affidavits attesting to the fact
that he had spent the whole day in Makati with his
family.
Ferrer claimed that the two complaints were foled for
the purpose of harassing him because he was the
principal lawyer of Atty. Daniel Villanueva in two cases
before the Securities and Exchange Commission. The
cases involved the ownership and control of Filipinas
Textile Mills (Filtex), which is owned by Villanueva's
family and whose premises are the Oo Kian Tiok
compound. The case was reffered to the IBP for
investigation. The Board of Governors of the IBP
dismissed the case against respondents. It acted on
the basis of the report and recommendation of Atty.
Victor C. Fernandez, Investigating Commissioner, who
found that the complaint is barred by the decision in the
administrative case filed by Hernandez, which involved
the same incident.
The Commissioner held that for res judicata to apply,
absolute identity of parties is not required, it being
sufficient that there is identity of interests of the parties.
Complainant filed a motion for reconsideration which
was forwarded to the court. Respondents filed an
Opposition to the motion for reconsideration. As a
preliminary matter, they argue that the motion for
reconsideration is a mere scrap of paper, because it is
not provided for in Rule 139- B of the Rules of Court,
and that what complainant should instead have done
was to appeal to this Court.
ISSUE:
Whether the motion for reconsideration was a mere
scrap of paper
HELD:
and decision by the Board of Governors. (c) If the
respondent is exonerated by the Board or the
disciplinary sanction imposed by it is less than
suspension or disbarment [such as admonition,
reprimand, or fine] it shall issue a decision exonerating
respondent or imposing such sanction. The case shall
be deemed terminated unless upon petition of the
complainant or other interested party filed with the
Supreme Court within fifteen (15) days from notice of
the Board's resolution, the Supreme Court orders
otherwise.
Although Rule 139-B, §12(c) makes no mention of a
motion for reconsideration, nothing in its text or in its
history suggests that such motion is prohibited. It may
therefore be filed within 15 days from notice to a party.
Indeed, the filing of such motion should be encouraged
before resort is made to this Court as a matter of
exhaustion of administrative remedies, to afford the
agency rendering the judgment an opportunity to
correct any error it may have committed through a
misapprehension of facts or misappreciation of the
evidence.
Considering, however, that complainant's motion for
reconsideration was filed after the IBP had forwarded
the records of this case to this Court, it would be more
expedient to treat it as complainant's petition for review
within the contemplation of Rule 139-B, §12(c). Now
with regard to complainant's argument that it was error
for the Investigating Commissioner to dismiss the
complaint against respondents because, by filing a
motion to dismiss, respondents are deemed to have
admitted the allegations of the complaint against them,
suffice it to say that the rule that a motion to dismiss is
to be considered as a hypothetical admission of the
facts alleged in the complaint applies more particularly
to cases in which the ground for dismissal is the failure
of the complaint to state a cause of action. When it
appears on the face of the complaint that the plaintiff is
not entitled to any relief under the facts alleged, the
defendant may file a motion to dismiss hypothetically
admitting the facts alleged in the complaint. By filing
such a motion, the defendant in effect says that even
assuming the facts to be as alleged by the plaintiff, the
latter has failed to prove that he has a right which the
former has violated.
The rule does not unqualifiedly apply to a case where
the defendant files a motion to dismiss based on lack
of jurisdiction of the court or tribunal over the person of
the defendant or over the subject matter or over the
nature of the action; or on improper venue; or on lack
of capacity to sue of the plaintiff or on litis pendentia,
res judicata, prescription, unenforceability, or on the
allegation that the suit is between members of the
same family and no earnest efforts towards a
compromise have been made. In such cases, the
hypothetical admission is limited to the facts alleged in
the complaint which relate to and are necessary for the
resolution of these grounds as preliminary matters
involving substantive or procedural laws, but not to the
other facts of the case. On the other hand, when a
motion to dismiss is based on payment, waiver,
abandonment, release, compromise, or other form of
extinguishment, the motion to dismiss does not
hypothetically, but actually, admits the facts alleged in
the complaint, i.e., the existence of the obligation or
debt, only that the plaintiff claims that the obligation has
been satisfied. So that when a motion to dismiss on
these grounds is denied, what is left to be proven in
the trial is no longer the existence of the debt but the
fact vel non of payment by the defendant.
Here, the Investigating Commissioner properly
dismissed the complaint in this case on the ground of
res judicata. While the complainant (Danilo
Hernandez) in Administrative Case No. 3835 is
different from the complainant in the present case, the
fact is that they have an identity of interest, as the
Investigating Commissioner ruled.
2. TAN vs CA
FACTS:
Fernando Tan Kiat (private respondent) filed a
complaint for recovery of property against herein
petitioners (the Tans). He claimed that he owns the
subject properties as he bought it in 1954 from Mr. Tan
Keh but was unable to effect immediate transfer of title
in his own favor in view of his foreign nationality at the
time of the sale. He alleged that, in 1958, Mr. Tan Keh
executed a deed of sale to Remigio Tan, his brother
and father of petitioners, with the understanding that
the subject properties are to be held in trust by Remigio
for the benefit of private respondent.
Another contract of lease was executed by Mr. Tan Keh
and Remigio in favor of private respondent to further
safeguard the latter's interest on the subject properties,
but private respondent never paid any rental and no
demand whatsoever for the payment thereof had been
made on him. Remigio was killed in 1968. At his wake,
petitioners were reminded of private respondent's
ownership of the subject properties and they promised
to transfer the subject properties to private respondent
who by then had already acquired Filipino citizenship
by naturalization. Petitioners, however, never made
good their promise and had the properties transferred
to their names.
Petitioners filed a motion to dismiss the complaint
based on the following grounds: (1) the complaint
stated no cause of action; (2) the cause of action has
long prescribed; (3) the cause of action has long been
barred by a prior judgment; and, (4) the claim has been
waived, abandoned and/or extinguished by laches and
estoppel. Private respondents filed an Opposition to
Motion To Dismiss with Memorandum, and in turn
petitioners filed the Memorandum of Authorities. The
Trial Court granted the motion to dismiss the complaint
agreeing to the afore stated grounds.
On appeal to the Court of Appeals, the latter reversed
the trial court's decision and remanded the case for
further proceedings. Thus this petition for review.
ISSUES:
Whether the complaint stated a cause of action
HELD:
NO. There is merit to the petition. The flaw in the
conclusion of the CA that the complaint stated a cause
of action is that, while conveniently echoing the general
rule that averments in the complaint are deemed
hypothetically admitted upon the filing of a motion to
dismiss grounded on the failure to state a cause of
action, it did not take into account the equally
established limitations to such rule, i.e., that a motion
to dismiss does not admit the truth of mere epithets of
fraud; nor allegations of legal conclusions; nor an
erroneous statement of law; nor mere inferences or
conclusions from facts not stated; nor mere
conclusions of law; nor allegations of fact that falsity of
which is subject to judicial notice; nor matters of
evidence; nor surplusage and irrelevant matter; nor
scandalous matter inserted merely to insult the
opposing
party; nor to legally impossible facts; nor to facts which
appear unfounded by a record incorporated in the
pleading, or by a document referred to; and nor to
general averments contradicted by more specific
averments.
A more judicious resolution of a motion to dismiss,
therefore, necessitates that the court be not restricted
to the consideration of the facts alleged in the
complaint and inferences fairly deducible therefrom.
Courts may consider other facts within the range of
judicial notice as well as relevant laws and
jurisprudence which the courts are bound to take into
account, and they are also fairly entitled to examine
records/documents duly incorporated into the
complaint by the pleader himself in ruling on the
demurrer to the complaint.
OTHER ISSUES:
WHY PRIVATE RESPONDENT ISN'T THE OWNER:
The execution of a lease contract between Remigio
Tan as lessor and private respondent as lessee over
the subject properties, the existence of which is
established not only by a copy thereof attached to
petitioners' motion to dismiss but by private
respondent's own admission reflected in paragraph 6
of the complaint, already belies private respondent's
claim of ownership. This is so because Article 1436 of
the Civil Code. Section 2, Rule 131 of the Rules of
Court and settled jurisprudence consistently instruct
that a lessee is estopped or prevented from disputing
the title of his landlord.
Private respondent alleged that he bought the subject
properties from Alejandro Tan Keh in 1954 but
nonetheless failed to present any document evidencing
the same, while Remigio Tan, as the other buyer, had
in his name TCTvNo. 53284 duly registered in the
Registry of Deeds of Manila on October 13, 1958.
RemigiovTan, beyond doubt, was the buyer entitled to
the subject properties since the prevailing rule is that in
the double sale of real property, the buyer who is in
possession of a Torrens title and had the deed of sale
registered must prevail.
Petitioners are in possession of TCT No. 117898 which
evidences their ownership of the subject properties. On
the other hand, private respondent relies simply on the
allegation that he is entitled to the properties by virtue
of a sale between him and Alejandro Tan Keh who is
now dead. Obviously, private respondent will rely on
parol evidence which, under the circumstances
obtaining, cannot be allowed without violating the
"Dead Man's Statute" found in Section 23, Rule 130 of
the Rules of Court.
(GRANTING THERE WAS A CAUSE OF ACTION)
WHETHER IT HAS PRESCRIBED: YES.
In this case, private respondent's occupation of the
subject properties was never in the concept of an
owner since he was a mere lessee who, as herein
before discussed, is estopped from denying the title of
Remigio Tan as ownerlessor. At best, private
respondent's stay on the properties as lessee was by
"license or by mere tolerance" which, under Article
1119 of the Civil Code, "shall not be available for the
purposes of possession." It thus becomes evident that
the filing of private respondent's complaint in 1993 —
thirty five (35) years after TCT No. 53284 in the name
of Remigio Tan was registered and eighteen (18) years
after the issuance of TCT No. 117898 in the names of
petitioners — was way beyond the ten (10)-year time
limit within which reconveyance of property based on
an implied trust should be instituted. Private
respondent's cause of action, assuming that it exists,
has clearly prescribed.
(GRANTING THERE WAS A CAUSE OF ACTION)
WHETHER THERE WAS WAIVER OF CAUSE OF
ACTION: YES, BY ESTOPPEL. Private respondent's
possession of the subject properties cannot be made
the basis to deflect the effects of laches because he is
a mere lessee who, to repeat, cannot assert any
adverse claim of ownership over the subject properties
against the lessor-owner. His mistake, if it is one, is
that he tarried for thirty (30) years before formally laying
claim to the subject properties before the court.
Considerable delay in asserting one's right before a
court of justice is strongly persuasive of the lack of
merit of his claim, since it is human nature for a person
to enforce his right when the same is threatened or
invaded. Thus, private respondent is estopped by
laches from questioning the ownership of the subject
properties.
3. ASIA PRODUCTION CO. vs PAÑO
FACTS:
Lolita Lee Le Hua and Alberto Dy, private respondents,
who claimed to be the owners of a building constructed
on a lot leased from Lucio San Andres and located in
Valenzuela, Bulacan, offered to sell the building to the
petitioners for P170,000.00. Petitioners agreed
because of private respondents' assurance that they
will also assign to the petitioners the contract of lease
over the land.
The above agreement and promise were not reduced
to writing. Private respondents undertook to deliver to
the petitioners the deed of conveyance over the
building and the deed of assignment of the contract of
lease within 60 days from the date of payment of the
downpayment. The balance was to be paid in monthly
installments. Petitioners paid the downpayment and
issued eight (8) postdated checks drawn against the
Equitable Banking Corporation for the payment of the
eight (8) monthly installments.
Relying on the good faith of private respondents,
petitioners constructed a weaving factory on the leased
lot. Unfortunately, private respondents, despite
extensions granted, failed to comply with their
undertaking to execute the deed to sale and to assign
the contract despite the fact that they were able to
encash the checks. Worse, the lot owner made it plain
to petitioners that he was unwilling to give consent to
the assignment of the lease unless petitioners agreed
to certain onerous terms, such as an increase in rental,
or the purchase of the land at a very unconscionable
price.
Petitioners were thus compelled to request for a stop
payment order of the remaining checks. Succeeding
negotiations to save the transaction proved futile by
reason of the continued failure of private respondents
to execute the deed of sale of the building and the deed
of assignment of the contract of lease. Petitioners
removed all their property, machinery and equipment
from the building, vacated the same and returned its
possession to private respondents. Petitioners
demanded from the latter the return of their partial
payment for the purchase price of the building. Private
respondents refused to return it.
Hence, petitioners, filed against private respondents a
complaint for its recovery and for actual, moral and
exemplary damages and attorney's fees with the then
Court of First Instance (now Regional Trial Court) of
Quezon City. Private respondent Lolita Lee Le Hua did
not file an Answer; hence, she was declared in default.
Private respondent Alberto Dy filed a motion to dismiss
the complaint on the ground that the claim on which the
action is based — an alleged purchase of a building
which is not evidenced by any writing — cannot be
proved by parol evidence since Article 1356 in relation
to Article 1358 of the Civil Code requires that it should
be in writing. In their opposition to said motion,
petitioners argue that their complaint is essentially for
collection of a sum of money; it does not seek to
enforce the sale, but aims to compel private
respondents to refund a sum of money which was paid
to them as purchase price in a sale which did not
materialize by reason of their bad faith. Furthermore,
the execution of the document was an undertaking of
the private respondents, which they refused to comply
with. Hence, they cannot now be heard to complain
against something which they themselves brought
about.
Respondent Judge granted the motion to dismiss on
the ground that the complaint is barred by the Statute
of Frauds, stating that the contract in this case is
condemned by the Statutes of Fraud as it involves not
merely the sale of real property (the building), it also
includes an alleged lease agreement that must
certainly be for more than one year (See Art. 1403, No.
2, subparagraph e, New Civil Code).
Plaintiffs cannot avoid the Statutes of Fraud by saying
that this is merely an action for the collection of a sum
of money. To be entitled to the sum of P50,000.00, it is
necessary to show that such contract was executed
and the same was violated but — plaintiffs are
prevented from proving this alleged agreement by parol
evidence.
Their motion for reconsideration having been denied,
petitioners filed this petition alleging therein as ground
therefor grave abuse of discretion on the part of
respondent Judge. Private respondent Alberto Dy filed
his Comment to the petition; Private respondent Lolita
Lee Le Hua was considered to have waived her right to
file her comment to the petition. Petitioners were
subsequently required to file their Brief, which they
complied with. Private respondents did not file their
Brief.
ISSUE:
Whether an action for the refund of partial payments of
the purchase price of a building covered by an oral
agreement to sell it with an oral promise to assign the
contract of lease on the lot where the building is
constructed is barred by the Statute of Frauds
HELD:
NO it is not. SC found merit in the petition. Article 1403
of the Civil Code declares the following contracts,
among others, as unenforceable, unless they are
ratified:
(2) Those that do not comply with the Statute of Frauds
as set forth in this number. In the following cases an
agreement hereafter made shall be unenforceable by
action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a
secondary evidence of its contents:
(a) An agreement that by its terms is not to be
performed within a year from the making thereof;
(b) A special promise to answer for the debt, default, or
miscarriage of another;
(c) An agreement made in consideration of marriage,
other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or
things in action, at a price not less than five hundred
pesos, unless the buyer accept and receive part of
such goods and chattels, or the evidences, or some of
them, of such things in action, or pay at the time some
part of the purchase money; but when a sale is made
by auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is
made, it is a sufficient memorandum;
(e) An agreement for the leasing for a longer period
than one year, or for the sale of real property or of an
interest therein;
(f) A representation to the credit of a third person.
It is well-settled in this jurisdiction that the Statute of
Frauds is applicable only to executory contracts not to
contracts that are totally or partially performed. If a
contract has been totally or partially performed, the
exclusion of parol evidence would promote fraud or bad
faith, for it would enable the defendant to keep the
benefits already derived by him form the transaction in
litigation, and, at the same time, evade the obligations,
responsibilities or liabilities assumed or contracted by
him thereby.
There can be no dispute that the instant case is not for
specific performance of the agreement to sell the
building and to assign the leasehold right. Petitioners
merely seek to recover their partial payment for the
agreed purchase price of the building. The action is
definitely not one for specific performance, hence the
Statute of Frauds does not apply. And even if it were
for specific performance, partial execution thereof by
petitioners effectively bars the private respondents
from invoking it.
Besides, even if the action were for specific
performance, it was premature for the respondent
Judge to dismiss the complaint by reason of the Statute
of Frauds despite the explicit allegations of partial
payment. For obvious reasons, it is not enough for a
party to allege partial performance in order to hold that
there has been such performance and to render a
decision declaring that the Statute of Frauds is
inapplicable. But neither is such party required to
establish such partial performance by documentary
proof before he could have the opportunity to introduce
oral testimony on the transaction.
SC thus ruled that an action by a withdrawing party to
recover his partial payment of the consideration of a
contract, which is otherwise unenforceable under the
Statute of Frauds, by reason of the failure of the other
contracting party to comply with his obligation, is not
covered by the Statute of Frauds.

4. SUNVILLE TIMBER PRODUCTS, INC., vs.
ABAD
FACT:
The petitioner (Sunville Timber Products Inc) was
granted a Timber License Agreement (TLA),
authorizing it to cut, remove and utilize timber within the
concession area covering 29,500 hectares of forest
land in Zamboanga del Sur, for a period of ten years.
Herein private respondents (Isidro Gilbolingo and
Robustiano Bugtai) filed a petition with the DENR for
the cancellation of the TLA on the ground of serious
violations of its conditions and the provisions of forestry
laws and regulations.
The same charges were subsequently made, also by
private respondents, in a complaint for injunction with
damages against the petitioner with the Regional Trial
Court of Pagadian City.
The petitioner moved to dismiss this case on three
grounds, to wit: 1) the court had no jurisdiction over the
complaint; 2) the plaintiffs had not yet exhausted
administrative remedies; and 3) the injunction sought
was expressly prohibited by section 1 of PD 605.
Judge Alfonso G. Abad denied the motion to dismiss
and the subsequent motion for reconsideration. The
petitioner then elevated the matter to the respondent
Court of Appeals, which sustained the trial court in a
decision. The CA held that the doctrine of exhaustion
of administrative remedies was not without exception
and pointed to the several instances approved by this
Court where it could be dispensed with. The
respondent court found that in the case before it, the
applicable exception was the urgent need for judicial
intervention.
The reason for this urgent need is that the adverse
effects of the logging operations of the defendant have
already covered a wider area than that feared to be
adversely affected by the City Council of Pagadian
City. When the grant of logging concessions started, so
was the denudation of forests. It is common knowledge
that heavy floods have occurred in areas/places
adjoining logging concessions.
Thus, it is urgent that indiscriminate logging be
stopped. Irreparable damage would ensue unless the
court intervenes. Reliance on the DENR may not be
enough, judging from its inaction on the council's
request seven years back. Also, Section 1 of PD 605
was held invalid in the case of De Lara v. Cloribel for
an encroachment on the judicial power vested in the
Supreme Court and the lower courts by Article VIII,
Section 1, of the Constitution.
The petitioner is now before the Court, contending that
the doctrine of exhaustion of administrative remedies
was not correctly applied and that the declaration of the
unconstitutionality of Section 1 of PD 605 was
improper.
ISSUE:
Whether the doctrine of exhaustion of administrative
remedies was correctly applied
HELD:
NO it as not. The SC sided with petitioner. The doctrine
of exhaustion of administrative remedies calls for resort
first to the appropriate administrative authorities in the
resolution of a controversy falling under their
jurisdiction before the same may be elevated to the
courts of justice for review. Non-observance of the
doctrine results in lack of a cause of action, which is
one of the grounds allowed in the Rules of Court for the
dismissal of the complaint. The deficiency is not
jurisdictional. Failure to invoke it operates as a waiver
of the objection as a ground for a motion to dismiss and
the court may then proceed with the case as if the
doctrine had been observed.
One of the reasons for the doctrine of exhaustion is the
separation of powers, which enjoins upon the Judiciary
a becoming policy of non-interference with matters
coming primarily (albeit not exclusively) within the
competence of the other departments. The theory is
that the administrative authorities are in a better
position to resolve questions addressed to their
particular expertise and that errors committed by
subordinates in their resolution may be rectified by their
superiors if given a chance to do so.
A no less important consideration is that administrative
decisions are usually questioned in the special civil
actions of certiorari, prohibition and mandamus, which
are allowed only when there is no other plain, speedy
and adequate remedy available to the petitioner. It may
be added that strict enforcement of the rule could also
relieve the courts of a considerable number of
avoidable cases which otherwise would burden their
heavily loaded dockets.
As correctly suggested by he respondent court,
however, there are a number of instances when the
doctrine may be dispensed with and judicial action
validly resorted to immediately. Among these
exceptional cases are:
1) when the question raised is purely legal;
2) when the administrative body is in estoppel;
3) when the act complained of is patently illegal;
4) when there is urgent need for judicial intervention;
5) when the claim involved is small;
6) when irreparable damage will be suffered;
7) when there is no other plain, speedy and adequate
remedy;
8) when strong public interest is involved;
9) when the subject of the controversy is private land;
and
10) in quo warranto proceedings.
Private respondents submits that their complaint
comes under the exceptions because forestry laws do
not require observance of the doctrine as a condition
precedent to judicial action; the question they are
raising is purely legal; application of the doctrine will
cause great and irreparable damage; and public
interest is involved.
HOWEVER, even if it be assumed that the forestry
laws do not expressly require prior resort to
administrative remedies, the reasons for the doctrine
above given, if nothing else, would suffice to still
require its observance. Even if such reasons were
disregarded, there would still be the explicit language
of pertinent laws vesting in the DENR the power and
function "to regulate the development, disposition,
extraction, exploration and use of the country's forests"
and "to exercise exclusive jurisdiction" in the
"management and disposition of all lands of the public
domain," and in the Forest Management Bureau
(formerly the Bureau of Forest Development) the
responsibility for the enforcement of the forestry laws
aid regulations here claimed to have been violated.
This comprehensive conferment clearly implies at the
very least that the DENR should be allowed to rule in
the first instance on any controversy coming under its
express powers before the courts of justice may
intervene.
The argument that the questions raised in the petition
are purely legal is also not acceptable. The private
respondents have charged that the petitioner has
violated the terms and conditions of the TLA and the
provisions of forestry laws and regulations. The charge
involves factual issues calling for the presentation of
supporting evidence.
As for the alleged urgent necessity for judicial action
and the claimed adverse impact of the case on the
national interest, the record does not show that the
petitioners have satisfactorily established these
extraordinary circumstances to justify deviation from
the doctrine by exhaustion of administrative remedies
and immediate resort to the courts of justice. In fact,
this particular submission must fall flat against the
petitioner's uncontested contention that it has since
1988 stopped its operations under the TLA in
compliance with the order of the DENR.
There in no question that Civil Case No. 2732 comes
within the jurisdiction of the respondent court.
Nevertheless, as the wrong alleged in the complaint
was supposedly committed as a result of the unlawful
logging activities of the petitioner, it will be necessary
first to determine whether or not the TLA and the
forestry laws and regulations had indeed been violated.
To repeat for emphasis, determination of this question
is the primary responsibility of the Forest Management
Bureau of the DENR. The application of the expertise
of the administrative agency in the resolution of the
issue raised is a condition precedent for the eventual
examination, if still necessary, of the same question by
a court of justice.
5. MUNICIPALITY OF BIÑAN, LAGUNA vs.
COURT OF APPEALS
FACTS:
Petitioner filed a case for unlawful detainer, with a
prayer for a writ of preliminary mandatory injunction,
against private respondent Jesus M. Garcia in the
Municipal Trial Court of Biñan, Laguna alleging that it
was no longer amenable to the renewal of its 25-year
lease contract with private respondent over the
premises involved because of its pressing need to use
the same for national and provincial offices therein.
Private respondent filed his answer to the complaint
contending that the contract of lease for the original
period of 25 years had not yet expired and, assuming
that it had expired, he has exercised his option to stay
in the premises for another 25 years as expressly
provided in the said contract.
Private respondent filed this time a "Motion for
Preliminary Hearing as if a Motion to Dismiss Has Been
Filed" on the ground that the complaint states no cause
of action, reiterating their argument in their answer.
After some further exchanges consisting of petitioner's
opposition to private respondent's aforesaid motion for
preliminary hearing, the latter's reply thereto, and the
parties' respective position papers, the municipal trial
court rendered judgment ordering private respondent
to vacate the premises.
Private respondent filed a "Manifestation/Motion"
before said trial court praying that the issues raised in
the motion for preliminary hearing, apparently because
it was in the nature of a motion to dismiss, be first
resolved instead of rendering judgment on the
pleadings. Thereafter, when private respondent
received a copy of the decision of the trial court, he filed
a notice of appeal to the Regional Trial Court of
Laguna.
Petitioner filed before said court a motion for execution
pending appeal, which was granted. The following day
a writ of execution was issued directing the deputy
sheriff or his duly authorized representative to enforce
the terms of the judgment.
Private respondent filed with the Court of Appeals a
petition for certiorari, with a prayer for the issuance of
a writ of preliminary injunction, assailing the aforesaid
order of execution pending appeal on the ground that
petitioner failed to furnish private respondent with a
copy of the motion therefor filed by it contrary to
Section 6, Rule 15 of the Rules of Court, hence the
invalidity of the lower court's order which granted the
writ of execution. Petitioner seasonably filed its
comment and/or opposition to said petition.
The CA rendered judgments etting aside the
questioned order for being violative of the requirement
in Section 6, Rule 15 of the Rules of Court which
provides that no motion shall be acted upon by the
court without proof of prior notice thereof to the adverse
party. Aside from annulling the controversial order,
however, respondent court likewise annulled the
judgment of the RTC. Respondent court granted the
second additional relief on the ground that the decision
is contrary to the agreement of the parties which should
be considered the law between them.
Petitioner duly filed a motion for reconsideration of said
judgment on the ground that the Court of Appeals
should have confined itself to the questioned order of
the respondent regional trial court. As earlier stated,
respondent court denied said motion, hence, the
instant petition wherein the petitioner contends that the
Court of Appeals overstepped the bounds of its
authority in annulling the decision of the municipal trial
court even if said decision was not an issue raised by
private respondent.
In his comment, private respondent refutes petitioner's
contention and claims that the issue of the merits of the
judgment of the municipal trial court was sufficiently
raised and controverted, hence, respondent court was
not in error when it passed judgment on the same.
Moreover, private respondent makes the riposte that it
is a cherished rule in procedural law that a controversy
should be settled in one single proceeding in order to
avoid multiplicity of suits.
ISSUE:
Whether CA was correct in annulling the decision of the
MTC along with annulling the motion for execution
HELD:
NO, CA was not correct . SC found merit with the
instant petition. The CA has no jurisdiction in a
certiorari proceeding involving an incident in a case to
rule on the merits of the main case itself which was not
on appeal before it. The validity of the order of the
regional trial court, authorizing the issuance of a writ of
execution during the pendency of the appeal therein
was the sole issue raised in the petition for certiorari
filed in respondent Court of Appeals. The allegation
that the decision of the municipal trial court was
improvidently and irregularly issued was raised by
private respondent only as an additional or alternative
argument to buttress his theory that the issuance of a
discretionary writ of execution was not in order, as can
be gleaned from the text of said petition itself.
Further, even assuming that the said issue was
squarely raised and sufficiently controverted, the same
cannot be considered a proper subject of a special civil
action for certiorari under Rule 65 which is limited only
to challenges against errors of jurisdiction. The
jurisdiction of the municipal trial court over the
ejectment case filed by the petitioner against private
respondent is not disputed. Thus, assuming that the
said lower court committed a mistake on the merits of
the case, it was nonetheless in the due exercise of its
jurisdiction. The error, if any was committed by the trial
court, was at most one of judgment or procedure
correctible by ordinary appeal.
Neither can it be said that the lower court committed a
grave abuse of discretion or exceeded its jurisdiction
when it failed to conduct a preliminary hearing, as
prayed for in private respondent's "Motion for
Preliminary Hearing as if a Motion to Dismiss Has Been
Filed," before summarily rendering judgment on the
merits of the case.
Section 5, Rule of the Rules of Court pertinently
provides: Any of the grounds for dismissal provides for
in this Rule, except improper venue, preliminary
hearing may be had thereon as if a motion to dismiss
had been filed.
The afore quoted provision allows the grounds for a
motion to dismiss to be set up as affirmative defenses
in the answer if no motion to dismiss has been filed.
However, contrary to the claim of private respondent,
the preliminary hearing permitted under the said
provision is not mandatory even when the same is
prayed for. It rests largely on the sound discretion of
the trial court. The use of the word "may" in said
provision shows that such a hearing is not a matter of
right demandable from the trial court.
Moreover, a preliminary hearing on an affirmative
defense for failure to state a cause of action is not
necessary. It is a well-settled rule that in a motion to
dismiss based on the ground that the complaint fails to
state a cause of action, the question submitted to the
court for determination is the sufficiency of the
allegations in the complaint itself. Whether those
allegations are true or not is beside the point, for their
truth is hypothetically admitted by the motion. The
issue rather is: admitting them to be true, may the court
render a valid judgment in accordance with the prayer
of the complaint?
Stated otherwise, the sufficiency of the cause of action
must appear on the face of the complaint in order to
sustain a dismissal on this ground. No extraneous
matter may be considered nor facts not alleged, which
would require evidence and therefore, must be raised
as defenses and await the trial. In other words, to
determine sufficiency of the cause of action, only the
facts alleged in the complaint, and no other should be
considered.
The respondent Judge departed from this rule in
conducting a hearing and in receiving evidence in
support of private respondent's affirmative defense,
that is, lack of cause of action.
If a judgment of a municipal trial court is sought to be
reviewed, the remedy is an appeal to the regional trial
court, not the filing of a special civil action of certiorari.
 6. NATIONAL POWER CORPORATION vs
CA
FACTS:
Petitioner FINE Chemicals (Phils.) Inc. (FINE) is a
corporation registered with the Board of Investments
(BOI) and engaged in the manufacture of plastics for
export. It filed an application for direct power
connection with herein co-petitioner National Power
Corporation (NPC). NPC, acting on the same, wrote a
letter to herein private respondent Manila Electric
Company (MERALCO), wherein it stated that as per
Memorandum of Understanding between NPC and
BOI, the NPC is authorized to connect directly to its
system qualified industrial consumers. However, due
to its policy not to compete directly with its customers,
NPC requests that it be informed whatever definite
decision MERALCO is contemplating on the requests
of FINE and of Rizal Cement for such direct
connection.
MERALCO advised NPC through letter that they are
not in a position to grant the request since to allow large
consumers to tap directly to NPC will mean foregoing
the share of the subsidy burden which will ultimately be
borne by the other remaining large consumers, and
that it will also mean costly duplication of facilities.
MERALCO further stated (also in a letter), among
others, that the direct connection of industries under
BOI-NPC memorandum of understanding
presupposes the inability of the utility/cooperatives to
meet certain standard of financial and technical
capability, both of which are not true in the case of
MERALCO.
NPC informed MERALCO through letter that in the
absence of a clear- cut policy that will inhibit NPC from
acceding to the said request, NPC is now preparing
and will put up the necessary facilities to supply power
to FINE; and that they are now negotiating the terms
and conditions of the supply.
MERALCO, in a letter, registered its strong objection;
reiterated its assurance that it is financially and
technically capable of serving the power requirements
of FINE; and with the statement that a draft executive
order creating the Energy Regulatory Board has been
prepared and may be issued momentarily, urged NPC
to hold off any further action towards serving applicant
directly, lest it will pre-empt that Board from
implementing government prescription on this issue.
But, NPC started to supply the electric requirements of
FINE by direct power supply connection. Hence,
MERALCO filed with the Regional Trial Court of Pasig,
a petition for Prohibition, mandamus and Damages
with Preliminary Injunction against petitioners NPC and
FINE.
FINE filed its opposition maintaining that the
application for injunctive relief had become moot and
academic since, prior to the filing of the petition, the
direct power service had already been consummated
and the requisite power lines and facilities of NPC had
long been installed and fully operational.
Accordingly, MERALCO amended its petition by
incorporating therein an application for a writ of
preliminary mandatory injunction.
FINE moved to dismiss the amended petition on the
ground of insufficiency of the allegations in the petition
to plead a cause of action. NPC adopted FINE's motion
to dismiss.
Meanwhile, trial judge allowed reception of
MERALCO's evidence in support of its application for a
writ of preliminary mandatory injunction, over FINE's
objection. MERALCO was granted leave to file its
second amended petition so as to incorporate this time
an allegation of grave and irreparable injury.
With the admission of MERALCO's second amended
petition, FINE filed a manifestation adopting its motion
to dismiss as its motion to dismiss the second
amended petition. On the other hand, MERALCO filed
its opposition thereto.
Respondent Judge denied the motion to dismiss saying
that there is a cause of action. He further stated that:
“Well settled rule is that when the motion to dismiss is
anchored on lack of cause of action, the facts alleged
in the complaint are assumed and no other fact can be
considered in resolving said motion.
After going carefully over the complaint, the Court
believes, and so holds, that if not properly traversed
it can render a valid judgment thereon.” FINE, without
filing a motion for reconsideration filed with the CA a
Petition for Certiorari, Prohibition and mandamus.
NPC, on the other hand, filed a Petition for Leave to
File Intervention to Adopt Petition and Motion for
Extension of Time to File Supplemental Petition.
The CA dismissed the petition for certiorari, prohibition
and mandamus. Hence, the instant petition.
ISSUE:
Whether MERALCO's petition in the lower court should
be dismissed.
HELD:
YES, it should be dismissed. It is significant that this
case is elevated to the Court of Appeals and now to this
Court because of the denial of petitioner's Motion to
Dismiss the amended petition of MERALCO.
Unquestionably, it is but an incident to the main case
and the ordinary procedure would have been to file an
answer, go to trial and if the decision is adverse,
reiterate the issue on appeal.
But this general rule is subject to certain exceptions,
among which are, if the court in denying the motion to
dismiss acts without or in excess of jurisdiction or with
grave abuse of discretion. The reason is, it would be
unfair to require the defendant to undergo the ordeal
and expense of trial under such circumstances as the
remedy of appeal would not be plain and adequate.
More importantly, petitioner's motion to dismiss is
based on the ground that the complaint states no cause
of action, so that there is no need for a full blown trial.
Held:
MERALCO's claim in its petition for Prohibition and
mandamus before the Regional Trial Court is anchored
on its standing as a holder of a franchise for the sale
and distribution of electric power in various areas of the
country including Calamba, Laguna. MERALCO
asserts that it has the right to be heard on any
application for direct power connection and to defeat
such application by showing its ability or willingness to
match the rates of NPC. As earlier stated, it also
expressed the fear that to allow large consumers to tap
directly to NPC will mean foregoing the share of the
subsidy burden which will ultimately be borne by the
other consumers.
As consistently ruled by this Court pursuant to P.D. No.
380 as amended by P.D. No. 395, NPC is statutorily
empowered to directly service all the requirements of a
BOI registered enterprise provided that, first, any
affected private franchise holder is afforded an
opportunity to be heard on the application therefor and
second, from such a healing, it is established that said
private franchise holder is incapable or unwilling to
match the reliability and rates of NPC for directly
serving the latter.
While initially, MERALCO may have been deprived of
the right to be heard in an administrative proceeding,
but in subsequent proceedings before the courts, it had
been given ample opportunity to show that it is capable
and wining to match NPC rates but failed. On the
contrary, in a hearing before the trial court or the
issuance of preliminary mandatory injunction,
MERALCO thru its witness admitted on cross
examination that it cannot charge the same rate NPC
is charging because MERALCO has to make a profit
on its investment.
In this Court, MERALCO never committed itself by
categorically stating that it can match NPC rates.
Instead it confined itself to the statement that it is
financially and technically capable of meeting FINE's
power requirements while in its Memorandum it avers
that "At this point in time, it would be highly improper to
ask Meralco whether it can match the rate of NPC."
Verily, the intent to evade the issue and to avail of
technicalities to annul the contract between FINE and
NPC are clearly evident so that no useful purpose will
be served to remand this case to the trial court only to
have the latter's decision raised again to the Court of
Appeals and then to this Court.
Ultimately the issue of exclusivity has already been laid
to rest by this Court with the established principle that
the exclusive nature of any public franchise is not
favored and that in all grants by the government to
private corporations, the interpretation of rights,
privileges or franchises is taken against the grantee.)
7. PACSPORT PHILS. V. NICCOLO SPORTS
Facts:
Petitioner, supplier of sports product entered an
exclusive retail agreement with herein respondent to
supply the latter on a consignment basis. In some time,
despite of petitioner’s several demand for payment
respondent failed to adhere the same.
Hence petitioner filed before the RTC of Makati for
damages and pre-terminated the contract. Therefore,
respondent urge to file a case before the RTC of QC
for Breach of contract. Both parties filed a motion to
dismiss the complaint on both opposing claims on the
grounds of litis pendentia.
Issue:
Which of the either case should have been dismissed?
Ruling:
The claims under QC RTC. The firmly established rule1
is that one of two actions will be dismissed on ground
of litis pendentia if the following requisites concur: (a)
identity of parties, or at least such as representing the
same interest in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded
on the same facts; and (c) the identity in the two (2)
cases should be such that judgment in one would
amount to res judicata in the other.
This Court held in several cases that when the
elements of litis pendentia exist, the action filed later
should be abated to avoid multiplicity of suits. This is
based on the maxim Qui prior est tempore, potior est
jure (He who is before in time is the better in right). This
is the general rule.
8. HACIENDA BIGAA, INC. v EPIFANIO V.
CHAVEZ
FACTS:
Petitioner Hacienda Bigaa, Inc. filed with the MTC of
Calatagan, Batangas a complaint for ejectment and
damages with application for writ of preliminary
injunction against respondent Epifanio V. Chavez. The
complaint alleged that Chavez, by force, strategy
and/or stealth, entered into the premises of Hacienda
Bigaa's properties covered by Transfer Certificate of
Title (TCT) Nos. 44695 and 56120 by cutting through a
section of the barbed wire fence surrounding the
properties and destroying the lock of one of its gates,
subsequently building a house on the property, and
occupying the lots without the prior consent and
against the will of Hacienda Bigaa.
The records show that the lots were originally covered
by TCT No. 722 owned by Ayala y Cia and/or Alfonso,
Jacobo and Enrique Zobel, known as Hacienda
Calatagan. They later acquired excess lands under
same title. The Ayalas and/or the Zobels then later
ordered the subdivision of the hacienda, including
these excess areas, and sold the subdivided lots to
third parties. Among the buyers or transferees of the
expanded and subdivided areas was Hacienda Bigaa.
Portions of the same lands were leased out by the
Republic, through the Bureau of Fisheries, to qualified
applicants in whose favor fishpond permits were
issued. The government issued fishpond permits
pertaining to lands covered by titles derived from TCT
No. 722. Suits were filed in various courts in Batangas
for the recovery of the areas in excess of the area
originally covered by TCT No. 722, which suits
ultimately reached the Supreme Court. In the Court's
1965 decisions in Dizon v. Rodriguez (for quieting of
title) and Republic v. Ayala y Cia and/or Hacienda
Calatagan, et al. (for annulment of titles), the excess
areas of TCT No. 722 were categorically declared as
unregisterable lands of the public domain such that any
title covering these excess areas are necessarily null
and void. In these cases, the Ayalas and the Zobels
were found to be mere usurpers of public domain
areas, and all subdivision titles issued to them or their
privies and covering these areas were invalidated; the
wrongfully registered public domain areas reverted to
the Republic.
To return to the forcible entry case, then Chavez
alleged in his answer before the MTC of Calatagan that
his mother, Zoila de Chavez (who died intestate on
September 14, 1979) was a fishpond permittee/lessee
under a Fishpond Permit issued by the Bureau of
Fisheries; that the areas covered by the permits are the
same parcels of land which he presently occupies as
Zoila's successor-in-interest and which Hacienda
Bigaa also claims.
Chavez argued that the suit is barred by prior judgment
in two prior cases (1) Civil Case No. 78, a suit for
unlawful detainer filed by the Zobels against Chavezs
predecessor-in-interest, Zoila de Chavez, before the
then Justice of the Peace Court (now Municipal Trial
Court) of Calatagan and (2) Civil Case No. 653, a case
of accion reinvindicatoria with prayer for preliminary
mandatory injunction filed by the Republic, Zoila de
Chavez, and other lessees or fishpond permittees of
the Republic, against Enrique Zobel (Hacienda Bigaa's
predecessor-ininterest) before the then Court of First
Instance of Batangas. This case reached the SC,
entitled Republic of the Philippines v. De los Angeles,
Enrique Zobel, et al. and was decided in 1988.
Chavez asserts that the subject matter and the issues
involved in these cases are squarely similar and/or
identical to the subject matter and issues involved in
the present forcible entry suit; the rulings in these two
cases, therefore constitute res judicata with respect to
the present case.
The MTC rendered a decision dismissing Hacienda
Bigaa's complaint, holding that the disputed lots form
part of the areas illegally expanded and made to
appear to be covered by TCT No. 722 of Hacienda
Bigaa's predecessors-in-interest hence, the
Hacienda's title are null and void. In so ruling, the MTC
applied this Court's pronouncements in the antecedent
cases of Dizon v. Rodriguez, Republic v. Ayala y Cia
and/or Hacienda Calatagan, Zobel, et al., and Republic
v. De los Angeles. MTC also ruled that the identity of
the parties, subject, issues and cause of action are the
same. RTC and the CA affirmed in toto the appealed
decision.
ISSUE:
Is there Res Judicata?
RULING:
YES. The doctrine of res judicata is set forth in Section
47 of Rule 39 of the Rules of Court, which in its relevant
part reads:
Sec. 47. Effect of judgments or final orders. The effect
of a judgment or final order rendered by a court of the
Philippines, having jurisdiction to pronounce the
judgment or final order, may be as follows:
(b) In other cases, the judgment or final order is, with
respect to the matter directly adjudged or as to any
other matter that could have been raised in relation
thereto, conclusive between the parties and their
successors in interest by title subsequent to the
commencement of the action or special proceeding,
litigating for the same thing and under the same title
and in the same capacity; and
(c) In any other litigation between the same parties or
their successors in interest, that only is deemed to have
been adjudged in a former judgment or final order
which appears upon its face to have been so adjudged,
or which was actually and necessarily included therein
or necessary thereto.
This provision comprehends two distinct concepts of
res judicata: (1) bar by former judgment and (2)
conclusiveness of judgment. Under the first concept,
res judicata absolutely bars any subsequent action
when the following requisites concur: (a) the former
judgment or order was final; (b) it adjudged the
pertinent issue or issues on their merits; (c) it was
rendered by a court that had jurisdiction over the
subject matter and the parties; and (d) between the first
and the second actions, there was identity of parties, of
subject matter, and of causes of action.
Where no identity of causes of action but only identity
of issues exists, res judicata comes under the second
concept i.e., under conclusiveness of judgment. Under
this concept, the rule bars the re-litigation of particular
facts or issues involving the same parties even if raised
under different claims or causes of action.
Conclusiveness of judgment finds application when a
fact or question has been squarely put in issue,
judicially passed upon, and adjudged in a former suit
by a court of competent jurisdiction. The fact or
question settled by final judgment or order binds the
parties to that action (and persons in privity with them
or their successors-in-interest), and continues to bind
them while the judgment or order remains standing and
unreversed by proper authority on a timely motion or
petition; the conclusively settled fact or question
furthermore cannot again be litigated in any future or
other action between the same parties or their privies
and successors-in-interest, in the same or in any other
court of concurrent jurisdiction, either for the same or
for a different cause of action. Thus, only the identities
of parties and issues are required for the operation of
the principle of conclusiveness of judgment.
While conclusiveness of judgment does not have the
same barring effect as that of a bar by former judgment
that proscribes subsequent actions, the former
nonetheless estops the parties from raising in a later
case the issues or points that were raised and
controverted, and were determinative of the ruling in
the earlier case. In other words, the dictum laid down
in the earlier final judgment or order becomes
conclusive and continues to be binding between the
same parties, their privies and successors-in-interest,
as long as the facts on which that judgment was
predicated continue to be the facts of the case or
incident before the court in a later case; the binding
effect and enforceability of that earlier dictum can no
longer be re-litigated in a later case since the issue has
already been resolved and finally laid to rest in the
earlier case.
SC rejected, Hacienda Bigaa's position that there could
be no res judicata in this case because the present suit
is for forcible entry while the antecedent cases
adverted were based on different causes of action i.e.,
quieting of title, annulment of titles and accion
reinvindicatoria.
For, res judicata, under the concept of conclusiveness
of judgment, operates even if no absolute identity of
causes of action exists. Res judicata, in its
conclusiveness of judgment concept, merely requires
identity of issues. We thus agree with the uniform view
of the lower courts the MTC, RTC and the CA on the
application of res judicata to the present case.
9. FELS ENERGY, INC. V THE PROVINCE OF
BATANGAS and THE OFFICE OF THE
PROVINCIAL ASSESSOR OF BATANGAS
FACTS:
Two consolidated cases were filed by FELS Energy,
Inc. (FELS) and National Power Corporation (NPC),
respectively.
NPC entered into a lease contract with Polar Energy,
Inc. over diesel engine power barges moored at
Batangas. The contract, denominated as an Energy
Conversion Agreement, was for a period of five years
wherein, NPC shall be responsible for the payment of:
(a) all taxes, import duties, fees, charges and other
levies imposed by the National Government
(b) all real estate taxes and assessments, rates and
other charges in respect of the Power Barges
Subsequently, Polar Energy, Inc. assigned its rights
under the Agreement to FELS. Thereafter, FELS
received an assessment of real property taxes on the
power barges. The assessed tax, which likewise
covered those due for 1994, amounted to
P56,184,088.40 per annum. FELS referred the matter
to NPC, reminding it of its obligation under the
Agreement to pay all real estate taxes. It then gave
NPC the full power and authority to represent it in any
conference regarding the real property assessment of
the Provincial Assessor.
NPC sought reconsideration of the Provincial
Assessor’s decision to assess real property taxes on
the power barges. However, the motion was denied.
The Local Board of Assessment Appeals (LBAA) ruled
that the power plant facilities, while they may be
classified as movable or personal property, are
nevertheless considered real property for taxation
purposes because they are installed at a specific
location with a character of permanency.
FELS appealed the LBAA’s ruling to the Central Board
of Assessment Appeals (CBAA). The CBAA rendered
a Decision finding the power barges exempt from real
property tax.
It was later reversed by the cbaa upon reconsideration
and affirmed by the CA
ISSUE:
Whether power barges, which are floating and
movable, are personal properties and therefore, not
subject to real property tax.
RULING:
No. Article 415 (9) of the New Civil Code provides that
"[d]ocks and structures which, though floating, are
intended by their nature and object to remain at a fixed
place on a river, lake, or coast" are considered
immovable property. Thus, power barges are
categorized as immovable property by destination,
being in the nature of machinery and other implements
intended by the owner for an industry or work which
may be carried on in a building or on a piece of land
and which tend directly to meet the needs of said
industry or work.
The findings of the LBAA and CBAA that the owner of
the taxable properties is petitioner FELS is the entity
being taxed by the local government. As stipulated
under the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall
own the Power Barges and all the fixtures, fittings,
machinery and equipment on the Site used in
connection with the Power Barges which have been
supplied by it at its own cost. POLAR shall operate,
manage and maintain the Power Barges for the
purpose of converting Fuel of NAPOCOR into
electricity.
It follows then that FELS cannot escape liability from
the payment of realty taxes by invoking its exemption
in Section 234 (c) of R.A. No. 7160, …the law states
that the machinery must be actually, directly and
exclusively used by the government owned or
controlled corporation;
The agreement POLAR undertakes that until the end
of the Lease Period, it will operate the Power Barges to
convert such Fuel into electricity. Therefore, FELS shall
be liable for the realty taxes and not the NPC who is
not actually, directly and exclusively using the same. It
is a basic rule that obligations arising from a contract
have the force of law between the parties. Petitions are
DENIED.
10. YUVIENCO versus DACUYCUY
Facts:
In essence, the theory of petitioners is that while it is
true that they did express willingness to sell to private
respondents the subject property (land and building) for
P6,500,000.00 provided the latter made known their
own decision to buy it not later than July 31, 1978, the
respondents' reply that they were agreeable was not
absolute, so much so that when ultimately petitioners'
representative went to Cebu City with a prepared and
duly signed contract for the purpose of perfecting and
consummating the transaction, respondents and said
representative found variance between the terms of
payment stipulated in the prepared document and what
respondents had in mind, hence the bank draft which
respondents were delivering to the representative was
returned and the document remained unsigned by
respondents.
The respondents, in their complaint, contended “That
on August 1, 1978 Pedro Gamboa arrived Tacloban
City bringing with him the prepared contract to
purchase and to sell referred to in his telegram dated
July 27, 1978 for the purpose of closing the
transactions referred to in paragraphs 8 and 9 hereof,
however, to the complete surprise of plaintiffs, the
defendant without giving notice to plaintiffs, changed
the mode of payment with respect to the balance of
P4,500,000.00 by imposing upon plaintiffs to pay same
amount within thirty (30) days from execution of the
contract instead of the former term of ninety (90) days.”
Issues:
1. Whether or not the complaint sufficiently states a
cause of action
2. Whether or not the claim alleged therein is
unenforceable under the Statute of Frauds
Ruling:
1. The court held that although there was no perfected
contract of sale in the light of the letter of Atty. Gamboa
of July 12, 1978 and the letter-reply thereto of Yao; it
being doubtful whether or not, under Article 1319 of the
Civil Code, the said letter may be deemed as an offer
to sell that is "certain", and more, the Yao telegram is
far from being an "absolute" acceptance under said
article, still there appears to be a cause of action
alleged in Paragraphs 8 to 12 of the respondents'
complaint, considering it is alleged therein that
subsequent to the telegram of Yao, it was agreed that
the petitioners would sell the property to respondents
for P6.5 M, by paving P2 M down and the balance in
90 days and which agreement was allegedly violated
when in the deeds prepared by Atty. Gamboa and
taken to Tacloban, only 30 days were given to
respondents.
2. Further, the court ruled that in any sale of real
property on installments, the Statute of Frauds read
together with the perfection requirements of Article
1475 of the Civil Code must be understood and applied
in the sense that the idea of payment on installments
must be in the requisite of a note or memorandum
therein contemplated.
11. Bank of America NT & SA v Court of
Appeals and Francisco
Facts:
Bank of America received an Irrevocable Letter of
Credit issued by Bank of Ayudhya for the Account of
General Chemicals Ltd., Inc. for the sale of plastic
ropes and agricultural files. Under the letter of credit,
Bank of America acted as an advising bank and Inter-
Resin Industrial Corp. (IR) acted as the beneficiary.
Upon receipt of the letter advice, Inter- Resin told Bank
of America to confirm the letter of credit.
Notwithstanding such instruction, Bank of America
failed to confirm the letter of credit. Inter-Resin made a
partial availment of the Letter of Credit after
presentment of the required documents to Bank of
America. After confirmation of all the documents Bank
of America issued a check in favor of IR. BA advised
Bank of Ayudhya of IR’s availment under the letter of
credit and asked for the corresponding reimbursement.
IR presented documents for the second availment
under the same letter of credit. However, BA stopped
the processing of such after they received a telex from
Bank of Ayudhya delaring that the LC fraudulent. BA
sued IR for the recovery of the first LC payment.
The IR contended that Bank of America should have
first checked the authenticity of the letter of credit with
bank of Ayudhya
Issue:
Whether or not Bank of America may recover what it
has paid under the letter of credit to Inter-Resin
Held:
May Bank of America then recover what it has paid
under the letter of credit when the corresponding draft
There would at least be three (3) parties: (a) the buyer,
who procures the letter of credit and obliges himself to
reimburse the issuing bank upon receipts of the
documents of title; (b) the bank issuing the letter of
credit, which undertakes to pay the seller upon receipt
of the draft and proper document of titles and to
surrender the documents to the buyer upon
reimbursement; and, (c) the seller, who in compliance
with the contract of sale ships the goods to the buyer
and delivers the documents of title and draft to the
issuing bank to recover payment.
The services of an advising (notifying) bank may be
utilized to convey to the seller the existence of the
credit; or, of a confirming bank 16 which will lend
credence to the letter of credit issued by a lesser known
issuing bank; or, of a paying bank, which undertakes to
encash the drafts drawn by the exporter. Further,
instead of going to the place of the issuing bank to
claim payment, the buyer may approach another bank,
termed the negotiating bank, 18 to have the draft
discounted.
Bank of America has acted independently as a
negotiating bank, thus saving Inter-Resin from the
hardship of presenting the documents directly to Bank
of Ayudhya to recover payment. As a negotiating bank,
Bank of America has a right to recourse against the
issuer bank and until reimbursement is obtained, Inter-
Resin, as the drawer of the draft, continues to assume
a contingent liability thereon.
Furthermore, bringing the letter of credit to the attention
of the seller is the primordial obligation of an advising
bank. The view that Bank of America should have first
checked the authenticity of the letter of credit with bank
of Ayudhya, by using advanced mode of business
communications, before dispatching the same to Inter-
Resin finds no real support.
12. ASSOCIATED BANK v. SPOUSES
JUSTINIANO S. MONTANO, SR.
FACTS:
Spouses Justiniano and Ligaya Montano (the
Montanos) owned three (3) parcels of land situated in
Cavite. Justiniano was then serving as congressman
for the lone district of Cavite and as minority floor
leader. When the country was under martial law,
Justiniano went to the United States of America (USA)
to avoid the harassment and threats made against him
by the dictator.
While still in the USA, the Montanos transferred the
said properties to Tres Cruces Agro-Industrial
Corporation (TCAIC) in exchange for shares of stock in
the company, allowing the Montanos to control 98% of
the stockholdings of TCAIC. Thus, on the certificates of
title registered in the name of the Montanos were
cancelled and were replaced with transfer certificates
of title (TCTs) in TCAIC’s name.
A year later, TCAIC sold the properties to International
Country Club, Inc. (ICCI) for P6,000,000.00. The sale
resulted in the cancellation of the titles of TCAIC, and
in their transfer to ICCI. ICCI immediately mortgaged
the parcels of land to Citizens Bank and Trust Co. (later
renamed as Associated Bank) for P2,000,000.00.The
loan matured but remained unpaid, prompting
Associated Bank to foreclose the mortgage. The
properties were then put on public auction and were
sold for P5,700,000.00 to Associated Bank, the sole
and highest bidder. Ownership over the said properties
was consolidated by Associated Bank and, new TCTs
were issued in its name.
Montanos returned to the country. After discovering the
transfer of the properties, the Montanos immediately
took physical possession of the same and began
cultivating the land.
Montanos filed an action for reconveyance of title
against herein petitioner, praying, in sum, that the
transfer of the properties from TCAIC to ICCI, and from
ICCI to Associated Bank, be declared null and void.
ISSUES:
1. Whether it is proper to file a motion to dismiss after
an answer has already been filed;
2. Whether the complaint should be dismissed on the
grounds set forth therein.
HELD:
1. On the propriety of the motion to dismiss. It is,
therefore, inconsequential that petitioner had already
filed an answer to the complaint prior to its filing of a
motion to dismiss. The option of whether to set the
case for preliminary hearing after the filing of an answer
which raises affirmative defenses, or to file a motion to
dismiss raising any of the grounds set forth in Section
2. Rule 16 of the Rules are procedural options which
are not mutually exclusive of each other. Moreover, as
petitioner correctly pointed out, respondents failed to
oppose the motion to dismiss despite having been
given the opportunity to do so by the RTC. Therefore,
any right to contest the same was already waived by
them.
3. On whether the complaint for reconveyance should
be dismissed In their complaint for reconveyance,
respondents alleged that the transfer of the three
parcels of land from TCAIC to ICCI was facilitated
through threat, duress and intimidation employed by
certain individuals. On its face, the complaint clearly
states a cause of action and raises issues of fact that
can be properly settled only after a full-blown trial. On
this ground, petitioner’s motion to dismiss must,
perforce, be denied. However, the RTC’s ruling that the
action has already prescribed was not correct. The
RTC, however, seemed to have overlooked the fact
that the basis of respondents’ complaint for
reconveyance is not fraud but threat, duress and
intimidation, allegedly employed by Marcos’ cronies
upon the relatives of the Montanos while the latter were
on selfexile. In fact, fraud was neither specifically
alleged nor remotely implied in the complaint.
The four-year prescriptive period must, be reckoned
from the said date. Thus, when respondents filed their
complaint for reconveyance on September 15, 1989,
the period provided for by law had not yet prescribed.
Therefore, petitioner’s motion to dismiss should be
denied.
13. LU v. LU YM
FACTS.
 On August 14, 2000, David Lu, Rosa Go, Silvano
Ludo and CL Corporation filed with the Regional Trial
Court (RTC) of Cebu City a complaint against Paterno
Lu Ym, Sr., Paterno Lu Ym, Jr., Victor Lu Ym, John Lu
Ym, Kelly Lu Ym, and Ludo & Luym Development
Corporation (LLDC) for Declaration of Nullity of Share
Issue, Receivership and Dissolution.
 The plaintiffs, shareholders of LLDC, claimed that the
Lu Ym father and sons, as members of the Board of
Directors, caused the issuance to the latter of 600,000
of the corporation’s unsubscribed and unissued shares
for less than their actual value. They then prayed for
the dissolution of the corporation and the appointment
of a receiver during the pendency of the action.
 The defendants moved to dismiss the complaint but
were denied and placed LLDC under receivership.
 Defendants Lu Ym father and sons elevated the
matter to the Court of Appeals through a petition for
certiorari but was still denied. They refiled the petition
and was granted.
 The Lu Ym father and sons then filed with the trial
court a motion to lift the order of receivership over
LLDC. Before the matter could be heard, David
instituted a petition for certiorari and prohibition before
the CA on the issue of the motion to lift order of
receivership.
 On February 27, 2003, the CA granted the petition
and ruled that the proceedings on the receivership
could not proceed without the parties amending their
pleadings. The Lu Ym father and sons thus filed a
petition for review with this Court.
 On March 31, 2003, the plaintiffs therein filed a
Motion to Admit Complaint to Conform to the Interim
Rules Governing IntraCorporate Controversies, which
was admitted by the trial court.
 On January 23, 2004, the Lu Ym father and sons
inquired from the Clerk of Court as to the amount of
docket fees paid by David, et al. John Lu Ym further
inquired from the Office of the Court Administrator
(OCA) on the correctness of the amount paid by David,
et al. The OCA informed John Lu Ym that a query on
the matter of docket fees should be addressed to the
trial court and not to the OCA.
 On March 1, 2004, the RTC decided the case on the
merits. It annulled the issuance of LLDC’s 600,000
shares of stock to the Lu Ym father and sons. It also
ordered the dissolution of LLDC and the liquidation of
its assets, and created a management committee to
take over LLDC. The Lu Ym father and sons appealed
to the CA.
 In our August 26, 2008 Decision, we declared that the
subject matter of the complaint filed by David, et al.,
was one incapable of pecuniary estimation. Movants
beg us to reconsider this position, pointing out that the
case filed below by David, et al., had for its objective
the nullification of the issuance of 600,000 shares of
stock of LLDC.
The complaint itself contained the allegation that the
“real value of these shares, based on underlying real
estate values, was One Billion Eighty Seven Million
Fifty Five Thousand One Hundred Five Pesos
(P1,087,055,105).”
 Upon deeper reflection, we find that the movants’
claim has merit. The 600,000 shares of stock were,
indeed, properties in litigation. They were the subject
matter of the complaint, and the relief prayed for
entailed the nullification of the transfer thereof and their
return to LLDC.
 Thus, to the extent of the damage or injury they
allegedly have suffered from this sale of the shares of
stock, the action they filed can be characterized as one
capable of pecuniary estimation. The shares of stock
have a definite value, which was declared by plaintiffs
themselves in their complaint. Accordingly, the docket
fees should have been computed based on this
amount. This is clear from the following version of Rule
141, Section 7, which was in effect at the time the
complaint was filed.
ISSUES and RATIO:
1. WON the trial court acquired jurisdiction over the
action filed by David– NO.
We have earlier held that a court acquires jurisdiction
over a case only upon the payment of the prescribed
fees. Hence, without payment of the correct docket
fees, the trial court did not acquire jurisdiction over the
action filed by David, et al. We also stated in our
Decision that the earlier rule in Manchester
Development Corporation v. Court of Appeals has
been relaxed. Subsequent decisions now uniformly
hold that when insufficient filing fees are initially paid
by the plaintiffs and there is no intention to defraud the
government, the Manchester rule does not apply.

DECISION:
The trial court did not acquire jurisdiction over the
action filed by David. Consequently, all interlocutory
matters pending before this Court, specifically the
incidents subject of these three consolidated petitions,
must be denied for being moot and academic.