G.R. No. 157479               TURNER vs.
LORENZO On October 27, 2000, the appraisal committee
SHIPPING CORPORATION, Respondent.
This case concerns the right of dissenting
stockholders to demand payment of the value
of their shareholdings.
In the stockholders’ suit to recover the value of
their shareholdings from the corporation, the
Regional Trial Court (RTC) upheld the dissenting
stockholders, herein petitioners, and ordered
the corporation, herein respondent, to pay.
Execution was partially carried out against the
respondent. On the respondent’s petition for
certiorari, however, the Court of Appeals (CA)
corrected the RTC and dismissed the
petitioners’ suit on the ground that their cause
of action for collection had not yet accrued due
to the lack of unrestricted retained earnings in
the books of the respondent.
Thus, the petitioners are now before the Court
to challenge the CA’s decision promulgated on
March 4, 2003 in C.A.-G.R. SP No. 74156
entitled Lorenzo Shipping Corporation v. Hon.
Artemio S. Tipon, in his capacity as Presiding
Judge of Branch 46 of the Regional Trial Court
of Manila, et al.1
Antecedents
The petitioners held 1,010,000 shares of stock
of the respondent, a domestic corporation
engaged primarily in cargo shipping activities.
In June 1999, the respondent decided to amend
its articles of incorporation to remove the
stockholders’ pre-emptive rights to newly
issued shares of stock. Feeling that the
corporate move would be prejudicial to their
interest as stockholders, the petitioners voted
against the amendment and demanded
payment of their shares at the rate of
₱2.276/share based on the book value of the
shares, or a total of ₱2,298,760.00.
The respondent found the fair value of the
shares demanded by the petitioners
unacceptable. It insisted that the market value
on the date before the action to remove the
pre-emptive right was taken should be the
value, or ₱0.41/share (or a total of
₱414,100.00), considering that its shares were
listed in the Philippine Stock Exchange, and that
the payment could be made only if the
respondent had unrestricted retained earnings
in its books to cover the value of the shares,
which was not the case.
The disagreement on the valuation of the
shares led the parties to constitute an appraisal
committee pursuant to Section 82 of the
Corporation Code, each of them nominating a
representative, who together then nominated
the third member who would be chairman of
the appraisal committee. Thus, the appraisal
committee came to be made up of Reynaldo
Yatco, the petitioners’ nominee; Atty. Antonio
Acyatan, the respondent’s nominee; and Leo
Anoche of the Asian Appraisal Company, Inc.,
the third member/chairman.
Nevertheless, because the principal office of
reported its valuation of ₱2.54/share, for an
aggregate value of ₱2,565,400.00 for the
petitioners.2
Subsequently, the petitioners demanded
payment based on the valuation of the
appraisal committee, plus 2%/month penalty
from the date of their original demand for
payment, as well as the reimbursement of the
amounts advanced as professional fees to the
appraisers.3
In its letter to the petitioners dated January 2,
2001,4 the respondent refused the petitioners’
demand, explaining that pursuant to the
Corporation Code, the dissenting stockholders
exercising their appraisal rights could be paid
only when the corporation had unrestricted
retained earnings to cover the fair value of the
shares, but that it had no retained earnings at
the time of the petitioners’ demand, as borne
out by its Financial Statements for Fiscal Year
1999 showing a deficit of ₱72,973,114.00 as of
December 31, 1999.
Upon the respondent’s refusal to pay, the
petitioners sued the respondent for collection
and damages in the RTC in Makati City on
January 22, 2001. The case, docketed as Civil
Case No. 01-086, was initially assigned to
Branch 132.5
On June 26, 2002, the petitioners filed their
motion for partial summary judgment, claiming
that:
7) xxx the defendant has an accumulated
unrestricted retained earnings of ELEVEN
MILLION NINE HUNDRED SEVENTY FIVE
THOUSAND FOUR HUNDRED NINETY
(P11,975,490.00) PESOS, Philippine Currency,
evidenced by its Financial Statement as of the
Quarter Ending March 31, 2002; xxx
8) xxx the fair value of the shares of the
petitioners as fixed by the Appraisal Committee
is final, that the same cannot be disputed xxx
9) xxx there is no genuine issue to material fact
and therefore, the plaintiffs are entitled, as a
matter of right, to a summary judgment. xxx 6
The respondent opposed the motion for partial
summary judgment, stating that the
determination of the unrestricted retained
earnings should be made at the end of the
fiscal year of the respondent, and that the
petitioners did not have a cause of action
against the respondent.
During the pendency of the motion for partial
summary judgment, however, the Presiding
Judge of Branch 133 transmitted the records to
the Clerk of Court for re-raffling to any of the
RTC’s special commercial courts in Makati City
due to the case being an intra-corporate
dispute. Hence, Civil Case No. 01-086 was re-
raffled to Branch 142.
the respondent was in Manila, Civil Case No.
01-086 was ultimately transferred to Branch 46
of the RTC in Manila, presided by Judge
Artemio Tipon,7 pursuant to the Interim Rules
of Procedure on Intra-Corporate Controversies
(Interim Rules) requiring intra-corporate cases
to be brought in the RTC exercising jurisdiction
over the place where the principal office of the
corporation was found.
After the conference in Civil Case No. 01-086
set on October 23, 2002, which the petitioners’
counsel did not attend, Judge Tipon issued an
order,8 granting the petitioners’ motion for
partial summary judgment, stating:
As to the motion for partial summary judgment,
there is no question that the 3-man committee
mandated to appraise the shareholdings of
plaintiff submitted its recommendation on
October 27, 2000 fixing the fair value of the
shares of stocks of the plaintiff at P2.54 per
share. Under Section 82 of the Corporation
Code:
"The findings of the majority of the appraisers
shall be final, and the award shall be paid by
the corporation within thirty (30) days after the
award is made."
"The only restriction imposed by the
Corporation Code is–"
"That no payment shall be made to any
dissenting stockholder unless the corporation
has unrestricted retained earning in its books to
cover such payment."
The evidence submitted by plaintiffs shows that
in its quarterly financial statement it submitted
to the Securities and Exchange Commission, the
defendant has retained earnings of
P11,975,490 as of March 21, 2002. This is not
disputed by the defendant. Its only argument
against paying is that there must be
unrestricted retained earning at the time the
demand for payment is made.
This certainly is a very narrow concept of the
appraisal right of a stockholder. The law does
not say that the unrestricted retained earnings
must exist at the time of the demand. Even if
there are no retained earnings at the time the
demand is made if there are retained earnings
later, the fair value of such stocks must be paid.
The only restriction is that there must be
sufficient funds to cover the creditors after the
dissenting stockholder is paid. No such
allegations have been made by the defendant.9
On November 12, 2002, the respondent filed a
motion for reconsideration.
On the scheduled hearing of the motion for
reconsideration on November 22, 2002, the
petitioners filed a motion for immediate
execution and a motion to strike out motion for
reconsideration. In the latter motion, they
pointed out that the motion for reconsideration
was prohibited by Section 8 of the Interim
Rules. Thus, also on November 22, 2002, Judge
Tipon denied the motion for reconsideration
and granted the petitioners’ motion for
immediate execution.10
Subsequently, on November 28, 2002, the RTC
issued a writ of execution.11
Aggrieved, the respondent commenced a
special civil action for certiorari in the CA to
challenge the two aforecited orders of Judge
Tipon, claiming that:
A. JUDGE TIPON GRAVELY ABUSED HIS
DISCRETION IN GRANTING SUMMARY
JUDGMENT TO THE SPOUSES TURNER,
BECAUSE AT THE TIME THE "COMPLAINT" WAS
FILED, LSC HAD NO RETAINED EARNINGS, AND
THUS WAS COMPLYING WITH THE LAW, AND
NOT VIOLATING ANY RIGHTS OF THE SPOUSES
TURNER, WHEN IT REFUSED TO PAY THEM THE
VALUE OF THEIR LSC SHARES. ANY RETAINED
EARNINGS MADE A YEAR AFTER THE
"COMPLAINT" WAS FILED ARE IRRELEVANT TO
THE SPOUSES TURNER’S RIGHT TO RECOVER
UNDER THE "COMPLAINT", BECAUSE THE
WELL-SETTLED RULE, REPEATEDLY BROUGHT
TO JUDGE TIPON’S ATTENTION, IS "IF NO RIGHT
EXISTED AT THE TIME (T)HE ACTION WAS
COMMENCED THE SUIT CANNOT BE
MAINTAINED, ALTHOUGH SUCH RIGHT OF
ACTION MAY HAVE ACCRUED THEREAFTER.
B. JUDGE TIPON IGNORED CONTROLLING CASE
LAW, AND THUS GRAVELY ABUSED HIS
DISCRETION, WHEN HE GRANTED AND ISSUED
THE QUESTIONED "WRIT OF EXECUTION"
DIRECTING THE EXECUTION OF HIS PARTIAL
SUMMARY JUDGMENT IN FAVOR OF THE
SPOUSES TURNER, BECAUSE THAT JUDGMENT
IS NOT A FINAL JUDGMENT UNDER SECTION 1
OF RULE 39 OF THE RULES OF COURT AND
THEREFORE CANNOT BE SUBJECT OF
EXECUTION UNDER THE SUPREME COURT’S
CATEGORICAL HOLDING IN PROVINCE OF
PANGASINAN VS. COURT OF APPEALS.
Upon the respondent’s application, the CA
issued a temporary restraining order (TRO),
enjoining the petitioners, and their agents and
representatives from enforcing the writ of
execution. By then, however, the writ of
execution had been partially enforced.
The TRO lapsed without the CA issuing a writ of
preliminary injunction to prevent the
execution. Thereupon, the sheriff resumed the
enforcement of the writ of execution.
The CA promulgated its assailed decision on
March 4, 2003,12 pertinently holding:
However, it is clear from the foregoing that the
Turners’ appraisal right is subject to the legal
condition that no payment shall be made to any
dissenting stockholder unless the corporation
has unrestricted retained earnings in its books
to cover such payment. Thus, the Supreme
Court held that:
The requirement of unrestricted retained
earnings to cover the shares is based on the
trust fund doctrine which means that the
capital stock, property and other assets of a
corporation are regarded as equity in trust for
the payment of corporate creditors. The reason
is that creditors of a corporation are preferred
over the stockholders in the distribution of
corporate assets. There can be no distribution
of assets among the stockholders without first
paying corporate creditors. Hence, any
disposition of corporate funds to the prejudice
of creditors is null and void. Creditors of a
corporation have the right to assume that so
long as there are outstanding debts and
liabilities, the board of directors will not use the
assets of the corporation to purchase its own
stock.
In the instant case, it was established that there
were no unrestricted retained earnings when
the Turners filed their Complaint. In a letter
dated 20 August 2000, petitioner informed the
Turners that payment of their shares could only
be made if it had unrestricted earnings in its
books to cover the same. Petitioner reiterated
this in a letter dated 2 January 2001 which
further informed the Turners that its Financial
Statement for fiscal year 1999 shows that its
retained earnings ending December 31, 1999
was at a deficit in the amount of
₱72,973,114.00, a matter which has not been
disputed by private respondents. Hence, in
accordance with the second paragraph of sec.
82, BP 68 supra, the Turners’ right to payment
had not yet accrued when they filed their
Complaint on January 22, 2001, albeit their
appraisal right already existed.
In Philippine American General Insurance Co.
Inc. vs. Sweet Lines, Inc., the Supreme Court
declared that:
Now, before an action can properly be
commenced all the essential elements of the
cause of action must be in existence, that is,
the cause of action must be complete. All valid
conditions precedent to the institution of the
particular action, whether prescribed by
statute, fixed by agreement of the parties or
implied by law must be performed or complied
with before commencing the action, unless the
conduct of the adverse party has been such as
to prevent or waive performance or excuse
non-performance of the condition.
It bears restating that a right of action is the
right to presently enforce a cause of action,
while a cause of action consists of the operative
facts which give rise to such right of action. The
right of action does not arise until the
performance of all conditions precedent to the
action and may be taken away by the running
of the statute of limitations, through estoppel,
or by other circumstances which do not affect
the cause of action. Performance or fulfillment
of all conditions precedent upon which a right
of action depends must be sufficiently alleged,
considering that the burden of proof to show
that a party has a right of action is upon the
person initiating the suit.
The Turners’ right of action arose only when
petitioner had already retained earnings in the
amount of ₱11,975,490.00 on March 21, 2002;
such right of action was inexistent on January
22, 2001 when they filed the Complaint.
In the doctrinal case of Surigao Mine
Exploration Co. Inc., vs. Harris, the Supreme
Court ruled:
Subject to certain qualifications, and except as
otherwise provided by law, an action
commenced before the cause of action has
accrued is prematurely brought and should be
dismissed. The fact that the cause of action
accrues after the action is commenced and
while it is pending is of no moment. It is a rule
of law to which there is, perhaps, no exception,
either at law or in equity, that to recover at all
there must be some cause of action at the
commencement of the suit. There are reasons
of public policy why there should be no
needless haste in bringing up litigation, and
why people who are in no default and against
whom there is as yet no cause of action should
not be summoned before the public tribunals
to answer complaints which are groundless. An
action prematurely brought is a groundless suit.
Unless the plaintiff has a valid and subsisting
cause of action at the time his action
is commenced, the defect cannot be cured or
remedied by the acquisition or accrual of one
while the action is pending, and a supplemental
complaint or an amendment setting up such
after-accrued cause of action is not permissible.
The afore-quoted ruling was reiterated in
Young vs Court of Appeals and Lao vs. Court of
Appeals.
The Turners’ apprehension that their claim for
payment may prescribe if they wait for the
petitioner to have unrestricted retained
earnings is misplaced. It is the legal possibility
of bringing the action that determines the
starting point for the computation of the period
of prescription. Stated otherwise, the
prescriptive period is to be reckoned from the
accrual of their right of action.
Accordingly, We hold that public respondent
exceeded its jurisdiction when it entertained
the herein Complaint and issued the assailed
Orders. Excess of jurisdiction is the state of
being beyond or outside the limits of
jurisdiction, and as distinguished from the
entire absence of jurisdiction, means that the
act although within the general power of the
judge, is not authorized and therefore void,
with respect to the particular case, because the
conditions which authorize the exercise of his
general power in that particular case are
wanting, and hence, the judicial power is not in
fact lawfully invoked.
We find no necessity to discuss the second
ground raised in this petition.
WHEREFORE, upon the premises, the petition is
GRANTED. The assailed Orders and the
corresponding Writs of Garnishment are
NULLIFIED. Civil Case No. 02-104692 is hereby
ordered DISMISSED without prejudice to
refiling by the private respondents of the action
for enforcement of their right to payment as
withdrawing stockholders.
SO ORDERED.
The petitioners now come to the Court for a
review on certiorari of the CA’s decision,
submitting that:
I. THE COURT OF APPEALS COMMITTED
SERIOUS ERRORS OF LAW WHEN IT GRANTED
THE PETITION FOR CERTIORARI WHEN THE
REGIONAL TRIAL COURT OF MANILA DID NOT
ACT BEYOND ITS JURISDICTION AMOUNTING
TO LACK OF JURISDICTION IN GRANTING THE
MOTION FOR PARTIAL SUMMARY JUDGMENT
AND IN GRANTING THE MOTION FOR
IMMEDIATE EXECUTION OF JUDGMENT;
II. THE COURT OF APPEALS COMMITTED
SERIOUS ERRORS OF LAW WHEN IT ORDERED
THE DISMISSAL OF THE CASE, WHEN THE
PETITION FOR CERTIORARI MERELY SOUGHT
THE ANNULMENT OF THE ORDER GRANTING
THE MOTION FOR PARTIAL SUMMARY
JUDGMENT AND OF THE ORDER GRANTING THE
MOTION FOR IMMEDIATE EXECUTION OF THE
JUDGMENT;
III. THE HONORABLE COURT OF APPEALS HAS
DECIDED QUESTIONS OF SUBSTANCE NOT
THEREFORE DETERMINED BY THIS HONORABLE
COURT AND/OR DECIDED IT IN A WAY NOT IN
ACCORD WITH LAW OR WITH JURISPRUDENCE.
Ruling
The petition fails.
The CA correctly concluded that the RTC had
exceeded its jurisdiction in entertaining the
petitioners’ complaint in Civil Case No. 01-086,
and in rendering the summary judgment and
issuing writ of execution.
A.
Stockholder’s Right of Appraisal, In General
A stockholder who dissents from certain
corporate actions has the right to demand
payment of the fair value of his or her shares.
This right, known as the right of appraisal, is
expressly recognized in Section 81 of the
Corporation Code, to wit:
Section 81. Instances of appraisal right. - Any
stockholder of a corporation shall have the
right to dissent and demand payment of the
fair value of his shares in the following
instances:
1. In case any amendment to the articles of
incorporation has the effect of changing or
restricting the rights of any stockholder or class
of shares, or of authorizing preferences in any
respect superior to those of outstanding shares
of any class, or of extending or shortening the
term of corporate existence;
2. In case of sale, lease, exchange, transfer,
mortgage, pledge or other disposition of all or
substantially all of the corporate property and
assets as provided in the Code; and
3. In case of merger or consolidation. (n)
Clearly, the right of appraisal may be exercised
when there is a fundamental change in the
charter or articles of incorporation substantially
prejudicing the rights of the stockholders. It
does not vest unless objectionable corporate
action is taken.13 It serves the purpose of
enabling the dissenting stockholder to have his
interests purchased and to retire from the
corporation.141avvphil
Under the common law, there were originally
conflicting views on whether a corporation had
the power to acquire or purchase its own
stocks. In England, it was held invalid for a
corporation to purchase its issued stocks
because such purchase was an indirect method
of reducing capital (which was statutorily
restricted), aside from being inconsistent with
the privilege of limited liability to
creditors.15 Only a few American jurisdictions
adopted by decision or statute the strict English
rule forbidding a corporation from purchasing
its own shares. In some American states where
the English rule used to be adopted, statutes
granting authority to purchase out of surplus
funds were enacted, while in others, shares
might be purchased even out of capital
provided the rights of creditors were not
prejudiced.16 The reason underlying the
limitation of share purchases sprang from the
necessity of imposing safeguards against the
depletion by a corporation of its assets and
against the impairment of its capital needed for
the protection of creditors.17
Now, however, a corporation can purchase its
own shares, provided payment is made out of
surplus profits and the acquisition is for a
legitimate corporate purpose.18 In the
Philippines, this new rule is embodied in
Section 41 of the Corporation Code, to wit:
Section 41. Power to acquire own shares. - A
stock corporation shall have the power to
purchase or acquire its own shares for a
legitimate corporate purpose or purposes,
including but not limited to the following cases:
Provided, That the corporation has unrestricted
retained earnings in its books to cover the
shares to be purchased or acquired:
1. To eliminate fractional shares arising out of
stock dividends;
2. To collect or compromise an indebtedness to
the corporation, arising out of unpaid
subscription, in a delinquency sale, and to
purchase delinquent shares sold during said
sale; and
3. To pay dissenting or withdrawing
stockholders entitled to payment for their
shares under the provisions of this Code. (n)
The Corporation Code defines how the right of
appraisal is exercised, as well as the
implications of the right of appraisal, as follows:
1. The appraisal right is exercised by any
stockholder who has voted against the
proposed corporate action by making a written
demand on the corporation within 30 days after
the date on which the vote was taken for the
payment of the fair value of his shares. The
failure to make the demand within the period is
deemed a waiver of the appraisal right.19
2. If the withdrawing stockholder and the
corporation cannot agree on the fair value of
the shares within a period of 60 days from the
date the stockholders approved the corporate
action, the fair value shall be determined and
appraised by three disinterested persons, one
of whom shall be named by the stockholder,
another by the corporation, and the third by
the two thus chosen. The findings and award of
the majority of the appraisers shall be final, and
the corporation shall pay their award within 30
days after the award is made. Upon payment by
the corporation of the agreed or awarded price,
the stockholder shall forthwith transfer his or
her shares to the corporation.20
3. All rights accruing to the withdrawing
stockholder’s shares, including voting and
dividend rights, shall be suspended from the
time of demand for the payment of the fair
value of the shares until either the
abandonment of the corporate action involved
or the purchase of the shares by the
corporation, except the right of such
stockholder to receive payment of the fair
value of the shares.21
4. Within 10 days after demanding payment for
his or her shares, a dissenting stockholder shall
submit to the corporation the certificates of
stock representing his shares for notation
thereon that such shares are dissenting shares.
A failure to do so shall, at the option of the
corporation, terminate his rights under this
Title X of the Corporation Code. If shares
represented by the certificates bearing such
notation are transferred, and the certificates
are consequently canceled, the rights of the
transferor as a dissenting stockholder under
this Title shall cease and the transferee shall
have all the rights of a regular stockholder; and
all dividend distributions that would have
accrued on such shares shall be paid to the
transferee.22
5. If the proposed corporate action is
implemented or effected, the corporation shall
pay to such stockholder, upon the surrender of
the certificates of stock representing his shares,
the fair value thereof as of the day prior to the
date on which the vote was taken, excluding
any appreciation or depreciation in anticipation
of such corporate action.23
Notwithstanding the foregoing, no payment
shall be made to any dissenting stockholder
unless the corporation has unrestricted
retained earnings in its books to cover the
payment. In case the corporation has no
available unrestricted retained earnings in its
books, Section 83 of the Corporation Code
provides that if the dissenting stockholder is
not paid the value of his shares within 30 days
after the award, his voting and dividend rights
shall immediately be restored.
The trust fund doctrine backstops the
requirement of unrestricted retained earnings
to fund the payment of the shares of stocks of
the withdrawing stockholders. Under the
doctrine, the capital stock, property, and other
assets of a corporation are regarded as equity
in trust for the payment of corporate creditors,
who are preferred in the distribution of
corporate assets.24 The creditors of a
corporation have the right to assume that the
board of directors will not use the assets of the
corporation to purchase its own stock for as
long as the corporation has outstanding debts
and liabilities.25 There can be no distribution of
assets among the stockholders without first
paying corporate debts. Thus, any disposition of
corporate funds and assets to the prejudice of
creditors is null and void.26
B. Petitioners’ cause of action was premature
That the respondent had indisputably no
unrestricted retained earnings in its books at
the time the petitioners commenced Civil Case
No. 01-086 on January 22, 2001 proved that the
respondent’s legal obligation to pay the value
of the petitioners’ shares did not yet arise.
Thus, the CA did not err in holding that the
petitioners had no cause of action, and in ruling
that the RTC did not validly render the partial
summary judgment.
A cause of action is the act or omission by
which a party violates a right of another.27 The
essential elements of a cause of action are: (a)
the existence of a legal right in favor of the
plaintiff; (b) a correlative legal duty of the
defendant to respect such right; and (c) an act
or omission by such defendant in violation of
the right of the plaintiff with a resulting injury
or damage to the plaintiff for which the latter
may maintain an action for the recovery of
relief from the defendant.28 Although the first
two elements may exist, a cause of action
arises only upon the occurrence of the last
element, giving the plaintiff the right to
maintain an action in court for recovery of
damages or other appropriate relief.29
Section 1, Rule 2, of the Rules of Court requires
that every ordinary civil action must be based
on a cause of action. Accordingly, Civil Case No.
01-086 was dismissible from the beginning for
being without any cause of action.
The RTC concluded that the respondent’s
obligation to pay had accrued by its having the
unrestricted retained earnings after the making
of the demand by the petitioners. It based its
conclusion on the fact that the Corporation
Code did not provide that the unrestricted
retained earnings must already exist at the time
of the demand.
The RTC’s construal of the Corporation Code
was unsustainable, because it did not take into
account the petitioners’ lack of a cause of
action against the respondent. In order to give
rise to any obligation to pay on the part of the
respondent, the petitioners should first make a
valid demand that the respondent refused to
pay despite having unrestricted retained
earnings. Otherwise, the respondent could not
be said to be guilty of any actionable omission
that could sustain their action to collect.
Neither did the subsequent existence of
unrestricted retained earnings after the filing of
the complaint cure the lack of cause of action in
Civil Case No. 01-086. The petitioners’ right of
action could only spring from an existing cause
of action. Thus, a complaint whose cause of
action has not yet accrued cannot be cured by
an amended or supplemental pleading alleging
the existence or accrual of a cause of action
during the pendency of the action.30 For, only
when there is an invasion of primary rights, not
before, does the adjective or remedial law
become operative.31 Verily, a premature
invocation of the court’s intervention renders
the complaint without a cause of action and
dismissible on such ground.32 In short, Civil Case
No. 01-086, being a groundless suit, should be
dismissed.
Even the fact that the respondent already had
unrestricted retained earnings more than
sufficient to cover the petitioners’ claims on
June 26, 2002 (when they filed their motion for
partial summary judgment) did not rectify the
absence of the cause of action at the time of
the commencement of Civil Case No. 01-086.
The motion for partial summary judgment,
being a mere application for relief other than
by a pleading,33 was not the same as the
complaint in Civil Case No. 01-086. Thereby, the
petitioners did not meet the requirement of the
Rules of Court that a cause of action must exist
at the commencement of an action, which is
"commenced by the filing of the original
complaint in court."34
The petitioners claim that the respondent’s
petition for certiorari sought only the
annulment of the assailed orders of the RTC
(i.e., granting the motion for partial summary
judgment and the motion for immediate
execution); hence, the CA had no right to direct
the dismissal of Civil Case No. 01-086.
The claim of the petitioners cannot stand.
Although the respondent’s petition for
certiorari targeted only the RTC’s orders
granting the motion for partial summary
judgment and the motion for immediate
execution, the CA’s directive for the dismissal of
Civil Case No. 01-086 was not an abuse of
discretion, least of all grave, because such
dismissal was the only proper thing to be done
under the circumstances. According to Surigao
Mine Exploration Co., Inc. v. Harris:35
Subject to certain qualification, and except as
otherwise provided by law, an action
commenced before the cause of action has
accrued is prematurely brought and should be
dismissed. The fact that the cause of action
accrues after the action is commenced and
while the case is pending is of no moment. It is
a rule of law to which there is, perhaps no
exception, either in law or in equity, that to
recover at all there must be some cause of
action at the commencement of the suit. There
are reasons of public policy why there should
be no needless haste in bringing up litigation,
and why people who are in no default and
against whom there is as yet no cause of action
should not be summoned before the public
tribunals to answer complaints which are
groundless. An action prematurely brought is a
groundless suit. Unless the plaintiff has a valid
and subsisting cause of action at the time his
action is commenced, the defect cannot be
cured or remedied by the acquisition or accrual
of one while the action is pending, and a
supplemental complaint or an amendment
setting up such after-accrued cause of action is
not permissible.
Lastly, the petitioners argue that the
respondent’s recourse of a special action for
certiorari was the wrong remedy, in view of the
fact that the granting of the motion for partial
summary judgment constituted only an error of
law correctible by appeal, not of jurisdiction.
The argument of the petitioners is baseless. The
RTC was guilty of an error of jurisdiction, for it
exceeded its jurisdiction by taking cognizance
of the complaint that was not based on an
existing cause of action.
WHEREFORE, the petition for review on
certiorari is denied for lack of merit.
We affirm the decision promulgated on March
4, 2003 in C.A.-G.R. SP No. 74156 entitled
Lorenzo Shipping Corporation v. Hon. Artemio
S. Tipon, in his capacity as Presiding Judge of
Branch 46 of the Regional Trial Court of Manila,
et al.
Costs of suit to be paid by the petitioners.
SO ORDERED.
Heirs of Ypon vs Ricaforte GR 198680
This is a direct recourse to the Court from the
Regional Trial Court of Toledo City, Branch 59
(RTC), through a petition for review on
certiorari1 under Rule 45 of the Rules of Court,
raising a pure question of law. In particular,
petitioners assail the July 27, 20112 and August
31, 20113 Orders of the RTC, dismissing Civil
Case No. T-2246 for lack of cause of action.
The Facts
On July 29, 2010, petitioners, together with
some of their cousins,4 filed a complaint for
Cancellation of Title and Reconveyance with
Damages (subject complaint) against
respondent Gaudioso Ponteras Ricaforte a.k.a.
"Gaudioso E. Ypon" (Gaudioso), docketed as
Civil Case No. T-2246.5 In their complaint, they
alleged that Magdaleno Ypon (Magdaleno) died
intestate and childless on June 28, 1968,
leaving behind Lot Nos. 2-AA, 2-C, 2-F, and 2-J
which were then covered by Transfer
Certificates of Title (TCT) Nos. T-44 and T-77-
A.6 Claiming to be the sole heir of Magdaleno,
Gaudioso executed an Affidavit of Self-
Adjudication and caused the cancellation of the
aforementioned certificates of title, leading to
their subsequent transfer in his name under
TCT Nos. T-2637 and T-2638,7 to the prejudice
of petitioners who are Magdaleno’s collateral
relatives and successors-in-interest.8
In his Answer, Gaudioso alleged that he is the
lawful son of Magdaleno as evidenced by: (a)
his certificate of Live Birth; (b) two (2) letters
from Polytechnic School; and (c) a certified true
copy of his passport.9 Further, by way of
affirmative defense, he claimed that: (a)
petitioners have no cause of action against him;
(b) the complaint fails to state a cause of
action; and (c) the case is not prosecuted by the
real parties-in-interest, as there is no showing
that the petitioners have been judicially
declared as Magdaleno’s lawful heirs.10
The RTC Ruling
On July 27, 2011, the RTC issued the assailed
July 27, 2011 Order,11 finding that the subject
complaint failed to state a cause of action
against Gaudioso. It observed that while the
plaintiffs therein had established their
relationship with Magdaleno in a previous
special proceeding for the issuance of letters of
administration,12 this did not mean that they
could already be considered as the decedent’s
compulsory heirs. Quite the contrary, Gaudioso
satisfactorily established the fact that he is
Magdaleno’s son – and hence, his compulsory
heir – through the documentary evidence he
submitted which consisted of: (a) a marriage
contract between Magdaleno and Epegenia
Evangelista; (b) a Certificate of Live Birth; (c) a
Letter dated February 19, 1960; and (d) a
passport.13
The plaintiffs therein filed a motion for
reconsideration which was, however, denied on
August 31, 2011 due to the counsel’s failure to
state the date on which his Mandatory
Continuing Legal Education Certificate of
Compliance was issued.14
Aggrieved, petitioners, who were among the
plaintiffs in Civil Case No. T-2246,15 sought
direct recourse to the Court through the instant
petition.
The Issue Before the Court
The core of the present controversy revolves
around the issue of whether or not the RTC’s
dismissal of the case on the ground that the
subject complaint failed to state a cause of
action was proper.
The Court’s Ruling
The petition has no merit.
Cause of action is defined as the act or omission
by which a party violates a right of another.16 It
is well-settled that the existence of a cause of
action is determined by the allegations in the
complaint.17 In this relation, a complaint is said
to assert a sufficient cause of action if,
admitting what appears solely on its face to be
correct, the plaintiff would be entitled to the
relief prayed for.18Accordingly, if the allegations
furnish sufficient basis by which the complaint
can be maintained, the same should not be
dismissed, regardless of the defenses that may
be averred by the defendants.19
As stated in the subject complaint, petitioners,
who were among the plaintiffs therein, alleged
that they are the lawful heirs of Magdaleno and
based on the same, prayed that the Affidavit of
Self-Adjudication executed by Gaudioso be
declared null and void and that the transfer
certificates of title issued in the latter’s favor be
cancelled. While the foregoing allegations, if
admitted to be true, would consequently
warrant the reliefs sought for in the said
complaint, the rule that the determination of a
decedent’s lawful heirs should be made in the
corresponding special proceeding20 precludes
the RTC, in an ordinary action for cancellation
of title and reconveyance, from granting the
same. In the case of Heirs of Teofilo Gabatan v.
CA,21 the Court, citing several other precedents,
held that the determination of who are the
decedent’s lawful heirs must be made in the
proper special proceeding for such purpose,
and not in an ordinary suit for recovery of
ownership and/or possession, as in this case:
Jurisprudence dictates that the determination
of who are the legal heirs of the deceased must
be made in the proper special proceedings in
court, and not in an ordinary suit for recovery
of ownership and possession of
property.1âwphi1 This must take precedence
over the action for recovery of possession and
ownership. The Court has consistently ruled
that the trial court cannot make a declaration
of heirship in the civil action for the reason that
such a declaration can only be made in a special
proceeding. Under Section 3, Rule 1 of the 1997
Revised Rules of Court, a civil action is defined
as one by which a party sues another for the
enforcement or protection of a right, or the
prevention or redress of a wrong while a special
proceeding is a remedy by which a party seeks
to establish a status, a right, or a particular fact.
It is then decisively clear that the declaration of
heirship can be made only in a special
proceeding inasmuch as the petitioners here
are seeking the establishment of a status or
right.
In the early case of Litam, et al. v. Rivera, this
Court ruled that the declaration of heirship
must be made in a special proceeding, and not
in an independent civil action. This doctrine
was reiterated in Solivio v. Court of Appeals x x
x:
In the more recent case of Milagros Joaquino v.
Lourdes Reyes, the Court reiterated its ruling
that matters relating to the rights of filiation
and heirship must be ventilated in the proper
probate court in a special proceeding instituted
precisely for the purpose of determining such
rights. Citing the case of Agapay v. Palang, this
Court held that the status of an illegitimate
child who claimed to be an heir to a decedent's
estate could not be adjudicated in an ordinary
civil action which, as in this case, was for the
recovery of property.22 (Emphasis and
underscoring supplied; citations omitted)
By way of exception, the need to institute a
separate special proceeding for the
determination of heirship may be dispensed
with for the sake of practicality, as when the
parties in the civil case had voluntarily
submitted the issue to the trial court and
already presented their evidence regarding the
issue of heirship, and the RTC had consequently
rendered judgment thereon,23 or when a
special proceeding had been instituted but had
been finally closed and terminated, and hence,
cannot be re-opened.24
In this case, none of the foregoing exceptions,
or those of similar nature, appear to exist.
Hence, there lies the need to institute the
proper special proceeding in order to
determine the heirship of the parties involved,
ultimately resulting to the dismissal of Civil
Case No. T-2246.
Verily, while a court usually focuses on the
complaint in determining whether the same
fails to state a cause of action, a court cannot
disregard decisions material to the proper
appreciation of the questions before it.25 Thus,
concordant with applicable jurisprudence, since
a determination of heirship cannot be made in
an ordinary action for recovery of ownership
and/or possession, the dismissal of Civil Case
No. T-2246 was altogether proper. In this light,
it must be pointed out that the RTC erred in
ruling on Gaudioso’s heirship which should, as
herein discussed, be threshed out and
determined in the proper special proceeding.
As such, the foregoing pronouncement should
therefore be devoid of any legal effect.
WHEREFORE, the petition is DENIED. The
dismissal of Civil Case No. T-2246 is hereby
AFFIRMED, without prejudice to any
subsequent proceeding to determine the lawful
heirs of the late Magdaleno Ypon and the rights
concomitant therewith.
SO ORDERED.
G.R. No. 161135. SWAGMAN HOTELS vs. COURT
OF APPEALS,
May a complaint that lacks a cause of action at
the time it was filed be cured by the accrual of
a cause of action during the pendency of the
case? This is the basic issue raised in this
petition for the Court’s consideration.
Sometime in 1996 and 1997, petitioner
Swagman Hotels and Travel, Inc., through Atty.
Leonor L. Infante and Rodney David Hegerty, its
president and vice-president, respectively,
obtained from private respondent Neal B.
Christian loans evidenced by three promissory
notes dated 7 August 1996, 14 March 1997,
and 14 July 1997. Each of the promissory notes
is in the amount of US$50,000 payable after
three years from its date with an interest of
15% per annum payable every three
months.1 In a letter dated 16 December 1998,
Christian informed the petitioner corporation
that he was terminating the loans and
demanded from the latter payment in the total
amount of US$150,000 plus unpaid interests in
the total amount of US$13,500.2
On 2 February 1999, private respondent
Christian filed with the Regional Trial Court of
Baguio City, Branch 59, a complaint for a sum of
money and damages against the petitioner
corporation, Hegerty, and Atty. Infante. The
complaint alleged as follows: On 7 August 1996,
14 March 1997, and 14 July 1997, the
petitioner, as well as its president and vice-
president obtained loans from him in the total
amount of US$150,000 payable after three
years, with an interest of 15% per annum
payable quarterly or every three months. For a
while, they paid an interest of 15% per annum
every three months in accordance with the
three promissory notes. However, starting
January 1998 until December 1998, they paid
him only an interest of 6% per annum, instead
of 15% per annum, in violation of the terms of
the three promissory notes. Thus, Christian
prayed that the trial court order them to pay
him jointly and solidarily the amount of
US$150,000 representing the total amount of
the loans; US$13,500 representing unpaid
interests from January 1998 until December
1998; ₱100,000 for moral damages; ₱50,000
for attorney’s fees; and the cost of the suit.3
The petitioner corporation, together with its
president and vice-president, filed an Answer
raising as defenses lack of cause of action and
novation of the principal obligations. According
to them, Christian had no cause of action
because the three promissory notes were not
yet due and demandable. In December 1997,
since the petitioner corporation was
experiencing huge losses due to the Asian
financial crisis, Christian agreed (a) to waive the
interest of 15% per annum, and (b) accept
payments of the principal loans in installment
basis, the amount and period of which would
depend on the state of business of the
petitioner corporation. Thus, the petitioner
paid Christian capital repayment in the amount
of US$750 per month from January 1998 until
the time the complaint was filed in February
1999. The petitioner and its co-defendants then
prayed that the complaint be dismissed and
that Christian be ordered to pay ₱1 million as
moral damages; ₱500,000 as exemplary
damages; and ₱100,000 as attorney’s fees.4
In due course and after hearing, the trial court
rendered a decision5 on 5 May 2000 declaring
the first two promissory notes dated 7 August
1996 and 14 March 1997 as already due and
demandable and that the interest on the loans
had been reduced by the parties from 15% to
6% per annum. It then ordered the petitioner
corporation to pay Christian the amount of
$100,000 representing the principal obligation
covered by the promissory notes dated 7
August 1996 and 14 March 1997, "plus interest
of 6% per month thereon until fully paid, with
all interest payments already paid by the
defendant to the plaintiff to be deducted
therefrom."
The trial court ratiocinated in this wise:
(1) There was no novation of defendant’s
obligation to the plaintiff. Under Article 1292 of
the Civil Code, there is an implied novation only
if the old and the new obligation be on every
point incompatible with one another.
The test of incompatibility between the two
obligations or contracts, according to an
imminent author, is whether they can stand
together, each one having an independent
existence. If they cannot, they are
incompatible, and the subsequent obligation
novates the first (Tolentino, Civil Code of the
Philippines, Vol. IV, 1991 ed., p. 384).
Otherwise, the old obligation will continue to
subsist subject to the modifications agreed
upon by the parties. Thus, it has been written
that accidental modifications in an existing
obligation do not extinguish it by novation.
Mere modifications of the debt agreed upon
between the parties do not constitute
novation. When the changes refer to secondary
agreement and not to the object or principal
conditions of the contract, there is no novation;
such changes will produce modifications of
incidental facts, but will not extinguish the
original obligation. Thus, the acceptance of
partial payments or a partial remission does not
involve novation (id., p. 387). Neither does the
reduction of the amount of an obligation
amount to a novation because it only means a
partial remission or condonation of the same
debt.
In the instant case, the Court is of the view that
the parties merely intended to change the rate
of interest from 15% per annum to 6% per
annum when the defendant started paying
$750 per month which payments were all
accepted by the plaintiff from January 1998
onward. The payment of the principal
obligation, however, remains unaffected which
means that the defendant should still pay the
plaintiff $50,000 on August 9, 1999, March 14,
2000 and July 14, 2000.
(2) When the instant case was filed on February
2, 1999, none of the promissory notes was due
and demandable. As of this date however, the
first and the second promissory notes have
already matured. Hence, payment is already
due.
Under Section 5 of Rule 10 of the 1997 Rules of
Civil Procedure, a complaint which states no
cause of action may be cured by evidence
presented without objection. Thus, even if the
plaintiff had no cause of action at the time he
filed the instant complaint, as defendants’
obligation are not yet due and demandable
then, he may nevertheless recover on the first
two promissory notes in view of the
introduction of evidence showing that the
obligations covered by the two promissory
notes are now due and demandable.
(3) Individual defendants Rodney Hegerty and
Atty. Leonor L. Infante can not be held
personally liable for the obligations contracted
by the defendant corporation it being clear that
they merely acted in representation of the
defendant corporation in their capacity as
General Manager and President, respectively,
when they signed the promissory notes as
evidenced by Board Resolution No. 1(94)
passed by the Board of Directors of the
defendant corporation (Exhibit "4").6
In its decision7 of 5 September 2003, the Court
of Appeals denied petitioner’s appeal and
affirmed in toto the decision of the trial court,
holding as follows:
In the case at bench, there is no incompatibility
because the changes referred to by appellant
Swagman consist only in the manner of
payment. . . .
Appellant Swagman’s interpretation that the
three (3) promissory notes have been novated
by reason of appellee Christian’s acceptance of
the monthly payments of US$750.00 as capital
repayments continuously even after the filing
of the instant case is a little bit strained
considering the stiff requirements of the law on
novation that the intention to novate must
appear by express agreement of the parties, or
by their acts that are too clear and unequivocal
to be mistaken. Under the circumstances, the
more reasonable interpretation of the act of
the appellee Christian in receiving the monthly
payments of US$750.00 is that appellee
Christian merely allowed appellant Swagman to
pay whatever amount the latter is capable of.
This interpretation is supported by the letter of
demand dated December 16, 1998 wherein
appellee Christian demanded from appellant
Swagman to return the principal loan in the
amount of US$150,000 plus unpaid interest in
the amount of US$13,500.00. . .
Appellant Swagman, likewise, contends that, at
the time of the filing of the complaint, appellee
Christian ha[d] no cause of action because none
of the promissory notes was due and
demandable.
Again, We are not persuaded.. . .
In the case at bench, while it is true that
appellant Swagman raised in its Answer the
issue of prematurity in the filing of the
complaint, appellant Swagman nonetheless
failed to object to appellee Christian’s
presentation of evidence to the effect that the
promissory notes have become due and
demandable.
The afore-quoted rule allows a complaint which
states no cause of action to be cured either by
evidence presented without objection or, in the
event of an objection sustained by the court, by
an amendment of the complaint with leave of
court (Herrera, Remedial Law, Vol. VII, 1997
ed., p. 108).8
Its motion for reconsideration having been
denied by the Court of Appeals in its Resolution
of 4 December 2003,9 the petitioner came to
this Court raising the following issues:
I. WHERE THE DECISION OF THE TRIAL COURT
DROPPING TWO DEFENDANTS HAS BECOME
FINAL AND EXECUTORY, MAY THE RESPONDENT
COURT OF APPEALS STILL STUBBORNLY
CONSIDER THEM AS APPELLANTS WHEN THEY
DID NOT APPEAL?
ii. Where there is no cause of action, is the
decision of the lower court valid?
III. MAY THE RESPONDENT COURT OF APPEALS
VALIDLY AFFIRM A DECISION OF THE LOWER
COURT WHICH IS INVALID DUE TO LACK OF
CAUSE OF ACTION?
IV. Where there is a valid novation, may the
original terms of contract which has been
novated still prevail?10
The petitioner harps on the absence of a cause
of action at the time the private respondent’s
complaint was filed with the trial court. In
connection with this, the petitioner raises the
issue of novation by arguing that its obligations
under the three promissory notes were
novated by the renegotiation that happened in
December 1997 wherein the private
respondent agreed to waive the interest in
each of the three promissory notes and to
accept US$750 per month as installment
payment for the principal loans in the total
amount of US$150,000. Lastly, the petitioner
questions the act of the Court of Appeals in
considering Hegerty and Infante as appellants
when they no longer appealed because the trial
court had already absolved them of the liability
of the petitioner corporation.
On the other hand, the private respondent
asserts that this petition is "a mere ploy to
continue delaying the payment of a just
obligation." Anent the fact that Hegerty and
Atty. Infante were considered by the Court of
Appeals as appellants, the private respondent
finds it immaterial because they are not
affected by the assailed decision anyway.
Cause of action, as defined in Section 2, Rule 2
of the 1997 Rules of Civil Procedure, is the act
or omission by which a party violates the right
of another. Its essential elements are as
follows:
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. 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 or other appropriate
relief.11
It is, thus, only upon the occurrence of the last
element that a cause of action arises, giving the
plaintiff the right to maintain an action in court
for recovery of damages or other appropriate
relief.
It is undisputed that the three promissory notes
were for the amount of P50,000 each and
uniformly provided for (1) a term of three
years; (2) an interest of 15 % per annum,
payable quarterly; and (3) the repayment of the
principal loans after three years from their
respective dates. However, both the Court of
Appeals and the trial court found that a
renegotiation of the three promissory notes
indeed happened in December 1997 between
the private respondent and the petitioner
resulting in the reduction – not waiver – of the
interest from 15% to 6% per annum, which
from then on was payable monthly, instead of
quarterly. The term of the principal loans
remained unchanged in that they were still due
three years from the respective dates of the
promissory notes. Thus, at the time the
complaint was filed with the trial court on 2
February 1999, none of the three promissory
notes was due yet; although, two of the
promissory notes with the due dates of 7
August 1999 and 14 March 2000 matured
during the pendency of the case with the trial
court. Both courts also found that the
petitioner had been religiously paying the
private respondent US$750 per month from
January 1998 and even during the pendency of
the case before the trial court and that the
private respondent had accepted all these
monthly payments.
With these findings of facts, it has become
glaringly obvious that when the complaint for a
sum of money and damages was filed with the
trial court on 2 February 1999, no cause of
action has as yet existed because the petitioner
had not committed any act in violation of the
terms of the three promissory notes as
modified by the renegotiation in December
1997. Without a cause of action, the private
respondent had no right to maintain an action
in court, and the trial court should have
therefore dismissed his complaint.
Despite its finding that the petitioner
corporation did not violate the modified terms
of the three promissory notes and that the
payment of the principal loans were not yet
due when the complaint was filed, the trial
court did not dismiss the complaint, citing
Section 5, Rule 10 of the 1997 Rules of Civil
Procedure, which reads:
Section 5. Amendment to conform to or
authorize presentation of evidence. — When
issues not raised by the pleadings are tried with
the express or implied consent of the parties,
they shall be treated in all respects as if they
had been raised in the pleadings. Such
amendment of the pleadings as may be
necessary to cause them to conform to the
evidence and to raise these issues may be
made upon motion of any party at any time,
even after judgment; but failure to amend does
not affect the result of the trial of these issues.
If evidence is objected to at the trial on the
ground that it is not within the issues made by
the pleadings, the court may allow the
pleadings to be amended and shall do so with
liberality if the presentation of the merits of the
action and the ends of substantial justice will be
subserved thereby. The court may grant a
continuance to enable the amendment to be
made.
According to the trial court, and sustained by
the Court of Appeals, this Section allows a
complaint that does not state a cause of action
to be cured by evidence presented without
objection during the trial. Thus, it ruled that
even if the private respondent had no cause of
action when he filed the complaint for a sum of
money and damages because none of the three
promissory notes was due yet, he could
nevertheless recover on the first two
promissory notes dated 7 August 1996 and 14
March 1997, which became due during the
pendency of the case in view of the
introduction of evidence of their maturity
during the trial.
Such interpretation of Section 5, Rule 10 of the
1997 Rules of Civil Procedure is erroneous.
Amendments of pleadings are allowed under
Rule 10 of the 1997 Rules of Civil Procedure in
order that the actual merits of a case may be
determined in the most expeditious and
inexpensive manner without regard to
technicalities, and that all other matters
included in the case may be determined in a
single proceeding, thereby avoiding multiplicity
of suits.12 Section 5 thereof applies to situations
wherein evidence not within the issues raised
in the pleadings is presented by the parties
during the trial, and to conform to such
evidence the pleadings are subsequently
amended on motion of a party. Thus, a
complaint which fails to state a cause of action
may be cured by evidence presented during the
trial.
However, the curing effect under Section 5 is
applicable only if a cause of action in fact exists
at the time the complaint is filed, but the
complaint is defective for failure to allege the
essential facts. For example, if a complaint
failed to allege the fulfillment of a condition
precedent upon which the cause of action
depends, evidence showing that such condition
had already been fulfilled when the complaint
was filed may be presented during the trial, and
the complaint may accordingly be amended
thereafter.13 Thus, in Roces v. Jalandoni,14 this
Court upheld the trial court in taking
cognizance of an otherwise defective complaint
which was later cured by the testimony of the
plaintiff during the trial. In that case, there was
in fact a cause of action and the only problem
was the insufficiency of the allegations in the
complaint. This ruling was reiterated in Pascua
v. Court of Appeals.15
It thus follows that a complaint whose cause of
action has not yet accrued cannot be cured or
remedied by an amended or supplemental
pleading alleging the existence or accrual of a
cause of action while the case is pending.16 Such
an action is prematurely brought and is,
therefore, a groundless suit, which should be
dismissed by the court upon proper motion
seasonably filed by the defendant. The
underlying reason for this rule is that a person
should not be summoned before the public
tribunals to answer for complaints which are
immature. As this Court eloquently said
in Surigao Mine Exploration Co., Inc. v. Harris:17
It is a rule of law to which there is, perhaps, no
exception, either at law or in equity, that to
recover at all there must be some cause of
action at the commencement of the suit. As
observed by counsel for appellees, there are
reasons of public policy why there should be no
needless haste in bringing up litigation, and
why people who are in no default and against
whom there is yet no cause of action should
not be summoned before the public tribunals
to answer complaints which are groundless. We
say groundless because if the action is
immature, it should not be entertained, and an
action prematurely brought is a groundless suit.
It is true that an amended complaint and the
answer thereto take the place of the originals
which are thereby regarded as abandoned
(Reynes vs. Compañía General de Tabacos
[1912], 21 Phil. 416; Ruyman and Farris vs.
Director of Lands [1916], 34 Phil., 428) and that
"the complaint and answer having been
superseded by the amended complaint and
answer thereto, and the answer to the original
complaint not having been presented in
evidence as an exhibit, the trial court was not
authorized to take it into account." (Bastida vs.
Menzi & Co. [1933], 58 Phil., 188.) But in none
of these cases or in any other case have we
held that if a right of action did not exist when
the original complaint was filed, one could be
created by filing an amended complaint. In
some jurisdictions in the United States what
was termed an "imperfect cause of action"
could be perfected by suitable amendment
(Brown vs. Galena Mining & Smelting Co., 32
Kan., 528; Hooper vs. City of Atlanta, 26 Ga.
App., 221) and this is virtually permitted in
Banzon and Rosauro vs. Sellner ([1933], 58
Phil., 453); Asiatic Potroleum [sic] Co. vs. Veloso
([1935], 62 Phil., 683); and recently in Ramos
vs. Gibbon (38 Off. Gaz., 241). That, however,
which is no cause of action whatsoever cannot
by amendment or supplemental pleading be
converted into a cause of action: Nihil de re
accrescit ei qui nihil in re quando jus
accresceret habet.
We are therefore of the opinion, and so hold,
that unless the plaintiff has a valid and
subsisting cause of action at the time his action
is commenced, the defect cannot be cured or
remedied by the acquisition or accrual of one
while the action is pending, and a supplemental
complaint or an amendment setting up such
after-accrued cause of action is not permissible.
(Emphasis ours).
Hence, contrary to the holding of the trial court
and the Court of Appeals, the defect of lack of
cause of action at the commencement of this
suit cannot be cured by the accrual of a cause
of action during the pendency of this case
arising from the alleged maturity of two of the
promissory notes on 7 August 1999 and 14
March 2000.
Anent the issue of novation, this Court observes
that the petitioner corporation argues the
existence of novation based on its own version
of what transpired during the renegotiation of
the three promissory notes in December 1997.
By using its own version of facts, the petitioner
is, in a way, questioning the findings of facts of
the trial court and the Court of Appeals.
As a rule, the findings of fact of the trial court
and the Court of Appeals are final and
conclusive and cannot be reviewed on appeal
to the Supreme Court18 as long as they are
borne out by the record or are based on
substantial evidence.19 The Supreme Court is
not a trier of facts, its jurisdiction being limited
to reviewing only errors of law that may have
been committed by the lower courts. Among
the exceptions is when the finding of fact of the
trial court or the Court of Appeals is not
supported by the evidence on record or is
based on a misapprehension of facts. Such
exception obtains in the present case.20
This Court finds to be contrary to the evidence
on record the finding of both the trial court and
the Court of Appeals that the renegotiation in
December 1997 resulted in the reduction of the
interest from 15% to 6% per annum and that
the monthly payments of US$750 made by the
petitioner were for the reduced interests.
It is worthy to note that the cash voucher dated
January 199821 states that the payment of
US$750 represents "INVESTMENT PAYMENT."
All the succeeding cash vouchers describe the
payments from February 1998 to September
1999 as "CAPITAL REPAYMENT."22 All these cash
vouchers served as receipts evidencing private
respondent’s acknowledgment of the payments
made by the petitioner: two of which were
signed by the private respondent himself and
all the others were signed by his
representatives. The private respondent even
identified and confirmed the existence of these
receipts during the hearing. 23 Significantly,
cognizant of these receipts, the private
respondent applied these payments to the
three consolidated principal loans in the
summary of payments he submitted to the
court.24
Under Article 1253 of the Civil Code, if the debt
produces interest, payment of the principal
shall not be deemed to have been made until
the interest has been covered. In this case, the
private respondent would not have signed the
receipts describing the payments made by the
petitioner as "capital repayment" if the
obligation to pay the interest was still
subsisting. The receipts, as well as private
respondent’s summary of payments, lend
credence to petitioner’s claim that the
payments were for the principal loans and that
the interests on the three consolidated loans
were waived by the private respondent during
the undisputed renegotiation of the loans on
account of the business reverses suffered by
the petitioner at the time.
There was therefore a novation of the terms of
the three promissory notes in that the interest
was waived and the principal was payable in
monthly installments of US$750. Alterations of
the terms and conditions of the obligation
would generally result only in modificatory
novation unless such terms and conditions are
considered to be the essence of the obligation
itself.25 The resulting novation in this case was,
therefore, of the modificatory type, not the
extinctive type, since the obligation to pay a
sum of money remains in force.
Thus, since the petitioner did not renege on its
obligation to pay the monthly installments
conformably with their new agreement and
even continued paying during the pendency of
the case, the private respondent had no cause
of action to file the complaint. It is only upon
petitioner’s default in the payment of the
monthly amortizations that a cause of action
would arise and give the private respondent a
right to maintain an action against the
petitioner.
Lastly, the petitioner contends that the Court of
Appeals obstinately included its President
Infante and Vice-President Hegerty as
appellants even if they did not appeal the trial
court’s decision since they were found to be
not personally liable for the obligation of the
petitioner. Indeed, the Court of Appeals erred
in referring to them as defendants-appellants;
nevertheless, that error is no cause for alarm
because its ruling was clear that the petitioner
corporation was the one solely liable for its
obligation. In fact, the Court of Appeals
affirmed in toto the decision of the trial court,
which means that it also upheld the latter’s
ruling that Hegerty and Infante were not
personally liable for the pecuniary obligations
of the petitioner to the private respondent.
In sum, based on our disquisition on the lack of
cause of action when the complaint for sum of
money and damages was filed by the private
respondent, the petition in the case at bar is
impressed with merit.
WHEREFORE, the petition is hereby GRANTED.
The Decision of 5 September 2003 of the Court
of Appeals in CA-G.R. CV No. 68109, which
affirmed the Decision of 5 May 2000 of the
Regional Trial Court of Baguio, Branch 59,
granting in part private respondent’s complaint
for sum of money and damages, and its
Resolution of 4 December 2003, which denied
petitioner’s motion for reconsideration are
hereby REVERSED and SET ASIDE. The
complaint docketed as Civil Case No. 4282-R is
hereby DISMISSED for lack of cause of action.
No costs.
SO ORDERED.
G.R. No. L-41423 JOSEPH vs. BAUTISTA
Petitioner prays in this appeal by certiorari for
the annulment and setting aside of the order,
dated July 8, 1975, dismissing petitioner's
complaint, as well as the order, dated August
22, 1975, denying his motion for
reconsideration of said dismissal, both issued
by respondent Judge Crispin V. Bautista of the
former Court of First Instance of Bulacan,
Branch III.
Petitioner herein is the plaintiff in Civil Case No.
50-V-73 entitled "Luis Joseph vs. Patrocinio
Perez, Domingo Villa y de Jesus, Rosario Vargas,
Antonio Sioson, Lazaro Villanueva and Jacinto
Pagarigan", filed before the Court of First
Instance of Bulacan, Branch III, and presided
over by respondent Judge Crispin V. Bautista;
while private respondents Patrocinio Perez,
Antonio Sioson, Jacinto Pagarigan and Lazaro
Villanueva are four of the defendants in said
case. Defendant Domingo Villa y de Jesus did
not answer either the original or the amended
complaint, while defendant Rosario Vargas
could not be served with summons; and
respondent Alberto Cardeno is included herein
as he was impleaded by defendant Patrocinio
Perez, one of respondents herein, in her cross-
claim.
The generative facts of this case, as culled from
the written submission of the parties, are as
follows:
Respondent Patrocinio Perez is the owner of a
cargo truck with Plate No. 25-2 YT Phil. '73 for
conveying cargoes and passengers for a
consideration from Dagupan City to Manila. On
January 12, 1973, said cargo truck driven by
defendant Domingo Villa was on its way to
Valenzuela, Bulacan from Pangasinan.
Petitioner, with a cargo of livestock, boarded
the cargo truck at Dagupan City after paying the
sum of P 9.00 as one way fare to Valenzuela,
Bulacan. While said cargo truck was negotiating
the National Highway proceeding towards
Manila, defendant Domingo Villa tried to
overtake a tricycle likewise proceeding in the
same direction. At about the same time, a pick-
up truck with Plate No. 45-95 B, supposedly
owned by respondents Antonio Sioson and
Jacinto Pagarigan, then driven by respondent
Lazaro Villanueva, tried to overtake the cargo
truck which was then in the process of
overtaking the tricycle, thereby forcing the
cargo truck to veer towards the shoulder of the
road and to ram a mango tree. As a result,
petitioner sustained a bone fracture in one of
his legs. 1
The following proceedings thereafter took
place: 2
Petitioner filed a complaint for damages against
respondent Patrocinio Perez, as owner of the
cargo truck, based on a breach of contract of
carriage and against respondents Antonio
Sioson and Lazaro Villanueva, as owner and
driver, respectively, of the pick-up truck, based
on quasi-delict.
Respondent Sioson filed his answer alleging
that he is not and never was an owner of the
pick-up truck and neither would he acquire
ownership thereof in the future.
On September 24, 1973, petitioner, with prior
leave of court, filed his amended complaint
impleading respondents Jacinto Pagarigan and
a certain Rosario Vargas as additional
alternative defendants. Petitioner apparently
could not ascertain who the real owner of said
cargo truck was, whether respondents
Patrocinio Perez or Rosario Vargas, and who
was the real owner of said pick-up truck,
whether respondents Antonio Sioson or Jacinto
Pagarigan.
Respondent Perez filed her amended answer
with crossclaim against her co-defendants for
indemnity and subrogation in the event she is
ordered to pay petitioner's claim, and therein
impleaded cross-defendant Alberto Cardeno as
additional alternative defendant.
On September 27, 1974, respondents Lazaro
Villanueva, Alberto Cardeno, Antonio Sioson
and Jacinto Pagarigan, thru their insurer,
Insurance Corporation of the Philippines, paid
petitioner's claim for injuries sustained in the
amount of P 1,300.00. By reason thereof,
petitioner executed a release of claim releasing
from liability the following parties, viz:
Insurance Corporation of the Philippines,
Alberto Cardeno, Lazaro Villanueva, Antonio
Sioson and Jacinto Pagarigan.
On December 2, 1974, respondents Lazaro
Villanueva, Alberto Cardeno and their insurer,
the Insurance Corporation of the Philippines,
paid respondent Patrocinio Perez' claim for
damages to her cargo truck in the amount of P
7,420.61.
Consequently, respondents Sioson, Pagarigan,
Cardeno and Villanueva filed a "Motion to
Exonerate and Exclude Defs/ Cross defs.
Alberto Cardeno, Lazaro Villanueva, Antonio
Sioson and Jacinto Pagarigan on the Instant
Case", alleging that respondents Cardeno and
Villanueva already paid P 7,420.61 by way of
damages to respondent Perez, and alleging
further that respondents Cardeno, Villanueva,
Sioson and Pagarigan paid P 1,300.00 to
petitioner by way of amicable settlement.
Thereafter, respondent Perez filed her
"Opposition to Cross-defs.' motion dated Dec.
2, 1974 and Counter Motion" to dismiss. The
so-called counter motion to dismiss was
premised on the fact that the release of claim
executed by petitioner in favor of the other
respondents inured to the benefit of
respondent Perez, considering that all the
respondents are solidarity liable to herein
petitioner.
On July 8, 1975, respondent judge issued the
questioned order dismissing the case, and a
motion for the reconsideration thereof was
denied. Hence, this appeal, petitioner
contending that respondent judge erred in
declaring that the release of claim executed by
petitioner in favor of respondents Sioson,
Villanueva and Pagarigan inured to the benefit
of respondent Perez; ergo, it likewise erred in
dismissing the case.
We find the present recourse devoid of merit.
The argument that there are two causes of
action embodied in petitioner's complaint,
hence the judgment on the compromise
agreement under the cause of action based on
quasi-delict is not a bar to the cause of action
for breach of contract of carriage, is untenable.
A cause of action is understood to be the delict
or wrongful act or omission committed by the
defendant in violation of the primary rights of
the plaintiff. 3 It is true that a single act or
omission can be violative of various rights at
the same time, as when the act constitutes
juridically a violation of several separate and
distinct legal obligations. However where there
is only one delict or wrong, there is but a single
cause of action regardless of the number of
rights that may have been violated belonging to
one person. 4
The singleness of a cause of action lies in the
singleness of the- delict or wrong violating the
rights of one person. Nevertheless, if only one
injury resulted from several wrongful acts, only
one cause of action arises. 5 In the case at bar,
there is no question that the petitioner
sustained a single injury on his person. That
vested in him a single cause of action, albeit
with the correlative rights of action against the
different respondents through the appropriate
remedies allowed by law.
The trial court was, therefore, correct in
holding that there was only one cause of action
involved although the bases of recovery
invoked by petitioner against the defendants
therein were not necessarily Identical since the
respondents were not identically
circumstanced. However, a recovery by the
petitioner under one remedy necessarily bars
recovery under the other. This, in essence, is
the rationale for the proscription in our law
against double recovery for the same act or
omission which, obviously, stems from the
fundamental rule against unjust enrichment.
There is no question that the respondents
herein are solidarily liable to petitioner. On the
evidence presented in the court below, the trial
court found them to be so liable. It is
undisputed that petitioner, in his amended
complaint, prayed that the trial court hold
respondents jointly and severally liable.
Furthermore, the allegations in the amended
complaint clearly impleaded respondents as
solidary debtors. We cannot accept the
vacuous contention of petitioner that said
allegations are intended to apply only in the
event that execution be issued in his favor.
There is nothing in law or jurisprudence which
would countenance such a procedure.
The respondents having been found to be
solidarity liable to petitioner, the full payment
made by some of the solidary debtors and their
subsequent release from any and all liability to
petitioner inevitably resulted in the
extinguishment and release from liability of the
other solidary debtors, including herein
respondent Patrocinio Perez.
The claim that there was an agreement entered
into between the parties during the pre-trial
conference that, after such payment made by
the other respondents, the case shall proceed
as against respondent Perez is both incredible
and unsubstantiated. There is nothing in the
records to show, either by way of a pre-trial
order, minutes or a transcript of the notes of
the alleged pre-trial hearing, that there was
indeed such as agreement.
WHEREFORE, the challenged orders of the
respondent judge are hereby AFFIRMED.
SO ORDERED.
G.R. NO. 158138 PHILIPPINE BANK OF,
COMMUNICATIONS v.LIM
A restrictive stipulation on the venue of actions
contained in a promissory note applies to the
surety agreement supporting it, because the
nature of the two contracts and the factual
circumstances surrounding their execution are
intertwined or interconnected. The surety
agreement is merely an accessory to the
principal loan agreement embodied in the
promissory note. Hence, the enforcement of
the former depends upon the latter.
The Case
Before us is a Petition for Review1 under Rule
45 of the Rules of Court, assailing the April 29,
2003 Decision2 of the Court of Appeals (CA) in
CA-GR SP No. 69786. The challenged Decision
disposed as follows:
"WHEREFORE, based on the foregoing, the
instant petition is hereby GRANTED. The
assailed Orders dated June 9, 2000 and January
9, 2002 are hereby ANNULED and SET ASIDE.
Civil Case No. 99-94976 is hereby
ordered DISMISSED without prejudice to the
filing thereof in the venue exclusively stipulated
by the parties."3
The Facts
The facts are related by the CA as follows:
"On September 3, 1999, the Philippine Bank of
Communications (hereinafter '[petitioner'])
filed a complaint against [Respondents Elena
Lim, Ramon Calderon and Tri-Oro International
Trading & Manufacturing Corporation ('Tri-Oro'
for brevity)] with the Regional Trial Court of
Manila for the collection of a deficiency
amounting to P4,014,297.23 exclusive of
interest. [Petitioner] alleged therein that
[respondents] obtained a loan from it and
executed a continuing surety agreement dated
November 16, 1995 in favor of [petitioner] for
all loans, credits, etc., that were extended or
may be extended in the future to
[respondents]. [Petitioner] granted a renewal
of said loan upon [respondent's] request, the
most recent being on January 21, 1998 as
evidenced by Promissory Note Renewal BD-
Variable No. 8298021001 in the amount
of P3,000,000.00. It was expressly stipulated
therein that the venue for any legal action that
may arise out of said promissory note shall be
Makati City, 'to the exclusion of all other courts'
x x x. [Respondents allegedly] failed to pay said
obligation upon maturity. Thus, [petitioner]
foreclosed the real estate mortgage executed
by [respondents] valued at P1,081,600.00
leaving a deficiency balance of P4,014,297.23
as of August 31, 1999.
"[Respondents] moved to dismiss the complaint
on the ground of improper venue, invoking the
stipulation contained in the last paragraph of
the promissory note with respect to the
restrictive/exclusive venue. [The trial court]
denied said motion asseverating that
[petitioner] ha[d] separate causes of action
arising from the promissory note and the
continuing surety agreement. Thus, [under]
Rule 4, Section 2, of the 1997 Rules of Civil
Procedure, as amended, x x x venue was
properly laid in Manila. [The trial court]
supported [its] order with cases where venue
was held to be merely permissive. A motion for
reconsideration of said order was likewise
denied."4
Ruling of the Court of Appeals
On appeal, the CA ruled that respondents'
alleged debt was based on the Promissory
Note, which had provided an exclusionary
stipulation on venue "to the exclusion of all
other courts."5 The parties' Surety Agreement,
though silent as to venue, was an accessory
contract that should have been interpreted in
consonance with the Promissory Note.6
Hence, this Petition.7
The Issue
Petitioner raises the following issue for our
consideration:
"Whether or not the Honorable Court of
Appeals had decided the issue of venue in a
way not in accord with law and applicable
decisions of this Honorable Court and had
thereby departed from the accepted and usual
course of judicial proceedings, as to call for this
Honorable Supreme Court's power of
supervision and appellate review."8
The Court's Ruling
The Petition is unmeritorious.
Sole Issue:
Venue
At the outset, this Court observes that
petitioner took liberties with the stipulated
facts to suit its allegations in the present
Petition. In its Complaint, petitioner bank
averred that respondents had entered into the
Surety Agreement (SA) to guarantee existing
and future credit facilities, and that they had
executed the Promissory Note (PN) to
document their loan.9 Now, the bank is claiming
that Tri-Oro issued the PN on which the other
respondents should be made liable as
sureties.10
This strategy is obviously intended to
disconnect the SA from the PN and to support
the claim of petitioner that the stipulation on
venue does not apply to the SA. However, as
will be discussed below, the cause of action to
recover on the basis of the SA is inseparable
from that which is based on the PN.
Rule on Venue
Section 2 of Rule 4 of the Rules of Court
provides that personal actions11 must be
commenced and tried (1) in the place where
the plaintiff resides, or (2) where the defendant
resides, or (3) in case of non-resident
defendants, where they may be found, at the
choice of the plaintiff.12 This rule on venue does
not apply when the law specifically provides
otherwise, or when - - before the filing of the
action - - the contracting parties agree in
writing on the exclusive venue thereof.13 Venue
is not jurisdictional and may be waived by the
parties.14
A stipulation as to venue does not preclude the
filing of the action in other places, unless
qualifying or restrictive words are used in the
agreement.15
In the instant case, the stipulation on the
exclusivity of the venue as stated in the PN is
not at issue. What petitioner claims is that
there was no restriction on the venue, because
none was stipulated in the SA on which
petitioner had allegedly based its
suit.16 Accordingly, the action on the SA may be
filed in Manila, petitioner's place of residence.
Petitioner adds that its Complaint filed in the
trial court had two causes of action: the first
was founded on a breach of the PN; and the
second, on a violation of the
SA.17 Consequently, it was allegedly correct to
join the causes of action and to file the case in
Manila, per Section 5 of Rule 2 of the Rules of
Court, which reads:18
"Section 5. Joinder of Causes of Action. 'A party
may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may
have against an opposing party, subject to the
following conditions:
xxx
(c) Where the causes of action are between the
same parties but pertain to different venue or
jurisdictions, the joinder may be allowed in the
Regional Trial Court provided one of the causes
of action falls within the jurisdiction of the said
court and venue lies therein."19
Surety Agreement
Suretyship arises upon the solidary binding of a
person - - deemed the surety - - with the
principal debtor, for the purpose of fulfilling an
obligation.20 The prestation is not an original
and direct obligation for the performance of
the surety's own act, but merely accessory or
collateral to the obligation contracted by the
principal.21 Although the surety contract is
secondary to the principal obligation, the surety
assumes liability as a regular party to the
undertaking.22
In enforcing a surety contract, the
"complementary-contracts-construed-
together" doctrine finds
application.23 According to this principle, an
accessory contract must be read in its entirety
and together with the principal
agreement.24 This principle is used in construing
contractual stipulations in order to arrive at
their true meaning; certain stipulations cannot
be segregated and then made to control.25 This
no-segregation principle is based on Article
1374 of the Civil Code, which we quote:
"Art. 1374. The various stipulations of a
contract shall be interpreted together,
attributing to the doubtful ones that sense
which may result from all of them taken
jointly."
The aforementioned doctrine is applicable to
the present case. Incapable of standing by
itself, the SA can be enforced only in
conjunction with the PN. The latter documents
the debt that is sought to be collected in the
action against the sureties.
The factual milieu of the present case shows
that the SA was entered into to facilitate
existing and future loan agreements. Petitioner
approved the loan covered by the PN, partly
because of the SA that assured the payment of
the principal obligation. The circumstances that
related to the issuance of the PN and the SA are
so intertwined that neither one could be
separated from the other. It makes no sense to
argue that the parties to the SA were not
bound by the stipulations in the PN.
Notably, the PN was a contract of adhesion that
petitioner required the principal debtor to
execute as a condition of the approval of the
loan. It was made in the form and language
prepared by the bank. By inserting the
provision that Makati City would be "the venue
for any legal action [that] may arise out of [the]
Promissory Note,"26 petitioner also restricted
the venue of actions against the sureties. The
legal action against the sureties arose not only
from the SA, but also from the PN.
Cause of Action
Petitioner correctly argues that there are two
causes of action contained in its Complaint. A
cause of action is a party's act or omission that
violates the rights of the other.27 Only one suit
may be commenced for a single cause of
action.28 If two or more suits are instituted on
the basis of the same cause of action, only one
case should remain and the others must be
dismissed.29
As against Tri-Oro International Trading &
Manufacturing Corporation, petitioner's cause
of action is the alleged failure to pay the debt in
violation of the PN; as against Elena Lim and
Ramon Calderon, in violation of the SA.
Because of the variance between the causes of
action, petitioner could have filed separate
actions against respondents to recover the
debt, on condition that it could not recover
twice from the same cause. It could have
proceeded against only one or all of them,30 as
full payment by any one of them would have
extinguished the obligation.31 By the same
token, respondents could have been joined as
defendants in one suit, because petitioner's
alleged right of relief arose from the same
transaction or series of transactions that had
common questions of fact.32 To avoid a
multiplicity of suits, joinder of parties is
encouraged by the law.
The cause of action, however, does not affect
the venue of the action. The vital issue in the
present case is whether the action against the
sureties is covered by the restriction on venue
stipulated in the PN. As earlier stated, the
answer is in the affirmative. Since the cases
pertaining to both causes of action are
restricted to Makati City as the proper venue,
petitioner cannot rely on Section 5 of Rule 2 of
the Rules of Court.
Liberal Construction
Petitioner's final plea for liberality in applying
the rules on venue must be rejected. As earlier
discussed, the PN was a contract of adhesion.
Ambiguities therein are to be construed against
the party that prepared the contract.33 On the
same principle, petitioner can no longer
disavow the stipulation on venue, considering
that it drafted the Surety Agreement. Besides,
this alleged technicality caused no miscarriage
of substantial justice, as petitioner may refile
the case.34 The inconveniences brought about
by its failure to observe the rules on venue
sprang from its own acts. Hence, it cannot
blame the courts or anyone else for the
resulting delay in the adjudication of the merits
of its cause.
WHEREFORE, the Petition is DENIED and the
assailed Decision AFFIRMED.
Costs against petitioner.
SO ORDERED.
GR 182311 CHUA vs METROBANK
This is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court, assailing the
Decision,1 dated 31 January 2008, later upheld
in a Resolution2 dated 28 March 2008, both
rendered by the Court of Appeals in CA-G.R. CV
No. 88087. The Court of Appeals, in its assailed
Decision, affirmed the Order3 dated 3 July 2006
of Branch 258 of the Regional Trial Court of
Parañaque City (RTC-Branch 258), dismissing
the action for damages, docketed as Civil Case
No. CV-05-0402, filed by petitioners Fidel O.
Chua (Chua) and Filiden Realty and
Development Corporation (Filiden), on the
ground of forum shopping.
Petitioner Chua is president of co-petitioner
Filiden, a domestic corporation, engaged in the
realty business.4 Respondent Metropolitan
Bank and Trust Co. (respondent Metrobank) is a
domestic corporation and a duly licensed
banking institution.5
Sometime in 1988, petitioners obtained from
respondent Metrobank a loan of
₱4,000,000.00, which was secured by a real
estate mortgage (REM) on parcels of land
covered by Transfer Certificates of Title (TCTs)
No. (108020)1148, No. 93919, and No. 125185,
registered in petitioner Chua’s name (subject
properties).6 Since the value of the collateral
was more than the loan, petitioners were given
an open credit line for future loans. On 18
September 1995, 17 January 1996, 31 July
1996, 21 January 1997, and 12 October 1998,
petitioners obtained other loans from
respondent Metrobank, and the real estate
mortgages were repeatedly amended in
accordance with the increase in petitioners’
liabilities.7
Having failed to fully pay their obligations,
petitioners entered into a Debt Settlement
Agreement8 with respondent Metrobank on 13
January 2000, whereby the loan obligations of
the former were restructured. The debt
consisted of a total principal amount of
₱79,650,000.00, plus unpaid interest of
₱7,898,309.02, and penalty charges of
₱552,784.96. Amortization payments were to
be made in accordance with the schedule
attached to the agreement.
In a letter9 dated 28 February 2001, the lawyers
of respondent Metrobank demanded that
petitioners fully pay and settle their liabilities,
including interest and penalties, in the total
amount of ₱103,450,391 as of 16 January 2001,
as well as the stipulated attorney’s fees, within
three days from receipt of said letter.
When petitioners still failed to pay their loans,
respondent Metrobank sought to extra-
judicially foreclose the REM constituted on the
subject properties. Upon a verified Petition for
Foreclosure filed by respondent Metrobank on
25 April 2001, respondent Atty. Romualdo
Celestra (Atty. Celestra) issued a Notice of Sale
dated 26 April 2001, wherein the mortgage
debt was set at ₱88,101,093.98, excluding
unpaid interest and penalties (to be computed
from 14 September 1999), attorney’s fees, legal
fees, and other expenses for the foreclosure
and sale. The auction sale was scheduled on 31
May 2001.10 On 4 May 2001, petitioners
received a copy of the Notice of Sale.11
On 28 May 2001, petitioner Chua, in his
personal capacity and acting on behalf of
petitioner Filiden, filed before Branch 257 of
the Regional Trial Court of Parañaque (RTC-
Branch 257), a Complaint for Injunction with
Prayer for Issuance of Temporary Restraining
Order (TRO), Preliminary Injunction and
Damages,12 against respondents Atty. Celestra,
docketed as Civil Case No. CV-01-0207. Upon
the motion of petitioners, RTC-Branch 257
issued a TRO enjoining respondents Metrobank
and Atty. Celestra from conducting the auction
sale of the mortgaged properties on 31 May
2001.13
After the expiration of the TRO on 18 June
2001, and no injunction having been issued by
RTC-Branch 257, respondent Atty. Celestra
reset the auction sale on 8 November 2001. On
8 November 2001, the rescheduled date of the
auction sale, RTC-Branch 257 issued an Order
directing that the said sale be reset anew after
8 November 2001. The Order was served on 8
November 2001, on respondent Atty. Celestra’s
daughter, Arlene Celestra, at a coffee shop
owned by the former’s other daughter, Grace
Celestra Aguirre. The auction sale, however,
proceeded on 8 November 2001, and a
Certificate of Sale was accordingly issued to
respondent Metrobank as the highest bidder of
the foreclosed properties. 14
On 13 February 2002, petitioners filed with
RTC-Branch 257 a Motion to Admit Amended
Complaint15 in Civil Case No. CV-01-0207. The
Amended Verified Complaint,16 attached to the
said Motion, impleaded as additional defendant
the incumbent Register of Deeds of Parañaque
City. Petitioners alleged that the Certificate of
Sale was a falsified document since there was
no actual sale that took place on 8 November
2001. And, even if an auction sale was
conducted, the Certificate of Sale would still be
void because the auction sale was done in
disobedience to a lawful order of RTC-Branch
257. Relevant portions of the Amended
Complaint of petitioners read:
12-E. There was actually no auction sale
conducted by [herein respondent] Atty.
Celestra on November 8, 2001 and the
CERTIFICATE OF SALE (Annex "K-2") is therefore
a FALSIFIED DOCUMENT and for which the
appropriate criminal complaint for falsification
of official/public document will be filed against
the said [respondent] Celestra and the
responsible officers of [herein respondent]
Metrobank, in due time;
12-F. But even granting that an auction sale was
actually conducted and that the said Certificate
of Sale is not a falsified document, the same
document is a nullity simply because the
auction sale was done in disobedience to a
lawful order of this Court and that therefore
the auction sale proceeding is null and void ab
initio.17
Petitioners additionally prayed in their
Amended Complaint for the award of damages
given the abuse of power of respondent
Metrobank in the preparation, execution, and
implementation of the Debt Settlement
Agreement with petitioners; the bad faith of
respondent Metrobank in offering the subject
properties at a price much lower than its
assessed fair market value; and the gross
violation by respondents Metrobank and Atty.
Celestra of the injunction.
Petitioners also sought, in their Amended
Complaint, the issuance of a TRO or a writ of
preliminary injunction to enjoin respondent
Atty. Celestra and all other persons from
proceeding with the foreclosure sale, on the
premise that no auction sale was actually held
on 8 November 2001.
In an Order dated 6 March 2002, RTC-Branch
257 denied petitioners’ application for
injunction on the ground that the sale of the
foreclosed properties rendered the same moot
and academic. The auction sale, which was
conducted by respondents Metrobank and Atty.
Celestra, after the expiration of the TRO, and
without knowledge of the Order dated 8
November 2001 of RTC-Branch 257, was
considered as proper and valid.18
Petitioners filed a Motion for Reconsideration
of the 6 March 2002 Order of RTC-Branch 257.
When RTC-Branch 257 failed to take any action
on said Motion, petitioners filed with the Court
of Appeals a Petition for Certiorari, docketed as
CA-G.R. No. 70208. In a Decision dated 26 July
2002, the Court of Appeals reversed the 6
March 2002 Order of RTC-Branch 257 and
remanded the case for further proceedings. The
Supreme Court dismissed the appeal of
respondents with finality. Thus, on 27
September 2005, RTC-Branch 257 set the
hearing for the presentation of evidence by
respondent Metrobank for the application for
preliminary injunction on 9 November 2005.19
On 2 November 2005, petitioners sought the
inhibition of Acting Executive Judge Rolando
How of RTC-Branch 257, who presided over
Civil Case No. CV-01-0207. Their motion was
granted and the case was re-raffled to RTC-
Branch 258.20
On 28 October 2005, petitioners filed with
Branch 195 of the Regional Trial Court of
Parañaque (RTC-Branch 195) a Verified
Complaint for Damages against respondents
Metrobank, Atty. Celestra, and three
Metrobank lawyers, namely, Atty. Antonio
Viray, Atty. Ramon Miranda and Atty. Pompeyo
Maynigo. The Complaint was docketed as Civil
Case No. CV-05-0402. Petitioners sought in
their Complaint the award of actual, moral, and
exemplary damages against the respondents
for making it appear that an auction sale of the
subject properties took place, as a result of
which, the prospective buyers of the said
properties lost their interest and petitioner
Chua was prevented from realizing a profit of
₱70,000,000.00 from the intended sale.21
Petitioners filed with RTC-Branch 195 a Motion
to Consolidate22 dated 27 December 2005,
seeking the consolidation of Civil Case No. CV-
05-0402, the action for damages pending
before said court, with Civil Case No. CV-01-
0207, the injunction case that was being heard
before RTC-Branch 258, based on the following
grounds:
2. The above-captioned case is a complaint for
damages as a result of the [herein
respondents’] conspiracy to make it appear as if
there was an auction sale conducted on
November 8, 2001 when in fact there was
none. The properties subject of the said auction
sale are the same properties subject of Civil
Case No. 01-0207.
3. Since the subject matter of both cases are
the same properties and the parties of both
cases are almost the same, and both cases have
the same central issue of whether there was an
auction sale, then necessarily, both cases
should be consolidated.
On 3 January 2006, respondents filed with RTC-
Branch 195 an Opposition to Motion to
Consolidate with Prayer for Sanctions, praying
for the dismissal of the Complaint for Damages
in Civil Case No. CV-05-0402, on the ground of
forum shopping.23
In an Order dated 23 January 2006, RTC-Branch
195 granted the Motion to Consolidate, and
ordered that Civil Case No. CV-05-0402 be
transferred to RTC-Branch 258, which was
hearing Civil Case No. 01-0207.24
After the two cases were consolidated,
respondents filed two motions before RTC-
Branch 258: (1) Motion for Reconsideration of
the Order dated 23 January 2006 of RTC-Branch
195, which granted the Motion to Consolidate
of petitioners; and (2) Manifestation and
Motion raising the ground of forum shopping,
among the affirmative defenses of
respondents.25 RTC-Branch 258 issued an Order
on 3 July 2006, granting the first Motion of
respondents, thus, dismissing Civil Case No. CV-
05-0402 on the ground of forum
shopping,26 and consequently, rendering the
second Motion of respondents moot. RTC-
Branch 258 declared that the facts or claims
submitted by petitioners, the rights asserted,
and the principal parties in the two cases were
the same. RTC-Branch 258 held in its 3 July
2006 Order27 that:
It is, therefore, the honest belief of the Court
that since there is identity of parties and the
rights asserted, the allegations of the
defendant are found meritorious and with legal
basis, hence, the motion is GRANTED and this
case is DISMISSED due to forum shopping.
As regards the second motion, the same has
already been mooted by the dismissal of this
case.
WHEREFORE, premises considered, the Motion
for Reconsideration filed by the defendants
whereby this case is DISMISSED due to forum
shopping and the Manifestation and Motion
likewise filed by the defendants has already
been MOOTED by the said dismissal.
From the foregoing Order of RTC-Branch 258,
petitioners filed a Petition for Review on
Certiorari with the Court of Appeals, docketed
as CA-G.R. CV No. 88087.
In a Decision dated 31 January 2008, the Court
of Appeals affirmed the 3 July 2006 Order of
RTC-Branch 258. The appellate court observed
that although the defendants in the two cases
were not identical, they represented a
community of interest. It also declared that the
cause of action of the two cases, upon which
the recovery of damages was based, was the
same, i.e., the feigned auction sale, such that
the nullification of the foreclosure of the
subject properties, which petitioners sought in
Civil Case No. CV-01-0207, would render proper
the award for damages, claimed by petitioners
in Civil Case No. CV-05-0402. Thus, judgment in
either case would result in res judicata. The
Court of Appeals additionally noted that
petitioners admitted in their Motion for
Consolidation that Civil Case No. CV-01-0207
and Civil Case No. CV-05-0402 involved the
same parties, central issue, and subject
properties.28 In its Decision,29 the appellate
court decreed:
All told, the dismissal by the RTC-Br. 258 of the
"second" case, Civil Case No. CV-05-0402, on
the ground of forum shopping should be upheld
as it is supported by law and jurisprudence.
WHEREFORE, the assailed order is AFFIRMED.
Costs against the [herein petitioners].
Petitioners filed a Motion for Reconsideration
of the afore-mentioned Decision, which the
Court of Appeals denied in a Resolution dated
28 March 2008.30
Hence, the present Petition, in which the
following issues are raised31:
I. WHETHER OR NOT THE "FIRST" AND THE
"SECOND" CASES HAVE THE SAME ULTIMATE
OBJECTIVE, I.E., TO HAVE THE AUCTION SALE BE
DECLARED AS NULL AND VOID.
II. WHETHER OR NOT THE OUTCOME OF THE
"FIRST" CASE WOULD AFFECT THE "SECOND"
CASE.
The only issue that needs to be determined in
this case is whether or not successively filing
Civil Case No. CV-01-0207 and Civil Case No. CV-
05-0402 amounts to forum shopping.
The Court answers in the affirmative.
The proscription against forum shopping is
found in Section 5, Rule 7 of the 1997 Rules of
Court, which provides that:
SEC. 5. Certification against forum shopping.—
The plaintiff or principal party shall certify
under oath in the complaint or other initiatory
pleading asserting a claim for relief, or in a
sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has
not theretofore commenced any action or filed
any claim involving the same issues in any
court, tribunal or quasi-judicial agency and, to
the best of his knowledge, no such other action
or claim is pending therein; (b) if there is such
other pending action or claim, a complete
statement of the present status thereof; and (c)
if he should thereafter learn that the same or
similar action or claim has been filed or is
pending, he shall report that fact within five (5)
days therefrom to the court wherein his
aforesaid complaint or initiatory pleading has
been filed.
Failure to comply with the foregoing
requirements shall not be curable by mere
amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of
the case without prejudice, unless otherwise
provided, upon motion and after hearing. The
submission of a false certification or non-
compliance with any of the undertakings
therein shall constitute indirect contempt of
court, without prejudice to the corresponding
administrative and criminal actions. If the acts
of the party or his counsel clearly constitutes
willful and deliberate forum shopping, the
same shall be ground for summary dismissal
with prejudice and shall constitute direct
contempt, as well as a cause for administrative
sanctions.
Forum shopping exists when a party repeatedly
avails himself of several judicial remedies in
different courts, simultaneously or successively,
all substantially founded on the same
transactions and the same essential facts and
circumstances, and all raising substantially the
same issues either pending in or already
resolved adversely by some other court.32
Ultimately, what is truly important in
determining whether forum shopping exists or
not is the vexation caused the courts and party-
litigant by a party who asks different courts to
rule on the same or related causes and/or to
grant the same or substantially the same
reliefs, in the process creating the possibility of
conflicting decisions being rendered by the
different fora upon the same issue.33
Forum shopping can be committed in three
ways: (1) filing multiple cases based on the
same cause of action and with the same prayer,
the previous case not having been resolved yet
(where the ground for dismissal is litis
pendentia); (2) filing multiple cases based on
the same cause of action and the same prayer,
the previous case having been finally resolved
(where the ground for dismissal is res judicata);
and (3) filing multiple cases based on the same
cause of action, but with different prayers
(splitting of causes of action, where the ground
for dismissal is also either litis pendentia or res
judicata).34
In the present case, there is no dispute that
petitioners failed to state in the Certificate of
Non-Forum Shopping, attached to their Verified
Complaint in Civil Case No. CV-05-0402 before
RTC-Branch 195, the existence of Civil Case No.
CV-01-0207 pending before RTC-Branch 258.
Nevertheless, petitioners insist that they are
not guilty of forum shopping, since (1) the two
cases do not have the same ultimate objective
– Civil Case No. CV-01-0207 seeks the
annulment of the 8 November 2001 public
auction and certificate of sale issued therein,
while Civil Case No. CV-05-0402 prays for the
award of actual and compensatory damages for
respondents’ tortuous act of making it appear
that an auction sale actually took place on 8
November 2001; and (2) the judgment in Civil
Case No. CV-01-0207, on the annulment of the
foreclosure sale, would not affect the outcome
of Civil Case No. CV-05-0402, on the
entitlement of petitioners to damages. The
Court, however, finds these arguments refuted
by the allegations made by petitioners
themselves in their Complaints in both cases.
Petitioners committed forum shopping by filing
multiple cases based on the same cause of
action, although with different prayers.
Sections 3 and 4, Rule 2 of the Rules of Court
proscribe the splitting of a single cause of
action:
Section 3. A party may not institute more than
one suit for a single cause of action.
Section 4. Splitting a single cause of action;
effect of.—If two or more suits are instituted on
the basis of the same cause of action, the filing
of one or a judgment upon the merits in any
one is available as a ground for the dismissal of
the others.
Forum shopping occurs although the actions
seem to be different, when it can be seen that
there is a splitting of a cause of action. 35 A
cause of action is understood to be the delict or
wrongful act or omission committed by the
defendant in violation of the primary rights of
the plaintiff. It is true that a single act or
omission can violate various rights at the same
time, as when the act constitutes juridically a
violation of several separate and distinct legal
obligations. However, where there is only one
delict or wrong, there is but a single cause of
action regardless of the number of rights that
may have been violated belonging to one
person.36
Petitioners would like to make it appear that
Civil Case No. CV-01-0207 was solely concerned
with the nullification of the auction sale and
certification of sale, while Civil Case No. CV-05-
0402 was a totally separate claim for damages.
Yet, a review of the records reveals that
petitioners also included an explicit claim for
damages in their Amended Complaint37 in Civil
Case No. CV-01-0207, to wit:
20-A. The abovementioned acts of [herein
respondents] Metrobank and Atty. Celestra are
in gross violation of the injunction made under
Article 19 of the Civil Code, thereby entitling
the [herein petitioners] to recover damages
from the said [respondents] in such amount as
may be awarded by the Court. (Emphasis ours.)
The "abovementioned acts" on which
petitioners anchored their claim to recover
damages were described in the immediately
preceding paragraph in the same Amended
Complaint, as follows 38:
20. To reiterate, the [herein respondent] is fully
aware that the assessed fair market value of
the real properties they seek to foreclose and
sell at public auction yet they have knowingly
offered the said properties for sale at the
amount of EIGHTY EIGHT MILLION ONE
HUNDRED ONE THOUSAND NINETY THREE
PESOS AND 98/100 (PhP88,101,093.98),
obviously because they know that the
[petitioners] or any other third person would
not be able to seasonably raise the said amount
and that said [respondent] Bank would be the
winner by default at the said sale at public
auction.
Petitioners averred in their Amended
Complaint in Civil Case No. CV-01-0207 that the
assessed fair market value of the subject
properties was ₱176,117,000.00.39
The Court observes that the damages being
claimed by petitioners in their Complaint in Civil
Case No. CV-05-0402 were also occasioned by
the supposedly fictitious 8 November 2001
foreclosure sale, thus 40:
24. The acts of [herein respondents] in making
it appear that there was an auction sale
conducted on 8 November 2001 and the
subsequent execution of the fictitious
Certificate of Sale is TORTIOUS, which entitles
the [herein petitioners] to file this instant
action under the principles of Human Relations,
more particularly Articles 19, 20 and 21 of the
Civil Code which provide that:
25. As a result of the aforesaid acts of the
[respondents], [petitioner’s] buyers of the
mortgaged properties had lost their interest
anymore (sic) in buying the said mortgaged
properties for not less than ₱175,000,000.00 as
per appraisal report of the Philippine Appraisal
Co., Inc., a copy of which is hereto attached as
Annex "R" and made an integral part hereof;
26. The aborted sale of the [petitioner’s]
mortgaged properties for the said amount of
not less than ₱175,000,000.00 could have paid
off [petitioners’] loan obligation with
[respondent] Metrobank for the principal
amount of ₱79,650,000.00 or even the
contested restructured amount of
₱103,450,391.84 (as stated in the petition for
foreclosure), which would have thus enabled
the plaintiff to realize a net amount of not less
than SEVENTY MILLION PESOS, more or less;
27. By reason of the aforesaid acts of
[respondents], [petitioners] suffered and will
continue to suffer actual or compensatory,
moral and exemplary or corrective damages,
the nature, extent and amount of
compensation of which will (sic) proven during
the trial but not less than SEVENTY MILLION
PESOS.
There is no question that the claims of
petitioners for damages in Civil Case No. CV-01-
0207 and Civil Case No. CV-05-0402 are
premised on the same cause of action, i.e., the
purportedly wrongful conduct of respondents
in connection with the foreclosure sale of the
subject properties.
At first glance, said claims for damages may
appear different. In Civil Case No. CV-01-0207,
the damages purportedly arose from the bad
faith of respondents in offering the subject
properties at the auction sale at a price much
lower than the assessed fair market value of
the said properties, said to be ₱176,117,000.00.
On the other hand, the damages in Civil Case
No. CV-05-0402, allegedly resulted from the
backing out of prospective buyers, who had
initially offered to buy the subject properties
for "not less than ₱175,000,000.00," because
respondents made it appear that the said
properties were already sold at the auction
sale. Yet, it is worthy to note that petitioners
quoted closely similar values for the subject
properties in both cases, against which they
measured the damages they supposedly
suffered. Evidently, this is due to the fact that
petitioners actually based the said values on
the single appraisal report of the Philippine
Appraisal Company on the subject properties.
Even though petitioners did not specify in their
Amended Complaint in Civil Case No. CV-01-
0207 the exact amount of damages they were
seeking to recover, leaving the same to the
determination of the trial court, and petitioners
expressly prayed that they be awarded
damages of not less than ₱70,000,000.00 in
their Complaint in Civil Case No. CV-05-0402,
petitioners cannot deny that all their claims for
damages arose from what they averred was a
fictitious public auction sale of the subject
properties.1avvphi1
Petitioners’ contention that the outcome of
Civil Case No. CV-01-0207 will not determine
that of Civil Case No. CV-05-0402 does not
justify the filing of separate cases. Even if it
were assumed that the two cases contain two
separate remedies that are both available to
petitioners, these two remedies that arose
from one wrongful act cannot be pursued in
two different cases. The rule against splitting a
cause of action is intended to prevent repeated
litigation between the same parties in regard to
the same subject of controversy, to protect the
defendant from unnecessary vexation; and to
avoid the costs and expenses incident to
numerous suits. It comes from the old maxim
nemo debet bis vexari, pro una et eadem causa
(no man shall be twice vexed for one and the
same cause).41
Moreover, petitioners admitted in their Motion
to Consolidate42 dated 27 December 2005
before RTC-Branch 195 that both cases shared
the same parties, the same central issue, and
the same subject property, viz:
2. The above-captioned case is a complaint for
damages as a result of the [herein
respondents’] conspiracy to make it appear as if
there was an auction sale conducted on
November 8, 2001 when in fact there was
none. The properties subject of the said auction
sale are the same properties subject of Civil
Case No. 01-0207.
3. Since the subject matter of both cases are
the same properties and the parties of both
cases are almost the same, and both cases have
the same central issue of whether there was an
auction sale, then necessarily, both cases
should be consolidated.
If the forum shopping is not considered willful
and deliberate, the subsequent case shall be
dismissed without prejudice, on the ground of
either litis pendentia or res judicata. However,
if the forum shopping is willful and deliberate,
both (or all, if there are more than two) actions
shall be dismissed with prejudice..43 In this case,
petitioners did not deliberately file Civil Case
No. CV-05-0402 for the purpose of seeking a
favorable decision in another forum.
Otherwise, they would not have moved for the
consolidation of both cases. Thus, only Civil
Case No. CV-05-0402 is dismissed and the
hearing of Civil Case No. CV-01-0207 before
RTC-Branch 258 will be continued.
IN VIEW OF THE FOREGOING, the instant
Petition is DENIED. The Decision dated 31
January 2008 and Resolution dated 28 March
2008 of the Court of Appeals in CA-G.R. CV No.
88087, affirming the Order dated 3 July 2006 of
Branch 258 of the Regional Trial Court of
Parañaque City, dismissing Civil Case No. CV-05-
0402, is AFFIRMED, without prejudice to the
proceedings in Civil Case No. CV-01-0207. Costs
against petitioners.
SO ORDERED.
GR 156185CHU vs SPOUSES CUNANAN
If two or more suits are instituted on the basis
of the same cause of action, the filing of one or
a judgment upon the merits in any one is
available as a ground for the dismissal of the
others.1
We review the decision promulgated on
November 19, 2002,2 whereby the Court of
Appeals (CA) dismissed the petitioners’
amended complaint in Civil Case No. 12251 of
the Regional Trial Court, Branch 41, in San
Fernando City, Pampanga (RTC) for being
barred by res judicata.
Antecedents
On September 30, 1986, Spouses Manuel and
Catalina Chu (Chus) executed a deed of sale
with assumption of mortgage3 involving their
five parcels of land situated in Saguin, San
Fernando City, Pampanga, registered under
Transfer Certificate of Title (TCT) No. 198470-R,
TCT No. 198471-R, TCT No. 198472-R, TCT No.
198473-R, and TCT No. 199556-R, all of the
Office of the Registry of Deeds of the Province
of Pampanga, in favor of Trinidad N. Cunanan
(Cunanan) for the consideration
of₱5,161,090.00. They also executed a so-
called side agreement, whereby they clarified
that Cunanan had paid only ₱1,000,000.00 to
the Chus despite the Chus, as vendors, having
acknowledged receiving ₱5,161,090.00; that
the amount of ₱1,600,000.00 was to be paid
directly to Benito Co and to Security Bank and
Trust Company (SBTC) in whose favor the five
lots had been mortgaged; and that Cunanan
would pay the balance of ₱2,561.90.00 within
three months, with a grace period of one
month subject to 3%/month interest on any
remaining unpaid amount. The parties further
stipulated that the ownership of the lots would
remain with the Chus as the vendors and would
be transferred to Cunanan only upon complete
payment of the total consideration and
compliance with the terms of the deed of sale
with assumption of mortgage.4
Thereafter, the Chus executed a special power
of attorney authorizing Cunanan to borrow
₱5,161,090.00 from any banking institution and
to mortgage the five lots as security, and then
to deliver the proceeds to the Chus net of the
balance of the mortgage obligation and the
downpayment.5
Cunanan was able to transfer the title of the
five lots to her name without the knowledge of
the Chus, and to borrow money with the lots as
security without paying the balance of the
purchase price to the Chus. She later
transferred two of the lots to Spouses Amado
and Gloria Carlos (Carloses) on July 29, 1987. As
a result, on March 18, 1988, the Chus caused
the annotation of an unpaid vendor’s lien on
three of the lots. Nonetheless, Cunanan still
assigned the remaining three lots to Cool Town
Realty on May 25, 1989 despite the
annotation.6
In February 1988, the Chus commenced Civil
Case No. G-1936 in the RTC to recover the
unpaid balance from Spouses Fernando and
Trinidad Cunanan (Cunanans). Five years later,
on April 19, 1993, the Chus amended the
complaint to seek the annulment of the deed of
sale with assumption of mortgage and of the
TCTs issued pursuant to the deed, and to
recover damages. They impleaded Cool Town
Realty and Development Corporation (Cool
Town Realty), and the Office of the Registry of
Deeds of Pampanga as defendants in addition
to the Cunanans.7
Considering that the Carloses had meanwhile
sold the two lots to Benelda Estate
Development Corporation (Benelda Estate) in
1995, the Chus further amended the complaint
in Civil Case No. G-1936 to implead Benelda
Estate as additional defendant. In due course,
Benelda Estate filed its answer with a motion to
dismiss, claiming, among others, that the
amended complaint stated no cause of action
because it had acted in good faith in buying the
affected lots, exerting all efforts to verify the
authenticity of the titles, and had found no
defect in them. After the RTC denied its motion
to dismiss, Benelda Estate assailed the denial
on certiorari in the CA, which annulled the
RTC’s denial for being tainted with grave abuse
of discretion and dismissed Civil Case No. G-
1936 as against Benelda Estate. On March 1,
2001, the Court upheld the dismissal of Civil
Case No. G-1936 in G.R. No. 142313 entitled
Chu, Sr. v. Benelda Estate Development
Corporation.8
On December 2, 1999, the Chus, the Cunanans,
and Cool Town Realty entered into a
compromise agreement,9 whereby the
Cunanans transferred to the Chus their 50%
share in "all the parcels of land situated in
Saguin, San Fernando, Pampanga" registered in
the name of Cool Town Realty "for and in
consideration of the full settlement of their
case." The RTC approved the compromise
agreement in a partial decision dated January
25, 2000.10
Thereafter, on April 30, 2001, the petitioners
herein (i.e., Catalina Chu and her children)
brought another suit, Civil Case No. 12251,
against the Carloses and Benelda
Estate,11 seeking the cancellation of the TCTs of
the two lots in the name of Benelda Estate, and
the issuance of new TCTs in their favor, plus
damages.
The petitioners amended their complaint in
Civil Case No. 12251 on February 4, 2002 to
implead the Cunanans as additional
defendants.12
The Cunanans moved to dismiss the amended
complaint based on two grounds, namely: (a)
bar by prior judgment, and (b) the claim or
demand had been paid, waived, and
abandoned. Benelda Estate likewise moved to
dismiss the amended complaint, citing as
grounds: (a) forum shopping; (b) bar by prior
judgment, and (c) failure to state a cause of
action. On their part, the Carloses raised
affirmative defenses in their answer, namely:
(a) the failure to state a cause of action; (b) res
judicata or bar by prior judgment; and (c) bar
by statute of limitations.
On April 25, 2002, the RTC denied both motions
to dismiss,13 holding that the amended
complaint stated a cause of action against all
the defendants; that the action was not barred
by res judicata because there was no identity of
parties and subject matter between Civil Case
No.12251 and Civil Case No. G-1936; and that
the Cunanans did not establish that the
petitioners had waived and abandoned their
claim or that their claim had been paid by
virtue of the compromise agreement, pointing
out that the compromise agreement involved
only the three parcels of land registered in the
name of Cool Town Realty.14
The Cunanans sought reconsideration, but their
motion was denied on May 31, 2002.15
On September 2, 2002, the Cunanans filed a
petition for certiorari in the CA (SP-72558),
assailing the RTC’s denial of their motion to
dismiss and motion for reconsideration.16
On November 19, 2002, the CA promulgated its
decision,17 granting the petition for certiorari
and nullifying the challenged orders of the RTC.
The CA ruled that the compromise agreement
had ended the legal controversy between the
parties with respect to the cause of action
arising from the deed of sale with assumption
of mortgage covering all the five parcels of
land; that Civil Case No. G-1936 and Civil Case
No.12251 involved the violation by the
Cunanans of the same legal right under the
deed of sale with assumption of mortgage; and
that the filing of Civil Case No.12251
contravened the rule against splitting of a cause
of action, and rendered Civil Case No.12251
subject of a motion to dismiss based on bar by
res judicata. The CA disposed thusly:
WHEREFORE, premises considered, the present
petition for certiorari is hereby GIVEN DUE
COURSE and the writ prayed for, accordingly
GRANTED. Consequently, the challenged Orders
of the respondent court denying the motions to
dismiss are hereby ANNULLED and SET ASIDE
and a new one is hereby rendered DISMISSING
the Amended Complaint in Civil Case No.
12251.
No costs.
SO ORDERED.18
Hence, this appeal.
Issue
Was Civil Case No. 12251 barred by res judicata
although the compromise agreement did not
expressly include Benelda Estate as a party and
although the compromise agreement made no
reference to the lots now registered in Benelda
Estate’s name?
Ruling
We deny the petition for review.
I.The petitioners contend that the compromise
agreement did not apply or extend to the
Carloses and Benelda Estate; hence, their Civil
Case No. 12251 was not barred by res judicata.
We disagree.
A compromise agreement is a contract
whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to
one already commenced.19 It encompasses the
objects specifically stated therein, although it
may include other objects by necessary
implication,20 and is binding on the contracting
parties, being expressly acknowledged as a
juridical agreement between them.21 It has the
effect and authority of res judicata upon the
parties.22
In the construction or interpretation of
a compromise agreement, the intention of the
parties is to be ascertained from the agreement
itself, and effect should be given to that
intention.23 Thus, the compromise
agreement must be read as a whole.
The following pertinent portions of
the compromise agreement indicate that the
parties intended to thereby settle all their
claims against each other, to wit:
1. That the defendants SPOUSES TRINIDAD
N.CUNANAN and FERNANDO C.CUNANAN for
and in consideration of the full settlement of
their case in the above-entitled case, hereby
TRANSFER, DELIVER, and CONVEY unto the
plaintiffs all their rights, interest, benefits,
participation, possession and ownership which
consists of FIFTY (50%) percent share on all the
parcels of land situated in Saguin, San Fernando
Pampanga now registered in the name of
defendant, COOL TOWN REALTY &
DEVELOPMENT CORPORATION, as particularly
evidenced by the corresponding Transfer
Certificates of Titles xxx
6. That the plaintiffs and the defendant herein
are waiving, abandoning, surrendering,
quitclaiming, releasing, relinquishing any and all
their respective claims against each other as
alleged in the pleadings they respectively filed
in connection with this case.24 (bold emphasis
supplied)
The intent of the parties to settle all their
claims against each other is expressed in the
phrase any and all their respective claims
against each other as alleged in the pleadings
they respectively filed in connection with this
case, which was broad enough to cover
whatever claims the petitioners might assert
based on the deed of sale with assumption of
mortgage.
There is no question that the deed of sale with
assumption of mortgage covered all the five
lots, to wit:
WHEREAS, the VENDORS are willing to sell the
above-described properties and the VENDEE is
willing to buy the same at FIFTY FIVE (₱55.00)
PESOS, Philippine Currency, per square meter,
or a total consideration of FIVE MILLION ONE
HUNDRED SIXTY ONE THOUSAND and NINETY
(₱5,161,090.00) PESOS, Philippine Currency.25
To limit the compromise agreement only to the
three lots mentioned therein would contravene
the avowed objective of Civil Case No. G-1936
to enforce or to rescind the entire deed of sale
with assumption of mortgage. Such
interpretation is akin to saying that the
Cunanans separately sold the five lots, which is
not the truth. For one, Civil Case No. G-1936 did
not demand separate amounts for each of the
purchased lots. Also, the compromise
agreement did not state that the value being
thereby transferred to the petitioners by the
Cunanans corresponded only to that of the
three lots.
Apparently, the petitioners were guilty of
splitting their single cause of action to enforce
or rescind the deed of sale with assumption of
mortgage. Splitting a single cause of action is
the act of dividing a single or indivisible cause
of action into several parts or claims and
instituting two or more actions upon them.26 A
single cause of action or entire claim or demand
cannot be split up or divided in order to be
made the subject of two or more different
actions.27 Thus, Section 4, Rule 2 of the Rules of
Court expressly prohibits splitting of a single
cause of action, viz:
Section 4. Splitting a single cause of action;
effect of. — If two or more suits are instituted
on the basis of the same cause of action, the
filing of one or a judgment upon the merits in
any one is available as a ground for the
dismissal of the others. (4a)1avvphi1
The petitioners were not at liberty to split their
demand to enforce or rescind the deed of sale
with assumption of mortgage and to prosecute
piecemeal or present only a portion of the
grounds upon which a special relief was sought
under the deed of sale with assumption of
mortgage, and then to leave the rest to be
presented in another suit; otherwise, there
would be no end to litigation.28 Their splitting
violated the policy against multiplicity of suits,
whose primary objective was to avoid unduly
burdening the dockets of the courts. Their
contravention of the policy merited the
dismissal of Civil Case No. 12251 on the ground
of bar by res judicata.1âwphi1
Res judicata means a matter adjudged, a thing
judicially acted upon or decided; a thing or
matter settled by judgment.29 The doctrine of
res judicata is an old axiom of law, dictated by
wisdom and sanctified by age, and founded on
the broad principle that it is to the interest of
the public that there should be an end to
litigation by the same parties over a subject
once fully and fairly adjudicated. It has been
appropriately said that the doctrine is a rule
pervading every well-regulated system of
jurisprudence, and is put upon two grounds
embodied in various maxims of the common
law: the one, public policy and necessity, which
makes it to the interest of the State that there
should be an end to litigation –interest
reipublicae ut sit finis litium; the other, the
hardship on the individual that he should be
vexed twice for one and the same cause –
nemo debet bis vexari pro una et eadem causa.
A contrary doctrine would subject the public
peace and quiet to the will and neglect of
individuals and prefer the gratification of the
litigious disposition on the part of suitors to the
preservation of the public tranquillity and
happiness.30
Under the doctrine of res judicata, a final
judgment or decree on the merits rendered 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.31 The
foundation principle upon which the doctrine
rests is that the parties ought not to be
permitted to litigate the same issue more than
once; that when a right or fact has been
judicially tried and determined by a court of
competent jurisdiction, so long as it remains
unreversed, should be conclusive upon the
parties and those in privity with them in law or
estate.32
Yet, in order that res judicata may bar the
institution of a subsequent action, the following
requisites must concur:– (a) the former
judgment must be final; (b) it must have been
rendered by a court having jurisdiction of the
subject matter and the parties; (c) it must be a
judgment on the merits; and (d) there must be
between the first and second actions (i) identity
of parties, (ii) identity of the subject matter,
and (iii) identity of cause of action.33
The first requisite was attendant. Civil Case No.
G-1936 was already terminated under the
compromise agreement, for the judgment,
being upon a compromise, was immediately
final and unappealable. As to the second
requisite, the RTC had jurisdiction over the
cause of action in Civil Case No. G-1936 for the
enforcement or rescission of the deed of sale
with assumption of mortgage, which was an
action whose subject matter was not capable of
pecuniary estimation. That the compromise
agreement explicitly settled the entirety of Civil
Case No. G-1936 by resolving all the claims of
the parties against each other indicated that
the third requisite was also satisfied.34
But was there an identity of parties, of subject
matter, and of causes of action between Civil
Case No.G-1936 and Civil Case No. 12251?
There is identity of parties when the parties in
both actions are the same, or there is privity
between them, or they are successors-in-
interest by title subsequent to the
commencement of the action litigating for the
same thing and under the same title and in the
same capacity.35 The requirement of the
identity of parties was fully met, because the
Chus, on the one hand, and the Cunanans, on
the other hand, were the parties in both cases
along with their respective privies. The fact that
the Carloses and Benelda Estate, defendants in
Civil Case No. 12251, were not parties in the
compromise agreement was inconsequential,
for they were also the privies of the Cunanans
as transferees and successors-in-interest. It is
settled that the absolute identity of parties was
not a condition sine qua non for res judicata to
apply, because a shared identity of interest
sufficed.36 Mere substantial identity of parties,
or even community of interests between
parties in the prior and subsequent cases, even
if the latter were not impleaded in the first
case, was sufficient.37
As to identity of the subject matter, both
actions dealt with the properties involved in the
deed of sale with assumption of mortgage.
Identity of the causes of action was also met,
because Case No. G-1936 and Civil Case No.
12251 were rooted in one and the same cause
of action – the failure of Cunanan to pay in full
the purchase price of the five lots subject of the
deed of sale with assumption of mortgage. In
other words, Civil Case No. 12251 reprised Civil
Case No. G-1936, the only difference between
them being that the petitioners alleged in the
former that Benelda Estate was "not also a
purchaser for value and in good faith."38
In fine, the rights and obligations of the parties
vis-à-vis the five lots were all defined and
governed by the deed of sale with assumption
of mortgage, the only contract between them.
That contract was single and indivisible, as far
as they were concerned. Consequently, the
Chus could not properly proceed against the
respondents in Civil Case No. 12251, despite
the silence of the compromise agreement as to
the Carloses and Benelda Estate, because there
can only be one action where the contract is
entire, and the breach total, and the petitioners
must therein recover all their claims and
damages.39 The Chus could not be permitted to
split up a single cause of action and make that
single cause of action the basis of several
suits.40
WHEREFORE, we deny the petition for review
on certiorari, and affirm the decision
promulgated in CA-G.R. SP No. 72558.
The petitioners shall pay the costs of suit.
SO ORDERED.
GR 140746 PANTRANCO VS
STANDARD INSURANCE
Before us is a petition for review
on certiorari assailing the Decision1 dated July
23 1999 and Resolution2 dated November 4,
1999 of the Court of Appeals in CA-G.R. CV No.
38453, entitled "Standard Insurance Company,
Inc., and Martina Gicale vs. PANTRANCO North
Express, Inc., and Alexander Buncan."
In the afternoon of October 28, 1984, Crispin
Gicale was driving the passenger jeepney
owned by his mother Martina Gicale,
respondent herein. It was then raining. While
driving north bound along the National
Highway in Talavera, Nueva Ecija, a passenger
bus, owned by Pantranco North Express, Inc.,
petitioner, driven by Alexander Buncan, also a
petitioner, was trailing behind. When the two
vehicles were negotiating a curve along the
highway, the passenger bus overtook the
jeepney. In so doing, the passenger bus hit the
left rear side of the jeepney and sped away.
Crispin reported the incident to the Talavera
Police Station and respondent Standard
Insurance Co., Inc. (Standard), insurer of the
jeepney. The total cost of the repair
was P21,415.00, but respondent Standard paid
only P8,000.00. Martina Gicale shouldered the
balance of P13,415.00.
Thereafter, Standard and Martina, respondents,
demanded reimbursement from petitioners
Pantranco and its driver Alexander Buncan, but
they refused. This prompted respondents to file
with the Regional Trial Court (RTC), Branch 94,
Manila, a complaint for sum of money.
In their answer, both petitioners specifically
denied the allegations in the complaint and
averred that it is the Metropolitan Trial Court,
not the RTC, which has jurisdiction over the
case.
On June 5, 1992, the trial court rendered a
Decision3 in favor of respondents Standard and
Martina, thus:
"WHEREFORE, and in view of the foregoing
considerations, judgment is hereby rendered in
favor of the plaintiffs, Standard Insurance
Company and Martina Gicale, and against
defendants Pantranco Bus Company and
Alexander Buncan, ordering the latter to pay as
follows:
(1) to pay plaintiff Standard Insurance the
amount of P8,000.00 with interest due thereon
from November 27, 1984 until fully paid;
(2) to pay plaintiff Martina Gicale the amount
of P13,415.00 with interest due thereon from
October 22, 1984 until fully paid;
(3) to pay the sum of P10,000.00 for attorney’s
fees;
(4) to pay the expenses of litigation and the
cost of suit.
SO ORDERED."
On appeal, the Court of Appeals, in a
Decision4 dated July 23, 1999, affirmed the trial
court’s ruling, holding that:
"The appellants argue that appellee Gicale’s
claim of P13,415.00 and appellee insurance
company’s claim of P8,000.00 individually fell
under the exclusive original jurisdiction of the
municipal trial court. This is not correct because
under the Totality Rule provided for under Sec.
19, Batas Pambansa Bilang 129, it is the sum of
the two claims that determines the
jurisdictional amount.
In the case at bench, the total of the two claims
is definitely more than P20,000.00 which at the
time of the incident in question was the
jurisdictional amount of the Regional Trial
Court.
Appellants contend that there was a misjoinder
of parties. Assuming that there was, under the
Rules of Court (Sec. 11, Rule 7) as well as under
the Rules of Civil Procedure (ditto), the same
does not affect the jurisdiction of the court nor
is it a ground to dismiss the complaint.
It does not need perspicacity in logic to see that
appellees Gicale’s and insurance company’s
individual claims against appellees (sic) arose
from the same vehicular accident on October
28, 1984 involving appellant Pantranco’s bus
and appellee Gicale’s jeepney. That being the
case, there was a question of fact common to
all the parties: Whose fault or negligence
caused the damage to the jeepney?
Appellants submit that they were denied their
day in court because the case was deemed
submitted for decision "without even declaring
defendants in default or to have waived the
presentation of evidence." This is incorrect. Of
course, the court did not declare defendants in
default because that is done only when the
defendant fails to tender an answer within the
reglementary period. When the lower court
ordered that the case is deemed submitted for
decision that meant that the defendants were
deemed to have waived their right to present
evidence. If they failed to adduce their
evidence, they should blame nobody but
themselves. They failed to be present during
the scheduled hearing for the reception of their
evidence despite notice and without any
motion or explanation. They did not even file
any motion for reconsideration of the order
considering the case submitted for decision.
Finally, contrary to the assertion of the
defendant-appellants, the evidence
preponderantly established their liability for
quasi-delict under Article 2176 of the Civil
Code."
Petitioners filed a motion for reconsideration
but was denied by the Appellate Court in a
Resolution dated November 4, 1999.
Hence, this petition for review
on certiorari raising the following assignments
of error:
"I.WHETHER OR NOT THE TRIAL COURT HAS
JURISDICTION OVER THE SUBJECT OF THE
ACTION CONSIDERING THAT RESPONDENTS’
RESPECTIVE CAUSE OF ACTION AGAINST
PETITIONERS DID NOT ARISE OUT OF THE SAME
TRANSACTION NOR ARE THERE QUESTIONS OF
LAW AND FACTS COMMON TO BOTH
PETITIONERS AND RESPONDENTS.
II.WHETHER OR NOT PETITIONERS ARE LIABLE
TO RESPONDENTS CONSIDERING THAT BASED
ON THE EVIDENCE ADDUCED AND LAW
APPLICABLE IN THE CASE AT BAR,
RESPONDENTS HAVE NOT SHOWN ANY RIGHT
TO THE RELIEF PRAYED FOR.
III.WHETHER OR NOT PETITIONERS WERE
DEPRIVED OF THEIR RIGHT TO DUE PROCESS."
For their part, respondents contend that their
individual claims arose out of the same
vehicular accident and involve a common
question of fact and law. Hence, the RTC has
jurisdiction over the case.
I.Petitioners insist that the trial court has no
jurisdiction over the case since the cause of
action of each respondent did not arise from
the same transaction and that there are no
common questions of law and fact common to
both parties. Section 6, Rule 3 of the Revised
Rules of Court,5 provides:
"Sec. 6. Permissive joinder of parties. – All
persons in whom or against whom any right to
relief in respect to or arising out of the same
transaction or series of transactions is alleged
to exist, whether jointly, severally, or in the
alternative, may, except as otherwise provided
in these Rules, join as plaintiffs or be joined as
defendants in one complaint, where any
question of law or fact common to all such
plaintiffs or to all such defendants may arise in
the action; but the court may make such orders
as may be just to prevent any plaintiff or
defendant from being embarrassed or put to
expense in connection with any proceedings in
which he may have no interest."
Permissive joinder of parties requires that: (a)
the right to relief arises out of the same
transaction or series of transactions; (b) there is
a question of law or fact common to all the
plaintiffs or defendants; and (c) such joinder is
not otherwise proscribed by the provisions of
the Rules on jurisdiction and venue.6
In this case, there is a single transaction
common to all, that is, Pantranco’s bus hitting
the rear side of the jeepney. There is also a
common question of fact, that is, whether
petitioners are negligent. There being a single
transaction common to both respondents,
consequently, they have the same cause of
action against petitioners.
To determine identity of cause of action, it
must be ascertained whether the same
evidence which is necessary to sustain the
second cause of action would have been
sufficient to authorize a recovery in the
first.7 Here, had respondents filed separate
suits against petitioners, the same evidence
would have been presented to sustain the
same cause of action. Thus, the filing by both
respondents of the complaint with the court
below is in order. Such joinder of parties avoids
multiplicity of suit and ensures the convenient,
speedy and orderly administration of justice.
Corollarily, Section 5(d), Rule 2 of the same
Rules provides:
"Sec. 5. Joinder of causes of action. – A party
may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may
have against an opposing party, subject to the
following conditions:
(d) Where the claims in all the causes of action
are principally for recovery of money the
aggregate amount claimed shall be the test of
jurisdiction."
The above provision presupposes that the
different causes of action which are joined
accrue in favor of the same plaintiff/s and
against the same defendant/s and that no
misjoinder of parties is involved.8 The issue of
whether respondents’ claims shall be lumped
together is determined by paragraph (d) of the
above provision. This paragraph embodies the
"totality rule" as exemplified by Section 33 (1)
of B.P. Blg. 1299 which states, among others,
that "where there are several claims or causes
of action between the same or different
parties, embodied in the same complaint, the
amount of the demand shall be the totality of
the claims in all the causes of action,
irrespective of whether the causes of action
arose out of the same or different
transactions."
As previously stated, respondents’ cause of
action against petitioners arose out of the same
transaction. Thus, the amount of the demand
shall be the totality of the claims.
Respondent Standard’s claim is P8,000.00,
while that of respondent Martina Gicale
is P13,415.00, or a total of P21,415.00. Section
19 of B.P. Blg. 129 provides that the RTC has
"exclusive original jurisdiction over all other
cases, in which the demand, exclusive of
interest and cost or the value of the property in
controversy, amounts to more than twenty
thousand pesos (P20,000.00)." Clearly, it is the
RTC that has jurisdiction over the instant case.
It bears emphasis that when the complaint was
filed, R.A. 7691 expanding the jurisdiction of
the Metropolitan, Municipal and Municipal
Circuit Trial Courts had not yet taken effect. It
became effective on April 15, 1994.
II.The finding of the trial court, affirmed by the
Appellate Court, that petitioners are negligent
and thus liable to respondents, is a factual
finding which is binding upon us, a rule well-
established in our jurisprudence. It has been
repeatedly held that the trial court's factual
findings, when affirmed by the Appellate Court,
are conclusive and binding upon this Court, if
they are not tainted with arbitrariness or
oversight of some fact or circumstance of
significance and influence. Petitioners have not
presented sufficient ground to warrant a
deviation from this rule.10
III.There is no merit in petitioners’ contention
that they were denied due process. Records
show that during the hearing, petitioner
Pantranco’s counsel filed two motions for
resetting of trial which were granted by the trial
court. Subsequently, said counsel filed a notice
to withdraw. After respondents had presented
their evidence, the trial court, upon petitioners’
motion, reset the hearing to another date. On
this date, Pantranco failed to appear. Thus, the
trial court warned Pantranco that should it fail
to appear during the next hearing, the case will
be submitted for resolution on the basis of the
evidence presented. Subsequently, Pantranco’s
new counsel manifested that his client is willing
to settle the case amicably and moved for
another postponement. The trial court granted
the motion. On the date of the hearing, the
new counsel manifested that Pantranco’s
employees are on strike and moved for another
postponement. On the next hearing, said
counsel still failed to appear. Hence, the trial
court considered the case submitted for
decision.
We have consistently held that the essence of
due process is simply an opportunity to be
heard, or an opportunity to explain one’s side
or an opportunity to seek for a reconsideration
of the action or ruling complained of.11
Petitioner Pantranco filed an answer and
participated during the trial and presentation of
respondents’ evidence. It was apprised of the
notices of hearing issued by the trial court.
Indeed, it was afforded fair and reasonable
opportunity to explain its side of the
controversy. Clearly, it was not denied of its
right to due process. What is frowned upon is
the absolute lack of notice and hearing which is
not present here.
WHEREFORE, the petition is DENIED. The
assailed Decision dated July 23 1999 and
Resolution dated November 4, 1999 of the
Court of Appeals in CA-G.R. CV No. 38453 are
hereby AFFIRMED. Costs against petitioners.
SO ORDERED.
GR 167246 UMALE VS CANOGA
Before us is a petition for review
on certiorari1 filed by George Leonard S. Umale
(petitioner), challenging the August 20, 2004
Decision2 of the Court of Appeals (CA) in CA-
G.R. SP. No. 78836 and its subsequent February
23, 2005 Resolution3 that denied his motion for
reconsideration. The CA reversed the
Decision4 of the Regional Trial Court (RTC)-
Branch 68, Pasig City, that dismissed Canoga
Park Development Corporation’s complaint for
unlawful detainer on the ground of litis
pendentia.
ANTECEDENTS
On January 4, 2000, the parties entered into a
Contract of Lease5 whereby the petitioner
agreed to lease, for a period of two (2) years
starting from January 16, 2000, an eight
hundred sixty (860)-square-meter prime lot
located in Ortigas Center, Pasig City owned by
the respondent. The respondent acquired the
subject lot from Ortigas & Co. Ltd. Partnership
through a Deed of Absolute Sale, subject to the
following conditions: (1) that no shopping
arcades or retail stores, restaurants, etc. shall
be allowed to be established on the property,
except with the prior written consent from
Ortigas & Co. Ltd. Partnership and (2) that the
respondent and/or its successors-in-interest
shall become member/s of the Ortigas Center
Association, Inc. (Association), and shall abide
by its rules and regulations.6
On October 10, 2000, before the lease contract
expired, the respondent filed an unlawful
detainer case against the petitioner before the
Metropolitan Trial Court (MTC)-Branch 68,
Pasig City, docketed as Civil Case No. 8084.7 The
respondent used as a ground for ejectment the
petitioner’s violation of stipulations in the lease
contract regarding the use of the property.
Under this contract, the petitioner shall use the
leased lot as a parking space for light vehicles
and as a site for a small drivers’ canteen,8 and
may not utilize the subject premises for other
purposes without the respondent’s prior
written consent.9 The petitioner, however,
constructed restaurant buildings and other
commercial establishments on the lot, without
first securing the required written consent from
the respondent, and the necessary permits
from the Association and the Ortigas & Co. Ltd.
Partnership. The petitioner also subleased the
property to various merchants-tenants in
violation of the lease contract.
The MTC-Branch 68 decided the ejectment case
in favor of the respondent. On appeal, the RTC-
Branch 155, Pasig City affirmed in toto the
MTC-Branch 68 decision.10 The case, however,
was re-raffled to the RTC-Branch 267, Pasig City
because the Presiding Judge of the RTC-Branch
155, upon motion, inhibited himself from
resolving the petitioner’s motion for
reconsideration.11 The RTC-Branch 267 granted
the petitioner’s motion, thereby reversing and
setting aside the MTC-Branch 68 decision.
Accordingly, Civil Case No. 8084 was dismissed
for being prematurely filed.12 Thus, the
respondent filed a petition for review with the
CA on April 10, 2002.13
During the pendency of the petition for review,
the respondent filed on May 3, 2002 another
case for unlawful detainer against the
petitioner before the MTC-Branch 71, Pasig
City. The case was docketed as Civil Case No.
9210.14 This time, the respondent used as a
ground for ejectment the expiration of the
parties’ lease contract.
On December 4, 2002, the MTC-Branch 71
rendered a decision15 in favor of the
respondent, the dispositive portion of which
read, as follows:
WHEREFORE, judgment is hereby rendered in
favor of the plaintiff [referring to the
respondent] and against the defendant and all
persons claiming rights under him, as follows:
1. Defendant and all persons claiming rights
under him are ordered to peacefully vacate the
premises located at Lot 9, Block 5, San Miguel
Avenue, Ortigas Center, Pasig City, covered by
Transfer Certificate of Title No. 488797 of the
Registry of Deeds of Pasig City and to surrender
the possession thereof to the plaintiff;
2. Defendant is ordered to pay unto plaintiff the
following:
a. Damages for the use of the property after
the expiration of the lease contract therefor in
the amount of One Hundred Fifty Thousand
Pesos (₱150,000.00) a month, beginning 16
January 2002 until he and all those claiming
rights under him have vacated and peacefully
turned over the subject premises to the
plaintiff; and
b. One Hundred Thousand Pesos (₱100,000.00)
as and for attorney’s fees together with costs of
suit.
3. With respect to the commercial units built by
[the] defendant on the subject land, he is
hereby ordered to remove the same from the
subject land and to restore the subject land in
the same condition as it was received unto the
plaintiff, at his exclusive account, failing which
the same shall be removed by the plaintiff, with
expenses therefor chargeable to the defendant.
On appeal, the RTC-Branch 68 reversed and set
aside the decision of the MTC-Branch 71, and
dismissed Civil Case No. 9210 on the ground
of litis pendentia.16 The petitioner, however,
was still ordered to pay rent in the amount of
seventy-one thousand five hundred pesos
(₱71,500.00) per month beginning January 16,
2002, which amount is the monthly rent
stipulated in the lease contract.
Aggrieved by the reversal, the respondent filed
a Petition for Review under Rule 42 of the Rules
of Court with the CA. The respondent argued
that there exists no litis pendentia between
Civil Case Nos. 8084 and 9210 because the two
cases involved different grounds for ejectment,
i.e., the first case was filed because of violations
of the lease contract, while the second case
was filed due to the expiration of the lease
contract. The respondent emphasized that the
second case was filed based on an event or a
cause not yet in existence at the time of the
filing of the first case.17 The lease contract
expired on January 15, 2002,18 while the first
case was filed on October 10, 2000.
On August 20, 2004, the CA nullified and set
aside the assailed decision of the RTC-Branch
68, and ruled that there was no litis
pendentia because the two civil cases have
different causes of action. The decision of the
MTC- Branch 71 was ordered reinstated.
Subsequently, the petitioner’s motion for
reconsideration was denied; hence, the filing of
the present petition for review on certiorari.
In presenting his case before this Court, the
petitioner insists that litis pendentia exists
between the two ejectment cases filed against
him because of their identity with one another
and that any judgment on the first case will
amount to res judicata on the other. The
petitioner argues that the respondent
reiterated the ground of violations of the lease
contract, with the additional ground of the
expiration of the lease contract in the second
ejectment case. Also, the petitioner alleges that
all of the elements of litis pendentia are
present in this case, thus, he prays for the
reversal and setting aside of the assailed CA
decision and resolution, and for the dismissal of
the complaint in Civil Case No. 9210 on the
ground of litis pendentia and/or forum
shopping.
THE COURT’S RULING
We disagree with the petitioner and find that
there is no litis pendentia.
As a ground for the dismissal of a civil
action, litis pendentia refers to a situation
where two actions are pending between the
same parties for the same cause of action, so
that one of them becomes unnecessary and
vexatious.19
Litis pendentia exists when the following
requisites are present: identity of the parties in
the two actions; substantial identity in the
causes of action and in the reliefs sought by the
parties; and the identity between the two
actions should be such that any judgment that
may be rendered in one case, regardless of
which party is successful, would amount to res
judicata in the other.20
In the present case, the parties’ bone of
contention is whether Civil Case Nos. 8084 and
9210 involve the same cause of action. The
petitioner argues that the causes of action are
similar, while the respondent argues otherwise.
If an identity, or substantial identity, of the
causes of action in both cases exist, then the
second complaint for unlawful detainer may be
dismissed on the ground of litis pendentia.
We rule that Civil Case Nos. 8084 and 9210
involve different causes of action.
Generally, a suit may only be instituted for a
single cause of action.21 If two or more suits are
instituted on the basis of the same cause of
action, the filing of one or a judgment on the
merits in any one is ground for the dismissal of
the others.22
Several tests exist to ascertain whether two
suits relate to a single or common cause of
action, such as whether the same evidence
would support and sustain both the first and
second causes of action23 (also known as the
"same evidence" test),24 or whether the
defenses in one case may be used to
substantiate the complaint in the other.25 Also
fundamental is the test of determining whether
the cause of action in the second case existed
at the time of the filing of the first complaint.26
Of the three tests cited, the third one is
especially applicable to the present case, i.e.,
whether the cause of action in the second case
existed at the time of the filing of the first
complaint – and to which we answer in the
negative. The facts clearly show that the filing
of the first ejectment case was grounded on the
petitioner’s violation of stipulations in the lease
contract, while the filing of the second case was
based on the expiration of the lease contract.
At the time the respondent filed the first
ejectment complaint on October 10, 2000, the
lease contract between the parties was still in
effect. The lease was fixed for a period of two
(2) years, from January 16, 2000, and in the
absence of a renewal agreed upon by the
parties, the lease remained effective until
January 15, 2002. It was only at the expiration
of the lease contract that the cause of action in
the second ejectment complaint accrued and
made available to the respondent as a ground
for ejecting the petitioner. Thus, the cause of
action in the second case was not yet in
existence at the time of filing of the first
ejectment case.
In response to the petitioner’s contention that
the similarity of Civil Case Nos. 8084 and 9210
rests on the reiteration in the second case of
the cause of action in the first case, we rule
that the restatement does not result in
substantial identity between the two cases.
Even if the respondent alleged violations of the
lease contract as a ground for ejectment in the
second complaint, the main basis for ejecting
the petitioner in the second case was the
expiration of the lease contract. If not for this
subsequent development, the respondent
could no longer file a second complaint for
unlawful detainer because an ejectment
complaint may only be filed within one year
after the accrual of the cause of action,27 which,
in the second case, was the expiration of the
lease contract.1awphi1
Also, contrary to petitioner’s assertion, there
can be no conflict between the decisions
rendered in Civil Case Nos. 8084 and 9210
because the MTC-Branch 71 decided the latter
case on the sole issue of whether the lease
contract between the parties had expired.
Although alleged by the respondent in its
complaint, the MTC-Branch 71 did not rule on
the alleged violations of the lease contract
committed by the petitioner. We note that the
damages awarded by the MTC-Branch 71 in
Civil Case No. 9210 were for those incurred
after the expiration of the lease contract,28 not
for those incurred prior thereto.
Similarly, we do not find the respondent guilty
of forum shopping in filing Civil Case No. 9210,
the second civil case. To determine whether a
party violated the rule against forum shopping,
the test applied is whether the elements of litis
pendentia are present or whether a final
judgment in one case will amount to res
judicata in another.29 Considering our
pronouncement that not all the requisites
of litis pendentia are present in this case, the
CA did not err in declaring that the respondent
committed no forum shopping. Also, a close
reading of the Verification and Certification of
Non-Forum Shopping30 (attached to the second
ejectment complaint) shows that the
respondent did disclose that it had filed a
former complaint for unlawful detainer against
the petitioner. Thus, the respondent cannot be
said to have committed a willful and deliberate
forum shopping.
WHEREFORE, the instant petition is DENIED.
The assailed Decision dated August 20, 2004
and Resolution dated February 23, 2005 of the
Court of Appeals in CA-G.R. SP. No. 78836 are
AFFIRMED.
SO ORDERED.
GR 172909 SPOUSES PLAZA VS
LUSTIVA
Through a petition for review on
certiorari,1 filed under Rule 45 of the Rules of
Court, the petitioners, spouses Silvestre O.
Plaza and Elena Y. Plaza, seek the reversal of
the decision2 dated October 24, 2005 and the
Resolution3 dated April 6, 2006 of the Court of
Appeals (CA) in CA-G.R. SP No. 59859.
THE FACTS
On August 28, 1997, the CA4 ruled that among
the Plaza siblings, namely: Aureliano, Emiliana,
Vidal, Marciano, and Barbara, Barbara was the
owner of the subject agricultural land. The
decision became final and executory and
Barbara's successors, respondents Guillermo
Lustiva, Eleodora Vda. de Martinez and Vicky
Sayson Goloseno, have continued occupying
the property.
On September 14, 1999, Vidal’s son and
daughter-in-law, the petitioners, filed a
Complaint for Injunction, Damages, Attorney’s
Fees with Prayer for the Issuance of the Writ of
Preliminary Injunction and/or Temporary
Restraining Order against the respondents and
the City Government of Butuan. They prayed
that the respondents be enjoined from
unlawfully and illegally threatening to take
possession of the subject property. According
to the petitioners, they acquired the land from
Virginia Tuazon in 1997; Tuazon was the sole
bidder and winner in a tax delinquency sale
conducted by the City of Butuan on December
27, 1996.
In their answer, the respondents pointed out
that they were never delinquent in paying the
land taxes and were in fact not aware that their
property had been offered for public auction.
Moreover, Tuazon, being a government
employee, was disqualified to bid in the public
auction, as stated in Section 89 of the Local
Government Code of 1991.5 As Tuazon’s
participation in the sale was void, she could
have not transferred ownership to the
petitioners. Equally important, the petitioners
merely falsified the property tax declaration by
inserting the name of the petitioners’ father,
making him appear as a co-owner of the
auctioned land. Armed with the falsified tax
declaration, the petitioners, as heirs of their
father, fraudulently redeemed the land from
Tuazon. Nonetheless, there was nothing to
redeem as the land was not sold. For these
irregularities, the petitioners had no right to the
Writ of Preliminary Injunction and/or
Temporary Restraining Order prayed for against
them.
THE RTC’S RULING
In its December 14, 1999 order,6 the Regional
Trial Court (RTC) of Butuan City, Branch 5,
reconsidered its earlier order,7 denied the
prayer for a Writ of Preliminary Injunction, and
ordered that the possession and occupation of
the land be returned to the respondents. The
RTC found that the auction sale was tainted
with irregularity as the bidder was a
government employee disqualified in
accordance with Section 89 of the Local
Government Code of 1991. The petitioners are
not buyers in good faith either. On the
contrary, they were in bad faith for having
falsified the tax declaration they redeemed the
property with.
THE CA’S RULING
Through a petition for review on certiorari
under Rule 65, the petitioners challenged the
RTC’s order before the CA.
While the petition for review on certiorari was
pending before the CA, the petitioners filed an
action for specific performance8 against the City
Government of Butuan. According to the
petitioners, they acquired possession and
ownership over the auctioned property when
they redeemed it from Tuazon. The City
Government of Butuan must therefore issue
them a certificate of sale.9
In its October 24, 2005 decision,10 the CA
affirmed the RTC’s ruling, found the petitioners
guilty of forum shopping, dismissed the case,
and referred the case to the Court and to the
Integrated Bar of the Philippines for
investigation and institution of the appropriate
administrative action.11 The CA, after legal
analysis, similarly concluded that for being
disqualified to bid under Section 89 of the Local
Government Code of 1991, Tuazon never
obtained ownership over the property; much
less transmit any proprietary rights to the
petitioners. Clearly, the petitioners failed to
establish any clear and unmistakable right
enforceable by the injunctive relief.
On April 6, 2006, the CA rejected the
petitioners’ motion for reconsideration.
THE PARTIES’ ARGUMENTS
The petitioners filed the present petition for
review on certiorari with this Court to challenge
the CA rulings. The petitioners maintain that
they did not falsify the tax declaration in
acquiring the auctioned property. Moreover,
assuming that Tuazon, the sole bidder, was
indeed disqualified from participating in the
public auction, Section 18112 of the Local
Government Code of 1991 finds application.
Applying the law, it is as if there was no bidder,
for which the City Government of Butuan was
to be considered the purchaser of the land in
auction. Therefore, when the petitioners
bought the land, they bought it directly from
the purchaser - City Government of Butuan -
and not from Tuazon, as redeemers.
Also, the respondents may not question the
validity of the public auction for failing to
deposit with the court the amount required by
Section 26713 of the Local Government Code of
1991.
Finally, the petitioners argue that they did not
commit forum shopping, as the reliefs prayed
for in the present case and in the specific
performance case are not the same. In the
present case, they merely impleaded the City
Government of Butuan as a nominal party to
pay for the value of the land only if possession
of the land was awarded to the respondents.
On the other hand, the complaint for specific
performance prayed that the City Government
of Butuan execute the necessary certificate of
sale and other relevant documents pertaining
to the auction.
The respondents, for their part, reiterate the
lower courts’ findings that there could have
been no legal redemption in favor of the
petitioners as the highest bidder was
disqualified from bidding. Moreover, the CA
correctly applied the law in finding the
petitioners guilty of forum shopping. Most
importantly, the grant of preliminary injunction
lies in the sound discretion of the court and the
petitioners failed to show proof that they are
entitled to it.
Meanwhile, on August 8, 2013, the RTC
dismissed the main action and ordered the
petitioners to pay the respondents attorney’s
fees and litigation expenses.14
THE COURT’S RULING
We resolve to deny the petition for lack of
merit.
The petitioners may not
raise factual issues
The petitioners maintain that they did not
falsify the tax declaration they reimbursed the
property with. According to them, the
document already existed in 1987, way before
they acquired the land in 1997. Contrary
likewise to the lower courts’ finding, they did
not purchase the land from Tuazon as
redemptioners; they directly bought the
property from the City Government of Butuan.
These factual contests are not appropriate for a
petition for review on certiorari under Rule 45.
The Court is not a trier of facts.15 The Court will
not revisit, re-examine, and re-evaluate the
evidence and the factual conclusions arrived at
by the lower courts.16 In the absence of
compelling reasons, the Court will not disturb
the rule that factual findings of the lower
tribunals are final and binding on this Court.17
Sections 181 and 267 of the Local Government
Code of 1991 are inapplicable; these provisions
do not apply to the present case
The petitioners may not invoke Section 18118 of
the Local Government Code of 1991 to validate
their alleged title. The law authorizes the local
government unit to purchase the auctioned
property only in instances where "there is no
bidder" or "the highest bid is xxx insufficient." A
disqualified bidder is not among the authorized
grounds. The local government also never
undertook steps to purchase the property
under Section 181 of the Local Government
Code of 1991, presumably because it knew the
invoked provision does not apply.
Neither can the Court agree with the
petitioners’ stance that the respondents’
defense — the petitioners’ defective title —
must fail for want of deposit to the court the
amount required by Section 267 of the Local
Government Code. The provision states:
Section 267. Action Assailing Validity of Tax
Sale. - No court shall entertain any action
assailing the validity or any sale at public
auction of real property or rights therein under
this Title until the taxpayer shall have deposited
with the court the amount for which the real
property was sold, together with interest of
two percent (2%) per month from the date of
sale to the time of the institution of the action.
The amount so deposited shall be paid to the
purchaser at the auction sale if the deed is
declared invalid but it shall be returned to the
depositor if the action fails.
Neither shall any court declare a sale at public
auction invalid by reason or irregularities or
informalities in the proceedings unless the
substantive rights of the delinquent owner of
the real property or the person having legal
interest therein have been impaired.
[underscores ours; italics supplied]
A simple reading of the title readily reveals that
the provision relates to actions for annulment
of tax sales. The section likewise makes use of
terms "entertain" and "institution" to mean
that the deposit requirement applies only to
initiatory actions assailing the validity of tax
sales. The intent of the provision to limit the
deposit requirement to actions for annulment
of tax sales led to the Court’s ruling in National
Housing Authority v. Iloilo City, et al.19 that the
deposit requirement is jurisdictional — a
condition necessary for the court to entertain
the action:
As is apparent from a reading of the foregoing
provision, a deposit equivalent to the amount
of the sale at public auction plus two percent
(2%) interest per month from the date of the
sale to the time the court action is instituted is
a condition — a "prerequisite," to borrow the
term used by the acknowledged father of the
Local Government Code — which must be
satisfied before the court can entertain any
action assailing the validity of the public auction
sale. The law, in plain and unequivocal
language, prevents the court from entertaining
a suit unless a deposit is made. xxx. Otherwise
stated, the deposit is a jurisdictional
requirement the nonpayment of which
warrants the failure of the action.
Clearly, the deposit precondition is an
ingenious legal device to guarantee the
satisfaction of the tax delinquency, with the
local government unit keeping the payment on
the bid price no matter the final outcome of the
suit to nullify the tax sale.20
The Court would later reiterate the
jurisdictional nature of the deposit in Wong v.
City of Iloilo,21 and pronounce:
In this regard, National Housing Authority v.
Iloilo City holds that the deposit required under
Section 267 of the Local Government Code is a
jurisdictional requirement, the nonpayment of
which warrants the dismissal of the action.
Because petitioners in this case did not make
such deposit, the RTC never acquired
jurisdiction over the complaints.22
These rulings clearly render inapplicable the
petitioners’ insistence that the respondents
should have made a deposit to the court. The
suit filed by the petitioners was an action for
injunction and damages; the issue of nullity of
the auction was raised by the respondents
themselves merely as a defense and in no way
converted the action to an action for
annulment of a tax sale.
The petitioners failed to show clear
and unmistakable rights to be protected
by the writ; the present action has been
rendered moot and academic by the
dismissal of the main action
As the lower courts correctly found, Tuazon had
no ownership to confer to the petitioners
despite the latter’s reimbursement of Tuazon’s
purchase expenses. Because they were never
owners of the property, the petitioners failed
to establish entitlement to the writ of
preliminary injunction. "[T]o be entitled to an
injunctive writ, the right to be protected and
the violation against that right must be shown.
A writ of preliminary injunction may be issued
only upon clear showing of an actual existing
right to be protected during the pendency of
the principal action. When the complainant’s
right or title is doubtful or disputed, he does
not have a clear legal right and, therefore, the
issuance of injunctive relief is not proper."23
Likewise, upon the dismissal of the main case
by the RTC on August 8, 2013, the question of
issuance of the writ of preliminary injunction
has become moot and academic. In Arevalo v.
Planters Development Bank,24 the Court ruled
that a case becomes moot and academic when
there is no more issue between the parties or
object that can be served in deciding the merits
of the case. Upon the dismissal of the main
action, the question of the non-issuance of a
writ of preliminary injunction automatically
died with it. A writ of preliminary injunction is a
provisional remedy; it is auxiliary, an adjunct of,
and subject to the determination of the main
action. It is deemed lifted upon the dismissal of
the main case, any appeal therefrom
notwithstanding.25
The petitioners are guilty of forum shopping
We agree with the CA that the petitioners
committed forum shopping when they filed the
specific performance case despite the
pendency of the present case before the CA. In
the recent case of Heirs of Marcelo Sotto, etc.,
et al. v. Matilde S. Palicte,26 the Court laid down
the three ways forum shopping may be
committed: 1) through litis pendentia — filing
multiple cases based on the same cause of
action and with the same prayer, the previous
case not having been resolved yet; 2) through
res judicata — filing multiple cases based on
the same cause of action and the same prayer,
the previous case having been finally resolved;
and 3) splitting of causes of action — filing
multiple cases based on the same cause of
action but with different prayers — the ground
to dismiss being either litis pendentia or res
judicata. "The requisites of litis pendentia are:
(a) the identity of parties, or at least such as
representing the same interests in both actions;
(b) the identity of rights asserted and relief
prayed for, the relief being founded on the
same facts; and (c) the identity of the two cases
such that judgment in one, regardless of which
party is successful, would amount to res
judicata in the other."27
Noticeable among these three types of forum
shopping is the identity of the cause of action in
the different cases filed. Cause of action is "the
act or omission by which a party violates the
right of another."28
The cause of action in the present case (and the
main case) is the petitioners’ claim of
ownership of the land when they bought it,
either from the City Government of Butuan or
from Tuazon. This ownership is the petitioners’
basis in enjoining the respondents from
dispossessing them of the property. On the
other hand, the specific performance case
prayed that the City Government of Butuan be
ordered to issue the petitioners the certificate
of sale grounded on the petitioners’ ownership
of the land when they had bought it, either
from the City Government of Butuan or from
Tuazon. While it may appear that the main
relief prayed for in the present injunction case
is different from what was prayed for in the
specific performance case, the cause of action
which serves as the basis for the reliefs remains
the same — the petitioners’ alleged ownership
of the property after its purchase in a public
auction.
Thus, the petitioners' subsequent filing of the
specific performance action is forum shopping
of the third kind-splitting causes of action or
filing multiple cases based on the same cause of
action, but with different prayers. As the Court
has held in the past, "there is still forum
shopping even if the reliefs prayed for in the
two cases are different, so long as both cases
raise substantially the same issues."29
Similarly, the CA correctly found that the
petitioners and their counsel were guilty of
forum shopping based on litis pendentia. Not
only were the parties in both cases the same
insofar as the City Government of Butuan is
concerned, there was also identity of rights
asserted and identity of facts alleged. The cause
of action in the specific performance case had
already been ruled upon in the present case,
although it was still pending appeal before the
CA. Likewise, the prayer sought in the specific
performance case-for the City Government
ofButuan to execute a deed of sale in favor of
the petitioners - had been indirectly ruled upon
in the present case when the R TC declared that
no certificate of sale could be issued because
there had been no valid sale.
WHEREFORE, premises considered, the Court
DENIES the petition for review on
certiorari.1âwphi1 The decision dated October
24, 2005 and the resolution dated April 6, 2006
of the Court of Appeals in CA-G.R. SP No. 59859
are hereby AFFIRMED.
SO ORDERED.
G.R. No. L-53564 BAYANG VS CA
Sometime in November 1969, Juan Bayang filed
a complaint for quieting of title with damages
against Benigno Biong in the Court of First
Instance of Surigao del Norte, Branch 1,
docketed as Civil Case No. 1892. 1 In 1970,
while the case was pending, Biong succeeded in
dispossessing the plaintiff of the land in
question and remained there until January 25,
1978. 2 On February 21, 1972, the case was
decided in favor of Biong, but the Court of
Appeals on December 8, 1977, reversed the
trial court, declaring in the dispositive portion
of its decision:
WHEREFORE, the judgment appealed from is
reversed and appellants are hereby declared
owner of the property in litigation, and
defendant-appellee are (sic) hereby ordered to
pay appellant the sum of P56.40 as the latter's
share in the proceeds from the sale of the
copra derived from the third harvest of
coconuts from the same land, and P1,000.00 as
attorney's fees, and costs of Litigation. 3
This decision became final on February 2, 1978.
On February 6, 1978, Bayang filed a second
case, docketed as Civil Case No. 2589, with the
CFI of Surigao del Norte, Branch II, seeking to
recover from Biong the incomes earned from
the same land from 1970 up to the quarterly
incomes from 1978 until the said land was
delivered to the plaintiff. 4 At the pre-trial
conference held on July 10, 1978, the counsel
for Bayang admitted that as of January 25,
1978, Biong had already surrendered
possession of the land in question to
Bayang. 5 On August 16, 1978, Biong filed a
motion for summary judgment, reiterating the
affirmative defense of res judicata raised in his
answer dated April 12, 1978, insofar as it
related to the incidents concerning the case
prior to January 25, 1978. 6 An opposition to
this motion was duly filed by Bayang. 7
The trial court, after considering the arguments
of the parties, granted the motion and
rendered a summary judgment on October 30,
1978. 8 The said decision was sustained by the
Court of Appeals, and Bayang is now before us
in this petition for review by certiorari under
Rule 45 of the Rules of Court.
His assignment of errors raises two basic
submissions, to wit:
1. Civil Case No. 2589 should not have been
decided by summary judgment.
2. The judgment in CA-G.R. No. 54720-R (appeal
from judgment in Civil Case No. 1892) did not
constitute res judicata as to bar Civil Case No.
2589.
Both contentions are incorrect. We rule for the
respondents.
In its decision, the Court of Appeals quoted the
following excerpt from Singleton v. Philippine
Trust Co.  9 on the nature and functions of the
summary judgment:
Summary judgment is one of the methods
sanctioned in the present Rules of Court for a
prompt disposition of civil actions wherein
there exists no serious controversy. The
procedure may be availed of not only by
claimants, but also by defending parties who
may be the object of unfounded claims. A
motion for summary judgment assumes that
scrutinizing of the facts will disclose that the
issues presented by the pleadings need not be
tried because they are so patently
unsubstantial as not to be genuine issues, or
that there is no genuine issue as to any material
facts or where the facts appear undisputed and
certain from the pleadings, depositions,
admissions and affidavits.
We hold that there was no genuine or triable
issue of fact raised by the parties, in view
particularly of the affirmative defense of res
judicata invoked by the private respondent.
That defense is sustained.
A long line of decisions has consistently held
that for res judicata to apply: a) the former
judgment must be final; b) it must have been
rendered by a court having jurisdiction over the
subject matter and the parties; c) it must be a
judgment on the merits; and d) there must be
between the first case and the second case
identity of parties, identity of subject matter
and Identity of cause of action. 10
The decision in Civil Case No. 1892 became final
and executory on February 2, 1978. There is no
dispute that the trial court which rendered that
decision had jurisdiction over the subject-
matter and the parties to the proceeding. The
case was tried on the merits. The parties to Civil
Case No. 1892 and the subsequent Civil Case
No. 2589 are the same petitioner and private
respondent now before us.
The petitioner would draw a distinction
between the land in dispute in Civil Case No.
1892 and the income from that land being
claimed in Civil Case No. 2589. But that is in our
view splitting hairs to split a cause of action.
The subject-matter is essentially the same in
both cases as the income is only a consequence
or accessory of the disputed property. We
cannot agree that there are involved here two
causes of action calling for two separate cases.
The claim for the income from the land was
incidental to, and should have been raised by
Bayang in his earlier claim for, ownership of the
land.
We note that while the first case was pending,
the private respondent, by the petitioner's own
account, "succeeded in dispossessing" him of
the disputed land 11 and that at the pretrial
conference on Civil Case No. 2589, Bayang's
counsel admitted that Biong had vacated the
said property as of January 25, 1978. 12 This
means that from 1970 to the date the
respondent surrendered the property in 1978,
Biong was presumably collecting and enjoying
the income therefrom to the exclusion of the
petitioner.
Civil Case No. 1892 was commenced in
November 1969 and was finally decided only on
February 2, 1978. The private respondent
entered the disputed property in 1970 and left
it only in 1978. For about seven years,
therefore, the petitioner made no move at all
to amend his complaint to include a claim for
the income supposedly received by the private
respondent during that period.
Under Rule 10, Section 6, of the Rules of Court.
Sec. 6. Matters subject of supplemental
pleadings. — Upon motion of a party the court
may, upon reasonable notice and upon such
terms as are just, permit him to serve a
supplemental pleading setting forth
transactions, occurrence or events which have
happened since the date of the pleading sought
to be supplemented. If the court deems it
advisable that the adverse party should plead
thereto, it shall so order, specifying the time
therefor.
In the case of Jalandoni v. Martin-
Guanzon, 13 this Court declared through Justice
J.B.L. Reyes:
As to the value of the plaintiff's share in the
products of the land during the time that the
former action was pending (which are the
damages claimed under the second cause of
action), their recovery is now barred by the
previous judgment. These damages are but the
result of the original cause of action, viz., the
continuing refusal by defendants in 1941 to
recognize the plaintiff's right to an interest in
the property. In the same way that plaintiffs
claimed for their share of the produce from
1941 to 1947, these later damages could have
been claimed in the first action, either in the
original camplaint (for their existence could be
anticipated when the first complaint was filed)
or else by supplemental pleading. To allow
them to be recovered by subsequent suit would
be a violation of the rule against multiplicity of
suits, and specifically of sections 3 and 4 of
Rules 2 of the Rules of Court, against the
splitting of causes of action, since these
damages spring from the same cause of action
that was pleading (sic) in the former case No.
573 between the same parties (Blossom & Co.,
Inc. v. Manila Gas Corporation, 55 Phil. 226;
Santos v. Moir, 36 Phil. 350; Pascua v. Sideco 24
Phil. 26; Bachrach Motor Co. v. Icarangal 68
Phil. 287).
And in another case, 14 the same jurist declared:
Urtula, as defendant in the expropriation case,
could have raised the matter of interest before
the trial court even if there had been no actual
taking yet by the Republic and the said court
could have included the payment of interest in
its judgment but conditioned upon the actual
taking, because the rate of interest upon the
amount of just compensation (6%) is a known
factor, and it can reasonably be expected that
at some future time, the expropriator would
take possession of the property, though the
date be not fixed. In this way, multiple suits
would be avoided. Moreover, nothing
prevented appellee from calling the attention
of the appellate courts (even by motion to
reconsider before judgment became final) to
the subsequent taking of possession by the
condemnor, and asking for allowance of
interest on the indemnity since that followed
the taking as a matter of course, and raised no
issue requiring remand of the records to the
Court of origin.
As the issue of interest could have been raised
in the former case but was not raised, res
judicata blocks the recovery of interest in the
present case. (Tejedor vs. Palet, 61 Phil. 494;
Phil. Engineering Corp., et al. vs. Ceniza, etc., et
al., L-17834, 29 Sept. 1962). It is settled that a
former judgment constitutes a bar, as between
the parties, not only as to matters expressly
adjudged, but all matters that could have been
adjudged at the time (Rule 39, sec. 49; Corda
vs. Maglinti L-17476, November 30, 1961;
Rodriguez vs. Tan, 48 Off. Gaz. 3330).
Clearly, then, Civil Case No. 2589 is barred by
the previous judgment in Civil Case No. 1892.
This being so, it should follow that the trial
judge committed no grave abuse of discretion
in deciding the latter case by summary
judgment.
We are not unmindful of the argument that
affirmance of the challenged decision of the
respondent court will result in the unjust
enrichment of Biong at the expense of Bayang.
This assumes, of course, that the petitioner
could have proved his right to the income he
now claims belatedly. The point is that he did
not make the proper claim at the proper time
and in the proper proceedings, and he cannot
do it now. Whatever right he might have had is
now deemed waived because of his neglect.
Nemo debet bis vexare pro una et eadem
causa. This has to be so if litigants are to be
spared the annoyance, anxiety and expense
that could otherwise be inflicted upon them
endlessly by capricious, malicious or vindictive
suitors.
WHEREFORE, the petition is dismiss and the
appealed decision is affirmed. Costs against the
petitioner.
SO ORDERED.
G.R. No. L-29155             DE LARENA VS
VILLANUEVA
The case at bar is a sequel to case G. R. No.
21706, Josefina Rubio de Larena vs.
Hermenegildo Villanueva, decided on March
26, 1924. 1 In that case we affirmed a decision of
the Court of First Instance ordering the
rescission of a lease of the Tacgajan Sugar
Plantation and the payment by the defendant-
lessee of the unpaid balance of the rent for the
agricultural year 1920-1922 in the sum of
P5,949.28 with interest from August 26, 1922,
an for P8,000 in rent for the agricultural year
1921-1923. The decision also provided that the
possession of the leased land be delivered to
the plaintiff.
Shortly after the record was returned to the
court below, a writ of execution was issued, but
before levy was made the parties came to an
agreement, under which the money judgment
was to be satisfied by the payment of P10,500
in cash and the transfer to the plaintiff of a
dwelling house situated in the municipality of
Bais. The agreement was carried out in
accordance with its terms, and on September
30, 1924, the following document was executed
by the plaintiff:
Habiendo llegado a un convenio entre la que
subscribe, ejecutante, en la causa civil No. 67
decidida por la Corte Suprema, y el ejecutado,
Don Hermenegildo Villanueva, por la presente
declaro haber recibido del Sheriff Provincial de
Negros Oriental, y mi entera satisfaccion la
suma de diez mil quinientos pesos (P10,500),
mas una casa residencial con su solar, situada
en la plaza del Municipio de Bais, Provincia de
Negros Oriental, cuyas descripciones aparecen
an un ocumento aparte, por el importnte de la
ejecusacion expidida por el Jusgado de Negros
Oriental al 14 de mayo de 1924, en vitud de
una decision de la Corte Suprema. Con este
queda definitivamente cumplimentada esta
ejecucion.
Y para que asi conste, firmo la presente en el
Municipio de Bais, Provincia de Negros
Oriental, I. F., ante el Sheriff Provincial de esta
Provincia de Negros Oriental y el Notario
Publico Don Francisco Romero, que ratifica este
compromiso.
(Fda.) JOSEFINA RUBIO, Vda. DE LARENA
Firmado en presencia de:
(Fdos.) BRAULIO RUBIO
              FRANCISCO PINERO
(ACKNOWLEDGMENT)
In the meantime, the defendant had harvested
the sugarcane crop produced in the agricultural
year 1922-1924, and after having satisfied the
aforesaid money judgment, he also continued
in possession of the plantation long enough to
appropriate to himself the following ratoon
cane crop.
The present action was brought on April 13,
1925, but the last amended complaint, setting
forth three causes of action, was not filed until
June 17, 1927. As her first cause of action the
plaintiff, after a preliminary statement of the
origin of the controversy, alleges that while
case G. R. No. 21706 was on appeal to the
Supreme Court, the defendant knew positively
that the aforesaid lease was declared rescinded
by the Court of First Instance on September 8,
1923, and that he, the defendant, also knew
that he thereafter was not entitled to the
possession of the aforesaid hacienda; that he,
nevertheless, in bad faith continued in such
possession during the agricultural year 1922-
1924 and appropriated to himself the cane
harvest for that year, which after deducting the
share of the sugar central, produced 1,679.02
piculs for his own benefit, which sugar was sold
by him for the sum of P13 a picul; that the
plaintiff has demanded payment to her of the
total value of said 1,679.02 piculs, amounting
to P21,827.26, but that the defendant refuses
to pay. The plaintiff, therefore, asks judgment
for the sum of P21,827.26 upon the first cause
of action.
For the second cause of action the plaintiff
alleges that under the contract of lease of the
Tacgajan Hacienda, one of the obligations
assumed by the defendant was that he would
use the care of a good father of the family in
conserving the tools, agricultural implements,
draft animals, and other effects enumerated in
an inventory made at the time the defendant
entered in possession under the lease; that he
was further obligated to return said property to
the plaintiff, but that he return said property to
the plaintiff, but that he returned only a part
that he returned only a part thereof and failed
to returned only a part thereof and failed to
return 4 carabaos, 4 vacunos, 1 corn mill, 4
wagons, 106 steel rails, 14 plows, 1 table, 1
scale, an 1 telephone, the total value of the
property enumerated being P3,596 for which
amount, plus P500 in damages, the plaintiff
asks judgment under her second cause of
action.
As a third cause of action the plaintiff alleges
that the harvest of sugar cane illegally made by
the defendant in 1924 left ratoon sugar cane in
the fields of the hacienda, which sugar can was
the property of the plaintiff, and that during the
year 1925, the defendant illegally harvested
said ratoon cane together with some recently
planted cane, which harvested after deducting
the share of the sugar central, produced
1,613.25 piculs of sugar, which the defendant
sold for his own benefit at the price of P13 per
picul, the total amount received by him being
P20,962.25 for which the plaintiff demands
judgment. lawphi1.net
In his answer to the first and third causes of
action, the defendants alleges that according to
the pleadings in case G. R. No. 21706, the two
causes of action were included in that case and,
therefore, must be considered res adjudicata.
In regard to the second cause of action the
defendant pleads the general issue and sets up
as a special defense that assuming that the
property referred to in said cause of action was
missing, it loss was due to its total extinction by
ordinary use, for which the defendant could not
be held responsible. For all three causes of
action, the defendant sets up as a special
defense the document executed by the plaintiff
on September 30, 1924, acknowledging the
satisfaction of the judgment in case G. R. No.
21706.
Upon trial the Court of First Instance sustained
the defendant's special defense and absolved
him from the complaint with the cost against
the plaintiff, whereupon the latter appealed to
this court.
We do not think that the court below erred in
absolving the defendant from liability upon the
second cause of action. It is not without
significance that in her original complaint the
plaintiff claimed only 5 plows, 6 carts, 3
carabaos an 4 vacunos, the total value of which
was alleged to be P1,360; in the first amended
complaint filed over two years later, the same
claim was made, but in the last amended
complaint a number of other articles were
included, thus increasing the claim to P3,596.
The court below found that the weight of the
evidence showed that the missing draft animals
died from rinderpest and that the other
personal property was turned over to the
provincial sheriff for delivery to the plaintiff
before the writ of execution was returned to
the court. If so, the action would lie against the
sheriff rather than against the defendant.
As to the first cause of action the defendant
argues that it was included in the prayer of an
amended complaint filed in case G. R. No.
21706 and that, although no express
determination thereof was made in the
decision of the case, it must, nevertheless, be
regarded as res judicata. That such is not the
case is very clear. The Code of Civil Procedure
says:
That only is deemed to have been so adjudged
in a former judgment which appears upon its
face to have been so adjudged, or which was
actually and necessarily included therein or
necessary thereto. (Sec. 307, Code of Civil
Proc.)
But the defendant maintains that the plaintiff
having had an opportunity to ventilate the
matter in the former case, she cannot now
enforce the same cause of action in the present
case. Properly speaking, this argument does not
involve the doctrine of res judicata but rests on
the well-known an, in American law, firmly
established principle that a party will not be
permitted to split up a single cause of action an
make it the basis for several suits. But that is
not this case. The rule is well established that
when a lease provides for the payment of the
rent in separate installments, each installment
is an independent cause of action, though it has
been held and is good law, that in an action
upon such a lease for the recovery of rent, the
installments due at the time the action brought
must be included in the complaint an that
failure to o so will constitute a bar to a
subsequent action for the payment of that rent.
The aforesaid action, G. R. No. 21706, was
brought on August 23, 1922, the plaintiff
demanding payment of then sue rent in
addition to the rescission of the lease. On July
27, 1923, the plaintiff filed a motion for an
amendment to paragraph 6 of the complaint
adding to that paragraph the following
sentence:
Que tambien ha vencido ya el tercer ano el
arrendamiento de la finca en cuestion y que
tampoco ha pagado el demandao el canon
correspondiente a icho ano.
The plaintiff also amended the prayer of the
complaint by asking judgment for rent for years
subsequent to 1922. The motion was granted,
and the case came up for trial on July 30, 1923,
and on September 8, 1923, the trial court
rendered its decision giving judgment for rent
up to and including the rent for the agricultural
year ending in 1923. The lease did not provide
for payment of rent in advance or at any
definite time, an it appears plainly from the
record that the rent for an agricultural year was
not considered due until the end of the
corresponding year. It follows that the rent for
the agricultural year 1922-1924 ha not become
sue time of the trial of the case and that
consequently the trial court could not render
judgment therefore. The action referred to is,
therefore, no bar to the first cause of action in
the present litigation.
The defendant places much weigh upon the
document of September 30, 1924, hereinbefore
quoted. The document speaks for itself, and it
will be readily seen that it is merely a receipt
for the satisfaction of the money judgment in
the case G. R. No. L-21706 and has nothing to
with the present case.
The only question in regard to the first cause of
action relates to the amount of the damages.
The plaintiff contends that the defendant was a
possessor in bad faith, and therefore, must pay
the value of the fruits of the land in accordance
with article 455 of the Civil Code. Under the
circumstances of the case, we cannot so hold.
The defendant held possession under the
contract of lease until said contract was
rescinded. The contract contained no special
provision for the procedure in effecting the
rescission, and it follows that it could only be
accompanied by a final judgment of the court.
The judgment in case G. R. No. L-210706 did
not become final until March 27, 192, when our
decision on appeal was rendered. As that must
have been close to the end of the harvest and
milling of the sugar crop for the period to which
the first cause of action refers, we do not think
that the defendant should be required to pay
more than the amount of the stipulated rent
for the period, i. e., the sum of P8,000 with
interest rent for that period, i. e., the sum of
P8,000 with interest. (Lerma vs. De la Cruz, 7
Phil., 581.)
The action for terminating the lease was
brought under article 1124 of the Civil Code, an
it may, perhaps, he said that properly speaking,
the subject matter of the action was a
resolution of the contract an not a rescission.
That may be true, but it is a distinction without
a difference; in their case a judicial declaration
would be necessary for the cancellation of the
contract in the absence of a special agreement.
Very little need be said in regard to the third
cause of action. It relates to a period
subsequent to the complete termination of the
lease by final judicial order. The defendant had
then no right whatever to the possession of the
land or to the fruits thereof, and in removing
the fruits, he acted in bad faith. This being the
case, he must pay for the fruits received by
him, less the necessary expenses of production.
(Arts. 455 and 453 of the Civil Code.) As his bad
faith commence long before the fruits in
question were produced, he is not entitled to
any part of the net proceeds of the crop. The
evidence shows that the net ratoon crop of the
year 1924-1925 was 1,613.25 piculs of sugar,
and according to the defendant's own
statement, the market value of the sugar was in
the neighborhood of P11 per picul an the costs
of production about P4.50. The net result is
that under the third cause of action, the
defendant must pay to the plaintiff the sum of
P10,486.13 with interest.
For the reason stated, the judgment of the
court below is affirmed in regard to the second
cause of action. It is reversed as to the first and
third causes of action, and it is hereby ordered
that the plaintiff have and recover from the
defendant the sum of P18,486.13 with interest
at the rate of 6 per cent per annum from April
13, 1925, the date of the filing of the complaint.
No costs will be allowed. So ordered.
Avanceña, C. J., Johnson Street, Malcolm,
Villamor, Romualdez, an Villa-Real, JJ., concur.
ORDER AMENDING DECISION
December 10, 1928
OSTRAND, J.:
In the motion filed by the defendant on
November 14, 1928 our attention is called to a
mathematical error in that we, in discussing the
plaintiff's third cause of action, failed to take
into consideration the fact that one-half of the
gross ratoon crop produced on the land in
question in the agricultural year 1924-1925 was
ceded to the sugar central as compensation for
the milling of the cane and that the defendant
paid the expenses of the production of the total
or gross crop. Page 8 of the aforesaid decision
is therefore amended so as to read as follows:
Very little need be said in regard to the third
cause of action. It relates to a period
subsequent to complete termination of the
lease by final judicial order. The defendant had
then no right whatever to the possession of the
land or to the fruits thereof, and in removing
the fruits, he acted in bad faith. This being the
case, he must pay for the fruits received by
him, less the necessary expenses of production
(Arts. 455 and 453 of the Civil Code.) As his bad
faith commenced long before the fruits in
question were produced, he is not entitled to
any part of the net proceeds of the crop. The
evidence shows that the gross ratoon crop for
the year 1924-1925 was 3,226.50 piculs of
sugar, and according to the defendant's own
statement, the market value of the sugar was in
the neighborhood of P11 per picul and the cost
of production about P4.50. The defendant
received only one-half of the gross crop, the
other half going to the sugar central as
compensation for the milling of the cane, but
the defendant paid the cost of production both
of his share of the sugar and that of the sugar
central. The net result is that under the third
cause of action, the defendant must pay to the
plaintiff the sum of P3,226.50 with interest.
"For the reasons stated, the judgment of the
court below is affirmed in regard to the second
cause of action. It is reversed as to the first an
third causes of action, an it is hereby ordered
that the plaintiff have and recover from the
defendant the sum of P11,226.50 with interest
at the rate of 6 per cent per annum from April
13, 1925, the date of the filing of the complaint.
No costs will be allowed." So ordered.
G.R. No. L-32958            BLOSSOM VS MANILA
GAS
STATEMENT
In its complaint filed March 3, 1927, the
plaintiff alleges that on September 10, 1918, it
entered into a contract with the defendant in
which the plaintiff promised and undertook to
purchase and receive from the defendant and
the defendant agreed to sell and deliver to the
plaintiff, for a period of four years, three tons of
water gas tar per month from September to
January 1, 1919 and twenty tons per month
after January 1, 1919, for the remaining period
of the contract; one-half ton of coal gas tar a
month from September to January 1, 1919, and
six tons per month after January 1, 1919, for
the remainder of the contract, delivery to be
made at the plant of the defendant in the City
of Manila, without containers and at the price
of P65 per ton for each kind of gas tar, it being
agreed that this price should prevail only so
long as the raw materials — coal and crude oil
—used by the defendant in the manufacture of
gas should cost the defendant the same price
as that prevailing at the time of the contract,
and that in the event of an increase or decrease
in the cost of raw material there would be a
corresponding increase or decrease in the price
of the tar. That on January 31, 1919, this
contract was amended so that it should
continue to remain in force for a period of ten
years from January 1, 1919, and it was agreed
that the plaintiff should not be obliged to take
the qualities of the tars required during the
year 1919, but that it might purchase tars in
such quantities as it could use to advantage at
the stipulated price. That after the year 1919
the plaintiff would take at least the quantities
specified in the contract of September 10,
1918, to be taken from and after January 1,
1919, and that at its option it would have the
right to take any quantity of water gas tar in
excess of the minimum quantity specified in
that contract and up to the total amount of
output of that tar of defendant's plant and also
to take any quantity of coal gas tar in excess of
the minimum quantity specified in that contract
and up to 50 per cent of defendant's entire
output of coal gas tar, and that by giving the
defendant ninety days' notice, it would have
the right at its option to take the entire output
of defendant's coal gas tar, except such as it
might need for its own use in and about its
plant. That in consideration of this modification
of the contract of September 10, 1918, plaintiff
agreed to purchase from the defendant of
certain piece of land lying adjacent to its plant
at the price of P5 per square meter, the proof
of which is evidenced by Exhibit C. That
pursuant to Exhibit C, defendant sold and
conveyed the land to the plaintiff which in turn
executed a mortgage thereon to the defendant
for P17,140.20, to secure the payment of the
balance of the purchase price.
It is then alleged:
VIII. That about the last part of July, 1920 the
defendant herein, the Manila Gas Corporation
willfully, and deliberately breached its said
contract, Exhibit C, with the plaintiff by ceasing
to deliver any coal and water gas tar to it
thereunder solely because of the increased
price of its tar products and its desire to secure
better prices therefor than plaintiff was obliged
to pay to it, notwithstanding the frequent and
urgent demands made by the plaintiff upon it
to comply with its aforesaid contract by
continuing to deliver the coal and water gas tar
to the plaintiff thereunder, but the said
defendant flatly refused to make any deliveries
under said contract, and finally on November
23, 1923, the plaintiff was forced to commence
action against the defendant herein in the
Court of First Instance of Manila, being case No.
25352, of that court entitled 'Blossom & Co.,
plaintiff, vs. Manila Gas Corporation,
defendant,' to recover the damages which it
had up to that time suffered by reason of such
flagrant violation of said contract on the part of
the defendant herein, and to obtain the specific
performance of the said contract and after due
trial of that action, judgment was entered
therein in favor of the plaintiff herein and
against the said defendant, the Manila Gas
Corporation, for the sum of P26,119.08, as the
damages suffered by this plaintiff by the
defendant's breach of said contract from July,
1920, up to and including September, 1923,
with legal interest thereon from November 23,
1923, and for the costs but the court refused to
order the said defendant to resume the
delivery of the coal and water gas tar to the
plaintiff under said contract, but left the
plaintiff with its remedy for damages against
said defendant for the subsequent breaches of
said contract, which said decision, as shown by
the copy attached hereto as Exhibit G, and
made a part hereof, was affirmed by our
Supreme Court on March 3, 1926;
IX. That after the defendant had willfully and
deliberately violated its said contract as herein-
before alleged, and the plaintiff suffered great
damage by reason thereof, the plaintiff claimed
the right to off- set its damages against the
balance due from it to said defendant on
account of the purchase of said land from the
defendant, and immediately thereupon and
notwithstanding said defendant was justly
indebted to the plaintiff at that time as shown
by the judgment of the Court Exhibit G, in more
that four times the amount due to it from the
plaintiff, the said defendant caused to be
presented against the plaintiff a foreclosure
action, known as the Manila Gas
Corporation versus Blossom & Company, No.
24267, of the Court of First Instance of Manila,
and obtained judgment therein ordering that
Blossom & Company pay the last installment
and interest due on said land or else the land
and improvements placed thereon by the
plaintiff would be sold as provided by law in
such cases to satisfy the same, and the said
defendant proceeded with the sale of said
property under said judgment and did
everything in its power to sell the same for the
sole purpose of crushing and destroying the
plaintiff's business and thus rendering it
impossible for the plaintiff herein to continue
with its said contract in the event that said
defendant might in the future consider it more
profitable to resume performance of the same,
but fortunately the plaintiff was able to redeem
its property as well as to comply with its
contract and continued demanding that the
defendant performed its said contract and
deliver to it the coal and water gas tar required
thereby.
That the defendant made no deliveries under
its contract, Exhibit C, from July, 1920 to March
26, 1926, or until after the Supreme Court
affirmed the judgment of the lower court for
damages in the sum of P26, 119.08. 1
It is then alleged that:
. . . On March 26, 1926 the said defendant
offered to resume delivery to the plaintiff from
that date of the minimum monthly quantities of
tars stated in its contract ,and the plaintiff
believing that the said defendant was at least
going to try to act in good faith in the further
performance of its said contract, commenced
to accept deliveries of said tars from it, and at
once ascertained that the said defendant was
deliberately charging it prices much higher than
the contract price, and while the plaintiff
accepted deliveries of the minimum quantities
of tars stated in said contract up to and
including January, 1927, (although it had
demanded deliveries of larger quantities
thereunder, as hereinafter alleged) and paid
the increased prices demanded by the
defendant, in the belief that it was its duty to
minimize the damages as much as possible
which the defendant would be required to pay
to it by reason of its violation of said contract, it
has in all cases done so under protest and with
the express reservation of the right to demand
from the said defendant an adjustment of the
prices charged in violation of its contract, and
the right to the payment of the losses which it
had and would suffer by reason of its refusal to
make additional deliveries under said contract,
and it also has continuously demanded that the
said defendant furnish to it statements
supported by its invoices showing the cost
prices if its raw materials — coal and crude oil
— upon which the contract price of the tars in
question is fixed, which is the only way the
plaintiff has to calculate the true price of said
tars, but said defendant has and still refuses to
furnish such information, and will continue to
refuse to do so, unless ordered to furnish such
information to the plaintiff by the court, and
the plaintiff believes from the information
which it now has and so alleges that the said
defendant has overcharged it on the deliveries
of said tars mentioned in the sum of at least
P10,000, all in violation of the rights of the
plaintiff under its said contract with the
defendant.
That on January 31, 1926 and pursuant to
Exhibit C. plaintiff notified the defendant in
writing that commencing with the month of
August, 1926 it desired to take delivery of 50
per cent of defendant's coal tar production for
that month and that on November 1, 1926, it
desired to take the entire output of defendant's
coal gas tar, but that the defendant refused and
still refuses to make such deliveries unless
plaintiff would take all of its water gas tar
production with the desired quantity of coal gas
tar which refusal was a plain violation of the
contract. That on January 29, 1927, and in
accord with Exhibit C, plaintiff notified the
defendant in writing that within ninety days
after the initial delivery to it of its total coal gas
tar production or in February, 1927, it would
require 50 per cent of its total water gas tar
production and that in April 1927, it would
require the total output of the defendant of
both coal and water gas tars, and that it
refused to make either of such deliveries.
It is then alleged:
XIV. That as shown by the foregoing allegations
of this complaint, it is apparent that
notwithstanding the plaintiff in this case has at
all times faithfully performed all the terms and
conditions of said contract, Exhibit C, on its part
of be performed, and has at all times and is
now ready, able and willing to accept and pay
for the deliveries of said coal and water gas tars
required by said contract and the notices given
pursuant thereto, the said defendant, the
Manila Gas Corporation, does not intend to
comply with its said contract, Exhibit C, and
deliver to the plaintiff at the times and under
the terms and conditions stated therein the
quantities of coal and water gas tars required
by said contract, and the several notices given
pursuant thereto, and that it is useless for the
plaintiff to insist further upon its performance
of the said contract, and for that reason he only
feasible course for the plaintiff to pursue is to
ask the court for the rescission of said contract
and for the full damages which the plaintiff has
suffered from September, 1923, and will suffer
for the remainder of said contract by reason of
the defendant's failure and refusal to perform
the same, and the plaintiff has so notified the
said defendant.
That since September, 1923, by reason of the
bad faith of the defendant, the plaintiff has
been damaged in the sum of P300,000, for
which it prays a corresponding judgment, and
that the contract, Exhibit C, be rescinded and
declared void and without force and effect.
After the filing and overruling of its demurrer,
the defendant filed an answer in the nature of a
general and specific denial and on April 10,
1928, and upon stipulation of the parties, the
court appointed W. W. Larkin referee, "to take
the evidence and, upon completion of the trial,
to report his findings of law and fact to the
court."
July 18, 1928, the defendant filed an amended
answer in which it alleged as an affirmative
defense, first, that the complaint does not state
facts sufficient to constitute cause of action the
reason that a prior adjudication has been had
of all the issues involved in this action, and,
second, "that on or about the 16th day of June,
1925, in an action brought in the Court of First
Instance of the City on Manila, Philippine
Islands, before the Honorable Geo. R. Harvey,
Judge, by Blossom & Company, plaintiff, vs.
Manila Gas Corporation, defendant, being civil
case No. 25353, of said court, for the same
cause of action as that set fourth in the
complaint herein, said plaintiff recovered
judgment upon the merits thereof, against said
defendant decreeing a breach of the contract
sued upon herein, and awarding damages
therefor in the sum of P26,119.08 with legal
interest from November 23, 1923, and costs of
suit, which judgment was upon appeal affirmed
by the Supreme Court of the Philippine Islands,
in case G. R. No. 24777 of said court, on the 3d
day of March, 1926 and reported in volume 48
Philippines Reports at page 848," and it prays
that plaintiff's complaint be dismissed with
costs.
After the evidence was taken the referee made
an exhaustive report of sixty-pages in which he
found that the plaintiff was entitled to
P56,901.53 damages, with legal interest from
the date of the filing on the complaint, to which
both parties filed numerous exceptions
In its decision the court says:
Incidental references have been made to the
referee's report. It was admirably prepared.
Leaving aside the question of damages and the
facts upon which the referee assessed them,
the facts are not in dispute — at least not in
serious dispute. They appear in the
documentary evidence and this decision is
based upon documents introduced into
evidence by plaintiff. If I could have agreed with
the referee in respect to the question of law, I
should have approved his report in toto. If
defendant is liable for the damages accruing
from November 23, 1923, the date the first
complaint was filed, to April 1st, 1926, the date
of resumption of relations; and if defendant,
after such resumption of relations, again
violated the contract, the damages assessed by
the referee, are, to my way of thinking, as fair
as could be estimated. He went to tremendous
pains in figuring out the details upon which he
based his decision. Unfortunately, I cannot
agree with his legal conclusions and the report
is set aside except wherein specifically
approved.
It is unnecessary to resolve specifically the
many exceptions made by both partied to the
referee's report. It would take much time to do
so. Much time has already been spent in
preparing this decision. Since both parties have
informed me that in case of adverse
judgment ,and appeal would be taken, I desire
to conclude the case so that delay will be
avoided.
Let judgment be entered awarding damages to
plaintiff in the sum of P2,219.60, with costs.
From which plaintiff only appealed and assigns
twenty-four different errors, of which the
following are material to this opinion:
I. The trial court erred in holding that this suit in
so far as the damages from November, 1923, to
March 31, 1926, are concerned , is
res adjudicata.
II. The trial court erred in holding that the
defendant repudiated the contract in question
as a whole, and that the plaintiff when it
brought its first suit to collect damages had
already elected and consented to the
dissolution of the contract, and its choice once
made, being final, it was estopped to claim that
the contract was alive when that suit was
brought.
VII. The trial court erred in refusing to sustain
plaintiff's third exception to the legal
interpretation placed on the contract in this
case by the referee with reference to quantity
of tars and his conclusion with respect to the
terms thereof that:
"1. Plaintiff must take and defendant must
deliver either the minimum or maximum
quantity of water gas tar and not any quantity
from the minimum to the maximum and/or
"2. Plaintiff must take either the minimum and
any quantity up to fifty per cent of entire
output of coal gas tar.
"3. With ninety days' notice by plaintiff to
defendant the former must take and the latter
must deliver total output of both tars, except
such as might be needed by defendant for use
in and about its plants and not any quantity
from the minimum up to total output of both
tars." (See page 47, Referee's report.)
And in holding that the option contained in said
contract, taking into consideration the
purposes of both parties in entering into the
contract, was a claimed by defendant: all the
water gas tar and 50 per cent of the coal gas tar
upon immediate notice and all tars upon ninety
day's notice.
VIII. The trial court erred in refusing to sustain
plaintiff's fourth exception to the finding and
conclusion of the referee that from the
correspondence between the parties it was
apparent that plaintiff did not make a right use
of its option, and that the letter of June 25,
1926, and the subsequent demands, with
exception of the letter of July 31, 1926, were
not made in pursuance to the terms of the
contract, and that defendant had no liability in
refusing to comply therewith, and in allowing
plaintiff damages only for the failure of the
defendant to deliver quantities shown in
Exhibits Ref. 21 and 22. (See pages 51, 52,
Referee's report.)
IX. The trial court erred in finding and holding
that the demands of plaintiff for additional tars
under its contract with the defendant were
extravagant and not made in good faith, and
that when it wrote to defendant that it desired
maximum quantities of coal gas tars and only
minimum of water gas tars, but with the
reservation of going back to minimum
quantities of both at any time it chose, it
announced its intention f breaching the
contract, and defendant was under no
obligation to deliver maximum quantities of
either tars, and since this was the efficient
cause of the failure of defendant to deliver or
plaintiff to accept tars, the blame is attribute to
plaintiff, and it cannot recover for a rescission.
XXIII. The trial court erred in refusing to sustain
plaintiff's seventeenth exception to the finding
and conclusion of the referee that the plaintiff
is entitled to recover from the defendant only
the following sums:
with interest, and in not awarding to the
plaintiff as damages in this case the sum of
P319,253.40, with legal interest thereon from
the date of filing the complaint in this case, in
the manner and form computed but it, and in
awarding damages to the plaintiff for the sum
of only P2,219.60. with costs.
JOHNS, J.:
In this action plaintiff seeks to recover damages
from the defendant which it claims to have
sustained after September, 1923, arising from,
and growing out of, its original contract of
September 10, 1918, as modified on January 1,
1919, to continue for a period of ten years from
that date.
In paragraph VIII of its complaint, plaintiff
alleges that about the last part of July, 1920,
the defendant "willfully and deliberately
breached its said contract," and that it "flatly
refused to make any deliveries under said
contract, and finally on November 23, 1923," it
was forced to commence action in the Court of
First Instance against the defendant known as
case No. 25352, to recover the damages which
it had then sustained by reason of such flagrant
violation of said contract on the part of the
defendant, in which judgment was rendered in
favor of the plaintiff and against the defendant
for P26,1119.08, as damages suffered by this
plaintiff by the defendant's breach of said
contract from July 1920, up to and including
September, 1923, with legal interest thereon
from November 23, 1923, and for the costs," in
which the court refused to order the defendant
to resume the delivery of the coal and water
gas tar to the plaintiff, in accord with said
contract, but left it with its remedy for damages
against the defendant for any subsequent
breaches of the contract. A copy of that
judgment, which was later affirmed by this
court, is attached to, marked Exhibit G, and
made a part of, the complaint in this action.
In their respective briefs, opposing counsel
have much to say about the purpose and intent
of the judgment, and it is vigorously asserted
that it was never intended that it should be or
become a bar to another action by the plaintiff
to recover any damages it may have sustained
after September, 1923, during the remainder of
the ten-year period of that contract. Be that as
it may, it must be conceded that the question
as to what would be the legal force and effect
of that judgment in that case was never
presented to, or decided by, the lower court or
this court. In the very nature of things, neither
court in that case would have the power to
pass upon or decided the legal force and effect
of its own judgment, for the simple reason that
it would be premature and outside of the issues
of any pleading, and could not be raised or
presented until after the judgment became
final and then only by an appropriate plea, as in
this case.
Plaintiff specifically alleges that the defendant
willfully and deliverately breached the contract
and "flatly refused to make any deliveries under
said contract," by reason of. which it was
forced to and commenced its former action in
which it was awarded P26,119.08 damages
against the defendant by reason of its breach of
the contract from July, 1920, to September,
1923.
In the final analysis, plaintiff in this action seeks
to recover damages growing out of, and arising
from, other and different breaches of that same
contract after November, 1923, for the
remainder of the ten-year period, and the
question is thus squarely presented as to
whether the rendition of the former judgment
is a bar to the right of the plaintiff to recover
damages from and after September, 1923,
arising from, and growing out of, breaches of
the original contract of September 10, 1918, as
modified on January 1, 1919. That is to say,
whether the plaintiff, in a former action, having
recovered judgment for the damages which it
sustained by reason of a breach of its contract
by the defendant up to September, 1923, can
now in this action recover damages it may have
sustained after September, 1923, arising from,
and growing out of, a breach of the same
contract, upon and for which it recovered its
judgment in the former action.
In the former action in which the judgment was
rendered, it is alleged in the compliant:
"7. That about the last part of July or the first
part of August, 1920, the Manila Gas
Corporation, the defendant herein, without any
cause ceased delivering coal and water gas tar
to the plaintiff herein; and that from that time
up to the present date, the plaintiff
corporation, Blossom & Company, has
frequently and urgently demanded of the
defendant, the Manila Gas Corporation, that it
comply with its aforesaid contract Exhibit A by
continuing to deliver coal and water gas tar to
this plaintiff — but that the said defendant has
refused and still refuses, to deliver to the
plaintiff any coal and water gas tar whatsoever
under the said contract Exhibit A, since the said
month of July 1920.
"9. That owing to the bad faith of the said
Manila Gas Corporation, defendant herein, in
not living up to its said contract Exhibit A, made
with this plaintiff, and refusing now to carry out
the terms of the same, be delivering to this
plaintiff the coal and water gas tar mentioned
in the said Exhibit A, has caused to this plaintiff
great and irreparable damages amounting to
the sum total of one hundred twenty- four
thousand eight hundred forty eight pesos and
seventy centavos (P124,848,70);and that the
said defendant corporation has refused, and
still refuses, to pay to this plaintiff the whole or
any part of the aforesaid sum.
"10. That the said contract Exhibit A, was to be
in force until January 1, 1929, that is to say ten
(10) years counted from January 1, 1929; and
that unless the defendant again commence to
furnish and supply this plaintiff with coal and
water gas tar, as provided for in the said
contract Exhibit A, the damages already
suffered by this plaintiff will continually
increase and become larger and larger in the
course of years preceding the termination of
the said contract on January 1, 1929."
In that action plaintiff prays for judgment
against the defendant:
"(a) That upon trial of this this cause judgment
be rendered in favor of the plaintiff and against
the defendant for the sum of P124,8484.70),
with legal interest thereon from November 23,
1923;
"(b) That the court specifically order the
defendant to resume the delivery of the coal
and water gas tar to the plaintiff under the
terms of the said contract Exhibit A of this
complaint."
In the final analysis, plaintiff must stand or fall
on its own pleadings, and tested by that rule it
must be admitted that the plaintiff's original
cause of action, in which it recovered judgment
for damages, was founded on the ten-year
contract, and that the damages which it then
recovered were recovered for a breach of that
contract.
Both actions are founded on one and the same
contract. By the terms of the original contract
of September 10, 1018, the defendant was to
sell and the plaintiff was to purchase three tons
of water gas tar per month form September to
January 1, 1919, and twenty tons of water gas
tar per month after January 1, 1919, one-half
ton of coal gas tar per month from September
to January 1, 1919, and six tons of coal gas tar
per month after January 1, 1919. That from and
after January 1, 1919, plaintiff would take at
least the quantities specified in the contract of
September 10, 1918, and that at its option, it
would have the right to take the total output of
water gas tar of defendant's plant and 50 per
cent of the gross output of its coal gas tar, and
upon giving ninety days' notice, it would have
the right to the entire output of coal gas tar,
except such as the defendant might need for its
own use. That is to say, the contract provided
for the delivery to the plaintiff from month to
month of the specified amounts of the different
tars as ordered and requested by the plaintiff.
In other words, under plaintiff's own theory,
the defendant was to make deliveries from
month to month of the tars during the period
of ten years, and it is alleged in both complaints
that the defendant broke its contract, and in
bad faith refused to make any more deliveries.
In 34 Corpus Juris, p. 839, it is said:
As a general rule a contract to do several things
at several times in its nature, so as to authorize
successive actions; and a judgment recovered
for a single breach of a continuing contract or
covenant is no bar to a suit for a subsequent
breach thereof. But where the covenant or
contract is entire, and the breach total, there
can be only one action, and plaintiff must
therein recover all his damages.
In the case of Rhoelm vs, Horst, 178 U. U., 1; 44
Law. ed., 953, that court said:
An unqualified and positive refusal to perform a
contract, though the performance thereof is
not yet due, may, if the renunciation goes to
the whole contract, be treated as a complete
breach which will entitle the injured party to
bring his action at once.
15 Ruling Case Law, 966, 967, sec. 441 says:
Similarly if there is a breach by the vendor of a
contract for the sale of goods to be delivered
and paid for in installments, and the vendee
maintains an action therefor and recovers
damages, he cannot maintain a subsequent
action to recover for the failure to deliver later
installments.
In Pakas vs. Hollingshead, 184 N. Y., 211; 77 N.
E., 40; 3 L. R. A. (N. S.), 1024, the syllabus says:
Upon refusal, by the seller, after partial
performance, longer to comply with his
contract to sell and deliver a quantity of articles
in installments the buyer cannot keep the
contract in force and maintain actions for
breaches as they occur but must recover all his
damages in one suit.
And on page 1044 of its opinion, the court say:
The learned counsel for the plaintiff contends
that the former judgment did not constitute a
bar to the present action but that the plaintiff
had the right to elect to waive or disregard the
breach, keep the contract in force, and
maintain successive actions for time to time as
the installments of goods were to be delivered,
however numerous these actions might be. It is
said that this contention is supported in reason
and justice, and has the sanction of authority at
least in other jurisdictions. We do not think that
the contention can be maintained. There is not
as it seems to us any judicial authority in this
state that gives it any substantial support. On
the contrary, we think that the cases, so far as
we have been able to examine them, are all the
other way, and are to the effect that, inasmuch
as there was a total breach of the contract by
the defendant's refusal to deliver, the plaintiff
cannot split up his demand and maintain
successive actions, but must either recover all
his damages in the first suit or wait until the
contract matured or the time for the delivery of
all the goods had arrived. In other words, there
can be but one action for damages for a total
breach of an entire contract to deliver goods,
and the fact that they were to be delivered in
installment from time to time does not change
the general rule.
The case of L. Bucki & Son Lumber Co. vs.
Atlantic Lumber Co. (109 Federal, 411), of the
United States Circuit Court of Appeals for the
Fifth Circuit, is very similar.
The syllabus says:
1. CONTRACTS — CONSTRUCTION —ENTIRE
CONTRACT. —A contract was made for the sale
of a large quantity of logs to be delivered in
monthly installments during a period of eight
years, payments to be made also in
installments at times having relation tot he
deliveries. It contained stipulations as to such
payments, and guaranties as to the average size
of the logs to be delivered in each
installment. Held, that it was an entire contract,
and not a number of separate and independent
agreements for the sale of the quantity to be
delivered and paid for each month, although
there might be breaches of the minor
stipulations and warranties with reference
thereto which would warrant suits without a
termination of the contract.
2. JUDGMENTS — MATTERS CONCLUDED —
ACTION FOR BREACH OF INDIVISIBLE
CONTRACT. — The seller declared the contract
terminated for alleged breaches by the
purchaser, and brought suit for general and
special damages the latter covering payments
due for installments of logs delivered. By way of
set-off and recoupment against this demand,
the purchaser pleaded breaches of the
warranty as to the size of the logs delivered
during the months for which payment had not
been made. Held, that the judgment in such
action was conclusive as to all claims or
demands or either party against the other
growing out of the entire contract, and was a
bar to a subsequent suit brought by the
purchaser to recover for other breaches of the
same warranty in relation to deliveries made in
previous months.
On page 415 of the opinion, the court says:
When the contract was ended, the claims of
each party for alleged breaches and damages
therefor constituted an indivisible demand; and
when the same, or any part of the same, was
pleaded, litigation had, and final judgment
rendered, such suit and judgment constitute a
bar to subsequent demands which were or
might have been litigated (Baird vs. U. S., 96 U.
S., 430; 24 L. ed., 703.)
In Watts vs. Weston (238 Federal, 149), Circuit
Court of Appeals, Second Circuit, the syllabus
says:
1. JUDGMENTS — 593 — JUDGMENT AS BAR —
MATTERS CONCLUDED. — Where a continuing
contract was terminated by the absolute
refusal of the party whose action was necessary
to further perform, a claim for damages on
account of the breach constituted as indivisible
demand, and when the same or any part of the
same was pleaded, litigated, and final judgment
rendered, such suit and judgment constitute a
bar to subsequent demands which were or
might have been litigated therein.
And on page 150 of the opinion, the court says:
It is enough to show the lack of merit in the
present contention to point out as an
inexorable rule of law that, when Kneval's
contract was discharged by his total
repudiation thereof, Watt's claims for breaches
and damages therefor constituted an indivisible
demand, and when the same, or any part of the
same, was pleaded, litigation had and final
judgment rendered, such suit and judgment
constitute a bar to subsequent demands which
were or might have been litigated." (Bucki, etc.,
Co. vs. Atlantic, etc., Co., 109 Fed. at page 415;
48 C. C. A., 459; Cf. Landon vs. Bulkley, 95 Fed.,
344; 337 C. C. A., 96.)
The rule is usually applied in cases of alleged or
supposed successive breaches, and
consequently severable demands for damages;
but if the contract has been discharged by
breach, if suit for damages is all that is left, the
rule is applicable, and every demand arising
form that contract and possessed by any given
plaintiff must be presented (at least as against
any given defendant) in one action; what the
plaintiff does not advance he foregoes by
conclusive presumption.
Inn Abbott vs. 76 Land and Water Co. (118 Pac.,
425; 161 Cal., 42), at page 428, the court said:
In Fish vs. Folley, 6 Hill (N. Y.), 54, it was held, in
accord with the rule we have discussed, that,
where the defendant had covenanted that
plaintiff should have a continual supply of
water for his mill from a dam, and subsequently
totally failed to perform for nine years, and
plaintiff brought an action for the breach and
recovered damages sustained by him to that
time, the judgment was a bar to a second
action arising from subsequent failure to
perform, on the theory that, although he
covenant was a continuing one in one sense, it
was an entire contract, and a total breach put
an end to it, and gave plaintiff the right to sue
for an equivalent in damages.
In such a case it is no warrant for a second
action that the party may not be able to
actually prove in the first action all the items of
the demand, or that all the damage may not
then have been actually suffered. He is bound
to prove in the first action not only such
damages as has been actually suffered, but also
such prospective damage by reason of the
breach as he may be legally entitled to, for the
judgment he recovers in such action will be a
conclusive adjudication as to the total damage
on account of the breach.
It will thus be seen that, where there is a
complete and total breach of a continuous
contract for a term of years, the recovery of a
judgment for damages by reason of the breach
is a bar to another action on the same contract
for and on account of the continuous breach.
In the final analysis is, there is no real dispute
about any material fact, and the important and
decisive question is the legal construction of
the pleadings in the former case and in this
case, and of the contract between the plaintiff
and the defendant of January 1, 1920.
The complaint on the former case specifically
alleges that the defendant "has refused and still
refuses, to deliver to the plaintiff any coal and
water gas tar whatsoever under the said
contract Exhibit A, since the said month of July,
1920." " That owing to the bad faith of the said
Manila Gas Corporation, defendant herein, in
not living up to its said contract Exhibit A, made
with this plaintiff, and refusing now to carry out
the terms of the same." That is a specific
allegation not only a breach of the contract
since the month of July, 1920, but of the faith
of the defendant in its continuous refusal to
make deliveries of any coal and water gas tar.
That amended complaint was filed on July 11,
1924, or four years after the alleged bad faith in
breaking the contract.
Having recovered damages against it, covering
a period of four years, upon the theory that the
defendant broke the contract, and in bad faith
refused to make deliveries of either of the tars,
how can the plaintiff now claim and assert that
the contract is still in fierce and effect? In the
instant case the plaintiff alleges and relies upon
the ten year contract on January 11, 1920,
which in bad faith was broken by the
defendant. If the contract was then broken,
how can it be enforced in this action?
It is admitted that the defendant never made
any deliveries of any tar from July, 1920, to
April, 1936. Also that it made nine deliveries to
plaintiff of the minimum quantities of coal and
water gas tar from April 7, 1926, to January 5,
1927.
Plaintiff contends that such deliveries were
made under and in continuation of the old
contract.
March 26, 1926, after the decision of this court
affirming the judgment in the original action,
plaintiff wrote the defendant:
. . . It is our desire to take deliveries of at least
the minimum quantities set forth therein and
shall appreciate to have you advise us how
soon you will be in a position to make
deliveries; . . .
. . . In view of the fact that you have only
effected settlement up to November 23, 1923,
please inform us what adjustment you are
willing to make for the period of time that has
since elapsed without your complying with the
contract.
In response to which on March 31, 1926, the
defendant wrote this letter to the plaintiff:
In reply to your letter of March 26th, 1926, in
regard to tar, we beg to advise you that we are
prepared to furnish the minimum quantities of
coal and water gas tars as per your letter, viz:
twenty tons of water gas tar and six tons of coal
gas tar. The price figured on present costs of
raw materials is P39.01 ) Thirty-nine and
01/100 Pesos) per ton of water gas and P33.59
(Thirty-three and 59/100 Pesos) per ton of coal
tar.
We shall expect you to take delivery and pay
for the above amount of tars at our factory on
or before April 7th prox.
Thereafter we shall be ready to furnish equal
amounts on the first of each month. Kindly
make your arrangements accordingly.
On January 29, 1927, the plaintiff wrote the
defendant that:
On July 31st last, we made demand upon you,
under the terms of our tar contract for 50 per
cent of your total coal tar production for that
month and also served notice on you that
beginning 90 days from August 1st we would
require you total output of coal tar monthly;
this in addition to the 20 tons of water gas tar
provided for in the contract to be taken
monthly.
We are here again on your for your total output
of coal tar immediately and the regular
minimum monthly quantity of water gas tar. In
this connection we desire to advise you that
within 90 days of your initial delivery to us of
your total coal tar output we will require 50 per
cent of your total water gas tar output, and,
further, that two months thereafter we will
require your total output of both tars.
February 2, 1927, the defendant wrote the
plaintiff:
Replying to your letter of Jan. 29, we would sat
that we have already returned to you the check
enclosed there with. As we have repeatedly
informed you we disagree with you as to the
construction of your contract and insist that
you take the whole output of both tars if you
wish to secure the whole of the coal tar.
With regard to your threat of further suits we
presume that you will act as advised. If you
make it necessary we shall do the
same.lawphil.net
From an analysis of these letters it clearly
appears that the plaintiff then sought to reply
upon and enforce the contract of January 1,
1920, and that defendant denied plaintiff's
construction of the contract, and insisted "that
you take the whole output of both tars if you
wish to secure the whole of the coal tar."
February 28, 1927, the plaintiff wrote the
defendant:
In view of your numerous violations of and
repeated refusal and failure to comply with the
terms and provisions of our contract dated
January 30-31, 1919, for the delivery to us of
water and coal gas tars, etc., we will commence
action," which it did.
The record tends to show that tars which the
defendant delivered after April 7, 1926, were
not delivered under the old contract of January
1, 1920, and that at all times since July 1920,
the defendant has consistently refused to make
any deliveries of any tars under that contract.
The referee found as a fact that plaintiff was
entitled to P2,219.60 for and on account of
overcharges which the defendant made for the
deliveries of fifty-four tons of coal gas tar, and
one hundred eighty tons of water gas tar after
April, 1926, and upon that point the lower says:
The fourth charge that plaintiff makes is
meritorious. The price was to be fixed on the
basis of raw materials. The charge for deliveries
during 1926 were too high. In this I agree with
entirely with the referee and adopt his findings
of fact and calculations. (See Referee's report,
p. 83) The referee awarded for overcharge
during the period aforesaid, the sum of
P2,219.60. The defendant was trying to
discharge plaintiff from buying tars and made
the price of raw material appear as high as
possible.
That finding is sustained upon the theory that
the defendant broke its contract which it made
with the plaintiff for the sale and delivery of the
tars on and after April, 1926.
After careful study of the many important
questions presented on this appeal in the
exhaustive brief of the appellant, we are clearly
of the opinion that, as found by the lower
court, the plea of res judicata must be
sustained. The judgment of the lower court is
affirmed.
It is so ordered, with costs against the
appellant.
G.R. No. 143788 DANFOSS VS
CONTINENTAL CEMENT
This is a petition for review on certiorari under
Rule 45 of the 1997 Rules on Civil Procedure of
the February 11, 2000 decision 1 of the Court of
Appeals in CA-G.R. No. SP-55645, and its
resolution dated June 7, 2000 denying
petitioner’s motion for reconsideration.
The antecedents show that on November 5,
1998, respondent Continental Cement
Corporation (CCC) filed a complaint for
damages against petitioner DANFOSS and
Mechatronics Instruments and Controls, Inc.
(MINCI) before the Regional Trial Court of
Quezon City, Branch 80, alleging that:
6. On 1 September 1997, Plaintiff CCC
purchased from defendant MINCI two (2) unit
132 KW Danfoss Brand Frequency
Converter/Inverter for use in the Finish Mill of
its Cement Plant located in Barrio Bigte,
Norzagaray, Bulacan. The said purchase is
covered by a Purchase [Order] (PO) No.
36625….
6.1 Under the terms and conditions of the
purchase order, the delivery of the two (2) unit
Frequency Converter are to be delivered within
eight (8) to ten (10) weeks from the opening of
the letter of credit;
7. Defendant MINCI, immediately relayed the
purchase order of plaintiff CCC to the other
defendant DANFOSS, represented by Messrs.
Klaus Stove and Hans Vigaard, who in turn
forwarded the same to their Asian Regional
Office in Singapore and Head Office in Denmark
for the shipment of the orders to the
Philippines.
7.1 Defendant DANFOSS’ commitment to
deliver the two (2) unit Danfoss Brand
Frequency Converter/Inverter to plaintiff CCC
was relayed by defendant MINCI to CCC upon
the assurance of Messrs. Stove and Vigaard of
DANFOSS.
8. On September 1997, plaintiff CCC received
the pro-forma invoice of defendant MINCI
through fax transmission dated 2 September
1998, indicating the mode of payment through
irrevocable letter of credit in favor of Danfoss
Industries Pte. Ltd. …
8.1 Plaintiff CCC executed and opened a letter
of credit under LC No. 970884 in favor of
DANFOSS INDUSTRIES PTE. LTD., with address
at 6 Jalan Pesawat, Singapore 619364, which is
the Asian Regional Office of defendant
DANFOSS …
9. Defendant MINCI informed plaintiff CCC
through fax transmission dated 17 September
1997, that the two (2) unit Frequency
Converter/Inverter are ready for shipment, and
at the same time requested for the
amendments of the letter of credit changing
the port of origin/loading from Singapore to
Denmark….
9.1 In compliance, plaintiff CCC amended the
letter of credit changing the port of origin from
Singapore to Denmark….
10. On 6 November 1997, defendant MINCI
informed plaintiff CCC that Danfoss Industries
Pte. Ltd. was still checking the status of the
shipment of the two (2) unit Frequency
Converter/Inverter with Danfoss Denmark.
10.1 In reply, plaintiff CCC through a letter
dated 7 November 1997, reiterated its demand
that every delay in the shipment of the two (2)
unit Frequency Converter/Inverter will cause
substantial losses in its operations and
requested for the early work out and the
immediate shipment of the frequency
converter to avoid further loss to the
company….
11. However, on 9 November 1997, defendant
DANFOSS, informed the other defendant MINCI
through fax transmission, copy furnished
plaintiff CCC, that the reason why DANFOSS has
delivery problems was that some of the
supplied components for the new VLT 5000
series did not meet the agreed quality
standard. That means that their factory was
canvassing for another supplier. And at that
moment, there was no clear message when
normal production will resume….
12. Due to this information received, plaintiff
CCC surmised that defendants MINCI and
DANFOSS could not be able to deliver the two
(2) unit Frequency Converter within the
maximum period of ten (10) weeks period from
the opening of the Letter of Credit, as one of
the conditions in the Purchase Order dated 1
September 1997.
12.1 Thereafter, no definite commitment was
received by plaintiff CCC from defendants
MINCI and DANFOSS for the delivery of the two
(2) unit Frequency Converter.
13. By reason of the delay of the defendants
MINCI and DANFOSS to deliver the two (2) unit
Frequency Converter/Inverter under PO No.
36625, plaintiff CCC, through its Purchasing
Manager, informed defendant MINCI in a letter
dated 13 November 1997, of the plaintiff’s
intention to cancel the said order….
13.1 As a consequence thereof, plaintiff CCC
has suffered an actual substantial production
losses in the amount of Eight Million Sixty-four
Thousand Pesos (P8,064,000.00) due to the
time lost and delay in the delivery of the said
two (2) unit Frequency Converter/Inverter.
Likewise, plaintiff CCC was compelled to look
for another supplier.
On February 17, 1999, petitioner DANFOSS filed
a motion to dismiss the complaint on the
ground that it did not state a cause of action:
xxx xxx xxx
The above allegations of the complaint clearly
establish the following key constitutive facts:
1. Defendant’s period of delivery is from 8 to 10
weeks from the opening of the letter of credit
on September 9, 1997 or until November 19,
1997.
2. Defendant Danfoss, although having
problems with its supplier during the period
prior to defendant’s cancellation, nevertheless,
plaintiff never alleged that Danfoss Denmark
cannot perform its obligation to deliver by the
10th week or on November 20, 1997.
Admittedly, plaintiff only surmised that
defendant Danfoss could not deliver.
3. Before the period for delivery has expired on
November 19, 1997, the plaintiff cancelled its
order on November 13, 1997. The cancellation
took place seven (7) days before the expiry of
the defendant’s obligation to deliver on
November 19, 1997.
4. Neither plaintiff nor defendant Danfoss
changed the date of delivery, what plaintiff
changed in the letter of credit was only the port
of origin/loading from Singapore to Denmark.
The period of delivery as stipulated in the pro
forma invoice issued by defendant MINCI
remained intact, that is for a period of 6 to 10
weeks from the opening of the letter of credit
on September 9, 1997 or until November 19,
1997 was still in force when the plaintiff
cancelled its order on November 13, 1997.
Defendant Danfoss has not incurred in delay
and has 7 days more within which to make
delivery. Plaintiff, having cancelled the order on
November 13, 1997 before the expiry of
defendant Danfoss’ delivery commitment,
defendant Danfoss’s principal could not have
been in default.
5. Plaintiff never made an extrajudicial demand
for the delivery of two (2) units Frequency
Converter on its due date. On the contrary, as
above alleged, plaintiff cancelled its order on
November 13, 1997.
6. Plaintiff’s claim for damages could not have
accrued until after defendant incurred in delay.
The above allegations neither prove any right of
the plaintiffs arising from the transactions nor a
violation of such right. It is submitted that this
Honorable Court based on the complaint,
cannot render a valid judgment against the
defendant Danfoss. The plaintiff’s cause of
action against Danfoss or plaintiff’s right to
demand delivery cannot arise earlier than
November 19, 1997, which is the last day for
the defendant Danfoss’s principal (Danfoss
Denmark) to deliver the two (2) units
Frequency Converter. As admitted by the
plaintiff, it cancelled its order on November 13,
1997, or six (6) days before the expiry of the
defendant’s obligation to deliver. Indeed,
defendant Danfoss’s obligation to deliver is not
yet demandable. The period of 8 to 10 weeks
for the delivery of plaintiff’s purchase order of
two (2) units Frequency Converter was
established for the benefit of both the plaintiff
and the defendant Danfoss. As such, plaintiff
cannot demand delivery before the period
stipulated….
From the allegations of the complaint, there is
also no clear and categorical demand for the
fulfillment of the plaintiff’s obligation to deliver
by the 10th week or on November 19, 1997.
WHEREFORE, it is respectfully prayed of this
Honorable Court that the Complaint be
dismissed for failure to state a cause of action.3
The court a quo denied the motion to dismiss
in its order4 dated May 28, 1999, holding that:
xxx xxx xxx
In the Court’s opinion, the issue of whether or
not the defendants incur delay in the delivery
of the equipment in question within the period
stipulated is a debatable question which
necessitates actual trial on the merits where
the parties have to adduce evidence in support
of their respective stance.
While the defendants contend that the
stipulated period of delivery had not lapsed yet
when the plaintiff cancelled its order of the two
equipments in question as the cancellation took
place seven (7) days before the expiry date of
the defendants’ obligation to deliver, the
plaintiff’s position is that the acts of the
defendants had made compliance with their
obligation to deliver within the period
stipulated, impossible, hence, there was no
need for a demand as the law provides that
"when demand would be useless, as when the
obligor has rendered it beyond his power to
perform." The plaintiff’s contention if properly
and strongly supported by evidence during the
hearing of the merits of the case may well
negates (sic) the defendant’s contrary stand.
As to the argument of the defendant MINCI
that it cannot be held liable jointly with the
defendant Danfoss due to the fact that it was
merely an "agent" of Danfoss, the Court finds
the same a debatable issue considering the
stand of plaintiff that the defendant MINCI
dealt with the former not as an agent but also
as a principal. The issue at hand necessitates
the presentation of evidence which has to be
done during the hearing on the merits of the
case where the issue of damages incurred by
either of the parties may well be taken up and
judgment be rendered after presentation of
evidence by the parties.
WHEREFORE, premises considered, the two
motions to dismiss, interposed separately by
the defendants as earlier stated, are both
denied.
SO ORDERED.5
Danfoss filed a motion for reconsideration of
the order but it was denied. On appeal to the
Court of Appeals, the latter also denied
Danfoss’ petition for lack of merit. The CA
likewise denied petitioner’s motion for
reconsideration, hence, this appeal.
The only issue for our consideration is whether
or not the CA erred in affirming the denial by
the court a quo of petitioner’s motion to
dismiss the complaint for damages on the
ground that it failed to state a cause of action.
Section 1 (g), Rule 16 of the 1997 Revised Rules
on Civil Procedure provides that:
Section 1. Grounds – Within the time for but
before filing the answer to the complaint or
pleading asserting a claim, a motion to dismiss
may be made on any of the following grounds:
xxx xxx xxx
(g) That the pleading asserting the claim states
no cause of action;
A cause of action is defined under Section 2,
Rule 2 of the same Rules as:
Sec. 2. Cause of action, defined. – A cause of
action is the act or omission by which a party
violates a right of another.
It is the delict or wrongful act or omission
committed by the defendant in violation of the
primary right of the plaintiff.6
In order to sustain a dismissal on the ground of
lack of cause of action, the insufficiency must
appear on the face of the complaint. And the
test of the sufficiency of the facts alleged in the
complaint to constitute a cause of action is
whether or not, admitting the facts alleged, the
court can render a valid judgment thereon in
accordance with the prayer of the complaint.
For this purpose, the motion to dismiss must
hypothetically admit the truth of the facts
alleged in the complaint.7
After a careful perusal of the allegations in
respondent’s complaint for damages against
petitioner, we rule that the same failed to state
a cause of action. When respondent sued
petitioner for damages, petitioner had not
violated any right of respondent from which a
cause of action had arisen. Respondent
only surmised that petitioner would not be able
to deliver the two units frequency
converter/inverter on the date agreed upon by
them. Based on this apprehension, it cancelled
its order six days prior to the agreed date of
delivery. How could respondent hold petitioner
liable for damages (1) when petitioner had not
yet breached its obligation to deliver the goods
and (2) after respondent made it impossible for
petitioner to deliver them by cancelling its
order even before the agreed delivery date?
The trial court erred in ruling that the issue of
whether or not the defendants incurred delay
in the delivery of the equipment within the
period stipulated was a debatable question. It
said that trial on the merits was necessary and
the parties had to adduce evidence in support
of their respective positions.8 But what was
there to argue about when, based on the
allegations of the complaint, petitioner was not
yet due to deliver the two units frequency
converter/inverter when respondent cancelled
its order? It still had six days within which to
comply with its obligation. The court a
quo should not have denied petitioner’s motion
to dismiss the complaint (for its failure to state
a cause of action) when, on its face, it was clear
that petitioner had not yet reneged on its
obligation to deliver the frequency
converter/inverter on the date mutually agreed
upon by the parties. Moreover, the obligation
itself was negated by no less than respondent’s
own act of cancelling its order even before the
prestation became due and demandable.
Where therefore was the breach? Where was
the damage caused by petitioner? There was
none.
Consequently, it was wrong for the CA to affirm
the order of the trial court denying petitioner’s
motion to dismiss the complaint for its failure
to state a cause of action.
The principle of anticipatory breach enunciated
in Blossom & Company, Inc. v. Manila Gas
Corporation  9 does not apply here. In that case,
Blossom & Company, Inc. entered into a
contract with Manila Gas Corporation for the
sale and delivery of water gas and coal gas tar
at stipulated prices for a period of four years.
On the second year of the contract, Manila Gas
willfully and deliberately refused to deliver any
coal and water gas tar to Blossom and
Company, Inc. because it was asking for a
higher price than what had been previously
stipulated by them. The price of its tar products
had gone up. We held that:
… even if the contract is divisible in its
performance and the future periodic deliveries
are not yet due, if the obligor has already
manifested his refusal to comply with his future
periodic obligations, "the contract is entire and
the breach total," hence, there can only be one
action for damages.10
Thus, the principle contemplates future
periodic deliveries and a willful refusal to
comply therewith. Here, the obligation was
single and indivisible – to deliver two units of
frequency converter/inverter by November 19,
1997. The records do not show that petitioner
refused to deliver the goods on the date agreed
upon. On the contrary, petitioner exerted
efforts to make good its obligation by looking
for other suppliers who could provide it the
parts needed to make timely delivery of the
frequency converter/inverter ordered by
respondent.
Furthermore, respondent’s complaint suffered
from another fatal infirmity. It was premature.
The obligation of petitioner to respondent was
not yet due and demandable at the time the
latter filed the complaint. The alleged violation
of respondent’s right being no more than mere
speculation, there was no need to call for
judicial intervention.
The premature invocation of the court’s
intervention was fatal to respondent’s cause of
action.11 Hence, the dismissal of respondent’s
complaint was in order.
In sum, since respondent’s fear that
petitioner might not be able to deliver the
frequency converter/inverter on time was not
the cause of action referred to by the Rules and
jurisprudence, the motion to dismiss the
respondent’s complaint for damages for lack of
cause of action should have been granted by
the trial court. In addition, the dismissal of the
complaint was warranted on the ground of
prematurity.
WHEREFORE, we hereby GRANT the petition.
The assailed decision of the CA dated February
11, 2000 and its resolution dated June 7, 2000
are REVERSED and SET ASIDE. Civil Case No. Q-
98-35997 pending before the Regional Trial
Court of Quezon City, Branch 80, is
hereby DISMISSED.
SO ORDERED.
G.R. No. 133876 BANK OF AMERICA vs.
AMERICAN REALTY
Does a mortgage-creditor waive its remedy to
foreclose the real estate mortgage constituted
over a third party mortgagor's property
situated in the Philippines by filing an action for
the collection of the principal loan before
foreign courts?
Sought to be reversed in the instant petition for
review on certiorari under Rule 45 of the Rules
of Court are the decision 1 of public respondent
Court of Appeals in CA G.R. CV No. 51094,
promulgated on 30 September 1997 and its
resolution, 2 dated 22 May 1998, denying
petitioner's motion for reconsideration.
Petitioner Bank of America NT & SA (BANTSA) is
an international banking and financing
institution duly licensed to do business in the
Philippines, organized and existing under and
by virtue of the laws of the State of California,
United States of America while private
respondent American Realty Corporation (ARC)
is a domestic corporation.
Bank of America International Limited (BAIL),
on the other hand, is a limited liability company
organized and existing under the laws of
England.
As borne by the records, BANTSA and BAIL on
several occasions granted three major multi-
million United States (US) Dollar loans to the
following corporate borrowers: (1) Liberian
Transport Navigation, S.A.; (2) El Challenger S.A.
and (3) Eshley Compania Naviera S.A.
(hereinafter collectively referred to as
"borrowers"), all of which are existing under
and by virtue of the laws of the Republic of
Panama and are foreign affiliates of private
respondent. 3
Due to the default in the payment of the loan
amortizations, BANTSA and the corporate
borrowers signed and entered into
restructuring agreements. As additional
security for the restructured loans, private
respondent ARC as third party mortgagor
executed two real estate mortgages, 4 dated 17
February 1983 and 20 July 1984, over its parcels
of land including improvements thereon,
located at Barrio Sto. Cristo, San Jose Del
Monte, Bulacan, and which are covered by
Transfer Certificate of Title Nos. T-78759, T-
78760, T-78761, T-78762 and T-78763.
Eventually, the corporate borrowers defaulted
in the payment of the restructured loans
prompting petitioner BANTSA to file civil
actions 5 before foreign courts for the collection
of the principal loan, to wit:
a) In England, in its High Court of Justice,
Queen's Bench Division, Commercial Court
(1992-Folio No 2098) against Liberian Transport
Navigation S.A., Eshley Compania Naviera S.A.,
El Challenger S.A., Espriona Shipping Company
S.A., Eddie Navigation Corp., S.A., Eduardo
Katipunan Litonjua and Aurelio Katipunan
Litonjua on June 17, 1992.
b) In England, in its High Court of Justice,
Queen's Bench Division, Commercial Court
(1992-Folio No. 2245) against El Challenger S.A.,
Espriona Shipping Company S.A., Eduardo
Katipuan Litonjua & Aurelio Katipunan Litonjua
on July 2, 1992;
c) In Hongkong, in the Supreme Court of
Hongkong High Court (Action No. 4039 of 1992)
against Eshley Compania Naviera S.A., El
Challenger S.A., Espriona Shipping Company
S.A. Pacific Navigators Corporation, Eddie
Navigation Corporation S.A., Litonjua
Chartering (Edyship) Co., Inc., Aurelio
Katipunan Litonjua, Jr. and Eduardo Katipunan
Litonjua on November 19, 1992; and
d) In Hongkong, in the Supreme Court of
Hongkong High Court (Action No. 4040 of 1992)
against Eshley Compania Naviera S.A., El
Challenger S.A., Espriona Shipping Company,
S.A., Pacific Navigators Corporation, Eddie
Navigation Corporation S.A., Litonjua
Chartering (Edyship) Co., Jr. and Eduardo
Katipunan Litonjua on November 21, 1992.
In the civil suits instituted before the foreign
courts, private respondent ARC, being a third
party mortgagor, was private not impleaded as
party-defendant.
On 16 December 1992, petitioner BANTSA filed
before the Office of the Provincial Sheriff of
Bulacan, Philippines an application for
extrajudicial foreclosure 6 of real estate
mortgage.
On 22 January 1993, after due publication and
notice, the mortgaged real properties were sold
at public auction in an extrajudicial foreclosure
sale, with Integrated Credit and Corporation
Services Co (ICCS) as the highest bidder for the
sum of Twenty four Million Pesos
(P24,000.000.00). 7
On 12 February 1993, private respondent filed
before the Pasig Regional Trial Court, Branch
159, an action for damages 8 against the
petitioner, for the latter's act of foreclosing
extrajudicially the real estate mortgages
despite the pendency of civil suits before
foreign courts for the collection of the principal
loan.
In its answer 9 petitioner alleged that the rule
prohibiting the mortgagee from foreclosing the
mortgage after an ordinary suit for collection
has been filed, is not applicable in the present
case, claiming that:
a) The plaintiff, being a mere third party
mortgagor and not a party to the principal
restructuring agreements, was never made a
party defendant in the civil cases filed in
Hongkong and England;
b) There is actually no civil suit for sum of
money filed in the Philippines since the civil
actions were filed in Hongkong and England. As
such, any decisions (sic) which may be rendered
in the abovementioned courts are not (sic)
enforceable in the Philippines unless a separate
action to enforce the foreign judgments is first
filed in the Philippines, pursuant to Rule 39,
Section 50 of the Revised Rules of Court.
c) Under English Law, which is the governing
law under the principal agreements, the
mortgagee does not lose its security interest by
filing civil actions for sums of money.
On 14 December 1993, private respondent filed
a motion for
suspension 10 of the redemption period on the
ground that "it cannot exercise said right of
redemption without at the same time waiving
or contradicting its contentions in the case that
the foreclosure of the mortgage on its
properties is legally improper and therefore
invalid."
In an order 11 dated 28 January 1994, the trial
court granted the private respondent's motion
for suspension after which a copy of said order
was duly received by the Register of Deeds of
Meycauayan, Bulacan.
On 07 February 1994, ICCS, the purchaser of
the mortgaged properties at the foreclosure
sale, consolidated its ownership over the real
properties, resulting to the issuance of Transfer
Certificate of Title Nos. T-18627, T-186272, T-
186273, T-16471 and T-16472 in its name.
On 18 March 1994, after the consolidation of
ownership in its favor, ICCS sold the real
properties to Stateland Investment Corporation
for the amount of Thirty Nine Million Pesos
(P39,000,000.00). 12 Accordingly, Transfer
Certificate of Title Nos. T-187781(m), T-
187782(m), T-187783(m), T-16653P(m) and T-
16652P(m) were issued in the latter's name.
After trial, the lower court rendered a
decision 13 in favor of private respondent ARC
dated 12 May 1993, the decretal portion of
which reads:
WHEREFORE, judgment is hereby rendered
declaring that the filing in foreign courts by the
defendant of collection suits against the
principal debtors operated as a waiver of the
security of the mortgages. Consequently, the
plaintiff's rights as owner and possessor of the
properties then covered by Transfer Certificates
of Title Nos. T-78759, T-78762, T-78763, T-
78760 and T-78761, all of the Register of Deeds
of Meycauayan, Bulacan, Philippines, were
violated when the defendant caused the
extrajudicial foreclosure of the mortgages
constituted thereon.
Accordingly, the defendant is hereby ordered
to pay the plaintiff the following sums, all with
legal interest thereon from the date of the filing
of the complaint up to the date of actual
payment:
1) Actual or compensatory damages in the
amount of Ninety Nine Million Pesos
(P99,000,000.00);
2) Exemplary damages in the amount of Five
Million Pesos (P5,000,000.00); and
3) Costs of suit.
SO ORDERED.
On appeal, the Court of Appeals affirmed the
assailed decision of the lower court prompting
petitioner to file a motion for reconsideration
which the appellate court denied.
Hence, the instant petition for
review 14 on certiorari where herein petitioner
BANTSA ascribes to the Court of Appeals the
following assignment of errors:
1. The Honorable Court of Appeals disregarded
the doctrines laid down by this Hon. Supreme
Court in the cases of Caltex Philippines, Inc. vs.
Intermediate Appellate Court docketed as G.R.
No. 74730 promulgated on August 25, 1989
and Philippine Commercial International Bank
vs. IAC, 196 SCRA 29 (1991 case), although said
cases were duly cited, extensively discussed
and specifically mentioned, as one of the issues
in the assignment of errors found on page 5 of
the decision dated September 30, 1997.
2. The Hon. Court of Appeals acted with grave
abuse of discretion when it awarded the private
respondent actual and exemplary damages
totalling P171,600,000.00, as of July 12, 1998
although such huge amount was not asked nor
prayed for in private respondent's complaint, is
contrary to law and is totally unsupported by
evidence (sic).
In fine, this Court is called upon to resolve two
main issues:
1. Whether or not the petitioner's act of filing a
collection suit against the principal debtors for
the recovery of the loan before foreign courts
constituted a waiver of the remedy of
foreclosure.
2. Whether or not the award by the lower court
of actual and exemplary damages in favor of
private respondent ARC, as third-party
mortgagor, is proper.
The petition is bereft of merit.
First, as to the issue of availability of remedies,
petitioner submits that a waiver of the remedy
of foreclosure requires the concurrence of two
requisites: an ordinary civil action for collection
should be filed and subsequently a final
judgment be correspondingly rendered therein.
According to petitioner, the mere filing of a
personal action to collect the principal loan
does not suffice; a final judgment must be
secured and obtained in the personal action so
that waiver of the remedy of foreclosure may
be appreciated. To put it differently, absent any
of the two requisites, the mortgagee-creditor is
deemed not to have waived the remedy of
foreclosure.
We do not agree.
Certainly, this Court finds petitioner's
arguments untenable and upholds the
jurisprudence laid down in Bachrach 15 and
similar cases adjudicated thereafter, thus:
In the absence of express statutory provisions,
a mortgage creditor may institute against the
mortgage debtor either a personal action or
debt or a real action to foreclose the mortgage.
In other words, he may he may pursue either of
the two remedies, but not both. By such
election, his cause of action can by no means
be impaired, for each of the two remedies is
complete in itself. Thus, an election to bring a
personal action will leave open to him all the
properties of the debtor for attachment and
execution, even including the mortgaged
property itself. And, if he waives such personal
action and pursues his remedy against the
mortgaged property, an unsatisfied judgment
thereon would still give him the right to sue for
a deficiency judgment, in which case, all the
properties of the defendant, other than the
mortgaged property, are again open to him for
the satisfaction of the deficiency. In either case,
his remedy is complete, his cause of action
undiminished, and any advantages attendant to
the pursuit of one or the other remedy are
purely accidental and are all under his right of
election. On the other hand, a rule that would
authorize the plaintiff to bring a personal action
against the debtor and simultaneously or
successively another action against the
mortgaged property, would result not only in
multiplicity of suits so offensive to justice
(Soriano vs. Enriques, 24 Phil. 584) and
obnoxious to law and equity (Osorio vs. San
Agustin, 25 Phil., 404), but also in subjecting the
defendant to the vexation of being sued in the
place of his residence or of the residence of the
plaintiff, and then again in the place where the
property lies.
In Danao vs. Court of Appeals, 16 this Court,
reiterating jurisprudence enunciated in Manila
Trading and Supply Co vs. Co Kim 17 and Movido
vs.
RFC, 18 invariably held:
. . . The rule is now settled that a mortgage
creditor may elect to waive his security and
bring, instead, an ordinary action to recover the
indebtedness with the right to execute a
judgment thereon on all the properties of the
debtor, including the subject matter of the
mortgage . . . , subject to the qualification that
if he fails in the remedy by him elected, he
cannot pursue further the remedy he has
waived. (Emphasis Ours)
Anent real properties in particular, the Court
has laid down the rule that a mortgage creditor
may institute against the mortgage debtor
either a personal action for debt or a real action
to foreclose the mortgage. 19
In our jurisdiction, the remedies available to the
mortgage creditor are deemed alternative and
not cumulative. Notably, an election of one
remedy operates as a waiver of the other. For
this purpose, a remedy is deemed chosen upon
the filing of the suit for collection or upon the
filing of the complaint in an action for
foreclosure of mortgage, pursuant to the
provision of Rule 68 of the of the 1997 Rules of
Civil Procedure. As to extrajudicial foreclosure,
such remedy is deemed elected by the
mortgage creditor upon filing of the petition
not with any court of justice but with the Office
of the Sheriff of the province where the sale is
to be made, in accordance with the provisions
of Act No. 3135, as amended by Act No. 4118.
In the case at bench, private respondent ARC
constituted real estate mortgages over its
properties as security for the debt of the
principal debtors. By doing so, private
respondent subjected itself to the liabilities of a
third party mortgagor. Under the law, third
persons who are not parties to a loan may
secure the latter by pledging or mortgaging
their own property. 20
Notwithstanding, there is no legal provision nor
jurisprudence in our jurisdiction which makes a
third person who secures the fulfillment of
another's obligation by mortgaging his own
property, to be solidarily bound with the
principal obligor. The signatory to the principal
contract—loan—remains to be primarily
bound. It is only upon default of the latter that
the creditor may have recourse on the
mortgagors by foreclosing the mortgaged
properties in lieu of an action for the recovery
of the amount of the loan. 21
In the instant case, petitioner's contention that
the requisites of filing the action for collection
and rendition of final judgment therein should
concur, is untenable.
Thus, in Cerna vs. Court of Appeals, 22 we
agreed with the petitioner in said case, that the
filing of a collection suit barred the foreclosure
of the mortgage:
A mortgagee who files a suit for collection
abandons the remedy of foreclosure of the
chattel mortgage constituted over the personal
property as security for the debt or value of the
promissory note when he seeks to recover in
the said collection suit.
. . . When the mortgagee elects to file a suit for
collection, not foreclosure, thereby abandoning
the chattel mortgage as basis for relief, he
clearly manifests his lack of desire and interest
to go after the mortgaged property as security
for the promissory note . . . .
Contrary to petitioner's arguments, we
therefore reiterate the rule, for clarity and
emphasis, that the mere act of filing of an
ordinary action for collection operates as a
waiver of the mortgage-creditor's remedy to
foreclose the mortgage. By the mere filing of
the ordinary action for collection against the
principal debtors, the petitioner in the present
case is deemed to have elected a remedy, as a
result of which a waiver of the other necessarily
must arise. Corollarily, no final judgment in the
collection suit is required for the rule on waiver
to apply.
Hence, in Caltex Philippines, Inc. vs.
Intermediate-Appellate Court, 23 a case relied
upon by petitioner, supposedly to buttress its
contention, this Court had occasion to rule that
the mere act of filing a collection suit for the
recovery of a debt secured by a mortgage
constitutes waiver of the other remedy of
foreclosure.
In the case at bar, petitioner BANTSA only has
one cause of action which is non-payment of
the debt. Nevertheless, alternative remedies
are available for its enjoyment and exercise.
Petitioner then may opt to exercise only one of
two remedies so as not to violate the rule
against splitting a cause of action.
As elucidated by this Court in the landmark
case of Bachrach Motor Co., Inc, vs. Icarangal. 24
For non-payment of a note secured by
mortgage, the creditor has a single cause of
action against the debtor. This single cause of
action consists in the recovery of the credit
with execution of the security. In other words,
the creditor in his action may make two
demands, the payment of the debt and the
foreclosure of his mortgage. But both demands
arise from the same cause, the non-payment of
the debt, and for that reason, they constitute a
single cause of action. Though the debt and the
mortgage constitute separate agreements, the
latter is subsidiary to the former, and both refer
to one and the same obligation. Consequently,
there exists only one cause of action for a single
breach of that obligation. Plaintiff, then, by
applying the rules above stated, cannot split up
his single cause of action by filing a complaint
for payment of the debt, and thereafter
another complaint for foreclosure of the
mortgage. If he does so, the filing of the first
complaint will bar the subsequent complaint.
By allowing the creditor to file two separate
complaints simultaneously or successively, one
to recover his credit and another to foreclose
his mortgage, we will, in effect, be authorizing
him plural redress for a single breach of
contract at so much cost to the courts and with
so much vexation and oppression to the debtor.
Petitioner further faults the Court of Appeals
for allegedly disregarding the doctrine
enunciated in Caltex wherein this High Court
relaxed the application of the general rules to
wit:
In the present case, however, we shall not
follow this rule to the letter but declare that it
is the collection suit which was waived and/or
abandoned. This ruling is more in harmony with
the principles underlying our judicial system. It
is of no moment that the collection suit was
filed ahead, what is determinative is the fact
that the foreclosure proceedings ended even
before the decision in the collection suit was
rendered. . . .
Notably, though, petitioner took the Caltex
ruling out of context. We must stress that the
Caltex case was never intended to overrule the
well-entrenched doctrine enunciated Bachrach,
which to our mind still finds applicability in
cases of this sort. To reiterate, Bachrach is still
good law.
We then quote the decision 25 of the trial court,
in the present case, thus:
The aforequoted ruling in Caltex is the
exception rather than the rule, dictated by the
peculiar circumstances obtaining therein. In the
said case, the Supreme Court chastised Caltex
for making ". . . a mockery of our judicial
system when it initially filed a collection suit
then, during the pendency thereof, foreclosed
extrajudicially the mortgaged property which
secured the indebtedness, and still pursued the
collection suit to the end." Thus, to prevent a
mockery of our judicial system", the collection
suit had to be nullified because the foreclosure
proceedings have already been pursued to their
end and can no longer be undone.
In the case at bar, it has not been shown
whether the defendant pursued to the end or
are still pursuing the collection suits filed in
foreign courts. There is no occasion, therefore,
for this court to apply the exception laid down
by the Supreme Court in Caltex by nullifying the
collection suits. Quite obviously, too, the
aforesaid collection suits are beyond the reach
of this Court. Thus the only way the court may
prevent the spector of a creditor having "plural
redress for a single breach of contract" is by
holding, as the Court hereby holds, that the
defendant has waived the right to foreclose the
mortgages constituted by the plaintiff on its
properties originally covered by Transfer
Certificates of Title Nos. T-78759, T-78762, T-
78760 and T-78761. (RTC Decision pp., 10-11)
In this light, the actuations of Caltex are
deserving of severe criticism, to say the least. 26
Moreover, petitioner attempts to mislead this
Court by citing the case of PCIB vs. IAC. 27 Again,
petitioner tried to fit a square peg in a round
hole. It must be stressed that far from
overturning the doctrine laid down in Bachrach,
this Court in PCIB buttressed its firm stand on
this issue by declaring:
While the law allows a mortgage creditor to
either institute a personal action for the debt or
a real action to foreclosure the mortgage, he
cannot pursue both remedies simultaneously or
successively as was done by PCIB in this case.
Thus, when the PCIB filed Civil Case No. 29392
to enforce payment of the 1.3 million
promissory note secured by real estate
mortgages and subsequently filed a petition for
extrajudicial foreclosure, it violates the rule
against splitting a cause of action.
Accordingly, applying the foregoing rules, we
hold that petitioner, by the expediency of filing
four civil suits before foreign courts, necessarily
abandoned the remedy to foreclose the real
estate mortgages constituted over the
properties of third-party mortgagor and herein
private respondent ARC. Moreover, by filing the
four civil actions and by eventually foreclosing
extrajudicially the mortgages, petitioner in
effect transgressed the rules against splitting a
cause of action well-enshrined in jurisprudence
and our statute books.
In Bachrach, this Court resolved to deny the
creditor the remedy of foreclosure after the
collection suit was filed, considering that the
creditor should not be afforded "plural redress
for a single breach of contract." For cause of
action should not be confused with the remedy
created for its enforcement. 28
Notably, it is not the nature of the redress
which is crucial but the efficacy of the remedy
chosen in addressing the creditor's cause.
Hence, a suit brought before a foreign court
having competence and jurisdiction to
entertain the action is deemed, for this
purpose, to be within the contemplation of the
remedy available to the mortgagee-creditor.
This pronouncement would best serve the
interest of justice and fair play and further
discourage the noxious practice of splitting up a
lone cause of action.
Incidentally, BANTSA alleges that under English
Law, which according to petitioner is the
governing law with regard to the principal
agreements, the mortgagee does not lose its
security interest by simply filing civil actions for
sums of money. 29
We rule in the negative.
This argument shows desperation on the part
of petitioner to rivet its crumbling cause. In the
case at bench, Philippine law shall apply
notwithstanding the evidence presented by
petitioner to prove the English law on the
matter.
In a long line of decisions, this Court adopted
the well-imbedded principle in our jurisdiction
that there is no judicial notice of any foreign
law. A foreign law must be properly pleaded
and proved as a fact. 30 Thus, if the foreign law
involved is not properly pleaded and proved,
our courts will presume that the foreign law is
the same as our local or domestic or internal
law. 31 This is what we refer to as the doctrine
of processual presumption.
In the instant case, assuming arguendo that the
English Law on the matter were properly
pleaded and proved in accordance with Section
24, Rule 132 of the Rules of Court and the
jurisprudence laid down in Yao Kee, et al. vs.
Sy-Gonzales, 32 said foreign law would still not
find applicability.
Thus, when the foreign law, judgment or
contract is contrary to a sound and established
public policy of the forum, the said foreign law,
judgment or order shall not be applied. 33
Additionally, prohibitive laws concerning
persons, their acts or property, and those
which have for their object public order, public
policy and good customs shall not be rendered
ineffective by laws or judgments promulgated,
or by determinations or conventions agreed
upon in a foreign country. 34
The public policy sought to be protected in the
instant case is the principle imbedded in our
jurisdiction proscribing the splitting up of a
single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil
Procedure is pertinent —
If two or more suits are instituted on the basis
of the same cause of action, the filing of one or
a judgment upon the merits in any one is
available as a ground for the dismissal of the
others.
Moreover, foreign law should not be applied
when its application would work undeniable
injustice to the citizens or residents of the
forum. To give justice is the most important
function of law; hence, a law, or judgment or
contract that is obviously unjust negates the
fundamental principles of Conflict of Laws. 35
Clearly then, English Law is not applicable.
As to the second pivotal issue, we hold that the
private respondent is entitled to the award of
actual or compensatory damages inasmuch as
the act of petitioner BANTSA in extrajudicially
foreclosing the real estate mortgages
constituted a clear violation of the rights of
herein private respondent ARC, as third-party
mortgagor.
Actual or compensatory damages are those
recoverable because of pecuniary loss in
business, trade, property, profession, job or
occupation and the same must be proved,
otherwise if the proof is flimsy and non-
substantial, no damages will be given. 36 Indeed,
the question of the value of property is always
a difficult one to settle as valuation of real
property is an imprecise process since real
estate has no inherent value readily
ascertainable by an appraiser or by the
court. 37 The opinions of men vary so much
concerning the real value of property that the
best the courts can do is hear all of the
witnesses which the respective parties desire to
present, and then, by carefully weighing that
testimony, arrive at a conclusion which is just
and equitable. 38
In the instant case, petitioner assails the Court
of Appeals for relying heavily on the valuation
made by Philippine Appraisal Company. In
effect, BANTSA questions the act of the
appellate court in giving due weight to the
appraisal report composed of twenty three
pages, signed by Mr. Lauro Marquez and
submitted as evidence by private respondent.
The appraisal report, as the records would
readily show, was corroborated by the
testimony of Mr. Reynaldo Flores, witness for
private respondent.
On this matter, the trial court observed:
The record herein reveals that plaintiff-appellee
formally offered as evidence the appraisal
report dated March 29, 1993 (Exhibit J,
Records, p. 409), consisting of twenty three (23)
pages which set out in detail the valuation of
the property to determine its fair market value
(TSN, April 22, 1994, p. 4), in the amount of
P99,986,592.00 (TSN, ibid., p. 5), together with
the corroborative testimony of one Mr.
Reynaldo F. Flores, an appraiser and director of
Philippine Appraisal Company, Inc. (TSN, ibid.,
p. 3). The latter's testimony was subjected to
extensive cross-examination by counsel for
defendant-appellant (TSN, April 22, 1994, pp. 6-
22). 39
In the matter of credibility of witnesses, the
Court reiterates the familiar and well-
entrenched rule that the factual findings of the
trial court should be respected. 40 The time-
tested jurisprudence is that the findings and
conclusions of the trial court on the credibility
of witnesses enjoy a badge of respect for the
reason that trial courts have the advantage of
observing the demeanor of witnesses as they
testify. 41
This Court will not alter the findings of the trial
court on the credibility of witnesses, principally
because they are in a better position to assess
the same than the appellate court. 42 Besides,
trial courts are in a better position to examine
real evidence as well as observe the demeanor
of witnesses. 43
Similarly, the appreciation of evidence and the
assessment of the credibility of witnesses rest
primarily with the trial court. 44 In the case at
bar, we see no reason that would justify this
Court to disturb the factual findings of the trial
court, as affirmed by the Court of Appeals, with
regard to the award of actual damages.
In arriving at the amount of actual damages,
the trial court justified the award by presenting
the following ratiocination in its assailed
decision 45, to wit:
Indeed, the Court has its own mind in the
matter of valuation. The size of the subject real
properties are (sic) set forth in their individuals
titles, and the Court itself has seen the
character and nature of said properties during
the ocular inspection it conducted. Based
principally on the foregoing, the Court makes
the following observations:
1. The properties consist of about 39 hectares
in Bo. Sto. Cristo, San Jose del Monte, Bulacan,
which is (sic) not distant from Metro Manila —
the biggest urban center in the Philippines —
and are easily accessible through well-paved
roads;
2. The properties are suitable for development
into a subdivision for low cost housing, as
admitted by defendant's own appraiser (TSN,
May 30, 1994, p. 31);
3. The pigpens which used to exist in the
property have already been demolished.
Houses of strong materials are found in the
vicinity of the property (Exhs. 2, 2-1 to 2-7), and
the vicinity is a growing community. It has even
been shown that the house of the Barangay
Chairman is located adjacent to the property in
question (Exh. 27), and the only remaining
piggery (named Cherry Farm) in the vicinity is
about 2 kilometers away from the western
boundary of the property in question (TSN,
November 19, p. 3);
4. It will not be hard to find interested buyers of
the property, as indubitably shown by the fact
that on March 18, 1994, ICCS (the buyer during
the foreclosure sale) sold the consolidated real
estate properties to Stateland Investment
Corporation, in whose favor new titles were
issued, i.e., TCT Nos. T-187781(m); T-
187782(m), T-187783(m); T-16653P(m) and T-
166521(m) by the Register of Deeds of
Meycauayan (sic), Bulacan;
5. The fact that ICCS was able to sell the subject
properties to Stateland Investment Corporation
for Thirty Nine Million (P39,000,000.00) Pesos,
which is more than triple defendant's appraisal
(Exh. 2) clearly shows that the Court cannot rely
on defendant's aforesaid estimate (Decision,
Records, p. 603).
It is a fundamental legal aphorism that the
conclusions of the trial judge on the credibility
of witnesses command great respect and
consideration especially when the conclusions
are supported by the evidence on
record. 46 Applying the foregoing principle, we
therefore hold that the trial court committed
no palpable error in giving credence to the
testimony of Reynaldo Flores, who according to
the records, is a licensed real estate broker,
appraiser and director of Philippine Appraisal
Company, Inc. since 1990. 47 As the records
show, Flores had been with the company for 26
years at the time of his testimony.
Of equal importance is the fact that the trial
court did not confine itself to the appraisal
report dated 29 March 1993, and the testimony
given by Mr. Reynaldo Flores, in determining
the fair market value of the real property.
Above all these, the record would likewise
show that the trial judge in order to appraise
himself of the characteristics and condition of
the property, conducted an ocular inspection
where the opposing parties appeared and were
duly represented.
Based on these considerations and the
evidence submitted, we affirm the ruling of the
trial court as regards the valuation of the
property —
. . . a valuation of Ninety Nine Million Pesos
(P99,000,000.00) for the 39-hectare properties
(sic) translates to just about Two Hundred Fifty
Four Pesos (P254.00) per square meter. This
appears to be, as the court so holds, a better
approximation of the fair market value of the
subject properties. This is the amount which
should be restituted by the defendant to the
plaintiff by way of actual or compensatory
damages . . . . 48
Further, petitioner ascribes error to the lower
court awarding an amount allegedly not asked
nor prayed for in private respondent's
complaint.
Notwithstanding the fact that the award of
actual and compensatory damages by the lower
court exceeded that prayed for in the
complaint, the same is nonetheless valid,
subject to certain qualifications.
On this issue, Rule 10, Section 5 of the Rules of
Court is pertinent:
Sec. 5. Amendment to conform to or authorize
presentation of evidence. — When issues not
raised by the pleadings are tried with the
express or implied consent of the parties, they
shall be treated in all respects as if they had
been raised in the pleadings. Such amendment
of the pleadings as may be necessary to cause
them to conform to the evidence and to raise
these issues may be made upon motion of any
party at any time, even after judgement; but
failure to amend does not affect the result of
the trial of these issues. If evidence is objected
to at the trial on the ground that it is not within
the issues made by the pleadings, the court
may allow the pleadings to be amended and
shall do so with liberality if the presentation of
the merits of the action and the ends of
substantial justice will be subserved thereby.
The court may grant a continuance to enable
the amendment to be made.
The jurisprudence enunciated in Talisay-Silay
Milling Co., Inc. vs. Asociacion de Agricultures
de Talisay-Silay, Inc. 49 citing Northern Cement
Corporation vs. Intermediate Appellate
Court 50 is enlightening:
There have been instances where the Court has
held that even without the necessary
amendment, the amount proved at the trial
may be validly awarded, as in Tuazon v.
Bolanos (95 Phil. 106), where we said that if the
facts shown entitled plaintiff to relief other
than that asked for, no amendment to the
complaint was necessary, especially where
defendant had himself raised the point on
which recovery was based. The appellate court
could treat the pleading as amended to
conform to the evidence although the
pleadings were actually not amended.
Amendment is also unnecessary when only
clerical error or non substantial matters are
involved, as we held in Bank of the Philippine
Islands vs. Laguna (48 Phil. 5). In Co Tiamco vs.
Diaz (75 Phil. 672), we stressed that the rule on
amendment need not be applied rigidly,
particularly where no surprise or prejudice is
caused the objecting party. And in the recent
case of National Power Corporation vs. Court of
Appeals (113 SCRA 556), we held that where
there is a variance in the defendant's pleadings
and the evidence adduced by it at the trial, the
Court may treat the pleading as amended to
conform with the evidence.
It is the view of the Court that pursuant to the
above-mentioned rule and in light of the
decisions cited, the trial court should not be
precluded from awarding an amount higher
than that claimed in the pleading
notwithstanding the absence of the required
amendment. But it is upon the condition that
the evidence of such higher amount has been
presented properly, with full opportunity on
the part of the opposing parties to support
their respective contentions and to refute each
other's evidence.
The failure of a party to amend a pleading to
conform to the evidence adduced during trial
does not preclude an adjudication by the court
on the basis of such evidence which may
embody new issues not raised in the pleadings,
or serve as a basis for a higher award of
damages. Although the pleading may not have
been amended to conform to the evidence
submitted during trial, judgment may
nonetheless be rendered, not simply on the
basis of the issues alleged but also the basis of
issues discussed and the assertions of fact
proved in the course of trial. The court may
treat the pleading as if it had been amended to
conform to the evidence, although it had not
been actually so amended. Former Chief Justice
Moran put the matter in this way:
When evidence is presented by one party, with
the expressed or implied consent of the
adverse party, as to issues not alleged in the
pleadings, judgment may be rendered validly as
regards those issues, which shall be considered
as if they have been raised in the pleadings.
There is implied consent to the evidence thus
presented when the adverse party fails to
object thereto.
Clearly, a court may rule and render judgment
on the basis of the evidence before it even
though the relevant pleading had not been
previously amended, so long as no surprise or
prejudice is thereby caused to the adverse
party. Put a little differently, so long as the basis
requirements of fair play had been met, as
where litigants were given full opportunity to
support their respective contentions and to
object to or refute each other's evidence, the
court may validly treat the pleadings as if they
had been amended to conform to the evidence
and proceed to adjudicate on the basis of all
the evidence before it.
In the instant case, inasmuch as the petitioner
was afforded the opportunity to refute and
object to the evidence, both documentary and
testimonial, formally offered by private
respondent, the rudiments of fair play are
deemed satisfied. In fact, the testimony of
Reynaldo Flores was put under scrutiny during
the course of the cross-examination. Under
these circumstances, the court acted within the
bounds of its jurisdiction and committed no
reversible error in awarding actual damages the
amount of which is higher than that prayed for.
Verily, the lower court's actuations are
sanctioned by the Rules and supported by
jurisprudence.
Similarly, we affirm the grant of exemplary
damages although the amount of Five Million
Pesos (P5,000,000.00) awarded, being
excessive, is subject to reduction. Exemplary or
corrective damages are imposed, by way of
example or correction for the public good, in
addition to the moral, temperate, liquidated or
compensatory damages. 51 Considering its
purpose, it must be fair and reasonable in every
case and should not be awarded to unjustly
enrich a prevailing party. 52 In our view, an
award of P50,000.00 as exemplary damages in
the present case qualifies the test of
reasonableness.
WHEREFORE, premises considered, the instant
petition is DENIED for lack of merit. The
decision of the Court of Appeals is hereby
AFFIRMED with MODIFICATION of the amount
awarded as exemplary damages. According,
petitioner is hereby ordered to pay private
respondent the sum of P99,000,000.00 as
actual or compensatory damages; P50,000.00
as exemplary damage and the costs of suit.
SO ORDERED.
G.R. No. 164521             ALLANDALE VS GOOD
DEVELOPMENT
Before the Court is a Petition for Review
on Certiorari under Rule 45 of the Rules of
Court, assailing the May 15, 2003 Decision1 of
the Court of Appeals (CA) in CA-G.R. CV No.
59475 which dismissed the petition of Allandale
Sportsline, Inc. and Melbarose R. Sasot from
the January 13, 1998 Decision2 of the Regional
Trial Court (RTC) of Pasig City, Branch 158 in
Civil Case No. 61053; and the June 12, 2004 CA
Resolution3 which denied petitioners’ motion
for reconsideration.
The relevant facts are as follows:
Allandale Sportsline, Inc. (ASI) obtained a loan
of P204,000.00 from The Good Development
Corp. (GDC) under a Promissory Note signed by
Melbarose R. Sasot (Melbarose) and Allandale
R. Sasot (Allandale), President and Vice-
President, respectively, of ASI, with Theresa L.
Manipon (Manipon) as one of three co-
makers.4 The Promissory Note provides that the
loan is payable in daily equal installments
of P2,000.00 with interest at the rate of
26.002% per annum. In case of default in the
payment of any installment, the entire balance
of the obligation shall become immediately due
and payable, and subject to liquidated penalty/
collection charge equivalent to 2% of the
principal.5
To provide additional security, ASI and
Melbarose executed in favor of GDC a Deed of
Mortgage6 in which they acceded that:
xxxx should the MORTGAGORS fail to comply
with any of the terms of the promissory note
and this mortgage contract, the MORTGAGEE
shall automatically have the absolute right
without need of prior notice or demand to
forthwith judicially or extrajudicially foreclose
this mortgage and proceed against all or any of
the mortgaged rights, interests and properties
for the full satisfaction of the MORTGAGORS'
entire obligation to the MORTGAGEE and, in
such event, the MORTGAGORS shall be further
liable to the MORTGAGEE in the same judicial
or extrajudicial foreclosure proceedings for
payment of attorney's fees in an amount
equivalent to twenty five (25%) per cent of the
unpaid indebtedness but in no case less that
Five hundred pesos (500.00); liquidated
damages in an amount equivalent to twenty-
five (25%) percent of said outstanding
obligation and all the expenses and costs
incidental to the above proceeding
xxx.7 (Emphasis supplied)
The properties subject of the mortgage are
itemized in an inventory attached to the deed.
They include: List A -- all the merchandise and
stocks in trade found in the commercial
establishment owned by ASI and Melbarose at
#514 M.V. delos Santos St., Sampaloc, Manila,
valued at P100,000.00; List B -- all the furniture,
fixtures, appliances, equipment and other
personal property found in said business
establishment, valued at P3,500.00; and List C --
one Toyota Corona 2DR. HT. with Motor No.
18R-1474348, valued at P40,000.00 and one
Toyota Corolla 4DR. SDN with Motor No. 4K-
5872110, valued at P35,000.00.8
On June 24, 1991, GDC demanded that
Melbarose pay the unpaid account
of P179,000.00 or surrender the mortgaged
chattels within five days from notice.9
When no payment was made, GDC filed with
the RTC a Complaint10 for Replevin and/or Sum
of Money with Damages against ASI,
Melbarose, Manipon, Florante Edrino and John
Doe.11 It is significant that plaintiff GDC prayed
for alternative reliefs, to wit:
WHEREFORE, for all the foregoing it is most
respectfully prayed of this Honorable Court
that:
1. A Writ of Replevin be issued ordering the
seizure of the above described chattels or
personal property with all the accessories or
equipments and directing their transfer to
Plaintiff for the purposes of foreclosure &/or
transfer in accordance with the law to satisfy
Defendants' obligation in favor of Plaintiff; and
2. After due notice and trial:
a. to enforce said seizure and Plaintiff's right
over aforedescribed chattels and/or personal
property; and
b. to order Defendants to pay Plaintiff jointly
and severally the sum of P43,750.00 as and for
attorney's fees and the sum equivalent to 25%
of the obligation as and for liquidated damages,
plus other expenses of litigation and costs of
suit.
On the Alternative Cause of Action, in the event
that manual delivery of said chattels or
personal property cannot be obtained for some
reason or another, to render judgment ordering
Defendants to pay plaintiff, jointly and severally
as follows:
1. The sum of P175,000.00 plus interest
thereon at 26.002% per annum from date of
maturity until said sum shall have been fully
paid.
2. The sum of P43,750.00 as and for Attorney's
fees, the sum equivalent to 25% of the
obligation as and for liquidated damages, such
other expenses of litigation and costs of suit.12
The RTC issued a Writ of Replevin,13 and by
virtue thereof, the Sheriff seized and delivered
to GDC only one unit of Toyota Corona with
Motor No. 18R-1474348 and two appliances.14
On December 2, 1991, GDC filed an Amended
Complaint to include in its application for
replevin the items under List A.15 After
admitting the Amended Complaint, the RTC
issued an Alias Writ of Replevin16 over the items
in List A, and, by virtue thereof, the Sheriff
seized and delivered to GDC the assorted items
enumerated therein.17
It appears that a Second Alias Writ of
Replevin18 was issued over one unit Toyota
Corolla with Motor No. 4K-5872110, but the
records do not indicate that the Sheriff made a
return on the writ.
Meanwhile, ASI and Melbarose filed their
Answer with Counterclaim. 19 They claimed that
their loan obligation to GDC was only
for P200,000.00, and after
deducting P18,000.00, which amount was
retained by GDC as advanced interest payment,
and P29,000.00, which represents payments
made from June 4, 1991 to July 8, 1991, their
unpaid obligation was only P171,000.00;20 that
they repeatedly tendered payment of this
amount, but GDC rejected their efforts for no
valid reason; that the unreasonable refusal of
GDC to accept their tender of payment relieved
them of their loan obligation;21 that its
Complaint being obviously without merit, GDC
should be held liable to them for damages.22
Manipon filed a separate Answer in which she
did not deny the authenticity of her signature
on the Promissory Note, but argued that she
did not knowingly or voluntarily sign the
instrument as a co-maker, for at that time she
was under the impression that the instrument
she was signing was her own loan application
with GDC.23
In its Pre-Trial Order dated May 22, 1992, the
RTC identified only these issues: (a) whether
GDC was entitled to collect P175,000.00, as
well as the interests, attorney's fees and other
expenses and costs; (b) whether ASI and
Melbarose made a valid tender of payment; (c)
whether Manipon was a real party-in-interest;
and (d) whether the prevailing party was
entitled to damages.24
However, it is significant that at the trial that
ensued, GDC disclosed that after it obtained
possession of the properties subject of the
writs of replevin, it caused the auction sale of
some of them and realized proceeds amounting
to P78,750.00.
While there is no certificate of sale in the
records of the case, respondent's witness
Leonila Buenviaje testified thus:
ATTY. MAMARIL:
Q     -     In this case, Miss witness, you were
able to seize by way of a writ of replevin some
properties of the defendants. What did you do
with these properties?
A     -     It was being sold by auction sale.
Q     -     Could you tell this Honorable Court if
the auction sale pushed through?
A     -     Yes, sir.
Q     -     How much were you able to realize
from the auction sale?
xxxx
A     -     We had pulled amounting
to P55,050.00. The Karaoke – P3,200.00; the
t.v. - P500.00; and athletic uniforms amounting
to P20,000.00.
Q     -     So, all in all how much could that be?
xxxx
A     -     More than P78,000.00. I
think P78,750.00.25
On cross-examination, the same witness
further described the auction sale:
ATTY. QUINONES:
xxxx
Q     -     Are you sure that these has been sold
already, Miss Buenviaje?
A     -     Yes, sir.
Q     -     When was it sold?
A     -     I forgot the exact date.
Q     -     Do you have any document that those
items were already sold?
A     -     We have a certificate of sale from the
Sheriff.
xxxx
Q     -     And the car Toyota Corona was also
seized and sold?
A     -     Yes, sir.
Q     -     And in turn you were able to sell it to a
third party?
A     -     Yes, sir.
Q     -     And that car was sold already in the
amount of P56,000.00, is that correct?
A     -     P55,000.00.26
Moreover, GDC presented to the RTC a
Statement of Account dated August 24, 1992,
which indicated that the total outstanding
balance of the loan obligation of ASI and
Melbarose was reduced to P191,111.82 after
the proceeds of the auction sale conducted on
June 19, 1992 in the amount of P78,750.00 was
deducted from the earlier balance
of P266,126.17.27
The RTC rendered a Decision, the dispositive
portion of which reads:
WHEREFORE, in view of the foregoing,
judgment is rendered in favor of the plaintiff
Good Development Corporation against
defendants Melbarose Sasot, Allandale
Sportsline Inc., and Ma. Theresa Manipon
ordering them to pay the plaintiff jointly and
severally the amount of P269,611.82 plus legal
interest thereon effective to date until the full
amount is fully paid, and 25% of the total
amount due as liquidated damages.
SO ORDERED.28 (Emphasis supplied)
ASI, Sasot and Manipon appealed to the CA,
which rendered the Decision assailed herein, to
wit:
WHEREFORE, premises considered, the instant
appeal is DENIED. The assailed decision of the
RTC of Pasig City, Branch 158 in Civil Case No.
61053 is hereby AFFIRMED.
SO ORDERED. 29
Their Motion for Reconsideration was also
denied by the CA.30
Only ASI and Sasot (petitioners) took the
present recourse, raising the following issues:
I. Whether or not petitioners’ check payment of
Php171,000.00, PCIB Check No. 851688, to
cover the total balance of their loan to
respondent, became a valid tender of payment
by virtue of the respondent’s acceptance
thereof;
II. Whether or not the "parol evidence rule"
applies on the promissory note in question
when the co-makers thereon are total strangers
to one another;
III. Whether or not petitioners are entitled to
the return of their properties pursuant to
Section 9, Rule 60 of the Rules of Court.
IV. Whether or not there is legal basis in the
award of liquidated damages. 31
The second issue deserves scant consideration
for lack of basis. Manipon did not join in the
petition. Hence, the finding of the RTC, as
affirmed by the CA, that she was a co-maker of
Promissory Note and a real party-in-interest is
already final and conclusive. Petitioners cannot
now question this finding by raising the defense
that Manipon signed the promissory note
without knowledge of the nature of her liability
under the instrument. Such defense is personal
to Manipon and cannot be invoked by
petitioners, unless it is shown that their
interests are so interwoven with
and dependent on Manipon’s as to be
inseparable.32 However, in their pleadings,
petitioners do not deny the authenticity and
due execution of the Promissory Note, whereas
Manipon has maintained that said instrument
was not duly executed; hence, their defenses
are clearly separate and distinct.
Only three issues are left to be resolved.
Anent the first issue, petitioners contend that
they were relieved of their obligation to pay
GDC (respondent) when they made several
attempts to tender payment but respondent
refused to accept them without any valid
reason. Petitioners claim that the first tender of
payment was made on July 3, 1991 when
petitioner Sasot sent respondent a PCIB check
postdated October 31, 1991 in the amount
of P171,000.00.33 Respondent rejected the
check, citing that the amount was insufficient
for, as of July 4, 1991, the balance of the
principal loan was P175,000.00,
not P171,000.00; and its maturity was
September 13, 1991, not October 31, 1991.34
On October 15, 1997, petitioners tendered
payment of P171,000.00 in cash,35 but
respondent refused to accept it due to the
insufficiency of the amount.36 Instead,
respondent sent petitioners a Statement of
Account dated October 29, 1991, indicating
that as of October 15, 1991 the total balance
due was P228,071.61.37
On October 29, 1991, petitioners tendered cash
payment of P174,986.96,38 but respondent still
refused to accept it for insufficiency of the
amount.39
The question then is whether petitioners’
tender of payment and respondent’s refusal
thereof discharged petitioners from their
obligation.
Tender of payment, without more, produces no
effect; rather, tender of payment must be
followed by a valid consignation in order to
produce the effect of payment and extinguish
an obligation.40
Tender of payment is but a preparatory act to
consignation. It is the manifestation by the
debtor of a desire to comply with or pay an
obligation. If refused without just cause, the
tender of payment will discharge the debtor of
the obligation to pay but only after a valid
consignation of the sum due shall have been
made with the proper court.41
Consignation is the deposit of the proper
amount with a judicial authority, before whom
the debtor must establish compliance with the
following mandatory requirements: (1) there
was a debt due; (2) the consignation of the
obligation had been made because the creditor
to whom tender of payment was made refused
to accept it, or because he was absent or
incapacitated, or because several persons claim
to be entitled to receive the amount due, or
because the title to the obligation has been
lost; (3) previous notice of the consignation had
been given to the person interested in the
performance of the obligation; (4) the amount
due was placed at the disposal of the court; and
(5) after the consignation had been made, the
person interested was notified thereof. Failure
to prove any of these requirements is enough
ground to render a consignation ineffective.42
Petitioners did not allege or prove that after
their tender of payment was refused by
respondents, they attempted or pursued
consignation of the payment with the proper
court. Their tender of payment not having been
followed by a valid consignation, it produced no
effect whatsoever, least of all the
extinguishment of the loan obligation.
Therefore, the first issue of the validity or
invalidity of their tender of payment is
completely moot and academic, for either way
the discussion will go, it will lead to no other
conclusion but that, without an accompanying
valid consignation, the tender of payment did
not result in the payment and extinguishment
of the loan obligation. The Court cannot take
cognizance of such a purely hypothetical
issue.43
The third and fourth issues are interrelated
because their resolution depends on the nature
of the remedy which respondent actually
adopted.
As emphasized at the outset, the reliefs
respondent prayed for in its Complaint and
Amended Complaint are in the alternative:
delivery of the mortgaged properties
preparatory to foreclosure or payment of the
unpaid loan.44
Moreover, after respondent acquired
possession of the mortgaged properties
through the writs of replevin, it caused the
auction sale of assorted sports outfits, one unit
Sansio Karaoke, one unit Sony T.V. Set and one
unit Toyota Corona, and earned proceeds
amounting to P78,750.00.45 While it appears
that respondent failed to obtain the other
personal properties covered by the Deed of
Mortgage and the writs of replevin, there is no
doubt that it had effectively elected the remedy
of extra-judicial foreclosure of the mortgage
security over the remedy of collection of the
unpaid loan.
The RTC was aware that respondent had
elected one remedy. In its Decision, it cited the
fact that some of the mortgaged properties
which were delivered to respondent by means
of the Writs of Replevin had been sold on
auction, and acknowledged that the proceeds
from said auction sale should be deducted from
the loan account of petitioners. The RTC noted:
The seized pieces of personal properties by
virtue of the writ of replevin and alias writ of
replevin were sold in an auction sale where
[respondent] realized P78,750.00 from the
sale.46
[Respondent] realized P78,500.00[sic] from the
auction sale of the seized personal property by
virtue of the writ of replevin. The amount
realized from the auction sale is clearly
insufficient to cover the unpaid balance,
interest, attorney’s fees, costs of the suit and
other expenses incidental to litigation. This
amount was deducted from the [petitioners’]
total obligation in the amount of P269,111.82
[sic] resulting in the net total obligation
of P191,111.82 as of August 24,
1992.47 (Emphasis supplied)
Yet, it is curious that in the dispositive portion
of its Decision, the RTC granted respondent the
remedy of collection of sum of money. The
dispositive portion of the RTC Decision is
reproduced below for emphasis:
WHEREFORE, in view of the foregoing,
judgment is rendered in favor of the
[respondent] Good Development Corporation
against [petitioners] Melbarose Sasot, Allandale
Sportsline Inc., and Ma. Theresa Manipon
ordering them to pay the [respondent] jointly
and severally the amount of P269,611.82 [sic]
plus legal interest thereon effective to date
until the full amount is fully paid, and 25% of
the total amount due as liquidated damages.
SO ORDERED.
Not only is there no more reference to the
conduct of the auction sale of the mortgaged
properties, there is also no longer any
acknowledgment that the proceeds earned
from the auction sale should be deducted from
the total unpaid loan.
This is a glaring error.
In Bachrach Motor Co., Inc. v. Icarangal,48 the
Court held that the remedies available to any
mortgage creditor are alternative, not
cumulative or successive,49 viz.:
For non-payment of a note secured by
mortgage, the creditor has a single cause of
action against the debtor. This single cause of
action consists in the recovery of the credit
with execution of the security. In other words,
the creditor in his action may make two
demands, the payment of the debt and the
foreclosure of his mortgage. But both demands
arise from the same cause, the non-payment of
the debt, and for that reason, they constitute a
single cause of action. Though the debt and the
mortgage constitute separate agreements, the
latter is subsidiary to the former, and both refer
to one and the same obligation. Consequently,
there exists only one cause of action for a single
breach of that obligation. Plaintiff, then, by
applying the rules above stated, cannot split up
his single cause of action by filing a complaint
for payment of the debt, and thereafter
another complaint for foreclosure of the
mortgage. If he does so, the filing of the first
complaint will bar the subsequent complaint. By
allowing the creditor to file two separate
complaints simultaneously or successively, one
to recover his credit and another to foreclose
his mortgage, we will, in effect, be authorizing
him plural redress for a single breach of
contract at so much cost to the courts and with
so much vexation and oppression to the debtor.
(Emphasis supplied)
By causing the auction sale of the mortgaged
properties, respondent effectively adopted and
pursued the remedy of extra-judicial
foreclosure,50 using the writ of replevin as a tool
to get hold of the mortgaged properties.51 As
emphasized in Bachrach, one effect of
respondent’s election of the remedy of extra-
judicial foreclosure is its waiver of the remedy
of collection of the unpaid loan.
Therefore, there was no more legal basis for
the RTC to grant respondent the relief of
collecting from petitioners "the amount of
Php269,611.82 [sic] plus legal interest thereon
effective to date until the full amount is fully
paid," nor for the CA to affirm it.
However, another effect of its election of the
remedy of extra-judicial foreclosure is that
whatever deficiency remains after applying the
proceeds of the auction sale to the total loan
obligation may still be recovered by
respondent.52
But to recover any deficiency after foreclosure,
the rule is that a mortgage creditor must
institute an independent civil
action.53 However, in PCI Leasing & Finance,
Inc. v. Dai54 the Court held that the claim should
at least be included in the pre-trial brief. In said
case, the mortgage-creditor had foreclosed on
the mortgaged properties and sold the same at
public auction during the trial on the action for
damages with replevin. After judgment on the
replevin case was rendered, the mortgage-
creditor filed another case, this time for the
deficiency amount. The Court dismissed the
second case on the ground of res judicata,
noting that:
Petitioner ignores the fact that it prayed in the
replevin case that in the event manual delivery
of the vessel could not be effected, the court
"render judgment in its favor by ordering
[herein respondents] to pay x x x the sum
of P3,502,095.00 plus interest and penalty
thereon from October 12, 1994 until fully paid
as provided in the Promissory Note."
Since petitioner had extrajudicially foreclosed
the chattel mortgage over the vessel even
before the pre-trial of the case, it should have
therein raised as issue during the pre-trial the
award of a deficiency judgment. After all, the
basis of its above-stated alternative prayer was
the same as that of its prayer for replevin – the
default of respondents in the payment of the
monthly installments of their loan. But it did
not. (Emphasis supplied)
The question in the present case therefore is
whether respondent instituted the proper
action for the deficiency amount or raised its
claim at the pre-trial.
An examination of the Complaint and Amended
Complaint reveals that respondent did not
allege any deficiency account. Nor did it raise
the matter in its Pre-Trial Brief.55 This is only to
be expected because the auction sale of the
properties was apparently conducted on June
19, 1992, long after it filed its
Complaint/Amended Complaint and Pre-trial
Brief.
However, the Court notes that evidence on the
deficiency amount was duly presented by
respondent and examined by petitioners.
Respondent’s employee Leonila Buenviaje
testified that the proceeds respondent earned
from the auction sale of the mortgaged
properties amounted to
only P78,750.00.56 Another employee, Grace
Borja, testified that after applying the proceeds
of P78,750 to the unpaid account of petitioners,
there remained a deficiency
of P91,111.82.57 Documentary evidence of the
deficiency amount was also presented in the
form of the August 24, 1992 Statement of
Account marked Exhibits "F-1" and "F-
2."58 Thus, an independent action to recover
the deficiency will merely entail the
presentation of the same evidence of the same
claim, in the process taxing the time and
resources of the parties and the
courts.59 Therefore, in the higher interest of
justice and equity, the Court takes it upon itself
to grant the claim of respondent to the
deficiency amount of P191,111.82, as stated in
its August 24, 1992 Statement of Account.
Yet another effect of the election by
respondent of the remedy of extra-judicial
foreclosure is the inapplicability of Section 9,
Rule 60 of the Rules of Court, which states:
Section 9. Judgment. – After trial of the issues,
the court shall determine who has the right of
possession to and the value of the property and
shall render judgment in the alternative for the
delivery thereof to the party entitled to the
same, or for its value in case delivery can not be
made and also for such damages as either party
may prove, with costs.
As already discussed, the properties of
petitioners which were seized by virtue of the
Writs of Replevin were extra-judicially
foreclosed and sold at public auction by
respondent in the exercise of its absolute right
under the contract entered into by the parties,
without need of prior notice or demand to
forthwith judicially or extra-judicially foreclose
this mortgage and proceed against all or any of
the mortgaged rights, interests and properties
for the full satisfaction of the mortgagors'
entire obligation to the mortgagee.
Finally, under the same Deed of Mortgage, it is
provided that in case of default, petitioners
shall be liable for liquidated penalty/collection
charge in the amount equivalent to "twenty-
five (25%) percent of said outstanding
obligation." It being settled that petitioners
defaulted on their loan obligation to
respondent, the former are liable for liquidated
damages.
WHEREFORE, the Court PARTLY GRANTS the
petition and MODIFIES the May 15, 2003
Decision and June 12, 2004 Resolution of the
Court of Appeals (CA) in CA-G.R. CV No. 59475,
as follows:
1. The award in the January 13, 1998 Decision
of the Regional Trial Court of Pasig City, Branch
158 in Civil Case No. 61053, in favor of
respondent, in "the amount of Php269,611.82
plus legal interest thereon effective to date
until the full amount is fully paid" is DELETED;
2. Respondent The Golden Development
Corporation is AWARDED P191,111.82 as the
deficiency amount subject to legal interest
effective September 12, 1997 up to the date of
full payment;
3. Respondent is AWARDED 25% of the
deficiency amount as liquidated damages.
The claim of petitioners Allandale Sportsline,
Inc. and Melbarose R. Sasot to recover
properties subject of the writs of replevin
is DENIED.
No costs.
SO ORDERED.
G.R. No. L-16797             ENRIQUEZ VS RAMOS
Direct appeal on points of law from a decision
of the Court of First Instance of Rizal in its Civil
Case No. Q-4232.
The record is to the effect that on 24 November
1958, Rodrigo Enriquez and the spouses
Urbano Dizon and Aurea Soriano de Dizon sold
to Socorro A. Ramos, by a notarial deed of even
date, eleven (11) parcels of land situated in
Bago Bantay, Quezon City, and covered by their
corresponding certificates of title, for the
stipulated price of P101,000.00. The vendee
paid P5,000.00 down, P2,500.00 in cash, and
P2,500.00 by a check drawn against the
Philippine National Bank, and agreed to satisfy
the balance of P96,000.00 within ninety (90)
days. To secure the said balance, the vendee
Socorro A. Ramos, in the same deed of sale,
mortgaged the eleven parcels in favor of the
vendors. By way of additional security, Socorro
A. Ramos, as attorney-in-fact of her children,
Enrique, Antonio, Milagros, and Lourdes, and as
judicial guardian of her minor child Angelita
Ramos, executed another mortgage on Lot No.
409 of the Malinta Estate.
Because of the vendee-mortgagor's failure to
comply with some conditions of the mortgage,
this action for foreclosure of the mortgage was
filed by the vendors-mortgagees in the court
below, on 29 April 1959. Defendant Socorro
Ramos moved to dismiss, alleging that the
plaintiffs previously had filed action against her
in the Court of First Instance of Manila on 24
February 1959 for the recovery of P2,500.00
paid by check as part of the down payment on
the price of the mortgaged lands; that at the
time this first suit was filed, the mortgage debt
was already accrued and demandable; that
plaintiffs were, therefore, guilty of splitting a
single cause of action, and under section 4 of
Rule 2 of the Rules of Court, the filing of the
first action for P2,500.00 was a defense that
could be pleaded in abatement of the second
suit. Upon opposition by the plaintiffs, the
Court of First Instance of Quezon City denied
the motion to dismiss; but defendant Ramos
repleaded the averments as a special defense
in her answer. After trial, on 16 December
1959, the Court of First Instance of Quezon City
rendered judgment against defendant Ramos;
ordered her to pay P96,000.00, with 12%
interest from 24 February 1959 until payment,
10% of the amount due as attorney's fees, and
the costs of the suit; and further decreed the
foreclosure sale of the mortgaged properties in
case of non-payment within ninety (90) days.
Socorro Ramos appealed directly to this Court,
and here insists that the action should be
dismissed on account of the alleged splitting of
appellee's cause of action, and that the
obligation not having fixed a period, although
one was intended, the court below should have
set first a date of maturity before ordering
payment or foreclosure.
We find no merit in the appeal.
Wherefore, the parties respectfully pray that
the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without
prejudice to the parties adducing other
evidence to prove their case not covered by
this stipulation of facts. 1äwphï1.ñët
An examination of the first complaint filed
against appellant in the Court of First Instance
of Manila shows that it was based on
appellants' having unlawfully stopped payment
of the check for P2,500.00 she had issued in
favor of appellees; while the complaint in the
present action was for non-payment of the
balance of P96,000.00 guaranteed by the
mortgage. The claim for P2,500.00 was,
therefore, a distinct debt not covered by the
security; and since the mortgage was
constituted on lands situated in Quezon City,
the appellees could not ask for its foreclosure in
the Manila courts. The two causes of action
being different, section 4 of Rule 2 does not
apply.
On the second assignment of error: the
stipulation in the mortgage contract that the
obligation for P96,000.00 was to be —
without interest, payable within ninety (90)
days from this date, provided that in case of
default it shall bear interest at the rate of 12%
per annum,
clearly fixes a date of maturity, the stipulated
twelve per cent in case of default being nothing
more than a penalty, designed to induce the
debtor to pay on or before the expiration of the
ninety (90) days. Hence, there was no call upon
the court to set another due date.
Finding no error in the judgment appealed
from, the same is affirmed, with costs against
appellants.
G.R. No. L-26266 TARNATE VS GARCIA
Appeal from an order of the Court of First
Instance of Batangas denying a petition to
restrain the Municipal Court of Batangas,
Batangas, from proceeding with its Civil Case
No. 1091 on the ground of pendency of another
action between the same parties for the same
cause.
On 17 August 1964 herein respondent Lucilo U.
Garcia filed a complaint for forcible entry
against herein petitioner Ramon A. Tarnate in
the Municipal Court of Batangas, Batangas,
which complaint was docketed as Civil Case No.
1083, alleging inter alia that:
2. — On August 2, 1964 plaintiff was and, for
some time prior thereto, had been in
possession of a strip of land situated in the
Municipality of Batangas, Province of Batangas
and known as the old or abandoned bed of the
Calumpang River, said strip of land being
graphically indicated on a sketch with two
parallel lines in blue ink. Copy of the sketch is
hereto attached and made integral part hereof
as Annex "A";
3. — On August 2, 1964 the defendant, without
the knowledge and consent of the plaintiff,
unlawfully, surreptitiously and forcibly, and
with the use of armed men, entered upon and
took possession of aforementioned land and
placed barbed wire fence along the western
side thereof, said barbed wire fence being
indicated graphically with broken lines in red
ink between points "X" and "Y" on the sketch
marked Annex "A", thereby illegally depriving
plaintiff of possession of said land and
preventing him from hauling therefrom
truckloads of sand, so that, unless restrained by
the Court, the defendant will continue to
commit further acts of dispossession and
unwarranted intrusion into the land in
question, to the damage and prejudice of the
plaintiff;
On 10 September 1964 respondent Garcia filed
another complaint for forcible entry against the
same defendant in the same court, which was
docketed as Civil Case No. 1091, alleging inter
alia:
2. That on August 2, 1964 plaintiff was and, for
some time prior thereto, had been in lawful
and peaceful possession of strips of land in the
Municipality of Batangas, Province of Batangas
and known as the old or abandoned bed of the
Calumpang River, said strips of land being
graphically indicated on a sketch with two
parallel lines in blue ink, which is situated east
of lots 57, 59 and 60 of the Batangas cadastre.
Copy of the sketch is hereto attached and made
integral part hereof as Annex "A";
3. That plaintiff's possession over a portion of
said strips of land more specifically that portion
situated east of Lot 57 is in consequence of his
ownership thereof and as regards those
portions east of Lots 59 and 60, supra, as
LESSEE thereof;
4. That on August 2, 1964 the defendant, by
means of force, strategy and stealth and with
the use of armed men, unlawfully,
surreptitiously and forcibly, entered upon and
took possession of the aforementioned strips of
land, placed thereon a barbed wire fence, the
same being indicated graphically with broken
lines in red ink between points of "X" and "Y"on
the sketch marked Annex "A", thereby
unlawfully and illegally deprived plaintiff of the
possession of said strips of land and prevented
him from hauling therefrom truckloads of sand
and since the date defendant has remained in
illegal possession of the premises and, up to the
present, still retain such unlawful possession
thereof, to the damage and prejudice of
plaintiff.
On 28 October 1964 Tarnate moved to dismiss
the second case (No. 1091) on the ground of
pendency of another action between the same
parties for the same cause. Garcia opposed the
motion.
On 23 December 1964 the municipal court
denied the motion to dismiss because it did not
find the ground for dismissal to be indubitable.
Having failed to secure a reconsideration,
petitioner Tarnate filed a petition for
prohibition and mandamus against the
municipal court of Batangas and Lucilo U.
Garcia in the Court of First Instance of Batangas
(Special Civil Case No. 1033), praying that the
order of denial by the municipal court be
annulled and that the said court be
commanded not to give due course to, but to
order the dismissal of Civil Case No. 1091.
After trial, where evidence was introduced and
stipulations of facts were made by the parties,
the Court of First Instance of Batangas
rendered judgment on 12 January 1966 denying
the writ prayed for.
The present case before Us is a direct appeal
from the aforesaid judgment of the Court of
First Instance of Batangas. The said court gave
due course to the appeal and ordered the
transmittal of the original records on 26 April
1966, or before the effectivity of Republic Act
5440.
The issue here is whether or not the municipal
court abused its discretion in denying the
motion to dismiss the second complaint
because the ground therefor, namely,
pendency of another action between the same
parties for the same cause, was not
indubitable. The court of first instance held that
there was no abuse of discretion and that if the
municipal court committed an error it was an
error of judgment, which was not correctible
by certiorari or prohibition.
Why two separate complaints instead of only
one were filed by herein private respondent is
explained by him in his opposition to the
petitioner's motion to dismiss in the municipal
court, thus:
We wish to state that before plaintiff instituted
the first action, he made a cursory inspection of
the fence illegally introduced by defendant on
the premises in dispute. Believing that the said
fence covers only Lot 58, Batangas Cadastre, of
which he is the administrator of his son Adrian
Garcia, be instituted CIVIL CASE NO. 1083
against the defendant....
However, a couple of weeks after the
institution of the first case or specifically on
September 1, 1964, plaintiff engaged the
services of a Private Land Surveyor to
undertake a relocation survey of Lots 57, 58, 59
and 60, Batangas, cadastre, in order to
determine the correct boundaries of said lots in
relation to the fence illegally constructed by
defendant RAMON A. TARNATE on the
abandoned river bed in question. The result of
the relocation survey was that shown in the
approved relocation plan showing that the said
fence not only intruded upon Lot 85, Batangas
Cadastre which is the subject matter of the first
case, but also encroaches upon Lots 57, 59 and
60, Batangas Cadastre, which are the subject
matter of the case at bar. (Emphasis supplied)
In the court of first instance the parties
stipulated in the course of the trial that Civil
Case No. 1083 referred to "that portion of the
old bed of the Calumpang River east of Lot 58"
and that Civil Case No. 1091 referred to the bed
of the "old course of the Calumpang River east
of Lot 57, 59 and 60."
While from the strictly technical viewpoint
there was a splitting of the cause of action in
pursuing the same remedy in two separate
complaints notwithstanding the fact that the
alleged forcible entry constituted one and the
same act, still a realistic and practical approach
dictated the action taken by the municipal
court. It should be remembered that the first
complaint was commenced on 17 August 1964
and had not yet been tried when the second
was filed about three weeks later. The two
cases could be tried together as one, or the
second complaint could be treated as an
amendment of the first. Either way the entire
controversy between the parties could be
judicially settled, disregarding unessential
procedural niceties, especially in the light of the
reasonable explanation offered by the plaintiff
below.
WHEREFORE, the order appealed from is
hereby affirmed, with costs against the
appellant.
G.R. No. 182435               ADA VS BAYLOS
Before this Court is a petition for review
on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the
Decision1 dated October 26, 2007 rendered by
the Court of Appeals (CA) in CA-G.R. CV No.
01746. The assailed decision partially reversed
and set aside the Decision2 dated October 20,
2005 issued ~y the Regional Trial Court (RTC),
Tan jay City, Negros Oriental, Branch 43 in Civil
Case No. 11657.
The Antecedent Facts
This case involves the estate of spouses
Florentino Baylon and Maximina Elnas Baylon
(Spouses Baylon) who died on November 7,
1961 and May 5, 1974, respectively.3 At the
time of their death, Spouses Baylon were
survived by their legitimate children, namely,
Rita Baylon (Rita), Victoria Baylon (Victoria),
Dolores Baylon (Dolores), Panfila Gomez
(Panfila), Ramon Baylon (Ramon) and herein
petitioner Lilia B. Ada (Lilia).
Dolores died intestate and without issue on
August 4, 1976. Victoria died on November 11,
1981 and was survived by her daughter, herein
petitioner Luz B. Adanza. Ramon died intestate
on July 8, 1989 and was survived by herein
respondent Florante Baylon (Florante), his child
from his first marriage, as well as by petitioner
Flora Baylon, his second wife, and their
legitimate children, namely, Ramon, Jr. and
herein petitioners Remo, Jose, Eric, Florentino
and Ma. Ruby, all surnamed Baylon.
On July 3, 1996, the petitioners filed with the
RTC a Complaint4 for partition, accounting and
damages against Florante, Rita and Panfila.
They alleged therein that Spouses Baylon,
during their lifetime, owned 43 parcels of
land5 all situated in Negros Oriental. After the
death of Spouses Baylon, they claimed that Rita
took possession of the said parcels of land and
appropriated for herself the income from the
same. Using the income produced by the said
parcels of land, Rita allegedly purchased two
parcels of land, Lot No. 47096 and half of Lot
No. 4706,7 situated in Canda-uay, Dumaguete
City. The petitioners averred that Rita refused
to effect a partition of the said parcels of land.
In their Answer,8 Florante, Rita and Panfila
asserted that they and the petitioners co-
owned 229 out of the 43 parcels of land
mentioned in the latter’s complaint, whereas
Rita actually owned 10 parcels of land10 out of
the 43 parcels which the petitioners sought to
partition, while the remaining 11 parcels of
land are separately owned by Petra Cafino
Adanza,11 Florante,12 Meliton Adalia,13 Consorcia
Adanza,14 Lilia15 and Santiago Mendez.16 Further,
they claimed that Lot No. 4709 and half of Lot
No. 4706 were acquired by Rita using her own
money. They denied that Rita appropriated
solely for herself the income of the estate of
Spouses Baylon, and expressed no objection to
the partition of the estate of Spouses Baylon,
but only with respect to the co-owned parcels
of land.
During the pendency of the case, Rita, through
a Deed of Donation dated July 6, 1997,
conveyed Lot No. 4709 and half of Lot No. 4706
to Florante. On July 16, 2000, Rita died
intestate and without any issue. Thereafter,
learning of the said donation inter vivos in favor
of Florante, the petitioners filed a
Supplemental Pleading17 dated February 6,
2002, praying that the said donation in favor of
the respondent be rescinded in accordance
with Article 1381(4) of the Civil Code. They
further alleged that Rita was already sick and
very weak when the said Deed of Donation was
supposedly executed and, thus, could not have
validly given her consent thereto.
Florante and Panfila opposed the rescission of
the said donation, asserting that Article 1381(4)
of the Civil Code applies only when there is
already a prior judicial decree on who between
the contending parties actually owned the
properties under litigation.18
The RTC Decision
On October 20, 2005, the RTC rendered a
Decision,19 the decretal portion of which reads:
Wherefore judgment is hereby rendered:
(1) declaring the existence of co-ownership
over parcels nos. 1, 2, 3, 5, 7, 10, 13, 14, 16, 17,
18, 26, 29, 30, 33, 34, 35, 36, 40 and 41
described in the complaint;
(2) directing that the above mentioned parcels
of land be partitioned among the heirs of
Florentino Baylon and Maximina Baylon;
(3) declaring a co-ownership on the properties
of Rita Baylon namely parcels no[s]. 6, 11, 12,
20, 24, 27, 31, 32, 39 and 42 and directing that
it shall be partitioned among her heirs who are
the plaintiffs and defendant in this case;
(4) declaring the donation inter vivos rescinded
without prejudice to the share of Florante
Baylon to the estate of Rita Baylon and
directing that parcels nos. 1 and 2 paragraph V
of the complaint be included in the division of
the property as of Rita Baylon among her heirs,
the parties in this case;
(5) excluding from the co-ownership parcels
nos. 20, 21, 22, 9, 43, 4, 8, 19 and 37.
Considering that the parties failed to settle this
case amicably and could not agree on the
partition, the parties are directed to nominate a
representative to act as commissioner to make
the partition. He shall immediately take [his]
oath of office upon [his] appointment. The
commissioner shall make a report of all the
proceedings as to the partition within fifteen
(15) days from the completion of this partition.
The parties are given ten (10) days within which
to object to the report after which the Court
shall act on the commissioner report.
SO ORDERED.20 (Emphasis ours)
The RTC held that the death of Rita during the
pendency of the case, having died intestate and
without any issue, had rendered the issue of
ownership insofar as parcels of land which she
claims as her own moot since the parties below
are the heirs to her estate. Thus, the RTC
regarded Rita as the owner of the said 10
parcels of land and, accordingly, directed that
the same be partitioned among her heirs.
Nevertheless, the RTC rescinded the donation
inter vivos of Lot No. 4709 and half of Lot No.
4706 in favor of Florante. In rescinding the said
donation inter vivos, the RTC explained that:
However, with respect to lot nos. 4709 and
4706 which [Rita] had conveyed to Florante
Baylon by way of donation inter vivos, the
plaintiffs in their supplemental pleadings (sic)
assailed the same to be rescissible on the
ground that it was entered into by the
defendant Rita Baylon without the knowledge
and approval of the litigants [or] of competent
judicial authority. The subject parcels of lands
are involved in the case for which plaintiffs
have asked the Court to partition the same
among the heirs of Florentino Baylon and
Maximina Elnas.
Clearly, the donation inter vivos in favor of
Florante Baylon was executed to prejudice the
plaintiffs’ right to succeed to the estate of Rita
Baylon in case of death considering that as
testified by Florante Baylon, Rita Baylon was
very weak and he tried to give her vitamins x x
x. The donation inter vivos executed by Rita
Baylon in favor of Florante Baylon is rescissible
for the reason that it refers to the parcels of
land in litigation x x x without the knowledge
and approval of the plaintiffs or of this Court.
However, the rescission shall not affect the
share of Florante Baylon to the estate of Rita
Baylon.21
Florante sought reconsideration of the Decision
dated October 20, 2005 of the RTC insofar as it
rescinded the donation of Lot No. 4709 and half
of Lot No. 4706 in his favor.22 He asserted that,
at the time of Rita’s death on July 16, 2000, Lot
No. 4709 and half of Lot No. 4706 were no
longer part of her estate as the same had
already been conveyed to him through a
donation inter vivos three years earlier. Thus,
Florante maintained that Lot No. 4709 and half
of Lot No. 4706 should not be included in the
properties that should be partitioned among
the heirs of Rita.
On July 28, 2006, the RTC issued an
Order23 which denied the motion for
reconsideration filed by Florante.
The CA Decision
On appeal, the CA rendered a Decision24 dated
October 26, 2007, the dispositive portion of
which reads:
WHEREFORE, the Decision dated October 20,
2005 and Order dated July 28, 2006
are REVERSED and SET ASIDE insofar as they
decreed the rescission of the Deed of Donation
dated July 6, 1997 and the inclusion of lot no.
4709 and half of lot no. 4706 in the estate of
Rita Baylon. The case is REMANDED to the trial
court for the determination of ownership of lot
no. 4709 and half of lot no. 4706.
SO ORDERED.25
The CA held that before the petitioners may file
an action for rescission, they must first obtain a
favorable judicial ruling that Lot No. 4709 and
half of Lot No. 4706 actually belonged to the
estate of Spouses Baylon and not to Rita. Until
then, the CA asserted, an action for rescission is
premature. Further, the CA ruled that the
petitioners’ action for rescission cannot be
joined with their action for partition,
accounting and damages through a mere
supplemental pleading. Thus:
If Lot No. 4709 and half of Lot No. 4706
belonged to the Spouses’ estate, then Rita
Baylon’s donation thereof in favor of Florante
Baylon, in excess of her undivided share therein
as co-heir, is void. Surely, she could not have
validly disposed of something she did not own.
In such a case, an action for rescission of the
donation may, therefore, prosper.
If the lots, however, are found to have
belonged exclusively to Rita Baylon, during her
lifetime, her donation thereof in favor of
Florante Baylon is valid. For then, she merely
exercised her ownership right to dispose of
what legally belonged to her. Upon her death,
the lots no longer form part of her estate as
their ownership now pertains to Florante
Baylon. On this score, an action for rescission
against such donation will not prosper. x x x.
Verily, before plaintiffs-appellees may file an
action for rescission, they must first obtain a
favorable judicial ruling that lot no. 4709 and
half of lot no. 4706 actually belonged to the
estate of Spouses Florentino and Maximina
Baylon, and not to Rita Baylon during her
lifetime. Until then, an action for rescission is
premature. For this matter, the applicability of
Article 1381, paragraph 4, of the New Civil Code
must likewise await the trial court’s resolution
of the issue of ownership.
Be that as it may, an action for rescission
should be filed by the parties concerned
independent of the proceedings below. The
first cannot simply be lumped up with the
second through a mere supplemental
pleading.26 (Citation omitted)
The petitioners sought reconsideration27 of the
Decision dated October 26, 2007 but it was
denied by the CA in its Resolution28 dated
March 6, 2008.
Hence, this petition.
Issue
The lone issue to be resolved by this Court is
whether the CA erred in ruling that the
donation inter vivos of Lot No. 4709 and half of
Lot No. 4706 in favor of Florante may only be
rescinded if there is already a judicial
determination that the same actually belonged
to the estate of Spouses Baylon.
The Court’s Ruling
The petition is partly meritorious.
Procedural Matters
Before resolving the lone substantive issue in
the instant case, this Court deems it proper to
address certain procedural matters that need
to be threshed out which, by laxity or
otherwise, were not raised by the parties
herein.
Misjoinder of Causes of Action
The complaint filed by the petitioners with the
RTC involves two separate, distinct and
independent actions – partition and rescission.
First, the petitioners raised the refusal of their
co-heirs, Florante, Rita and Panfila, to partition
the properties which they inherited from
Spouses Baylon. Second, in their supplemental
pleading, the petitioners assailed the donation
inter vivos of Lot No. 4709 and half of Lot No.
4706 made by Rita in favor of Florante
pendente lite.
The actions of partition and
rescission cannot be joined in a
single action.
By a joinder of actions, or more properly, a
joinder of causes of action is meant the uniting
of two or more demands or rights of action in
one action, the statement of more than one
cause of action in a declaration. It is the union
of two or more civil causes of action, each of
which could be made the basis of a separate
suit, in the same complaint, declaration or
petition. A plaintiff may under certain
circumstances join several distinct demands,
controversies or rights of action in one
declaration, complaint or petition.29
The objectives of the rule or provision are to
avoid a multiplicity of suits where the same
parties and subject matter are to be dealt with
by effecting in one action a complete
determination of all matters in controversy and
litigation between the parties involving one
subject matter, and to expedite the disposition
of litigation at minimum cost. The provision
should be construed so as to avoid such
multiplicity, where possible, without prejudice
to the rights of the litigants.30
Nevertheless, while parties to an action may
assert in one pleading, in the alternative or
otherwise, as many causes of action as they
may have against an opposing party, such
joinder of causes of action is subject to the
condition, inter alia, that the joinder shall not
include special civil actions governed by special
rules.31
Here, there was a misjoinder of causes of
action. The action for partition filed by the
petitioners could not be joined with the action
for the rescission of the said donation inter
vivos in favor of Florante. Lest it be overlooked,
an action for partition is a special civil action
governed by Rule 69 of the Rules of Court while
an action for rescission is an ordinary civil
action governed by the ordinary rules of civil
procedure. The variance in the procedure in the
special civil action of partition and in the
ordinary civil action of rescission precludes
their joinder in one complaint or their being
tried in a single proceeding to avoid confusion
in determining what rules shall govern the
conduct of the proceedings as well as in the
determination of the presence of requisite
elements of each particular cause of action.32
A misjoined cause of action, if not
severed upon motion of a party or
by the court sua sponte, may be
adjudicated by the court together
with the other causes of action.
Nevertheless, misjoinder of causes of action is
not a ground for dismissal. Indeed, the courts
have the power, acting upon the motion of a
party to the case or sua sponte, to order the
severance of the misjoined cause of action to
be proceeded with separately.33 However, if
there is no objection to the improper joinder or
the court did not motu proprio direct a
severance, then there exists no bar in the
simultaneous adjudication of all the
erroneously joined causes of action. On this
score, our disquisition in Republic of the
Philippines v. Herbieto34 is instructive, viz:
This Court, however, disagrees with petitioner
Republic in this regard. This procedural lapse
committed by the respondents should not
affect the jurisdiction of the MTC to proceed
with and hear their application for registration
of the Subject Lots.
xxxx
Considering every application for land
registration filed in strict accordance with the
Property Registration Decree as a single cause
of action, then the defect in the joint
application for registration filed by the
respondents with the MTC constitutes a
misjoinder of causes of action and parties.
Instead of a single or joint application for
registration, respondents Jeremias and David,
more appropriately, should have filed separate
applications for registration of Lots No. 8422
and 8423, respectively.
Misjoinder of causes of action and parties do
not involve a question of jurisdiction of the
court to hear and proceed with the case. They
are not even accepted grounds for dismissal
thereof. Instead, under the Rules of Court, the
misjoinder of causes of action and parties
involve an implied admission of the court’s
jurisdiction. It acknowledges the power of the
court, acting upon the motion of a party to the
case or on its own initiative, to order the
severance of the misjoined cause of action, to
be proceeded with separately (in case of
misjoinder of causes of action); and/or the
dropping of a party and the severance of any
claim against said misjoined party, also to be
proceeded with separately (in case of
misjoinder of parties).35 (Citations omitted)
It should be emphasized that the foregoing rule
only applies if the court trying the case has
jurisdiction over all of the causes of action
therein notwithstanding the misjoinder of the
same. If the court trying the case has no
jurisdiction over a misjoined cause of action,
then such misjoined cause of action has to be
severed from the other causes of action, and if
not so severed, any adjudication rendered by
the court with respect to the same would be a
nullity.
Here, Florante posed no objection, and neither
did the RTC direct the severance of the
petitioners’ action for rescission from their
action for partition. While this may be a patent
omission on the part of the RTC, this does not
constitute a ground to assail the validity and
correctness of its decision. The RTC validly
adjudicated the issues raised in the actions for
partition and rescission filed by the petitioners.
Asserting a New Cause of Action in a
Supplemental Pleading
In its Decision dated October 26, 2007, the CA
pointed out that the said action for rescission
should have been filed by the petitioners
independently of the proceedings in the action
for partition. It opined that the action for
rescission could not be lumped up with the
action for partition through a mere
supplemental pleading.
We do not agree.
A supplemental pleading may raise
a new cause of action as long as it
has some relation to the original
cause of action set forth in the
original complaint.
Section 6, Rule 10 of the Rules of Court reads:
Sec. 6. Supplemental Pleadings. – Upon motion
of a party the court may, upon reasonable
notice and upon such terms as are just, permit
him to serve a supplemental pleading setting
forth transactions, occurrences or events which
have happened since the date of the pleading
sought to be supplemented. The adverse party
may plead thereto within ten (10) days from
notice of the order admitting the supplemental
pleading.
In Young v. Spouses Sy,36 this Court had the
opportunity to elucidate on the purpose of a
supplemental pleading. Thus:
As its very name denotes, a supplemental
pleading only serves to bolster or add
something to the primary pleading. A
supplement exists side by side with the original.
It does not replace that which it supplements.
Moreover, a supplemental pleading assumes
that the original pleading is to stand and that
the issues joined with the original pleading
remained an issue to be tried in the action. It is
but a continuation of the complaint. Its usual
office is to set up new facts which justify,
enlarge or change the kind of relief with
respect to the same subject matter as the
controversy referred to in the original
complaint.
The purpose of the supplemental pleading is to
bring into the records new facts which will
enlarge or change the kind of relief to which
the plaintiff is entitled; hence, any
supplemental facts which further develop the
original right of action, or extend to vary the
relief, are available by way of supplemental
complaint even though they themselves
constitute a right of action.37 (Citations omitted
and emphasis ours)
Thus, a supplemental pleading may properly
allege transactions, occurrences or events
which had transpired after the filing of the
pleading sought to be supplemented, even if
the said supplemental facts constitute another
cause of action.
Admittedly, in Leobrera v. Court of
Appeals,38 we held that a supplemental pleading
must be based on matters arising subsequent
to the original pleading related to the claim or
defense presented therein, and founded on the
same cause of action. We further stressed
therein that a supplemental pleading may not
be used to try a new cause of action.
However, in Planters Development Bank v. LZK
Holdings and Development Corp.,39 we clarified
that, while a matter stated in a supplemental
complaint should have some relation to the
cause of action set forth in the original
pleading, the fact that the supplemental
pleading technically states a new cause of
action should not be a bar to its allowance but
only a matter that may be considered by the
court in the exercise of its discretion. In such
cases, we stressed that a broad definition of
"cause of action" should be applied.
Here, the issue as to the validity of the
donation inter vivos of Lot No. 4709 and half of
Lot No. 4706 made by Rita in favor of Florante
is a new cause of action that occurred after the
filing of the original complaint. However, the
petitioners’ prayer for the rescission of the said
donation inter vivos in their supplemental
pleading is germane to, and is in fact,
intertwined with the cause of action in the
partition case. Lot No. 4709 and half of Lot No.
4706 are included among the properties that
were sought to be partitioned.
The petitioners’ supplemental pleading merely
amplified the original cause of action, on
account of the gratuitous conveyance of Lot
No. 4709 and half of Lot No. 4706 after the
filing of the original complaint and prayed for
additional reliefs, i.e., rescission. Indeed, the
petitioners claim that the said lots form part of
the estate of Spouses Baylon, but cannot be
partitioned unless the gratuitous conveyance of
the same is rescinded. Thus, the principal issue
raised by the petitioners in their original
complaint remained the same.
Main Issue: Propriety of Rescission
After having threshed out the procedural
matters, we now proceed to adjudicate the
substantial issue presented by the instant
petition.
The petitioners assert that the CA erred in
remanding the case to the RTC for the
determination of ownership of Lot No. 4709
and half of Lot No. 4706. They maintain that
the RTC aptly rescinded the said donation inter
vivos of Lot No. 4709 and half of Lot No. 4706
pursuant to Article 1381(4) of the Civil Code.
In his Comment,40 Florante asserts that before
the petitioners may file an action for rescission,
they must first obtain a favorable judicial ruling
that Lot No. 4709 and half of Lot No. 4706
actually belonged to the estate of Spouses
Baylon. Until then, Florante avers that an action
for rescission would be premature.
The petitioners’ contentions are well-taken.
The resolution of the instant dispute is
fundamentally contingent upon a
determination of whether the donation inter
vivos of Lot No. 4709 and half of Lot No. 4706 in
favor of Florante may be rescinded pursuant to
Article 1381(4) of the Civil Code on the ground
that the same was made during the pendency
of the action for partition with the RTC.
Rescission is a remedy to address
the damage or injury caused to the
contracting parties or third
persons.
Rescission is a remedy granted by law to the
contracting parties and even to third persons,
to secure the reparation of damages caused to
them by a contract, even if it should be valid, by
means of the restoration of things to their
condition at the moment prior to the
celebration of said contract.41 It is a remedy to
make ineffective a contract, validly entered into
and therefore obligatory under normal
conditions, by reason of external causes
resulting in a pecuniary prejudice to one of the
contracting parties or their creditors.42
Contracts which are rescissible are valid
contracts having all the essential requisites of a
contract, but by reason of injury or damage
caused to either of the parties therein or to
third persons are considered defective and,
thus, may be rescinded.
The kinds of rescissible contracts, according to
the reason for their susceptibility to rescission,
are the following: first, those which are
rescissible because of lesion or
prejudice;43 second, those which are rescissible
on account of fraud or bad faith;44 and third,
those which, by special provisions of law,45 are
susceptible to rescission. 46
Contracts which refer to things
subject of litigation is rescissible
pursuant to Article 1381(4) of the
Civil Code.
Contracts which are rescissible due to fraud or
bad faith include those which involve things
under litigation, if they have been entered into
by the defendant without the knowledge and
approval of the litigants or of competent
judicial authority. Thus, Article 1381(4) of the
Civil Code provides:
Art. 1381. The following contracts are
rescissible:
xxxx
(4) Those which refer to things under litigation
if they have been entered into by the
defendant without the knowledge and approval
of the litigants or of competent judicial
authority.
The rescission of a contract under Article
1381(4) of the Civil Code only requires the
concurrence of the following: first, the
defendant, during the pendency of the case,
enters into a contract which refers to the thing
subject of litigation; and second, the said
contract was entered into without the
knowledge and approval of the litigants or of a
competent judicial authority. As long as the
foregoing requisites concur, it becomes the
duty of the court to order the rescission of the
said contract.
The reason for this is simple. Article 1381(4)
seeks to remedy the presence of bad faith
among the parties to a case and/or any
fraudulent act which they may commit with
respect to the thing subject of litigation.
When a thing is the subject of a judicial
controversy, it should ultimately be bound by
whatever disposition the court shall render.
The parties to the case are therefore expected,
in deference to the court’s exercise of
jurisdiction over the case, to refrain from doing
acts which would dissipate or debase the thing
subject of the litigation or otherwise render the
impending decision therein ineffectual.
There is, then, a restriction on the disposition
by the parties of the thing that is the subject of
the litigation. Article 1381(4) of the Civil Code
requires that any contract entered into by a
defendant in a case which refers to things
under litigation should be with the knowledge
and approval of the litigants or of a competent
judicial authority.
Further, any disposition of the thing subject of
litigation or any act which tends to render
inutile the court’s impending disposition in such
case, sans the knowledge and approval of the
litigants or of the court, is unmistakably and
irrefutably indicative of bad faith. Such acts
undermine the authority of the court to lay
down the respective rights of the parties in a
case relative to the thing subject of litigation
and bind them to such determination.
It should be stressed, though, that the
defendant in such a case is not absolutely
proscribed from entering into a contract which
refer to things under litigation. If, for instance,
a defendant enters into a contract which
conveys the thing under litigation during the
pendency of the case, the conveyance would be
valid, there being no definite disposition yet
coming from the court with respect to the thing
subject of litigation. After all, notwithstanding
that the subject thereof is a thing under
litigation, such conveyance is but merely an
exercise of ownership.
This is true even if the defendant effected the
conveyance without the knowledge and
approval of the litigants or of a competent
judicial authority. The absence of such
knowledge or approval would not precipitate
the invalidity of an otherwise valid contract.
Nevertheless, such contract, though considered
valid, may be rescinded at the instance of the
other litigants pursuant to Article 1381(4) of
the Civil Code.
Here, contrary to the CA’s disposition, the RTC
aptly ordered the rescission of the donation
inter vivos of Lot No. 4709 and half of Lot No.
4706 in favor of Florante. The petitioners had
sufficiently established the presence of the
requisites for the rescission of a contract
pursuant to Article 1381(4) of the Civil Code. It
is undisputed that, at the time they were
gratuitously conveyed by Rita, Lot No. 4709 and
half of Lot No. 4706 are among the properties
that were the subject of the partition case then
pending with the RTC. It is also undisputed that
Rita, then one of the defendants in the
partition case with the RTC, did not inform nor
sought the approval from the petitioners or of
the RTC with regard to the donation inter vivos
of the said parcels of land to Florante.
Although the gratuitous conveyance of the said
parcels of land in favor of Florante was valid,
the donation inter vivos of the same being
merely an exercise of ownership, Rita’s failure
to inform and seek the approval of the
petitioners or the RTC regarding the
conveyance gave the petitioners the right to
have the said donation rescinded pursuant to
Article 1381(4) of the Civil Code.
Rescission under Article 1381(4) of
the Civil Code is not preconditioned
upon the judicial determination as
to the ownership of the thing
subject of litigation.
In this regard, we also find the assertion that
rescission may only be had after the RTC had
finally determined that the parcels of land
belonged to the estate of Spouses Baylon
intrinsically amiss. The petitioners’ right to
institute the action for rescission pursuant to
Article 1381(4) of the Civil Code is not
preconditioned upon the RTC’s determination
as to the ownership of the said parcels of land.
It bears stressing that the right to ask for the
rescission of a contract under Article 1381(4) of
the Civil Code is not contingent upon the final
determination of the ownership of the thing
subject of litigation. The primordial purpose of
Article 1381(4) of the Civil Code is to secure the
possible effectivity of the impending judgment
by a court with respect to the thing subject of
litigation. It seeks to protect the binding effect
of a court’s impending adjudication vis-à-vis the
thing subject of litigation regardless of which
among the contending claims therein would
subsequently be upheld. Accordingly, a
definitive judicial determination with respect to
the thing subject of litigation is not a condition
sine qua non before the rescissory action
contemplated under Article 1381(4) of the Civil
Code may be instituted.
Moreover, conceding that the right to bring the
rescissory action pursuant to Article 1381(4) of
the Civil Code is preconditioned upon a judicial
determination with regard to the thing subject
litigation, this would only bring about the very
predicament that the said provision of law
seeks to obviate. Assuming arguendo that a
rescissory action under Article 1381(4) of the
Civil Code could only be instituted after the
dispute with respect to the thing subject of
litigation is judicially determined, there is the
possibility that the same may had already been
conveyed to third persons acting in good faith,
rendering any judicial determination with
regard to the thing subject of litigation illusory.
Surely, this paradoxical eventuality is not what
the law had envisioned.
Even if the donation inter vivos is
validly rescinded, a determination
as to the ownership of the subject
parcels of land is still necessary.
Having established that the RTC had aptly
ordered the rescission of the said donation
inter vivos in favor of Florante, the issue that
has to be resolved by this Court is whether
there is still a need to determine the ownership
of Lot No. 4709 and half of Lot No. 4706.
In opting not to make a determination as to the
ownership of Lot No. 4709 and half of Lot No.
4706, the RTC reasoned that the parties in the
proceedings before it constitute not only the
surviving heirs of Spouses Baylon but the
surviving heirs of Rita as well. As intimated
earlier, Rita died intestate during the pendency
of the proceedings with the RTC without any
issue, leaving the parties in the proceedings
before the RTC as her surviving heirs. Thus, the
RTC insinuated, a definitive determination as to
the ownership of the said parcels of land is
unnecessary since, in any case, the said parcels
of land would ultimately be adjudicated to the
parties in the proceedings before it.
We do not agree.
Admittedly, whoever may be adjudicated as the
owner of Lot No. 4709 and half of Lot No. 4706,
be it Rita or Spouses Baylon, the same would
ultimately be transmitted to the parties in the
proceedings before the RTC as they are the only
surviving heirs of both Spouses Baylon and Rita.
However, the RTC failed to realize that a
definitive adjudication as to the ownership of
Lot No. 4709 and half of Lot No. 4706 is
essential in this case as it affects the authority
of the RTC to direct the partition of the said
parcels of land. Simply put, the RTC cannot
properly direct the partition of Lot No. 4709
and half of Lot No. 4706 until and unless it
determines that the said parcels of land indeed
form part of the estate of Spouses Baylon.
It should be stressed that the partition
proceedings before the RTC only covers the
properties co-owned by the parties therein in
their respective capacity as the surviving heirs
of Spouses Baylon. Hence, the authority of the
RTC to issue an order of partition in the
proceedings before it only affects those
properties which actually belonged to the
estate of Spouses Baylon.
In this regard, if Lot No. 4709 and half of Lot
No. 4706, as unwaveringly claimed by Florante,
are indeed exclusively owned by Rita, then the
said parcels of land may not be partitioned
simultaneously with the other properties
subject of the partition case before the RTC. In
such case, although the parties in the case
before the RTC are still co-owners of the said
parcels of land, the RTC would not have the
authority to direct the partition of the said
parcels of land as the proceedings before it is
only concerned with the estate of Spouses
Baylon.
WHEREFORE, in consideration of the foregoing
disquisitions, the petition is PARTIALLY
GRANTED. The Decision dated October 26,
2007 issued by the Court of Appeals in CA-G.R.
CV No. 01746 is MODIFIED in that the Decision
dated October 20, 2005 issued by the Regional
Trial Court, Tanjay City, Negros Oriental, Branch
43 in Civil Case No. 11657, insofar as it decreed
the rescission of the Deed of Donation dated
July 6, 1997 is hereby REINSTATED. The case
is REMANDED to the trial court for the
determination of the ownership of Lot No. 4709
and half of Lot No. 4706 in accordance with this
Decision.
SO ORDERED.
G.R. No. L-64013 UNION GLASS
VS SEC
This petition for certiorari and prohibition seeks
to annul and set aside the Order of the
Securities and Exchange Commission, dated
September 25, 1981, upholding its jurisdiction
in SEC Case No. 2035, entitled "Carolina
Hofileña, Complainant, versus Development
Bank of the Philippines, et al., Respondents."
Private respondent Carolina Hofileña,
complainant in SEC Case No. 2035, is a
stockholder of Pioneer Glass Manufacturing
Corporation, Pioneer Glass for short, a
domestic corporation engaged in the operation
of silica mines and the manufacture of glass
and glassware. Since 1967, Pioneer Glass had
obtained various loan accommodations from
the Development Bank of the Philippines [DBP],
and also from other local and foreign sources
which DBP guaranteed.
As security for said loan accommodations,
Pioneer Glass mortgaged and/or assigned its
assets, real and personal, to the DBP, in
addition to the mortgages executed by some of
its corporate officers over their personal assets.
The proceeds of said financial exposure of the
DBP were used in the construction of a glass
plant in Rosario, Cavite, and the operation of
seven silica mining claims owned by the
corporation.
It appears that through the conversion into
equity of the accumulated unpaid interests on
the various loans amounting to P5.4 million as
of January 1975, and subsequently increased by
another P2.2 million in 1976, the DBP was able
to gain control of the outstanding shares of
common stocks of Pioneer Glass, and to get
two, later three, regular seats in the
corporation's board of directors.
Sometime in March, 1978, when Pioneer Glass
suffered serious liquidity problems such that it
could no longer meet its financial obligations
with DBP, it entered into a dacion en pago
agreement with the latter, whereby all its
assets mortgaged to DBP were ceded to the
latter in full satisfaction of the corporation's
obligations in the total amount of
P59,000,000.00. Part of the assets transferred
to the DBP was the glass plant in Rosario,
Cavite, which DBP leased and subsequently sold
to herein petitioner Union Glass and Container
Corporation, hereinafter referred to as Union
Glass.
On April 1, 1981, Carolina Hofileña filed a
complaint before the respondent Securities and
Exchange Commission against the DBP, Union
Glass and Pioneer Glass, docketed as SEC Case
No. 2035. Of the five causes of action pleaded
therein, only the first cause of action concerned
petitioner Union Glass as transferee and
possessor of the glass plant. Said first cause of
action was based on the alleged illegality of the
aforesaid dacion en pago resulting from: [1] the
supposed unilateral and unsupported
undervaluation of the assets of Pioneer Glass
covered by the agreement; [2] the self-dealing
indulged in by DBP, having acted both as
stockholder/director and secured creditor of
Pioneer Glass; and [3] the wrongful inclusion by
DBP in its statement of account of P26M as due
from Pioneer Glass when the same had already
been converted into equity.
Thus, with respect to said first cause of action,
respondent Hofileña prayed that the SEC issue
an order:têñ.£îhqwâ£
1. Holding that the so called dacion en pago
conveying all the assets of Pioneer Glass and
the Hofileña personal properties to Union Glass
be declared null and void on the ground that
the said conveyance was tainted with.têñ.
£îhqwâ£
A. Self-dealing on the part of DBP which was
acting both as a controlling
stockholder/director and as secured creditor of
the Pioneer Glass, all to its advantage and to
that of Union Glass, and to the gross prejudice
of the Pioneer Glass,
B. That the dacion en pago is void because
there was gross undervaluation of the assets
included in the so-called dacion en pago by
more than 100% to the prejudice of Pioneer
Glass and to the undue advantage of DBP and
Union Glass;
C. That the DBP unduly favored Union Glass
over another buyer, San Miguel Corporation,
notwithstanding the clearly advantageous
terms offered by the latter to the prejudice of
Pioneer Glass, its other creditors and so-called
'Minority stockholders.'
2. Holding that the assets of the Pioneer Glass
taken over by DBP and part of which was
delivered to Union Glass particularly the glass
plant to be returned accordingly.
3. That the DBP be ordered to accept and
recognize the appraisal conducted by the Asian
Appraisal Inc. in 1975 and again in t978 of the
asset of Pioneer Glass. 1
In her common prayer, Hofileña asked that DBP
be sentenced to pay Pioneer Glass actual,
consequential, moral and exemplary damages,
for its alleged illegal acts and gross bad faith;
and for DBP and Union Glass to pay her a
reasonable amount as attorney's fees. 2
On April 21, 1981, Pioneer Glass filed its
answer. On May 8, 1981, petitioners moved for
dismissal of the case on the ground that the
SEC had no jurisdiction over the subject matter
or nature of the suit. Respondent Hofileña filed
her opposition to said motion, to which herein
petitioners filed a rejoinder.
On July 23, 1981, SEC Hearing Officer Eugenio E.
Reyes, to whom the case was assigned, granted
the motion to dismiss for lack of jurisdiction.
However, on September 25, 1981, upon motion
for reconsideration filed by respondent
Hofileña, Hearing Officer Reyes reversed his
original order by upholding the SEC's
jurisdiction over the subject matter and over
the persons of petitioners. Unable to secure a
reconsideration of the Order as well as to have
the same reviewed by the Commission En Banc,
petitioners filed the instant petition for
certiorari and prohibition to set aside the order
of September 25, 1981, and to prevent
respondent SEC from taking cognizance of SEC
Case No. 2035.
The issue raised in the petition may be
propounded thus: Is it the regular court or the
SEC that has jurisdiction over the case?
In upholding the SEC's jurisdiction over the case
Hearing Officer Reyes rationalized his
conclusion thus:têñ.£îhqwâ£
As correctly pointed out by the complainant,
the present action is in the form of a derivative
suit instituted by a stockholder for the benefit
of the corporation, respondent Pioneer Glass
and Manufacturing Corporation, principally
against another stockholder, respondent
Development Bank of the Philippines, for
alleged illegal acts and gross bad faith which
resulted in the dacion en pago arrangement
now being questioned by complainant. These
alleged illegal acts and gross bad faith came
about precisely by virtue of respondent
Development Bank of the Philippine's status as
a stockholder of co-respondent Pioneer Glass
Manufacturing Corporation although its status
as such stockholder, was gained as a result of
its being a creditor of the latter. The derivative
nature of this instant action can also be gleaned
from the common prayer of the complainant
which seeks for an order directing respondent
Development Bank of the Philippines to pay co-
respondent Pioneer Glass Manufacturing
Corporation damages for the alleged illegal acts
and gross bad faith as above-mentioned.
As far as respondent Union Glass and Container
Corporation is concerned, its inclusion as a
party-respondent by virtue of its being an
indispensable party to the present action, it
being in possession of the assets subject of the
dacion en pago and, therefore, situated in such
a way that it will be affected by any judgment
thereon, 3
In the ordinary course of things, petitioner
Union Glass, as transferee and possessor of the
glass plant covered by the dacion en
pago agreement, should be joined as party-
defendant under the general rule which
requires the joinder of every party who has an
interest in or lien on the property subject
matter of the dispute. 4 Such joinder of parties
avoids multiplicity of suits as well as ensures
the convenient, speedy and orderly
administration of justice.
But since petitioner Union Glass has no intra-
corporate relation with either the complainant
or the DBP, its joinder as party-defendant in
SEC Case No. 2035 brings the cause of action
asserted against it outside the jurisdiction of
the respondent SEC.
The jurisdiction of the SEC is delineated by
Section 5 of PD No. 902-A as follows:têñ.
£îhqwâ£
Sec. 5. In addition to the regulatory and
adjudicative function of the Securities and
Exchange Commission over corporations,
partnerships and other forms of associations
registered with it as expressly granted under
existing laws and devices, it shall have original
and exclusive jurisdiction to hear and decide
cases involving:
a] Devices and schemes employed by or any
acts, of the board of directors, business
associates, its officers or partners, amounting
to fraud and misrepresentation which may be
detrimental to the interest of the public and/or
the stockholders, partners, members of
associations or organizations registered with
the Commission
b] Controversies arising out of intra-corporate
or partnership relations, between and among
stockholders, members or associates; between
any or all of them and the corporation,
partnership, or association of which they are
stockholders, members or associates,
respectively; and between such corporation,
partnership or association and the state insofar
as it concerns their individual franchise or right
to exist as such entity;
c] Controversies in the election or
appointments of directors, trustees, officers or
managers of such corporations, partnerships or
associations.
This grant of jurisdiction must be viewed in the
light of the nature and function of the SEC
under the law. Section 3 of PD No. 902-A
confers upon the latter "absolute jurisdiction,
supervision, and control over all corporations,
partnerships or associations, who are grantees
of primary franchise and/or license or permit
issued by the government to operate in the
Philippines ... " The principal function of the SEC
is the supervision and control over
corporations, partnerships and associations
with the end in view that investment in these
entities may be encouraged and protected, and
their activities pursued for the promotion of
economic development. 5
It is in aid of this office that the adjudicative
power of the SEC must be exercised. Thus the
law explicitly specified and delimited its
jurisdiction to matters intrinsically connected
with the regulation of corporations,
partnerships and associations and those dealing
with the internal affairs of such corporations,
partnerships or associations.
Otherwise stated, in order that the SEC can
take cognizance of a case, the controversy must
pertain to any of the following relationships: [a]
between the corporation, partnership or
association and the public; [b] between the
corporation, partnership or association and its
stockholders, partners, members, or officers;
[c] between the corporation, partnership or
association and the state in so far as its
franchise, permit or license to operate is
concerned; and [d] among the stockholders,
partners or associates themselves.
The fact that the controversy at bar involves
the rights of petitioner Union Glass who has no
intra-corporate relation either with
complainant or the DBP, places the suit beyond
the jurisdiction of the respondent SEC. The case
should be tried and decided by the court of
general jurisdiction, the Regional Trial Court.
This view is in accord with the rudimentary
principle that administrative agencies, like the
SEC, are tribunals of limited jurisdiction 6 and,
as such, could wield only such powers as are
specifically granted to them by their enabling
statutes. 7 As We held in Sunset
View Condominium Corp. vs. Campos, Jr.: 8têñ.
£îhqwâ£
Inasmuch as the private respondents are not
shareholders of the petitioner condominium
corporation, the instant cases for collection
cannot be a 'controversy arising out of intra-
corporate or partnership relations between and
among stockholders, members or associates;
between any or all of them and the
corporation, partnership or association of
which they are stockholders, members or
associates, respectively,' which controversies
are under the original and exclusive jurisdiction
of the Securities & Exchange Commission,
pursuant to Section 5 [b] of P.D. No. 902-A. ...
As heretofore pointed out, petitioner Union
Glass is involved only in the first cause of action
of Hofileñas complaint in SEC Case No, 2035.
While the Rules of Court, which applies
suppletorily to proceedings before the SEC,
allows the joinder of causes of action in one
complaint, such procedure however is subject
to the rules regarding jurisdiction, venue and
joinder of parties. 9 Since petitioner has no
intra-corporate relationship with the
complainant, it cannot be joined as party-
defendant in said case as to do so would violate
the rule or jurisdiction. Hofileñas complaint
against petitioner for cancellation of the sale of
the glass plant should therefore be brought
separately before the regular court But such
action, if instituted, shall be suspended to await
the final outcome of SEC Case No. 2035, for the
issue of the validity of the dacion en
pago posed in the last mentioned case is a
prejudicial question, the resolution of which is a
logical antecedent of the issue involved in the
action against petitioner Union Glass. Thus,
Hofileñas complaint against the latter can only
prosper if final judgment is rendered in SEC
Case No. 2035, annulling the dacion en
pago executed in favor of the DBP.
WHEREFORE, the instant petition is hereby
granted, and the questioned Orders of
respondent SEC, dated September 25, 1981,
March 25, 1982 and May 28, 1982, are hereby
set aside. Respondent Commission is ordered
to drop petitioner Union Glass from SEC Case
No. 2035, without prejudice to the filing of a
separate suit before the regular court of justice.
No pronouncement as to costs.
SO ORDERED.1äwphï1.ñët
Concepcion, Jr., Guerrero, Abad Santos, De
Castro, Melencio-Herrera, Plana, Relova and
Gutierrez, Jr., JJ., concur.
Separate Opinions  DBP of Pioneer Glass amounted to
TEEHANKEE, J., concurring:
I concur in the Court's judgment penned by Mr.
Justice Escolin setting aside the questioned
orders of respondent SEC and ordering that
petitioner Union Glass be dropped from SEC
Case No. 2035 for lack of SEC jurisdiction over it
as a third party purchaser of the glass plant
acquired by the DBP by dacion en pago from
Pioneer Glass, without prejudice to Hofileña
filing a separate suit in the regular courts of
justice against Union Glass for recovery and
cancellation of the said sale of the glass plant in
favor of Union Glass.
I concur also with the statement in the Court's
opinion that the final outcome of SEC Case No.
2035 with regard to the validity of the dacion
en pago is a prejudicial case. If Hofileña's
complaint against said dacion en pago fails in
the SEC, then it clearly has no cause of action
against Union Glass for cancellation of DBP's
sale of the plant to Union Glass.
The purpose of this brief concurrence is with
reference to the statement in the Court's
opinion that "Thus, Hofileñas complaint against
the latter can only prosper if final judgment is
rendered in SEC Case No. 2035, annulling
the dacion en pago executed in favor of the
DBP," to erase any impression that a favorable
judgment secured by Hofileña in SEC Case No.
2035 against the DBP and Pioneer Glass would
necessarily mean that its action against Union
Glass in the regular courts of justice for
recovery and cancellation of the DBP sale of the
glass plant to Union Glass would necessarily
prosper. It must be borne in mind that as
already indicated, the SEC has no jurisdiction
over Union Glass as an outsider. The suit in the
regular courts of justice that Hofileña might
bring against Union Glass is of course subject to
all defenses as to the validity of the sale of the
glass plant in its favor as a buyer in good faith
and should it successfully substantiate such
defenses, then Hofileñas action against it for
cancellation of the sale might fail as a
consequence.
 
AQUINO, J., dissenting:
I dissent with due deference to Justice Escolin's
opinion. What are belatedly assailed in this
certiorari and prohibition case filed on May 17,
1983 are the order of September 25, 1981 of
Eugenio E. Reyes, a SEC hearing officer, and the
orders of March 25 and May 28, 1982 of
Antonio R. Manabat, another SEC hearing
officer.
Although a jurisdictional issue is raised and
jurisdiction over the subject matter may be
raised at any stage of the case, nevertheless,
the petitioners are guilty of laches and
nonexhaustion of the remedy of appeal with
the Securities and Exchange Commission
en banc.
The petitioners resorted to the special civil
actions of certiorari and prohibition because
they assail the orders of mere SEC hearing
officers. This is not a review of the order,
decision or ruling of the SEC sitting en banc
which, according to section 6 of Presidential
Decree No. 902-A (1976), may be made by this
Court "in accordance with the pertinent
provisions of the Rules of Court."
Rule 43 of the Rules of Court used to allow
review by this Court of the SEC order, ruling or
decision. Republic Act 5434 (1968) substituted
the Court of Appeals for this Court in line with
the policy of lightening our heavy jurisdictional
burden. But this Court seems to have been
restored as the reviewing authority by
Presidential Decree No. 902-A.
However, section 9 of the Judiciary
Reorganization Law returned to the
Intermediate Appellate Court
the exclusive jurisdiction to review the ruling,
order or decision of the SEC as a quasi-judicial
agency. The same section 9 granted to the
Appellate Court jurisdiction in certiorari and
prohibition cases over the SEC although not
exclusive.têñ.£îhqwâ£
In this case, the SEC seems to have adopted the
orders of the two hearing officers as its own
orders as shown by the stand taken by the
Solicitor General in defending the SEC. If that
were so, that is, if the orders of the hearing
officers should be treated as the orders of the
SEC itself en banc, this Court would have no
jurisdiction over this case. It should be the
Appellate Court that should exercise the power
of review.
Carolina Hofileña has been a stockholder since
1958 of the Pioneer Glass Manufacturing
Corporation. Her personal assets valued at
P6,804,810 were apparently or supposedly
mortgaged to the DBP to secure the obligations
of Pioneer Glass (p. 32, Rollo).
Pioneer Glass became indebted to the
Development Bank of the Philippines in the
total sum of P59,000,000. Part of the loan was
used by Pioneer Glass to establish its glass plant
in Rosario, Cavite. The unpaid interest on the
loan amounting to around seven million pesos
became the DBP's equity in Pioneer Glass. The
DBP became a substantial stockholder of
Pioneer Glass. Three members of the Pioneer
Glass' board of directors were from the DBP.
The glass plant commenced operations in 1977.
At that time, Pioneer Glass was heavily
indebted to the DBP. Instead of foreclosing its
mortgage, DBP maneuvered to have the
mortgaged assets of Pioneer Glass, including
the glass plant, transferred to the DBP by way
of dacion en pago. This transaction was alleged
to be an "auto contract" or a case of the DBP
contracting with itself since the DBP had a
dominant position in Pioneer Glass.
Hofileña alleged that although the debt to the
P59,000,000, the glass plant in 1977 had a
"sound value" of P77,329,000 and a
"reproduction cost" of P90,403,000. She further
alleged that San Miguel Corporation was willing
to buy the glass plant for P40,000,000 cash,
whereas it was actually sold to Union Glass &
Container Corporation for the same amount
under a 25-year term of payment (pp. 32-34,
Rollo).
On March 31, 1981; Carmen Hofileña filed with
the SEC a complaint against the DBP, Union
Glass, Pioneer Glass and Rafael Sison as
chairman of the DBP and Pioneer Glass boards
of directors. Union Glass filed a motion to
dismiss on the ground that jurisdiction over the
case is lodged in the Court of First Instance.
Hofileña opposed the motion. Hearing Officer
Reyes in his order of July 23, 1981 dismissed
the complaint on the ground that the case is
beyond the jurisdiction of the SEC.
Hofileña filed a motion for reconsideration
which was opposed by Union Glass. Hearing
Officer Reyes in his order of September 25,
1981 reconsidered his dismissal order and ruled
that Union Glass is an indispensable party
because it is the transferee of the controverted
assets given by way of dacion en pago to the
DBP. He ruled that the SEC has jurisdiction over
the case.
Union Glass filed a motion for reconsideration.
Hearing Officer Antonio R. Manabat denied the
motion on the ground "that the present action
is an intra-corporate dispute involving
stockholders of the same corporation (p. 26,
Rollo).
Union Glass filed a second motion for
reconsideration with the prayer that the SEC
should decide the motion en banc. The hearing
officer ruled that the remedy of Union Glass
was to file a timely appeal. Hence, its second
motion for reconsideration was denied by the
hearing officer. (This ruling is a technicality
which hinders substantial justice.)
It is clear that Union Glass has no cause of
action for certiorari and prohibition. Its
recourse was to appeal to the SEC en banc the
denial of its first motion for reconsideration.
There is no question that the SEC has
jurisdiction over the intra-corporate dispute
between Hofileña and the DBP, both
stockholders of Pioneer Glass, over the dacion
en pago.
Now, does the SEC lose jurisdiction because of
the joinder of Union Glass which has privity
with the DBP since it was the transferee of the
assets involved in the dacion en pago?
Certainly, the joinder of Union Glass does not
divest the SEC of jurisdiction over the case. The
joinder of Union Glass is necessary because the
DBP, its transfer or, is being sued regarding
the dacion en pago. The defenses of Union
Glass are tied up with the defenses of the DBP
in the intra-corporate dispute. Hofileñas cause
of action should not be split.
It would not be judicious and expedient to
require Hofileña to sue the DBP and Union
Glass in the Regional Trial Court. The SEC is
more competent than the said court to decide
the intra-corporate dispute.
The SEC, as the agency enforcing Presidential
Decree No. 902-A, is in the best position to
know the extent of its jurisdiction. Its
determination that it has jurisdiction in this
case has persuasive weight.
Concepcion, Jr., Guerro, Abad Santos, De
Castro, Melencio-Herrera, Plana, Relova and
Gutierrez, Jr., JJ., concur.
Separate Opinions
TEEHANKEE, J., concurring:
I concur in the Court's judgment penned by Mr.
Justice Escolin setting aside the questioned
orders of respondent SEC and ordering that
petitioner Union Glass be dropped from SEC
Case No. 2035 for lack of SEC jurisdiction over it
as a third party purchaser of the glass plant
acquired by the DBP by dacion en pago from
Pioneer Glass, without prejudice to Hofileña
filing a separate suit in the regular courts of
justice against Union Glass for recovery and
cancellation of the said sale of the glass plant in
favor of Union Glass.
I concur also with the statement in the Court's
opinion that the final outcome of SEC Case No.
2035 with regard to the validity of the dacion
en pago is a prejudicial case. If Hofileña's
complaint against said dacion en pago fails in
the SEC, then it clearly has no cause of action
against Union Glass for cancellation of DBP's
sale of the plant to Union Glass.
The purpose of this brief concurrence is with
reference to the statement in the Court's
opinion that "Thus, Hofileñas complaint against
the latter can only prosper if final judgment is
rendered in SEC Case No. 2035, annulling
the dacion en pago executed in favor of the
DBP," to erase any impression that a favorable
judgment secured by Hofileña in SEC Case No.
2035 against the DBP and Pioneer Glass would
necessarily mean that its action against Union
Glass in the regular courts of justice for
recovery and cancellation of the DBP sale of the
glass plant to Union Glass would necessarily
prosper. It must be borne in mind that as
already indicated, the SEC has no jurisdiction
over Union Glass as an outsider. The suit in the
regular courts of justice that Hofileña might
bring against Union Glass is of course subject to
all defenses as to the validity of the sale of the
glass plant in its favor as a buyer in good faith
and should it successfully substantiate such
defenses, then Hofileñas action against it for
cancellation of the sale might fail as a
consequence.
 
AQUINO, J., dissenting:
I dissent with due deference to Justice Escolin's
opinion. What are belatedly assailed in this
certiorari and prohibition case filed on May 17,
1983 are the order of September 25, 1981 of
Eugenio E. Reyes, a SEC hearing officer, and the
orders of March 25 and May 28, 1982 of
Antonio R. Manabat, another SEC hearing
officer.
Although a jurisdictional issue is raised and
jurisdiction over the subject matter may be
raised at any stage of the case, nevertheless,
the petitioners are guilty of laches and
nonexhaustion of the remedy of appeal with
the Securities and Exchange Commission en
banc.
The petitioners resorted to the special civil
actions of certiorari and prohibition because
they assail the orders of mere SEC hearing
officers. This is not a review of the order,
decision or ruling of the SEC sitting en banc
which, according to section 6 of Presidential
Decree No. 902-A (1976), may be made by this
Court "in accordance with the pertinent
provisions of the Rules of Court."
Rule 43 of the Rules of Court used to allow
review by this Court of the SEC order, ruling or
decision. Republic Act 5434 (1968) substituted
the Court of Appeals for this Court in line with
the policy of lightening our heavy jurisdictional
burden. But this Court seems to have been
restored as the reviewing authority by
Presidential Decree No. 902-A.
However, section 9 of the Judiciary
Reorganization Law returned to the
Intermediate Appellate Court
the exclusive jurisdiction to review the ruling,
order or decision of the SEC as a quasi-judicial
agency. The same section 9 granted to the
Appellate Court jurisdiction in certiorari and
prohibition cases over the SEC although not
exclusive.têñ.£îhqwâ£
In this case, the SEC seems to have adopted the
orders of the two hearing officers as its own
orders as shown by the stand taken by the
Solicitor General in defending the SEC. If that
were so, that is, if the orders of the hearing
officers should be treated as the orders of the
SEC itself en banc, this Court would have no
jurisdiction over this case. It should be the
Appellate Court that should exercise the power
of review.
Carolina Hofileña has been a stockholder since
1958 of the Pioneer Glass Manufacturing
Corporation. Her personal assets valued at
P6,804,810 were apparently or supposedly
mortgaged to the DBP to secure the obligations
of Pioneer Glass (p. 32, Rollo).
Pioneer Glass became indebted to the
Development Bank of the Philippines in the
total sum of P59,000,000. Part of the loan was
used by Pioneer Glass to establish its glass plant
in Rosario, Cavite. The unpaid interest on the
loan amounting to around seven million pesos
became the DBP's equity in Pioneer Glass. The
DBP became a substantial stockholder of
Pioneer Glass. Three members of the Pioneer
Glass' board of directors were from the DBP.
The glass plant commenced operations in 1977.
At that time, Pioneer Glass was heavily
indebted to the DBP. Instead of foreclosing its
mortgage, DBP maneuvered to have the
mortgaged assets of Pioneer Glass, including
the glass plant, transferred to the DBP by way
of dacion en pago. This transaction was alleged
to be an "auto contract" or a case of the DBP
contracting with itself since the DBP had a
dominant position in Pioneer Glass.
Hofileña alleged that although the debt to the
DBP of Pioneer Glass amounted to
P59,000,000, the glass plant in 1977 had a
"sound value" of P77,329,000 and a
"reproduction cost" of P90,403,000. She further
alleged that San Miguel Corporation was willing
to buy the glass plant for P40,000,000 cash,
whereas it was actually sold to Union Glass &
Container Corporation for the same amount
under a 25-year term of payment (pp. 32-34,
Rollo).
On March 31, 1981; Carmen Hofileña filed with
the SEC a complaint against the DBP, Union
Glass, Pioneer Glass and Rafael Sison as
chairman of the DBP and Pioneer Glass boards
of directors. Union Glass filed a motion to
dismiss on the ground that jurisdiction over the
case is lodged in the Court of First Instance.
Hofileña opposed the motion. Hearing Officer
Reyes in his order of July 23, 1981 dismissed
the complaint on the ground that the case is
beyond the jurisdiction of the SEC.
Hofileña filed a motion for reconsideration
which was opposed by Union Glass. Hearing
Officer Reyes in his order of September 25,
1981 reconsidered his dismissal order and ruled
that Union Glass is an indispensable party
because it is the transferee of the controverted
assets given by way of dacion en pago to the
DBP. He ruled that the SEC has jurisdiction over
the case.
Union Glass filed a motion for reconsideration.
Hearing Officer Antonio R. Manabat denied the
motion on the ground "that the present action
is an intra-corporate dispute involving
stockholders of the same corporation (p. 26,
Rollo).
Union Glass filed a second motion for
reconsideration with the prayer that the SEC
should decide the motion en banc. The hearing
officer ruled that the remedy of Union Glass
was to file a timely appeal. Hence, its second
motion for reconsideration was denied by the
hearing officer. (This ruling is a technicality
which hinders substantial justice.)
It is clear that Union Glass has no cause of
action for certiorari and prohibition. Its
recourse was to appeal to the SEC en banc the
denial of its first motion for reconsideration.
There is no question that the SEC has
jurisdiction over the intra-corporate dispute
between Hofileña and the DBP, both
stockholders of Pioneer Glass, over the dacion
en pago.
Now, does the SEC lose jurisdiction because of
the joinder of Union Glass which has privity
with the DBP since it was the transferee of the
assets involved in the dacion en pago?
Certainly, the joinder of Union Glass does not
divest the SEC of jurisdiction over the case. The
joinder of Union Glass is necessary because the
DBP, its transfer or, is being sued regarding
the dacion en pago. The defenses of Union
Glass are tied up with the defenses of the DBP
in the intra-corporate dispute. Hofileñas cause
of action should not be split.
It would not be judicious and expedient to
require Hofileña to sue the DBP and Union
Glass in the Regional Trial Court. The SEC is
more competent than the said court to decide
the intra-corporate dispute.
The SEC, as the agency enforcing Presidential
Decree No. 902-A, is in the best position to
know the extent of its jurisdiction. Its
determination that it has jurisdiction in this
case has persuasive weight.
G.R. No. L-66620 FLORES VS HON
MALLARE
The Court rules that the application of the
totality rule under Section 33(l) of Batas
Pambansa Blg. 129 and Section 11 of the
Interim Rules is subject to the requirements for
the permissive joinder of parties under Section
6 of Rule 3 which provides as follows:
Permissive joinder of parties.-All persons in
whom or against whom any right to relief in
respect to or arising out of the same
transaction or series of transactions is alleged
to exist, whether jointly, severally, or in the
alternative, may, except as otherwise provided
in these rules, join as plaintiffs or be joined as
defendants in one complaint, where any
question of law or fact common to all such
plaintiffs or to all such defendants may arise in
the action; but the court may make such orders
as may be just to prevent any plaintiff or
defendant from being embarrassed or put to
expense in connection with any proceedings in
which he may have no interest.
Petitioner has appealed by certiorari from the
order of Judge Heilia S. Mallare-Phillipps of the
Regional Trial Court of Baguio City and Benguet
Province which dismissed his complaint for lack
of jurisdiction. Petitioner did not attach to his
petition a copy of his complaint in the
erroneous belief that the entire original record
of the case shall be transmitted to this Court
pursuant to the second paragraph of Section 39
of BP129. This provision applies only to
ordinary appeals from the regional trial court to
the Court of Appeals (Section 20 of the Interim
Rules). Appeals to this Court by petition for
review on certiorari are governed by Rule 45 of
the Rules of Court (Section 25 of the Interim
Rules).
However, the order appealed from states that
the first cause of action alleged in the
complaint was against respondent Ignacio
Binongcal for refusing to pay the amount of
P11,643.00 representing cost of truck tires
which he purchased on credit from petitioner
on various occasions from August to October,
1981; and the second cause of action was
against respondent Fernando Calion for
allegedly refusing to pay the amount of
P10,212.00 representing cost of truck tires
which he purchased on credit from petitioner
on several occasions from March, 1981 to
January, 1982.
On December 15, 1983, counsel for respondent
Binongcal filed a Motion to Dismiss on the
ground of lack of jurisdiction since the amount
of the demand against said respondent was
only P11,643.00, and under Section 19(8) of
BP129 the regional trial court shall exercise
exclusive original jurisdiction if the amount of
the demand is more than twenty thousand
pesos (P20,000.00). It was further averred in
said motion that although another person,
Fernando Calion, was allegedly indebted to
petitioner in the amount of P10,212.00, his
obligation was separate and distinct from that
of the other respondent. At the hearing of said
Motion to Dismiss, counsel for respondent
Calion joined in moving for the dismissal of the
complaint on the ground of lack of jurisdiction.
Counsel for petitioner opposed the Motion to
Dismiss. As above stated, the trial court
dismissed the complaint for lack of jurisdiction.
Petitioner maintains that the lower court has
jurisdiction over the case following the "novel"
totality rule introduced in Section 33(l) of
BP129 and Section 11 of the Interim Rules.
The pertinent portion of Section 33(l) of BP129
reads as follows:
... Provided,That where there are several claims
or causes of action between the same or
different parties, embodied in the same
complaint, the amount of the demand shall be
the totality of the claims in all the causes of
action, irrespective of whether the causes of
action arose out of the same or different
transactions. ...
Section 11 of the Interim Rules provides thus:
Application of the totality rule.-In actions where
the jurisdiction of the court is dependent on
the amount involved, the test of jurisdiction
shall be the aggregate sum of all the money
demands, exclusive only of interest and costs,
irrespective of whether or not the separate
claims are owned by or due to different parties.
If any demand is for damages in a civil action,
the amount thereof must be specifically
alleged.
Petitioner compares the above-quoted
provisions with the pertinent portion of the
former rule under Section 88 of the Judiciary
Act of 1948 as amended which reads as follows:
... Where there are several claims or causes of
action between the same parties embodied in
the same complaint, the amount of the
demand shall be the totality of the demand in
all the causes of action, irrespective of whether
the causes of action arose out of the same or
different transactions; but where the claims or
causes of action joined in a single complaint are
separately owned by or due to different parties,
each separate claim shall furnish the
jurisdictional test. ...
and argues that with the deletion of the proviso
in the former rule, the totality rule was reduced
to clarity and brevity and the jurisdictional test
is the totality of the claims in all, not in each, of
the causes of action, irrespective of whether
the causes of action arose out of the same or
different transactions.
This argument is partly correct. There is no
difference between the former and present
rules in cases where a plaintiff sues a defendant
on two or more separate causes of action. In
such cases, the amount of the demand shall be
the totality of the claims in all the causes of
action irrespective of whether the causes of
action arose out of the same or different
transactions. If the total demand exceeds
twenty thousand pesos, then the regional trial
court has jurisdiction. Needless to state, if the
causes of action are separate and independent,
their joinder in one complaint is permissive and
not mandatory, and any cause of action where
the amount of the demand is twenty thousand
pesos or less may be the subject of a separate
complaint filed with a metropolitan or
municipal trial court.
On the other hand, there is a difference
between the former and present rules in cases
where two or more plaintiffs having separate
causes of action against a defendant join in a
single complaint. Under the former rule,
"where the claims or causes of action joined in
a single complaint are separately owned by or
due to different parties, each separate claim
shall furnish the jurisdictional test" (Section 88
of the Judiciary Act of 1948 as
amended, supra). This was based on the ruling
in the case of Vda. de Rosario vs. Justice of the
Peace, 99 Phil. 693. As worded, the former rule
applied only to cases of permissive joinder of
parties plaintiff. However, it was also applicable
to cases of permissive joinder of parties
defendant, as may be deduced from the ruling
in the case of Brillo vs. Buklatan, thus:
Furthermore, the first cause of action is
composed of separate claims against several
defendants of different amounts each of which
is not more than P2,000 and falls under the
jurisdiction of the justice of the peace court
under section 88 of Republic Act No, 296. The
several claims do not seem to arise from the
same transaction or series of transactions and
there seem to be no questions of law or of fact
common to all the defendants as may warrant
their joinder under Rule 3, section 6. Therefore,
if new complaints are to be filed in the name of
the real party in interest they should be filed in
the justice of the peace court. (87 Phil. 519,
520, reiterated in Gacula vs. Martinez, 88 Phil.
142, 146)
Under the present law, the totality rule is
applied also to cases where two or more
plaintiffs having separate causes of action
against a defendant join in a single complaint,
as well as to cases where a plaintiff has
separate causes of action against two or more
defendants joined in a single complaint.
However, the causes of action in favor of the
two or more plaintiffs or against the two or
more defendants should arise out of the same
transaction or series of transactions and there
should be a common question of law or fact, as
provided in Section 6 of Rule 3.
The difference between the former and present
rules in cases of permissive joinder of parties
may be illustrated by the two cases which were
cited in the case of Vda. de Rosario vs. Justice
of the Peace (supra) as exceptions to the
totality rule. In the case of Soriano y Cia vs. Jose
(86 Phil. 523), where twenty-nine dismissed
employees joined in a complaint against the
defendant to collect their respective claims,
each of which was within the jurisdiction of the
municipal court although the total exceeded
the jurisdictional amount, this Court held that
under the law then the municipal court had
jurisdiction. In said case, although the plaintiffs'
demands were separate, distinct and
independent of one another, their joint suit
was authorized under Section 6 of Rule 3 and
each separate claim furnished the jurisdictional
test. In the case of International Colleges, Inc.
vs. Argonza (90 Phil. 470), where twenty-five
dismissed teachers jointly sued the defendant
for unpaid salaries, this Court also held that the
municipal court had jurisdiction because the
amount of each claim was within, although the
total exceeded, its jurisdiction and it was a case
of permissive joinder of parties plaintiff under
Section 6 of Rule 3.
Under the present law, the two cases above
cited (assuming they do not fall under the
Labor Code) would be under the jurisdiction of
the regional trial court. Similarly, in the
abovecited cases of Brillo vs. Buklatan and
Gacula vs. Martinez (supra), if the separate
claims against the several defendants arose out
of the same transaction or series of
transactions and there is a common question of
law or fact, they would now be under the
jurisdiction of the regional trial court.
In other words, in cases of permissive joinder of
parties, whether as plaintiffs or as defendants,
under Section 6 of Rule 3, the total of all the
claims shall now furnish the jurisdictional test.
Needless to state also, if instead of joining or
being joined in one complaint separate actions
are filed by or against the parties, the amount
demanded in each complaint shall furnish the
jurisdictional test.
In the case at bar, the lower court correctly
held that the jurisdictional test is subject to the
rules on joinder of parties pursuant to Section 5
of Rule 2 and Section 6 of Rule 3 of the Rules of
Court and that, after a careful scrutiny of the
complaint, it appears that there is a misjoinder
of parties for the reason that the claims against
respondents Binongcal and Calion are separate
and distinct and neither of which falls within its
jurisdiction.
WHEREFORE, the order appealed from is
affirmed, without pronouncement as to costs.
SO ORDERED.
G.R. No. 181622               GENESIS INVESTMENT
VS HEIRS OF EBARASABAL
Before the Court is a petition for review on
certiorari under Rule 45 of the Rules of Court
seeking to reverse and set aside the
Decision1 and Resolution,2 dated July 11, 2007
and January 10, 2008, respectively, of the Court
of Appeals (CA) in CA-G.R. CEB-SP No. 01017.
The antecedents of the case are as follows:
On November 12, 2003, herein respondents
filed against herein petitioners a Complaint3 for
Declaration of Nullity of Documents, Recovery
of Shares, Partition, Damages and Attorney's
Fees. The Complaint was filed with the Regional
Trial Court (RTC) of Barili, Cebu.
On August 5, 2004, herein petitioners filed a
Motion to Dismiss4 contending, among others,
that the RTC has no jurisdiction to try the case
on the ground that, as the case involves title to
or possession of real property or any interest
therein and since the assessed value of the
subject property does not exceed ₱20,000.00
(the same being only ₱11,990.00), the action
falls within the jurisdiction of the Municipal
Trial Court (MTC).5
In its Order6 dated September 29, 2004, the
RTC granted petitioners' Motion to Dismiss,
holding as follows:
And while the prayer of the plaintiffs for the
annulment of documents qualified the case as
one incapable of pecuniary estimation thus,
rendering it cognizable supposedly by the
second level courts but considering that
Republic Act No. 7691 expressly provides to
cover "all civil actions" which phrase
understandably is to include those incapable of
pecuniary estimation, like the case at bar, this
Court is of the view that said law really finds
application here more so that the same case
also "involves title to, or possession of, real
property, or any interest therein." For being so,
the assessed value of the real property involved
is determinative of which court has jurisdiction
over the case. And the plaintiffs admitting that
the assessed value of the litigated area is less
than ₱20,000.00, the defendants are correct in
arguing that the case is beyond this Court's
jurisdiction.7
Respondents filed a Motion for Partial
Reconsideration,8 arguing that their complaint
consists of several causes of action, including
one for annulment of documents, which is
incapable of pecuniary estimation and, as such,
falls within the jurisdiction of the RTC.9
On March 17, 2005, the RTC issued an Order
granting respondents' Motion for Partial
Reconsideration and reversing its earlier Order
dated September 29, 2004. The RTC ruled, thus:
On the issue of want of jurisdiction, this court
likewise finds to be with merit the contention
of the movants as indeed the main case or the
primary relief prayed for by the movants is for
the declaration of nullity or annulment of
documents which unquestionably is incapable
of pecuniary estimation and thus within the
exclusive original jurisdiction of this court to try
although in the process of resolving the
controversy, claims of title or possession of the
property in question is involved which together
with all the other remaining reliefs prayed for
are but purely incidental to or as a
consequence of the foregoing principal relief
sought.10
Petitioners filed a Motion for
Reconsideration,11 but the RTC denied it in its
Order dated June 23, 2005.
Aggrieved, petitioners filed a petition for
certiorari with the CA. However, the CA
dismissed the petition via its assailed Decision
dated July 11, 2007, holding that the subject
matter of respondents' complaint is incapable
of pecuniary estimation and, therefore, within
the jurisdiction of the RTC, considering that the
main purpose in filing the action is to declare
null and void the documents assailed therein.12
Petitioners' Motion for Reconsideration was,
subsequently, denied in the CA Resolution
dated January 10, 2008.
Hence, the instant petition for review on
certiorari raising the sole issue, to wit:
Whether or not the Honorable Court of Appeals
gravely erred in concluding that the Regional
Trial Court, Branch 60 of Barili, Cebu has
jurisdiction over the instant case when the
ALLEGATIONS IN THE COMPLAINT clearly shows
that the main cause of action of the
respondents is for the Recovery of their Title,
Interest, and Share over a Parcel of Land, which
has an assessed value of ₱11,990.00 and thus,
within the jurisdiction of the Municipal Trial
Court.13
The petition lacks merit.
For a clearer understanding of the case, this
Court, like the CA, finds it proper to quote
pertinent portions of respondents' Complaint,
to wit:
1. Plaintiffs are all Filipino, of legal age,
surviving descendants – either as grandchildren
or great grandchildren – and heirs and
successors-in-interest of deceased Roman
Ebarsabal, who died on 07 September 1952 x x
x above, and to transfer, restore or reconvey and
8. During the lifetime of Roman Ebarsabal, he
acquired a parcel of land situated in Basdaku,
Saavedra, Moalboal, Cebu, x x x.
xxxx
with a total assessed value of ₱2,890.00 x x x.
However, for the year 2002, the property was
already having (sic) a total assessed value of
₱11,990.00 x x x.
9. Upon the death of said Roman Ebarsabal, his
eight (8) children named in par. 7 above,
became co-owners of his above-described
property by hereditary succession; taking
peaceful possession and enjoyment of the
same in fee simple pro indiviso, paying the real
estate taxes thereon and did not partition the
said property among themselves until all of
them likewise died, leaving, however, their
respective children and descendants and/or
surviving heirs and successors-in-interest, and
who are now the above-named plaintiffs
herein;
10. The plaintiffs who are mostly residents in
(sic) Mindanao and Manila, have just recently
uncovered the fact that on 28th January 1997,
the children and descendants of deceased Gil
Ebarsabal, namely: Pelagio, Hipolito, Precela,
Fructuosa, Roberta, Florentino, Erlinda,
Sebastian, Cirilo, all surnamed Ebarsabal, have
executed among themselves a Deed of
Extrajudicial Settlement with Sale of Roman
Ebarsabal's entire property described above, by
virtue of which they allegedly extrajudicially
settled the same and, for ₱2,600,000.00 –
although only the sum of ₱950,000.00 was
reflected in their Deed of Sale for reason only
known to them, they sold the whole property
to defendants Genesis Investment Inc.
represented by co-defendant Rhodora B. Lim,
the wife of Lambert Lim, without the
knowledge, permission and consent of the
plaintiffs who are the vendors' co-owners of the
lot in question, x x x.
11. Surprisingly, however, the defendant
Genesis managed to have the Tax Declaration
of the property issued in the name of co-
defendant Cebu Jaya Realty Incorporated, a
firm which, as already intimated above, is also
owned by Spouses Lambert and Rhodora B.
Lim, instead of in the name of Genesis
Investment, Incorporated, which is actually the
vendee firm of the lot in question.
xxxx
Hence, the reason why Cebu Jaya Realty,
Incorporated is joined and impleaded herein as
a co-defendant.
12. Without the participation of the plaintiffs
who are co-owners of the lot in question in the
proceedings, the aforementioned extrajudicial
settlement with sale cannot be binding upon
the plaintiff-co-owners.
13. Further, where as in this case, the other
heirs who are the plaintiffs herein, did not
consent to the sale of their ideal shares in the
inherited property, the sale was only to be
limited to the pro indiviso share of the selling
heirs.
xxxx
14. By representation, the plaintiffs, are
therefore, by law, entitled to their rightful
shares from the estate of the deceased Roman
Ebarsabal consisting of seven (7) shares that
would have been due as the shares of seven (7)
other children of Roman Ebarsabal who are also
now deceased, namely: Ceferino, Floro, Leona,
Pedro, Isidoro, Julian and Benito, all surnamed
Ebarsabal.
15. The defendants who had prior knowledge
of the existence of the other heirs who are co-
owners of the vendors of the property they
purchased, had unlawfully acted in bad faith in
insisting to buy the whole property in co-
ownership, only from the heirs and successors-
in-interest of deceased Gil Ebarsabal, who is
only one (1) of the eight (8) children of
deceased Roman Ebarsabal, and without
notifying thereof in whatever manner the
plaintiffs who are the heirs and successors-in-
interest of the other co-owners of the property-
in-question; thus, have compelled the plaintiffs
herein to file this instant case in court to
protect their interests, x x x.
xxxx
PRAYER
WHEREFORE, in view of all the foregoing, it is
most respectfully prayed of this Honorable
Court that, after due notice and hearing,
judgment shall be rendered in favor of the
plaintiffs, as follows, to wit:
1 – Declaring as null and void and not binding
upon the plaintiffs, the following documents to
wit:
(a) Deed of Extrajudicial Settlement with Sale
executed by and between the heirs of deceased
Gil Ebarsabal headed by Pedro Ebarsabal, and
Genesis Investment, Inc., represented by
Rhodora Lim, dated 28th of January, 1997,
marked as Annex-A;
(b) Memorandum of Agreement executed
between Pedro Ebarsabal and Genesis
Investment, Inc., represented by Rhodora Lim
dated 27 January, which document is notarized;
(c) Tax Declaration of Real Property issued to
Cebu Jaya Realty, Inc., marked as Annex-D;
2 – Ordering the defendants to make partition
of the property in litigation with the plaintiffs
into eight (8) equal shares; to get one (1) share
thereof, which is the only extent of what they
allegedly acquired by purchase as mentioned
deliver to the plaintiffs, seven (7) shares
thereof, as pertaining to and due for the latter
as the heirs and successors-in-interest of the
seven (7) brothers and sister of deceased Gil
Ebarsabal already named earlier in this
complaint;
xxxx
Further reliefs and remedies just and equitable
in the premises are also herein prayed for.
x x x x14
It is true that one of the causes of action of
respondents pertains to the title, possession
and interest of each of the contending parties
over the contested property, the assessed
value of which falls within the jurisdiction of
the MTC. However, a complete reading of the
complaint would readily show that, based on
the nature of the suit, the allegations therein,
and the reliefs prayed for, the action is within
the jurisdiction of the RTC.
As stated above, it is clear from the records
that respondents' complaint was for
"Declaration of Nullity of Documents, Recovery
of Shares, Partition, Damages and Attorney's
Fees." In filing their Complaint with the RTC,
respondents sought to recover ownership and
possession of their shares in the disputed
parcel of land by questioning the due execution
and validity of the Deed of Extrajudicial
Settlement with Sale as well as the
Memorandum of Agreement entered into by
and between some of their co-heirs and herein
petitioners. Aside from praying that the RTC
render judgment declaring as null and void the
said Deed of Extrajudicial Settlement with Sale
and Memorandum of Agreement, respondents
likewise sought the following: (1) nullification of
the Tax Declarations subsequently issued in the
name of petitioner Cebu Jaya Realty, Inc.; (2)
partition of the property in litigation; (3)
reconveyance of their respective shares; and
(3) payment of moral and exemplary damages,
as well as attorney's fees, plus appearance
fees.1âwphi1
Clearly, this is a case of joinder of causes of
action which comprehends more than the issue
of partition of or recovery of shares or interest
over the real property in question but includes
an action for declaration of nullity of contracts
and documents which is incapable of pecuniary
estimation.15
As cited by the CA, this Court, in the case of
Singson v. Isabela Sawmill,16 held that:
In determining whether an action is one the
subject matter of which is not capable of
pecuniary estimation, this Court has adopted
the criterion of first ascertaining the nature of
the principal action or remedy sought. If it is
primarily for the recovery of a sum of money,
the claim is considered capable of pecuniary
estimation, and whether jurisdiction is in the
municipal courts or in the courts of first
instance would depend on the amount of the
claim. However, where the basic issue is
something other than the right to recover a
sum of money, where the money claim is
purely incidental to, or a consequence of, the
principal relief sought, this Court has
considered such actions as cases where the
subject of the litigation may not be estimated in
terms of money, and are cognizable by courts
of first instance [now Regional Trial Courts].17
This rule was reiterated in Russell v. Vestil18 and
Social Security System v. Atlantic Gulf and
Pacific Company of Manila Inc.19
Contrary to petitioners contention, the
principal relief sought by petitioners is the
nullification of the subject Extrajudicial
Settlement with Sale entered into by and
between some of their co-heirs and
respondents, insofar as their individual shares
in the subject property are concerned. Thus,
the recovery of their undivided shares or
interest over the disputed lot, which were
included in the sale, simply becomes a
necessary consequence if the above deed is
nullified. Hence, since the principal action
sought in respondents Complaint is something
other than the recovery of a sum of money, the
action is incapable of pecuniary estimation and,
thus, cognizable by the RTC.20 Well entrenched
is the rule that jurisdiction over the subject
matter of a case is conferred by law and is
determined by the allegations in the complaint
and the character of the relief sought,
irrespective of whether the party is entitled to
all or some of the claims asserted.21
Moreover, it is provided under Section 5 (c),
Rule 2 of the Rules of Court that where the
causes of action are between the same parties
but pertain to different venues or jurisdictions,
the joinder may be allowed in the RTC provided
one of the causes of action falls within the
jurisdiction of said court and the venue lies
therein. Thus, as shown above, respondents
complaint clearly falls within the jurisdiction of
the RTC.
WHEREFORE, the petition is DENIED. The
Decision and Resolution dated July 11, 2007
and January 10, 2008, respectively, of the Court
of Appeals in CA-G.R. CEB-SP No. 01017 are
AFFIRMED.
SO ORDERED.
G.R. No. 171456             UNIWIDE VS CRUZ
Petitioner, Uniwide Holdings, Inc. (UHI), whose
principal office is located in Parañaque City,
entered into a Franchise Agreement1 (the
agreement) granting respondent, Alexander M.
Cruz (Cruz), a five-year franchise to adopt and
use the "Uniwide Family Store System" for the
establishment and operation of a "Uniwide
Family Store" along Marcos Highway, Sta. Cruz,
Cogeo, Marikina City.
Article 10.22 of the agreement called for Cruz as
franchisee to pay UHI a monthly service fee
of P50,000 or three percent of gross monthly
purchases, whichever is higher, payable within
five days after the end of each month without
need of formal billing or demand from UHI. In
case of any delay in the payment of the
monthly service fee, Cruz would, under Article
10.33 of the agreement, be liable to pay an
interest charge of three percent per month.
It appears that Cruz had purchased goods from
UHI’s affiliated companies First Paragon
Corporation (FPC) and Uniwide Sales
Warehouse Club, Inc. (USWCI).
In August 2002, FPC and USWCI executed
Deeds of Assignment4 in favor of UHI assigning
all their rights and interests over Cruz’s
accounts payable to them.
As of August 13, 2002, Cruz had outstanding
obligations with UHI, FPC, and USWCI in the
total amount of P1,358,531.89, drawing UHI to
send him a letter of even date for the
settlement thereof in five days. His receipt of
the letter notwithstanding, Cruz’s accounts
remained unsettled.
Thus UHI filed a complaint5 for collection of
sum of money before the Regional Trial Court
(RTC) of Parañaque docketed as Civil Case No.
04-0278 against Cruz on the following causes of
action:
First Cause of Action
10. Being entitled to the payment of monthly
service fee pursuant to the FA, which
defendant failed to pay despite demand,
plaintiff suffered actual damages in the amount
of Phil. Peso: One Million Three Hundred
Twenty Seven Thousand Six Hundred Sixty Nine
& 83/100 (P1,327,669.83), computed as of 05
April 2004, for which defendant should be held
liable together with legal interest thereon from
the date of filing of this Complaint, until fully
paid.
Second Cause of Action
11. Being the assignee of the receivable of FPC,
which receivable defendant failed to pay
despite demand, plaintiff suffered actual
damages in the amount of Phil. Peso: Sixty Four
Thousand One Hundred Sixty Five & 96/100
(P64,165.96) for which defendant should be
held liable together with the legal interest
thereon computed from date of receipt of
plaintiff’s demand letter, or on August 16, 2002
to be exact, until fully paid.
Third Cause of Action
12. Being the assignee of the receivable of
USWCI, which receivable defendant failed to
pay despite demand, plaintiff suffered actual
damages in the total amount of Phil. Peso: One
Million Five Hundred Seventy Nine Thousand
Sixty One & 36/100 (P1,579,061.36), computed
as of 05 April 2004, inclusive of the two and a
half percent (2.5%) monthly interest, as and by
way of penalty, and the three (3%) annual
interest on the unpaid amount, for which
defendant should be held liable, with legal
interest thereon from the date of filing of this
Complaint, until fully paid.
Fourth Cause of Action
13. By reason of defendant’s obstinate refusal
or failure to pay his indebtedness, plaintiff was
constrained to file this Complaint and in the
process incur expenses by way of attorney’s
fees, which could be reasonably estimated to
reach at least Phil. Peso: Two Hundred Fifty
Thousand (P250,000.00) and for which
defendant should be held answerable
for.6 (Emphasis and underscoring supplied)
To the complaint Cruz filed a motion to
dismiss7 on the ground of improper venue, he
invoking Article 27.5 of the agreement which
reads:
27.5 Venue Stipulation – The Franchisee
consents to the exclusive jurisdiction of the
courts of Quezon City, the Franchisee waiving
any other venue.8 (Emphasis supplied)
Branch 258 of the Parañaque RTC, by Order9 of
December 12, 2005, granted Cruz’s motion to
dismiss.
Hence, the present petition before this Court,
raising the sole legal issue of:
WHETHER A CASE BASED ON SEVERAL CAUSES
OF ACTION IS DISMISSIBLE ON THE GROUND OF
IMPROPER VENUE WHERE ONLY ONE OF THE
CAUSES OF ACTION ARISES FROM A CONTRACT
WITH EXCLUSIVE VENUE
STIPULATION.10 (Underscoring supplied)
Petitioner contends that nowhere in the
agreement is there a mention of FPC and
USWCI, and neither are the two parties thereto,
hence, they cannot be bound to the stipulation
on "exclusive venue."
The petition is impressed with merit.
The general rule on venue of personal actions,
as in petitioner’s complaint for collection of
sum of money, is embodied in Section 2, Rule 4
of the Rules of Court which provides:
Sec. 2. Venue of personal actions. – All other
actions may be commenced and tried
where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or
any of the principal defendants resides, or in
the case of a nonresident defendant, where he
may be found, at the election of the plaintiff.
(Emphasis and underscoring supplied)
The afore-quoted provision is, however,
qualified by Section 4 of the same rule which
allows parties, before the filing of the action, to
validly agree in writing on an exclusive venue.11
The forging of a written agreement on an
exclusive venue of an action does not, however,
preclude parties from bringing a case to other
venues.
Where there is a joinder of causes of action
between the same parties one of which does
not arise out of the contract where the
exclusive venue was stipulated upon, the
complaint, as in the one at bar, may be brought
before other venues provided that such other
cause of action falls within the jurisdiction of
the court and the venue lies therein.12
Based on the allegations in petitioner’s
complaint, the second and third causes of
action are based on the deeds of assignment
executed in its favor by FPC and USWCI. The
deeds bear no exclusive venue stipulation with
respect to the causes of action thereunder.
Hence, the general rule on venue applies – that
the complaint may be filed in the place where
the plaintiff or defendant resides.13
It bears emphasis that the causes of action on
the assigned accounts are not based on a
breach of the agreement between UHI and
Cruz. They are based on separate, distinct and
independent contracts-deeds of assignment in
which UHI is the assignee of Cruz’s obligations
to the assignors FPC and USWCI. Thus, any
action arising from the deeds of assignment
cannot be subjected to the exclusive venue
stipulation embodied in the agreement. So San
Miguel Corporation v. Monasterio14 enlightens:
Exclusive venue stipulation embodied in a
contract restricts or confines parties
thereto when the suit relates to breach of said
contract. But where the exclusivity clause does
not make it necessarily encompassing, such
that even those not related to the enforcement
of the contract should be subject to the
exclusive venue, the stipulation designating
exclusive venues should be strictly confined to
the specific undertaking or agreement.
Otherwise, the basic principles of freedom to
contract might work to the great disadvantage
of a weak party-suitor who ought to be allowed
free access to courts of justice.15 (Emphasis and
underscoring supplied)
In fine, since the other causes of action in
petitioner’s complaint do not relate to a breach
of the agreement it forged with Cruz
embodying the exclusive venue stipulation,
they should not be subjected thereto. As San
Miguel further enlightens:
Restrictive stipulations are in derogation of the
general policy of making it more convenient for
the parties to institute actions arising from or in
relation to their agreements. Thus, the
restriction should be strictly construed as
relating solely to the agreement for which the
exclusive venue stipulation is embodied.
Expanding the scope of such limitation on a
contracting party will create unwarranted
restrictions which the parties might find
unintended or worse, arbitrary and
oppressive.16 (Underscoring supplied)
WHEREFORE, the petition is GRANTED. The
December 12, 2005 Order of Regional Trial
Court of Parañaque City, Branch 258 in Civil
Case No. 04-0278 is SET ASIDE. The case
is REMANDED to said court which is directed to
reinstate the case to its docket and conduct
further proceedings thereon with dispatch.
SO ORDERED.
G.R. Nos. 175277 & 175285               UNICAPITAL
VS CONSING
Before the Court are consolidated petitions for
review on certiorari1 assailing separate
issuances of the Court of Appeals (CA) as
follows:
(a) The petitions in G.R. Nos. 175277 and
175285 filed by Unicapital, Inc., (Unicapital),
Unicapital Realty, Inc. (URI), and Unicapital
Director and Treasurer Jaime J. Martirez
(Martirez)assail the CA’s Joint Decision2 dated
October 20, 2005 and Resolution3 dated
October 25, 2006 in CA-G.R. SP Nos. 64019and
64451 which affirmed the Resolution4 dated
September 14,1999 and Order5 dated February
15, 2001 of the Regional Trial Court (RTC) of
Pasig City, Branch 68 (RTC-Pasig City) in SCA No.
1759, upholding the denial of their motion to
dismiss; and
(b) The petition in G.R. No. 192073 filed by
Rafael Jose Consing, Jr. (Consing, Jr.) assails the
CA’s Decision 6 dated September 30, 2009 and
Resolution7 dated April 28, 2010 inCA-G.R. SP
No. 101355 which affirmed the Orders dated
July16, 20078 and September 4, 20079 of the
RTC of Makati City, Branch 60 (RTC-Makati City)
in Civil Case No. 99-1418,upholding the denial
of his motion for consolidation.
The Facts
In 1997, Consing, Jr., an investment banker, and
his mother, Cecilia Dela Cruz (Dela Cruz),
obtained an ₱18,000,000.00 loan from
Unicapital,₱12,000,000.00 of which was
acquired on July 24, 1997 and the
remaining₱6,000,000.00 on August 1, 1997.
The said loan was secured by Promissory
Notes10 and a Real Estate Mortgage11 over a
42,443 square meter-parcel of land located at
Imus, Cavite, registered in the name of Dela
Cruz as per Transfer Certificate of Title (TCT)
No. T-687599 (subject property).12 Prior to
these transactions, Plus Builders, Inc. (PBI), a
real estate company, was already interested to
develop the subject property into a residential
subdivision.13 In this regard, PBI entered into a
joint venture agreement with Unicapital,
through its real estate development arm, URI.
In view of the foregoing, the loan and mortgage
over the subject property was later on modified
into an Option to Buy Real Property14 and, after
further negotiations, Dela Cruz decided to sell
the same to Unicapital and PBI. For this
purpose, Dela Cruz appointed Consing, Jr. as
her attorney-in-fact.15
Eventually, Unicapital, through URI, purchased
one-half of the subject property for a
consideration of ₱21,221,500.00 (against which
Dela Cruz’s outstanding loan obligations were
first offset), while PBI bought the remaining half
for the price of ₱21,047,000.00.16 In this
relation, Dela Cruz caused TCT No. T-687599 to
be divided into three separate titles as follows:
(a) TCT No. T-851861 for URI;17 (b) TCT No. T-
851862 for PBI;18 and (c)TCT No. T-51863 which
was designated as a road lot.19 However, even
before URI and PBI were able to have the titles
transferred to their names, Juanito Tan Teng
(Teng) and Po Willie Yu (Yu) informed
Unicapital that they are the lawful owners of
the subject property as evidenced by TCT No.T-
114708;20 that they did not sell the subject
property; and that Dela Cruz’s title, i.e., TCT No.
T-687599, thereto was a mere
forgery.21 Prompted by Teng and Yu’s
assertions, PBI conducted further investigations
on the subject property which later revealed
that Dela Cruz's title was actually of dubious
origin. Based on this finding, PBI and Unicapital
sent separate demand letters22 to Dela Cruz and
Consing, Jr., seeking the return of the purchase
price they had paid for the subject property.
From the above-stated incidents stemmed the
present controversies as detailed hereunder.
The Proceedings Antecedent to G.R. Nos.
175277 & 175285
On May 3, 1999, Consing, Jr. filed a complaint,
denominated as a Complex Action for
Declaratory Relief23 and later amended to
Complex Action for Injunctive Relief24 (Consing,
Jr.’s complaint) before the RTC-Pasig City
against Unicapital, URI, PBI, Martirez, PBI
General Manager Mariano Martinez (Martinez),
Dela Cruz and Does 1-20, docketed as SCA No.
1759. In his complaint, Consing, Jr. claimed that
the incessant demands/recovery efforts made
upon him by Unicapital and PBI to return to
them the purchase price they had paid for the
subject property constituted harassment and
oppression which severely affected his personal
and professional life.25 He also averred that he
was coerced to commit a violation of Batas
Pambansa Blg. 2226 as Unicapital and PBI, over
threats of filing acase against him, kept on
forcing him to issue a post-dated check in the
amount sought to be recovered,
notwithstanding their knowledge that he had
no funds for the same.27 He further alleged that
Unicapital and URI required him to sign blank
deeds of sale and transfers without cancelling
the old one sin violation of the laws on land
registration and real estate
development.28 Likewise, Consing, Jr. added
that Unicapital and PBI’s representatives were"
speaking of him in a manner that was
inappropriate and libelous,"29 and that some
John Does "deliberately engaged in a
fraudulent scheme to compromise Consing, Jr.’s
honor, integrity and fortune x x x consisting of
falsifying or causing to be falsified, or
attempting to present as falsified certain
transfers of Land Titles and Deeds for
profit,"30 classifying the foregoing as ultra vires
acts which should warrant sanctions under the
corporation law, Revised Securities Act and
related laws.31 Accordingly, Consing, Jr. prayed
that: (a) he be declared as a mere agent of Dela
Cruz, and as such, devoid of any obligation to
Unicapital, URI, and PBI for the transactions
entered into concerning the subject property;
(b) Unicapital, URI, and PBI be enjoined from
harassing or coercing him, and from speaking
about him in a derogatory fashion; and (c)
Unicapital, URI, and PBI pay him actual and
consequential damages in the amount of
₱2,000,000.00, moral damages of at least
₱1,000,000.00, exemplary damages of
₱1,000,000.00, all per month, reckoned from
May 1, 1999 and until the controversy is
resolved, and attorney's fees and costs of suit.32
For their part, Unicapital, URI, and Martirez
(Unicapital, et al.) filed separate Motions to
Dismiss33 Consing, Jr.’s complaint (Unicapital, et
al.’s motion to dismiss) on the ground of failure
to state a cause of action, considering that: (a)
no document was attached against which
Consing, Jr. supposedly derived his right and
against which his rights may be as certained; (b)
the demands to pay against Consing, Jr. and for
him to tender post-dated checks to cover the
amount due were well within the rights of
Unicapital as an unpaid creditor, as Consing, Jr.
had already admitted his dealings with them;
(c) the utterances purportedly constituting libel
were not set out in the complaint; and (d) the
laws supposedly violated were not properly
identified. Moreover, Unicapital, et al. posited
that the RTC-PasigCity did not acquire
jurisdiction over the case given that Consing, Jr.
failed to pay the proper amount of docket fees.
In the same vein, they maintained that the RTC-
Pasig City had no jurisdiction over their
supposed violations of the Corporation Code
and Revised Securities Act, which, discounting
its merits, should have been supposedly lodged
with the Securities and Exchange Commission.
Finally, they pointed out that Consing, Jr.’s
complaint suffers from a defective verification
and, thus, dismissible.34
Similar to Unicapital et al.’s course of action,
PBI and its General Manager, Martinez
(Unicapital and PBI, et al.), sought the dismissal
of Consing, Jr.’s complaint on the ground that it
does not state a cause of action. They also
denied having singled out Consing, Jr. because
their collection efforts were directed at both
Consing, Jr. and Dela Cruz, which should be
deemed as valid and, therefore, should not be
restrained.35
On September 14, 1999, the RTC-Pasig City
issued a Resolution36 denying the above
mentioned motions to dismiss, holding that
Consing, Jr.’s complaint sufficiently stated a
cause of action for tort and damages pursuant
to Article 19 of the Civil Code. It ruled that
where there is abusive behavior, a
complainant, like Consing, Jr., has the right to
seek refuge from the courts. It also noted that
the elements of libel in a criminal case are not
the same as those for a civil action founded on
the provisions of the Civil Code, and therefore,
necessitates a different treatment. It equally
refused to dismiss the action on the ground of
non-payment of docket fees, despite Consing,
Jr.’s escalated claims for damages therein, as
jurisdiction was already vested in it upon the
filing of the original complaint. Moreover, it
resolved to apply the liberal construction rule
as regards the subject complaint’s verification
and certification, despite its improper wording,
considering further that such defect was not
raised at the first opportunity. Consequently, it
ordered Unicapital and PBI, et al. to file their
Answer and, in addition, to submit" any
Comment or Reaction within five (5) days from
receipt hereof on the allegations of Consing, Jr.
in his rejoinder of September 9, 1999regarding
the supposed filing of an identical case in
Makati City,"37 i.e., Civil Case No. 99-1418.
Unperturbed, Unicapital and PBI, et al. moved
for reconsideration therefrom which was,
however, denied by the RTC-Pasig City in an
Order38 dated February 15, 2001 for lack of
merit. Aggrieved, they elevated the denial of
their motions to dismiss before the CA via a
petition for certiorari and
prohibition,39 docketed as CA-G.R. SP Nos.
64019 and 64451.
On October 20, 2005, the CA rendered a Joint
Decision40 holding that no grave abuse of
discretion was committed by the RTC-Pasig City
in refusing to dismiss Consing, Jr.'s
complaint.1âwphi1 At the outset, it ruled that
while the payment of the prescribed docket fee
is a jurisdictional requirement, its non-payment
will not automatically cause the dismissal of the
case. In this regard, it considered that should
there be any deficiency in the payment of such
fees, the same shall constitute a lien on the
judgment award.41 It also refused to dismiss the
complaint for lack of proper verification upon a
finding that the copy of the amended complaint
submitted to the RTC-Pasig City was properly
notarized.42 Moreover, it upheld the order of
the RTC-Pasig City for Unicapital and PBI, et al.
to submit their comment due to the alleged
existence of a similar case filed before the RTC-
Makati City.43
Anent the substantive issues of the case, the CA
concurred with the RTC-Pasig City that Consing
Jr.'s complaint states a cause of action. It found
that Unicapital and PBI, et al.’s purportedly
abusive manner in enforcing their claims
against Consing, Jr. was properly constitutive of
a cause of action as the same, if sufficiently
proven, would have subjected him to
"defamation of his name in business circles, the
threats and coercion against him to reimburse
the purchase price, fraud and falsification and
breach of fiduciary obligation." It also found
that the fact that Consing Jr.'s complaint
contains "nebulous" allegations will not
warrant its dismissal as any vagueness therein
can be clarified through a motion for a bill of
particulars."44 Furthermore, it noted that
Consing, Jr. does not seek to recover his claims
against any particular provision of the
corporation code or the securities act but
against the actions of Unicapital and PBI, et al.;
hence, Consing, Jr.’s complaint was principally
one for damages over which the RTC has
jurisdiction, and, in turn, there lies no
misjoinder of causes of action.45
Dissatisfied, only Unicapital, et al. sought
reconsideration therefrom but the same was
denied by the CA in a Resolution46 dated
October 25,2006. Hence, the present petitions
for review on certiorari in G.R. Nos.175277 and
175285.
The Proceedings Antecedent to G.R. No.
192073
On the other hand, on August 4, 1999,
Unicapital filed a complaint47 for sum of money
with damages against Consing, Jr. and Dela Cruz
before the RTC-Makati City, docketed as Civil
Case No. 99-1418, seeking to recover (a) the
amount of ₱42,195,397.16, representing the
value of their indebtedness based on the
Promissory Notes (subject promissory notes)
plus interests; (b) ₱5,000,000.00 as exemplary
damages; (c) attorney's fees; and (d) costs of
suit.48
PBI also filed a complaint for damages and
attachment against Consing, Jr. and Dela Cruz
before the RTC of Manila, Branch 12, docketed
as Civil Case No. 99-95381, also predicated on
the same set of facts as above narrated.49 In its
complaint, PBI prayed that it be allowed to
recover the following: (a) ₱13,369,641.79,
representing the total amount of installment
payments made as actual damages plus
interests; (b) ₱200,000.00 as exemplary
damages; (c) ₱200,000.00 as moral damages;
(d) attorney's fees; and (e) costs of suit.50 Civil
Case No. 99-95381 was subsequently
consolidated with SCA No. 1759 pending before
the RTC-Pasig City.51
For his part, Consing, Jr. filed a Motion to
Dismiss Civil Case No. 99-1418 which was,
however, denied by the RTC-Makati City in an
Order52 dated November 16, 1999. Thereafter,
he filed a Motion for Consolidation53 (motion
for consolidation) of Civil Case No. 99-1418
with his own initiated SCA No. 1759 pending
before the RTC-Pasig City.
In an Order54 dated July 16, 2007, the RTC-
Makati City dismissed Consing, Jr.’s motion for
consolidation and, in so doing, ruled that the
cases sought to be consolidated had no identity
of rights or causes of action and the reliefs
sought for by Consing, Jr. from the RTC-Pasig
City will not bar Unicapital from pursuing its
money claims against him. Moreover, the RTC-
Makati City noted that Consing, Jr. filed his
motion only as an after thought as it was made
after the mediation proceedings between him
and Unicapital failed. Consing, Jr.'s motion for
reconsideration therefrom was denied in an
Order55 dated September 4, 2007. Hence, he
filed a petition for certiorari before the CA,
docketed as CA-G.R. SP No. 101355, ascribing
grave abuse of discretion on the part of the
RTC-Makati City in refusing to consolidate Civil
Case No. 99-1418 with SCA No. 1759 in Pasig
City.
On September 30, 2009, the CA rendered a
Decision56 sustaining the Orders dated July 16,
2007 and September 4, 2007 of the RTC-Makati
City which denied Consing, Jr.’s motion for
consolidation. It held that consolidation is a
matter of sound discretion on the part of the
trial court which could be gleaned from the use
of the word "may" in Section 1, Rule38 of the
Rules of Court. Considering that preliminary
steps (such as mediation) have already been
undertaken by the parties in Civil Case No.99-
1418 pending before the RTC-Makati City, its
consolidation with SCA No. 1759 pending
before the RTC-Pasig City "would merely result
in complications in the work of the latter court
or squander the resources or remedies already
utilized in the Makati case."57 Moreover, it
noted that the records of the consolidated
Pasig and Manila cases, i.e., SCA No. 1759 and
Civil Case No. 99-95381, respectively, had
already been elevated to the Court, that joint
proceedings have been conducted in those
cases and that the pre-trial therein had been
terminated as early as October 23,
2007.Therefore, due to these reasons, the
consolidation prayed for would be
impracticable and would only cause a
procedural faux pas. Undaunted, Consing, Jr.
filed a motion for reconsideration therefrom
but was denied by the CA in a
Resolution58 dated April 28, 2010. Hence, the
present petition for review on certiorari in G.R.
No. 192073.
The Proceedings Before the Court
After the filing of the foregoing cases, the
parties were required to file their respective
comments and replies. Further, considering
that G.R. No.192073 (Makati case) involves the
same parties and set of facts with those in G.R.
Nos. 175277 & 175285 (Pasig case), these cases
were ordered consolidated per the Court's
Resolution59 dated November 17, 2010. On
March 9, 2011, the Court resolved to give due
course to the instant petitions and required the
parties to submit their respective
memoranda.60
The Issues Before the Court
The essential issues in these cases are as
follows: (a) in G.R. Nos.175277 and 175285,
whether or not the CA erred in upholding the
RTC-Pasig City’s denial of Unicapital, et al.’s
motion to dismiss; and (b) in G.R. No. 192073,
whether or not the CA erred in upholding the
RTC-Makati City’s denial of Consing, Jr.’s
motion for consolidation.
The Court’s Ruling
A. Propriety of the denial of
Unicapital, et al.’s motion to
dismiss and ancillary issues.
A cause of action is defined as the act or
omission by which a party violates a right of
another.61 It is well-settled that the existence of
a cause of action is determined by the
allegations in the complaint.62 In this relation, a
complaint is said to sufficiently assert a cause of
action if, admitting what appears solely on its
face to be correct, the plaintiff would be
entitled to the relief prayed for.63 Thus, if the
allegations furnish adequate basis by which the
complaint can be maintained, then the same
should not be dismissed, regardless of the
defenses that may be averred by the
defendants.64 As edified in the case of Pioneer
Concrete Philippines, Inc. v. Todaro,65 citing
Hongkong and Shanghai Banking Corporation,
Limited. v. Catalan66 (HSBC):
The elementary test for failure to state a cause
of action is whether the complaint alleges facts
which if true would justify the relief demanded.
Stated otherwise, may the court render a valid
judgment upon the facts alleged therein? The
inquiry is into the sufficiency, not the veracity
of the material allegations. If the allegations in
the complaint furnish sufficient basis on which
it can be maintained, it should not be dismissed
regardless of the defense that may be
presented by the defendants.67 (Emphasis
supplied)
Stated otherwise, the resolution on this matter
should stem from an analysis on whether or not
the complaint is able to convey a cause of
action; and not that the complainant has no
cause of action. Lest it be misunderstood,
failure to state a cause of action is properly a
ground for a motion to dismiss under Section
1(g), Rule 1668 of the Rules of Court(Rules),
while the latter is not a ground for dismissal
under the same rule.
In this case, the Court finds that Consing, Jr.’s
complaint in SCA No.1759 properly states a
cause of action since the allegations there
insufficiently bear out a case for damages
under Articles 19 and 26 of the Civil Code.
Records disclose that Consing, Jr.’s complaint
contains allegations which aim to demonstrate
the abusive manner in which Unicapital and
PBI, et al. enforced their demands against him.
Among others, the complaint states that
Consing, Jr. "has constantly been harassed and
bothered by Unicapital and PBI, et al.; x x x
besieged by phone calls from them; x x x has
had constant meetings with them variously,
and on a continuing basis, such that he is
unable to attend to his work as an investment
banker."69 In the same pleading, he also alleged
that Unicapital and PBI, et al.’s act of
"demanding a postdated check knowing fully
well that he does not have the necessary funds
to cover the same, nor is he expecting to have
them is equivalent to asking him to commit a
crime under unlawful coercive
force."70 Accordingly, these specific allegations,
if hypothetically admitted, may result into the
recovery of damages pursuant to Article 19 of
the Civil Code which states that "every person
must, in the exercise of his rights and in the
performance of his duties, act with justice, give
everyone his due, and observe honesty and
good faith." As explained in the HSBC case:
When a right is exercised in a manner which
does not conform with the norms enshrined in
Article 19 and results in damage to another, a
legal wrong is thereby committed for which the
wrongdoer must beheld responsible. But a
right, though by itself legal because it is
recognized or granted by law as such, may
nevertheless become the source of some
illegality. A person should be protected only
when he acts in the legitimate exercise of his
right, that is, when he acts with prudence and
in good faith; but not when he acts with
negligence or abuse. There is an abuse of right
when it is exercised for the only purpose of
prejudicing or injuring another. The exercise of
a right must be in accordance with the purpose
for which it was established, and must not be
excessive or unduly harsh; there must be no
intention to injure another.71 (Emphasis
supplied)
Likewise, Consing, Jr.’s complaint states a cause
of action for damages under Article 26 of the
Civil Code which provides that:
Article 26. Every person shall respect the
dignity, personality, privacy and peace of mind
of his neighbors and other persons. The
following and similar acts, though they may not
constitute a criminal offense, shall produce a
cause of action for damages, prevention and
other relief:
(1) Prying into the privacy of another's
residence;
(2) Meddling with or disturbing the private life
or family relations of another;
(3) Intriguing to cause another to be alienated
from his friends;
(4) Vexing or humiliating another on account of
his religious beliefs, lowly station in life, place
of birth, physical defect, or other personal
condition.
The rationale therefor was explained in the
case of Manaloto v. Veloso III,72 citing
Concepcion v. CA,73 to wit:
The philosophy behind Art. 26 underscores the
necessity for its inclusion in our civil law. The
Code Commission stressed in no uncertain
terms that the human personality must be
exalted. The sacredness of human personality is
a concomitant consideration of every plan for
human amelioration. The touchstone of every
system of law, of the culture and civilization of
every country, is how far it dignifies man. If the
statutes insufficiently protect a person from
being unjustly humiliated, in short, if human
personality is not exalted - then the laws are
indeed defective. Thus, under this article, the
rights of persons are amply protected, and
damages are provided for violations of a
person's dignity, personality, privacy and peace
of mind.74
To add, a violation of Article 26 of the Civil Code
may also lead to the payment of moral
damages under Article 2219(10)75 of the Civil
Code.
Records reveal that Consing, Jr., in his
complaint, alleged that "he has come to
discover that Unicapital and PBI, et al. are
speaking of him in a manner that is
inappropriate and libelous; and that they have
spread their virulent version of events in the
business and financial community such that he
has suffered and continues to suffer injury upon
his good name and reputation which, after all,
is the most sacred and valuable wealth he
possesses - especially considering that he is an
investment banker."76 In similar regard, the
hypothetical admission of these allegations may
result into the recovery of damages pursuant to
Article 26, and even Article2219(10), of the Civil
Code.
Corollary thereto, Unicapital, et al.’s
contention77 that the case should be dismissed
on the ground that it failed to set out the actual
libelous statements complained about cannot
be given credence. These incidents, as well as
the specific circumstances surrounding the
manner in which Unicapital and PBI, et al.
pursued their claims against Consing, Jr. may be
better ventilated during trial. It is a standing
rule that issues that require the contravention
of the allegations of the complaint, as well as
the full ventilation, in effect, of the main merits
of the case, should not be within the province
of a mere motion to dismiss,78 as in this case.
Hence, as what is only required is that the
allegations furnish adequate basis by which the
complaint can be maintained, the Court – in
view of the above-stated reasons – finds that
the RTC-Pasig City’s denial of Unicapital, et al.’s
motion to dismiss on the ground of failure to
state a cause of action was not tainted with
grave abuse of discretion which would
necessitate the reversal of the CA’s ruling.
Verily, for grave abuse of discretion to exist, the
abuse of discretion must be patent and gross so
as to amount to an evasion of a positive duty or
a virtual refusal to perform a duty enjoined by
law, or to act at all in contemplation of
law.79 This the Court does not perceive in the
case at bar.
Further, so as to obviate any confusion on the
matter, the Court equally finds that the causes
of action in SCA No. 1759 were not – as
Unicapital, et al. claim – misjoined even if
Consing, Jr. averred that Unicapital and PBI, et
al. violated certain provisions of the
Corporation Law and the Revised Securities
Act.80
The rule is that a party’s failure to observe the
following conditions under Section 5, Rule 2 of
the Rules results in a misjoinder of causes of
action:81
SEC. 5. Joinder of causes of action . - A party
may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may
have against an opposing party, subject to the
following conditions:
(a) The party joining the causes of action shall
comply with the rules on joinder of parties;
(b) The joinder shall not include special civil
actions governed by special rules;
(c) Where the causes of action are between the
same parties but pertain to different venues or
jurisdictions, the joinder may be allowed in the
Regional Trial Court provided one of the causes
of action falls within the jurisdiction of said
court and the venue lies therein; and
(d) Where the claims in all the causes of action
are principally for recovery of money the
aggregate amount claimed shall be the test of
jurisdiction. (Emphasis supplied)
A careful perusal of his complaint discloses that
Consing, Jr. did not seek to hold Unicapital and
PBI, et al. liable for any specific violation of the
Corporation Code or the Revised Securities Act.
Rather, he merely sought damages for
Unicapital and PBI, et al.’s alleged acts of
making him sign numerous documents and
their use of the same against him. In this
respect, Consing, Jr. actually advances an
injunction and damages case82 which properly
falls under the jurisdiction of the RTC-Pasig
City.83 Therefore, there was no violation of
Section 5, Rule 2 of the Rules, particularly,
paragraph (c) thereof. Besides, even on the
assumption that there was a misjoinder of
causes of action, still, such defect should not
result in the dismissal of Consing, Jr.’s
complaint. Section 6, Rule 2 of the Rules
explicitly states that a "misjoinder of causes of
action is not a ground for dismissal of an
action" and that "a misjoined cause of action
may, on motion of a party or on the initiative of
the court, be severed and proceeded with
separately."
Neither should Consing, Jr.’s failure to pay the
required docket fees lead to the dismissal of his
complaint.1âwphi1 It has long been settled that
while the court acquires jurisdiction over any
case only upon the payment of the prescribed
docket fees, its non-payment at the time of the
filing of the complaint does not automatically
cause the dismissal of the complaint provided
that the fees are paid within a reasonable
period.84 Consequently, Unicapital, et al.’s
insistence that the stringent rule on non-
payment of docket fees enunciated in the case
of Manchester Development Corporation v.
CA85 should be applied in this case cannot be
sustained in the absence of proof that Consing,
Jr. intended to defraud the government by his
failure to pay the correct amount of filing fees.
As pronounced in the case of Heirs of Bertuldo
Hinog v. Hon. Melicor:86
Plainly, while the payment of the prescribed
docket fee is a jurisdictional requirement, even
its
non-payment at the time of filing does not
automatically cause the dismissal of the case,
as long as the fee is paid within the applicable
prescriptive or reglementary period, more so
when the party involved demonstrates a
willingness to abide by the rules prescribing
such payment.
Thus, when insufficient filing fees were initially
paid by the plaintiffs and there was no
intention to defraud the government, the
Manchester rule does not apply.87 (Emphasis
and italics in the original)
Indeed, while the Court acknowledges
Unicapital, et al.'s apprehension that Consing,
Jr.'s "metered" claim for damages to the tune
of around ₱2,000,000.00 per month88 may
balloon to a rather huge amount by the time
that this case is finally disposed of, still, any
amount that may by then fall due shall be
subject to assessment and any additional fees
determined shall constitute as a lien against the
judgment as explicitly provided under Section
2,89 Rule 141 of the Rules.
Finally, on the question of whether or not
Consing, Jr.'s complaint was properly verified,
suffice it to state that since the copy submitted
to the trial court was duly notarized by one
Atty. Allan B. Gepty and that it was only
Unicapital, et al.’s copy which lacks the
notarization, then there was sufficient
compliance with the requirements of the rules
on pleadings.90
In fine, the Court finds no reversible error on
the part of the CA in sustaining the RTC-Pasig
City’s denial of Unicapital et al.’s motion to
dismiss. As such, the petitions in G.R. Nos.
175277 and 175285 must be denied.
B. Propriety of the denial of
Consing, Jr.’s motion for
consolidation.
The crux of G.R. No. 192073 is the propriety of
the RTC-Makati City’s denial of Consing, Jr.’s
motion for the consolidation of the Pasig case,
i.e., SCA No. 1759, and the Makati case, i.e.,
Civil Case No. 99-1418.Records show that the
CA upheld the RTC-Makati City’s denial of the
foregoing motion, finding that the
consolidation of these cases was merely
discretionary on the part of the trial court. It
added that it was "impracticable and would
cause a procedural faux pas
"if it were to "allow the RTC-Pasig City to
preside over the Makati case."91
The CA’s ruling is proper.
It is hornbook principle that when or two or
more cases involve the same parties and affect
closely related subject matters, the same must
be consolidated and jointly tried, in order to
serve the best interest of the parties and to
settle the issues between them promptly, thus,
resulting in a speedy and inexpensive
determination of cases. In addition,
consolidation serves the purpose of avoiding
the possibility of conflicting decisions rendered
by the courts in two or more cases, which
otherwise could be disposed of in a single
suit.92 The governing rule is Section 1, Rule 31
of the Rules which provides:
SEC. 1. Consolidation. - When actions involving
a common question of law or fact are pending
before the court, it may order a joint hearing or
trial of any or all the matters in issue in the
actions; it may order all the actions
consolidated; and it may make such orders
concerning proceedings therein as may tend to
avoid unnecessary costs or delay.
In the present case, the Court observes that the
subject cases, i.e., SCA No. 1759 and Civil Case
No. 99-1418, although involving the same
parties and proceeding from a similar factual
milieu, should remain unconsolidated since
they proceed from different sources of
obligations and, hence, would not yield
conflicting dispositions. SCA No. 1759 is an
injunction and damages case based on the Civil
Code provisions on abuse of right and
defamation, while Civil Case No. 99-1418 is a
collection and damages suit based on
actionable documents, i.e., the subject
promissory notes. In particular, SCA No. 1759
deals with whether or not Unicapital and BPI, et
al, abused the manner in which they demanded
payment from Consing, Jr., while Civil Case No.
99-1418 deals with whether or not Unicapital
may demand payment from Consing, Jr. based
on the subject promissory notes. Clearly, a
resolution in one case would have no practical
effect as the core issues and reliefs sought in
each case are separate and distinct from the
other.
Likewise, as the CA correctly pointed out, the
RTC-Makati City could not have been failured in
retaining Civil Case No. 99-1418 in its dockets
since pre-trial procedures have already been
undertaken therein and, thus, its consolidation
with SCA No. 1759 pending before the RTC-
Pasig City would merely result in complications
on the part of the latter court or squander the
resources or remedies already utilized in Civil
Case No. 99-1418.93 In this light, aside from the
perceived improbability of having conflicting
decisions, the consolidation of SCA No. 1759
and Civil Case No. 99-1418 would, contrary to
its objective, only delay the proceedings and
entail unnecessary costs.
All told, the Court finds the consolidation of
SCA No. 1759 and Civil Case No. 99-1418 to be
improper, impelling the affirmance of the CA’s
ruling. Consequently, the petition in G.R. No.
192073 must also be denied.
WHEREFORE, the petitions in G.R. Nos. 175277,
175285 and 192073 are DENIED. Accordingly,
the Court of Appeals’ Joint Decision dated
October 20, 2005 and Resolution dated
October 25, 2006 in CA-G.R. SP Nos. 64019 and
64451 and the Decision dated September 30,
2009 and Resolution dated April 28, 2010 in CA-
G.R. No. 101355 are hereby AFFIRMED.
G. R. No. 166876             INIEGO VS HON
PURGANAN
For this Court to grant this petition for review
on certiorari under Rule 45 of the Rules of
Court, petitioner has to persuade us on two
engaging questions of law. First, he has to
convince us that actions for damages based on
quasi-delict are actions that are capable of
pecuniary estimation, and therefore would fall
under the jurisdiction of the municipal courts if
the claim does not exceed the jurisdictional
amount of P400,000.00 in Metro Manila.
Second, he has to convince us that the moral
and exemplary damages claimed by the private
respondent should be excluded from the
computation of the above-mentioned
jurisdictional amount because they arose from
a cause of action other than the negligent act of
the defendant.
Petitioner urges us to reverse the 28 October
2004 Decision and 26 January 2005 Resolution
of the Court of Appeals, Eighth Division, in CA-
G.R. SP No. 76206 denying due course to the
petition for certiorari filed by petitioner under
Rule 65, elevating the 21 October 2002
Omnibus Order and the 21 January 2003 Order
of the Regional Trial Court (RTC), Branch 42,
City of Manila. The dispositive portion of the 28
October 2004 Decision of the Court of Appeals
reads:
WHEREFORE, the petition is DENIED DUE
COURSE and DISMISSED for lack of merit.2
The factual and procedural antecedents of this
case are as follows:
On 1 March 2002, private respondent Fokker
Santos filed a complaint for quasi-delict and
damages against Jimmy T. Pinion, the driver of
a truck involved in a traffic accident, and
against petitioner Artemio Iniego, as owner of
the said truck and employer of Pinion. The
complaint stemmed from a vehicular accident
that happened on 11 December 1999, when a
freight truck allegedly being driven by Pinion hit
private respondent’s jitney which private
respondent was driving at the time of the
accident.
On 24 August 2002, private respondent filed a
Motion to Declare defendant in Default
allegedly for failure of the latter to file his
answer within the final extended period. On 28
August 2002, petitioner filed a Motion to Admit
and a Motion to Dismiss the complaint on the
ground, among other things, that the RTC has
no jurisdiction over the cause of action of the
case.
On 21 October 2002, public respondent Judge
Guillermo G. Purganan, acting as presiding
judge of the RTC, Branch 42, Manila, issued the
assailed Omnibus Order denying the Motion to
Dismiss of the petitioner and the Motion to
Declare Defendant in Default of the private
respondent. Pertinent portions of the Omnibus
Order and the dispositive portion thereof read:
In his opposition to the motion to declare him
in default and his Motion to Admit defendant
IÑEGO alleged that he never received the Order
dated 12 August 2002. But believing in good
faith, without being presumptuous, that his 3rd
Motion for additional Time to file or any
appropriate [pleading] would be granted, he
filed the aforesaid Motion received by the
Court on 23 August 2002.
The explanation of defendant IÑEGO has merit.
The order dated 12 August 2002 was sent to a
wrong address, thus defendant IÑEGO did not
receive it. Since it was not received, he was not
aware that the court would grant no further
extension. The Motion to Admit Motion to
Dismiss has to be granted and the Motion to
declare Defendant IÑEGO [in default] has to be
DENIED.
xxxx
The plaintiff opines that this court has exclusive
jurisdiction because the cause of action is the
claim for damages, which exceeds P400,000.00.
The complaint prays for actual damages in the
amount of P40,000.00, moral damages in the
amount of P300,000.00, and exemplary
damages in the amount of P150,000.00.
Excluding attorney’s fees in the amount
of P50,000.00, the total amount of damages
being claimed is P490,000.00.
Proceeding on the assumption that the cause of
action is the claim of (sic) for damages in the
total amount of P490,000.00, this court has
jurisdiction. But is the main cause of action the
claim for damages?
This court is of the view that the main cause of
action is not the claim for damages but quasi-
delict. Damages are being claimed only as a
result of the alleged fault or negligence of both
defendants under Article 2176 of the Civil Code
in the case of defendant Pinion and under
Article 2180 also of the Civil Code in the case of
defendant Iniego. But since fault or negligence
(quasi-delicts) could not be the subject of
pecuniary estimation, this court has exclusive
jurisdiction.
xxxx
WHEREFORE, in view of all the foregoing, the
motion to declare defendant Iniego in default
and the said defendant’s motion to dismiss are
denied.3
On 7 November 2002, petitioner filed a Motion
for Reconsideration of the Omnibus Order of 21
October 2002. On 21 January 2003, public
respondent issued an Order denying
petitioner’s motion for reconsideration.
Pertinent portions of the 21 January 2003
Order are reproduced hereunder:
What this court referred to in its Order sought
to be reconsidered as not capable of pecuniary
estimation is the CAUSE OF ACTION, which is
quasi-delict and NOT the amount of damage
prayed for.
xxxx
WHEREFORE, in view of the foregoing, the
motion for reconsideration is DENIED.4
Petitioner elevated the 21 October 2002 and 21
January 2003 Orders of the RTC to the Court of
Appeals on petition for certiorari under Rule 65
of the Rules of Court. On 28 October 2004, the
Court of Appeals promulgated the assailed
Decision, the dispositive portion thereof reads:
WHEREFORE, the petition is DENIED DUE
COURSE and dismissed for lack of merit.5
On 22 November 2004, petitioner moved for
reconsideration, which was denied by the Court
of Appeals on 26 January 2005. Hence, this
present petition.
Petitioner claims that actions for damages
based on quasi-delict are actions that are
capable of pecuniary estimation; hence, the
jurisdiction in such cases falls upon either the
municipal courts (the Municipal Trial Courts,
Metropolitan Trial Courts, Municipal Trial
Courts In Cities, And Municipal Circuit Trial
Courts), or the Regional Trial Courts, depending
on the value of the damages claimed.
Petitioner argues further that should this Court
find actions for damages capable of pecuniary
estimation, then the total amount of damages
claimed by the private respondent must
exceed P400,000.00 in order that it may fall
under the jurisdiction of the RTC. Petitioner
asserts, however, that the moral and exemplary
damages claimed by private respondent be
excluded from the computation of the total
amount of damages for jurisdictional purposes
because the said moral and exemplary damages
arose, not from the quasi-delict, but from the
petitioner’s refusal to pay the actual damages.
I terms of money, and are cognizable exclusively
Actions for damages based on quasi-delicts are
primarily and effectively actions for the
recovery of a sum of money for the damages
suffered because of the defendant’s alleged
tortious acts, and are therefore capable of
pecuniary estimation.
In a recent case,6 we did affirm the jurisdiction
of a Municipal Circuit Trial Court in actions for
damages based on quasi-delict, although the
ground used to challenge said jurisdiction was
an alleged forum shopping, and not the
applicability of Section 19(1) of Batas Pambansa
Blg. 129.
According to respondent Judge, what he
referred to in his assailed Order as not capable
of pecuniary estimation is the cause of action,
which is a quasi-delict, and not the amount of
damage prayed for.7 From this, respondent
Judge concluded that since fault or negligence
in quasi-delicts cannot be the subject of
pecuniary estimation, the RTC has jurisdiction.
The Court of Appeals affirmed respondent
Judge in this respect.8
Respondent Judge’s observation is erroneous. It
is crystal clear from B.P. Blg. 129, as amended
by Republic Act No. 7691, that what must be
determined to be capable or incapable of
pecuniary estimation is not the cause of action,
but the subject matter of the action.9 A cause of
action is "the delict or wrongful act or omission
committed by the defendant in violation of the
primary rights of the plaintiff."10 On the other
hand, the "subject matter of the action" is "the
physical facts, the thing real or personal, the
money, lands, chattels, and the like, in relation
to which the suit is prosecuted, and not the
delict or wrong committed by the defendant."11
The case of Lapitan v. Scandia, Inc., et al.,12 has
guided this Court time and again in determining
whether the subject matter of the action is
capable of pecuniary estimation. In Lapitan, the
Court spoke through the eminent Mr. Justice
Jose B.L. Reyes:
In determining whether an action is one the
subject matter of which is not capable of
pecuniary estimation this Court has adopted
the criterion of first ascertaining the nature of
the principal action or remedy sought. If it is
primarily for the recovery of a sum of money,
the claim is considered capable of pecuniary
estimation, and whether jurisdiction is in the
municipal courts or in the courts of first
instance [now Regional Trial Courts] would
depend on the amount of the claim. However,
where the basic issue is something other than
the right to recover a sum of money, where the
money claim is purely incidental to, or a
consequence of, the principal relief sought like
suits to have the defendant perform his part of
the contract (specific performance) and in
actions for support, or for annulment of a
judgment or to foreclose a mortgage, this court
has considered such actions as cases where the
subject of the litigation may not be estimated in
by courts of first instance [now Regional Trial
Courts]. x x x.13 (Emphasis supplied.)
Actions for damages based on quasi-delicts are
primarily and effectively actions for the
recovery of a sum of money for the damages
suffered because of the defendant’s alleged
tortious acts. The damages claimed in such
actions represent the monetary equivalent of
the injury caused to the plaintiff by the
defendant, which are thus sought to be
recovered by the plaintiff. This money claim is
the principal relief sought, and is not merely
incidental thereto or a consequence thereof. It
bears to point out that the complaint filed by
private respondent before the RTC actually
bears the caption "for DAMAGES."
Fault or negligence, which the Court of Appeals
claims is not capable of pecuniary estimation, is
not actionable by itself. For such fault or
negligence to be actionable, there must be a
resulting damage to a third person. The relief
available to the offended party in such cases is
for the reparation, restitution, or payment of
such damage, without which any alleged
offended party has no cause of action or relief.
The fault or negligence of the defendant,
therefore, is inextricably intertwined with the
claim for damages, and there can be no action
based on quasi-delict without a claim for
damages.
We therefore rule that the subject matter of
actions for damages based on quasi-delict is
capable of pecuniary estimation.
II
The amount of damages claimed is within the
jurisdiction of the RTC, since it is the claim for
all kinds of damages that is the basis of
determining the jurisdiction of courts, whether
the claims for damages arise from the same or
from different causes of action.
Despite our concurrence in petitioner’s claim
that actions for damages based on quasi-delict
are actions that are capable of pecuniary
estimation, we find that the total amount of
damages claimed by the private respondent
nevertheless still exceeds the jurisdictional limit
of P400,000.00 and remains under the
jurisdiction of the RTC.
Petitioner argues that in actions for damages
based on quasi-delict, claims for damages
arising from a different cause of action (i.e.,
other than the fault or negligence of the
defendant) should not be included in the
computation of the jurisdictional amount.
According to petitioner, the moral and
exemplary damages claimed by the
respondents in the case at bar are not direct
and proximate consequences of the alleged
negligent act. Petitioner points out that the
complaint itself stated that such moral and
exemplary damages arose from the alleged
refusal of defendants to honor the demand for
damages, and therefore there is no reasonable
cause and effect between the fault or
negligence of the defendant and the claim for
moral and exemplary damages.14 If the claims
for moral and exemplary damages are not
included in the computation for purposes of
determining jurisdiction, only the claim for
actual damages in the amount of P40,000.00
will be considered, and the MeTC will have
jurisdiction.
We cannot give credence to petitioner’s
arguments. The distinction he made between
damages arising directly from injuries in a
quasi-delict and those arising from a refusal to
admit liability for a quasi-delict is more
apparent than real, as the damages sought by
respondent originate from the same cause of
action: the quasi-delict. The fault or negligence
of the employee and the juris tantum
presumption of negligence of his employer in
his selection and supervision are the seeds of
the damages claimed, without distinction.
Even assuming, for the sake of argument, that
the claims for moral and exemplary damages
arose from a cause of action other than the
quasi-delict, their inclusion in the computation
of damages for jurisdictional purposes is still
proper. All claims for damages should be
considered in determining the jurisdiction of
the court regardless of whether they arose
from a single cause of action or several causes
of action. Rule 2, Section 5, of the Rules of
Court allows a party to assert as many causes of
action as he may have against the opposing
party. Subsection (d) of said section provides
that where the claims in all such joined causes
of action are principally for recovery of money,
the aggregate amount claimed shall be the test
of jurisdiction.15
Hence, whether or not the different claims for
damages are based on a single cause of action
or different causes of action, it is the total
amount thereof which shall govern. Jurisdiction
in the case at bar remains with the RTC,
considering that the total amount claimed,
inclusive of the moral and exemplary damages
claimed, is P490,000.00.
In sum, actions for damages based on quasi-
delicts are actions that are capable of pecuniary
estimation. As such, they fall within the
jurisdiction of either the RTC or the municipal
courts, depending on the amount of damages
claimed. In this case, the amount of damages
claimed is within the jurisdiction of the RTC,
since it is the claim for all kinds of damages that
is the basis of determining the jurisdiction of
courts, whether the claims for damages arise
from the same or from different causes of
action.
WHEREFORE, the petition for review on
certiorari is hereby DENIED for lack of merit.
The Decision and Resolution of the Court of
Appeals dated 28 October 2004 and 26 January
2005, respectively, are AFFIRMED insofar as
they held that the Regional Trial Court has
jurisdiction. No costs.
SO ORDERED.
RULE 3 – PARTIES TO CIVIL ACTIONS
G.R. No. L-770             LIMJOCO VS INTESTATE
ESTATE
Under date of May 21, 1946, the Public Service
Commission, through Deputy Commissioner
Fidel Ibañez, rendered its decision in case No.
4572 of Pedro O. Fragante, as applicant for a
certificate of public convenience to install,
maintain and operate an ice plant in San Juan,
Rizal, whereby said commission held that the
evidence therein showed that the public
interest and convenience will be promoted in a
proper and suitable manner "by authorizing the
operation and maintenance of another ice
plant of two and one-half (2-½) tons in the
municipality of San Juan; that the original
applicant Pedro O. Fragante was a Filipino
Citizen at the time of his death; and that his
intestate estate is financially capable of
maintaining the proposed service". The
commission, therefore, overruled the
opposition filed in the case and ordered "that
under the provisions of section 15 of
Commonwealth Act No. 146, as amended a
certificate of public convenience be issued to
the Intestate Estate of the deceased Pedro
Fragante, authorizing said Intestate Estate
through its Special or Judicial Administrator,
appointed by the proper court of competent
jurisdiction, to maintain and operate an ice
plant with a daily productive capacity of two
and one-half (2-1/2) tons in the Municipality of
San Juan and to sell the ice produced from said
plant in the said Municipality of San Juan and in
the Municipality of Mandaluyong, Rizal, and in
Quezon City", subject to the conditions therein
set forth in detail (petitioner's brief, pp. 33-34).
Petitioner makes four assignments of error in
his brief as follows:
1. The decision of the Public Service
Commission is not in accordance with law.
2. The decision of the Public Service
Commission is not reasonably supported by
evidence.
3. The Public Service Commission erred in not
giving petitioner and the Ice and Cold Storage
Industries of the Philippines, Inc., as existing
operators, a reasonable opportunity to meet
the increased demand.
4. The decision of the Public Service
Commission is an unwarranted departure from
its announced policy with respect to the
establishment and operation of ice plant. (Pp.
1-2, petitioner's brief.)
In his argument petitioner contends that it was
error on the part of the commission to allow
the substitution of the legal representative of
the estate of Pedro O. Fragante for the latter as
party applicant in the case then pending before
the commission, and in subsequently granting
to said estate the certificate applied for, which
is said to be in contravention of law.
If Pedro O. Fragante had not died, there can be
no question that he would have had the right to
prosecute his application before the
commission to its final conclusion. No one
would have denied him that right. As declared
by the commission in its decision, he had
invested in the ice plant in question P 35,000,
and from what the commission said regarding
his other properties and business, he would
certainly have been financially able to maintain
and operate said plant had he not died. His
transportation business alone was netting him
about P1,440 a month. He was a Filipino citizen
and continued to be such till his demise. The
commission declared in its decision, in view of
the evidence before it, that his estate was
financially able to maintain and operate the ice
plant. The aforesaid right of Pedro O. Fragante
to prosecute said application to its conclusion
was one which by its nature did not lapse
through his death. Hence, it constitutes a part
of the assets of his estate, for which a right was
property despite the possibility that in the end
the commission might have denied application,
although under the facts of the case, the
commission granted the application in view of
the financial ability of the estate to maintain
and operate the ice plant. Petitioner, in his
memorandum of March 19, 1947, admits (page
3) that the certificate of public convenience
once granted "as a rule, should descend to his
estate as an asset". Such certificate would
certainly be property, and the right to acquire
such a certificate, by complying with the
requisites of the law, belonged to the decedent
in his lifetime, and survived to his estate and
judicial administrator after his death.
If Pedro O. Fragrante had in his lifetime secured
an option to buy a piece of land and during the
life of the option he died, if the option had
been given him in the ordinary course of
business and not out of special consideration
for his person, there would be no doubt that
said option and the right to exercise it would
have survived to his estate and legal
representatives. In such a case there would also
be the possibility of failure to acquire the
property should he or his estate or legal
representative fail to comply with the
conditions of the option. In the case at bar
Pedro O. Fragrante's undoubted right to apply
for and acquire the desired certificate of public
convenience — the evidence established that
the public needed the ice plant — was under
the law conditioned only upon the requisite
citizenship and economic ability to maintain
and operate the service. Of course, such right
to acquire or obtain such certificate of public
convenience was subject to failure to secure its
objective through nonfulfillment of the legal
conditions, but the situation here is no different
from the legal standpoint from that of the
option in the illustration just given.
Rule 88, section 2, provides that the executor
or administrator may bring or defend actions,
among other cases, for the protection of the
property or rights of the deceased which
survive, and it says that such actions may be
brought or defended "in the right of the
deceased".
Rule 82, section 1, paragraph (a), mentions
among the duties of the executor or
administrator, the making of an inventory of all
goods, chattels, rights, credits, and estate of
the deceased which shall come to his
possession or knowledge, or to the possession
of any other person for him.
In his commentaries on the Rules of Court
(Volume II, 2nd ed., pages 366, 367) the
present chief Justice of this Court draws the
following conclusion from the decisions cited
by him:
Therefore, unless otherwise expressly provided
by law, any action affecting the property
or rights (emphasis supplied) of a deceased
person which may be brought by or against him
if he were alive, may likewise be instituted and
prosecuted by or against the administrator,
unless the action is for recovery of money, debt
or interest thereon, or unless, by its very
nature, it cannot survive, because death
extinguishes the right
It is true that a proceeding upon the application
for a certificate of public convenience before
the Public Service Commission is not an
"action". But the foregoing provisions and
citations go to prove that the decedent's rights
which by their nature are not extinguished by
death go to make up a part and parcel of the
assets of his estate which, being placed under
the control and management of the executor or
administrator, can not be exercised but by him
in representation of the estate for the benefit
of the creditors, devisees or legatees, if any,
and the heirs of the decedent. And if the right
involved happens to consist in the prosecution
of an unfinished proceeding upon an
application for a certificate of public
convenience of the deceased before the Public
Service Commission, it is but logical that the
legal representative be empowered and
entitled in behalf of the estate to make the
right effective in that proceeding.
Manresa (Vol. III, 6th ed., p. 11) says that No.
10 of article 334 and article 336 of the Civil
Code, respectively, consider as immovable and
movable things rights which are not material.
The same eminent commentator says in the
cited volume (p. 45) that article 336 of the Civil
Code has been deficiently drafted in that it is
not sufficiently expressive of all incorporeal
rights which are also property for juridical
purposes.
Corpus Juris (Vol. 50, p. 737) states that in the
broad sense of the term, property includes,
among other things, "an option", and "the
certificate of the railroad commission
permitting the operation of a bus line", and on
page 748 of the same volume we read:
However, these terms (real property, as estate
or interest) have also been declared to include
every species of title, inchoate or complete,
and embrace rights which lie in contract,
whether executory or executed. (Emphasis
supplied.)
Another important question raised by
petitioner is whether the estate of Pedro O.
Fragrante is a "person" within the meaning of
the Public Service Act.
Words and Phrases, First Series, (Vol. 6, p,
5325), states the following doctrine in the
jurisdiction of the State of Indiana:
As the estate of the decedent is in law regarded
as a person, a forgery committed after the
death of the man whose name purports to be
signed to the instrument may be prosecuted as
with the intent to defraud the estate.
Billings vs. State, 107 Ind., 54, 55, 6 N. E. 914, 7
N. E. 763, 57 Am. Rep. 77.
The Supreme Court of Indiana in the decision
cited above had before it a case of forgery
committed after the death of one Morgan for
the purpose of defrauding his estate. The
objection was urged that the information did
not aver that the forgery was committed with
the intent to defraud any person. The Court,
per Elliott, J., disposed of this objection as
follows:
. . . The reason advanced in support of this
proposition is that the law does not regard the
estate of a decedent as a person. This intention
(contention) cannot prevail. The estate of the
decedent is a person in legal contemplation.
"The word "person" says Mr. Abbot, "in its legal
signification, is a generic term, and includes
artificial as well as natural persons," 2 Abb.
Dict. 271; Douglas vs. Pacific, etc. Co., 4 Cal.
304; Planters', etc., Bank vs. Andrews, 8 Port.
(Ala.) 404. It said in another work that 'persons
are of two kinds: natural and artificial. A natural
person is a human being. Artificial persons
include (1) a collection or succession of natural
persons forming a corporation; (2) a collection
of property to which the law attributes the
capacity of having rights and duties. The latter
class of artificial persons is recognized only to a
limited extent in our law. "Examples are the
estate of a bankrupt or deceased person." 2
Rapalje & L. Law Dict. 954. Our own cases
inferentially recognize the correctness of the
definition given by the authors from whom we
have quoted, for they declare that it is
sufficient, in pleading a claim against a
decedent's estate, to designate the defendant
as the estate of the deceased person, naming
him. Ginn vs. Collins, 43 Ind. 271. Unless we
accept this definition as correct, there would be
a failure of justice in cases where, as here, the
forgery is committed after the death of a
person whose name is forged; and this is a
result to be avoided if it can be done consistent
with principle. We perceive no difficulty in
avoiding such a result; for, to our minds, it
seems reasonable that the estate of a decedent
should be regarded as an artificial person. It is
the creation of law for the purpose of enabling
a disposition of the assets to be properly made,
and, although natural persons as heirs, devises,
or creditors, have an interest in the property,
the artificial creature is a distinct legal entity.
The interest which natural persons have in it is
not complete until there has been a due
administration; and one who forges the name
of the decedent to an instrument purporting to
be a promissory note must be regarded as
having intended to defraud the estate of the
decedent, and not the natural persons having
diverse interests in it, since ha cannot be
presumed to have known who those persons
were, or what was the nature of their
respective interest. The fraudulent intent is
against the artificial person, — the estate —
and not the natural persons who have direct or
contingent interest in it. (107 Ind. 54, 55, 6 N.E.
914-915.)
In the instant case there would also be a failure
of justice unless the estate of Pedro O.
Fragrante is considered a "person", for
quashing of the proceedings for no other
reason than his death would entail prejudicial
results to his investment amounting to
P35,000.00 as found by the commission, not
counting the expenses and disbursements
which the proceeding can be presumed to have
occasioned him during his lifetime, let alone
those defrayed by the estate thereafter. In this
jurisdiction there are ample precedents to
show that the estate of a deceased person is
also considered as having legal personality
independent of their heirs. Among the most
recent cases may be mentioned that of "Estate
of Mota vs. Concepcion, 56 Phil., 712, 717,
wherein the principal plaintiff was the estate of
the deceased Lazaro Mota, and this Court gave
judgment in favor of said estate along with the
other plaintiffs in these words:
. . . the judgment appealed from must be
affirmed so far as it holds that defendants
Concepcion and Whitaker are indebted to he
plaintiffs in the amount of P245,804.69 . . . .
Under the regime of the Civil Code and before
the enactment of the Code of Civil Procedure,
the heirs of a deceased person were considered
in contemplation of law as the continuation of
his personality by virtue of the provision of
article 661 of the first Code that the heirs
succeed to all the rights and obligations of the
decedent by the mere fact of his death. It was
so held by this Court in Barrios vs. Dolor, 2 Phil.,
44, 46. However, after the enactment of the
Code of Civil Procedure, article 661 of the Civil
Code was abrogated, as held in Suiliong & Co.
vs. Chio-Taysan, 12 Phil., 13, 22. In that case, as
well as in many others decided by this Court
after the innovations introduced by the Code of
Civil Procedure in the matter of estates of
deceased persons, it has been the constant
doctrine that it is the estate or the mass of
property, rights and assets left by the decedent,
instead of the heirs directly, that becomes
vested and charged with his rights and
obligations which survive after his demise.
The heirs were formerly considered as the
continuation of the decedent's personality
simply by legal fiction, for they might not have
been flesh and blood — the reason was one in
the nature of a legal exigency derived from the
principle that the heirs succeeded to the rights
and obligations of the decedent. Under the
present legal system, such rights and
obligations as survive after death have to be
exercised and fulfilled only by the estate of the
deceased. And if the same legal fiction were not
indulged, there would be no juridical basis for
the estate, represented by the executor or
administrator, to exercise those rights and to
fulfill those obligations of the deceased. The
reason and purpose for indulging the fiction is
identical and the same in both cases. This is
why according to the Supreme Court of Indiana
in Billings vs. State, supra, citing 2 Rapalje & L.
Dictionary, 954, among the artificial persons
recognized by law figures "a collection of
property to which the law attributes the
capacity of having rights and duties", as for
instance, the estate of a bankrupt or deceased
person.
Petitioner raises the decisive question of
whether or not the estate of Pedro O.
Fragrante can be considered a "citizen of the
Philippines" within the meaning of section 16 of
the Public Service Act, as amended, particularly
the proviso thereof expressly and categorically
limiting the power of the commission to issue
certificates of public convenience or certificates
of public convenience and necessity "only to
citizens of the Philippines or of the United
States or to corporations, copartnerships,
associations, or joint-stock companies
constituted and organized under the laws of
the Philippines", and the further proviso that
sixty per centum of the stock or paid-up capital
of such entities must belong entirely to citizens
of the Philippines or of the United States.
Within the Philosophy of the present legal
system, the underlying reason for the legal
fiction by which, for certain purposes, the
estate of the deceased person is considered a
"person" is the avoidance of injustice or
prejudice resulting from the impossibility of
exercising such legal rights and fulfilling such
legal obligations of the decedent as survived
after his death unless the fiction is indulged.
Substantially the same reason is assigned to
support the same rule in the jurisdiction of the
State of Indiana, as announced in Billings vs.
State, supra, when the Supreme Court of said
State said:
. . . It seems reasonable that the estate of a
decedent should be regarded as an artificial
person. it is the creation of law for the purpose
of enabling a disposition of the assets to be
properly made . . . .
Within the framework and principles of the
constitution itself, to cite just one example,
under the bill of rights it seems clear that while
the civil rights guaranteed therein in the
majority of cases relate to natural persons, the
term "person" used in section 1 (1) and (2)
must be deemed to include artificial or juridical
persons, for otherwise these latter would be
without the constitutional guarantee against
being deprived of property without due process
of law, or the immunity from unreasonable
searches and seizures. We take it that it was
the intendment of the framers to include
artificial or juridical, no less than natural,
persons in these constitutional immunities and
in others of similar nature. Among these
artificial or juridical persons figure estates of
deceased persons. Hence, we hold that within
the framework of the Constitution, the estate
of Pedro O. Fragrante should be considered an
artificial or juridical person for the purposes of
the settlement and distribution of his estate
which, of course, include the exercise during
the judicial administration thereof of those
rights and the fulfillment of those obligations of
his which survived after his death. One of those
rights was the one involved in his pending
application before the Public Service
Commission in the instant case, consisting in
the prosecution of said application to its final
conclusion. As stated above, an injustice would
ensue from the opposite course.
How about the point of citizenship? If by legal
fiction his personality is considered extended so
that any debts or obligations left by, and
surviving, him may be paid, and any surviving
rights may be exercised for the benefit of his
creditors and heirs, respectively, we find no
sound and cogent reason for denying the
application of the same fiction to his
citizenship, and for not considering it as
likewise extended for the purposes of the
aforesaid unfinished proceeding before the
Public Service Commission. The outcome of
said proceeding, if successful, would in the end
inure to the benefit of the same creditors and
the heirs. Even in that event petitioner could
not allege any prejudice in the legal sense, any
more than he could have done if Fragrante had
lived longer and obtained the desired
certificate. The fiction of such extension of his
citizenship is grounded upon the same
principle, and motivated by the same reason, as
the fiction of the extension of personality. The
fiction is made necessary to avoid the injustice
of subjecting his estate, creditors and heirs,
solely by reason of his death to the loss of the
investment amounting to P35,000, which he
has already made in the ice plant, not counting
the other expenses occasioned by the instant
proceeding, from the Public Service
Commission of this Court.
We can perceive no valid reason for holding
that within the intent of the constitution
(Article IV), its provisions on Philippine
citizenship exclude the legal principle of
extension above adverted to. If for reasons
already stated our law indulges the fiction of
extension of personality, if for such reasons the
estate of Pedro O. Fragrante should be
considered an artificial or juridical person
herein, we can find no justification for refusing
to declare a like fiction as to the extension of
his citizenship for the purposes of this
proceeding.
Pedro O. Fragrante was a Filipino citizen, and as
such, if he had lived, in view of the evidence of
record, he would have obtained from the
commission the certificate for which he was
applying. The situation has suffered but one
change, and that is, his death. His estate was
that of a Filipino citizen. And its economic
ability to appropriately and adequately operate
and maintain the service of an ice plant was the
same that it received from the decedent
himself. In the absence of a contrary showing,
which does not exist here, his heirs may be
assumed to be also Filipino citizens; and if they
are not, there is the simple expedient of
revoking the certificate or enjoining them from
inheriting it.
Upon the whole, we are of the opinion that for
the purposes of the prosecution of said case
No. 4572 of the Public Service Commission to
its final conclusion, both the personality and
citizenship of Pedro O. Fragrante must be
deemed extended, within the meaning and
intent of the Public Service Act, as amended, in
harmony with the constitution: it is so adjudged
and decreed.
Decision affirmed, without costs. So ordered.
G.R. No. L-2832         BARLIN VS RAMIREZ
There had been priests of the Roman Catholic
Church in the pueblo of Lagonoy, in the
Province of Ambos Camarines, since 1839. On
the 13th of January, 1869, the church and
convent were burned. They were rebuilt
between 1870 and 1873. There was evidence
that this was done by the order of the
provincial governor. The labor necessary for
this reconstruction was performed by the
people of the pueblo the direction of the
cabeza de barangay. Under the law then in
force, each man in the pueblo was required to
work for the government, without
compensation, for forty days every year. The
time spent in the reconstruction of these
buildings was counted as a part of the forty
days. The material necessary was brought and
paid for in part by the parish priest from the
funds of the church and in part was donated by
certain individuals of the pueblo. After the
completion of the church it was always
administered, until November 14, 1902, by a
priest of a Roman Catholic Communion and all
the people of the pueblo professed that faith
and belonged to that church.
The defendant, Ramirez, having been
appointed by the plaintiff parish priest, took
possession of the church on the 5th of July,
1901. he administered it as such under the
orders of his superiors until the 14th day of
November, 1902. His successor having been
then appointed, the latter made a demand on
this defendant for the delivery to him of the
church, convent, and cemetery, and the sacred
ornaments, books, jewels, money, and other
property of the church. The defendant, by a
written document of that date, refused to make
such delivery. That document is as follows:
At 7 o'clock last night I received through Father
Agripino Pisino your respected order of the
12th instant, wherein I am advised of the
appointment of Father Pisino as acting parish
priest of this town, and directed to turn over to
him this parish and to report to you at the
vicarage. In reply thereto, I have the honor to
inform you that the town of Lagonoy, in
conjunction with the parish priest thereof, has
seen fit to sever connection with the Pope at
Rome and his representatives in these Islands,
and join the Filipino Church, the head of which
is at Manila. This resolution of the people was
reduced to writing and triplicate copies made,
of which I beg to inclose a copy herewith.
For this reason I regret to inform you that I am
unable to obey your said order by delivering to
Father Agripino Pisino the parish property of
Lagonoy which, as I understand, is now outside
of the control of the Pope and his
representatives in these Islands. May God
guard you many years.
Lagonoy, November 14, 1902.
(Signed) VICENTE RAMIREZ.
RT. REV. VICAR OF THIS DISTRICT.
The document, a copy of which is referred to in
this letter, is as follows:
LAGONOY, November, 9, 1902.
The municipality of this town and some of its
most prominent citizens having learned
through the papers from the capital of these
Islands of the constitution of the Filipino
National Church, separate from the control of
the Pope at Rome by reason of the fact that the
latter has refused to either recognize or grant
the rights to the Filipino clergy which have
many times been urged, and it appearing to us
that the reasons advanced why such offices
should be given to the Filipino clergy are
evidently well-founded, we have deemed it
advisable to consult with the parish priest of
this town as to whether it would be
advantageous to join the said Filipino Church
and to separate from the control of the Pope as
long as he continues to ignore the rights of the
said Filipino clergy, under the conditions that
there will be no change in the articles of faith,
and that the sacraments and other dogmas will
be recognized and particularly that of the
immaculate conception of the mother of our
Lord. But the moment the Pope at Rome
recognizes and grants the rights heretofore
denied to the Filipino clergy we will return to
his control. In view of this, and subject to this
condition, the reverend parish priest, together
with the people of the town, unanimously join
in declaring that from this date they separate
themselves from the obedience and control of
the Pope and join the Filipino National Church.
This assembly and the reverend parish priest
have accordingly adopted this resolution
written in triplicate, and resolved to send a
copy thereof to the civil government of this
province for its information, and do sign the
same below. Vicente Ramirez, Francisco Israel,
Ambrosio Bocon, Florentino Relloso, Macario P.
Ledesma, Cecilio Obias, Balbino Imperial, Juan
Preseñada, Fernando Deudor, Mauricio Torres,
Adriano Sabater.
At the meeting at which the resolution spoken
of in this document was adopted, there were
present about 100 persons of the pueblo. There
is testimony in the case that the population of
the pueblo was at that time 9,000 and that all
but 20 of the inhabitants were satisfied with
the action there taken. Although it is of no
importance in the case, we are inclined to think
that the testimony to this effect merely means
that about 100 of the principal men of the town
were in favor of the resolution and about 20 of
such principal men were opposed to it. After
the 14th of November, the defendant, Ramirez,
continued in the possession of the church and
other property and administered the same
under the directions of his superior, the Obispo
Maximo of the Independent Filipino Church.
The rites and ceremonies and the manner of
worship were the same after the 14th day of
November as they were before, but the
relations between the Roman Catholic Church
and the defendant had been entirely severed.
In January, 1904, the plaintiff brought this
action against the defendant, Ramirez, alleging
in his amended complaint that the Roman
Catholic Church was the owner of the church
building, the convent, cemetery, the books,
money, and other property belonging thereto,
and asking that it be restored to the possession
thereof and that the defendant render an
account of the property which he had received
and which was retained by him, and for other
relief.
The answer of the defendant, Ramirez, in
addition to a general denial of the allegation of
the complaint, admitted that he was in the
possession and administration of the property
described therein with the authority of the
municipality of Lagonoy and of the inhabitants
of the same, who were the lawful owners of
the said property. After this answer had been
presented, and on the 1st day of November,
1904, the municipality of Lagonoy filed a
petition asking that it be allowed to intervene
in the case and join with the defendant,
Ramirez, as a defendant therein. This petition
been granted, the municipality of the 1st day of
December filed an answer in which it alleged
that the defendant, Ramirez, was in possession
of the property described in the complaint
under the authority and with the consent of the
municipality of Lagonoy and that such
municipality was the owner thereof.
Plaintiff answered this complaint, or answer in
intervention, and the case was tried and final
judgment in entered therein in favor of the
plaintiff and against the defendants. The
defendants then brought the case here by a bill
of exceptions.
That the person in the actual possession of the
church and other property described in the
complaint is the defendant, Ramirez, is plainly
established by the evidence. It does not appear
that the municipality, as a corporate body, ever
took any action in reference to this matter until
they presented their petition for intervention in
this case. In fact, the witnesses for the defense,
when they speak of the ownership of the
buildings, say that they are owned by the
people of the pueblo, and one witness, the
president, said that the municipality as a
corporation had nothing whatever to do with
the matter. That the resolution adopted on the
14th of November, and which has been quoted
above, was not the action of the municipality,
as such, is apparent from an inspection thereof.
The witnesses for the defenses speak of a
delivery of the church by the people of the
pueblo to the defendant, Ramirez, but there is
no evidence in the case of any such delivery.
Their testimony in regard to the delivery always
refers to the action taken on the 14th of
November, a record of which appears that in
the document above quoted. It is apparent that
the action taken consisted simply in separating
themselves from the Roman Catholic Church,
and nothing is said therein in reference to the
material property then in possession of the
defendant, Ramirez.
There are several grounds upon which this
judgment must be affirmed.
(1) As to the defendant, Ramirez, it appears
that he took possession of the property as the
servant or agent of the plaintiff. The only right
which he had to the possession at the time he
took it, was the right which was given to him by
the plaintiff, and he took possession under the
agreement to return that possession whenever
it should be demanded of him. Under such
circumstances he will not be allowed, when the
return of such possession is demanded by him
the plaintiff, to say that the plaintiff is not the
owner of the property and is not entitled to
have it delivered back to him. The principle of
law that a tenant can not deny his landlord's
title, which is found in section 333, paragraph
2, of the Code of Civil Procedure, and also in
the Spanish law, is applicable to a case of this
kind. An answer of the defendant, Ramirez, in
which he alleged that he himself was the owner
of the property at the time he received it from
the plaintiff, or in which he alleged that the
pueblo was the owner of the property at that
time, would constitute no defense. There is no
claim made by him that since the delivery of
the possession of the property to him by the
plaintiff he has acquired the title thereto by
other means, nor does he is own behalf make
any claim whatever either to the property or to
the possession thereof.
(2) The municipality of Lagonoy, in its answer,
claims as such, to be the owner of the property.
As we have said before, the evidence shows
that it never was in the physical possession of
the property. But waiving this point and
assuming that the possession of Ramirez, which
he alleges in his answer is the possession of the
municipality, gives the municipality the rights of
a possessor, the question still arises, Who has
the better right to the present possession of
the property? The plaintiff, in 1902, had been in
the lawful possession thereof for more than
thirty years and during all that time its
possession had never been questioned or
disturbed. That possession has been taken
away from it and it has the right now to recover
the possession from the persons who have so
deprived it of such possession, unless the latter
can show that they have a better right thereto.
This was the preposition which was discussed
and settled in the case of Bishop of Cebu vs.
Mangaron, 1No. 1748, decided June 1, 1906.
That decision holds that as against one who has
been in possession for the length of the plaintiff
has been in possession, and who had been
deprived of his possession, and who can not
produce any written evidence of title, the mere
fact that the defendant is in possession does
not entitle the defendant to retain that
possession. In order that he may continue in
possession, he must show a better right
thereto.
The evidence in this case does not show that
the municipality has, as such, any right of
whatever in the property in question. It has
produced no evidence of ownership. Its claim
of ownership is rested in its brief in this court
upon the following propositions: That the
property in question belonged prior to the
treaty of Paris to the Spanish Government; that
by the treaty of Paris the ownership thereof
passed to the Government of the United States;
that by section 12 of the act of Congress of July
1, 1902, such property was transferred to the
Government of the Philippine Islands, and that
by the circular of that Government, dated
November 11, 1902, the ownership and the
right to the possession of this property passed
to the municipality of Lagonoy. If, for the
purposes of the argument, we should admit
that the other propositions are true, there is no
evidence whatever to support the last
proposition, namely that the Government of
the Philippine Islands has transferred the
ownership of this church to the municipality of
Lagonoy. We have found no circular of the date
above referred to. The one of February 10,
1903, which is probably the one intended,
contains nothing that indicates any such
transfer. As to the municipality of Lagonoy,
therefore, it is very clear that it has neither
title, ownership, nor right of possession.
(3) We have said that it would have no such
title or ownership ever admitting that the
Spanish Government was the owner of the
property and it has passed by the treaty of Paris
to the American Government. But this
assumption is not true. As a matter of law, the
Spanish Government at the time the treaty of
peace was signed, was not the owner of this
property, nor of any other property like it,
situated in the Philippine Islands.
It does not admit of doubt that from the
earliest times the parish churches in the
Philippine Islands were built by the Spanish
Government. Law 2, title 2, book 1, of the
Compilation of the Laws of the Indies is, in part,
as follows:
Having erected all the churches, cathedrals, and
parish houses of the Spaniards and natives of
our Indian possessions from their discovery at
the cost and expense of our royal treasury, and
applied for their service and maintenance the
part of the tithes belonging to us by apostolic
concession according to the division we have
made.
Law 3 of the same title to the construction of
parochial churches such as the one in question.
That law is as follows:
The parish churches which was erected in
Spanish towns shall be of durable and decent
construction. Their costs shall be divided and
paid in three parts: One by our royal treasury,
another by the residents and
Indian encomenderos of the place where such
churches are constructed, and the other part by
the Indians who abide there; and if within the
limits of a city, village, or place there should be
any Indians incorporated to our royal crown,
we command that for our part there be
contributed the same amount as the residents
and encomenderos, respectively, contribute;
and the residents who have no Indians shall
also contribute for this purpose in accordance
with their stations and wealth, and that which
is so given shall be deducted from the share of
the Indians should pay.1âwphil.net
Law 11 of the same title is as follows:
We command that the part of the tithes which
belongs to the fund for the erection of churches
shall be given to their superintendents to be
expended for those things necessary for these
churches with the advice of the prelates and
officials, and by their warrants, and not
otherwise. And we request and charge the
archbishops and bishops not to interfere in the
collection and disbursement thereof, but to
guard these structures.
Law 4, title 3, book 6, is as follows:
In all settlements, even though the Indians are
few, there shall be erected a church where
mass can be decently held, and it shall have a
donor with a key, notwithstanding the fact that
it be the subject to or separate from a parish.
Not only were all the parish churches in the
Philippines erected by the King and under his
direction, but it was made unlawful to erect a
church without the license of the King. This
provision is contained in Law 2, title 6, book 1,
which is as follows:
Whereas it is our intention to erect, institute,
found, and maintain all cathedrals, parish
churches, monasteries, votive hospitals,
churches, and religious and pious
establishments where they are necessary for
the teaching, propagation, and preaching of the
doctrine of our sacred Roman Catholic faith,
and to aid to this effect with out royal treasury
whenever possible, and to receive information
of such places where they should be founded
and are necessary, and the ecclesiastical
patronage of all our Indies belonging to us:
We command that there shall not be erected,
instituted, founded, or maintained any
cathedral, parish church, monastery, hospital,
or votive churches, or other pious or religious
establishment without our express permission
as is provided in Law 1, title 2, and Law 1, title
3, of this book, notwithstanding any permission
heretofore given by our viceroy or other
ministers, which in this respect we revoke and
make null, void, and of no effect.
By agreement at an early date between the
Pope and the Crown of Spain, all tithes in the
Indies were given by the former to the latter
and the disposition made the King of the fund
thus created is indicated by Law 1, title 16,
book 1, which is as follows:
Whereas the ecclesiastical tithes from the
Indies belong to us by the apostolic concessions
of the supreme pontiffs, we command the
officials of our royal treasury of those provinces
to collect and cause to be collected all tithes
due and to become due from the crops and
flocks of the residents in the manner in which it
has been the custom to pay the same, and from
these tithes the churches shall be provided with
competent persons of good character to serve
them and with all ornaments and things which
may be necessary for divine worship, to the end
that these churches may be well served and
equipped, and we shall be informed of God, our
Lord; this order shall be observed where the
contrary has not already been directed by us in
connection with the erection of churches.
That the condition of things existing by virtue of
the Laws of the Indies was continued to the
present time is indicated by the royal order of
the 31st of January, 1856, and by the royal
order of the 13th of August, 1876, both relating
to the construction and repair of churches,
there being authority for saying that the latter
order was in force in the Philippines.
This church, and other churches similarly
situated in the Philippines, having been erected
by the Spanish Government, and under its
direction, the next question to be considered is,
To whom did these churches belong?
Title 28 of the third partida is devoted to the
ownership of things and, after discussing what
can be called public property and what can be
called private property, speaks, in Law 12, of
those things which are sacred, religious, or
holy. That law is as follows:
Law XII. — HOW SACRED OR RELIGIOUS THINGS
CAN NOT BE OWNED BY ANY PERSON.
No sacred, religious, or holy thing, devoted to
the service of God, can be the subject of
ownership by any man, nor can it be considered
as included in his property holdings. Although
the priests may have such things in their
possession, yet they are not the owners
thereof. They, hold them thus as guardians or
servants, or because they have the care of the
same and serve God in or without them. Hence
they were allowed to take from the revenues of
the church and lands what was reasonably
necessary for their support; the balance,
belonging to God, was to be devoted to pious
purposes, such as the feeding and clothing of
the poor, the support of orphans, the marrying
of poor virgins to prevent their becoming evil
women because of their poverty, and for the
redemption of captives and the repairing of the
churches, and the buying of chalices, clothing,
books, and others things which they might be in
need of, and other similar charitable purposes.
And then taking up for consideration the first of
the classes in to which this law has divided
these things, it defines in Law 13, title 28,
third partida, consecrated things. That law is as
follows:
Sacred things, we say, are those which are
consecrated by the bishops, such as churches,
the altars therein, crosses, chalices, censers,
vestments, books, and all other things which
are in tended for the service of the church, and
the title to these things can not be alienated
except in certain specific cases as we have
already shown in the first partida of this book
by the laws dealing with this subject. We say
further that even where a consecrated church
is razed, the ground upon which it formerly
stood shall always be consecrated ground. But
if any consecrated church should fall into the
hands of the enemies of our faith it shall there
and then cease to be sacred as long as the
enemy has it under control, although once
recovered by the Christians, it will again
become sacred, reverting to its condition
before the enemy seized it and shall have all
the right and privileges formerly belonging to it.
That the principles of the partida in reference
to churches still exist is indicated by Sanchez
Roman, whose work on the Civil Law contains
the following statement:
First Group. Spiritual and corporeal or
ecclesiastical. A. Spiritual. — From early times
distinction has been made by authors and by
law between things governed by divine law,
called divine, and those governed by human
law, called human, and although the former can
not be the subject of civil juridical relations,
their nature and species should be ascertained
either to identify them and exclude them from
such relations or because they furnish a
complete explanation of the foregoing
tabulated statement, or finally because the
laws of the partida deal with them.
Divine things are those which are either directly
or indirectly established by God for his service
and sanctification of men and which are
governed by divine or canonical laws. This
makes it necessary to divide them into spiritual
things, which are those which have a direct
influence on the religious redemption of man
such as the sacrament, prayers, fasts,
indulgences, etc., and corporeal or
ecclesiastical, which are those means more or
less direct for the proper religious salvation of
man.
7. First Group. Divine things. B. Corporeal or
ecclesiastical things (sacred, religious, holy, and
temporal belonging to the church). —
Corporeal or ecclesiastical things are so divided.
(a) Sacred things are those devoted to God,
religion, and worship in general, such as
temples, altars, ornaments, etc. These things
can not be alienated except for some pious
purpose and in such cases as are provided for in
the laws, according to which their control
pertains to the ecclesiastical authorities, and in
so far as their use is concerned, to the believers
and the clergy. (2 Derecho Civil Español,
Sanchez Roman, p. 480; 8 Manresa,
Commentaries on the Spanish Civil Code, p.
636; 3 Alcubilla, Diccionario de la
Administracion Española, p. 486.)
The partidas defined minutely what things
belonged to the public in general and what
belonged to private persons. In the first group
churches are not named. The present Civil Code
declares in article 338 that property is of public
or private ownership. Article 339, which defines
public property, is as follows:
Property of public ownership is —
1. That destined to the public use, such as
roads, canals, rivers, torrents, ports, and
bridges constructed by the State, and banks,
shores, roadsteads, and that of similar
character.
2. That belonging exclusively to the state
without being for public use and which is
destined to some public service, or to the
development of the national wealth, such as
walls, fortresses, and other works for the
defense of the territory, and mines, until their
concession has been granted.
The code also defines the property of provinces
and of pueblos, and in defining what property is
of public use, article 344 declares as follows:
Property for public use in provinces and in
towns comprises the provincial and town roads,
the squares, streets, fountains, and public
waters, the promenades, and public works of
general service supported by the said towns or
provinces.
All other property possessed by either is
patrimonial, and shall be governed by the
provisions of this code, unless otherwise
prescribe in special laws.
It will be noticed that in either one of these
articles is any mention made of churches. When
the Civil Code undertook to define those things
in a pueblo which were for the common use of
the inhabitants of the pueblo, or which
belonged to the State, while it mentioned a
great many other things, it did not mention
churches.
It has been said that article 25 of the
Regulations for the Execution of the Mortgage
Law indicates that churches belong to the State
and are public property. That article is as
follows:
There shall be excepted from the record
required by article 2 of the law:
First. Property which belongs exclusively to the
eminent domain of the State, and which is for
the use of all, such as the shores of the sea,
islands, rivers and their borders, wagon roads,
and the roads of all kinds, with the exception of
railroads; streets, parks, public promenades,
and commons of towns, provided they are not
lands of common profit to the inhabitants;
walls of cities and parks, ports, and roadsteads,
and any other analogous property during the
time they are in common and general use,
always reserving the servitudes established by
law on the shores of the sea and borders of
navigable rivers.
Second. Public temples dedicated to the
Catholic faith.
A reading of this article shows that far from
proving that churches belong to the State and
to the eminent domain thereof, it proves the
contrary, for, if they had belonged to the State,
they would have been included in the first
paragraph instead of being placed in a
paragraph by themselves.
The truth is that, from the earliest times down
to the cession of the Philippines to the United
States, churches and other consecrated objects
were considered outside of the commerce of
man. They were not public property, nor could
they be subjects of private property in the
sense that any private person could the owner
thereof. They constituted a kind of property
distinctive characteristic of which was that it
was devoted to the worship of God.
But, being material things was necessary that
some one should have the care and custody of
them and the administration thereof, and the
question occurs, To whom, under the Spanish
law, was intrusted that possession and
administration? For the purposes of the
Spanish law there was only one religion. That
was the religion professed by the Roman
Catholic Church. It was for the purposes of that
religion and for the observance of its rites that
this church and all other churches in the
Philippines were erected. The possession of the
churches, their care and custody, and the
maintenance of religious worship therein were
necessarily, therefore, intrusted to that body. It
was, by virtue of the laws of Spain, the only
body which could under any circumstances
have possession of, or any control over, any
church dedicated to the worship of God. By
virtue of those laws this possession and right of
control were necessarily exclusive. It is not
necessary or important to give any name to this
right of possession and control exercised by the
Roman Catholic Church in the church buildings
of the Philippines prior to 1898. It is not
necessary to show that the church as a juridical
person was the owner of the buildings. It is
sufficient to say that this right to the exclusive
possession and control of the same, for the
purposes of its creation, existed.
The right of patronage, existing in the King of
Spain with reference to the churches in the
Philippines, did not give him any right to
interfere with the material possession of these
buildings.
Title 6 of book 1 of the Compilation of the laws
of the Indies treats Del Patronazgo Real de las
Indias. There is nothing in any one of the fifty-
one laws which compose this title which in any
way indicates that the King of Spain was the
owner of the churches in the Indies because he
had constructed them. These laws relate to the
right of presentation to ecclesiastical charges
and offices. For example, Law 49 of the title
commences as follows:
Because the patronage and right of
presentation of all archbishops, bishops,
dignitaries, prevents, curates, and doctrines
and all other beneficiaries and ecclesiastical
offices whatsoever belong to us, no other
person can obtain or possess the same without
our presentation as provided in Law 1 and
other laws of this title.
Title 15 of the first partida treats of the right of
patronage vesting in private persons, but there
is nothing in any one of its fifteen laws which in
any way indicates that the private patron is the
owner of the church.
When it is said that this church never belonged
to the Crown of Spain, it is not intended to say
that the Government and had no power over it.
It may be that by virtue of that power of
eminent domain which is necessarily resides in
every government, it might have appropriated
this church and other churches, and private
property of individuals. But nothing of this kind
was ever attempted in the Philippines.
It, therefore, follows that in 1898, and prior to
the treaty of Paris, the Roman Catholic Church
had by law the exclusive right to the possession
of this church and it had the legal right to
administer the same for the purposes for which
the building was consecrated. It was then in the
full and peaceful possession of the church with
the rights aforesaid. That these rights were fully
protected by the treaty of Paris is very clear.
That treaty, in article 8, provides, among other
things, as follows:
And it is hereby declared that the
relinquishment or cession, as the case may be,
to which the preceding paragraph refers, can
not in any respect impair the property or rights
which by law belong to the peaceful possession
of property of all kinds, or provinces,
municipalities, public or private establishments,
ecclesiastical or civic bodies, or any other
associations having legal capacity to acquire
and possess property in the aforesaid
territories renounced or ceded, or of private
individuals, or whatsoever nationality such
individuals may be.
It is not necessary, however, to invoke the
provisions of that treaty. Neither the
Government of the United States, nor the
Government of these Islands, has ever
attempted in any way to interfere with the
rights which the Roman Catholic Church had in
this building when Spanish sovereignty ceased
in the Philippines. Any interference that has
resulted has been caused by private individuals,
acting without any authority from the
Government.
No point is made in the brief of the appellant
that any distinction should be made between
the church and the convent. The convent
undoubtedly was annexed to the church and, as
to it, the provisions of Law 19, title 2, book 1, of
the Compilation of the Laws of the Indies would
apply. That law is as follows:
We command that the Indians of each town or
barrio shall construct such houses as may be
deemed sufficient in which the priests of such
towns or barrios may live comfortably adjoining
the parish church of the place where that may
be built for the benefit of the priests in charge
of such churches and engaged in the education
and conversion of their Indian parishioners, and
they shall not be alienated or devoted to any
other purpose.
The evidence in this case makes no showing in
regard to the cemetery. It is always mentioned
in connection with the church and convent and
no point is made by the possession of the
church and convent, he is not also entitled to
recover possession of the cemetery. So,
without discussing the question as to whether
the rules applicable to churches are all respects
applicable to cemeteries, we hold for the
purpose of this case that the plaintiff has the
same right to the cemetery that he has to the
church.
(4) It is suggested by the appellant that the
Roman Catholic Church has no legal personality
in the Philippine Islands. This suggestion, made
with reference to an institution which
antedates by almost a thousand years any
other personality in Europe, and which existed
"when Grecian eloquence still flourished in
Antioch, and when idols were still worshiped in
the temple of Mecca," does not require serious
consideration. In the preamble to the budget
relating to ecclesiastical obligations, presented
by Montero Rios to the Cortes on the 1st of
October 1871, speaking of the Roman Catholic
Church, he says:
Persecuted as an unlawful association since the
early days of its existence up to the time of
Galieno, who was the first of the Roman
emperors to admit it among the juridicial
entities protected by the laws of the Empire, it
existed until then by the mercy and will of the
faithful and depended for such existence upon
pious gifts and offerings. Since the latter half of
the third century, and more particularly since
the year 313, when Constantine, by the edict of
Milan, inaugurated an era of protection for the
church, the latter gradually entered upon the
exercise of such rights as were required for the
acquisition, preservation, and transmission of
property the same as any other juridical entity
under the laws of the Empire. (3 Dictionary of
Spanish Administration, Alcubilla, p. 211. See
also the royal order of the 4th of December,
1890, 3 Alcubilla, 189.)
The judgment of the court below is affirmed,
with the costs of this instance against the
appellant. After the expiration of twenty days
from the date hereof let judgment be entered
in accordance herewith, and ten days
thereafter the record be remanded to the court
below for execution. So ordered.
Arellano, C.J., Torres, Mapa and Tracey, JJ.,
concur.
Johnson, J., reserves his vote.
Separate Opinions
CARSON, J., concurring:
I am in entire accord with the majority of the
court as to the disposition of this case, but I can
not adopt the reasoning by which some of the
conclusions appear to have been obtained, nor
accept without reserve all of the propositions
laid down in the majority opinion.
Profoundly as I respect the judgment of my
associates, and distrustful as I ought to be of
my own, the transcendant importance of the
issues involved seems to impose upon me the
duty of writing a separate opinion and stating
therein as clearly as may be the precise
grounds upon which I base my assent and the
reasons which forbid my acceptance of the
majority opinion in its entirety.
I accept the argument and authority of the
opinion of the court in so far as it finds: That
the Roman Catholic Church is a juridical entity
in the Philippine Islands; that the defendant,
Ramirez, can not and should not be permitted
in this action to deny the plaintiff's right to the
possession of the property in question, because
he can not be heard to set up title thereto in
himself or a third person, at least until he has
first formally surrendered it to the plaintiff who
intrusted it to his care; that the municipality of
Lagonoy has failed to show by evidence of
record that it is or ever was in physical
possession of the property in question; and
that the possession of the defendant Ramirez,
can not be relied upon as the possession of the
municipality because the same reason which
estops Ramirez from denying the right of
possession in the plaintiff estops any other
person claiming possession through him from
denying that right. I agree, furthermore, with
the finding that the defendant municipality
failed to establish a better right to the
possession than the plaintiff in this action,
because, claiming to be the owner by virtue of
a grant from the Philippine Government, it
failed to establish the existence of such grant;
and because, furthermore, it was shown that
the plaintiff or his predecessors had been in
possession and control of the property in
question for a long period of years prior to the
treaty of Paris by unlawful authority of the King
of Spain, and that since the sovereignty of
these Islands has been transferred to the
United States the new sovereign has never at
any time divested or attempted to divest the
plaintiff of this possession and control.
Thus far I am able to accept the reasoning of
the majority opinion, and these propositions,
supported as they are by the law and the
evidence in this case, completely dispose of the
question before us and establish the right of
the plaintiff to a judgment for possession.
I am not prepared, however, to give my assent
to the proposition that prior to the Treaty of
Paris "The King of Spain was not the owner of
the property in question nor of any other
property like it situated in the Philippine
Islands," and inferentially that the United States
is not now the owner thereof and has no
property rights therein other than, perhaps, the
mere right of eminent domain.
I decline to affirm this proposition, first,
because it is not necessary in the decision of
this case; and second, because I am of opinion
that, in the unlimited and unrestricted sense in
which it is stated in the majority opinion, it is
inaccurate and misleading, if not wholly
erroneous.
That it is not necessary for the proper
disposition of this case will be apparent if we
consider the purpose for which it is introduced
in the argument and the proposition which it is
intended to controvert. As stated in the
majority opinion, the claim of ownership of the
defendant municipality —
It is rested upon the following propositions:
That the property in question belonged, prior
to the treaty of Paris, to the Spanish
Government; that by the treaty of Paris the
ownership of thereof passed to the
Government of the United States; that by
article 12 of the act of Congress of July 1, 1902,
such property was transferred to the
Government of the Philippine Islands, and that
by a circular of that Government dated
November 11, 1902, the ownership and the
right to the possession of this property passed
to the municipality of Lagonoy.
It is evident that if any of these propositions is
successfully controverted, the defendants'
claim of ownership must fall to the ground. The
majority opinion finds (and I am entire accord
as to this finding) that neither the Government
of the United States nor the Philippine
Government had ever made, or attempted to
make, such transfer, and in making its finding it
completely, conclusively, and finally disposes of
defendants' claim of ownership.
All the acts of the Government of the United
States and of the present Government of the
Philippine Islands which can have any relation
to the property in question are before us, and
so short a period of years has elapsed since the
transfer of the sovereignty of these Islands to
the United States that it is possible to
demonstrate with the utmost certainty that by
no act of the United States or of the
Government of the Philippine Islands has the
ownership and possession of this property been
conferred upon the defendant municipality; it is
a very different undertaking, however, to
review the legislation of Spain for the three
centuries of her Philippine occupation for the
purpose of deciding the much-vexed question
of the respective property rights of the Spanish
sovereign and the Roman Catholic Church in
State-constructed and State-aided churches in
these Islands; and if I am correct in my
contention that a holding that the King of Spain
was not." and, inferentially, that the
Government of the United States is not, "the
owner of this property or any other property
like it is situated in the Philippine Islands" is not
necessary for the full, final, and complete
determination of the case at bar, then I think
that this court should refrain from making so
momentous a finding in a case wherein the
United States is not a party and has never had
an opportunity to be heard.
But the mere fact that a finding that the King of
Spain had no right of ownership in this property
which could pass to the United States under the
provisions of the treaty of Paris is not necessary
in my opinion for the disposition of the case at
bar, would not impose upon me the duty of
writing a separate opinion if it were in fact and
a law a correct holding. I am convinced,
however, that when stated without limitations
or restrictions, as it appears in the majority
opinion, it is inaccurate and misleading, and it
may not be improper, therefore, to indicate
briefly my reasons for doubting it.
As stated in the majority opinion, "it does not
admit of doubt that the parish churches in the
Philippines were built by the Spanish
Government," and it would seem therefore
that prior to their dedication, the beneficial
ownership, the legal title, the possession and
control of all this property must be taken to
have been vested in that Government. But it
must be admitted that after this property was
dedicated, the ownership, in contemplation of
Spanish law, was said to have been in God, and
there can be no doubt that the physical
possession and control of these churches for
the purposes for which they were dedicated
was given to the Roman Catholic Church — not,
as I think, absolutely and conclusively, but
limited by and subject to the royal patronage
( patronato real) which included the right to
intervene in the appointment of the
representatives of the church into whose hands
the possession and control of the sacred editors
were to be intrusted.
The anomalous status thus created might well
have given rise to doubts and uncertainties as
to the legal title and beneficial ownership of
this property had not the grantor and the
lawgiver of Spain expressly and specifically
provided that neither the Roman Catholic
Church nor any other person was or could
become the owner thereof, and that all these
sacred edifices were to be regarded as beyond
the commerce of men.
No sacred, religious, or holy thing, devoted to
the service of God, can be the subject of
ownership by any man, nor it can be considered
as included in his property holdings. Although
the priests may have such things in their
possession, yet they are not the owners
thereof. They hold them thus as guardians or
servants, or because they have the care of the
same and serve God in or with them. Hence
they were allowed to take from the Revenues
of the church and lands what was reasonably
necessary for their support; the balance,
belonging to God, was to be devoted to pious
purposes, such as the feeding and clothing of
the poor, the support of orphans, the marrying
of poor virgins to prevent their becoming evil
women because of their poverty; and for the
redemption of captivers and the repairing of
the churches, and the buying of chalices,
clothing, books, and other things which they
might be in seed of, and other similar charitable
purposes. (Law 12, title 28, partida 3.)
It is difficult to determine, and still more
difficult to state, the precise meaning and legal
effect of this disposition of the ownership,
possession, and control of the parish churches
in the Philippines; but since it was not possible
for God, in any usual or ordinary sense to take
or hold, to enforce or to defend the legal title
to this property, it would seem that a grant to
Him by the King or the Government of Spain
could not suffice to convey to Him the legal title
of the property set out in the grant, and the
truth would seem to be that the treatment of
this property in contemplation of Spanish law
as the property of God was a mere arbitrary
convention, the purpose and object of which
was crystallize the status of all such property in
the peculiar and unusual mold in which it was
cast at the time of its dedication.
So long as church and state remained united
and so long as the Roman Catholic Church
continued to be the church of the State, this
convention served its purpose well; indeed, its
very indefiniteness seems to have aided in the
accomplishment of the end for which it was
adopted, and on a review of all the pertinent
citations of Spanish law which have been
brought to my attention, I am satisfied that the
status created by the above-cited law 12 of the
partidas continued without substantial
modification to the date of the transfer of
sovereignty from the King of Spain to the
United States. But this transfer of sovereignty,
and the absolute severance of church and state
which resulted therefrom, render it necessary
to ascertain as definitely as may be the true
meaning and intent of this conventional
treatment of the parish churches in the
Philippines as the property of God, and it is
evident that for this purpose we must look to
the substance rather than the form and
examine the intention of the grantor and the
object he sought to attain, rather than the
words and conventional terms whereby that
intent was symbolically expressed.
It is not necessary to go beyond the citations of
the majority opinion to see that the objects
which the grantor sought to attain were, first,
and chiefly, to advance the cause of religion
among the people of the Philippine Islands and
to provide for their religious instruction and
edification by furnishing them with parish
churches suitable for the worship and
glorification of God; second, to place those
sacred edifices under the guardian care and
custody of the church of the State; and, third,
to deny to that church and to all others the
right of ownership in the property thus
dedicated; and since God could neither take
nor hold the legal title to this property, the
declaration of the King of Spain as set out in the
above-cited law, that when dedicated these
churches became in some peculiar and especial
manner the property of God, was in effect no
more than a solemn obligation imposed upon
himself to hold them for the purposes for which
they were dedicated, and to exercise no right of
property in them inconsistent therewith.
This declaration that these churches are the
property of God and the provisions which
accompanied it, appear to me to be precisely
equivalent to a declaration of trust by the
grantor that he would hold the property as
trustee for the use for which it was
dedicated — that is, for the religious edification
and enjoyment of the people of the Philippine
Islands — and that he would give to the Roman
Catholic Church the physical possession and
control thereof, including the disposition of any
funds arising therefrom, under certain
stipulated conditions and for the purposes
expressly provided by law. In other words, the
people of the Philippine Islands became the
beneficial owners of all such property, and the
grantor continued to hold the legal title, in trust
nevertheless to hold the property for the
purposes for which it was dedicated and on the
further trust to give the custody and control
thereof to the Roman Catholic Church. If this
interpretation of the meaning and intent of the
convention of Spanish law which treated God
as the owner of the parish churches of the
Philippine Islands be correct, a holding that the
King of Spain had no right to ownership in this
property which could pass to the United States
by virtue of the treaty of Paris can not be
maintained; and it is to withhold my assent
from this proposition that I have been
compelled to write this separate opinion.
For the purposes of this opinion it is not
necessary, nor would it be profitable, to do
more than indicate the line of reasoning which
has led me to my conclusions, nor to discuss at
length the question of ownership of this
property, because whether it be held to be in
abeyance or in God or in the Roman Catholic
Church or in the United States it has been
shown without deciding this question of
ownership that the right to the possession for
the purpose for which it was dedicated is in the
Roman Catholic Church, and while the
complaint in this action alleges that the Roman
Catholic Church is the owner of the property in
question, the prayer of the complaint is for the
possession of this property of which it is alleged
that church has been unlawfully deprived; and
because, furthermore, if I am correct in my
contention that the legal title to the State-
constructed churches in the Philippines passed
to the United States the virtue of the treaty of
Paris, it passed, nevertheless, subject to the
trusts under which it was held prior thereto,
and the United States can not at will repudiate
the conditions of that trust and retain its place
in the circle of civilized nations; and as long as
the property continues to be used for the
purposes for which it was dedicated, the
Government of the United States has no lawful
right to deprive the Roman Catholic Church of
the possession and control thereof under the
terms and conditions upon which that
possession and control were originally granted.
G.R. No. L-53856 VENTANILLA VS LAZARO
Petitioner Oscar Ventanilla Enterprises
Corporation, in these special civil actions of
certiorari and prohibition, seeks to restrain the
enforcement against it of the judgment of the
Court of First Instance of Manila dated
November 14, 1978 in Civil Case No. 107607
entitled "Emperor Films Int'l. (Phils.), Inc. vs.
Broadway Theater".
A similar petition was filed in the Court of
Appeals by the herein petitioner. It was
dismissed because that Court can issue the
writs of certiorari and prohibition only in aid of
its appellate jurisdiction and there was no more
appeal in Civil Case No. 107607. Moreover, as
reasoned out by the Court of Appeals, the
petitioner, not being a party in Civil Case No.
107607, cannot ask for a review of any order
issued in that case (CA-G.R. No. SP-09510-R,
April 30,1980).
It is at once obvious that the complaint in Civil
Case No. 107607 is defective because the
defendant is not a natural or juridical person.
However, that defect was cured by the answer
of Ricardo C. Ventanilla, the lessee of the
Broadway Theater (who admitted having issued
three postdated checks to guarantee his wife's
obligation to the plaintiff), and by the
compromise agreement dated October 11,
1978 executed between the plaintiff and
Ricardo C. Ventanilla, who, in effect,
substituted himself for defendant "Broadway
theater".
In that compromise agreement, which is in
reality a confession of judgment, Ricardo C.
Ventanilla, as defendant, acknowledged that he
was obligated to pay Emperor Films Int'l.
(Phils.), Inc. the sum of P12,662 which he
promised to pay in installments. He agreed
that, in case he defaulted in the payment of any
installment, "execution shall immediately
issue".
The lower court rendered judgment in
accordance with the compromise agreement.
Oscar Ventanilla Enterprises Corporation
alleged that the deputy sheriff of Branch XXXV
of the Court of First Instance of Manila would
enforce against the Broadway Theater the writ
of execution issued in Civil Case No. 107607. It
claims to be the owner of the Broadway
Theater located at Burgos Avenue, Cabanatuan
City which it leased to Ricardo C. Ventanilla for
a ten-year period starting January 1, 1975
(Annex A).
We hold that Oscar Ventanilla Enterprises
Corporation is entitled to the writ of prohibition
enjoining the sheriff from levying on the
Broadway Theater for the satisfaction of the
judgment rendered against Ricardo C.
Ventanilla who is a mere lessee of the theater.
This incident would not have arisen if Emperor
Films Int'l. (Phils.), Inc. had sued directly
Ricardo C. Ventanilla and not "Broadway
Theater" and if respondent Judge had
perceived the anomaly that the defendant is
not a natural or juridical person and had
ordered the substitution of Ricardo C.
Ventanilla for "Broadway Theater" as the real
party defendant in Civil Case No. 107607.
WHEREFORE, the lower court and the sheriff of
Manila are directed to desist from enforcing
the judgment in question against the properties
of the petitioner in the Broadway Theater at
Cabanatuan City. No costs.
SO ORDERED.
G.R. No. L-58028 CHIANG KAI SHEK vs CA.
An unpleasant surprise awaited Fausta F. Oh
when she reported for work at the Chiang Kai
Shek School in Sorsogon on the first week of
July, 1968. She was told she had no assignment
for the next semester. Oh was shocked. She
had been teaching in the school since 1932 for
a continuous period of almost 33 years. And
now, out of the blue, and for no apparent or
given reason, this abrupt dismissal.
Oh sued. She demanded separation pay, social
security benefits, salary differentials, maternity
benefits and moral and exemplary
damages. 1 The original defendant was the
Chiang Kai Shek School but when it filed a
motion to dismiss on the ground that it could
not be sued, the complaint was
amended. 2 Certain officials of the school were
also impleaded to make them solidarily liable
with the school.
The Court of First Instance of Sorsogon
dismissed the complaint. 3 On appeal, its
decision was set aside by the respondent court,
which held the school suable and liable while
absolving the other defendants. 4 The motion
for reconsideration having been denied, 5 the
school then came to this Court in this petition
for review on certiorari.
The issues raised in the petition are:
1. Whether or not a school that has not been
incorporated may be sued by reason alone of
its long continued existence and recognition by
the government,
2. Whether or not a complaint filed against
persons associated under a common name will
justify a judgment against the association itself
and not its individual members.
3. Whether or not the collection of tuition fees
and book rentals will make a school profit-
making and not charitable.
4. Whether or not the Termination Pay Law
then in force was available to the private
respondent who was employed on a year-to-
year basis.
5. Whether or not the awards made by the
respondent court were warranted.
We hold against the petitioner on the first
question. It is true that Rule 3, Section 1, of the
Rules of Court clearly provides that "only
natural or juridical persons may be parties in a
civil action." It is also not denied that the school
has not been incorporated. However, this
omission should not prejudice the private
respondent in the assertion of her claims
against the school.
As a school, the petitioner was governed by Act
No. 2706 as amended by C.A. No. 180, which
provided as follows:
Unless exempted for special reasons by the
Secretary of Public Instruction, any private
school or college recognized by the government
shall be incorporated under the provisions of
Act No. 1459 known as the Corporation Law,
within 90 days after the date of recognition,
and shall file with the Secretary of Public
Instruction a copy of its incorporation papers
and by-laws.
Having been recognized by the government, it
was under obligation to incorporate under the
Corporation Law within 90 days from such
recognition. It appears that it had not done so
at the time the complaint was filed
notwithstanding that it had been in existence
even earlier than 1932. The petitioner cannot
now invoke its own non-compliance with the
law to immunize it from the private
respondent's complaint.
There should also be no question that having
contracted with the private respondent every
year for thirty two years and thus represented
itself as possessed of juridical personality to do
so, the petitioner is now estopped from
denying such personality to defeat her claim
against it. According to Article 1431 of the Civil
Code, "through estoppel an admission or
representation is rendered conclusive upon the
person making it and cannot be denied or
disproved as against the person relying on it."
As the school itself may be sued in its own
name, there is no need to apply Rule 3, Section
15, under which the persons joined in an
association without any juridical personality
may be sued with such association. Besides, it
has been shown that the individual members of
the board of trustees are not liable, having
been appointed only after the private
respondent's dismissal. 6
It is clear now that a charitable institution is
covered by the labor laws 7 although the
question was still unsettled when this case
arose in 1968. At any rate, there was no law
even then exempting such institutions from the
operation of the labor laws (although they were
exempted by the Constitution from ad
valorem taxes). Hence, even assuming that the
petitioner was a charitable institution as it
claims, the private respondent was nonetheless
still entitled to the protection of the
Termination Pay Law, which was then in force.
While it may be that the petitioner was
engaged in charitable works, it would not
necessarily follow that those in its employ were
as generously motivated. Obviously, most of
them would not have the means for such
charity. The private respondent herself was
only a humble school teacher receiving a
meager salary of Pl80. 00 per month.
At that, it has not been established that the
petitioner is a charitable institution, considering
especially that it charges tuition fees and
collects book rentals from its students. 8 While
this alone may not indicate that it is profit-
making, it does weaken its claim that it is a non-
profit entity.
The petitioner says the private respondent had
not been illegally dismissed because her
teaching contract was on a yearly basis and the
school was not required to rehire her in 1968.
The argument is that her services were
terminable at the end of each year at the
discretion of the school. Significantly, no
explanation was given by the petitioner, and no
advance notice either, of her relief after
teaching year in and year out for all of thirty-
two years, the private respondent was simply
told she could not teach any more.
The Court holds, after considering the particular
circumstance of Oh's employment, that she had
become a permanent employee of the school
and entitled to security of tenure at the time of
her dismissal. Since no cause was shown and
established at an appropriate hearing, and the
notice then required by law had not been
given, such dismissal was invalid.
The private respondent's position is no
different from that of the rank-and-file
employees involved in Gregorio Araneta
University Foundation v. NLRC, 9 of whom the
Court had the following to say:
Undoubtedly, the private respondents'
positions as deans and department heads of
the petitioner university are necessary in its
usual business. Moreover, all the private
respondents have been serving the university
from 18 to 28 years. All of them rose from the
ranks starting as instructors until they became
deans and department heads of the university.
A person who has served the University for 28
years and who occupies a high administrative
position in addition to teaching duties could not
possibly be a temporary employee or a casual.
The applicable law is the Termination Pay Law,
which provided:
SECTION 1. In cases of employment, without a
definite period, in a commercial, industrial, or
agricultural establishment or enterprise, the
employer or the employee may terminate at
any time the employment with just cause; or
without just cause in the case of an employee
by serving written notice on the employer at
least one month in advance, or in the case of an
employer, by serving such notice to the
employee at least one month in advance or
one-half month for every year of service of the
employee, whichever, is longer, a fraction of at
least six months being considered as one whole
year.
The employer, upon whom no such notice was
served in case of termination of employment
without just cause may hold the employee
liable for damages.
The employee, upon whom no such notice was
served in case of termination of employment
without just cause shall be entitled to
compensation from the date of termination of
his employment in an I amount equivalent to
his salaries or wages correspond to the
required period of notice. ... .
The respondent court erred, however, in
awarding her one month pay instead of only
one-half month salary for every year of service.
The law is quite clear on this matter.
Accordingly, the separation pay should be
computed at P90.00 times 32 months, for a
total of P2,880.00.
Parenthetically, R.A. No. 4670, otherwise
known as the Magna Carta for Public School
Teachers, confers security of tenure on the
teacher upon appointment as long as he
possesses the required qualification. 10 And
under the present policy of the Department of
Education, Culture and Sports, a teacher
becomes permanent and automatically
acquires security of tenure upon completion of
three years in the service. 11
While admittedly not applicable to the case at
bar, these I rules nevertheless reflect the
attitude of the government on the protection of
the worker's security of tenure, which is now
guaranteed by no less than the Constitution
itself. 12
We find that the private respondent was
arbitrarily treated by the petitioner, which has
shown no cause for her removal nor had it
given her the notice required by the
Termination Pay Law. As the respondent court
said, the contention that she could not report
one week before the start of classes is a flimsy
justification for replacing her. 13 She had been
in its employ for all of thirty-two years. Her
record was apparently unblemished. There is
no showing of any previous strained relations
between her and the petitioner. Oh had every
reason to assume, as she had done in previous
years, that she would continue teaching as
usual.
It is easy to imagine the astonishment and hurt
she felt when she was flatly and without
warning told she was dismissed. There was not
even the amenity of a formal notice of her
replacement, with perhaps a graceful
expression of thanks for her past services. She
was simply informed she was no longer in the
teaching staff. To put it bluntly, she was fired.
For the wrongful act of the petitioner, the
private respondent is entitled to moral
damages. 14 As a proximate result of her illegal
dismissal, she suffered mental anguish, serious
anxiety, wounded feelings and even
besmirched reputation as an experienced
teacher for more than three decades. We also
find that the respondent court did not err in
awarding her exemplary damages because the
petitioner acted in a wanton and oppressive
manner when it dismissed her. 15
The Court takes this opportunity to pay a
sincere tribute to the grade school teachers,
who are always at the forefront in the battle
against illiteracy and ignorance. If only because
it is they who open the minds of their pupils to
an unexplored world awash with the magic of
letters and numbers, which is an extraordinary
feat indeed, these humble mentors deserve all
our respect and appreciation.
WHEREFORE, the petition is DENIED. The
appealed decision is AFFIRMED except for the
award of separation pay, which is reduced to
P2,880.00. All the other awards are approved.
Costs against the petitioner.
This decision is immediately executory.
SO ORDERED.
G.R. No. 173297     STRONGHOLD INSURANCE
VS CUENCA
The personality of a corporation is distinct and
separate from the personalities of its
stockholders. Hence, its stockholders are not
themselves the real parties in interest to claim
and recover compensation for the damages
arising from the wrongful attachment of its
assets. Only the corporation is the real party in
interest for that purpose.
The Case
Stronghold Insurance Company, Inc.
(Stronghold Insurance), a domestic insurance
company, assails the decision promulgated on
January 31, 2006,1 whereby the Court of
Appeals (CA) in CA-G.R. CV No. 79145 affirmed
the judgment rendered on April 28, 2003 by the
Regional Trial Court in Parafiaque City (RTC)
holding Stronghold Insurance and respondent
Manuel D. Marafion, Jr. jointly and solidarily
liable for damages to respondents Tomas
Cuenca, Marcelina Cuenca, Milagros Cuenca
(collectively referred to as Cuencas), and
Bramie Tayactac, upon the latter’s claims
against the surety bond issued by Stronghold
Insurance for the benefit of Marañon.2
Antecedents
On January 19, 1998, Marañon filed a
complaint in the RTC against the Cuencas for
the collection of a sum of money and damages.
His complaint, docketed as Civil Case No. 98-
023, included an application for the issuance of
a writ of preliminary attachment.3 On January
26, 1998, the RTC granted the application for
the issuance of the writ of preliminary
attachment conditioned upon the posting of a
bond of ₱1,000,000.00 executed in favor of the
Cuencas. Less than a month later, Marañon
amended the complaint to implead Tayactac as
a defendant.4
On February 11, 1998, Marañon posted SICI
Bond No. 68427 JCL (4) No. 02370 in the
amount of ₱1,000,000.00 issued by Stronghold
Insurance. Two days later, the RTC issued the
writ of preliminary attachment.5 The sheriff
served the writ, the summons and a copy of the
complaint on the Cuencas on the same day. The
service of the writ, summons and copy of the
complaint were made on Tayactac on February
16, 1998.6
Enforcing the writ of preliminary attachment on
February 16 and February 17, 1998, the sheriff
levied upon the equipment, supplies, materials
and various other personal property belonging
to Arc Cuisine, Inc. that were found in the
leased corporate office-cum-commissary or
kitchen of the corporation.7 On February 19,
1998, the sheriff submitted a report on his
proceedings,8 and filed an ex parte motion
seeking the transfer of the levied properties to
a safe place. The RTC granted the ex parte
motion on February 23, 1998.9
On February 25, 1998, the Cuencas and
Tayactac presented in the RTC a Motion to
Dismiss and to Quash Writ of Preliminary
Attachment on the grounds that: (1) the action
involved intra-corporate matters that were
within the original and exclusive jurisdiction of
the Securities and Exchange Commission (SEC);
and (2) there was another action pending in the
SEC as well as a criminal complaint in the Office
of the City Prosecutor of Parañaque City.10
On March 5, 1998, Marañon opposed the
motion.11
On August 10, 1998, the RTC denied the Motion
to Dismiss and to Quash Writ of Preliminary
Attachment, stating that the action, being one
for the recovery of a sum of money and
damages, was within its jurisdiction.12
Under date of September 3, 1998, the Cuencas
and Tayactac moved for the reconsideration of
the denial of their Motion to Dismiss and to
Quash Writ of Preliminary Attachment, but the
RTC denied their motion for reconsideration on
September 16, 1998.
Thus, on October 14, 1998, the Cuencas and
Tayactac went to the CA on certiorari and
prohibition to challenge the August 10, 1998
and September 16, 1998 orders of the RTC on
the basis of being issued with grave abuse of
discretion amounting to lack or excess of
jurisdiction (C.A.-G.R. SP No. 49288).13
On June 16, 1999, the CA promulgated its
assailed decision in C.A.-G.R. SP No.
49288,14 granting the petition. It annulled and
set aside the challenged orders, and dismissed
the amended complaint in Civil Case No. 98-023
for lack of jurisdiction, to wit:
WHEREFORE, the Orders herein assailed are
hereby ANNULLED AND SET ASIDE, and the
judgment is hereby rendered DISMISSING the
Amended Complaint in Civil Case No. 98-023 of
the respondent court, for lack of jurisdiction.
SO ORDERED.
On December 27, 1999, the CA remanded to
the RTC for hearing and resolution of the
Cuencas and Tayactac’s claim for the damages
sustained from the enforcement of the writ of
preliminary attachment.15
On February 17, 2000,16 the sheriff reported to
the RTC, as follows:
On the scheduled inventory of the properties
(February 17, 2000) and to comply with the
Resolution of the Court of Appeals dated
December 24, 1999 ordering the delivery of the
attached properties to the defendants, the
proceedings thereon being:
1. With the assistance for (sic) the counsel of
Cuencas, Atty. Pulumbarit, Atty. Ayo, defendant
Marcelina Cuenca, and two Court Personnel,
Robertson Catorce and Danilo Abanto, went to
the warehouse where Mr. Marañon
recommended for safekeeping the properties in
which he personally assured its safety, at No.
14, Marian II Street, East Service Road,
Parañaque Metro Manila.
2. That to our surprise, said warehouse is now
tenanted by a new lessee and the properties
were all gone and missing.
3. That there are informations (sic) that the
properties are seen at Conti’s Pastry & Bake
Shop owned by Mr. Marañon, located at BF
Homes in Parañaque City.
On April 6, 2000, the Cuencas and Tayactac
filed a Motion to Require Sheriff to Deliver
Attached Properties and to Set Case for
Hearing,17 praying that: (1) the Branch Sheriff
be ordered to immediately deliver the attached
properties to them; (2) Stronghold Insurance be
directed to pay them the damages being sought
in accordance with its undertaking under the
surety bond for ₱1,000,0000.00; (3) Marañon
be held personally liable to them considering
the insufficiency of the amount of the surety
bond; (4) they be paid the total of
₱1,721,557.20 as actual damages representing
the value of the lost attached properties
because they, being accountable for the
properties, would be turning that amount over
to Arc Cuisine, Inc.; and (5) Marañon be made
to pay ₱200,000.00 as moral damages,
₱100,000.00 as exemplary damages, and
₱100,000.00 as attorney’s fees.
Stronghold Insurance filed its answer and
opposition on April 13, 2000. In turn, the
Cuencas and Tayactac filed their reply on May
5, 2000.
On May 25, 2000, Marañon filed his own
comment/opposition to the Motion to Require
Sheriff to Deliver Attached Properties and to
Set Case for Hearing of the Cuencas and
Tayactac, arguing that because the attached
properties belonged to Arc Cuisine, Inc. 50% of
the stockholding of which he and his relatives
owned, it should follow that 50% of the value
of the missing attached properties constituted
liquidating dividends that should remain with
and belong to him. Accordingly, he prayed that
he should be required to return only
₱100,000.00 to the Cuencas and Tayactac.18
On June 5, 2000, the RTC commanded Marañon
to surrender all the attached properties to the
RTC through the sheriff within 10 days from
notice; and directed the Cuencas and Tayactac
to submit the affidavits of their witnesses in
support of their claim for damages.19
On June 6, 2000, the Cuencas and Tayactac
submitted their Manifestation and
Compliance.20
Ruling of the RTC
After trial, the RTC rendered its judgment on
April 28, 2003, holding Marañon and
Stronghold Insurance jointly and solidarily liable
for damages to the Cuencas and Tayactac,21 viz:
WHEREFORE, premises considered, as the
defendants were able to preponderantly prove
their entitlement for damages by reason of the
unlawful and wrongful issuance of the writ of
attachment, MANUEL D. MARAÑON, JR.,
plaintiff and defendant, Stronghold Insurance
Company Inc., are found to be jointly and
solidarily liable to pay the defendants the
following amount to wit:
(1) Ph₱1,000,000.00 representing the amount
of the bond;
(2) PhP 100,000.00 as moral damages;
(3) PhP 50,000.00 as exemplary damages;
(4) Php 100,000.00 as attorney’s fees; and
(5) To pay the cost of suit.
SO ORDERED.
Ruling of the CA
Only Stronghold Insurance appealed to the CA
(C.A.-G.R. CV No. 79145), assigning the
following errors to the RTC, to wit:
I.
THE LOWER COURT ERRED IN ORDERING
SURETY-APPELLANT TO PAY THE AMOUNT OF
₱1,000,000.00 REPRESENTING THE AMOUNT
OF THE BOND AND OTHER DAMAGES TO THE
DEFENDANTS.
II.
THE LOWER COURT ERRED IN NOT TAKING
INTO ACCOUNT THE INDEMNITY AGREEMENT
(EXH. "2-SURETY") EXECUTED BY MANUEL D.
MARAÑON, JR. IN FAVOR OF STRONGHOLD
WHEREIN HE BOUND HIMSELF TO INDEMNIFY
STRONGHOLD OF WHATEVER AMOUNT IT MAY
BE HELD LIABLE ON ACCOUNT OF THE
ISSUANCE OF THE ATTACHMENT BOND.22
On January 31, 2006, the CA, finding no
reversible error, promulgated its decision
affirming the judgment of the RTC.23
Stronghold Insurance moved for
reconsideration, but the CA denied its motion
for reconsideration on June 22, 2006.
Issues
Hence, this appeal by petition for review on
certiorari by Stronghold Insurance, which
submits that:
I.
THE COURT OF APPEALS COMMITTED GRAVE
REVERSIBLE ERROR AND DECIDED QUESTIONS
OF SUBSTANCE IN A WAY NOT IN ACCORDANCE
WITH LAW AND APPLICABLE DECISIONS OF THE
HONORABLE COURT CONSIDERING THAT THE
COURT OF APPEALS AFFIRMED THE
ERRONEOUS DECISION OF THE TRIAL COURT
HOLDING RESPONDENT MARA[Ñ]ON AND
PETITIONER STRONGHOLD JOINTLY AND
SOLIDARILY LIABLE TO PAY THE RESPONDENTS
CUENCA, et al., FOR PURPORTED DAMAGES BY
REASON OF THE ALLEGED UNLAWFUL AND
WRONGFUL ISSUANCE OF THE WRIT OF
ATTACHMENT, DESPITE THE FACT THAT:
A) RESPONDENT CUENCA et al., ARE NOT THE
OWNERS OF THE PROPERTIES ATTACHED AND
THUS, ARE NOT THE PROPER PARTIES TO CLAIM
ANY PURPORTED DAMAGES ARISING
THEREFROM.
B) THE PURPORTED DAMAGES BY REASON OF
THE ALLEGED UNLAWFUL AND WRONGFUL
ISSUANCE OF THE WRIT OF ATTACHMENT
WERE CAUSED BY THE NEGLIGENCE OF THE
BRANCH SHERIFF OF THE TRIAL COURT AND HIS
FAILURE TO COMPLY WITH THE PROVISIONS OF
THE RULES OF COURT PERTAINING TO THE
ATTACHMENT OF PROPERTIES.
C) THE TRIAL COURT GRAVELY ERRED WHEN IT
HELD PETITIONER STRONGHOLD TO BE
SOLIDARILY LIABLE WITH RESPONDENT
MARA[Ñ]ON TO RESPONDENTS CUENCA et al.,
FOR MORAL DAMAGES, EXEMPLARY DAMAGES,
ATTORNEY’S FEES AND COST OF SUIT DESPITE
THE FACT THAT THE GUARANTY OF PETITIONER
STRONGHOLD PURSUANT TO ITS SURETY BOND
IS LIMITED ONLY TO THE AMOUNT OF
₱1,000,000.00.
II
IN ANY EVENT, THE DECISION OF THE COURT
APPEALS SHOULD HAVE HELD RESPONDENT
MARA[Ñ]ON TO BE LIABLE TO INDEMNIFY
PETITIONER STRONGHOLD FOR ALL PAYMENTS,
DAMAGES, COSTS, LOSSES, PENALTIES,
CHARGES AND EXPENSES IT SUSTAINED IN
CONNECTION WITH THE INSTANT CASE,
PURSUANT TO THE INDEMNITY AGREEMENT
ENTERED INTO BY PETITIONER STRONGHOLD
AND RESPONDENT MARA[Ñ]ON.24
On their part, the Cuencas and Tayactac
counter:
A. Having actively participated in the trial and
appellate proceedings of this case before the
Regional Trial Court and the Court of Appeals,
respectively, petitioner Stronghold is legally and
effectively BARRED by ESTOPPEL from raising
for the first time on appeal before this
Honorable Court a defense and/or issue not
raised below.25
B. Even assuming arguendo without admitting
that the principle of estoppel is not applicable
in this instant case, the assailed Decision and
Resolution find firm basis in law considering
that the writ of attachment issued and
enforced against herein respondents has been
declared ILLEGAL, NULL AND VOID for having
been issued beyond the jurisdiction of the trial
court.
C. There having been a factual and legal finding
of the illegality of the issuance and
consequently, the enforcement of the writ of
attachment, Maranon and his surety
Stronghold, consistent with the facts and the
law, including the contract of suretyship they
entered into, are JOINTLY AND SEVERALLY
liable for the damages sustained by herein
respondents by reason thereof.
D. Contrary to the allegations of Stronghold, its
liability as surety under the attachment bond
without which the writ of attachment shall not
issue and be enforced against herein
respondent if prescribed by law. In like manner,
the obligations and liability on the attachment
bond are also prescribed by law and not left to
the discretion or will of the contracting parties
to the prejudice of the persons against whom
the writ was issued.
E. Contrary to the allegations of Stronghold, its
liability for the damages sustained by herein
respondents is both a statutory and contractual
obligation and for which, it cannot escape
accountability and liability in favor of the
person against whom the illegal writ of
attachment was issued and enforced. To allow
Stronghold to delay, excuse or exempt itself
from liability is unconstitutional, unlawful, and
contrary to the basic tenets of equity and fair
play.
F. While the liability of Stronghold as surety
indeed covers the principal amount of
₱1,000,000.00, nothing in the law and the
contract between the parties limit or exempt
Stronghold from liability for other damages.
Including costs of suit and interest.26
In his own comment,27
Marañon insisted that he could not be
personally held liable under the attachment
bond because the judgment of the RTC was
rendered without jurisdiction over the subject
matter of the action that involved an intra-
corporate controversy among the stockholders
of Arc Cuisine, Inc.; and that the jurisdiction
properly pertained to the SEC, where another
action was already pending between the
parties.
Ruling
Although the question of whether the Cuencas
and Tayactac could themselves recover
damages arising from the wrongful attachment
of the assets of Arc Cuisine, Inc. by claiming
against the bond issued by Stronghold
Insurance was not raised in the CA, we do not
brush it aside because the actual legal interest
of the parties in the subject of the litigation is a
matter of substance that has jurisdictional
impact, even on appeal before this Court.
The petition for review is meritorious.
There is no question that a litigation should be
disallowed immediately if it involves a person
without any interest at stake, for it would be
futile and meaningless to still proceed and
render a judgment where there is no actual
controversy to be thereby determined. Courts
of law in our judicial system are not allowed to
delve on academic issues or to render advisory
opinions. They only resolve actual
controversies, for that is what they are
authorized to do by the Fundamental Law itself,
which forthrightly ordains that the judicial
power is wielded only to settle actual
controversies involving rights that are legally
demandable and enforceable.28
To ensure the observance of the mandate of
the Constitution, Section 2, Rule 3 of the Rules
of Court requires that unless otherwise
authorized by law or the Rules of Court every
action must be prosecuted or defended in the
name of the real party in interest.29 Under the
same rule, a real party in interest is one who
stands to be benefited or injured by the
judgment in the suit, or one who is entitled to
the avails of the suit. Accordingly, a person , to
be a real party in interest in whose name an
action must be prosecuted, should appear to be
the present real owner of the right sought to be
enforced, that is, his interest must be a present
substantial interest, not a mere expectancy, or
a future, contingent, subordinate, or
consequential interest.30
Where the plaintiff is not the real party in
interest, the ground for the motion to dismiss is
lack of cause of action.31 The reason for this is
that the courts ought not to pass upon
questions not derived from any actual
controversy. Truly, a person having no material
interest to protect cannot invoke the
jurisdiction of the court as the plaintiff in an
action.32 Nor does a court acquire jurisdiction
over a case where the real party in interest is
not present or impleaded.
The purposes of the requirement for the real
party in interest prosecuting or defending an
action at law are: (a) to prevent the prosecution
of actions by persons without any right, title or
interest in the case; (b) to require that the
actual party entitled to legal relief be the one to
prosecute the action; (c) to avoid a multiplicity
of suits; and (d) to discourage litigation and
keep it within certain bounds, pursuant to
sound public policy.33 Indeed, considering that
all civil actions must be based on a cause of
action,34 defined as the act or omission by
which a party violates the right of
another,35 the former as the defendant must be
allowed to insist upon being opposed by the
real party in interest so that he is protected
from further suits regarding the same
claim.36 Under this rationale, the requirement
benefits the defendant because "the defendant
can insist upon a plaintiff who will afford him a
setup providing good res judicata protection if
the struggle is carried through on the merits to
the end."37
The rule on real party in interest ensures,
therefore, that the party with the legal right to
sue brings the action, and this interest ends
when a judgment involving the nominal plaintiff
will protect the defendant from a subsequent
identical action. Such a rule is intended to bring
before the court the party rightfully interested
in the litigation so that only real controversies
will be presented and the judgment, when
entered, will be binding and conclusive and the
defendant will be saved from further
harassment and vexation at the hands of other
claimants to the same demand.38
But the real party in interest need not be the
person who ultimately will benefit from the
successful prosecution of the action. Hence, to
aid itself in the proper identification of the real
party in interest, the court should first ascertain
the nature of the substantive right being
asserted, and then must determine whether
the party asserting that right is recognized as
the real party in interest under the rules of
procedure. Truly, that a party stands to gain
from the litigation is not necessarily
controlling.39
It is fundamental that the courts are
established in order to afford reliefs to persons
whose rights or property interests have been
invaded or violated, or are threatened with
invasion by others’ conduct or acts, and to give
relief only at the instance of such persons. The
jurisdiction of a court of law or equity may not
be invoked by or for an individual whose rights
have not been breached.40
The remedial right or the remedial obligation is
the person’s interest in the controversy. The
right of the plaintiff or other claimant is alleged
to be violated by the defendant, who has the
correlative obligation to respect the right of the
former. Otherwise put, without the right, a
person may not become a party plaintiff;
without the obligation, a person may not be
sued as a party defendant; without the
violation, there may not be a suit. In such a
situation, it is legally impossible for any person
or entity to be both plaintiff and defendant in
the same action, thereby ensuring that the
controversy is actual and exists between
adversary parties. Where there are no
adversary parties before it, the court would be
without jurisdiction to render a judgment.41
There is no dispute that the properties subject
to the levy on attachment belonged to Arc
Cuisine, Inc. alone, not to the Cuencas and
Tayactac in their own right. They were only
stockholders of Arc Cuisine, Inc., which had a
personality distinct and separate from that of
any or all of them.42 The damages occasioned to
the properties by the levy on attachment,
wrongful or not, prejudiced Arc Cuisine, Inc.,
not them. As such, only Arc Cuisine, Inc. had
the right under the substantive law to claim
and recover such damages. This right could not
also be asserted by the Cuencas and Tayactac
unless they did so in the name of the
corporation itself. But that did not happen
herein, because Arc Cuisine, Inc. was not even
joined in the action either as an original party
or as an intervenor.
The Cuencas and Tayactac were clearly not
vested with any direct interest in the personal
properties coming under the levy on
attachment by virtue alone of their being
stockholders in Arc Cuisine, Inc. Their
stockholdings represented only their
proportionate or aliquot interest in the
properties of the corporation, but did not vest
in them any legal right or title to any specific
properties of the corporation. Without doubt,
Arc Cuisine, Inc. remained the owner as a
distinct legal person.43
Given the separate and distinct legal
personality of Arc Cuisine, Inc., the Cuencas and
Tayactac lacked the legal personality to claim
the damages sustained from the levy of the
former’s properties. According to Asset
Privatization Trust v. Court of Appeals,44 even
when the foreclosure on the assets of the
corporation was wrongful and done in bad faith
the stockholders had no standing to recover for
themselves moral damages; otherwise, they
would be appropriating and distributing part of
the corporation’s assets prior to the dissolution
of the corporation and the liquidation of its
debts and liabilities. Moreover, in Evangelista v.
Santos,45 the Court, resolving whether or not
the minority stockholders had the right to bring
an action for damages against the principal
officers of the corporation for their own
benefit, said:
As to the second question, the complaint shows
that the action is for damages resulting from
mismanagement of the affairs and assets of the
corporation by its principal officer, it being
alleged that defendant’s maladministration has
brought about the ruin of the corporation and
the consequent loss of value of its stocks. The
injury complained of is thus primarily to the
corporation, so that the suit for the damages
claimed should be by the corporation rather
than by the stockholders (3 Fletcher,
Cyclopedia of Corporation pp. 977-980). The
stockholders may not directly claim those
damages for themselves for that would result in
the appropriation by, and the distribution
among them of part of the corporate assets
before the dissolution of the corporation and
the liquidation of its debts and liabilities,
something which cannot be legally done in view
of section 16 of the Corporation Law, which
provides:
No shall corporation shall make or declare any
stock or bond dividend or any dividend
whatsoever except from the surplus profits
arising from its business, or divide or distribute
its capital stock or property other than actual
profits among its members or stockholders
until after the payment of its debts and the
termination of its existence by limitation or
lawful dissolution.
In the present case, the plaintiff stockholders
have brought the action not for the benefit of
the corporation but for their own benefit, since
they ask that the defendant make good the
losses occasioned by his mismanagement and
pay to them the value of their respective
participation in the corporate assets on the
basis of their respective holdings. Clearly, this
cannot be done until all corporate debts, if
there be any, are paid and the existence of the
corporation terminated by the limitation of its
charter or by lawful dissolution in view of the
provisions of section 16 of the Corporation Law.
(Emphasis ours)
It results that plaintiffs complaint shows no
cause of action in their favor so that the lower
court did not err in dismissing the complaint on
that ground.
While plaintiffs ask for remedy to which they
are not entitled unless the requirement of
section 16 of the Corporation Law be first
complied with, we note that the action stated
in their complaint is susceptible of being
converted into a derivative suit for the benefit
of the corporation by a mere change in the
prayer. Such amendment, however, is not
possible now, since the complaint has been
filed in the wrong court, so that the same has
to be dismissed.46
That Marañon knew that Arc Cuisine, Inc.
owned the properties levied on attachment but
he still excluded Arc Cuisine, Inc. from his
complaint was of no consequence now. The
Cuencas and Tayactac still had no right of
action even if the affected properties were then
under their custody at the time of the
attachment, considering that their custody was
only incidental to the operation of the
corporation.
It is true, too, that the Cuencas and Tayactac
could bring in behalf of Arc Cuisine, Inc. a
proper action to recover damages resulting
from the attachment. Such action would be one
directly brought in the name of the
corporation. Yet, that was not true here, for,
instead, the Cuencas and Tayactac presented
the claim in their own names.
In view of the outcome just reached, the Court
deems it unnecessary to give any extensive
consideration to the remaining issues.
WHEREFORE, the Court GRANTS the petition for
review; and REVERSES and SETS ASIDE the
decision of the Court of Appeals in CA-G.R. CV
No. 79145 promulgated on January 31,2006.
No pronouncements on costs of suit.
SO ORDERED.
G.R. Nos. 161166-67             MAYOR DAGDAG VS
TONGNAWA
Before us is a petition for review
on certiorari1 assailing the joint Decision 2 dated
July 31, 2003 and Resolution dated December
10, 2003 of the Court of Appeals in CA-G.R. SP
Nos. 54511 and 57315. The dispositive portion
of the joint Decision reads:
"WHEREFORE, these consolidated Petitions for
Review are hereby GRANTED. The assailed
Resolutions dated October 21, 1997 and May
31, 1999 of the Civil Service Commission
upholding Respondent’s [now petitioner Mayor
Rhustom L. Dagadag] Order of Suspension
dated June 29, 1999, and January 24, 2000
upholding Respondent’s Order of Separation,
are hereby REVERSED AND SET ASIDE.
Petitioners Michael C. Tongnawa and Antonio
B. Gammod are hereby accordingly
REINSTATED WITH CORRESPONDING
BACKWAGES.
SO ORDERED."3
Petitioner was formerly the mayor of the
municipality of Tanudan, Province of Kalinga.
Michael Tongnawa and Antonio Gammod,
respondents, are the municipal engineer and
municipal planning and development
coordinator, respectively, of the said
municipality.
On July 24, 1995, petitioner, while then the
mayor of Tanudan, sent respondents a
memorandum ordering them to explain within
72 hours why they should not be
administratively sanctioned for acts
unbecoming of public servants and failure to
perform their duties. Respondents submitted to
petitioner their respective explanations.
On August 1, 1995, petitioner issued Executive
Order No. 95-002 creating a Municipal
Grievance Committee to investigate the
charges against respondents. Guilbert
Dangpason, then the vice-mayor of Tanudan,
was designated Chairman.
After investigation, the Committee found
respondents liable for insubordination, non-
performance of duties and absences without
official leaves (AWOL).
On November 27, 1995, petitioner issued an
order suspending respondents from their
respective positions for two months or from
December 1, 1995 to February 28, 1996.
Respondents then appealed to the Civil Service
Commission (CSC) contending that their right to
due process has been violated. On May 23,
1996, during the pendency of respondents’
appeal, petitioner issued an order dropping
them from the roll of employees effective May
28, 1996 by reason of their unauthorized
absences. Again, they appealed to the CSC.
On October 21, 1997, the CSC issued Resolution
No. 974229 affirming petitioner’s
order suspending respondents from the service
for two months. They moved for a
reconsideration but was denied by the CSC on
May 31, 1999, prompting them to file with the
Court of Appeals a petition for review,
docketed as CA-G.R. SP No. 54511.
Meanwhile, on June 29, 1999, the CSC issued
Resolution No. 991136 affirming petitioner’s
order dropping respondents from the roll.
When their motion for reconsideration was
denied by the CSC, respondents filed with the
Court of Appeals a petition for review,
docketed as CA-G.R. SP 57315.
As mentioned earlier, the Court of Appeals, in
its joint Decision in CA-G.R. SP Nos. 54511 and
57315, granted respondents’ petitions for
review, reversing the CSC challenged
Resolutions and reinstating them to their
respective positions and ordering the payment
of their corresponding backwages.
In reversing the CSC, the Court of Appeals held:
"As a general rule, findings of the CSC are not
disturbed on appeal, but if there are substantial
facts which may alter the results of the case,
this Court is tasked to evaluate and take them
into consideration.
Petitioners (now respondents) ascribed
irregularities in the conduct of the Grievance
Committee hearing and submitted two
Affidavits subscribed by one William Tumbali
and by former Vice-Mayor Guilbert Dangpason,
then chairman of the said Grievance
Committee. Dangpason attested that while it is
true that there was a meeting held, no
investigation was actually conducted. The
Petitioners maintained that they were not
given an opportunity to explain their side and
prove their defenses. They claimed that the
minutes on which the suspension of the
Petitioners was solely based do not state the
true proceedings, therefore, depriving them of
their right to be heard.
None other than the Chairman of the Grievance
Committee, assigned to investigate the alleged
negligence of the Petitioners, had renounced
the contents of the minutes of the supposed
investigation. Dangpason who ‘wish(ed) to set
the record straight…in fairness to all concerned’
categorically declared that the Petitioners were
not given an opportunity to defend themselves
since there was no actual investigation
conducted and even expressed his willingness
‘to testify and confirm’ his declarations just to
ascertain the truth. These declarations of
Dangpason and Tumbali were not denied by
the Respondent. In the absence therefore of
any showing of ill intent or bad faith on the part
of Dangpason and Tumbali, their Affidavits are
to be afforded great weight and credence.
In the light of this clear and convincing
evidence, Petitioners were able to rebut or
overcome the presumption of regularity in the
conduct of the Grievance Committee hearing.
Accordingly, the minutes cannot solely be the
basis for Petitioners’ suspension.
x x x, we find that the suspension of the
Petitioners has no factual basis.
It must be emphasized that, in administrative
proceedings, it is not the duty of Petitioners to
disperse what the Respondent failed to prove.
The Respondent must first affirmatively show
rationally adequate evidence that Petitioners’
suspension was for a justifiable cause.
Petitioners’ suspension was not justified and,
therefore, illegal because Respondent failed to
prove the allegations and accusations against
the Petitioners.
The Petitioners likewise assailed the resolution
of the CSC affirming Respondent’s Order of
Separation as having been done in violation of
their right to due process.
xxx
The previous rule required that the absences of
an officer or employee before he can be
dropped from the roll must be ‘for at least
thirty (30) days without approved leave.’
However, the above-quoted rule now provides
that the absences without authorized leave
must be continuous, which means
uninterrupted, or unbroken totaling at least 30
days. Clearly, the amendment is intended to
make the requirement on absences
‘continuous’ and not just totaling ‘at least 30
days.’
Considering that statutes prescribing the
grounds for the suspension or removal of an
officer are penal in nature, the same should be
strictly construed. Thus, where the law
enumerates the grounds for disciplinary action,
no other grounds may be invoked for his
suspension or removal. Hence, although the
unauthorized absences of Petitioners
Tongnawa and Gammod totaled 41 and 43
days, respectively, it is clear from the records
that the days when the Petitioners were
absent, although more than 30 days, were not
continuous as required by the law, but
intermittent. Furthermore, there was no
evidence, much less allegation, that the gap or
break was a special or a regular holiday. Clearly,
one of the requirements for the dropping from
the rolls is not attendant. Hence, there was no
valid termination of Petitioners’ services.
Inescapable then is the conclusion that since
the Petitioners were illegally suspended and
unjustifiably separated from their work, they
are entitled to reinstatement and backwages."
Petitioner filed a joint motion for
reconsideration but was denied by the Court of
Appeals.
Hence, the instant petition.
Basically, petitioner alleges that his "suspension
and dismissal orders against the respondents
are supported by substantial
evidence."4 Moreover, the sworn declarations
of William Tumbali and Guilbert Dangpason,
the designated Chairman of the Municipal
Grievance Committee, that there was actually
no investigation conducted on petitioner’s
charges, are "devoid of credibility." 5
In their joint comment, respondents aver that
petitioner has no legal personality to file the
instant petition because he had ceased to be
the municipal mayor of Tanudan, Kalinga; and
that the CSC, being the aggrieved party, is the
proper party to file this petition.
The fundamental issue before us is: who may
appeal from the Decision of the Court of
Appeals?
In resolving the issue, the concept of "real party
in interest" becomes relevant.
Section 2, Rule 3 of the 1997 Rules of Civil
Procedure, as amended, provides:
"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."
The established rule is that a real party in
interest is one who would be benefited or
injured by the judgment, or one entitled to the
avails of the suit. The word "interest," as
contemplated by the Rules, means material
interest or an interest in issue and to be
affected by the judgment, as distinguished from
mere interest in the question involved or a
mere incidental interest. Stated differently, the
rule refers to a real or present substantial
interest as distinguished from a mere
expectancy, or a future, contingent,
subordinate, or consequential interest. As a
general rule, one who has no right or interest
to protect cannot invoke the jurisdiction of the
court as party-plaintiff in an action.6
We hold that the CSC and the mayor of
Tanudan are real parties in interest in this case
and, therefore, can contest the assailed joint
Decision of the Court of Appeals before us.
The CSC is the party adversely affected by the
questioned Decision of the Court of Appeals
because it has been mandated by the
Constitution to preserve and safeguard the
integrity of our civil service system.7 Thus, any
transgression by herein respondents of the CSC
rules and regulations will adversely affect its
integrity. Significantly, it has not challenged the
assailed Decision.
As regards the mayor of Tanudan, there are
two (2) reasons why he may interpose such
appeal. The first is rooted in his power to
appoint officials and employees of his
municipality.8 Both respondents were
appointed by petitioner during his incumbency.
In Francisco Abella, Jr. vs. Civil Service
Commission,9 the Court En Banc (through
Justice Artemio V. Panganiban) held that the
municipal mayor, being the appointing
authority, is the real party in interest to
challenge the CSC’s disapproval of the
appointment of his appointee, thus:
"x x x. The power of appointment necessarily
entails the exercise of judgment and discretion
(Sevilla vs. Parina, 128 Phil. 639, 643, October
30, 1967; Manalang vs. Quitoriano, 94 Phil.
903, 911, April 30, 1954). Luego vs. Civil Service
Commission (227 Phil. 303, August 5, 1986)
declared:
‘Appointment is an essentially discretionary
power and must be performed by the officer in
which it is vested according to his best lights,
the only condition being that the appointee
should possess the qualifications required by
law. If he does, then the appointment cannot
be faulted on the ground that there are others
better qualified who should have been
preferred. This is a political question involving
considerations of wisdom which only the
appointing authority can decide’ (Rimonte vs.
Civil Service Commission, 314 Phil. 421, 430,
May 29, 1995).
Significantly, ‘the selection of the appointee –
taking into account the totality of his
qualifications, including those abstract qualities
that define his personality – is the prerogative
of the appointing authority (Lapinid vs. Civil
Service Commission, 274 Phil. 381, 387, May 14,
1991, per Cruz J.; Jimenez vs. Francisco, 127
Phil. 1025, 1032, February 28, 1957; Branganza
vs. Commission on Elections, 127 Phil. 442, 447,
August 15, 1967). No tribunal, not even this
Court (Lapinid vs. Civil Service
Commission, supra; Amponin vs. Commission
on Elections, 128 Phil. 412, 415, September 29,
1967), may compel the exercise of an
appointment for a favored person (Sevilla vs.
Patrina, supra; Manalang vs. Quitoriano, supra;
Torio vs. Civil Service Commission, 209 SCRA
677, 691, June 9, 1992; Medalla vs. Sto. Tomas,
208 SCRA 351, 357, May 5, 1992).
The CSC’s disapproval of an appointment is a
challenge to the exercise of the appointing
authority’s discretion. The appointing authority
must have the right to contest the disapproval.
Thus, Section 2 of Rule VI of CSC Memorandum
Circular 40, s. 1998 is justified insofar as it
allows the appointing authority to request
reconsideration or appeal.
In Central Bank vs. Civil Service
Commission (171 SCRA 744, 756, April 10,
1989), this Court has affirmed that the
appointing authority stands to be adversely
affected when the CSC disapproves an
appointment. Thus, the said authority can
‘defend its appointment since it knows the
reasons for the same’ (id., p. 757, per
Gancayco, J.). It is also the act of the appointing
authority that is being questioned when an
appointment is disapproved (id.).
x x x." (underscoring ours)
Similarly, where a municipal mayor orders
the suspension or dismissal of a municipal
employee on grounds he believes to be proper,
but his order is reversed or nullified by the CSC
or the Court of Appeals (as in this case), he has
the right to contest such adverse ruling. His
right to appeal flows from the fact that his
power to appoint carries with it the power to
remove. Being chief executive of the
municipality, he possesses this disciplinary
power over appointive municipal officials and
employees.10 To be sure, whenever his order
imposing administrative sanctions upon erring
municipal personnel is challenged, he should be
allowed to defend his action considering that
he is the appointing authority.
The second reason why the municipal mayor of
Tanudan has legal personality to challenge the
Decision of the Court of Appeals is because the
salaries of the respondents, being municipal
officials, are drawn from the municipal funds.
Obviously, the mayor has real and substantial
interest in the outcome of the administrative
cases against respondents.
Admittedly, however, petitioner, at the time he
filed with this Court the instant petition
assailing the Appellate Court Decision, was no
longer the mayor of Tanudan.
Section 17, Rule 3 of the 1997 Rules of Civil
Procedure, as amended, is relevant, thus:
"Sec. 17. Death or separation of a party who is
a public officer. – When a public officer is a
party in an action in his official capacity and
during its pendency dies, resigns or
otherwise ceases to hold office, the action may
be continued and maintained by or against his
successor if, within thirty (30) days after the
successor takes office or such time as may be
granted by the court, it is satisfactorily shown
to the court by any party that there is a
substantial need for continuing or maintaining
it and that the successor adopts or continues or
threatens to adopt or continue the action of his
predecessor. Before a substitution is made, the
party or officer to be affected, unless expressly
assenting thereto, shall be given reasonable
notice of the application therefor and accorded
an opportunity to be heard." (underscoring
ours)
Interpreting the above rule, in gr_ Miranda vs.
Carreon,11 gr_ Heirs of Mayor Nemencio Galvez
vs. Court of Appeals,12 and Roque, et al. vs.
Delgado, et al.,13 we held that where the
petitioner (a public officer) ceases to be mayor,
the appeal and/or action he initiated may be
continued and maintained by his successor if
there is substantial need to do so. If the
successor failed to pursue the appeal and/or
action, the same should be dismissed.
Records show that upon petitioner’s cessation
from public office, his successor did not file any
manifestation to the effect that he is continuing
and maintaining this appeal.
We thus agree with the respondents that
petitioner has lost his legal personality to
interpose the instant petition.
WHEREFORE, the instant petition is hereby
DENIED. Costs against petitioner.
SO ORDERED.
G.R. No. 161298             SPOUSES OCO VS
LIMBARING
Basic in procedural law is the rule that every
action must be prosecuted or defended in the
name of the real party in interest. In the
present case, the respondent, who was not a
party to the contracts being sued upon, was not
able to prove material interest in the litigation.
For his failure to do so, the trial court cannot be
faulted for dismissing the action to rescind the
contracts. His status as trustor remained a bare
allegation, as he had failed to rebut the legal
presumption: that there is absence of a trust
when the purchase price in a deed of sale is
paid by a parent in favor of a child. Here, the
prima facie presumption is "that there is a gift
in favor of the child." Any allegation to the
contrary must be proven by clear and
satisfactory evidence, a burden that was not
discharged by the plaintiff.
The Case
Before us is a Petition for Review1 under Rule
45 of the Rules of Court, assailing the August
26, 2003 Decision2 and the November 25, 2003
Resolution3 of the Court of Appeals (CA) in CA-
GR CV No. 69386. The challenged Decision
disposed as follows:
"WHEREFORE, the order dated October 2, 2000
of the Regional Trial Court, Branch 15, Ozami[s]
City in Civil Case No. OZC 99-14 is hereby
REVERSED. The agreement entered upon by
plaintiff-appellant and defendant-appellee
Percita L. Oco is hereby RESCINDED. After
returning the agreed purchase amount
of P60,000.00 to defendants-appellees, the
Register of Deeds of Ozami[s] City shall issue
the new Transfer Certificates of Title in the
name of plaintiff-appellant thereby canceling
the TCT Nos. T-22073 and T-22072."4
The Facts
The pertinent facts are not disputed. Sometime
in 1996, Sabas Limbaring subdivided his Lot
2325-D, covered by Transfer Certificate of Title
(TCT) No. 5268, into two lots denominated as
Lot Nos. 2325-D-1 and 2325-D-2.5 He then
executed in favor of Jennifer Limbaring a Deed
of Sale for Lot 2325-D-2 for P60,000; and, in
favor of Sarah Jane Limbaring, another Deed for
Lot 2325-D-1 for P14,440. Accordingly, TCT No.
5268 was cancelled and TCT Nos. T-21921 and
T-21920 were issued in the names of Jennifer
and Sarah Jane, respectively.6
Sensing some irregularities in the transaction,
Percita Oco, the daughter of Sabas Limbaring,
left Puerto Princesa City and went to Ozamis
City.7 She then filed a case of perjury and
falsification of documents against respondent,
her uncle who was the father of Jennifer and
Sarah Jane. During the pre-litigation conference
called by City Prosecutor Luzminda Uy on July 1,
1996, the parties agreed that the two parcels of
land should be reconveyed to Percita, who was
to pay respondent all the expenses that had
been and would be incurred to transfer the
titles to her name.8
Respondent demanded P30,000 for the
estimated expenses for documentation, capital
gains, and documentary stamp taxes;
registration fees for the Register of Deeds; and
other incidental expenses for clearances from
the Department of Agrarian Reform
(DAR).9 Percita succeeded in lowering the
amount to P25,000, for which she executed an
undertaking worded as follows:
"I, Percita Oco, of legal age, and residing at
Puerto Princesa, do hereby undertake to give
the full amount of Twenty Five Thousand
(P25,000.00) Pesos to my uncle Victor
Limbaring after document No. 230, series of
1996; Transfer Certificate of Title No. T-21920
and Transfer Certificate of Title No. T-21921
shall have been cancelled and revoked.
"Ozamis City, Philippines, July 1, 1996."10
Pursuant to their agreement, respondent
facilitated the transfer of the titles to her from
the names of his daughters. After the transfer
had been effected on July 12, 1996, Percita left
for Puerta Princesa on July 17, 1996, without
paying the P25,000. Several demands were
made, but she refused to pay.
On April 6, 1999, respondent filed against
Spouses Anthony and Percita Oco a Complaint
for the rescission of the sales contracts, with
recovery of possession and ownership of the
two parcels of land.11 Among others, he claimed
1) that he was the actual buyer of the lots, but
the vendees whose names appeared on the
Deeds were his daughters; 2) that he initially
refused to reconvey the properties because he
had paid for them with his hard-earned money,
which was partly used by Sabas Limbaring for
medical expenses; 3) that Percita had prepared
the two Deeds of Sale, which his daughters
signed despite receiving no consideration as
stated in the Deeds; 4) that because she
refused to pay the P25,000, the Limbaring clan
held a meeting on October 26, 1996, during
which it was agreed that P1,000 per month
would be given to respondent from the rentals
of Sabas Limbaring’s house; and 5) that the
agreement was not implemented, because
Percita had failed to cooperate.12
On May 27, 1999, Spouses Oco filed a Motion
to Dismiss on the ground that the plaintiff
(herein respondent) was not the real party in
interest.13 In his Opposition to the Motion to
Dismiss, respondent contended that he was a
trustor, whose property was being held in trust
by his daughters.14 He also averred that, on the
assumption that he was not the real party in
interest, he was entitled to an amendment of
the pleadings.15
On August 30, 1999, the RTC issued an Order
denying the Motion to Dismiss. It ruled that
evidence was required to resolve the parties’
respective allegations.16
On October 4, 1999, Spouses Oco filed an
Answer with Counterclaim, alleging in the main:
1) that respondent had tried to secure a DAR
clearance and to have a certificate of title
issued in his name, but failed because Republic
Act (RA) 6657 prohibited the acquisition of
more than five hectares of agricultural land; 2)
that through deceit and manipulation,
respondent was able to convince Sabas
Limbaring to execute the two Deeds of Sale,
notwithstanding the lack of any consideration;
3) that Sabas informed Percita that the
agricultural land had never been sold; 4) that
she refused to pay the P25,000, because the
suspensive conditions stated in the Promissory
Note had not been complied with; 5) that she
paid for all the expenses incurred in their
transaction; 6) that for her alleged failure to
pay the P25,000 and for "other deceits,"
respondent filed a criminal Complaint docketed
as Criminal Case No. 2985; 7) that respondent
was guilty of forum shopping for filing that case
despite the institution of the civil aspect in the
criminal case; 8) that respondent was not the
real party in interest and had no legal standing
to sue; 9) that the lots, which were acquired by
Jennifer and Sarah Jane without paying any
consideration, should be returned to Percita
without any consideration; and 10) that the
Deeds of Sale reconveying the lots
acknowledged receipt of consideration.17
Respondent testified on his behalf. He then
formally offered his exhibits.18 After filing their
Comments to Plaintiff’s Formal Offer of
Exhibits, Spouses Oco filed a Demurrer to
Evidence, to which he filed his Opposition.19
On October 2, 2000, the RTC granted the
demurrer and dismissed the Complaint and
Counterclaim,20 on the ground that respondent
was not the real party in interest. The trial
court also held that Jennifer and Sarah Jane had
already acknowledged receipt of the
consideration for the reconveyance of the lots.
It added that the P25,000 was an independent
obligation for the reimbursement of the
expenses incurred for the transfer of the
titles.21
Ruling of the Court of Appeals
The CA held that a trust relationship was
created when respondent purchased the lots in
favor of his daughters.22 Thus, he was a real
party in interest.
The appellate court also ruled that the P25,000
was part of the consideration for the
reconveyance of the two parcels of land.23 The
CA held that, since Percita had admitted her
failure to pay the amount, respondent had the
right to rescind the contracts of
reconveyance.24
The assailed November 25, 2003 CA Resolution
denied reconsideration. Hence, this Petition. 25
The Issues
Petitioners state the issues in this wise:
"I. The Honorable Court of Appeals gravely
erred in finding respondent the trustor of the
subject properties and in declaring respondent
the real party in interest for the rescission of
the two deeds of absolute sale executed by
Jennifer Limbaring and Sarah Jane Limbaring in
favor of the petitioners.
"II. The Honorable Court of Appeals gravely
erred in declaring that respondent has fully
complied [with] his obligation in the
undertaking executed by petitioner after the
ownership of the subject properties were
transferred to petitioners.
"III. The Honorable Court of Appeals gravely
erred and gravely abused [its] discretion in
ordering the rescission of the Deed of Absolute
Sale executed by Jennifer Limbaring and Sarah
Jane Limbaring in favor of the petitioners
involving the subject properties.
"IV. The Honorable Court of Appeals gravely
abused [its] discretion when it ignored the
pending case before the Fourth Division of the
Honorable Court of Appeals with the same
transaction, essential facts and circumstances
in this case."26
The threshold issue is whether respondent,
who was the plaintiff in the trial court, was a
real party in interest in the suit to rescind the
Deeds of Reconveyance.
The Court’s Ruling
The Petition is meritorious.
Main Issue:
Real Party in Interest
Petitioners contend that respondent was not a
trustor, and therefore not the real party in
interest and had no legal right to institute the
suit.27 The real parties in interest were Jennifer
and Sarah Jane, to whom the subject properties
had been given as gifts.28
The controversy centers on Rule 3 of the Rules
of Court, specifically an elementary rule in
remedial law, which is quoted as follows:
"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 applied to the present case, this provision
has two requirements: 1) to institute an action,
the plaintiff must be the real party in interest;
and 2) the action must be prosecuted in the
name of the real party in interest.29 Necessarily,
the purposes of this provision are 1) to prevent
the prosecution of actions by persons without
any right, title or interest in the case; 2) to
require that the actual party entitled to legal
relief be the one to prosecute the action; 3) to
avoid a multiplicity of suits; and 4) to
discourage litigation and keep it within certain
bounds, pursuant to sound public policy.30
Interest within the meaning of the Rules means
material interest or an interest in issue to be
affected by the decree or judgment of the case,
as distinguished from mere curiosity about the
question involved.31 One having no material
interest to protect cannot invoke the
jurisdiction of the court as the plaintiff in an
action.32 When the plaintiff is not the real party
in interest, the case is dismissible on the
ground of lack of cause of action.33
Action on Contracts
The parties to a contract are the real parties in
interest in an action upon it, as consistently
held by the Court.34 Only the contracting parties
are bound by the stipulations in the
contract;35 they are the ones who would benefit
from and could violate it.36 Thus, one who is not
a party to a contract, and for whose benefit it
was not expressly made, cannot maintain an
action on it. One cannot do so, even if the
contract performed by the contracting parties
would incidentally inure to one’s benefit.37
As an exception, parties who have not taken
part in a contract may show that they have a
real interest affected by its performance or
annulment.38 In other words, those who are not
principally or subsidiarily obligated in a
contract, in which they had no intervention,
may show their detriment that could result
from it.39 Contracts pour autrui are covered by
this exception.40 In this latter instance, the law
requires that the "contracting parties must
have clearly and deliberately conferred a favor
upon a third person." A "mere incidental
benefit is not enough."
Action on the Contracts
Presently Involved
Respondent’s Complaint, entitled "Rescission of
Contract & Recovery of Possession &
Ownership of Two Parcels of Land," is clearly an
action on a contract. The agreements sought to
be rescinded41 clearly show that the parties to
the Deeds of Absolute Sale were Jennifer and
Sarah Jane Limbaring42 as vendors and Percita
Oco as vendee. Clearly then, the action upon
the contracts may -- as a rule -- be instituted
only by Jennifer and Sarah Jane against Percita.
Respondent is not a real party in interest. He
was not a party to the contracts and has not
demonstrated any material interest in their
fulfillment. Evidently, the allegations in the
Complaint do not show that the properties
would be conveyed to him, even if Percita were
to be proven to have committed a breach of
the subject agreements.
Trust Relationship
To show material interest, respondent argues
that a trust was created when he purchased the
properties from Sabas Limbaring in favor of his
daughters. As trustor, he allegedly stands to be
benefited or injured by any decision in the
case.43
Trust is the legal relationship between one
person who has equitable ownership of a
property and another who owns the legal title
to the property.44 The trustor is the one who
establishes the trust; the beneficiary, the
person for whose benefit the trust was created;
and the trustee, the one in whom, by
conferment of a legal title, confidence has been
reposed as regards the property of the
beneficiary.45
Trusts may be either express or
implied.46 Express trusts are those created by
direct and positive acts of the parties, such as
by some writing, deed or will; or by words
either expressly or impliedly evidencing an
intention to create a trust. Implied trusts are
those that, without being expressed, are
deducible from the nature of the transaction as
matters of intent; or that are super-induced in
the transaction by operation of law as a matter
of equity, independently of the particular
intention of the parties.47
Respondent has presented only bare assertions
that a trust was created. Noting the need to
prove the existence of a trust, this Court has
held thus:
"As a rule, the burden of proving the existence
of a trust is on the party asserting its existence,
and such proof must be clear and satisfactorily
show the existence of the trust and its
elements. While implied trusts may be proved
by oral evidence, the evidence must be
trustworthy and received by the courts with
extreme caution, and should not be made to
rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required
because oral evidence can easily be
fabricated."48
On this point, the Civil Code states as follows:
"ART. 1448. There is an implied trust when
property is sold, and the legal estate is granted
to one party but the price is paid by another for
the purpose of having the beneficial interest of
the property. The former is the trustee, while
the latter is the beneficiary. However, if the
person to whom the title is conveyed is a child,
legitimate or illegitimate, of the one paying the
price of the sale, no trust is implied by law, it
being disputably presumed that there is a gift in
favor of the child."
Under the last sentence of Article 1448,
respondent’s alleged acts -- paying the price of
the subject properties and, in the titles, naming
his children as owners -- raise the presumption
that a gift was effected in their favor.
Respondent failed to rebut this presumption.
Absent any clear proof that a trust was created,
he cannot be deemed a real party in
interest.49 That he should be deemed a trustor
on the basis merely of having paid the purchase
price is plainly contradicted by the presumption
based on Article 1448 of the Civil Code "that
there is a gift in favor of the child," not a trust
in favor of the parent.
Other Issues
Having found that respondent is not a real
party in interest, this Court deems it no longer
necessary to rule on the other issues raised by
petitioner.
WHEREFORE, the Petition is GRANTED, and the
assailed Decision and Resolution are SET ASIDE.
Civil Case No. OZC99-14, entitled "Victor
Limbaring v. Spouses Percita L. Oco and
Anthony Oco," is DISMISSED. No
pronouncement as to costs.
SO ORDERED.
G.R. No. 120465 UY VS CA
Petitioners William Uy and Rodel Roxas are
agents authorized to sell eight parcels of land
by the owners thereof. By virtue of such
authority, petitioners offered to sell the lands,
located in Tuba, Tadiangan, Benguet to
respondent National Housing Authority (NHA)
to be utilized and developed as a housing
project.
On February 14, 1989, the NHA Board passed
Resolution No. 1632 approving the acquisition
of said lands, with an area of 31.8231 hectares,
at the cost of P23.867 million, pursuant to
which the parties executed a series of Deeds of
Absolute Sale covering the subject lands. Of the
eight parcels of land, however, only five were
paid for by the NHA because of the report 1 it
received from the Land Geosciences Bureau of
the Department of Environment and Natural
Resources (DENR) that the remaining area is
located at an active landslide area and
therefore, not suitable for development into a
housing project.
On 22 November 1991, the NHA issued
Resolution No. 2352 cancelling the sale over
the three parcels of land. The NHA, through
Resolution No. 2394, subsecguently offered the
amount of P1.225 million to the landowners
as daños perjuicios.
On 9 March 1992, petitioners filed before the
Regional Trial Court (RTC) of Quezon City a
Complaint for Damages against NHA and its
General Manager Robert Balao.
After trial, the RTC rendered a decision
declaring the cancellation of the contract to be
justified. The trial court nevertheless awarded
damages to plaintiffs in the sum of P1.255
million, the same amount initially offered by
NHA to petitioners as damages.
Upon appeal by petitioners, the Court of
Appeals reversed the decision of the trial court
and entered a new one dismissing the
complaint. It held that since there was
"sufficient justifiable basis" in cancelling the
sale, "it saw no reason" for the award of
damages. The Court of Appeals also noted that
petitioners were mere attorneys-in-fact and,
therefore, not the real parties-in-interest in the
action before the trial court.
. . . In paragraph 4 of the complaint, plaintiffs
alleged themselves to be "sellers' agents" for
the several owners of the 8 lots subject matter
of the case. Obsviously, William Uy and Rodel
Roxas in filing this case acted as attorneys-in-
fact of the lot owners who are the real parties
in interest but who were omitted to be pleaded
as party-plaintiffs in the case. This omission is
fatal. Where the action is brought by an
attorney-in-fact of a land owner in his name, (as
in our present action) and not in the name of
his principal, the action was properly dismissed
(Ferrer vs. Villamor, 60 SCRA 406 [1974];
Marcelo vs. de Leon, 105 Phil. 1175) because
the rule is that every action must be prosecuted
in the name of the real parties-in-interest
(Section 2, Rule 3, Rules of Court).
When plaintiffs UY and Roxas sought payment
of damages in their favor in view of the partial
rescission of Resolution No. 1632 and the Deed
of Absolute Sale covering TCT Nos. 10998,
10999 and 11292 (Prayer complaint, page 5,
RTC records), it becomes obviously
indispensable that the lot owners be included,
mentioned and named as party-plaintiffs, being
the real party-in-interest. UY and Roxas, as
attorneys-in-fact or apoderados, cannot by
themselves lawfully commence this action,
more so, when the supposed special power of
attorney, in their favor, was never presented as
an evidence in this case. Besides, even if herein
plaintiffs Uy and Roxas were authorized by the
lot owners to commence this action, the same
must still be filed in the name of the principal,
(Filipino Industrial Corporation vs. San Diego,
23 SCRA 706 [1968]). As such indispensable
party, their joinder in the action is mandatory
and the complaint may be dismissed if not so
impleaded (NDC vs. CA, 211 SCRA 422 [1992]). 2
Their motion for reconsideration having been
denied, petitioners seek relief from this Court
contending that:
I. THE RESPONDENT CA ERRED IN DECLARING
THAT RESPONDENT NHA HAD ANY LEGAL BASIS
FOR RESCINDING THE SALE INVOLVING THE
LAST THREE (3) PARCELS COVERED BY NHA
RESOLUTION NO. 1632.
II. GRANTING ARGUENDO THAT THE
RESPONDENT NHA HAD LEGAL BASIS TO
RESCIND THE SUBJECT SALE, THE RESPONDENT
CA NONETHELESS ERRED IN DENYING HEREIN
PETITIONERS' CLAIM TO DAMAGES, CONTRARY
TO THE PROVISIONS OF ART. 1191 OF THE CIVIL
CODE.
III. THE RESPONDENT CA ERRED IN DISMISSING
THE SUBJECT COMPLAINT FINDING THAT THE
PETITIONERS FAILED TO JOIN AS
INDISPENSABLE PARTY PLAINTIFF THE SELLING
LOT-OWNERS. 3
We first resolve the issue raised in the the third
assignment of error.
Petitioners claim that they lodged the
complaint not in behalf of their principals but in
their own name as agents directly damaged by
the termination of the contract. The damages
prayed for were intended not for the benefit of
their principals but to indemnify petitioners for
the losses they themselves allegedly incurred as
a result of such termination. These damages
consist mainly of "unearned income" and
advances. 4 Petitioners, thus, attempt to
distinguish the case at bar from those involving
agents or apoderedos instituting actions in
their own name but in behalf of their
principals. 5 Petitioners in this case purportedly
brought the action for damages in their own
name and in their own behalf.
We find this contention unmeritorious.
Sec. 2, Rule 3 of the Rules of Court requires that
every action must be prosecuted and defended
in the name of the real party-in-interest. The
real party-in-interest is the party who stands to
be benefited or injured by the judgment or the
party entitled to the avails of the suit. "Interest,
within the meaning of the rule, means material
interest, an interest in the issue and to be
affected by the decree, as distinguished from
mere interest in the question involved, or a
mere incidental interest. 6 Cases construing the
real party-in-interest provision can be more
easily understood if it is borne in mind that the
true meaning of real party-in-interest may be
summarized as follows: An action shall be
prosecuted in the name of the party who, by
the substantive law, has the right sought to be
enforced. 7
Do petitioners, under substantive law, possess
the right they seek to enforce? We rule in the
negative.
The applicable substantive law in this case is
Article 1311 of the Civil Code, which states:
Contracts take effect only between the parties,
their assigns, and heirs, except in case where
the rights and obligations arising from the
contract are not transmissible by their nature,
or by stipulation, or by provision of law. . . .
If a contract should contain some stipulation in
favor of a third person, he may demand its
fulfillment provided he communicated his
acceptance to the obligor before its revocation.
A mere incidental benefit or interest of a
person is not sufficient. The contracting parties
must have clearly and deliberately conferred a
favor upon a third person. (Emphasis supplied.)
Petitioners are not parties to the contract of
sale between their principals and NHA. They
are mere agents of the owners of the land
subject of the sale. As agents, they only render
some service or do something in representation
or on behalf of their principals. 8 The rendering
of such service did not make them parties to
the contracts of sale executed in behalf of the
latter. Since a contract may be violated only by
the parties thereto as against each other, the
real parties-in-interest, either as plaintiff or
defendant, in an action upon that contract
must, generally, either be parties to said
contract. 9
Neither has there been any allegation, much
less proof, that petitioners are the heirs of their
principals.
Are petitioners assignees to the rights under
the contract of sale? In McMicking vs. Banco
Español-Filipino, 10 we held that the rule
requiring every action to be prosecuted in the
name of the real party-in-interest.
. . . recognizes the assignments of rights of
action and also recognizes that when one has a
right of action assigned to him he is then the
real party in interest and may maintain an
action upon such claim or right. The purpose of
[this rule] is to require the plaintiff to be the
real party in interest, or, in other words, he
must be the person to whom the proceeds of
the action shall belong, and to prevent actions
by persons who have no interest in the result of
the same. . . .
Thus, an agent, in his own behalf, may bring an
action founded on a contract made for his
principal, as an assignee of such contract. We
find the following declaration in Section 372 (1)
of the Restatement of the Law on Agency
(Second): 11
Sec. 372. Agent as Owner of Contract Right
(1) Unless otherwise agreed, an agent who has
or who acquires an interest in a contract which
he makes on behalf of his principal can,
although not a promisee, maintain such action
thereon maintain such action thereon as might
a transferee having a similar interest.
The Comment on subsection (1) states:
a. Agent a transferee. One who has made a
contract on behalf of another may become an
assignee of the contract and bring suit against
the other party to it, as any other transferee.
The customs of business or the course of
conduct between the principal and the agent
may indicate that an agent who ordinarily has
merely a security interest is a transferee of the
principals rights under the contract and as such
is permitted to bring suit. If the agent has
settled with his principal with the
understanding that he is to collect the claim
against the obligor by way of reimbursing
himself for his advances and commissions, the
agent is in the position of an assignee who is
the beneficial owner of the chose in action. He
has an irrevocable power to sue in his
principal's name. . . . And, under the statutes
which permit the real party in interest to sue,
he can maintain an action in his own name. This
power to sue is not affected by a settlement
between the principal and the obligor if the
latter has notice of the agent's interest. . . .
Even though the agent has not settled with his
principal, he may, by agreement with the
principal, have a right to receive payment and
out of the proceeds to reimburse himself for
advances and commissions before turning the
balance over to the principal. In such a case,
although there is no formal assignment, the
agent is in the position of a transferee of the
whole claim for security; he has an irrevocable
power to sue in his principal's name and, under
statutes which permit the real party in interest
to sue, he can maintain an action in his own
name.
Petitioners, however, have not shown that they
are assignees of their principals to the subject
contracts. While they alleged that they made
advances and that they suffered loss of
commissions, they have not established any
agreement granting them "the right to receive
payment and out of the proceeds to reimburse
[themselves] for advances and commissions
before turning the balance over to the
principal[s]."
Finally, it does not appear that petitioners are
beneficiaries of a stipulation pour autrui under
the second paragraph of Article 1311 of the
Civil Code. Indeed, there is no stipulation in any
of the Deeds of Absolute Sale "clearly and
deliberately" conferring a favor to any third
person.
That petitioners did not obtain their
commissions or recoup their advances because
of the non-performance of the contract did not
entitle them to file the action below against
respondent NHA. Section 372 (2) of the
Restatement of the Law on Agency (Second)
states:
(2) An agent does not have such an interest in a
contract as to entitle him to maintain an action
at law upon it in his own name merely because
he is entitled to a portion of the proceeds as
compensation for making it or because he is
liable for its breach.
The following Comment on the above
subsection is illuminating:
The fact that an agent who makes a contract
for his principal will gain or suffer loss by the
performance or nonperformance of the
contract by the principal or by the other party
thereto does not entitle him to maintain an
action on his own behalf against the other party
for its breach. An agent entitled to receive a
commission from his principal upon the
performance of a contract which he has made
on his principal's account does not, from this
fact alone, have any claim against the other
party for breach of the contract, either in an
action on the contract or otherwise. An agent
who is not a promisee cannot maintain an
action at law against a purchaser merely
because he is entitled to have his compensation
or advances paid out of the purchase price
before payment to the principal. . . .
Thus, in Hopkins vs. Ives, 12 the Supreme Court
of Arkansas, citing Section 372 (2) above,
denied the claim of a real estate broker to
recover his alleged commission against the
purchaser in an agreement to purchase
property.
In Goduco vs. Court of appeals, 13 this Court
held that:
. . . granting that appellant had the authority to
sell the property, the same did not make the
buyer liable for the commission she claimed. At
most, the owner of the property and the one
who promised to give her a commission should
be the one liable to pay the same and to whom
the claim should have been directed. . . .
As petitioners are not parties, heirs, assignees,
or beneficiaries of a stipulation pour
autrui under the contracts of sale, they do not,
under substantive law, possess the right they
seek to enforce. Therefore, they are not the
real parties-in-interest in this case.
Petitioners not being the real parties-in-
interest, any decision rendered herein would
be pointless since the same would not bind the
real parties-in-
interest. 14
Nevertheless, to forestall further litigation on
the substantive aspects of this case, we shall
proceed to rule on me merits. 15
Petitioners submit that respondent NHA had no
legal basis to "rescind" the sale of the subject
three parcels of land. The existence of such
legal basis, notwithstanding, petitioners argue
that they are still entitled to an award of
damages.
Petitioners confuse the cancellation of the
contract by the NHA as a rescission of the
contract under Article 1191 of the Civil Code.
The right of rescission or, more accurately,
resolution, of a party to an obligation under
Article 1191 is predicated on a breach of faith
by the other party that violates the reciprocity
between them. 16 The power to rescind,
therefore, is given to the injured party. 17 Article
1191 states:
The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors
should not comply with what is incumbent
upon him.
The injured party may choose between the
fulfillment and the rescission of the obligation,
with the payment of damages in either case. He
may also seek rescission, even after he has
chosen fulfillment, if the latter should become
impossible.
In this case, the NHA did not rescind the
contract. Indeed, it did not have the right to do
so for the other parties to the contract, the
vendors, did not commit any breach, much less
a substantial breach, 18 of their obligation. Their
obligation was merely to deliver the parcels of
land to the NHA, an obligation that they
fulfilled. The NHA did not suffer any injury by
the performance thereof.
The cancellation, therefore, was not a
rescission under Article 1191. Rather, the
cancellation was based on the negation of the
cause arising from the realization that the
lands, which were the object of the sale, were
not suitable for housing.
Cause is the essential reason which moves the
contracting parties to enter into it. 19 In other
words, the cause is the immediate, direct and
proximate reason which justifies the creation of
an obligation through the will of the contracting
parties. 20 Cause, which is the essential reason
for the contract, should be distinguished from
motive, which is the particular reason of a
contracting party which does not affect the
other party. 21
For example, in a contract of sale of a piece of
land, such as in this case, the cause of the
vendor (petitioners' principals) in entering into
the contract is to obtain the price. For the
vendee, NHA, it is the acquisition of the
land. 22 The motive of the NHA, on the other
hand, is to use said lands for housing. This is
apparent from the portion of the Deeds of
Absolute Sale 23 stating:
WHEREAS, under the Executive Order No. 90
dated December 17, 1986, the VENDEE is
mandated to focus and concentrate its efforts
and resources in providing housing assistance
to the lowest thirty percent (30%) of urban
income earners, thru slum upgrading and
development of sites and services projects;
WHEREAS, Letters of Instructions Nos. 555 and
557 [as] amended by Letter of Instruction No.
630, prescribed slum improvement and
upgrading, as well as the development of sites
and services as the principal housing strategy
for dealing with slum, squatter and other
blighted communities;
WHEREAS, the VENDEE, in pursuit of and in
compliance with the above-stated purposes
offers to buy and the VENDORS, in a gesture of
their willing to cooperate with the above policy
and commitments, agree to sell the aforesaid
property together with all the existing
improvements there or belonging to the
VENDORS;
NOW, THEREFORE, for and in consideration of
the foregoing premises and the terms and
conditions hereinbelow stipulated, the
VENDORS hereby, sell, transfer, cede and
convey unto the VENDEE, its assigns, or
successors-in-interest, a parcel of land located
at Bo. Tadiangan, Tuba, Benguet containing a
total area of FIFTY SIX THOUSAND EIGHT
HUNDRED NINETEEN (56,819) SQUARE
METERS, more or less . . . .
Ordinarily, a party's motives for entering into
the contract do not affect the contract.
However, when the motive predetermines the
cause, the motive may be regarded as the
cause. In Liguez vs. Court of Appeals, 24 this
Court, speaking through Justice J.B.L. REYES,
HELD:
. . . it is well to note, however, that Manresa
himself (Vol. 8, pp. 641-642), while maintaining
the distinction and upholding the
inoperativeness of the motives of the parties to
determine the validity of the contract,
expressly excepts from the rule those contracts
that are conditioned upon the attainment of
the motives of either party.
The same view is held by the Supreme Court of
Spain, in its decisions of February 4, 1941, and
December 4, 1946, holding that the motive may
be regarded as causa when it predetermines
the purpose of the contract.
In this case, it is clear, and petitioners do not
dispute, that NHA would not have entered into
the contract were the lands not suitable for
housing. In other words, the quality of the land
was an implied condition for the NHA to enter
into the contract. On the part of the NHA,
therefore, the motive was the cause for its
being a party to the sale.
Were the lands indeed unsuitable for housing
as NHA claimed?
We deem the findings contained in the report
of the Land Geosciences Bureau dated 15 July
1991 sufficient basis for the cancellation of the
sale, thus:
In Tadiangan, Tuba, the housing site is situated
in an area of moderate topography. There [are]
more areas of less sloping ground apparently
habitable. The site is underlain by . . . thick slide
deposits (4-45m) consisting of huge
conglomerate boulders (see Photo No. 2)
mix[ed] with silty clay materials. These clay
particles when saturated have some swelling
characteristics which is dangerous for any civil
structures especially mass housing
development. 25
Petitioners contend that the report was merely
"preliminary," and not conclusive, as indicated
in its title:
MEMORANDUM
TO: EDWIN G. DOMINGO
Chief, Lands Geology Division
FROM: ARISTOTLE A. RILLON
Geologist II
SUBJECT: Preliminary Assessment of
Tadiangan Housing Project in Tuba, Benguet 26
Thus, page 2 of the report states in part:
Actually there is a need to conduct further
geottechnical [sic] studies in the NHA property.
Standard Penetration Test (SPT) must be
carried out to give an estimate of the degree of
compaction (the relative density) of the slide
deposit and also the bearing capacity of the soil
materials. Another thing to consider is the
vulnerability of the area to landslides and other
mass movements due to thick soil cover.
Preventive physical mitigation methods such as
surface and subsurface drainage and regrading
of the slope must be done in the area. 27
We read the quoted portion, however, to mean
only that further tests are required to
determine the "degree of compaction," "the
bearing capacity of the soil materials," and the
"vulnerability of the area to landslides," since
the tests already conducted were inadequate
to ascertain such geological attributes. It is only
in this sense that the assessment was
"preliminary."
Accordingly, we hold that the NHA was justified
in canceling the contract. The realization of the
mistake as regards the quality of the land
resulted in the negation of the motive/cause
thus rendering the contract inexistent. 28 Article
1318 of the Civil Code states that:
Art. 1318. There is no contract unless the
following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of
the contract;
(3) Cause of the obligation which is established.
(Emphasis supplied.)
Therefore, assuming that petitioners are
parties, assignees or beneficiaries to the
contract of sale, they would not be entitled to
any award of damages.
WHEREFORE, the instant petition is hereby
DENIED.
SO ORDERED.
G.R. No. 157449               GOCO VS CA
FACTUAL BACKGROUND
The subject of the present petition for
certiorari1 is Lot No. 2042, a parcel of land
located in Calapan, Oriental Mindoro and
covered by Original Certificate of Title (OCT)
No. 529, registered in the name of Feliciano
Alveyra (Alveyra).
In 1952, the Municipality of Calapan (now a
City) acquired a one-half interest over Lot No.
2042 in satisfaction of a judgment award in its
favor against Alveyra. Upon registration,
however, the entire Lot No. 2042 was included
in Transfer Certificate of Title (TCT) No. 21306;
OCT No. 529 was accordingly cancelled.
To determine the extent of Alveyra and the
Municipality of Calapan’s interest over Lot No.
2042, an action to quiet title2 was instituted,
which case eventually reached the Court of
Appeals (CA).3 The CA, in a decision dated
October 28, 1974, subdivided Lot No. 2042 into
two lots: one-half or Lot No. 2042-A (referring
to the northern portion) was declared as the
property of the heirs of Alveyra who had since
died, while the other half, Lot No. 2042-B
(referring to the southern portion), was
declared owned by the Municipality of Calapan.
We affirmed the CA’s decision on February 23,
1976 in G.R. No. 40820. The petitioners’ title
over Lot No. 2042-A was registered as TCT No.
T-46154 and that of the Municipality of Calapan
as TCT No. T-46155.
Meanwhile, while the heirs of Alveyra and the
Municipality of Calapan were litigating their
conflicting rights over Lot No. 2042, the heirs
sold their one-half interest over the land (Lot
No. 2042-A) to respondent spouses Hicoblino
and Lourdes Catly (respondent Catlys).
Respondent Catlys then filed a petition for
judicial approval of the subdivision plan of Lot
No. 2042-A.4 On July 31, 1996, the trial court
approved the petition and ordered the
subdivision of Lot No. 2042-A to into four lots
and the registration of four new titles under the
name of the respondents.5
In 1999, respondent Catlys alleged that a
portion of their Lot No. 2042-A was being
occupied by the petitioners and sought to
recover possession of the lot, initially, by
instituting an ejectment case against the
petitioners. 6 When the ejectment case was
dismissed,7 respondent Catlys then filed a
complaint for recovery of possession 8 against
the petitioners; the case is still pending decision
before the Regional Trial Court (RTC) of Calapan
City, Branch 39.
Allegedly to defend themselves against the
cases filed by respondent Catlys and to protect
their vested rights as lawful occupants of the
land, the petitioners filed a complaint for
declaration of nullity of the four certificates of
title issued in respondent Caltys’ names.9 The
petitioners claimed they are occupants of the
original Lot No. 2042 since 1946 and anchored
their continued right to occupy as lessees of the
Municipality of Calapan. They also alleged that
the titles issued in respondent Catlys’ names
(covering Lot No. 2042-A which were
subdivided into four lots) included portions that
they claimed were part of Lot No. 2042-B which
belonged to the Municipality of Calapan. The
petitioners consider the inclusion of these
portions of Lot No. 2042-B prejudicial to their
interest as its actual occupants, hence, they
questioned respondent Catlys’ titles.
Respondent Catlys, in turn, moved for the
dismissal of the complaint asserting that it
failed to state a cause of action and that the
petitioners (plaintiffs below) were not the real
parties in interest.
In its September 7, 1999 Order,10 the Regional
Trial Court (RTC) of Oriental Mindoro, Branch
39, ordered the dismissal of the complaint for
declaration of nullity of respondent Catlys’
titles. It found that the petitioners were in fact
occupying portions of respondent Catlys’ Lot
No. 2042-A. Although the petitioners were
asserting a legal right to occupy the land by
virtue of a lease contract, the lease covered
only Lot No. 2042-B – the southern portion
which belonged to the Municipality of Calapan.
The trial court discovered that the petitioners
were occupying areas outside those covered by
their lessor’s title and concluded they had no
cause of action against respondent Catlys. The
relevant portion of the September 7, 1999
Order said:
As consistently admitted by the [petitioners],
they are occupying the lot belonging to the
Municipal Government of Calapan as occupant-
lessees x x x it was ascertained that the
[petitioners] are outside the area covered by
the Municipal Government’s title.11
Corollary to this, it declared that the petitioners
were not the real parties in interest who could
assail and seek the annulment of the
respondents’ title.
The petitioners’ move to have the September 7,
1999 Order reconsidered was denied by the
RTC in its March 30, 2000 Order.12 They sought
the reversal of the trial court’s Orders by filing a
petition for certiorari under Rule 65 of the
Rules of Court before the CA.
In a decision dated October 7, 2002,13 the CA
dismissed the petition and affirmed the RTC’s
dismissal of the complaint for annulment of
respondent Catlys’ titles. It ruled that
petitioners erred in filing a certiorari petition
under Rule 65 of the Rules of Court to assail an
order of dismissal by the trial court. An order
sustaining a motion to dismiss is a final
adjudication on the merits of the case and the
remedy of the plaintiff is to appeal the order.
This procedural lapse notwithstanding, the CA
proceeded to consider the petition as an
ordinary appeal filed under Rule 41.
Ruling on the merits of case, the CA agreed
with the RTC that the petitioners have no cause
of action against respondent Catlys. The
petitioners were assailing respondents Catlys’
titles which were derived from TCT No. T-46154
covering Lot No. 2042-A. These titles, however,
are separate and distinct from the land that the
petitioners are occupying which is registered as
TCT No. T-46155 covering Lot No. 2042-B in the
name of the Municipality of Calapan. Thus,
their claimed vested rights in Lot No. 2042-B
were not at all impaired by respondent Catlys’
titles. Even assuming that a portion of
respondent Catlys’ lot includes that belonging
to the Municipality of Calapan, the petitioners
do not possess sufficient interest to assail
respondent Catlys’ titles as they are mere
lessees.
The petitioners filed a motion for
reconsideration of the CA’s decision dated
October 7, 2002.14 The CA denied the motion in
a resolution dated March 6, 2003.15 The
petitioners now seek to reverse these CA
rulings before the Court via a petition for
certiorari filed under Rule 65 of the Rules of
Court. The petitioners reiterate the same
arguments they raised before the RTC and insist
that they have sufficient interest in praying for
the annulment of respondent Catlys’ titles, as
their vested rights have been impaired.
THE COURT’S RULING
The Court resolves to dismiss the petition.
A petition for certiorari resolves only errors of
jurisdiction
The petitioners have twice erroneously availed
of the remedy of a certiorari petition, first,
before the CA against the RTC order dismissing
its complaint for annulment of title, and
second, before the Court against the CA’s
decision thereon.
Time and again, we have discussed the nature
of a certiorari petition – it is intended to correct
only errors of jurisdiction where the court or
tribunal has acted with grave abuse of
discretion. A writ of certiorari cannot be used
for any other purpose; it cannot be used to
resolve questions or issues beyond its
competence such as errors of judgment.
Certiorari will not be issued to cure errors by
the trial court in its appreciation of the
evidence of the parties, its conclusions
anchored on the said findings, and its
conclusions of law.16
The supervisory jurisdiction of a court over the
issuance of a writ of certiorari cannot be
exercised for the purpose of reviewing the
intrinsic correctness of a judgment of the lower
court on the basis either of the law or the facts
of the case, or of the wisdom or legal
soundness of the decision. Even if the findings
of the court are incorrect, as long as it has
jurisdiction over the case, such correction is
normally beyond the province of certiorari.
Where the error is not one of jurisdiction, but
of an error of law or fact - a mistake of
judgment - appeal is the remedy.17 [Emphasis
supplied.]1avvphi1
In the two certiorari petitions the petitioners
filed before the CA and before the Court, they
assailed rulings of the lower courts by claiming
that the findings and conclusions of these
courts were merely speculative and based on
misapprehension of facts. These assigned
errors, however, constitute an attack on the
correctness or soundness of the decision
assailed and does not at all affect the
jurisdiction of the court to issue such decision.
In other words, they amount to no more than
errors of judgment correctible by an appeal,
not by a writ of certiorari that will issue only
when there is no appeal, or any plain, speedy,
and adequate remedy in the ordinary course of
law.18
Since an order of dismissal by the trial court is a
final order from which an ordinary appeal
under Rule 41 can be taken,19 the petitioners
should have taken this avenue against the RTC
order of September 7, 1999 instead of resorting
to a petition for certiorari before the CA.
Supreme Court Circular No. 2-90 is unequivocal
in directing the dismissal of an inappropriate
mode of appeal:
4. Erroneous Appeals – An appeal taken to
either the Supreme Court or the Court of
Appeals by the wrong or inappropriate mode
shall be dismissed.
But rather than dismissing outright the petition,
the CA, "in the interest of justice," decided to
treat it as an appeal filed under Rule 41 and
consider the errors raised by the petitioners. As
it turned out, however, the CA still ruled for the
petition’s dismissal because it found that
petitioners’ did not have any cause of action
against respondent Catlys and were not the real
parties in interest.
As the petitioners now raise before this Court
the same errors of judgment already raised
before and resolved by the CA, the dismissal of
the present certiorari petition is in order for
being the wrong remedy. Errors of judgment
committed by the CA are reviewable by this
Court via a petition for review on certiorari
under Rule 45 of the Rules of Court. Erroneous
findings and conclusion do not render the
appellate court vulnerable to the corrective
writ of certiorari.20
The petitioners’ invocation of a liberal
application of the rules of procedure is
unavailing. Even if the Court were to consider
the present petition as an appeal filed under
Rule 45, we would ultimately order its dismissal
for failing to find any reversible error
committed by the CA.
An action for annulment of title, like any other
civil action, must be instituted by the real party
in interest
Section 2, Rule 3 of the Rules of Court 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.
This provision has two requirements: 1) to
institute an action, the plaintiff must be the real
party in interest; and 2) the action must be
prosecuted in the name of the real party in
interest. Interest within the meaning of the
Rules of Court means material interest or an
interest in issue to be affected by the decree or
judgment of the case, as distinguished from
mere curiosity about the question involved.
One having no material interest to protect
cannot invoke the jurisdiction of the court as
the plaintiff in an action. When the plaintiff is
not the real party in interest, the case is
dismissible on the ground of lack of cause of
action.21
An action for annulment of certificates of title
to property into the issue of ownership of the
land covered by a Torrens title and the relief
generally prayed for by the plaintiff is to be
declared as the land’s true owner.22 The real
party in interest in such action therefore is the
person claiming title or ownership adverse to
that of the registered owner. The case of
Tankiko v. Cezar23 has illustrated for us the
application of this principle in the following
manner:
It is evident that respondents are not the real
parties in interest. Because they admit that
they are not the owners of the land but mere
applicants for sales patents thereon, it is
daylight clear that the land is public in
character and that it should revert to the State.
This being the case, Section 101 of the Public
Land Act categorically declares that only the
government may institute an action to recover
ownership of a public land.
Under Section 2, Rule 3 of the Rules of Court,
every action must be prosecuted or defended
in the name of the real party in interest. It
further defines a "real party in interest" as one
who stands to be benefited or injured by the
judgment in the suit. x x x The interest of the
party must be personal and not one based on a
desire to vindicate the constitutional right of
some third and unrelated party.
Clearly, a suit filed by a person who is not a
party in interest must be dismissed. Thus, in
Lucas v. Durian, the Court affirmed the
dismissal of a Complaint filed by a party who
alleged that the patent was obtained by
fraudulent means and, consequently, prayed
for the annulment of said patent and the
cancellation of a certificate of title. The Court
declared that the proper party to bring the
action was the government, to which the
property would revert. Likewise affirming the
dismissal of a Complaint for failure to state a
cause of action, the Court in Nebrada v. Heirs of
Alivio noted that the plaintiff, being a mere
homestead applicant, was not the real party in
interest to institute an action for reconveyance.
Verily, the Court stressed that "if the suit is not
brought in the name of or against the real party
in interest, a motion to dismiss may be filed on
the ground that the complaint states no cause
of action."24 [Emphasis supplied.]
The petitioners demand the annulment of
respondent Catlys’ titles because they allege
that these included portions belonging to the
Municipality of Calapan. This allegation is a
clear recognition of the Municipality’s superior
interest over the lot. In instituting the action for
annulment of respondent Catlys’ titles, what
the petitioners are asserting is a right that is not
personal to them, but to that of the local
government. That they are lessees who were
granted by the Municipality of Calapan the
option to purchase the portion they occupy
does not suffice to constitute as parties with
material interest to commence the action.
WHEREFORE, premises considered, we hereby
DISMISS the petitioners’ Petition for Certiorari
filed under Rule 65 of the Rules of Court. The
Decision of October 7, 2002 and Resolution of
March 6, 2003 in CA-G.R. SP No. 58307 are
AFFIRMED. Cost against the petitioners.
SO ORDERED.
G.R. No. 76225 TAMPICO VS INTERMEDIATE
APPELATE COURT
May a tenanted parcel of land be donated by
the landowner so that it can be the site of a
public high school without securing the consent
of the tenant-lessee? Who bears the
responsibility of paying disturbance
compensation? These are the issues raised in
this case.
On May 10, 1985, a complaint for payment of
disturbance compensation with damages was
filed by petitioner Espiridion Tanpingco against
respondent Benedicto Horca, Sr. with the
Regional Trial Court of Palo, Leyte.
It is alleged in the complaint that the petitioner
is the tenant-lessee in the respondent's parcel
of agricultural riceland situated at Brgy.
Buenavista, Jaro, Leyte under a leasehold
contract entered into sometime in April, 1976;
that in a letter dated April 9, 1985, the
respondent through his representative
informed him to desist from working on the
subject land, having already donated the same
on February 3, 1985; that the respondent
openly ordered the petitioner to vacate the
landholding and is determined to oust him from
the premises in violation of the law; that the
petitioner is willing to accept payment of
disturbance compensation in an amount
computed in accordance with law and in the
alternative to remain as tenant-lessee of the
subject riceland.
On July 5, 1985, the case was called for pre-trial
following which the trial court gave the
respondent until July 9, 1985 to file his answer.
The respondent filed instead a Motion to
Dismiss alleging principally that the complaint
states no cause of action because the
respondent is not the real party-in-interest
having already donated the subject land to the
Ministry of Education, Culture, and Sports,
Region VIII, as a school site of the Buenavista
Barangay High School; and that the donation
not having in anyway benefited the
respondent, no disturbance compensation is
due the petitioner since under Section 36 (1) of
the Agrarian Reform Code as amended,
disturbance compensation holds true only in
cases wherein the lessor-owner derives
financial benefits from the conversion of the
agricultural land into non-agricultural purposes.
The trial court granted the respondent's Motion
to Dismiss and denied the petitioner's Motion
for Reconsideration.
On June 20, 1986, the Intermediate Appellate
Court rendered the decision now assailed, the
dispositive portion of which reads as follows:
WHEREFORE, finding no merit in the instant
appeal, the same is hereby DISMISSED with
costs taxed against the appellant.
From the aforesaid decision, petitioner
Esperidion Tanpingco interposed the present
petition under the following assignment of
errors.
I.Was it proper for the trial court to grant the
Motion to Dismis filed by the defendant inspite
of explicit mandate against such action as
contained in Section 17 of P.D. No. 946?
II.Was respondent Court correct in sustaining
the validity of the conversion of the subject
tenanted riceland into a school site?
III.Was it correct in ruling that a tenant is not
entitled to payment of disturbance
compensation in case his tenanted landholding
is donated and converted into a school site?
Anent the first assignment of error, the
petitioner anchors his contention mainly on
Section 17 of Presidential Decree No. 946 which
provides:
Sec. 17. Pleading, Hearing, Limitation on
Postponements. — The defendant shall file
answer to the complaint (not a motion to
dismiss), within a non-extendible period of ten
(10) days from service of
summons . . .
In Sucaldito and De Guzman v. Hon.
Montejo (193 SCRA 556 [1991]), the Court
declared that where the law speaks in clear and
categorical language, there is no room for
interpretation. However, technicalities may be
disregarded in order to resolve the case on its
merits. (Ruiz v. Court of Appeals, G.R. No.
93454, September 13, 1991 citing Tesoro v.
Mathay, 185 SCRA 124 [1990]).
On this point, the respondent appellate court
noted that:
The rationale of the rule requiring a defendant
in an agrarian case to file an answer and not a
motion to dismiss is to expedite the
proceedings. The filing of the motion to dismiss
and the granting thereof by the lower court
based upon indubitable grounds precisely
expedited the proceedings and conforms with
the spirit and intention of P.D. 946 which
requires courts trying agrarian cases to employ
every reasonable means to ascertain the facts
of every case in accordance with justice and
equity without regard to technicalities of law
and procedure and empowering the Court to
adopt any appropriate measure or procedure in
any situation or matter not provided for or
covered by the Decree (Section 16, 3rd and 4th
sentences, P.D. 946).
We, therefore, take exception to the literal
application of Section 17 of P.D. No. 946 for as
stated in Salonga v. Warner Barnes and Co.,
Ltd. (88 Phil. 125 [1951], an action is brought
for a practical purpose, nay to obtain actual and
positive relief. If the party sued upon is not the
proper party, any decision that may be
rendered against him would be futile, for it
cannot be enforced or executed. The effort that
may be employed will be wasted.
Section 2, Rule 3 of the Rules of Court requires
that every action must be prosecuted in the
name of the real party-in-interest. A corollary
proposition to this rule is that an action must
be brought against the real party-in-interest, or
against a party which may be bound by the
judgment to be rendered therein (Salonga v.
Warner Barnes and Co., Ltd. supra citing
Salmon and Pacific Commercial Co., v. Tan
Cuenco, 36 Phil. 556 [1917]). The real party-in-
interest is one who stands to be benefited or be
injured by the judgment, or the party entitled
to the avails of the suit (Rebollido v. Court of
Appeals, 170 SCRA 800 [1989] citing Samahan
ng mga Nangungupahan sa Azcarraga Textile
Market, Inc., et al. v. Court of Appeals, 165
SCRA 598 [1988]). If the suit is not brought
against the real party-in-interest, a motion to
dismiss may be filed on the ground that the
complaint states no cause of action (Section
1(g), Rule 16, Rules of Court).
Hence, the resolution of the dispute hinges
upon the determination of whether or not the
private respondent is the real party-in-interest
against whom the suit should be brought.
The private respondent bolsters his claim that
he is not the real party-in-interest on Section 10
of Republic Act No. 3844 (Code of Agrarian
Reforms of the Philippines) which provides
that:
. . . In the case the agricultural lessor sells,
alienates or transfers the legal possession of
the landholding, the purchaser or transferee
thereof shall be subrogated to the rights and
substituted to the obligation of the agricultural
lessor.
In effect, the private respondent is of the view
that the Ministry of Education, Culture and
Sports, as donee, became the new lessor of the
agricultural lessee by operation of law and is
therefore the real party-in-interest against
whom the claim for disturbance compensation
should be directed.
We agree with the contentions of the private
respondent. The petitioner should have
impleaded the Ministry of Education, Culture
and Sports as the party-defendant for as stated
in Roman Catholic Archbishop of Manila v.
Court of Appeals (198 SCRA 300 [1991]), a
donation, as a mode of acquiring ownership,
results in an effective transfer of title over the
property from the donor to the donee and once
a donation is accepted, the donee becomes the
absolute owner of the property donated.
Under Article 428 of the New Civil Code, the
owner has the right to dispose of a thing
without other limitations than those
established by law. As an incident of ownership
therefore, there is nothing to prevent a
landowner from donating his naked title to the
land. However, the new owner must respect
the rights of the tenant. Section 7 of R.A. No.
3844, as amended (Code of Agrarian Reforms
of the Philippines) gives the agricultural lessee
the right to work on the landholding once the
leasehold relationship is established. It also
entitles him to security of tenure on his
landholding. He can only be ejected by the
court for cause. Time and again, this Court has
guaranteed the continuity and security of
tenure of a tenant even in cases of a mere
transfer of legal possession. As elucidated in
the case of Bernardo v. Court of Appeals (168
SCRA 439 [1988]), security of tenure is a legal
concession to agricultural lessees which they
value as life itself and deprivation of their
landholdings is tantamount to deprivation of
their only means of livelihood. Also, under
Section 10 of the same Act, the law explicitly
provides that the leasehold relation is not
extinguished by the alienation or transfer of the
legal possession of the landholding. The only
instances when the agricultural leasehold
relationship is extinguished are found in Section
8, 28 and 36 of the Code of Agrarian Reforms of
the Philippines. The donation of the land did
not terminate the tenancy relationship.
However, the donation itself is valid.
Considering that the tenant in the case at bar is
willing to accept payment of disturbance
compensation in exchange for his right to
cultivate the landholding in question, the real
issue is who should pay the compensation. We
rule that the Ministry of Education, Culture and
Sports as the new owner cannot oust the
petitioner from the subject riceland and build a
public high school thereon until after there is
payment of the disturbance compensation in
accordance with Section 36 (1) of R.A. No.
3844, as amended.
In view of the foregoing, we are of the opinion
and so hold that the trial court correctly
dismissed the complaint for payment of
disturbance compensation because the private
respondent is not the real party-in-interest.
And having arrived at this conclusion, we do
not deem it necessary to pass upon the other
errors assigned by the petitioner for as stated
in Filamer Christian Institute v. Court of
Appeals (190 SCRA 485 [1990]), a person who
was not impleaded in the complaint could not
be bound by the decision rendered therein, for
no man shall be affected by a proceeding to
which he is a stranger. The remedy then of the
petitioner is to claim his disturbance
compensation from the new owner or
whatever agency, local or national, is in a
position to pay for it.
WHEREFORE, the petition is hereby DENIED.
The decision dated 20 June 1986 of the
Intermediate Appellate Court is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
G.R. No. L-2246             SALONGA VS BARNES
This is an appeal from a decision of the Court of
First Instance of Manila ordering the defendant,
as agent of Westchester Fire Insurance
Company of New York, to pay to the plaintiff
the sum of P727. 82 with legal interest thereon
from the filing of the complaint until paid, and
the costs. The case was taken to this court
because it involves only questions of law.
On August 28, 1946, Westchester Fire
Insurance Company of New York entered into a
contract with Tina J. Gamboa whereby said
company insured one case of rayon yardage
which said Tina J. Gamboa shipped from San
Francisco, California, on steamer Clovis Victory,
to Manila, Philippines and consigned to Jovito
Salonga, plaintiff herein. According to the
contract of insurance, the insurance company
undertook to pay to the sender or her
consignee the damages that may be caused to
the goods shipped subject to the condition that
the liability of the company will be limited to
the actual loss which the insured may suffer not
to the exceed the sum of (2,000. The ship
arrived in Manila on September 10, 1946. On
October 7, the shipment was examined by C. B.
Nelson and Co., marine surveyors, at the
request of the plaintiff, and in their
examination the surveyors found a shortage in
the shipment in the amount of P1,723,12. On
October 9, plaintiff filed a claim for damages in
the amount of P1,723.12 against the American
President Lines, agents of the ship Clovis
Victory, demanding settlement, and when
apparently no action was taken on this claim,
plaintiff demanded payment thereof from
Warner, Barnes and Co., Ltd., as agent of the
insurance company in the Philippines, and this
agent having refused to pay the claim, on April
17, 1947, plaintiff instituted the present action.
In the meantime, the American President Lines,
in a letter dated November 25, 1946, agreed to
pay to the plaintiff the amount of P476.17
under its liability in the bill of lading, and when
this offer was rejected, the claim was finally
settled in the amount of P1,021.25. As a result,
the amount claimed in the complaint as the
ultimate liability of the defendant under the
insurance contract was reduced to P717.82
only.
After trial, at which both parties presented
their respective evidence, the court rendered
judgment as stated in the early part of this
decision. The motion for reconsideration filed
by the defendant having been denied, the case
was appealed to this court.
Appellant now assigns the following errors:
I
The trial court erred in finding that the loss or
damage of the case of rayon yardage (Pilferage,
as found by the marine surveyors)is included in
the risks insured against as enunciated in the
insurance policy.
II
The trial court erred in holding that defendant,
as agent of Westchester Fire Insurance
Company of New York, United States of
America, is responsible upon the insurance
claim subject to the suit.
III
The trial court erred in denying defendant's
motion for new trial and to set aside the
decision. (Appellant's assignments of error).
We will begin by discussing the second error
assigned by appellant for the reason that if our
view on the question raised is in favor of the
claim of appellant there would be no need to
proceed with the discussion of the other errors
assigned, for that would put an end to the
controversy.
As regards the second assignment of error,
counsel claims that the defendant cannot be
made responsible to pay the amount in
litigation because (1) said defendant has no
contractual relation with either the plaintiff or
his consignor; (2) the defendant is not the real
party in interest against whom the suit should
be brought; and (3) a judgment for or against
an agent in no way binds the real party in
interest.
1. We are of the opinion that the first point is
well taken. It is a well known rule that a
contractual obligation or liability, or an
action ex-contractu, must be founded upon a
contract, oral or written, either express or
implied. This is axiomatic. If there is no
contract, there is no corresponding liability, and
no cause of action may arise therefrom. This is
what is provided for in article 1257 of the Civil
Code. This article provides that contracts are
binding upon the parties who make them and
their heirs, excepting, with respect to the latter,
where the rights and obligations are not
transmissible, and when the contract contains a
stipulation in favor of a third person, he may
demand its fulfillment if he gives notice of his
acceptance before it is revoked. This is also the
ruling laid down by this court in the case of E.
Macias and Co. vs. Warner, Barnes and Co. (43
Phil. 155) wherein, among others, the court
said:
. . . There is no contract of any kind, either oral
or written, between the plaintiff and Warner,
Barnes and Company. Plaintiff's contracts are
with the insurance companies, and are in
writing, and the premiums were paid to the
insurance companies and the policies were
issued by, and in the name of, the insurance
companies, and on the face of the policy itself,
the plaintiff knew that the defendant was
acting as agent, for, and was representing, the
respective insurance companies in the issuance
and delivery of the policies. The defendant
company did not contract or agree to do
anything or to pay the plaintiff any money at
any time or on any condition, either as agent or
principal.
Every cause of action ex-contractu must be
founded upon a contract, oral or written, either
express or implied.
Warner, Barnes and Co., as principal or agent,
did not make any contract, either oral or
written, with the plaintiff. The contracts were
made between the respective insurance
companies and the insured, and were made by
the insurance companies, through Warner,
Barnes and Co., as their agent.
As in the case of a bank draft, it is not the
cashier of the bank who makes the contract to
pay the money evidenced by the draft, it is the
bank, acting through its cashier, that makes the
contract. So, in the instant case, it was the
insurance companies, acting through Warner,
Barnes and Co., as their agent, that made the
written contracts with the insured. (E. Macias
and Co. vs. Warner, Barnes and Co., 43 Phil.,
155, 161, 162.)
Bearing in mind the above rule, we find that the
defendant has not taken part, directly or
indirectly, in the contract in question. The
evidence shows that the defendant did not
enter into any contract either with the plaintiff
or his consignor — Tina J. Gamboa. The
contract of marine insurance, Exhibit C, was
made and executed only by and between the
Westchester Fire Insurance Company of New
York and Tina J. Gamboa. The contract was
entered in New York. There is nothing therein
which may affect, in favor or adversely, the
defendant, the fulfillment of which may be
demanded by or against it. That contract is
purely bilateral, binding only upon Gamboa and
the insurance company. When the lower court,
therefore, imposed upon the defendant an
obligation which it has never assumed, either
expressly or impliedly, or when it extended to
the defendant the effects of a contract which
was entered into exclusively by and between
the Westchester Fire Insurance Company of
New York and Tina J. Gamboa, the error it has
committed is evident. This is contrary to law.
We do not find any material variance between
this case and the case of E. Macias and
Co. vs. Warner, Barnes and Co., supra, as
pointed out by counsel for appellee, in so far as
the principle we are considering is concerned.
Both cases involve similar facts which call for
the application of a similar ruling. In both cases
the issue is whether an agent, who acts within
the scope of his authority, can assume personal
liability for a contract entered into by him in
behalf of his principal. And in the Macias case
we said that the agent did not assume personal
liability because the only party bound was the
principal. And in this case this principle acquires
added force and effect when we consider the
fact that the defendant did not sign the
contract as agent of the foreign insurance
company as the defendant did in the Macias
case. The Macias case, therefore, is on all fours
with this case and is decisive of the question
under consideration.
2. Counsel next contends that Warner, Barnes
and Co., Ltd., is not the real party in interest
against whom the suit should be brought. It is
claimed that this action should have been filed
against its principal, the Westchester Fire
Insurance Company of New York. This point is
also well taken. Section 2, Rule 3 of the Rules of
Court requires that "every action must be
prosecuted in the name of the real party in
interest." A corollary proposition to this rule is
that an action must be brought against the real
party in interest, or against a party which may
be bound by the judgment to be rendered
therein (Salmon and Pacific Commercial
Co. vs. Tan Cueco, 36 Phil., 556). The real party
in interest is the party who would be benefited
or injured by the judgment, or the "party
entitled to the avails of the suit" (1 Sutherland,
Court Pleading Practice and Forms, p. 11). And
in the case at bar, the defendant issued upon in
its capacity as agent of Westchester Fire
Insurance Company of New York in spite of the
fact that the insurance contract has not been
signed by it. As we have said, the defendant did
not assume any obligation thereunder either as
agent or as a principal. It cannot, therefore, be
made liable under said contract, and hence it
can be said that this case was filed against one
who is not the real party in interest.
We agree with counsel for the appellee that the
defendant is a settlement and adjustment
agent of the foreign insurance company and
that as such agent it has the authority to settle
all the losses and claims that may arise under
the policies that may be issued by or in behalf
of said company in accordance with the
instructions it may receive from time to time
from its principal, but we disagree with counsel
in his contention that as such adjustment and
settlement agent, the defendant has assumed
personal liability under said policies, and,
therefore, it can be sued in its own right. An
adjustment and settlement agent is no different
from any other agent from the point of view of
his responsibility, for he also acts in a
representative capacity. Whenever he adjusts
or settles a claim, he does it in behalf of his
principal, and his action is binding not upon
himself but upon his principal. And here again,
the ordinary rule of agency applies. The
following authorities bear this out:
An insurance adjuster is ordinarily a special
agent for the person or company for whom he
acts, and his authority is prima
facie coextensive with the business intrusted to
him. . . .
An adjuster does not discharge functions of a
quasi-judicial nature, but represents his
employer, to whom he owes faithful service,
and for his acts, in the employer's interest, the
employer is responsible so long as the acts are
done while the agent is acting within the scope
of his employment. (45 C. J. S., 1338-1340.)
It, therefore, clearly appears that the scope and
extent of the functions of an adjustment and
settlement agent do not include personal
liability. His functions are merely to settle and
adjusts claims in behalf of his principal if those
claims are proven and undisputed, and if the
claim is disputed or is disapproved by the
principal, like in the instant case, the agent
does not assume any personal liability. The
recourse of the insured is to press his claim
against the principal.
3. This brings us to the consideration of the
third point. It is claimed that a judgment, for or
against an agent, in no way binds the real party
in interest. In our opinion this point is also well
taken, for it is but a sequel to the principle we
have pointed out above. The reason is obvious.
An action is brought for a practical purpose, nay
to obtain actual and positive relief. If the party
sued upon is not the proper party, any decision
that may be rendered against him would be
futile, for it cannot be enforced or executed.
The effort that may be employed will be
wasted. Such would be the result of this case if
it will be allowed to proceed against the
defendant, for even if a favorable judgment is
obtained against it, it cannot be enforced
because the real party is not involved. The
defendant cannot be made to pay for
something it is not responsible. Thus, in the
following authorities it was held:
. . . Section 114 of the Code of Civil Procedure
requires an action to be brought in the name of
the real party in interest; and a corollary
proposition requires that an action shall be
brought against the persons or entities which
are to be bound by the judgment obtained
therein. An action upon a cause of action
pertaining to his principal cannot be brought by
an attorney-in-fact in his name
(Arroyo vs. Granada and Gentero, 18 Phil., 484);
nor can an action based upon a right of action
belonging to a principal be brought in the name
of his representative (Lichauco vs. Limjuco and
Gonzalo, 19 Phil., 12). Actions must be brought
by the real parties in interest and against the
persons who are to be bound by the judgment
obtained therein. (Salmon and Pacific
Commercial Co. vs. Tan Cueco, 36 Phil., 557-
558.)
An action to set aside an instrument of transfer
of land should be brought in the name of the
real party in interest. An apoderado or attorney
in fact is not a real party. He has no interest in
the litigation and has absolutely no right to
bring the defendant into court or to put him to
the expense of a suit, and there is no pro-vision
of law permitting action to be brought in such
manner. A judgment for or against
the apoderado in no way binds or affects the
real party, and a decision in the suit would be
utterly futile. It would touch no interest, adjust
no question, bind no one, and settle no
litigation. Courts should not be required to
spend their time solemnly considering and
deciding cases where no one could be bound
and no interest affected by such deliberation
and decision. (Arroyo vs. Granada and Gentero,
18 Phil., 484.)
If the case cannot be filed against the
defendant as we have pointed out, what then is
the remedy of the plaintiff under the
circumstances? Is the case of the plaintiff
beyond remedy? We believe that the only way
by which the plaintiff can bring the principal
into this case or make it come under the courts
in this jurisdiction is to follow the procedure
indicated in section 14, Rule 7, of the Rules of
Court concerning litigations involving foreign
corporations. This rule says that if the
defendant is a foreign corporation and it has
not designated an agent in the Philippines on
whom service may be made in case of litigation,
such service may be made on any agent it may
have in the Philippines. And in our opinion the
Westchester Fire Insurance Company of new
York comes within the import of this rule for
even if it has not designated an agent as
required by law, it has however a settling agent
who may serve the purpose. In other words, an
action may be brought against said insurance
company in the Philippines and the process
may be served on the defendant to give our
courts the necessary jurisdiction. This is the
way we have pointed out in the case of General
Corporation of the Philippines and Mayon
Investment Co. vs. Union Insurance Society of
Canton Ltd. et al., (87 Phil., 313).
In view of the foregoing, we are of the opinion
and so hold that the lower court erred in
holding the defendant responsible for the loss
or damage claimed in the complaint. And
having arrived at this conclusion, we do not
deem it necessary to pass upon the other
errors assigned by the appellant.
Wherefore, the decision appealed from is
hereby reversed. The complaint is hereby
dismissed, with costs against the appellee.
G.R. No. 186993               ANG VS ANG
Before this Court is a petition for review
on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the
Decision1 dated August 28, 2008 and the
Resolution2 dated February 20, 2009 rendered
by the Court of Appeals (CA) in CA-G.R. SP No.
101159. The assailed decision annulled and set
aside the Orders dated April 12, 20073 and
August 27, 20074 issued by the Regional Trial
Court (RTC) of Quezon City, Branch 81 in Civil
Case No. Q-06-58834.
The Antecedent Facts
On September 2, 1992, spouses Alan and Em
Ang (respondents) obtained a loan in the
amount of Three Hundred Thousand U.S.
Dollars (US$300,000.00) from Theodore and
Nancy Ang (petitioners). On even date, the
respondents executed a promissory note5 in
favor of the petitioners wherein they promised
to pay the latter the said amount, with interest
at the rate of ten percent (10%) per annum,
upon demand. However, despite repeated
demands, the respondents failed to pay the
petitioners.
Thus, on August 28, 2006, the petitioners sent
the respondents a demand letter asking them
to pay their outstanding debt which, at that
time, already amounted to Seven Hundred
Nineteen Thousand, Six Hundred Seventy-One
U.S. Dollars and Twenty-Three Cents
(US$719,671.23), inclusive of the ten percent
(10%) annual interest that had accumulated
over the years. Notwithstanding the receipt of
the said demand letter, the respondents still
failed to settle their loan obligation.
On August 6, 2006, the petitioners, who were
then residing in Los Angeles, California, United
States of America (USA), executed their
respective Special Powers of Attorney6 in favor
of Attorney Eldrige Marvin B. Aceron (Atty.
Aceron) for the purpose of filing an action in
court against the respondents. On September
15, 2006, Atty. Aceron, in behalf of the
petitioners, filed a Complaint7 for collection of
sum of money with the RTC of Quezon City
against the respondents.
On November 21, 2006, the respondents
moved for the dismissal of the complaint filed
by the petitioners on the grounds of improper
venue and prescription.8 Insisting that the
venue of the petitioners’ action was improperly
laid, the respondents asserted that the
complaint against them may only be filed in the
court of the place where either they or the
petitioners reside. They averred that they
reside in Bacolod City while the petitioners
reside in Los Angeles, California, USA. Thus, the
respondents maintain, the filing of the
complaint against them in the RTC of Quezon
City was improper.
The RTC Orders
On April 12, 2007, the RTC of Quezon City
issued an Order9 which, inter alia, denied the
respondents’ motion to dismiss. In ruling
against the respondents’ claim of improper
venue, the court explained that:
Attached to the complaint is the Special Power
of Attorney x x x which clearly states that
plaintiff Nancy Ang constituted Atty. Eldrige
Marvin Aceron as her duly appointed attorney-
in-fact to prosecute her claim against herein
defendants. Considering that the address given
by Atty. Aceron is in Quezon City, hence, being
the plaintiff, venue of the action may lie where
he resides as provided in Section 2, Rule 4 of
the 1997 Rules of Civil Procedure.10
The respondents sought reconsideration of the
RTC Order dated April 12, 2007, asserting that
there is no law which allows the filing of a
complaint in the court of the place where the
representative, who was appointed as such by
the plaintiffs through a Special Power of
Attorney, resides.11
The respondents’ motion for reconsideration
was denied by the RTC of Quezon City in its
Order12 dated August 27, 2007.
The respondents then filed with the CA a
petition for certiorari13 alleging in the main that,
pursuant to Section 2, Rule 4 of the Rules of
Court, the petitioners’ complaint may only be
filed in the court of the place where they or the
petitioners reside. Considering that the
petitioners reside in Los Angeles, California,
USA, the respondents assert that the complaint
below may only be filed in the RTC of Bacolod
City, the court of the place where they reside in
the Philippines.
The respondents further claimed that, the
petitioners’ grant of Special Power of Attorney
in favor of Atty. Aceron notwithstanding, the
said complaint may not be filed in the court of
the place where Atty. Aceron resides, i.e., RTC
of Quezon City. They explained that Atty.
Aceron, being merely a representative of the
petitioners, is not the real party in interest in
the case below; accordingly, his residence
should not be considered in determining the
proper venue of the said complaint.
The CA Decision
On August 28, 2008, the CA rendered the
herein Decision,14 which annulled and set aside
the Orders dated April 12, 2007 and August 27,
2007 of the RTC of Quezon City and,
accordingly, directed the dismissal of the
complaint filed by the petitioners. The CA held
that the complaint below should have been
filed in Bacolod City and not in Quezon City.
Thus:
As maybe clearly gleaned from the foregoing,
the place of residence of the plaintiff’s
attorney-in-fact is of no moment when it comes
to ascertaining the venue of cases filed in
behalf of the principal since what should be
considered is the residence of the real parties
in interest, i.e., the plaintiff or the defendant,
as the case may be. Residence is the permanent
home – the place to which, whenever absent
for business or pleasure, one intends to return.
Residence is vital when dealing with venue.
Plaintiffs, herein private respondents, being
residents of Los Angeles, California, U.S.A.,
which is beyond the territorial jurisdiction of
Philippine courts, the case should have been
filed in Bacolod City where the defendants,
herein petitioners, reside. Since the case was
filed in Quezon City, where the representative
of the plaintiffs resides, contrary to Sec. 2 of
Rule 4 of the 1997 Rules of Court, the trial court
should have dismissed the case for improper
venue.15
The petitioners sought a reconsideration of the
Decision dated August 28, 2008, but it was
denied by the CA in its Resolution dated
February 20, 2009.16
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit
this lone issue for this Court’s resolution:
WHETHER OR NOT THE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR OF LAW
WHEN IT RULED THAT THE COMPLAINT MUST
BE DISMISSED ON THE GROUND THAT VENUE
WAS NOT PROPERLY LAID.17
The Court’s Ruling
The petition is denied.
Contrary to the CA’s disposition, the petitioners
maintain that their complaint for collection of
sum of money against the respondents may be
filed in the RTC of Quezon City. Invoking Section
3, Rule 3 of the Rules of Court, they insist that
Atty. Aceron, being their attorney-in-fact, is
deemed a real party in interest in the case
below and can prosecute the same before the
RTC. Such being the case, the petitioners assert,
the said complaint for collection of sum of
money may be filed in the court of the place
where Atty. Aceron resides, which is the RTC of
Quezon City.
On the other hand, the respondents in their
Comment18 assert that the petitioners are
proscribed from filing their complaint in the
RTC of Quezon City. They assert that the
residence of Atty. Aceron, being merely a
representative, is immaterial to the
determination of the venue of the petitioners’
complaint.
The petitioners’ complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of
personal actions are fixed for the convenience
of the plaintiffs and their witnesses. Equally
settled, however, is the principle that choosing
the venue of an action is not left to a plaintiff’s
caprice; the matter is regulated by the Rules of
Court.19
The petitioners’ complaint for collection of sum
of money against the respondents is a personal
action as it primarily seeks the enforcement of
a contract. The Rules give the plaintiff the
option of choosing where to file his complaint.
He can file it in the place (1) where he himself
or any of them resides, or (2) where the
defendant or any of the defendants resides or
may be found. The plaintiff or the defendant
must be residents of the place where the action
has been instituted at the time the action is
commenced.20
However, if the plaintiff does not reside in the
Philippines, the complaint in such case may
only be filed in the court of the place where the
defendant resides. In Cohen and Cohen v.
Benguet Commercial Co., Ltd.,21 this Court held
that there can be no election as to the venue of
the filing of a complaint when the plaintiff has
no residence in the Philippines. In such case,
the complaint may only be filed in the court of
the place where the defendant resides. Thus:
Section 377 provides that actions of this
character "may be brought in any province
where the defendant or any necessary party
defendant may reside or be found, or in any
province where the plaintiff or one of the
plaintiffs resides, at the election of the
plaintiff." The plaintiff in this action has no
residence in the Philippine Islands. Only one of
the parties to the action resides here. There can
be, therefore, no election by plaintiff as to the
place of trial. It must be in the province where
the defendant resides. x x x.22 (Emphasis ours)
Here, the petitioners are residents of Los
Angeles, California, USA while the respondents
reside in Bacolod City. Applying the foregoing
principles, the petitioners’ complaint against
the respondents may only be filed in the RTC of
Bacolod City – the court of the place where the
respondents reside. The petitioners, being
residents of Los Angeles, California, USA, are
not given the choice as to the venue of the
filing of their complaint.
Thus, the CA did not commit any reversible
error when it annulled and set aside the orders
of the RTC of Quezon City and consequently
dismissed the petitioners’ complaint against the
respondents on the ground of improper venue.
In this regard, it bears stressing that the situs
for bringing real and personal civil actions is
fixed by the Rules of Court to attain the
greatest convenience possible to the litigants
and their witnesses by affording them
maximum accessibility to the courts.23 And even
as the regulation of venue is primarily for the
convenience of the plaintiff, as attested by the
fact that the choice of venue is given to him, it
should not be construed to unduly deprive a
resident defendant of the rights conferred
upon him by the Rules of Court.24
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.
Contrary to the petitioners’ claim, Atty. Aceron,
despite being the attorney-in-fact of the
petitioners, is not a real party in interest in the
case below. Section 2, Rule 3 of the Rules of
Court reads:
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.
(Emphasis ours)
Interest within the meaning of the Rules of
Court means material interest or an interest in
issue to be affected by the decree or judgment
of the case, as distinguished from mere
curiosity about the question involved. 25 A real
party in interest is the party who, by the
substantive law, has the right sought to be
enforced.26
Applying the foregoing rule, it is clear that Atty.
Aceron is not a real party in interest in the case
below as he does not stand to be benefited or
injured by any judgment therein. He was
merely appointed by the petitioners as their
attorney-in-fact for the limited purpose of filing
and prosecuting the complaint against the
respondents. Such appointment, however, does
not mean that he is subrogated into the rights
of petitioners and ought to be considered as a
real party in interest.
Being merely a representative of the
petitioners, Atty. Aceron in his personal
capacity does not have the right to file the
complaint below against the respondents. He
may only do so, as what he did, in behalf of the
petitioners – the real parties in interest. To
stress, the right sought to be enforced in the
case below belongs to the petitioners and not
to Atty. Aceron. Clearly, an attorney-in-fact is
not a real party in interest.27
The petitioner’s reliance on Section 3, Rule 3 of
the Rules of Court to support their conclusion
that Atty. Aceron is likewise a party in interest
in the case below is misplaced. Section 3, Rule 3
of the Rules of Court provides that:
Sec. 3. Representatives as parties. – Where the
action is allowed to be prosecuted and
defended by a representative or someone
acting in a fiduciary capacity, the beneficiary
shall be included in the title of the case and
shall be deemed to be the real property in
interest. A representative may be a trustee of
an expert trust, a guardian, an executor or
administrator, or a party authorized by law or
these Rules. An agent acting in his own name
and for the benefit of an undisclosed principal
may sue or be sued without joining the
principal except when the contract involves
things belonging to the principal. (Emphasis
ours)
Nowhere in the rule cited above is it stated or,
at the very least implied, that the
representative is likewise deemed as the real
party in interest. The said rule simply states
that, in actions which are allowed to be
prosecuted or defended by a representative,
the beneficiary shall be deemed the real party
in interest and, hence, should be included in
the title of the case.
Indeed, to construe the express requirement of
residence under the rules on venue as
applicable to the attorney-in-fact of the plaintiff
would abrogate the meaning of a "real party in
interest", as defined in Section 2 of Rule 3 of
the 1997 Rules of Court vis-à-vis Section 3 of
the same Rule.28
On this score, the CA aptly observed that:
As may be unerringly gleaned from the
foregoing provisions, there is nothing therein
that expressly allows, much less implies that an
action may be filed in the city or municipality
where either a representative or an attorney-
in-fact of a real party in interest resides. Sec. 3
of Rule 3 merely provides that the name or
names of the person or persons being
represented must be included in the title of the
case and such person or persons shall be
considered the real party in interest. In other
words, the principal remains the true party to
the case and not the representative. Under the
plain meaning rule, or verba legis, if a statute is
clear, plain and free from ambiguity, it must be
given its literal meaning and applied without
interpretation. xxx29 (Citation omitted)
At this juncture, it bears stressing that the rules
on venue, like the other procedural rules, are
designed to insure a just and orderly
administration of justice or the impartial and
even-handed determination of every action and
proceeding. Obviously, this objective will not be
attained if the plaintiff is given unrestricted
freedom to choose the court where he may file
his complaint or petition. The choice of venue
should not be left to the plaintiff's whim or
caprice. He may be impelled by some ulterior
motivation in choosing to file a case in a
particular court even if not allowed by the rules
on venue.30
WHEREFORE, in consideration of the foregoing
disquisitions, the petition is DENIED. The
Decision dated August 28, 2008 and Resolution
dated February 20, 2009 rendered by the Court
of Appeals in CA-G.R. SP No. 101159
are AFFIRMED.
SO ORDERED.
G.R. No. L-59731               CHING VS CA
This is a petition for review on certiorari which
seeks to nullify the decision of respondent
Court of Appeals (penned by Hon. Rodolfo A.
Nocon with the concurrence of Hon. Crisolito
Pascual and Juan A. Sison) in CA-G.R. No.
12358-SP entitled Alfredo Ching v. Hon. M. V.
Romillo, et al. which in effect affirmed the
decision of the Court of First Instance of Rizal,
now Regional Trial Court (penned by Judge
Manuel V. Romillo, Jr. then District Judge,
Branch XXVII Pasay City) granting ex-parte the
cancellation of title registered in the name of
Ching Leng in favor of Pedro Asedillo in Civil
Case No. 6888-P entitled Pedro Asedillo v.
Ching Leng and/or Estate of Ching Leng.
The facts as culled from the records disclose
that:
In May 1960, Decree No. N-78716 was issued to
spouses Maximo Nofuente and Dominga
Lumandan in Land Registration Case No. N-
2579 of the Court of First Instance of Rizal and
Original Certificate of Title No. 2433
correspondingly given by the Register of Deeds
for the Province of Rizal covering a parcel of
land situated at Sitio of Kay-Biga Barrio of San
Dionisio, Municipality of Paranaque, Province
of Rizal, with an area of 51,852 square meters
(Exhibit "7", p. 80, CA, Rollo).
In August 1960, 5/6 portion of the property was
reconveyed by said spouses to Francisco,
Regina, Perfects, Constancio and Matilde all
surnamed Nofuente and Transfer Certificate of
Title No. 78633 was issued on August 10, 1960
accordingly (Exhibit "8", pp. 81 and 82, Ibid.).
By virtue of a sale to Ching Leng with postal
address at No. 44 Libertad Street, Pasay City,
Transfer Certificate of Title No. 91137 was
issued on September 18, 1961 and T.C.T. No.
78633 was deemed cancelled. (Exhibit "5-2",
pp. 76-77 and 83, Ibid.).
On October 19, 1965, Ching Leng died in
Boston, Massachusetts, United States of
America. His legitimate son Alfredo Ching filed
with the Court of First Instance of Rizal (now
RTC) Branch III, Pasay City a petition for
administration of the estate of deceased Ching
Leng docketed as Sp. Proc. No. 1956-P. Notice
of hearing on the petition was duly published in
the "Daily Mirror", a newspaper of general
circulation on November 23 and 30 and
December 7, 1965. No oppositors appeared at
the hearing on December 16, 1965,
consequently after presentation of evidence
petitioner Alfredo Ching was appointed
administrator of Ching Leng's estate on
December 28, 1965 and letters of
administration issued on January 3, 1966 (pp.
51-53, Rollo). The land covered by T.C.T. No.
91137 was among those included in the
inventory submitted to the court (p. 75, Ibid.).
Thirteen (13) years after Ching Leng's death, a
suit against him was commenced on December
27, 1978 by private respondent Pedro Asedillo
with the Court of First Instance of Rizal (now
RTC), Branch XXVII, Pasay City docketed as Civil
Case No. 6888-P for reconveyance of the
abovesaid property and cancellation of T.C.T.
No. 91137 in his favor based on possession (p.
33, Ibid.). Ching Leng's last known address
is No. 44 Libertad Street, Pasay City which
appears on the face of T.C.T. No. 91137
(not No. 441 Libertad Street, Pasay City, as
alleged in private respondent's complaint).
(Order dated May 29, 1980, p. 55, Ibid.). An
amended complaint was filed by private
respondent against Ching Leng and/or Estate of
Ching Leng on January 30, 1979 alleging "That
on account of the fact that the defendant has
been residing abroad up to the present, and it
is not known whether the defendant is still alive
or dead, he or his estate may be served by
summons and other processes only by
publication;" (p. 38, Ibid.). Summons by
publication to Ching Leng and/or his estate was
directed by the trial court in its order dated
February 7, 1979. The summons and the
complaint were published in the "Economic
Monitor", a newspaper of general circulation in
the province of Rizal including Pasay City on
March 5, 12 and 19, 1979. Despite the lapse of
the sixty (60) day period within which to
answer defendant failed to file a responsive
pleading and on motion of counsel for the
private respondent, the court a quo in its order
dated May 25, 1979, allowed the presentation
of evidence ex-parte. A judgment by default
was rendered on June 15, 1979, the decretal
portion of which reads:
WHEREFORE, finding plaintiffs causes of action
in the complaint to be duly substantiated by
the evidence, judgment is hereby rendered in
favor of the plaintiff and against the defendant
declaring the former (Pedro Asedillo) to be the
true and absolute owner of the property
covered by T.C.T. No. 91137; ordering the
defendant to reconvey the said property in
favor of the plaintiff; sentencing the defendant
Ching Leng and/or the administrator of his
estate to surrender to the Register of Deeds of
the Province of Rizal the owner's copy of T.C.T.
No. 91137 so that the same may be cancelled
failing in which the said T.C.T. No. 91137 is
hereby cancelled and the Register of Deeds of
the Province of Rizal is hereby ordered to issue,
in lieu thereof, a new transfer certificate of title
over the said property in the name of the
plaintiff Pedro Asedillo of legal age, and a
resident of Estrella Street, Makati, Metro
Manila, upon payment of the fees that may be
required therefor, including the realty taxes
due the Government.
IT IS SO ORDERED. (pp. 42-44, Ibid.)
Said decision was likewise served by publication
on July 2, 9 and 16, 1979 pursuant to Section 7
of Rule 13 of the Revised Rules of Court (CA
Decision, pp. 83-84, Ibid.). The title over the
property in the name of Ching Leng was
cancelled and a new Transfer Certificate of Title
was issued in favor of Pedro Asedillo (p. 77,
CA Rollo) who subsequently sold the property
to Villa Esperanza Development, Inc. on
September 3, 1979 (pp. 125-126, Ibid.).
On October 29, 1979 petitioner Alfredo Ching
learned of the abovestated decision. He filed a
verified petition on November 10, 1979 to set it
aside as null and void for lack of jurisdiction
which was granted by the court on May 29,
1980 (penned by Hon. Florentino de la Pena,
Vacation Judge, pp. 54-59, Rollo).
On motion of counsel for private respondent
the said order of May 29, 1980 was
reconsidered and set aside, the decision dated
June 15, 1979 aforequoted reinstated in the
order dated September 2, 1980. (pp. 60-
63, Ibid.)
On October 30, 1980, petitioner filed a motion
for reconsideration of the said latter order but
the same was denied by the trial court on April
12, 1981 (pp. 77-79, Ibid.)
Petitioner filed an original petition
for certiorari with the Court of Appeals but the
same was dismissed on September 30, 1981.
His motion for reconsideration was likewise
denied on February 10, 1982 (pp. 81-90, Ibid.)
Private respondent Pedro Asedillo died on June
7, 1981 at Makati, Metro Manila during the
pendency of the case with the Court of Appeals
(p. 106, CA Rollo).
Hence, the instant petition.
Private respondent's comment was filed on
June 1, 1982 (p. 117, Ibid.) in compliance with
the resolution dated April 26, 1982 (p.
109, Ibid.) Petitioner filed a reply to comment
on June 18, 1982 (p. 159, Ibid ), and the Court
gave due course to the petition in the
resolution of June 28, 1982 (p. 191, Ibid.)
Petitioner raised the following:
ASSIGNMENTS OF ERROR
I. WHETHER OR NOT A DEAD MAN CHING LENG
AND/OR HIS ESTATE MAY BE VALIDLY SERVED
WITH SUMMONS AND DECISION BY
PUBLICATION.
II. WHETHER OR NOT AN ACTION FOR
RECONVEYANCE OF PROPERTY AND
CANCELLATION OF TITLE IS IN PERSONAM, AND
IF SO, WOULD A DEAD MAN AND/OR HIS
ESTATE BE BOUND BY SERVICE OF SUMMONS
AND DECISION BY PUBLICATION.
III. WHETHER OR NOT THE PROCEEDINGS FOR
RECONVEYANCE AND CANCELLATION OF TITLE
CAN BE HELD EX-PARTE.
IV.WHETHER OR NOT THE TRIAL COURT
ACQUIRED JURISDICTION OVER THE SUBJECT
MATTER AND THE PARTIES.
V.WHETHER OR NOT PRIVATE RESPONDENT IS
GUILTY OF LACHES IN INSTITUTING THE ACTION
FOR RECONVEYANCE AFTER THE LAPSE OF 19
YEARS FROM THE TIME THE DECREE OF
REGISTRATION WAS ISSUED.
Petitioner's appeal hinges on whether or not
the Court of Appeals has decided a question of
substance in a way probably not in accord with
law or with the applicable decisions of the
Supreme Court.
Petitioner avers that an action for
reconveyance and cancellation of title is in
personam and the court a quo never acquired
jurisdiction over the deceased Ching Leng
and/or his estate by means of service of
summons by publication in accordance with the
ruling laid down in Ang Lam v. Rosillosa et al.,
86 Phil. 448 [1950].
On the other hand, private respondent argues
that an action for cancellation of title is quasi in
rem, for while the judgment that may be
rendered therein is not strictly a judgment in in
rem, it fixes and settles the title to the property
in controversy and to that extent partakes of
the nature of the judgment in rem, hence,
service of summons by publication may be
allowed unto Ching Leng who on the face of the
complaint was a non-resident of the Philippines
in line with the doctrine enunciated in Perkins
v. Dizon, 69 Phil. 186 [1939].
The petition is impressed with merit.
An action to redeem, or to recover title to or
possession of, real property is not an action in
rem or an action against the whole world, like a
land registration proceeding or the probate of a
will; it is an action in personam, so much so that
a judgment therein is binding only upon the
parties properly impleaded and duly heard or
given an opportunity to be heard. Actions in
personam and actions in rem differ in that the
former are directed against specific persons
and seek personal judgments, while the latter
are directed against the thing or property or
status of a person and seek judgments with
respect thereto as against the whole world. An
action to recover a parcel of land is a real action
but it is an action in personam, for it binds a
particular individual only although it concerns
the right to a tangible thing (Ang Lam v.
Rosillosa, supra).
Private respondent's action for reconveyance
and cancellation of title being in personam, the
judgment in question is null and void for lack of
jurisdiction over the person of the deceased
defendant Ching Leng. Verily, the action was
commenced thirteen (13) years after the
latter's death. As ruled by this Court in Dumlao
v. Quality Plastic Products, Inc. (70 SCRA 475
[1976]) the decision of the lower court insofar
as the deceased is concerned, is void for lack of
jurisdiction over his person. He was not, and he
could not have been validly served with
summons. He had no more civil personality. His
juridical personality, that is fitness to be subject
of legal relations, was lost through death (Arts.
37 and 42 Civil Code).
The same conclusion would still inevitably be
reached notwithstanding joinder of Ching
Leng's estate as co-defendant. it is a well-
settled rule that an estate can sue or be sued
through an executor or administrator in his
representative capacity (21 Am. Jr. 872).
Contrary to private respondent's claims,
deceased Ching Leng is a resident of 44 Libertad
Street, Pasay City as shown in his death
certificate and T. C. T. No. 91137 and there is an
on-going intestate proceedings in the same
court, Branch III commenced in 1965, and
notice of hearing thereof duly published in the
same year. Such misleading and misstatement
of facts demonstrate lack of candor on the part
of private respondent and his counsel, which is
censurable.
The complaint for cancellation of Ching Leng's
Torrens Title must be filed in the original land
registration case, RTC, Pasig, Rizal, sitting as a
land registration court in accordance with
Section 112 of the Land Registration Act (Act
No. 496, as amended) not in CFI Pasay City in
connection with, or as a mere incident in Civil
Case No. 6888-P (Estanislao v. Honrado, 114
SCRA 748 [1982]).
Section 112 of the same law requires "notice to
all parties in interest." Since Ching Leng was
already in the other world when the summons
was published he could not have been notified
at all and the trial court never acquired
jurisdiction over his person. The ex-
parte proceedings for cancellation of title could
not have been held (Estanislao v.
Honrado, supra).
The cited case of Perkins v. Dizon, supra is
inapplicable to the case at bar since petitioner
Perkins was a non-resident defendant sued in
Philippine courts and sought to be excluded
from whatever interest she has in 52,874
shares of stocks with Benguet Consolidated
Mining Company. The action being a quasi in
rem summons by publication satisfied the
constitutional requirement of due process.
The petition to set aside the judgment for lack
of jurisdiction should have been granted and
the amended complaint of private respondent
based on possession and filed only in 1978
dismissed outrightly. Ching Leng is an innocent
purchaser for value as shown by the evidence
adduced in his behalf by petitioner herein,
tracing back the roots of his title since 1960,
from the time the decree of registration was
issued.
The sole remedy of the landowner whose
property has been wrongfully or erroneously
registered in another's name—after one year
from the date of the decree—is not to set aside
the decree, but respecting the decree as
incontrovertible and no longer open to review,
to bring an ordinary action in the ordinary court
of justice for damages if the property has
passed unto the hands of an innocent
purchaser for value (Sy, Sr. v. Intermediate
Appellate Court, G.R. No. 66742; Teoville
Development Corporation v. IAC, et al., G.R. No.
75011, June 16, 1988).
Failure to take steps to assert any rights over a
disputed land for 19 years from the date of
registration of title is fatal to the private
respondent's cause of action on the ground of
laches. Laches is the failure or neglect, for an
unreasonable 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 (Bailon-Casilao v. Court of
Appeals, G.R. No. 78178, April 15, 1988;
Villamor v. Court of Appeals, G.R. No. 41508,
June 27, 1988).
The real purpose of the Torrens system is to
quiet title to land and to stop forever any
question as to its legality. Once a title is
registered, the owner may rest secure, without
the necessity of waiting in the portals of the
court, or sitting on the "mirador su casa," to
avoid the possibility of losing his land (National
Grains Authority v. IAC, 157 SCRA 388 [1988]).
A Torrens title is generally a conclusive
evidence of the ownership of the land referred
to therein (Section 49, Act 496). A strong
presumption exists that Torrens titles are
regularly issued and that they are valid. A
Torrens title is incontrovertible against any
"information possessoria" or title existing prior
to the issuance thereof not annotated on the
title (Salamat Vda. de Medina v. Cruz, G.R. No.
39272, May 4, 1988).
PREMISES CONSIDERED, (1) the instant petition
is hereby GRANTED; (2) the appealed decision
of the Court of Appeals is hereby REVERSED
and SET ASIDE; (3) the trial court's decision
dated June 15, 1979 and the Order dated
September 2, 1980 reinstating the same are
hereby declared NULL and VOID for lack of
jurisdiction and (4) the complaint in Civil Case
No. 6888-P is hereby DISMISSED.
SO ORDERED.
G.R. No. 143870 MIA VS RIVERA VILLAGE
We resolve the Petition for Review on
Certiorari1 dated August 23, 2000 filed by the
Manila International Airport Authority (MIAA),
assailing the Decision2 of the Court of Appeals
dated June 30, 2000 which directed the
issuance of a writ of preliminary injunction
restraining petitioner from evicting the
homeowners of Rivera Village from their
dwellings.
The antecedents, culled from the petition and
the assailed Decision, are as follows:
The then Civil Aeronautics Administration (CAA)
was entrusted with the administration,
operation, management, control, maintenance
and development of the Manila International
Airport (MIA), now the Ninoy Aquino
International Airport. Among its powers was
the power to enter into, make and execute
concessions and concession rights for purposes
essential to the operation of the airport.
On May 25, 1965, the CAA, through its Director,
Capt. Vicente C. Rivera, entered into individual
lease contracts with its employees (lessees) for
the lease of portions of a four (4)-hectare lot
situated in what is now known as Rivera Village
located in Barangay 199 and 200 in Pasay City.
The leases were for a twenty-five (25)-year
period to commence on May 25, 1965 up to
May 24, 1990 at ₱20.003 per annum as rental.
On May 4, 1982, Executive Order No. (EO) 778
was issued (later amended by EO 903 on July
21, 1983), creating petitioner MIAA,
transferring existing assets of the MIA to MIAA,
and vesting the latter with the power to
administer and operate the MIA.
Sometime in January 1995, MIAA stopped
issuing accrued rental bills and refused to
accept rental payments from the lessees. As a
result, respondent Rivera Village Lessee
Homeowners Association, Inc. (homeowners
association), purportedly representing the
lessees, requested MIAA to sell the subject
property to its members, invoking the
provisions of Presidential Decree No. (PD) 1517
or the Urban Land Reform Act and PD 2016.
The MIAA, on February 14, 1996, denied the
request, claiming that the subject property is
included in its Conceptual Development Plan
intended for airport-related activities.
Respondent then filed a petition for mandamus
and prohibition with prayer for the issuance of
a preliminary injunction4 against MIAA and the
National Housing Authority (NHA). The petition,
docketed as Civil Case No. 97-1598 in the
Regional Trial Court of Pasay City, Branch 109,
sought to restrain the MIAA from implementing
its Conceptual Development Plan insofar as
Rivera Village is concerned. It also sought to
compel MIAA to segregate Rivera Village from
the scope of the Conceptual Development Plan
and the NHA to take the necessary steps for the
disposition of the property in favor of the
members of the homeowners association.
MIAA filed an answer5 alleging that the petition
fails to state a cause of action in view of the
expiration of the lease contracts and the lack of
personality to sue of the homeowners
association. MIAA also claimed that the
homeowners association is not entitled to a
writ of mandamus because it does not have a
clear legal right to possess the subject property
and MIAA does not have a corresponding duty
to segregate Rivera Village from its Conceptual
Development Plan.
A preliminary hearing on MIAA’s affirmative
defenses was conducted, after which the trial
court issued an Order6 dated October 12, 1998,
denying the prayer for the issuance of a
temporary restraining order and/or writ of
preliminary injunction and dismissing the
petition for lack of merit. The dispositive
portion of the Order reads:
In view of all the foregoing, the prayer for the
issuance of a temporary restraining order
and/or writ of preliminary injunction is hereby
denied for lack of merit and the above-entitled
petition is hereby ordered dismissed for lack of
merit.
SO ORDERED.7
The trial court held that PD 1818 bars the
issuance of a restraining order, preliminary
injunction or preliminary mandatory injunction
in any case, dispute or controversy involving
infrastructure projects of the government or
any public utility operated by the government.
It also ruled that the petition failed to state a
cause of action inasmuch as petitioner therein
(respondent homeowners association) is not
the real party-in-interest, the individual
members of the association being the ones who
have possessory rights over their respective
premises. Moreover, the lease contracts have
already expired.
As regards the contention that the lessees are
entitled to possess the subject property by
virtue of PD 1517, Proclamation No. 1967 and
PD 2016, which respectively identify parcels of
urban land as part of the Urban Land Reform
Zone, specify certain areas in Metro Manila,
including Rivera Village, as areas for priority
development or urban land reform zones, and
prohibit the eviction of occupant families from
such lands, the trial court declared that the
subject property has been reserved by MIAA
for airport-related activities and, as such, is
exempt from the coverage of the
Comprehensive and Continuing Urban
Development and Housing Program under
Republic Act No. (RA) 7279.
Respondent filed an appeal with the Court of
Appeals, interposing essentially the same
arguments raised before the trial court. The
appellate court annulled and set aside the
order of the trial court and remanded the case
for further proceedings. The dispositive portion
of the assailed Decision states:
WHEREFORE, the assailed October 12, 1998
Order is annulled, set aside and reversed. The
case is remanded to the court a quo for further
proceedings.
A writ of preliminary injunction is issued
restraining and preventing respondent MIAA
from evicting the members of petitioner Rivera
Village Association from their respective lots in
the Rivera Village. Petitioner is ordered to post
a bond in the amount of ₱500,000.00 with the
condition that petitioner will pay to respondent
MIAA all damages it may sustain by reason of
the injunction if the court should finally decided
that petitioner is not entitled thereto. Upon
approval of the bond, the writ of preliminary
injunction shall forthwith issue.
SO ORDERED.8
The appellate court foremost ruled that the
case can be construed as a class suit instituted
by the Rivera Village lessees. The homeowners
association, considered as the representative of
the lessees, merely instituted the suit for the
benefit of its members. It does not claim to
have any right or interest in the lots occupied
by the lessees, nor seek the registration of the
titles to the land in its name.
On the issue of the expiration of the lease
contracts and the application of PD 1517,
Proclamation No. 1967 and PD 2016, the Court
of Appeals held that the expiration of the lease
contracts cannot adversely affect the rights
acquired by the lessees under the foregoing
laws. Besides, the lease contracts were
impliedly renewed by virtue of MIAA’s
acceptance of rental payments from May 25,
1990 up to December 1994. This resulted in an
implied new lease under Article 1670 of the
Civil Code.
Moreover, the appellate court construed Sec.
5(c) of RA 7279 to mean that if the government
lot has not been utilized during the ten (10)-
year period for the purpose for which it has
been reserved prior to 1983, then said lot is
encompassed by the law and is subject to
distribution to the legitimate and qualified
residents of the area after appropriate
proceedings have been undertaken.
As to whether PD 1818 bars the issuance of an
injunctive writ in this case, the appellate court
ruled that PD 1818 is a general law on the
issuance of restraining orders and writs of
preliminary injunction. On the other hand, PD
2016 is a special law specifically prohibiting the
eviction of tenants from lands identified as
areas for priority development. Thus, the trial
court can issue an injunctive writ if the act
sought to be restrained will enforce the
eviction of tenants from urban land reform
zones.
The court, however, declared that it cannot
make a definitive ruling on the rights of the
members of the homeowners association vis-à-
vis the MIAA Conceptual Development Plan,
considering the need for a full-blown trial to
ferret out whether the claimed rights under the
pertinent laws have ripened to actual legal and
vested rights in their favor.
MIAA now seeks a review of the Decision of the
Court of Appeals. In the instant petition, MIAA
contends that the appellate court erred in
ruling that PD 2016, which prohibits the
eviction of occupant families from real property
identified as areas for priority development or
urban land reform zones, has modified PD
1818, which bars the issuance of injunctive writ
in cases involving infrastructure projects of the
government, including public utilities for the
transport of goods and commodities.
It argues that the petition filed by the
homeowners association with the trial court
fails to state a cause of action because the
homeowners association is not the real party-
in-interest in the suit. Allegedly, the Board
Resolution presented by respondent shows that
it was only the board of directors of the
association, as distinguished from the members
thereof, which authorized respondent to act as
its representative in the suit.
MIAA also stresses that the subject property
has recently been reserved by MIAA for airport-
related activities and, as such, Sec. 5(c) of RA
7279 applies. Under the said law, lands which
are used, reserved or otherwise set aside for
government offices, facilities and other
installations are exempt from the coverage of
the law.
Moreover, MIAA avers that the Court of
Appeals should not have granted injunctive
relief to respondent, considering that the grant
of an injunction would inflict greater damage to
petitioner and to the public.
Respondent filed a Comment9 dated November
20, 2000, arguing that MIAA is mandated by
law to dispose of Rivera Village to the
homeowners thereof. Under existing laws, the
homeowners have the right to possess and
enjoy the property. To accept MIAA’s pretense
that the property has been recently reserved
for airport-related activities and therefor
exempt from the coverage of RA 7279 will
allegedly violate the right of the homeowners
as bona fide tenants to socialized housing.
Respondent further argues that PD 1818 is
inapplicable to this case because it has
established a clear and unmistakable right to an
injunction. Besides, PD 2016 which protects
from eviction tenants of lands identified for
priority development, is a later enactment
which should be deemed to prevail over PD
1818.
In the Resolution10 dated January 24, 2001, the
petition was given due course and the parties
were required to submit their respective
memoranda.
Accordingly, MIAA submitted
its Memorandum11 dated March 20, 2001, while
respondent filed its Memorandum12 dated April
20, 2001. For its part, NHA manifested that it is
adopting the memorandum of MIAA as its own
insofar as the same is germane and material to
NHA’s stand.13
As presented and discussed by the parties, the
issues are the following:
1. Has PD 2016 modified PD 1818?
2. Did the petition filed by respondent with the
trial court state a cause of action against
petitioner?
3. Is petitioner obliged to dispose of the subject
properties in favor of the members of
respondent association after appropriate
proceedings?
4. Is respondent entitled to the issuance of a
writ of preliminary injunction?14
We first resolve the threshold question of
whether respondent has personality to sue.
MIAA contends that the real parties-in-interest
in the petition filed with the trial court are the
individual members of the homeowners
association. Not having been brought in the
name of the real parties-in-interest, the suit
was correctly dismissed by the trial court for
failure to state a cause of action.
The 1997 Rules of Civil Procedure (Rules of
Court) 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 A case is dismissible for lack of
personality to sue upon proof that the plaintiff
is not the real party-in-interest, hence
grounded on failure to state a cause of action.16
The petition before the trial court was filed by
the homeowners association, represented by
its President, Panfilo R. Chiutena, Sr., upon
authority of a Board Resolution empowering
the latter to file "[A]ll necessary action to the
Court of Justice and other related acts
necessary to have our Housing Project number
4 land be titled to the members of the
Association."
Obviously, the petition cannot be considered a
class suit under Sec. 12, Rule 317 of the Rules of
Court, the requisites therefor not being present
in the case, notably because the petition does
not allege the existence and prove the
requisites of a class suit, i.e., that the subject
matter of the controversy is one of common or
general interest to many persons and the
parties are so numerous that it is impracticable
to bring them all before the court, and because
it was brought only by one party.
In Board of Optometry v. Colet,18 we held that
courts must exercise utmost caution before
allowing a class suit, which is the exception to
the requirement of joinder of all indispensable
parties. For while no difficulty may arise if the
decision secured is favorable to the plaintiffs, a
quandary would result if the decision were
otherwise as those who were deemed
impleaded by their self-appointed
representatives would certainly claim denial of
due process.
There is, however, merit in the appellate
court’s pronouncement that the petition should
be construed as a suit brought by the
homeowners association as the representative
of the members thereof under Sec. 3, Rule 3 of
the Rules of Court, which provides:
Sec. 3. Representatives as parties.—Where the
action is allowed to be prosecuted or defended
by a representative or someone acting in a
fiduciary capacity, the beneficiary shall be
included in the title of the case and shall be
deemed to be the real party in interest. A
representative may be a trustee of an express
trust, a guardian, an executor or administrator,
or a party authorized by law or these Rules. An
agent acting in his own name and for the
benefit of an undisclosed principal may sue or
be sued without joining the principal except
when the contract involves things belonging to
the principal. [Emphasis supplied.]
It is a settled rule that every action must be
prosecuted or defended in the name of the real
party-in-interest. Where the action is allowed
to be prosecuted or defended by a
representative acting in a fiduciary capacity, the
beneficiary must be included in the title of the
case and shall be deemed to be the real party-
in-interest. The name of such beneficiaries
shall, likewise, be included in the complaint.19
Moreover, Sec. 4, Rule 8 of the Rules of Court
provides that facts showing the capacity of a
party to sue or be sued, or the authority of a
party to sue or be sued in a representative
capacity must be averred in the complaint. In
order to maintain an action in a court of justice,
the plaintiff must have an actual legal
existence, that is, he or she or it must be a
person in law and possessed of a legal entity as
either a natural or an artificial person. The
party bringing suit has the burden of proving
the sufficiency of the representative character
that he claims. If a complaint is filed by one
who claims to represent a party as plaintiff but
who, in fact, is not authorized to do so, such
complaint is not deemed filed and the court
does not acquire jurisdiction over the
complaint. It must be stressed that an
unauthorized complaint does not produce any
legal effect.20
In this case, the petition filed with the trial
court sufficiently avers that the homeowners
association, through its President, is suing in a
representative capacity as authorized under the
Board Resolution attached to the petition.
Although the names of the individual members
of the homeowners association who are the
beneficiaries and real parties-in-interest in the
suit were not indicated in the title of the
petition, this defect can be cured by the simple
expedient of requiring the association to
disclose the names of the principals and to
amend the title and averments of the petition
accordingly.
Essentially, the purpose of the rule that actions
should be brought or defended in the name of
the real party-in-interest is to protect against
undue and unnecessary litigation and to ensure
that the court will have the benefit of having
before it the real adverse parties in the
consideration of a case. This rule, however, is
not to be narrowly and restrictively construed,
and its application should be neither dogmatic
nor rigid at all times but viewed in consonance
with extant realities and practicalities.21 As
correctly noted by the Court of Appeals, the
dismissal of this case based on the lack of
personality to sue of petitioner-association will
only result in the filing of multiple suits by the
individual members of the association.
What is more decisive to the resolution of the
present controversy, however, is a matter not
addressed by the parties in the case before this
Court, that is, the fact that the petition filed
before the trial court is for mandamus to
compel MIAA to segregate Rivera Village from
the scope of its Conceptual Development Plan
and the NHA to take the necessary steps for the
disposition of the subject property in favor of
the members of the homeowners association.
Parenthetically, while the procedural rule is
that a party is required to indicate in his brief
an assignment of errors and only those
assigned shall be considered by the appellate
court in deciding the case, it is equally settled
that appellate courts have ample authority to
rule on matters not assigned as errors in an
appeal, if these are indispensable or necessary
to the just resolution of the pleaded issues.22
For instance, the Court has allowed the
consideration of other grounds not raised or
assigned as errors specifically in the following
instances: (1) grounds not assigned as errors
but affecting jurisdiction over the subject
matter; (2) matters not assigned as errors on
appeal but are evidently plain or clerical errors
within the contemplation of the law; (3)
matters not assigned as errors on appeal but
consideration of which is necessary in arriving
at a just decision and complete resolution of
the case or to serve the interest of justice or to
avoid dispensing piecemeal justice; (4) matters
not specifically assigned as errors on appeal but
raised in the trial court and are matters of
record having some bearing on the issue
submitted which the parties failed to raise or
which the lower court ignored; (5) matters not
assigned as errors on appeal but closely related
to an error assigned; and (6) matters not
assigned as errors on appeal but upon which
the determination of a question properly
assigned is dependent.23
In this case, although the propriety of the filing
of a petition for mandamus was no longer
raised as an issue before this Court, MIAA
asserted in its answer24 to the original petition
that the homeowners association is not entitled
to a writ of mandamus because it has not
shown any legal right to possess the subject
property and a correlative obligation on the
part of MIAA to segregate the property from its
Conceptual Development Plan. MIAA averred:
28. Petitioner is not entitled to the issuance of a
writ of mandamus. For a writ of mandamus to
issue, it is essential that petitioner has a legal
right to the thing demanded and that it is the
imperative duty of respondent to perform the
act required. The legal right of petitioner to the
thing demanded must be well-defined, clear
and certain. The corresponding duty of
respondent to perform the required act must
also be clear and specific (Cf. Lemi v. Valencia,
26 SCRA 203, 210 [1968]).
29. Petitioner, in view of the expiration of the
lease contracts of its individual members, has
failed to show that it has the legal right to
possess the subject property.
30. There is therefore no corresponding duty
on the part of respondent MIAA to segregate
the property from the scope of its Conceptual
Development Plan.25
The question of whether the homeowners
association is entitled to the issuance of a writ
of mandamus was again raised in the
memorandum26 filed by MIAA with the Court of
Appeals. MIAA alleged:
Appellant is not entitled to the issuance of a
writ of mandamus. For a writ of mandamus to
issue, it is essential that the appellant has a
legal right to the thing demanded and that it is
the imperative duty of respondent to perform
the act required. The legal right of appellant to
the thing demanded must be well-defined,
clear and certain. The corresponding duty of
respondent to perform the required act must
also be clear and specific (cf. Lemi v. Valencia,
26 SCRA 203, 210 [1968]).
In view of the expiration of the lease contracts
of its individual members, appellant has failed
to show that it has the legal right to possess the
subject property. There is therefore no
corresponding duty on the part of the MIAA to
segregate the property from the scope of its
conceptual development plan.27
The question of whether mandamus is the
proper remedy was clearly raised in the trial
court and the Court of Appeals although it was
largely ignored by both courts. This issue being
indispensable to the resolution of this case, we
shall rule on the matter.
A writ of mandamus can be issued only when
petitioner’s legal right to the performance of a
particular act which is sought to be compelled
is clear and complete. A clear legal right is a
right which is indubitably granted by law or is
inferable as a matter of law.28
In order that a writ of mandamus may aptly
issue, it is essential that, on the one hand,
petitioner has a clear legal right to the claim
that is sought and that, on the other hand,
respondent has an imperative duty to perform
that which is demanded of him. Mandamus will
not issue to enforce a right, or to compel
compliance with
a duty, which is questionable or over which a
substantial doubt exists. The principal function
of the writ of mandamus is to command and to
expedite, not to inquire and to adjudicate.
Thus, it is neither the office nor the aim of the
writ to secure a legal right but to implement
that which is already established. Unless the
right to relief sought is unclouded, mandamus
will not issue.
In this case, the Court of Appeals itself
conceded that no definitive ruling as regards
the rights of the individual members of the
homeowners association could yet be made
considering the need for a full determination of
whether their claimed rights under the
pertinent laws have ripened into actual legal
and vested rights. The appellate court even
outlined the requisites under PD 1517 which
have yet to be complied with, namely: (1) the
submission to the NHA of a proposal to acquire
the subject property as required under Sec.
929 of PD 1517;
and (2) proof that the members of the
homeowners association are qualified to avail
of the benefits under PD 1517 as mandated by
Sec. 630 of the same law.
Resort to mandamus is evidently premature
because there is no showing that the members
of the homeowners association have already
filed an application or proposal with the NHA to
acquire their respective lots. There is still an
administrative remedy open to the members of
the homeowners association which they should
have first pursued, failing which they cannot
invoke judicial action.31
We note that while respondent alleges that its
members enlisted themselves with the NHA in
order to avail of the benefits of the law, the
NHA, in its answer32 to the petition, denied this
allegation for being self-serving. Whatever
rights the members of the homeowners
association may have under the relevant laws
are still in substantial doubt or dispute. Hence,
the petition for mandamus was appropriately
dismissed for failure to state a cause of action.
So, too, should the prayer for the issuance of a
writ of prohibition contained in the same
petition be denied. Writs of certiorari,
prohibition and mandamus are prerogative
writs of equity and their granting is ordinarily
within the sound discretion of the courts to be
exercised on equitable principles. Said writs
should only be issued when the right to the
relief is clear.33 As our findings in this case
confirm, the homeowners association failed to
establish a clear legal right to the issuance of
the writs of mandamus and prohibition prayed
for.
There is, moreover, another ground for the
dismissal of the petition filed before the trial
court which appears to have been overlooked
by the parties in this case.
In the original petition filed before the trial
court, the homeowners association averred
that although EO 903 transferred to MIAA the
properties and assets of MIA, such transfer was
made subject to what the homeowners
association claims to be the existing rights of its
members.34 MIAA dismissed this allegation as
an erroneous conclusion of law.35
We cite the complete text of the relevant
provision of EO 903 to fully understand the
import thereof and its effect on the present
controversy. Section 3 thereof states:
Sec. 3. Creation of the Manila International
Airport Authority.—There is hereby established
a body corporate to be known as the Manila
International Airport Authority which shall be
attached to the Ministry of Transportation and
Communications. The principal office of the
Authority shall be located at the New Manila
International Airport. The Authority may
establish such offices, branches, agencies or
subsidiaries as it may deem proper and
necessary; Provided, That any subsidiary that
may be organized shall have the prior approval
of the President.
The land where the Airport is presently located
as well as the surrounding land area of
approximately six hundred hectares, are hereby
transferred, conveyed and assigned to the
ownership and administration of the Authority,
subject to existing rights, if any. The Bureau of
Lands and other appropriate government
agencies shall undertake an actual survey of the
area transferred within one year from the
promulgation of this Executive Order and the
corresponding title to be issued in the name of
the authority. Any portion thereof shall not be
disposed through sale or through any other
mode unless specifically approved by the
President of the Philippines. [Emphasis
supplied.]
As can clearly be seen from the foregoing
provision, while it is true that the ownership
and administration of the airport and its
surrounding land was assigned to MIAA subject
to existing rights, which we may here
understand to be the rights granted under PD
1517, EO 903 specifically requires the approval
of the President of the Philippines before any
disposition by sale or any other mode may be
made concerning the property transferred to
MIAA.
The Executive Secretary as representative of
the President of the Philippines is, therefore, an
indispensable party in actions seeking to
compel the sale or disposition of properties of
the MIAA. Section 7, Rule 3 of the Rules of
Court provides that parties-in-interest without
whom no final determination can be had of an
action shall be joined either as plaintiffs or
defendants.
Thus, the presence of all indispensable parties
is a condition sine qua non for the exercise of
judicial power. It is precisely when an
indispensable party is not before the court that
the action should be dismissed. The plaintiff is
mandated to implead all indispensable parties,
and the absence of one renders all subsequent
actions of the court null and void for want of
authority to act, not only as to the absent
parties, but even as to those present. One who
is a party to a case is not bound by any decision
of the court; otherwise, he will be deprived of
his right to due process.36
For the foregoing reasons, the prayer for the
issuance of the writ of preliminary injunction
must perforce be denied. Preliminary injunction
is a mere ancillary remedy which cannot stand
separately or proceed independently of the
main case. Having declared that the petition
filed before the trial court was correctly
dismissed, the determination of the
homeowners association’s entitlement to a writ
of preliminary injunction is already moot and
academic.37
Besides, as earlier noted, the right of the
members of the homeowners association to
possess and purchase the subject property is
still uncertain considering that they have not
completed the process for the acquisition of
their lots as outlined in PD 1517.
Injunction is a preservative remedy aimed at
protecting substantive rights and interests. The
writ of preliminary injunction is issued by the
court to prevent threatened or continuous
irreparable injury to parties before their claims
can be thoroughly studied and adjudicated. Its
sole objective is to preserve the status quo until
the merits of the case can be heard fully. The
writ is issued upon the satisfaction of two
requisites, namely: (1) the existence of a right
to be protected; and (2) acts which are violative
of said right. In the absence of a clear legal
right, the issuance of the injunctive relief
constitutes grave abuse of discretion.
Injunction is not designed to protect contingent
or future rights. Where the complainant’s right
is doubtful or disputed, injunction is not proper.
The possibility of irreparable damage without
proof of actual existing right is not a ground for
an injunction.38
With this conclusion, we deem it unnecessary
to discuss the other issues raised in this
petition.
WHEREFORE, the instant petition is GRANTED.
The Decision of the Court of Appeals dated
June 30, 2000 is REVERSED and SET ASIDE. Civil
Case No. 97-1598 of the Regional Trial Court of
Pasay City is ordered DISMISSED.
SO ORDERED.
G.R. No. 160347             CARANDANG VS HEIRS
OF DE GUZMAN
This is a Petition for Review on Certiorari
assailing the Court of Appeals Decision1 and
Resolution affirming the Regional Trial Court
(RTC) Decision rendering herein petitioners
Arcadio and Luisa Carandang [hereinafter
referred to as spouses Carandang] jointly and
severally liable for their loan to Quirino A. de
Guzman.
The Court of Appeals summarized the facts as
follows:
[Quirino de Guzman] and [the Spouses
Carandang] are stockholders as well as
corporate officers of Mabuhay Broadcasting
System (MBS for brevity), with equities at fifty
four percent (54%) and forty six percent (46%)
respectively.
On November 26, 1983, the capital stock of
MBS was increased, from ₱500,000 to P1.5
million and ₱345,000 of this increase was
subscribed by [the spouses Carandang].
Thereafter, on March 3, 1989, MBS again
increased its capital stock, from ₱1.5 million to
₱3 million, [the spouses Carandang] yet again
subscribed to the increase. They subscribed to
₱93,750 worth of newly issued capital stock.
[De Guzman] claims that, part of the payment
for these subscriptions were paid by him,
₱293,250 for the November 26, 1983 capital
stock increase and ₱43,125 for the March 3,
1989 Capital Stock increase or a total of
₱336,375. Thus, on March 31, 1992, [de
Guzman] sent a demand letter to [the spouses
Carandang] for the payment of said total
amount.
[The spouses Carandang] refused to pay the
amount, contending that a pre-incorporation
agreement was executed between [Arcadio
Carandang] and [de Guzman], whereby the
latter promised to pay for the stock
subscriptions of the former without cost, in
consideration for [Arcadio Carandang’s]
technical expertise, his newly purchased
equipment, and his skill in repairing and
upgrading radio/communication equipment
therefore, there is no indebtedness on their
part [sic].
On June 5, 1992, [de Guzman] filed his
complaint, seeking to recover the ₱336,375
together with damages. After trial on the
merits, the trial court disposed of the case in
this wise:
"WHEREFORE, premises considered, judgment
is hereby rendered in favor of [de Guzman].
Accordingly, [the spouses Carandang] are
ordered to jointly and severally pay [de
Guzman], to wit:
(1) ₱336,375.00 representing [the spouses
Carandang’s] loan to de Guzman;
(2) interest on the preceding amount at the
rate of twelve percent (12%) per annum from
June 5, 1992 when this complaint was filed until
the principal amount shall have been fully paid;
(3) ₱20,000.00 as attorney’s fees;
(4) Costs of suit.
The spouses Carandang appealed the RTC
Decision to the Court of Appeals, which
affirmed the same in the 22 April 2003 assailed
Decision:
WHEREFORE, in view of all the foregoing the
assailed Decision is hereby AFFIRMED. No
costs.2
The Motion for Reconsideration filed by the
spouses Carandang was similarly denied by the
Court of Appeals in the 6 October 2003 assailed
Resolution:
WHEREFORE, in view thereof, the motion for
reconsideration is hereby DENIED and our
Decision of April 22, 2003, which is based on
applicable law and jurisprudence on the matter
is hereby AFFIRMED and REITERATED.3
The spouses Carandang then filed before this
Court the instant Petition for Review on
Certiorari, bringing forth the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED MANIFEST ERROR IN
FAILING TO STRICTLY COMPLY WITH SECTION
16, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED IN ITS FINDING
THAT THERE IS AN ALLEGED LOAN FOR WHICH
PETITIONERS ARE LIABLE, CONTRARY TO
EXPRESS PROVISIONS OF BOOK IV, TITLE XI, OF
THE NEW CIVIL CODE PERTAINING TO LOANS.
III.
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED IN FINDING THAT
THE RESPONDENTS WERE ABLE TO DISCHARGE
THEIR BURDEN OF PROOF, IN COMPLETE
DISREGARD OF THE REVISED RULES ON
EVIDENCE.
IV.
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT FAILED TO APPLY SECTIONS 2 AND 7,
RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
V.
WHETHER OR NOT THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED IN FINDING THAT
THE PURPORTED LIABILITY OF PETITIONERS ARE
JOINT AND SOLIDARY, IN VIOLATION OF
ARTICLE 1207 OF THE NEW CIVIL CODE.4
Whether or not the RTC Decision is void for
failing to comply with Section 16, Rule 3 of the
Rules of Court
The spouses Carandang claims that the Decision
of the RTC, having been rendered after the
death of Quirino de Guzman, is void for failing
to comply with Section 16, Rule 3 of the Rules
of Court, which provides:
SEC. 16. Death of party; duty of counsel. –
Whenever a party to a pending action dies, and
the claim is not thereby extinguished, it shall be
the duty of his counsel to inform the court
within 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 the 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 spouses Carandang posits that such failure
to comply with the above rule renders void the
decision of the RTC, in adherence to the
following pronouncements in Vda. de Haberer
v. Court of Appeals5 and Ferreria v. Vda. de
Gonzales6 :
Thus, it has been held that when a party dies in
an action that survives and no order is issued by
the court for the appearance of the legal
representative or of the heirs of the deceased
in substitution of the deceased, and as a matter
of fact no substitution has ever been effected,
the trial held by the court without such legal
representatives or heirs and the judgment
rendered after such trial are null and void
because the court acquired no jurisdiction over
the persons of the legal representatives or of
the heirs upon whom the trial and judgment
would be binding.7
In the present case, there had been no court
order for the legal representative of the
deceased to appear, nor had any such legal
representative appeared in court to be
substituted for the deceased; neither had the
complainant ever procured the appointment of
such legal representative of the deceased,
including appellant, ever asked to be
substituted for the deceased. As a result, no
valid substitution was effected, consequently,
the court never acquired jurisdiction over
appellant for the purpose of making her a party
to the case and making the decision binding
upon her, either personally or as a
representative of the estate of her deceased
mother.8
However, unlike jurisdiction over the subject
matter which is conferred by law and is not
subject to the discretion of the
parties,9 jurisdiction over the person of the
parties to the case may be waived either
expressly or impliedly.10 Implied waiver comes
in the form of either voluntary appearance or a
failure to object.11
In the cases cited by the spouses Carandang,
we held that there had been no valid
substitution by the heirs of the deceased party,
and therefore the judgment cannot be made
binding upon them. In the case at bar, not only
do the heirs of de Guzman interpose no
objection to the jurisdiction of the court over
their persons; they are actually claiming and
embracing such jurisdiction. In doing so, their
waiver is not even merely implied (by their
participation in the appeal of said Decision), but
express (by their explicit espousal of such view
in both the Court of Appeals and in this Court).
The heirs of de Guzman had no objection to
being bound by the Decision of the RTC.
Thus, lack of jurisdiction over the person, being
subject to waiver, is a personal defense which
can only be asserted by the party who can
thereby waive it by silence.
It also pays to look into the spirit behind the
general rule requiring a formal substitution of
heirs. The underlying principle therefor is not
really because substitution of heirs is a
jurisdictional requirement, but because non-
compliance therewith results in the undeniable
violation of the right to due process of those
who, though not duly notified of the
proceedings, are substantially affected by the
decision rendered therein.12 Such violation of
due process can only be asserted by the
persons whose rights are claimed to have been
violated, namely the heirs to whom the adverse
judgment is sought to be enforced.
Care should, however, be taken in applying the
foregoing conclusions. In People v.
Florendo,13 where we likewise held that the
proceedings that took place after the death of
the party are void, we gave another reason for
such nullity: "the attorneys for the offended
party ceased to be the attorneys for the
deceased upon the death of the latter, the
principal x x x." Nevertheless, the case at bar
had already been submitted for decision before
the RTC on 4 June 1998, several months before
the passing away of de Guzman on 19 February
1999. Hence, no further proceedings requiring
the appearance of de Guzman’s counsel were
conducted before the promulgation of the RTC
Decision. Consequently, de Guzman’s counsel
cannot be said to have no authority to appear
in trial, as trial had already ceased upon the
death of de Guzman.
In sum, the RTC Decision is valid despite the
failure to comply with Section 16, Rule 3 of the
Rules of Court, because of the express waiver
of the heirs to the jurisdiction over their
persons, and because there had been, before
the promulgation of the RTC Decision, no
further proceedings requiring the appearance
of de Guzman’s counsel.
Before proceeding with the substantive aspects
of the case, however, there is still one more
procedural issue to tackle, the fourth issue
presented by the spouses Carandang on the
non-inclusion in the complaint of an
indispensable party.
Whether or not the RTC should have dismissed
the case for failure to state a cause of action,
considering that Milagros de Guzman, allegedly
an indispensable party, was not included as a
party-plaintiff
The spouses Carandang claim that, since three
of the four checks used to pay their stock
subscriptions were issued in the name of
Milagros de Guzman, the latter should be
considered an indispensable party. Being such,
the spouses Carandang claim, the failure to join
Mrs. de Guzman as a party-plaintiff should
cause the dismissal of the action because "(i)f a
suit is not brought in the name of or against the
real party in interest, a motion to dismiss may
be filed on the ground that the complaint states
no cause of action."14
The Court of Appeals held:
We disagree. The joint account of spouses
Quirino A de Guzman and Milagros de Guzman
from which the four (4) checks were drawn is
part of their conjugal property and under both
the Civil Code and the Family Code the husband
alone may institute an action for the recovery
or protection of the spouses’ conjugal property.
Thus, in Docena v. Lapesura [355 SCRA 658],
the Supreme Court held that "x x x Under the
New Civil Code, the husband is the
administrator of the conjugal partnership. In
fact, he is the sole administrator, and the wife
is not entitled as a matter of right to join him in
this endeavor. The husband may defend the
conjugal partnership in a suit or action without
being joined by the wife. x x x Under the Family
Code, the administration of the conjugal
property belongs to the husband and the wife
jointly. However, unlike an act of alienation or
encumbrance where the consent of both
spouses is required, joint management or
administration does not require that the
husband and wife always act together. Each
spouse may validly exercise full power of
management alone, subject to the intervention
of the court in proper cases as provided under
Article 124 of the Family Code. x x x."
The Court of Appeals is correct. Petitioners
erroneously interchange the terms "real party
in interest" and "indispensable party." A real
party in interest is the party who stands to be
benefited or injured by the judgment of the
suit, or the party entitled to the avails of the
suit.15 On the other hand, an indispensable
party is a party in interest without whom no
final determination can be had of an action,16 in
contrast to a necessary party, which is one who
is not indispensable but who ought to be joined
as a party if complete relief is to be accorded as
to those already parties, or for a complete
determination or settlement of the claim
subject of the action.17
The spouses Carandang are indeed correct that
"(i)f a suit is not brought in the name of or
against the real party in interest, a motion to
dismiss may be filed on the ground that the
complaint states no cause of
action."18 However, what dismissal on this
ground entails is an examination of whether
the parties presently pleaded are interested in
the outcome of the litigation, and not whether
all persons interested in such outcome are
actually pleaded. The latter query is relevant in
discussions concerning indispensable and
necessary parties, but not in discussions
concerning real parties in interest. Both
indispensable and necessary parties are
considered as real parties in interest, since both
classes of parties stand to be benefited or
injured by the judgment of the suit.
Quirino and Milagros de Guzman were married
before the effectivity of the Family Code on 3
August 1988. As they did not execute any
marriage settlement, the regime of conjugal
partnership of gains govern their property
relations.19
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.20 Credits
are personal properties,21 acquired during the
time the loan or other credit transaction was
executed. Therefore, credits loaned during the
time of the marriage are presumed to be
conjugal property.
Consequently, assuming that the four checks
created a debt for which the spouses
Carandang are liable, such credits are
presumed to be conjugal property. There being
no evidence to the contrary, such presumption
subsists. As such, Quirino de Guzman, being a
co-owner of specific partnership property,22 is
certainly a real party in interest. Dismissal on
the ground of failure to state a cause of action,
by reason that the suit was allegedly not
brought by a real party in interest, is therefore
unwarranted.
So now we come to the discussion concerning
indispensable and necessary parties. When an
indispensable party is not before the court, the
action should likewise be dismissed.23 The
absence of an indispensable party renders all
subsequent actuations of the court void, for
want of authority to act, not only as to the
absent parties but even as to those
present.24 On the other hand, the non-joinder
of necessary parties do not result in the
dismissal of the case. Instead, Section 9, Rule 3
of the Rules of Court provides for the
consequences of such non-joinder:
Sec. 9. Non-joinder of necessary parties to be
pleaded. – Whenever in any pleading in which a
claim is asserted a necessary party is not joined,
the pleader shall set forth his name, if known,
and shall state why he is omitted. Should the
court find the reason for the omission
unmeritorious, it may order the inclusion of the
omitted necessary party if jurisdiction over his
person may be obtained.
The failure to comply with the order for his
inclusion, without justifiable cause, shall be
deemed a waiver of the claim against such
party.
The non-inclusion of a necessary party does not
prevent the court from proceeding in the
action, and the judgment rendered therein
shall be without prejudice to the rights of such
necessary party.
Non-compliance with the order for the
inclusion of a necessary party would not
warrant the dismissal of the complaint. This is
an exception to Section 3, Rule 17 which allows
the dismissal of the complaint for failure to
comply with an order of the court, as Section 9,
Rule 3 specifically provides for the effect of
such non-inclusion: it shall not prevent the
court from proceeding in the action, and the
judgment rendered therein shall be without
prejudice to the rights of such necessary party.
Section 11, Rule 3 likewise provides that the
non-joinder of parties is not a ground for the
dismissal of the action.
Other than the indispensable and necessary
parties, there is a third set of parties: the pro-
forma parties, which are those who are
required to be joined as co-parties in suits by or
against another party as may be provided by
the applicable substantive law or procedural
rule.25 An example is provided by Section 4,
Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. – Husband and wife
shall sue or be sued jointly, except as provided
by law.
Pro-forma parties can either be indispensable,
necessary or neither indispensable nor
necessary. The third case occurs if, for example,
a husband files an action to recover a property
which he claims to be part of his exclusive
property. The wife may have no legal interest in
such property, but the rules nevertheless
require that she be joined as a party.
In cases of pro-forma parties who are neither
indispensable nor necessary, the general rule
under Section 11, Rule 3 must be followed:
such non-joinder is not a ground for dismissal.
Hence, in a case concerning an action to
recover a sum of money, we held that the
failure to join the spouse in that case was not a
jurisdictional defect.26 The non-joinder of a
spouse does not warrant dismissal as it is
merely a formal requirement which may be
cured by amendment.27
Conversely, in the instances that the pro-forma
parties are also indispensable or necessary
parties, the rules concerning indispensable or
necessary parties, as the case may be, should
be applied. Thus, dismissal is warranted only if
the pro-forma party not joined in the complaint
is an indispensable party.
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 superceded:
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. Hular28 and Adlawan
v. Adlawan,29 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,30 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.31
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.32
We therefore hold that Milagros de Guzman is
not an indispensable party in the action for the
recovery of the allegedly loaned money to the
spouses Carandang. As such, she need not have
been impleaded in said suit, and dismissal of
the suit is not warranted by her not being a
party thereto.
Whether or not respondents were able to
prove the loan sought to be collected from
petitioners
In the second and third issues presented by the
spouses Carandang, they claim that the de
Guzmans failed to prove the alleged loan for
which the spouses Carandang were held liable.
As previously stated, spouses Quirino and
Milagros de Guzman paid for the stock
subscriptions of the spouses Carandang,
amounting to ₱336,375.00. The de Guzmans
claim that these payments were in the form of
loans and/or advances and it was agreed upon
between the late Quirino de Guzman, Sr. and
the spouses Carandang that the latter would
repay him. Petitioners, on the other hand,
argue that there was an oral pre-incorporation
agreement wherein it was agreed that Arcardio
Carandang would always maintain his 46%
equity participation in the corporation even if
the capital structures were increased, and that
Quirino de Guzman would personally pay the
equity shares/stock subscriptions of Arcardio
Carandang with no cost to the latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth
assigned error that [the de Guzmans] failed to
prove by preponderance of evidence, either the
existence of the purported loan or the non-
payment thereof.
Simply put, preponderance of evidence means
that the evidence as a whole adduced by one
side is superior to that of the other. The
concept of preponderance of evidence refers to
evidence that is of greater weight, or more
convincing, than that which is offered in
opposition to it; it means probability of truth.
[The spouses Carandang] admitted that it was
indeed [the de Guzmans] who paid their stock
subscriptions and their reason for not
reimbursing the latter is the alleged pre-
incorporation agreement, to which they offer
no clear proof as to its existence.
It is a basic rule in evidence that each party
must prove his affirmative allegation. Thus, the
plaintiff or complainant has to prove his
affirmative allegations in the complaints and
the defendant or respondent has to prove the
affirmative allegations in his affirmative
defenses and counterclaims.33
The spouses Carandang, however, insist that
the de Guzmans have not proven the loan
itself, having presented evidence only of the
payment in favor of the Carandangs. They
claim:
It is an undeniable fact that payment is not
equivalent to a loan. For instance, if Mr. "A"
decides to pay for Mr. "B’s" obligation, that
payment by Mr. "A" cannot, by any stretch of
imagination, possibly mean that there is now a
loan by Mr. "B" to Mr. "A". There is a possibility
that such payment by Mr. "A" is purely out of
generosity or that there is a mutual agreement
between them. As applied to the instant case,
that mutual agreement is the pre-incorporation
agreement (supra) existing between Mr. de
Guzman and the petitioners --- to the effect
that the former shall be responsible for paying
stock subscriptions of the latter. Thus, when
Mr. de Guzman paid for the stock subscriptions
of the petitioners, there was no loan to speak
of, but only a compliance with the pre-
incorporation agreement.34
The spouses Carandang are mistaken. If indeed
a Mr. "A" decides to pay for a Mr. "B’s"
obligation, the presumption is that Mr. "B" is
indebted to Mr. "A" for such amount that has
been paid. This is pursuant to Articles 1236 and
1237 of the Civil Code, which provide:
Art. 1236. The creditor is not bound to accept
payment or performance by a third person who
has no interest in the fulfillment of the
obligation, unless there is a stipulation to the
contrary.
Whoever pays for another may demand from
the debtor what he has paid, except that if he
paid without the knowledge or against the will
of the debtor, he can recover only insofar as
the payment has been beneficial to the debtor.
Art. 1237. Whoever pays on behalf of the
debtor without the knowledge or against the
will of the latter, cannot compel the creditor to
subrogate him in his rights, such as those
arising from a mortgage, guarantee, or penalty.
Articles 1236 and 1237 are clear that, even in
cases where the debtor has no knowledge of
payment by a third person, and even in cases
where the third person paid against the will of
the debtor, such payment would produce a
debt in favor of the paying third person. In fact,
the only consequences for the failure to inform
or get the consent of the debtor are the
following: (1) the third person can recover only
insofar as the payment has been beneficial to
the debtor; and (2) the third person is not
subrogated to the rights of the creditor, such as
those arising from a mortgage, guarantee or
penalty.35
We say, however, that this is merely a
presumption. By virtue of the parties’ freedom
to contract, the parties could stipulate
otherwise and thus, as suggested by the
spouses Carandang, there is indeed a possibility
that such payment by Mr. "A" was purely out of
generosity or that there was a mutual
agreement between them. But such mutual
agreement, being an exception to presumed
course of events as laid down by Articles 1236
and 1237, must be adequately proven.
The de Guzmans have successfully proven their
payment of the spouses Carandang’s stock
subscriptions. These payments were, in fact,
admitted by the spouses Carandang.
Consequently, it is now up to the spouses
Carandang to prove the existence of the pre-
incorporation agreement that was their
defense to the purported loan.
Unfortunately for the spouses Carandang, the
only testimony which touched on the existence
and substance of the pre-incorporation
agreement, that of petitioner Arcardio
Carandang, was stricken off the record because
he did not submit himself to a cross-
examination of the opposing party. On the
other hand, the testimonies of Romeo
Saavedra,36 Roberto S. Carandang,37 Gertrudes
Z. Esteban,38 Ceferino Basilio,39 and Ma. Luisa
Carandang40 touched on matters other than the
existence and substance of the pre-
incorporation agreement. So aside from the
fact that these witnesses had no personal
knowledge as to the alleged existence of the
pre-incorporation agreement, the testimonies
of these witnesses did not even mention the
existence of a pre-incorporation agreement.
Worse, the testimonies of petitioners Arcadio
Carandang and Ma. Luisa Carandang even
contradicted the existence of a pre-
incorporation agreement because when they
were asked by their counsel regarding the
matter of the check payments made by the late
Quirino A. de Guzman, Sr. in their behalf, they
said that they had already paid for it thereby
negating their own defense that there was a
pre-incorporation agreement excusing
themselves from paying Mr. de Guzman the
amounts he advanced or loaned to them. This
basic and irrefutable fact can be gleaned from
their testimonies which the private
respondents are quoting for easy reference:
a. With respect to the testimony of Ma. Luisa
Carandang
Q: Now, can you tell this Honorable Court how
do you feel with respect to the Complaint of
the plaintiff in this case charging you that you
paid for this year and asking enough to paid
(sic) your tax?
A: We have paid already, so, we are not liable
for anything payment (sic).41
b. With respect to the testimony of Arcadio
Carandang
"Q: How much?
A: ₱40,000.00 to ₱50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar
Ragasa, that there were receipts issued for the
payment of your shares; which receipts were
marked as Exhibits "G" to "L" (Plaintiff).
I’m showing to you these receipts so marked by
the plaintiff as their exhibits which were issued
in the name of Ma. Luisa Carandang, your wife;
and also, Arcadio M. Carandang. Will you
please go over this Official Receipt and state for
the records, who made for the payment stated
in these receipts in your name?
A: I paid for those shares."42
There being no testimony or documentary
evidence proving the existence of the pre-
incorporation agreement, the spouses
Carandang are forced to rely upon an alleged
admission by the original plaintiff of the
existence of the pre-incorporation agreement.
Petitioners claim that the late Quirino A. de
Guzman, Sr. had admitted the existence of the
pre-incorporation agreement by virtue of
paragraphs 13 and 14 of their Answer and
paragraph 4 of private respondents’ Reply.
Paragraphs 13 and 14 of petitioners’ Answer
dated 7 July 1992 state in full:
13. Sometime in November, 1973 or
thereabout, herein plaintiff invited defendant
Arcadio M. Carandang to a joint venture by
pooling together their technical expertise,
equipments, financial resources and franchise.
Plaintiff proposed to defendant and mutually
agreed on the following:
1. That they would organize a corporation
known as Mabuhay Broadcasting Systems, Inc.
2. Considering the technical expertise and
talent of defendant Arcadio M. Carandang and
his new equipments he bought, and his skill in
repairing and modifying radio/communication
equipments into high proficiency, said
defendant would have an equity participation
in the corporation of 46%, and plaintiff 54%
because of his financial resources and
franchise.
3. That defendant would always maintain his
46% equity participation in the corporation
even if the capital structures are increased, and
that plaintiff would personally pay the equity
shares/stock subscriptions of defendant with
no cost to the latter.
4. That because of defendant’s expertise in the
trade including the marketing aspects, he
would be the President and General Manager,
and plaintiff the Chairman of the Board.
5. That considering their past and trustworthy
relations, they would maintain such relations in
the joint venture without any mental
reservation for their common benefit and
success of the business.
14. Having mutually agreed on the above
arrangements, the single proprietorship of
plaintiff was immediately spun-off into a
corporation now known as Mabuhay
Broadcasting System, Inc. The incorporators are
plaintiff and his family members/nominees
controlling jointly 54% of the stocks and
defendant Arcadio M. Carandang controlling
singly 46% as previously agreed.43
Meanwhile, paragraphs 3 and 4 of private
respondents’ Reply dated 29 July 1992 state in
full:
3. Plaintiffs admits the allegation in paragraph
13.1 of the Answer only insofar the plaintiff and
defendant Arcadio M. Carandang organized a
corporation known as Mabuhay Broadcasting
Systems, Inc. Plaintiff specifically denies the
other allegations in paragraph 13 of the
Answer, the same being devoid of any legal or
factual bases. The truth of the matter is that
defendant Arcadio M. Carandang was not able
to pay plaintiff the agreed amount of the lease
for a number of months forcing the plaintiff to
terminate lease. Additionally, the records
would show that it was the defendant Arcadio
M. Carandang who proposed a joint venture
with the plaintiff.
It appears that plaintiff agreed to the formation
of the corporation principally because of a
directive of then President Marcos indicating
the need to broaden the ownership of radio
broadcasting stations. The plaintiff owned the
franchise, the radio transmitter, the antenna
tower, the building containing the radio
transmitter and other equipment. Verily, he
would be placed in a great disadvantage if he
would still have to personally pay for the shares
of defendant Arcadio M. Carandang.
4. Plaintiff admits the allegations in paragraph
14 of the Answer.44
In effect, the spouses Carandang are relying on
the fact that Quirino de Guzman stated that he
admitted paragraph 14 of the Answer, which
incidentally contained the opening clause
"(h)aving mutually agreed on the above
arrangements, x x x."
Admissions, however, should be clear and
unambiguous. This purported admission by
Quirino de Guzman reeks of ambiguity, as the
clause "(h)aving mutually agreed on the above
arrangements," seems to be a mere
introduction to the statement that the single
proprietorship of Quirino de Guzman had been
converted into a corporation. If Quirino de
Guzman had meant to admit paragraph 13.3,
he could have easily said so, as he did the other
paragraphs he categorically admitted. Instead,
Quirino de Guzman expressly stated the
opposite: that "(p)laintiff specifically denies the
other allegations of paragraph 13 of the
Answer."45 The Reply furthermore states that
the only portion of paragraph 13 which Quirino
de Guzman had admitted is paragraph 13.1,
and only insofar as it said that Quirino de
Guzman and Arcardio Carandang organized
Mabuhay Broadcasting Systems, Inc.46
All the foregoing considered, we hold that
Quirino de Guzman had not admitted the
alleged pre-incorporation agreement. As there
was no admission, and as the testimony of
Arcardio Carandang was stricken off the record,
we are constrained to rule that there was no
pre-incorporation agreement rendering Quirino
de Guzman liable for the spouses Carandang’s
stock subscription. The payment by the spouses
de Guzman of the stock subscriptions of the
spouses Carandang are therefore by way of
loan which the spouses Carandang are liable to
pay.1âwphi1
Whether or not the liability of the spouses
Carandang is joint and solidary
Finally, the Court of Appeals also upheld the
RTC Decision insofar as it decreed a solidary
liability. According to the Court of Appeals:
With regards (sic) the tenth assigned error, [the
spouses Carandang] contend that:
"There is absolutely no evidence, testimonial or
documentary, showing that the purported
obligation of [the spouses Carandang] is joint
and solidary. x x x
"Furthermore, the purported obligation of [the
spouses Carandang] does not at all qualify as
one of the obligations required by law to be
solidary x x x."
It is apparent from the facts of the case that
[the spouses Carandang] were married way
before the effectivity of the Family Code hence;
their property regime is conjugal partnership
under the Civil Code.
It must be noted that for marriages governed
by the rules of conjugal partnership of gains, an
obligation entered into by the husband and
wife is chargeable against their conjugal
partnership and it is the partnership, which is
primarily bound for its repayment. Thus, when
the spouses are sued for the enforcement of
the obligation entered into by them, they are
being impleaded in their capacity as
representatives of the conjugal partnership and
not as independent debtors, such that the
concept of joint and solidary liability, as
between them, does not apply.47
The Court of Appeals is correct insofar as it held
that when the spouses are sued for the
enforcement of the obligation entered into by
them, they are being impleaded in their
capacity as representatives of the conjugal
partnership and not as independent debtors.
Hence, either of them may be sued for the
whole amount, similar to that of a solidary
liability, although the amount is chargeable
against their conjugal partnership property.
Thus, in the case cited by the Court of Appeals,
Alipio v. Court of Appeals,48 the two sets of
defendant-spouses therein were held liable for
₱25,300.00 each, chargeable to their respective
conjugal partnerships.
WHEREFORE, the Decision of the Court of
Appeals, affirming the judgment rendered
against the spouses Carandang, is hereby
AFFIRMED with the following MODIFICATION:
The spouses Carandang are ORDERED to pay
the following amounts from their conjugal
partnership properties:
(1) ₱336,375.00 representing the spouses
Carandang’s loan to Quirino de Guzman; and
(2) Interest on the preceding amount at the
rate of twelve percent (12%) per annum from 5
June 1992 when the complaint was filed until
the principal amount can be fully paid; and
(3) ₱20,000.00 as attorney’s fees.
No costs.
SO ORDERED.
G.R. No. L-66620 FLORES VS HON MALLARE
The Court rules that the application of the
totality rule under Section 33(l) of Batas
Pambansa Blg. 129 and Section 11 of the
Interim Rules is subject to the requirements for
the permissive joinder of parties under Section
6 of Rule 3 which provides as follows:
Permissive joinder of parties.-All persons in
whom or against whom any right to relief in
respect to or arising out of the same
transaction or series of transactions is alleged
to exist, whether jointly, severally, or in the
alternative, may, except as otherwise provided
in these rules, join as plaintiffs or be joined as
defendants in one complaint, where any
question of law or fact common to all such
plaintiffs or to all such defendants may arise in
the action; but the court may make such orders
as may be just to prevent any plaintiff or
defendant from being embarrassed or put to
expense in connection with any proceedings in
which he may have no interest.
Petitioner has appealed by certiorari from the
order of Judge Heilia S. Mallare-Phillipps of the
Regional Trial Court of Baguio City and Benguet
Province which dismissed his complaint for lack
of jurisdiction. Petitioner did not attach to his
petition a copy of his complaint in the
erroneous belief that the entire original record
of the case shall be transmitted to this Court
pursuant to the second paragraph of Section 39
of BP129. This provision applies only to
ordinary appeals from the regional trial court to
the Court of Appeals (Section 20 of the Interim
Rules). Appeals to this Court by petition for
review on certiorari are governed by Rule 45 of
the Rules of Court (Section 25 of the Interim
Rules).
However, the order appealed from states that
the first cause of action alleged in the
complaint was against respondent Ignacio
Binongcal for refusing to pay the amount of
P11,643.00 representing cost of truck tires
which he purchased on credit from petitioner
on various occasions from August to October,
1981; and the second cause of action was
against respondent Fernando Calion for
allegedly refusing to pay the amount of
P10,212.00 representing cost of truck tires
which he purchased on credit from petitioner
on several occasions from March, 1981 to
January, 1982.
On December 15, 1983, counsel for respondent
Binongcal filed a Motion to Dismiss on the
ground of lack of jurisdiction since the amount
of the demand against said respondent was
only P11,643.00, and under Section 19(8) of
BP129 the regional trial court shall exercise
exclusive original jurisdiction if the amount of
the demand is more than twenty thousand
pesos (P20,000.00). It was further averred in
said motion that although another person,
Fernando Calion, was allegedly indebted to
petitioner in the amount of P10,212.00, his
obligation was separate and distinct from that
of the other respondent. At the hearing of said
Motion to Dismiss, counsel for respondent
Calion joined in moving for the dismissal of the
complaint on the ground of lack of jurisdiction.
Counsel for petitioner opposed the Motion to
Dismiss. As above stated, the trial court
dismissed the complaint for lack of jurisdiction.
Petitioner maintains that the lower court has
jurisdiction over the case following the "novel"
totality rule introduced in Section 33(l) of
BP129 and Section 11 of the Interim Rules.
The pertinent portion of Section 33(l) of BP129
reads as follows:
... Provided,That where there are several claims
or causes of action between the same or
different parties, embodied in the same
complaint, the amount of the demand shall be
the totality of the claims in all the causes of
action, irrespective of whether the causes of
action arose out of the same or different
transactions. ...
Section 11 of the Interim Rules provides thus:
Application of the totality rule.-In actions where
the jurisdiction of the court is dependent on
the amount involved, the test of jurisdiction
shall be the aggregate sum of all the money
demands, exclusive only of interest and costs,
irrespective of whether or not the separate
claims are owned by or due to different parties.
If any demand is for damages in a civil action,
the amount thereof must be specifically
alleged.
Petitioner compares the above-quoted
provisions with the pertinent portion of the
former rule under Section 88 of the Judiciary
Act of 1948 as amended which reads as follows:
... Where there are several claims or causes of
action between the same parties embodied in
the same complaint, the amount of the
demand shall be the totality of the demand in
all the causes of action, irrespective of whether
the causes of action arose out of the same or
different transactions; but where the claims or
causes of action joined in a single complaint are
separately owned by or due to different parties,
each separate claim shall furnish the
jurisdictional test. ...
and argues that with the deletion of the proviso
in the former rule, the totality rule was reduced
to clarity and brevity and the jurisdictional test
is the totality of the claims in all, not in each, of
the causes of action, irrespective of whether
the causes of action arose out of the same or
different transactions.
This argument is partly correct. There is no
difference between the former and present
rules in cases where a plaintiff sues a defendant
on two or more separate causes of action. In
such cases, the amount of the demand shall be
the totality of the claims in all the causes of
action irrespective of whether the causes of
action arose out of the same or different
transactions. If the total demand exceeds
twenty thousand pesos, then the regional trial
court has jurisdiction. Needless to state, if the
causes of action are separate and independent,
their joinder in one complaint is permissive and
not mandatory, and any cause of action where
the amount of the demand is twenty thousand
pesos or less may be the subject of a separate
complaint filed with a metropolitan or
municipal trial court.
On the other hand, there is a difference
between the former and present rules in cases
where two or more plaintiffs having separate
causes of action against a defendant join in a
single complaint. Under the former rule,
"where the claims or causes of action joined in
a single complaint are separately owned by or
due to different parties, each separate claim
shall furnish the jurisdictional test" (Section 88
of the Judiciary Act of 1948 as
amended, supra). This was based on the ruling
in the case of Vda. de Rosario vs. Justice of the
Peace, 99 Phil. 693. As worded, the former rule
applied only to cases of permissive joinder of
parties plaintiff. However, it was also applicable
to cases of permissive joinder of parties
defendant, as may be deduced from the ruling
in the case of Brillo vs. Buklatan, thus:
Furthermore, the first cause of action is
composed of separate claims against several
defendants of different amounts each of which
is not more than P2,000 and falls under the
jurisdiction of the justice of the peace court
under section 88 of Republic Act No, 296. The
several claims do not seem to arise from the
same transaction or series of transactions and
there seem to be no questions of law or of fact
common to all the defendants as may warrant
their joinder under Rule 3, section 6. Therefore,
if new complaints are to be filed in the name of
the real party in interest they should be filed in
the justice of the peace court. (87 Phil. 519,
520, reiterated in Gacula vs. Martinez, 88 Phil.
142, 146)
Under the present law, the totality rule is
applied also to cases where two or more
plaintiffs having separate causes of action
against a defendant join in a single complaint,
as well as to cases where a plaintiff has
separate causes of action against two or more
defendants joined in a single complaint.
However, the causes of action in favor of the
two or more plaintiffs or against the two or
more defendants should arise out of the same
transaction or series of transactions and there
should be a common question of law or fact, as
provided in Section 6 of Rule 3.
The difference between the former and present
rules in cases of permissive joinder of parties
may be illustrated by the two cases which were
cited in the case of Vda. de Rosario vs. Justice
of the Peace (supra) as exceptions to the
totality rule. In the case of Soriano y Cia vs. Jose
(86 Phil. 523), where twenty-nine dismissed
employees joined in a complaint against the
defendant to collect their respective claims,
each of which was within the jurisdiction of the
municipal court although the total exceeded
the jurisdictional amount, this Court held that
under the law then the municipal court had
jurisdiction. In said case, although the plaintiffs'
demands were separate, distinct and
independent of one another, their joint suit
was authorized under Section 6 of Rule 3 and
each separate claim furnished the jurisdictional
test. In the case of International Colleges, Inc.
vs. Argonza (90 Phil. 470), where twenty-five
dismissed teachers jointly sued the defendant
for unpaid salaries, this Court also held that the
municipal court had jurisdiction because the
amount of each claim was within, although the
total exceeded, its jurisdiction and it was a case
of permissive joinder of parties plaintiff under
Section 6 of Rule 3.
Under the present law, the two cases above
cited (assuming they do not fall under the
Labor Code) would be under the jurisdiction of
the regional trial court. Similarly, in the
abovecited cases of Brillo vs. Buklatan and
Gacula vs. Martinez (supra), if the separate
claims against the several defendants arose out
of the same transaction or series of
transactions and there is a common question of
law or fact, they would now be under the
jurisdiction of the regional trial court.
In other words, in cases of permissive joinder of
parties, whether as plaintiffs or as defendants,
under Section 6 of Rule 3, the total of all the
claims shall now furnish the jurisdictional test.
Needless to state also, if instead of joining or
being joined in one complaint separate actions
are filed by or against the parties, the amount
demanded in each complaint shall furnish the
jurisdictional test.
In the case at bar, the lower court correctly
held that the jurisdictional test is subject to the
rules on joinder of parties pursuant to Section 5
of Rule 2 and Section 6 of Rule 3 of the Rules of
Court and that, after a careful scrutiny of the
complaint, it appears that there is a misjoinder
of parties for the reason that the claims against
respondents Binongcal and Calion are separate
and distinct and neither of which falls within its
jurisdiction.
WHEREFORE, the order appealed from is
affirmed, without pronouncement as to costs.
SO ORDERED.
G.R. No. 173946               BOSTON EQUITY VS CA
Before the Court is a Petition for Review on
Certiorari seeking to reverse and set aside: (1)
the Decision,1 dated 28 February 2006 and (2)
the Resolution,2 dated 1 August 2006 of the
Court of Appeals in CA-G.R. SP No. 88586. The
challenged decision granted herein
respondent's petition for certiorari upon a
finding that the trial court committed grave
abuse of discretion in denying respondent's
motion to dismiss the complaint against
her.3 Based on this finding, the Court of Appeals
reversed and set aside the Orders, dated 8
November 20044 and 22 December
2004,5 respectively, of the Regional Trial Court
(RTC) of Manila, Branch 24.
The Facts
On 24 December 1997, petitioner filed a
complaint for sum of money with a prayer for
the issuance of a writ of preliminary
attachment against the spouses Manuel and
Lolita Toledo.6 Herein respondent filed an
Answer dated 19 March 1998 but on 7 May
1998, she filed a Motion for Leave to Admit
Amended Answer7 in which she alleged, among
others, that her husband and co-defendant,
Manuel Toledo (Manuel), is already dead.8 The
death certificate9 of Manuel states "13 July
1995" as the date of death. As a result,
petitioner filed a motion, dated 5 August 1999,
to require respondent to disclose the heirs of
Manuel.10 In compliance with the verbal order
of the court during the 11 October 1999
hearing of the case, respondent submitted the
required names and addresses of the
heirs.11 Petitioner then filed a Motion for
Substitution,12 dated 18 January 2000, praying
that Manuel be substituted by his children as
party-defendants. It appears that this motion
was granted by the trial court in an Order dated
9 October 2000.13
Pre-trial thereafter ensued and on 18 July 2001,
the trial court issued its pre-trial order
containing, among others, the dates of hearing
of the case.14
The trial of the case then proceeded. Herein
petitioner, as plaintiff, presented its evidence
and its exhibits were thereafter admitted.
On 26 May 2004, the reception of evidence for
herein respondent was cancelled upon
agreement of the parties. On 24 September
2004, counsel for herein respondent was given
a period of fifteen days within which to file a
demurrer to evidence.15 However, on 7 October
2004, respondent instead filed a motion to
dismiss the complaint, citing the following as
grounds: (1) that the complaint failed to
implead an indispensable party or a real party
in interest; hence, the case must be dismissed
for failure to state a cause of action; (2) that
the trial court did not acquire jurisdiction over
the person of Manuel pursuant to Section 5,
Rule 86 of the Revised Rules of Court; (3) that
the trial court erred in ordering the substitution
of the deceased Manuel by his heirs; and (4)
that the court must also dismiss the case
against Lolita Toledo in accordance with Section
6, Rule 86 of the Rules of Court.16
The trial court, in an Order dated 8 November
2004, denied the motion to dismiss for having
been filed out of time, citing Section 1, Rule 16
of the 1997 Rules of Court which states that:
"Within the time for but before filing the
answer to the complaint or pleading asserting a
claim, a motion to dismiss may be made x x
x."17 Respondent’s motion for reconsideration
of the order of denial was likewise denied on
the ground that "defendants’ attack on the
jurisdiction of this Court is now barred by
estoppel by laches" since respondent failed to
raise the issue despite several chances to do
so.18
Aggrieved, respondent filed a petition for
certiorari with the Court of Appeals alleging
that the trial court seriously erred and gravely
abused its discretion in denying her motion to
dismiss despite discovery, during the trial of the
case, of evidence that would constitute a
ground for dismissal of the case.19
The Court of Appeals granted the petition
based on the following grounds:
It is elementary that courts acquire jurisdiction
over the person of the defendant x x x only
when the latter voluntarily appeared or
submitted to the court or by coercive process
issued by the court to him, x x x. In this case, it
is undisputed that when petitioner Boston filed
the complaint on December 24, 1997,
defendant Manuel S. Toledo was already dead,
x x x. Such being the case, the court a quo could
not have acquired jurisdiction over the person
of defendant Manuel S. Toledo.
x x x the court a quo’s denial of respondent’s
motion to dismiss was based on its finding that
respondent’s attack on the jurisdiction of the
court was already barred by laches as
respondent failed to raise the said ground in its
[sic] amended answer and during the pre-trial,
despite her active participation in the
proceedings.
However, x x x it is well-settled that issue on
jurisdiction may be raised at any stage of the
proceeding, even for the first time on appeal.
By timely raising the issue on jurisdiction in her
motion to dismiss x x x respondent is not
estopped from raising the question on
jurisdiction.
Moreover, when issue on jurisdiction was
raised by respondent, the court a quo had not
yet decided the case, hence, there is no basis
for the court a quo to invoke estoppel to justify
its denial of the motion for reconsideration;
It should be stressed that when the complaint
was filed, defendant Manuel S. Toledo was
already dead. The complaint should have
impleaded the estate of Manuel S. Toledo as
defendant, not only the wife, considering that
the estate of Manuel S. Toledo is an
indispensable party, which stands to be
benefited or be injured in the outcome of the
case. x x x
xxxx
Respondent’s motion to dismiss the complaint
should have been granted by public respondent
judge as the same was in order. Considering
that the obligation of Manuel S. Toledo is
solidary with another debtor, x x x, the claim x x
x should be filed against the estate of Manuel S.
Toledo, in conformity with the provision of
Section 6, Rule 86 of the Rules of Court, x x x.20
The Court of Appeals denied petitioner’s
motion for reconsideration. Hence, this
petition.
The Issues
Petitioner claims that the Court of Appeals
erred in not holding that:
1. Respondent is already estopped from
questioning the trial court’s jurisdiction;
2. Petitioner never failed to implead an
indispensable party as the estate of Manuel is
not an indispensable party;
3. The inclusion of Manuel as party-defendant
is a mere misjoinder of party not warranting
the dismissal of the case before the lower
court; and
4. Since the estate of Manuel is not an
indispensable party, it is not necessary that
petitioner file its claim against the estate of
Manuel.
In essence, what is at issue here is the
correctness of the trial court’s orders denying
respondent’s motion to dismiss.
The Ruling of the Court
We find merit in the petition.
Motion to dismiss filed out of time
To begin with, the Court of Appeals erred in
granting the writ of certiorari in favor of
respondent. Well settled is the rule that the
special civil action for certiorari is not the
proper remedy to assail the denial by the trial
court of a motion to dismiss. The order of the
trial court denying a motion to dismiss is merely
interlocutory, as it neither terminates nor
finally disposes of a case and still leaves
something to be done by the court before a
case is finally decided on the
merits.21 Therefore, "the proper remedy in such
a case is to appeal after a decision has been
rendered."22
As the Supreme Court held in Indiana
Aerospace University v. Comm. on Higher
Education:23
A writ of certiorari is not intended to correct
every controversial interlocutory ruling; it is
resorted only to correct a grave abuse of
discretion or a whimsical exercise of judgment
equivalent to lack of jurisdiction. Its function is
limited to keeping an inferior court within its
jurisdiction and to relieve persons from
arbitrary acts – acts which courts or judges
have no power or authority in law to perform.
It is not designed to correct erroneous findings
and conclusions made by the courts. (Emphasis
supplied)
Even assuming that certiorari is the proper
remedy, the trial court did not commit grave
abuse of discretion in denying respondent’s
motion to dismiss. It, in fact, acted correctly
when it issued the questioned orders as
respondent’s motion to dismiss was filed SIX
YEARS AND FIVE MONTHS AFTER SHE FILED HER
AMENDED ANSWER. This circumstance alone
already warranted the outright dismissal of the
motion for having been filed in clear
contravention of the express mandate of
Section 1, Rule 16, of the Revised Rules of
Court. Under this provision, a motion to dismiss
shall be filed within the time for but before the
filing of an answer to the complaint or pleading
asserting a claim.24
More importantly, respondent’s motion to
dismiss was filed after petitioner has completed
the presentation of its evidence in the trial
court, giving credence to petitioner’s and the
trial court’s conclusion that the filing of the
motion to dismiss was a mere ploy on the part
of respondent to delay the prompt resolution
of the case against her.
Also worth mentioning is the fact that
respondent’s motion to dismiss under
consideration herein is not the first motion to
dismiss she filed in the trial court. It appears
that she had filed an earlier motion to
dismiss26 on the sole ground of the
unenforceability of petitioner’s claim under the
Statute of Frauds, which motion was denied by
the trial court. More telling is the following
narration of the trial court in its Order denying
respondent’s motion for reconsideration of the
denial of her motion to dismiss:
As can be gleaned from the records, with the
admission of plaintiff’s exhibits, reception of
defendants’ evidence was set on March 31, and
April 23, 2004 x x x . On motion of the
defendants, the hearing on March 31, 2004 was
cancelled.
On April 14, 2004, defendants sought the
issuance of subpoena ad testificandum and
duces tecum to one Gina M. Madulid, to appear
and testify for the defendants on April 23,
2004. Reception of defendants’ evidence was
again deferred to May 26, June 2 and June 30,
2004, x x x.
On May 13, 2004, defendants sought again the
issuance of a subpoena duces tecum and ad
testificandum to the said Gina Madulid. On May
26, 2004, reception of defendants [sic]
evidence was cancelled upon the agreement of
the parties. On July 28, 2004, in the absence of
defendants’ witness, hearing was reset to
September 24 and October 8, 2004 x x x.
On September 24, 2004, counsel for defendants
was given a period of fifteen (15) days to file a
demurrer to evidence. On October 7, 2004,
defendants filed instead a Motion to Dismiss x x
x.27
Respondent’s act of filing multiple motions,
such as the first and earlier motion to dismiss
and then the motion to dismiss at issue here, as
well as several motions for postponement,
lends credibility to the position taken by
petitioner, which is shared by the trial court,
that respondent is
deliberately impeding the early disposition of
this case. The filing of the second motion to
dismiss was, therefore, "not only improper but
also dilatory."28 Thus, the trial court, "far from
deviating or straying off course from
established jurisprudence on the matter, x x x
had in fact faithfully observed the law and legal
precedents in this case."29 The Court of Appeals,
therefore, erred not only in entertaining
respondent’s petition for certiorari, it likewise
erred in ruling that the trial court committed
grave abuse of discretion when it denied
respondent’s motion to dismiss.
On whether or not respondent is estopped
from
questioning the jurisdiction of the trial court
At the outset, it must be here stated that, as
the succeeding discussions will demonstrate,
jurisdiction over the person of Manuel should
not be an issue in this case. A protracted
discourse on jurisdiction is, nevertheless,
demanded by the fact that jurisdiction has been
raised as an issue from the lower court, to the
Court of Appeals and, finally, before this Court.
For the sake of clarity, and in order to finally
settle the controversy and fully dispose of all
the issues in this case, it was deemed
imperative to resolve the issue of jurisdiction.
1. Aspects of Jurisdiction
Petitioner calls attention to the fact that
respondent’s motion to dismiss questioning the
trial court’s jurisdiction was filed more than six
years after her amended answer was filed.
According to petitioner, respondent had several
opportunities, at various stages of the
proceedings, to assail the trial court’s
jurisdiction but never did so for six straight
years. Citing the doctrine laid down in the case
of Tijam, et al. v. Sibonghanoy, et
al.30 petitioner claimed that respondent’s
failure to raise the question of jurisdiction at an
earlier stage bars her from later questioning it,
especially since she actively participated in the
proceedings conducted by the trial court.
Petitioner’s argument is misplaced, in that, it
failed to consider that the concept of
jurisdiction has several aspects, namely: (1)
jurisdiction over the subject matter; (2)
jurisdiction over the parties; (3) jurisdiction
over the issues of the case; and (4) in cases
involving property, jurisdiction over the res or
the thing which is the subject of the litigation.31
The aspect of jurisdiction which may be barred
from being assailed as a result of estoppel by
laches is jurisdiction over the subject matter.
Thus, in Tijam, the case relied upon by
petitioner, the issue involved was the authority
of the then Court of First Instance to hear a
case for the collection of a sum of money in the
amount of ₱1,908.00 which amount was, at
that time, within the exclusive original
jurisdiction of the municipal courts.
In subsequent cases citing the ruling of the
Court in Tijam, what was likewise at issue was
the jurisdiction of the trial court over the
subject matter of the case. Accordingly, in
Spouses Gonzaga v. Court of Appeals,32 the
issue for consideration was the authority of the
regional trial court to hear and decide an action
for reformation of contract and damages
involving a subdivision lot, it being argued
therein that jurisdiction is vested in the Housing
and Land Use Regulatory Board pursuant to PD
957 (The Subdivision and Condominium Buyers
Protective Decree). In Lee v. Presiding Judge,
MTC, Legaspi City,33 petitioners argued that the
respondent municipal trial court had no
jurisdiction over the complaint for ejectment
because the issue of ownership was raised in
the pleadings. Finally, in People v.
Casuga,34 accused-appellant claimed that the
crime of grave slander, of which she was
charged, falls within the concurrent jurisdiction
of municipal courts or city courts and the then
courts of first instance, and that the judgment
of the court of first instance, to which she had
appealed the municipal court's conviction,
should be deemed null and void for want of
jurisdiction as her appeal should have been
filed with the Court of Appeals or the Supreme
Court.
In all of these cases, the Supreme Court barred
the attack on the jurisdiction of the respective
courts concerned over the subject matter of the
case based on estoppel by laches, declaring
that parties cannot be allowed to belatedly
adopt an inconsistent posture by attacking the
jurisdiction of a court to which they submitted
their cause voluntarily.35
Here, what respondent was questioning in her
motion to dismiss before the trial court was
that court’s jurisdiction over the person of
defendant Manuel. Thus, the principle of
estoppel by laches finds no application in this
case. Instead, the principles relating to
jurisdiction over the person of the parties are
pertinent herein.
The Rules of Court provide:
RULE 9
EFFECT OF FAILURE TO PLEAD
Section 1. Defenses and objections not pleaded.
– Defenses and objections not pleaded either in
a motion to dismiss or in the answer are
deemed waived. However, when it appears
from the pleadings or the evidence on record
that the court has no jurisdiction over the
subject matter, that there is another action
pending between the same parties for the
same cause, or that the action is barred by a
prior judgment or by statute of limitations, the
court shall dismiss the claim.
RULE 15
MOTIONS
Sec. 8. Omnibus motion. – Subject to the
provisions of Section 1 of Rule 9, a motion
attacking a pleading, order, judgment, or
proceeding shall include all objections then
available, and all objections not so included
shall be deemed waived.
Based on the foregoing provisions, the
"objection on jurisdictional grounds which is
not waived even if not alleged in a motion to
dismiss or the answer is lack of jurisdiction over
the subject matter. x x x Lack of jurisdiction
over the subject matter can always be raised
anytime, even for the first time on appeal, since
jurisdictional issues cannot be waived x x x
subject, however, to the principle of estoppel
by laches."36
Since the defense of lack of jurisdiction over the
person of a party to a case is not one of those
defenses which are not deemed waived under
Section 1 of Rule 9, such defense must be
invoked when an answer or a motion to dismiss
is filed in order to prevent a waiver of the
defense.37 If the objection is not raised either in
a motion to dismiss or in the answer, the
objection to the jurisdiction over the person of
the plaintiff or the defendant is deemed waived
by virtue of the first sentence of the above-
quoted Section 1 of Rule 9 of the Rules of
Court.38
The Court of Appeals, therefore, erred when it
made a sweeping pronouncement in its
questioned decision, stating that "issue on
jurisdiction may be raised at any stage of the
proceeding, even for the first time on appeal"
and that, therefore, respondent timely raised
the issue in her motion to dismiss and is,
consequently, not estopped from raising the
question of jurisdiction. As the question of
jurisdiction involved here is that over the
person of the defendant Manuel, the same is
deemed waived if not raised in the answer or a
motion to dismiss. In any case, respondent
cannot claim the defense since "lack of
jurisdiction over the person, being subject to
waiver, is a personal defense which can only be
asserted by the party who can thereby waive it
by silence."39
2. Jurisdiction over the person of a defendant is
acquired through a valid service of summons;
trial court did not acquire jurisdiction over the
person of Manuel Toledo
In the first place, jurisdiction over the person of
Manuel was never acquired by the trial court. A
defendant is informed of a case against him
when he receives summons. "Summons is a
writ by which the defendant is notified of the
action brought against him. Service of such writ
is the means by which the court acquires
jurisdiction over his person."40
In the case at bar, the trial court did not acquire
jurisdiction over the person of Manuel since
there was no valid service of summons upon
him, precisely because he was already dead
even before the complaint against him and his
wife was filed in the trial court. The issues
presented in this case are similar to those in the
case of Sarsaba v. Vda. de Te.41
In Sarsaba, the NLRC rendered a decision
declaring that Patricio Sereno was illegally
dismissed from employment and ordering the
payment of his monetary claims. To satisfy the
claim, a truck in the possession of Sereno’s
employer was levied upon by a sheriff of the
NLRC, accompanied by Sereno and his lawyer,
Rogelio Sarsaba, the petitioner in that case. A
complaint for recovery of motor vehicle and
damages, with prayer for the delivery of the
truck pendente lite was eventually filed against
Sarsaba, Sereno, the NLRC sheriff and the NLRC
by the registered owner of the truck. After his
motion to dismiss was denied by the trial court,
petitioner Sarsaba filed his answer. Later on,
however, he filed an omnibus motion to dismiss
citing, as one of the grounds, lack of jurisdiction
over one of the principal defendants, in view of
the fact that Sereno was already dead when the
complaint for recovery of possession was filed.
Although the factual milieu of the present case
is not exactly similar to that of Sarsaba, one of
the issues submitted for resolution in both
cases is similar: whether or not a case, where
one of the named defendants was already dead
at the time of its filing, should be dismissed so
that the claim may be pursued instead in the
proceedings for the settlement of the estate of
the deceased defendant. The petitioner in the
Sarsaba Case claimed, as did respondent
herein, that since one of the defendants died
before summons was served on him, the trial
court should have dismissed the complaint
against all the defendants and the claim should
be filed against the estate of the deceased
defendant. The petitioner in Sarsaba, therefore,
prayed that the complaint be dismissed, not
only against Sereno, but as to all the
defendants, considering that the RTC did not
acquire jurisdiction over the person of
Sereno.42 This is exactly the same prayer made
by respondent herein in her motion to dismiss.
The Court, in the Sarsaba Case, resolved the
issue in this wise:
x x x We cannot countenance petitioner’s
argument that the complaint against the other
defendants should have been dismissed,
considering that the RTC never acquired
jurisdiction over the person of Sereno. The
court’s failure to acquire jurisdiction over one’s
person is a defense which is personal to the
person claiming it. Obviously, it is now
impossible for Sereno to invoke the same in
view of his death. Neither can petitioner invoke
such ground, on behalf of Sereno, so as to reap
the benefit of having the case dismissed against
all of the defendants. Failure to serve summons
on Sereno’s person will not be a cause for the
dismissal of the complaint against the other
defendants, considering that they have been
served with copies of the summons and
complaints and have long submitted their
respective responsive pleadings. In fact, the
other defendants in the complaint were given
the chance to raise all possible defenses and
objections personal to them in their respective
motions to dismiss and their subsequent
answers.43 (Emphasis supplied.)
Hence, the Supreme Court affirmed the
dismissal by the trial court of the complaint
against Sereno only.
Based on the foregoing pronouncements, there
is no basis for dismissing the complaint against
respondent herein. Thus, as already
emphasized above, the trial court correctly
denied her motion to dismiss.
On whether or not the estate of Manuel
Toledo is an indispensable party
Rule 3, Section 7 of the 1997 Rules of Court
states:
SEC. 7. Compulsory joinder of indispensable
parties. – Parties-in-interest without whom no
final determination can be had of an action
shall be joined either as plaintiffs or
defendants.
An indispensable party is one who has such an
interest in the controversy or subject matter of
a case that a final adjudication cannot be made
in his or her absence, without injuring or
affecting that interest. He or she is a party who
has not only an interest in the subject matter of
the controversy, but "an interest of such nature
that a final decree cannot be made without
affecting that interest or leaving the
controversy in such a condition that its final
determination may be wholly inconsistent with
equity and good conscience. It has also been
considered that an indispensable party is a
person in whose absence there cannot be a
determination between the parties already
before the court which is effective, complete or
equitable." Further, an indispensable party is
one who must be included in an action before it
may properly proceed.44
On the other hand, a "person is not an
indispensable party if his interest in the
controversy or subject matter is separable from
the interest of the other parties, so that it will
not necessarily be directly or injuriously
affected by a decree which does complete
justice between them. Also, a person is not an
indispensable party if his presence would
merely permit complete relief between him or
her and those already parties to the action, or if
he or she has no interest in the subject matter
of the action." It is not a sufficient reason to
declare a person to be an indispensable party
simply because his or her presence will avoid
multiple litigations.45
Applying the foregoing pronouncements to the
case at bar, it is clear that the estate of Manuel
is not an indispensable party to the collection
case, for the simple reason that the obligation
of Manuel and his wife, respondent herein, is
solidary.
The contract between petitioner, on the one
hand and respondent and respondent’s
husband, on the other, states:
FOR VALUE RECEIVED, I/We jointly and
severally46 (in solemn) promise to pay BOSTON
EQUITY RESOURCES, INC. x x x the sum of
PESOS: [ONE MILLION FOUR HUNDRED
(₱1,400,000.00)] x x x.47
The provisions and stipulations of the contract
were then followed by the respective
signatures of respondent as "MAKER" and her
husband as "CO-MAKER."48 Thus, pursuant to
Article 1216 of the Civil Code, petitioner may
collect the entire amount of the obligation from
respondent only. The aforementioned provision
states: "The creditor may proceed against any
one of the solidary debtors or some or all of
them simultaneously. The demand made
against one of them shall not be an obstacle to
those which may subsequently be directed
against the others, so long as the debt has not
been fully collected."
In other words, the collection case can proceed
and the demands of petitioner can be satisfied
by respondent only, even without impleading
the estate of Manuel. Consequently, the estate
of Manuel is not an indispensable party to
petitioner’s complaint for sum of money.
However, the Court of Appeals, agreeing with
the contention of respondent, held that the
claim of petitioner should have been filed
against the estate of Manuel in accordance
with Sections 5 and 6 of Rule 86 of the Rules of
Court. The aforementioned provisions provide:
SEC. 5. Claims which must be filed under the
notice. If not filed, barred; exceptions. All
claims for money against the decedent, arising
from contract, express or implied, whether the
same be due, not due, or contingent, all claims
for funeral expenses and judgment for money
against the decedent, must be filed within the
time limited in the notice; otherwise, they are
barred forever, except that they may be set
forth as counterclaims in any action that the
executor or administrator may bring against the
claimants. x x x.
SEC. 6. Solidary obligation of decedent. Where
the obligation of the decedent is solidary with
another debtor, the claim shall be filed against
the decedent as if he were the only debtor,
without prejudice to the right of the estate to
recover contribution from the other debtor. x x
x.
The Court of Appeals erred in its interpretation
of the above-quoted provisions.
In construing Section 6, Rule 87 of the old Rules
of Court, the precursor of Section 6, Rule 86 of
the Revised Rules of Court, which latter
provision has been retained in the present
Rules of Court without any revisions, the
Supreme Court, in the case of Manila Surety &
Fidelity Co., Inc. v. Villarama, et. al.,49 held:50
Construing Section 698 of the Code of Civil
Procedure from whence [Section 6, Rule 87]
was taken, this Court held that where two
persons are bound in solidum for the same
debt and one of them dies, the whole
indebtedness can be proved against the estate
of the latter, the decedent’s liability being
absolute and primary; x x x. It is evident from
the foregoing that Section 6 of Rule 87 provides
the procedure should the creditor desire to go
against the deceased debtor, but there is
certainly nothing in the said provision making
compliance with such procedure a condition
precedent before an ordinary action against the
surviving solidary debtors, should the creditor
choose to demand payment from the latter,
could be entertained to the extent that failure
to observe the same would deprive the court
jurisdiction to take cognizance of the action
against the surviving debtors. Upon the other
hand, the Civil Code expressly allows the
creditor to proceed against any one of the
solidary debtors or some or all of them
simultaneously. There is, therefore, nothing
improper in the creditor’s filing of an action
against the surviving solidary debtors alone,
instead of instituting a proceeding for the
settlement of the estate of the deceased
debtor wherein his claim could be filed.
The foregoing ruling was reiterated and
expounded in the later case of Philippine
National Bank v. Asuncion51 where the Supreme
Court pronounced:
A cursory perusal of Section 6, Rule 86 of the
Revised Rules of Court reveals that nothing
therein prevents a creditor from proceeding
against the surviving solidary debtors. Said
provision merely sets up the procedure in
enforcing collection in case a creditor chooses
to pursue his claim against the estate of the
deceased solidary debtor. The rule has been set
forth that a creditor (in a solidary obligation)
has the option whether to file or not to file a
claim against the estate of the solidary debtor.
xxx
xxxx
It is crystal clear that Article 1216 of the New
Civil Code is the applicable provision in this
matter. Said provision gives the creditor the
right to "proceed against anyone of the solidary
debtors or some or all of them simultaneously."
The choice is undoubtedly left to the solidary
creditor to determine against whom he will
enforce collection. In case of the death of one
of the solidary debtors, he (the creditor) may, if
he so chooses, proceed against the surviving
solidary debtors without necessity of filing a
claim in the estate of the deceased debtors. It is
not mandatory for him to have the case
dismissed as against the surviving debtors and
file its claim against the estate of the deceased
solidary debtor, x x x. For to require the
creditor to proceed against the estate, making
it a condition precedent for any collection
action against the surviving debtors to prosper,
would deprive him of his substantive
rightsprovided by Article 1216 of the New Civil
Code. (Emphasis supplied.)
As correctly argued by petitioner, if Section 6,
Rule 86 of the Revised Rules of Court were
applied literally, Article 1216 of the New Civil
Code would, in effect, be repealed since under
the Rules of Court, petitioner has no choice but
to proceed against the estate of [the deceased
debtor] only. Obviously, this provision
diminishes the [creditor’s] right under the New
Civil Code to proceed against any one, some or
all of the solidary debtors. Such a construction
is not sanctioned by principle, which is too well
settled to require citation, that a substantive
law cannot be amended by a procedural rule.
Otherwise stated, Section 6, Rule 86 of the
Revised Rules of Court cannot be made to
prevail over Article 1216 of the New Civil Code,
the former being merely procedural, while the
latter, substantive.
Based on the foregoing, the estate of Manuel is
not an indispensable party and the case can
proceed as against respondent only. That
petitioner opted to collect from respondent
and not from the estate of Manuel is evidenced
by its opposition to respondent’s motion to
dismiss asserting that the case, as against her,
should be dismissed so that petitioner can
proceed against the estate of Manuel.
On whether or not the inclusion of Manuel as
party defendant is a misjoinder of party
Section 11 of Rule 3 of the Rules of Court states
that "neither misjoinder nor non-joinder of
parties is ground for dismissal of an action.
Parties may be dropped or added by order of
the court on motion of any party or on its own
initiative at any stage of the action and on such
terms as are just. Any claim against a misjoined
party may be severed and proceeded with
separately."
Based on the last sentence of the afore-quoted
provision of law, a misjoined party must have
the capacity to sue or be sued in the event that
the claim by or against the misjoined party is
pursued in a separate case. In this case,
therefore, the inclusion of Manuel in the
complaint cannot be considered a misjoinder,
as in fact, the action would have proceeded
against him had he been alive at the time the
collection case was filed by petitioner. This
being the case, the remedy provided by Section
11 of Rule 3 does not obtain here. The name of
Manuel as party-defendant cannot simply be
dropped from the case. Instead, the procedure
taken by the Court in Sarsaba v. Vda. de
Te,52 whose facts, as mentioned earlier,
resemble those of this case, should be followed
herein. There, the Supreme Court agreed with
the trial court when it resolved the issue of
jurisdiction over the person of the deceased
Sereno in this wise:
As correctly pointed by defendants, the
Honorable Court has not acquired jurisdiction
over the person of Patricio Sereno since there
was indeed no valid service of summons insofar
as Patricio Sereno is concerned. Patricio Sereno
died before the summons, together with a copy
of the complaint and its annexes, could be
served upon him.
However, the failure to effect service of
summons unto Patricio Sereno, one of the
defendants herein, does not render the action
DISMISSIBLE, considering that the three (3)
other defendants, x x x, were validly served
with summons and the case with respect to the
answering defendants may still proceed
independently. Be it recalled that the three (3)
answering defendants have previously filed a
Motion to Dismiss the Complaint which was
denied by the Court.
Hence, only the case against Patricio Sereno
will be DISMISSED and the same may be filed as
a claim against the estate of Patricio Sereno,
but the case with respect to the three (3) other
accused [sic] will proceed. (Emphasis
supplied.)53
As a result, the case, as against Manuel, must
be dismissed.
In addition, the dismissal of the case against
Manuel is further warranted by Section 1 of
Rule 3 of the Rules of Court, which states that:
only natural or juridical persons, or entities
authorized by law may be parties in a civil
action." Applying this provision of law, the
Court, in the case of Ventura v.
Militante,54 held:
Parties may be either plaintiffs or defendants. x
x x. In order to maintain an action in a court of
justice, the plaintiff must have an actual legal
existence, that is, he, she or it must be a person
in law and possessed of a legal entity as either a
natural or an artificial person, and no suit can
be lawfully prosecuted save in the name of
such a person.
The rule is no different as regards party
defendants. It is incumbent upon a plaintiff,
when he institutes a judicial proceeding, to
name the proper party defendant to his cause
of action. In a suit or proceeding in personam of
an adversary character, the court can acquire
no jurisdiction for the purpose of trial or
judgment until a party defendant who actually
or legally exists and is legally capable of being
sued, is brought before it. It has even been held
that the question of the legal personality of a
party defendant is a question of substance
going to the jurisdiction of the court and not
one of procedure.
The original complaint of petitioner named the
"estate of Carlos Ngo as represented by
surviving spouse Ms. Sulpicia Ventura" as the
defendant.1âwphi1 Petitioner moved to
dismiss the same on the ground that the
defendant as named in the complaint had no
legal personality. We agree.
x x x. Considering that capacity to be sued is a
correlative of the capacity to sue, to the same
extent, a decedent does not have the capacity
to be sued and may not be named a party
defendant in a court action. (Emphases
supplied.)
Indeed, where the defendant is neither a
natural nor a juridical person or an entity
authorized by law, the complaint may be
dismissed on the ground that the pleading
asserting the claim states no cause of action or
for failure to state a cause of action pursuant to
Section 1(g) of Rule 16 of the Rules of Court,
because a complaint cannot possibly state a
cause of action against one who cannot be a
party to a civil action.55
Since the proper course of action against the
wrongful inclusion of Manuel as party-
defendant is the dismissal of the case as against
him, thus did the trial court err when it ordered
the substitution of Manuel by his heirs.
Substitution is proper only where the party to
be substituted died during the pendency of the
case, as expressly provided for by Section 16,
Rule 3 of the Rules of Court, which states:
Death of party;duty of counsel. – Whenever a
party to a pending action dies, and the claim is
not thereby extinguished, it shall be the duty of
his counsel to inform the court within thirty
(30) days after such death of the fact thereof,
and to give the name and address of his legal
representative or representatives. x x x
The heirs of the deceased may be allowed to be
substituted for the deceased, without requiring
the appointment of an executor or
administrator x x x.
The court shall forthwith order said legal
representative or representatives to appear
and be substituted within a period of thirty (30)
days from notice. (Emphasis supplied.)
Here, since Manuel was already dead at the
time of the filing of the complaint, the court
never acquired jurisdiction over his person and,
in effect, there was no party to be substituted.
WHEREFORE, the petition is GRANTED. The
Decision dated 28 February 2006 and the
Resolution dated 1 August 2006 of the Court of
Appeals in CA-G.R. SP No. 88586 are REVERSED
and SET ASIDE. The Orders of the Regional Trial
Court dated 8 November 2004 and 22
December 2004, respectively, in Civil Case No.
97-86672, are REINSTATED. The Regional Trial
Court, Branch 24, Manila is hereby DIRECTED to
proceed with the trial of Civil Case No. 97-
86672 against respondent Lolita G. Toledo only,
in accordance with the above pronouncements
of the Court, and to decide the case with
dispatch.
SO ORDERED.
G.R. No. 166519               MALAZARTE VS CA
Assailed in this petition for review on certiorari
under Rule 45 of the Rules of Court are the May
12, 2004 Decision1 of the Court of Appeals (CA)
in CA-G.R. CV No. 43085 and the December 1,
2004 Resolution2 denying reconsideration of
the challenged decision.
The pertinent facts and proceedings follow.
In 1974, petitioners3 filed a complaint for
recovery of title to property with damages
before the Court of First Instance (now,
Regional Trial Court [RTC]) of Maasin, Southern
Leyte against respondents. The case was
docketed as Civil Case No. R-1949. The property
subject of the case was a parcel of coconut land
in Canturing, Maasin, Southern Leyte, declared
under Tax Declaration No. 3587 in the name of
petitioner Nieves with an area of 2.6360
hectares.4 In their complaint, petitioners prayed
that judgment be rendered confirming their
rights and legal title to the subject property and
ordering the defendants to vacate the occupied
portion and to pay damages.5
Respondents, for their part, denied petitioners’
allegation of ownership and possession of the
premises, and interposed, as their main
defense, that the subject land was inherited by
all the parties from their common ancestor,
Francisco Plasabas.6
Revealed in the course of the trial was that
petitioner Nieves, contrary to her allegations in
the complaint, was not the sole and absolute
owner of the land. Based on the testimonies of
petitioners’ witnesses, the property passed on
from Francisco to his son, Leoncio; then to
Jovita Talam, petitioner Nieves’ grandmother;
then to Antonina Talam, her mother; and then
to her and her siblings—Jose, Victor and
Victoria.7
After resting their case, respondents raised in
their memorandum the argument that the case
should have been terminated at inception for
petitioners’ failure to implead indispensable
parties, the other co-owners – Jose, Victor and
Victoria.
In its April 19, 1993 Order,8 the trial court,
without ruling on the merits, dismissed the case
without prejudice, thus:
This Court, much as it wants to decide the
instant case on the merits, being one of the old
inherited cases left behind, finds difficulty if not
impossibility of doing so at this stage of the
proceedings when both parties have already
rested their cases. Reluctantly, it agrees with
the defendants in the observation that some
important indispensable consideration is
conspicuously wanting or missing.
It is not the Court’s wish to turn its back on the
crucial part of the case, which is the
pronouncement of the judgment to settle the
issues raised in the pleadings of the parties
once and for all, after all the time, effort and
expense spent in going through the trial
process.
But, rules are rules. They have to be followed,
to arrive at a fair and just verdict. Section 7,
Rule 3 of the Rules of Court provides:
"x x x Compulsory joinder of indispensable
parties. – Parties in interest without whom no
final determination can be had of an action
shall be joined either as plaintiffs or
defendants."
What the Court wants to say here is that the
instant case should have been dismissed
without prejudice a long time ago for lack of
cause of action as the plaintiffs spouses Marcos
Malazarte and Nieves Plasabas Malazarte have
no complete legal personality to sue by
themselves alone without joining the brothers
and sisters of Nieves who are as
INDISPENSABLE as the latter in the final
determination of the case. Not impleading
them, any judgment would have no
effectiveness.
They are that indispensable that a final decree
would necessarily affect their rights, so that the
Court cannot proceed without their presence.
There are abundant authorities in this regard.
Thus –
"The general rule with reference to the making
of parties in a civil action requires the joinder of
all indispensable parties under any and all
conditions, their presence being a sine qua non
of the exercise of judicial power. (Borlasa v.
Polistico, 47 Phil. 345, 348) For this reason, our
Supreme Court has held that when it appears of
record that there are other persons interested
in the subject matter of the litigation, who are
not made parties to the action, it is the duty of
the court to suspend the trial until such parties
are made either plaintiffs or defendants.
(Pobre, et al. v. Blanco, 17 Phil. 156). x x x
Where the petition failed to join as party
defendant the person interested in sustaining
the proceeding in the court, the same should
be dismissed. x x x When an indispensable
party is not before the court, the action should
be dismissed. (People, et al. v. Rodriguez, et al.,
G.R. Nos. L-14059-62, September 30, 1959) (sic)
"Parties in interest without whom no final
determination can be had of an action shall be
joined either as plaintiffs or defendants. (Sec. 7,
Rule 3, Rules of Court). The burden of procuring
the presence of all indispensable parties is on
the plaintiff. (39 Amjur [sic] 885). The evident
purpose of the rule is to prevent the multiplicity
of suits by requiring the person arresting a right
against the defendant to include with him,
either as co-plaintiffs or as co-defendants, all
persons standing in the same position, so that
the whole matter in dispute may be
determined once and for all in one litigation.
(Palarca v. Baginsi, 38 Phil. 177, 178).
"An indispensable party is a party who has such
an interest in the controversy or subject matter
that a final adjudication cannot be made, in his
absence, without inquiring or affecting such
interest; a party who has not only an interest of
such a nature that a final decree cannot be
made without affecting his interest or leaving
the controversy in such a condition that its final
determination may be wholly inconsistent with
equity and good conscience. (67 C.J.S. 892).
Indispensable parties are those without whom
no action can be finally determined." (Sanidad
v. Cabataje, 5 Phil. 204)
WHEREFORE, IN VIEW OF ALL THE FOREGOING
CONSIDERATIONS, both the complaint and the
counterclaim in the instant case are ordered
DISMISSED without prejudice. No
pronouncement as to costs.
SO ORDERED.9
Aggrieved, petitioners elevated the case to the
CA. In the challenged May 12, 2004
Decision,10 the appellate court affirmed the
ruling of the trial court. The CA, further,
declared that the non-joinder of the
indispensable parties would violate the
principle of due process, and that Article 487 of
the Civil Code could not be applied considering
that the complaint was not for ejectment, but
for recovery of title or a reivindicatory action.11
With their motion for reconsideration denied in
the further assailed December 1, 2004
Resolution,12 petitioners filed the instant
petition.
The Court grants the petition and remands the
case to the trial court for disposition on the
merits.
Article 487 of the Civil Code provides that any
one of the co-owners may bring an action for
ejectment.1avvphi1.zw+ The article covers all
kinds of actions for the recovery of possession,
including an accion publiciana and a
reivindicatory action. A co-owner may file suit
without necessarily joining all the other co-
owners as co-plaintiffs because the suit is
deemed to be instituted for the benefit of all.
Any judgment of the court in favor of the
plaintiff will benefit the other co-owners, but if
the judgment is adverse, the same cannot
prejudice the rights of the unimpleaded co-
owners.13
With this disquisition, there is no need to
determine whether petitioners’ complaint is
one for ejectment or for recovery of title. To
repeat, Article 487 of the Civil Code applies to
both actions.
Thus, petitioners, in their complaint, do not
have to implead their co-owners as parties. The
only exception to this rule is when the action is
for the benefit of the plaintiff alone who claims
to be the sole owner and is, thus, entitled to
the possession thereof. In such a case, the
action will not prosper unless the plaintiff
impleads the other co-owners who are
indispensable parties.14
Here, the allegation of petitioners in their
complaint that they are the sole owners of the
property in litigation is immaterial, considering
that they acknowledged during the trial that
the property is co-owned by Nieves and her
siblings, and that petitioners have been
authorized by the co-owners to pursue the case
on the latter’s behalf.15 Impleading the other
co-owners is, therefore, not mandatory,
because, as mentioned earlier, the suit is
deemed to be instituted for the benefit of all.
In any event, the trial and appellate courts
committed reversible error when they
summarily dismissed the case, after both
parties had rested their cases following a
protracted trial commencing in 1974, on the
sole ground of failure to implead indispensable
parties. The rule is settled that the non-joinder
of indispensable parties is not a ground for the
dismissal of an action. The remedy is to implead
the non-party claimed to be indispensable.
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 at such times as
are just. If petitioner refuses to implead an
indispensable party despite the order of the
court, the latter may dismiss the
complaint/petition for the
plaintiff’s/petitioner's failure to comply
therewith.16
WHEREFORE, premises considered, the instant
petition is GRANTED, and the case is
REMANDED to the trial court for appropriate
proceedings. The trial court is further DIRECTED
to decide on the merits of the civil case WITH
DISPATCH.
SO ORDERED.
G.R. No. 183059               QUILATAN VS HEIRS OF
QUILATAN
The issue for resolution is whether the Court of
Appeals correctly reversed the decision of the
Regional Trial Court (RTC) of Pasig City, Branch
266, and ordered the dismissal without
prejudice of Civil Case No. 67367 on the ground
of failure to implead all the indispensable
parties to the case.
On August 15, 1999, petitioners Ely Quilatan
and Rosvida Quilatan-Elias filed Civil Case No.
67367 for nullification of Tax Declaration Nos.
D-014-00330 and D-014-00204 and Partition of
the Estate of the late Pedro Quilatan with
damages against respondent heirs of Lorenzo
Quilatan. They claim that during his lifetime,
Pedro Quilatan owned two parcels of land
covered by Tax Declaration Nos. 1680 and
2301, both located in Taguig, Metro Manila;
that sometime in 1998,1 they discovered that
said tax declarations were cancelled without
their knowledge and new ones were issued, to
wit: Tax Declaration No. D-014-00204 and D-
014-00330, under the names of Spouses
Lorenzo Quilatan and Anita Lizertiquez as
owners thereof.2
On June 22, 2004, the trial court rendered its
decision declaring as void the cancellation of
Tax Declaration Nos. 1680 and 2301. At the
same time, it ordered the partition of the
subject properties into three equal shares
among the heirs of Francisco, Ciriaco and
Lorenzo, all surnamed Quilatan.
On appeal, the Court of Appeals reversed
without prejudice the decision of the trial court
on the ground that petitioners failed to implead
other co-heirs who are indispensable parties to
the case. Thus, the judgment of the trial court
was null and void for want of
jurisdiction.3 Petitioners filed a motion for
reconsideration4 but it was denied.
Hence, this petition for review where
petitioners argue that the issue of failure to
implead indispensable parties was a mere
afterthought because respondents did not raise
the same in their Answer to the complaint, but
only for the first time in their Motion for
Reconsideration of the June 22, 2004 decision
of the trial court.5 Petitioners further argue that
the order of dismissal without prejudice and
the re-filing of the case in order to implead the
heirs of Ciriaco only invite multiplicity of suits
since the second action would be a repetition
of the first action, where the judgment therein
rightly partitioned the subject properties into
three equal shares, apportioning each share to
the heirs of the children of Pedro Quilatan.6
The petition lacks merit.
Records show that Pedro Quilatan died
intestate in 1960 and was survived by his three
children, namely, Ciriaco, Francisco and
Lorenzo, all of whom are now deceased. Ciriaco
was survived by his children, namely Purita
Santos, Rosita Reyes, Renato Quilatan, Danilo
Quilatan, and Carlito Quilatan; Francisco was
survived by herein petitioners and their two
other siblings, Solita Trapsi and Rolando
Quilatan; while Lorenzo was survived by his
children, herein respondents.
In the complaint filed by petitioners before the
trial court, they failed to implead their two
siblings, Solita and Rolando, and all the heirs of
Ciriaco, as co-plaintiffs or as defendants. It is
clear that the central thrust of the complaint
filed in Civil Case No. 67367 was to revert the
subject properties back to the estate of Pedro
Quilatan, thereby making all his heirs pro
indiviso co-owners thereof, and to partition
them equally among themselves; and that all
the co-heirs and persons having an interest in
the subject properties are indispensable parties
to an action for partition, which will not lie
without the joinder of said parties.
Respondents could not be blamed if they did
not raise this issue in their Answer because in
an action for partition of real estate, it is the
plaintiff who is mandated by the Rules to
implead all the indispensable parties,
considering that the absence of one such 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.71avvphi1
Thus, the Court of Appeals correctly applied
Section 1, Rule 69 and Section 7, Rule 3 of the
Rules of Court, which read:
SECTION 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
in this rule prescribed, 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 the other persons interested in
the property. (Emphasis supplied)
SECTION 7. Compulsory joinder of
indispensable parties. — Parties in interest
without whom no final determination can be
had of an action shall be joined either as
plaintiffs or defendants.
In Moldes v. Villanueva,8 the Court held that:
An indispensable party is one who has such an
interest in the controversy or subject matter
that a final adjudication cannot be made, in his
absence, without injuring or affecting that
interest. A party who has not only an interest in
the subject matter of the controversy, but also
has an interest of such nature that a final
decree cannot be made without affecting his
interest or leaving the controversy in such a
condition that its final determination may be
wholly inconsistent with equity and good
conscience. He is a person in whose absence
there cannot be a determination between the
parties already before the court which is
effective, complete, or equitable. In
Commissioner Andrea D. Domingo v. Herbert
Markus Emil Scheer, the Court held that the
joinder of indispensable parties is mandatory.
Without the presence of indispensable parties
to the suit, the judgment of the court cannot
attain real finality. Strangers to a case are not
bound by the judgment rendered by the court.
The absence of an indispensable party renders
all subsequent actions of the court null and
void, with no authority to act not only as to the
absent party but also as to those present. The
responsibility of impleading all the
indispensable parties rests on the
petitioner/plaintiff.
Likewise, in Metropolitan Bank and Trust
Company v. Hon. Floro T. Alejo, the Court ruled
that the evident aim and intent of the Rules
regarding the joinder of indispensable and
necessary parties is a complete determination
of all possible issues, not only between the
parties themselves but also as regards to other
persons who may be affected by the judgment.
A valid judgment cannot even be rendered
where there is want of indispensable parties.
On the issue of multiplicity of suits, the Court of
Appeals correctly ordered the dismissal of Civil
Case No. 67367 without prejudice for want of
jurisdiction. The dismissal could have been
avoided had petitioners, instead of merely
stating in their complaint the unimpleaded
indispensable parties, joined them as parties to
the case in order to have a complete and final
determination of the action. As aptly observed
by the appellate court:
Indeed, a perusal of the records will show that
plaintiffs-appellees did not implead their other
co-heirs, either as plaintiffs or defendants in the
case. Their complaint squarely stated that
Pedro Quilatan had three children, namely,
Ciriaco Quilatan, Francisco Quilatan, and
Lorenzo Quilatan, who are now all deceased.
Ciriaco Quilatan is survived by his children,
namely, Purita Santos, Rosita Reyes, Renato
Quilatan, Danilo Quilatan, and Carlito Quilatan.
Defendants-appellants are the children of
Lorenzo Quilatan. The plaintiffs-appellees,
along with Solita Trapsi and Rolando Quilatan,
are the children of Francisco Quilatan.
However, Purita Santos, Rosita Reyes, Renato
Quilatan, Danilo Quilatan, Carlito Quilatan,
Solita Trapsi, and Rolando Quilatan were not
joined as parties in the instant case.9
The rationale for treating all the co-owners of a
property as indispensable parties in a suit
involving the co-owned property is explained in
Arcelona v. Court of Appeals:10
As held by the Supreme Court, were the courts
to permit an action in ejectment to be
maintained by a person having merely an
undivided interest in any given tract of land, a
judgment in favor of the defendants would not
be conclusive as against the other co-owners
not parties to the suit, and thus the defendant
in possession of the property might be
harassed by as many succeeding actions of
ejectment, as there might be co-owners of the
title asserted against him. The purpose of this
provision was to prevent multiplicity of suits by
requiring the person asserting a right against
the defendant to include with him, either as co-
plaintiffs or as co-defendants, all persons
standing in the same position, so that the
whole matter in dispute may be determined
once and for all in one litigation.
In fine, 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. Hence, the trial court should have
ordered the dismissal of the complaint.
WHEREFORE, the Petition for Review
on Certiorari is hereby DENIED. The Decision of
the Court of Appeals dated March 17, 2008 in
CA-G.R. CV No. 88851 which reversed the
decision of the Regional Trial Court of Pasig
City, Branch 266, for want of jurisdiction for
failure to implead all indispensable parties is
AFFIRMED. The case is REMANDED to the trial
court which is hereby DIRECTED to implead all
indispensable parties.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
G.R. No. 141970            METROBANK VS HON
ALLEJO
Certificate of Title (TCT) in which a real estate
mortgage is annotated, the mortgagee is an
indispensable party. In such suit, a decision
canceling the TCT and the mortgage annotation
is subject to a petition for annulment of
judgment, because the non-joinder of the
mortgagee deprived the court of jurisdiction to
pass upon the controversy.
The Case
Before this Court is a Petition for Review on
Certiorari1 under Rule 45 of the Rules of Court,
assailing the March 25, 1999 Resolution of the
Court of Appeals (CA) in CA-GR SP No. 50638,
which states in full:
"This resolves the petition for annulment of
judgment based on ‘external (sic) fraud’ filed by
petitioner Metropolitan Bank and Trust
Company seeking to annul the Decision dated
August 12, 1998 rendered by respondent judge,
Honorable Floro T. Alejo, Presiding Judge of the
Regional Trial Court, Branch 172, Valenzuela,
Metro Manila, in Civil Case No. 4930-V-96
entitled ‘Sy Tan Se, represented by his attorney-
in-fact Sian Suat Ngo v. Raul Acampado, et al.
"This Court has observed that petitioner knew
of the questioned Decision sometime [i]n
October 1998 (Petition, Rollo, p. 3). This being
the case, petitioner should have first sought
recourse by way of petition for relief from
judgment under Rule 38 of the 1997 Rules of
Civil Procedure. Accordingly, the petition for
annulment of judgment is DENIED DUE COURSE
and DISMISSED outright for being insufficient in
form and substance (Section 2, Rule 47, 1997
Rules of Civil Procedure)."
Also challenged is the January 27, 2000 CA
Resolution2 denying petitioner’s Motion for
Reconsideration.
The Facts
On November 21, 19953 and January 30,
1996,4 Spouses Raul and Cristina Acampado
obtained loans from petitioner in the amounts
of P5,000,000 and P2,000,000, respectively. As
security for the payment of these credit
accommodations, the Acampados executed in
favor of petitioner a Real Estate Mortgage5 and
an Amendment of Real Estate Mortgage6 over a
parcel of land registered in their names. The
land was covered by TCT No. V-41319 in the
Registry of Deeds of Valenzuela City, where the
contracts were also registered on November
20, 1995 and January 23, 1996, respectively.7
On June 3, 1996, a Complaint for Declaration of
Nullity of TCT No. V-41319 was filed by
Respondent Sy Tan Se against Spouses
Acampado. In the Regional Trial Court (RTC) of
Valenzuela, Branch 172, it was docketed as Civil
Case No. 4930-V-96,8 the progenitor of the
present controversy.
Despite being the registered mortgagee of the
real property covered by the title sought to be
annulled, petitioner was not made a party to
Civil Case No. 4930-V-96,9 nor was she notified
of its existence.
Because the spouses defaulted in the payment
of their loan, extrajudicial foreclosure
proceedings over the mortgaged property were
initiated on April 19, 1997.
On June 17, 1997, the sheriff of Valenzuela
conducted an auction sale of the property,
during which petitioner submitted the highest
and winning bid.10 On July 15, 1997, a
Certificate of Sale was issued in its favor.11 This
sale was entered in the Registry of Deeds of
Valenzuela on July 28, 1997.
When the redemption period lapsed exactly a
year after, on July 28, 1998, petitioner executed
an Affidavit of Consolidation of Ownership to
enable the Registry of Deeds of Valenzuela to
issue a new TCT in its name.
Upon presentation to the Register of Deeds of
the Affidavit of Consolidation of Ownership,
petitioner was informed of the existence of the
August 12, 1998 RTC Decision in Civil Case No.
4930-V-96, annulling TCT No. V-41319. The
dispositive portion of the Decision12 stated:
"WHEREFORE, judgment is hereby rendered
declaring as null and void Transfer Certificate of
Title No.V-41319 in the name of defendant Raul
Acampado for having proceeded from an
illegitimate source. With costs against the
defendant.
SO ORDERED."
On January 27, 1999, petitioner filed with the
Court of Appeals a Petition for Annulment of
the RTC Decision.
Ruling of the Court of Appeals
For being insufficient in form and substance,
the Petition for Annulment was outrightly
dismissed by the CA. It ruled that petitioner
ought to have filed, instead, a petition for relief
from judgment or an action for quieting of title.
Hence, this Petition.13
Issues
In its Memorandum, petitioner presents the
following issues:
"I
x x x [W]hether or not a petition for annulment
of judgment under Rule 47 of the 1997 Rules of
Civil Procedure is the proper remedy available
to petitioner under the circumstances."
"II
x x x [W]hether or not the judgment of the trial
court in Civil Case No. 4930-V-96 should be
annulled."14
The Court’s Ruling
The Petition is meritorious.
First Issue:
Proper Remedy
Respondents aver that a petition for annulment
is not proper, because there were three
different remedies available but they were not
resorted to by petitioner.
We are not persuaded. First, a petition for
relief, the remedy pointed to by the Court of
Appeals, was not available to petitioner.
Section 1, Rule 38 of the Rules of Court, states:
"Petition for relief from judgment, order, or
other proceedings.-When a judgment or final
order is entered, or any other proceeding is
thereafter taken against a party in any court
through fraud, accident, mistake, or excusable
negligence, he may file a petition in such court
and in the same case praying that the
judgment, order or proceeding be set aside."
(Italics supplied)
It must be emphasized that petitioner was
never a party to Civil Case No. 4930-V-96.
In Lagula et al. v. Casimiro et al.,15 the Court
held that -- relative to a motion for relief on the
ground of fraud, accident, mistake, or
excusable negligence -- Rule 38 of the Rules of
Court "only applies when the one deprived of
his right is a party to the case." Since petitioner
was never a party to the case or even
summoned to appear therein, then the remedy
of relief from judgment under Rule 38 of the
Rules of Court was not proper. This is plainly
provided in the italicized words of the present
provision just quoted.
Second, in denying petitioner’s Motion for
Reconsideration of the Decision dismissing the
Petition for Annulment of Judgment, the Court
of Appeals reasoned that another remedy, an
action for quieting of title, was also available to
petitioner.
We do not agree. It should be stressed that this
case was instituted to ask for relief from the
peremptory declaration of nullity of TCT No. V-
41319, which had been issued without first
giving petitioner an opportunity to be heard.
Petitioner focused on the judgment in Civil Case
No. 4930-V-96 which adversely affected it, and
which it therefore sought to annul. Filing an
action for quieting of title will not remedy what
it perceived as a disregard of due process; it is
therefore not an appropriate remedy.
Equally important, an action for quieting of title
is filed only when there is a cloud on title to
real property or any interest therein. As
defined, a "cloud on title is a semblance of title
which appears in some legal form but which is
in fact unfounded."16 In this case, the subject
judgment cannot be considered as a cloud on
petitioner’s title or interest over the real
property covered by TCT No. V-41319, which
does not even have a semblance of being a
title.
It would not be proper to consider the subject
judgment as a cloud that would warrant the
filing of an action for quieting of title, because
to do so would require the court hearing the
action to modify or interfere with the judgment
or order of another co-equal court. Well-
entrenched in our jurisdiction is the doctrine
that a court has no power to do so, as that
action may lead to confusion and seriously
hinder the administration of justice.17 Clearly,
an action for quieting of title is not an
appropriate remedy in this case.
Third, private respondent cites a last remedy:
the intervention by petitioner in Civil Case No.
4930-V-96. The availability of this remedy
hinges on petitioner’s knowledge of the
pendency of that case, which would have
otherwise been alerted to the need to
intervene therein. Though presumed by private
respondent, any such knowledge prior to
October 1998 is, however, emphatically denied
by petitioner.
The Petition for Annulment before the Court of
Appeals precisely alleged that private
respondent purposely concealed the case by
excluding petitioner as a defendant in Civil Case
No. 4930-V-96, even if the latter was an
indispensable party. Without due process of
law, the former intended to deprive petitioner
of the latter’s duly registered property right.
Indeed, the execution of the Decision in Civil
Case No. 4930-V-96 necessarily entailed its
enforcement against petitioner, even though it
was not a party to that case. Hence, the latter
concludes that annulment of judgment was the
only effective remedy open to it.
The allegation of extrinsic fraud, if fully
substantiated by a preponderance of evidence,
may be the basis for annulling a
judgment.18 The resort to annulment becomes
proper because of such allegation, coupled with
the unavailability of the other remedies pointed
to by respondents.
Second Issue:
Lack of Jurisdiction
It is undisputed that the property covered by
TCT No. V-41319 was mortgaged to petitioner,
and that the mortgage was annotated on TCT
No. V-41319 before the institution of Civil Case
No. 4930-V-96. It is also undisputed that all
subsequent proceedings pertaining to the
foreclosure of the mortgage were entered in
the Registry of Deeds. The nullification and
cancellation of TCT No. V-41319 carried with it
the nullification and cancellation of the
mortgage annotation.
Although a mortgage affects the land itself and
not merely the TCT covering it, the cancellation
of the TCT and the mortgage annotation
exposed petitioner to real prejudice, because
its rights over the mortgaged property would
no longer be known and respected by third
parties. Necessarily, therefore, the nullification
of TCT No. V-41319 adversely affected its
property rights, considering that a real
mortgage is a real right and a real property by
itself.19
Evidently, petitioner is encompassed within the
definition of an indispensable party; thus, it
should have been impleaded as a defendant in
Civil Case No. 4930-V-96.
"An indispensable party is a party who has such
an interest in the controversy or subject matter
that a final adjudication cannot be made, in his
absence, without injuring or affecting that
interest[;] a party who has not only an interest
in the subject matter of the controversy, but
also has an interest of such nature that a final
decree cannot be made without affecting his
interest or leaving the controversy in such a
condition that its final determination may be
wholly inconsistent with equity and good
conscience. It has also been considered that an
indispensable party is a person in whose
absence there cannot be a determination
between the parties already before the court
which is effective, complete, or equitable.
Further, an indispensable party is one who
must be included in an action before it may
properly go forward.
"A person is not an indispensable party,
however, if his interest in the controversy or
subject matter is separable from the interest of
the other parties, so that it will not necessarily
be directly or injuriously affected by a decree
which does complete justice between them."20
The joinder of indispensable parties to an
action is mandated by Section 7, Rule 3 of the
Revised Rules of Civil Procedures, which we
quote:
"SEC 7. Compulsory joinder of indispensable
parties. – Parties in interest without whom no
final determination can be had of an action
shall be joined either as plaintiffs or
defendants."
Aside from the above provision, jurisprudence
requires such joinder, as the following excerpts
indicate:
"Indispensable parties must always be joined
either as plaintiffs or defendants, for the court
cannot proceed without them. x x x.
Indispensable parties are those with such an
interest in the controversy that a final decree
would necessarily affect their rights, so that the
courts cannot proceed without their
presence."21
"x x x. Without the precence of indispensable
parties to a suit or proceeding, a judgment of a
Court cannot attain real finality."22
"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 to order the inclusion of such
party. (The Revised Rules of Court, Annotated &
Commented by Senator Vicente J. Francisco,
Vol. I, p. 271, 1973 ed., See also Cortez vs. Avila,
101 Phil. 705.) Such an order is unavoidable, for
the ‘general rule with reference to the making
of parties in a civil action requires the joinder of
all necessary parties wherever possible, and the
joinder of all indispensable parties under any
and all conditions, the presence of those latter
parties being a sine qua non of the exercise of
judicial power.’ (Borlasa vs. Polistico, 47 Phil.
345, at p. 347.) It is precisely ‘when an
indispensable party is not before the court
(that) the action should be dismissed.’ (People
vs. Rodriguez, 106 Phil. 325. at p. 327.) The
absence of an indispensable party renders all
subsequent actuations 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."23 (emphasis supplied)
"The evident aim and intent of the Rules
regarding the joinder of indispensable and
necessary parties is a complete determination
of all possible issues, not only between the
parties themselves but also as regards to other
persons who may be affected by the judgment.
A valid judgment cannot even be rendered
where there is want of indispensable parties."24
From the above, it is clear that 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."25 We stress that the absence of
indispensable parties renders all subsequent
actuations of the court null and void, because
of that court’s want of authority to act, not only
as to the absent parties but even as to those
present.
It is argued that petitioner cannot possibly be
an indispensable party, since the mortgage may
not even be valid because of the possible
absence of compliance with the
requirement26 that the mortgagor be the
absolute owner of the thing mortgaged. It
should be emphasized, however, that at the
time the mortgage was constituted, there was
an existing TCT (No. V-41319), which named the
mortgagors, the Acampado spouses, as the
registered owners of the property. In Seno v.
Mangubat 27 this Court held as follows:
"The well-known rule in this jurisdiction is that
a person dealing with a registered land has a
right to rely upon the face of the Torrens
Certificate of Title and to dispense with the
need of inquiring further, except when the
party concerned has actual knowledge of facts
and circumstances that would impel a
reasonably cautious man to make such inquiry.
"Thus, where innocent third persons relying on
the correctness of the certificate of title issued,
acquire rights over the property, the court
cannot disregard such rights and order the total
cancellation of the certificate for that would
impair public confidence in the certificate of
title; otherwise everyone dealing with property
registered under the Torrens system would
have to inquire in every instance as to whether
the title ha[s] been regularly or irregularly
issued by the court. Indeed this is contrary to
the evident purpose of the law."
The peremptory disregard of the annotations
registered and entered in TCT No. V-41319
constituted a deprivation of private property
without due process of law and was therefore
unquestionably unjust and iniquitous. This, we
cannot countenance.
Clearly, it was the trial court’s duty to order
petitioner’s inclusion as a party to Civil Case No.
4930-V-96. This was not done. Neither the
court nor private respondents bothered to
implead petitioner as a party to the case. In the
absence of petitioner, an indispensable party,
the trial court had no authority to act on the
case. Its judgment therein was null and void
due to lack of jurisdiction over an indispensable
party.
28
In Leonor v. Court of Appeals  and Arcelona v.
Court of Appeals,29 we held thus:
"A void judgment for want of jurisdiction is no
judgment at all. It cannot be the source of any
right nor the creator of any obligation. All acts
performed pursuant to it and all claims
emanating from it have no legal effect. Hence,
it can never become final and any writ of
execution based on it is void:"x x x it may be
said to be a lawless thing which can be treated
as an outlaw and slain at sight, or ignored
wherever and whenever it exhibits its head."
WHEREFORE, the Petition is GRANTED and the
assailed Resolutions of the Court of Appeals
are REVERSED. The Decision of the Regional
Trial Court in Civil Case No. 4930-V-41319 is
hereby NULLIFIED and SET ASIDE. No costs.
SO ORDERED.
G.R. No. 189486               GUY VS GUY
THE FACTS
With 519,997 shares of stock as reflected in
Stock Certificate Nos. 004-014, herein
respondent Gilbert G. Guy (Gilbert) practically
owned almost 80 percent of the 650,000
subscribed capital stock of GoodGold Realty &
Development Corporation (GoodGold), 1 one of
the multi-million corporations which Gilbert
claimed to have established in his 30s.
GoodGold’s remaining shares were divided
among Francisco Guy (Francisco) with 130,000
shares, Simny Guy (Simny), Benjamin Lim and
Paulino Delfin Pe, with one share each,
respectively. Gilbert is the son of spouses
Francisco and Simny. Simny, one of the
petitioners, however, alleged that it was she
and her husband who established GoodGold,
putting the bulk of its shares under Gilbert’s
name. She claimed that with their eldest son,
Gaspar G. Guy (Gaspar), having entered the
Focolare Missionary in 1970s, renouncing
worldly possessions,2 she and Francisco put the
future of the Guy group of companies in
Gilbert’s hands. Gilbert was expected to bring
to new heights their family multi-million
businesses and they, his parents, had high
hopes in him.
Simny further claimed that upon the advice of
their lawyers, upon the incorporation of
GoodGold, they issued stock certificates
reflecting the shares held by each stockholder
duly signed by Francisco as President and Atty.
Emmanuel Paras as Corporate Secretary, with
corresponding blank endorsements at the back
of each certificate – including Stock Certificate
Nos. 004-014 under Gilbert’s name.3 These
certificates were all with Gilbert’s irrevocable
endorsement and power of attorney to have
these stocks transferred in the books of
corporation.4 All of these certificates were
always in the undisturbed possession of the
spouses Francisco and Simny, including Stock
Certificate Nos. 004-014.5
In 1999, the aging Francisco instructed
Benjamin Lim, a nominal shareholder of
GoodGold and his trusted employee, to
collaborate with Atty. Emmanuel Paras, to
redistribute GoodGold’s shareholdings evenly
among his children, namely, Gilbert, Grace Guy-
Cheu (Grace), Geraldine Guy (Geraldine), and
Gladys Guy (Gladys), while maintaining a
proportionate share for himself and his wife,
Simny.6
Accordingly, some of GoodGold’s certificates
were cancelled and new ones were issued to
represent the redistribution of GoodGold’s
shares of stock. The new certificates of stock
were signed by Francisco and Atty. Emmanuel
Paras, as President and Corporate Secretary,
respectively.
The shares of stock were distributed among the
following stockholders:
In September 2004, or five years after the
redistribution of GoodGold’s shares of stock,
Gilbert filed with the Regional Trial Court (RTC)
of Manila, a Complaint for the "Declaration of
Nullity of Transfers of Shares in GoodGold and
of General Information Sheets and Minutes of
Meeting, and for Damages with Application for
a Preliminary Injunctive Relief," against his
mother, Simny, and his sisters, Geraldine,
Grace, and Gladys.8 Gilbert alleged, among
others, that no stock certificate ever
existed;9 that his signature at the back of the
spurious Stock Certificate Nos. 004-014 which
purportedly endorsed the same and that of the
corporate secretary, Emmanuel Paras, at the
obverse side of the certificates were forged,
and, hence, should be nullified.10
Gilbert, however, withdrew the complaint,
after the National Bureau of Investigation (NBI)
submitted a report to the RTC of Manila
authenticating Gilbert’s signature in the
endorsed certificates.11 The NBI report stated:
FINDINGS:
Comparative analysis of the specimens
submitted under magnification using varied
lighting process and with the aid of
photographic enlargements disclosed the
presence of significant and fundamental
similarities in the personal handwriting habits
existing between the questioned signatures of
"GILBERT G. GUY" and "EMMANUEL C. PARAS,"
on one hand, and their corresponding standard
specimen/exemplar signatures, on the other
hand, such as in:
- Basic design of letters/elements;
- Manner of execution/line quality;
- Minute identifying details.
CONCLUSION:
A. The questioned and the standard
specimen/exemplar signatures of Gilbert G.
Guy were written by one and the same person;
B. The questioned and the standard
specimen/exemplar signatures of "EMMANUEL
C. PARAS" were written by one and the same
person. (Emphasis supplied)12
The present controversy arose, when in 2008,
three years after the complaint with the RTC of
Manila was withdrawn, Gilbert again filed a
complaint, this time, with the RTC of
Mandaluyong, captioned as "Intra-Corporate
Controversy: For the Declaration of Nullity of
Fraudulent Transfers of Shares of Stock
Certificates, Fabricated Stock Certificates,
Falsified General Information Sheets, Minutes
of Meetings, and Damages with Application for
the Issuance of a Writ of Preliminary and
Mandatory Injunction," docketed as SEC-MC08-
112, against his mother, Simny, his sisters,
Geraldine, Gladys, and the heirs of his late
sister Grace.13
Gilbert alleged that he never signed any
document which would justify and support the
transfer of his shares to his siblings and that he
has in no way, disposed, alienated,
encumbered, assigned or sold any or part of his
shares in GoodGold.14 He also denied the
existence of the certificates of stocks.
According to him, "there were no certificates of
stocks under his name for the shares of stock
subscribed by him were never issued nor
delivered to him from the time of the inception
of the corporation."15
Gilbert added that the Amended General
Information Sheets (GIS) of GoodGold for the
years 2000 to 2004 which his siblings submitted
to the Securities and Exchange Commission
(SEC) were spurious as these did not reflect his
true shares in the corporation which
supposedly totaled to 595,000 shares;16 that no
valid stockholders’ annual meeting for the year
2004 was held, hence proceedings taken
thereon, including the election of corporate
officers were null and void;17 and, that his
siblings are foreign citizens, thus, cannot own
more than forty percent of the authorized
capital stock of the corporation.18
Gilbert also asked in his complaint for the
issuance of a Writ of Preliminary and
Mandatory Injunction to protect his rights.19
In an Order dated 30 June 2008,20 the RTC
denied Gilbert’s Motion for Injunctive
Relief21 which constrained him to file a motion
for reconsideration, and, thereafter, a Motion
for Inhibition against Judge Edwin Sorongon,
praying that the latter recuse himself from
further taking part in the case.
Meanwhile, Gilbert’s siblings filed a
manifestation claiming that the complaint is a
nuisance and harassment suit under Section
1(b), Rule 1 of the Interim Rules of Procedure
on Intra-Corporate Controversies.
In an Order dated 6 November 2008,22 the RTC
denied the motion for inhibition. The RTC also
dismissed the case, declaring it a nuisance and
harassment suit, viz.:
WHEREFORE, the court resolves:
(1) To DENY as it is hereby DENIED
respondent’s Motion for Inhibition;
(2) To DENY as it is hereby DENIED
respondent’s Motion for Reconsideration of the
June 30, 2008 Order; and,
(3) To declare as it is herby declared the instant
case as a nuisance or harassment suit.
Accordingly, pursuant to Section 1(b), Rule 1 of
the Interim Rules of Procedure for Intra-
Corporate Dispute, the instant case is hereby
DISMISSED. No pronouncement as to costs.23
This constrained Gilbert to assail the above
Order before the Court of Appeals (CA). The
petition for review was docketed as CA-G.R. SP
No. 106405.
In a Decision24 dated 27 May 2009, the CA
upheld Judge Sorongon’s refusal to inhibit from
hearing the case on the ground that Gilbert
failed to substantiate his allegation of Judge
Sorongon’s partiality and bias.25
The CA, in the same decision, also denied
Gilbert’s Petition for the Issuance of Writ of
Preliminary Injunction for failure to establish a
clear and unmistakable right that was violated
as required under Section 3, rule 58 of the 1997
Rules of Civil Procedure.26
The CA, however, found merit on Gilbert’s
contention that the complaint should be heard
on the merits. It held that:
A reading of the Order, supra, dismissing the
respondent’s complaint for being a harassment
suit revealed that the court a quo relied heavily
on the pieces of documentary evidence
presented by the Petitioners to negate
Respondent’s allegation of fraudulent transfer
of shares of stock, fabrication of stock
certificates and falsification of General
Information Sheets (GIS), inter alia. It bears
emphasis that the Respondent is even
questioning the genuiness and authenticity of
the Petitioner’s documentary evidence. To our
mind, only a full-blown trial on the merits can
afford the determination of the genuineness
and authenticity of the documentary evidence
and other factual issues which will ultimately
resolve whether there was indeed a transfer of
shares of stock.27
Hence, these consolidated petitions.
G.R. No. 189486 is a Petition for Review under
Rule 45 of the Rules of Court filed by Simny,
Geraldine, Gladys, and the heirs of the late
Grace against Gilbert, which prays that this
Court declare Civil Case No. SEC-MC08-112, a
harassment or nuisance suit.
Meanwhile, during the pendency of G.R. No.
189486, the trial court set the pre-trial
conference on the case subject of this
controversy, constraining the petitioners to file
a Motion to defer the pre-trial, which was,
however, denied by the court a quo in an Order
dated 11 September 2009,28 viz.:
In a Resolution dated September 3, 2009, the
Honorable Court of Appeals (CA) (Former
Second Division) denied the Motion for Partial
Reconsideration filed [by petitioners] herein.
Inasmuch as there is no longer any impediment
to proceed with the instant case and the fact
that this court was specifically directed by the
May 27, 2009 Decision of the CA Second
Division to proceed with the trial on the merits
with dispatch, this court resolves to deny the
motion under consideration.
WHEREFORE, premises considered, the Motion
to Defer Pre-Trial Conference and Further
Proceedings filed by petitioners is hereby
DENIED. Set the pre-trial on October 20, 2009,
at 8:30 in the morning.
The denial of the petitioners’ motion to defer
pre-trial, compelled them to file with this Court
a Petition for Certiorari with Urgent Application
for the Issuance of TRO and/or A Writ of
Preliminary Injunction, docketed as G.R. No.
189699. Because of the pendency of the G.R.
No. 189486 before us, the petitioners deemed
proper to question the said denial before us as
an incident arising from the main controversy.29
OUR RULING
Suits by stockholders or members of a
corporation based on wrongful or fraudulent
acts of directors or other persons may be
classified into individual suits, class suits, and
derivative suits.30
An individual suit may be instituted by a
stockholder against another stockholder for
wrongs committed against him personally, and
to determine their individual rights31 – this is an
individual suit between stockholders. But an
individual suit may also be instituted against a
corporation, the same having a separate
juridical personality, which by its own may be
sued. It is of course, essential that the suing
stockholder has a cause of action against the
corporation.32
Individual suits against another stockholder or
against a corporation are remedies which an
aggrieved stockholder may avail of and which
are recognized in our jurisdiction as embedded
in the Interim Rules on Intra-Corporate
Controversy. Together with this right is the
parallel obligation of a party to comply with the
compulsory joinder of indispensable parties
whether they may be stockholders or the
corporation itself.
The absence of an indispensable
party in a case 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.33
It bears emphasis that this controversy started
with Gilbert’s complaint filed with the RTC of
Mandaluyong City in his capacity as
stockholder, director and Vice-President of
GoodGold.34
Gilbert’s complaint essentially prayed for the
return of his original 519,997 shares in
GoodGold, by praying that the court declare
that "there were no valid transfers of the
contested shares to defendants and
Francisco."35 It baffles this Court, however, that
Gilbert omitted Francisco as defendant in his
complaint. While Gilbert could have opted to
waive his shares in the name of Francisco to
justify the latter’s non-inclusion in the
complaint, Gilbert did not do so, but instead,
wanted everything back and even wanted the
whole transfer of shares declared fraudulent.
This cannot be done, without including
Francisco as defendant in the original case. The
transfer of the shares cannot be, as Gilbert
wanted, declared entirely fraudulent without
including those of Francisco who owns almost a
third of the total number.
Francisco, in both the 2004 and 2008
complaints, is an indispensable party without
whom no final determination can be had for
the following reasons: (a) the complaint prays
that the shares now under the name of the
defendants and Francisco be declared
fraudulent; (b) Francisco owns 195,000 shares
some of which, Gilbert prays be returned to
him; (c) Francisco signed the certificates of
stocks evidencing the alleged fraudulent shares
previously in the name of Gilbert. The inclusion
of the shares of Francisco in the complaint
makes Francisco an indispensable party.
Moreover, the pronouncement about the
shares of Francisco would impact on the
hereditary rights of the contesting parties or on
the conjugal properties of the spouses to the
effect that Francisco, being husband of Simny
and father of the other contesting parties, must
be included for, otherwise, in his absence,
there cannot be a determination between the
parties already before the court which is
effective, complete, or equitable.
The definition in the Rules of Court, Section 7,
Rule 3 thereof, of indispensable parties as
"parties in interest without whom no final
determination can be had of an action" has
been jurisprudentially amplified. In Sps. Garcia
v. Garcia, et.al.,36 this Court held that:
An indispensable party is a party who has such
an interest in the controversy or subject matter
that a final adjudication cannot be made, in his
absence, without injuring or affecting that
interest, a party who has not only an interest in
the subject matter of the controversy, but also
has an interest of such nature that a final
decree cannot be made without affecting his
interest or leaving the controversy in such a
condition that its final determination may be
wholly inconsistent with equity and good
conscience. It has also been considered that an
indispensable party is a person in whose
absence there cannot be a determination
between the parties already before the court
which is effective, complete, or equitable.
Further, an indispensable party is one who
must be included in an action before it may
properly go forward.
This was our pronouncements in Servicewide
Specialists Inc. v. CA,37 Arcelona v. CA,38 and
Casals v. Tayud Golf and Country Club, Inc.39
Settled is the rule that joinder of indispensable
parties is compulsory40 being a sine qua non for
the exercise of judicial power,41 and, it is
precisely "when an indispensable party is not
before the court that the action should be
dismissed" for such absence 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.42
It bears emphasis that Gilbert, while suing as a
stockholder against his co-stockholders, should
have also impleaded GoodGold as defendant.
His complaint also prayed for the annulment of
the 2004 stockholders’ annual meeting, the
annulment of the 2004 election of the board of
directors and of its officers, the annulment of
2004 GIS submitted to the SEC, issuance of an
order for the accounting of all monies and
rentals of GoodGold, and the issuance of a writ
of preliminary and mandatory injunction. We
have made clear that GoodGold is a separate
juridical entity distinct from its stockholders
and from its directors and officers. The trial
court, acting as a special commercial court,
cannot settle the issues with finality without
impleading GoodGold as defendant. Like
Francisco, and for the same reasons, GoodGold
is an indispensable party which Gilbert should
have impleaded as defendant in his complaint.
Allegations of deceit, machination,
false pretenses, misrepresentation,
and threats are largely conclusions
of law that, without supporting
statements of the facts to which the
allegations of fraud refer, do not
sufficiently state an effective cause of
action.43
"In all averments of fraud or mistake, the
circumstances constituting fraud or mistake
must be stated with particularity"44 to "appraise
the other party of what he is to be called on to
answer, and so that it may be determined
whether the facts and circumstances alleged
amount to fraud."45 These particulars would
necessarily include the time, place and specific
acts of fraud committed.46 "The reason for this
rule is that an allegation of fraud concerns the
morality of the defendant’s conduct and he is
entitled to know fully the ground on which the
allegations are made, so he may have every
opportunity to prepare his case to clear himself
at the trial."47
The complaint of Gilbert states:
13. The said spurious Amended GIS for the
years 2000, 2001, 2002, 2003, 2004 and also in
another falsified GIS for the year 2004, the
petitioners indicated the following alleged
stockholders of GOODGOLD with their
respective shareholdings, to wit:
14. The above spurious GIS would show that
form the original 519,997 shares of stocks
owned by the respondent, which is equivalent
to almost 80% of the total subscriptions and/or
the outstanding capital stock of GOODGOLD,
respondent’s subscription was drastically
reduced to only 65,000 shares of stocks which
is merely equivalent to only 10 percent of the
outstanding capital stock of the corporation.
15. Based on the spurious GIS, shares
pertaining to Benjamin Lim and Paulino Delfin
Pe were omitted and the total corporate shares
originally owned by incorporators including
herein respondent have been fraudulently
transferred and distributed, as follows: x x x
(Emphasis supplied)
18. To date, respondent is completely unaware
of any documents signed by him that would
justify and support the foregoing transfer of his
shares to the defendants. Respondent strongly
affirms that he has not in any way, up to this
date of filing the instant complaint, disposed,
alienated, encumbered, assigned or sold any or
part of the shares of stocks of GOODGOLD
corporation owned by him and registered
under his name under the books of the
corporation.
19. Neither has respondent endorsed, signed,
assigned any certificates of stock representing
the tangible evidence of his stocks ownership,
there being no certificates of stocks issued by
the corporation nor delivered to him since its
inception on June 6, 1988. Considering that the
corporation is merely a family corporation,
plaintiff does not find the issuance of stock
certificates necessary to protect his corporate
interest and he did not even demand for its
issuance despite the fact that he was the sole
subscriber who actually paid his subscription at
the time of incorporation.48
Tested against established standards, we find
that the charges of fraud which Gilbert accuses
his siblings are not supported by the required
factual allegations. In Reyes v. RTC of
Makati,49 which we now reiterate, mutatis
mutandis, while the complaint contained
allegations of fraud purportedly committed by
his siblings, these allegations are not particular
enough to bring the controversy within the
special commercial court’s jurisdiction; they are
not statements of ultimate facts, but are mere
conclusions of law: how and why the alleged
transfer of shares can be characterized as
"fraudulent" were not explained and
elaborated on.50 As emphasized in Reyes:
Not every allegation of fraud done in a
corporate setting or perpetrated by corporate
officers will bring the case within the special
commercial court’s jurisdiction. To fall within
this jurisdiction, there must be sufficient nexus
showing that the corporation’s nature,
structure, or powers were used to facilitate the
fraudulent device or scheme.51 (Emphasis
supplied)
Significantly, no corporate power or office was
alleged to have facilitated the transfer of
Gilbert’s shares. How the petitioners
perpetrated the fraud, if ever they did, is an
indispensable allegation which Gilbert must
have had alleged with particularity in his
complaint, but which he failed to.
Failure to specifically allege the
fraudulent acts in intra-corporate
controversies is indicative of a
harassment or nuisance suit and may
be dismissed motu proprio.
In ordinary cases, the failure to specifically
allege the fraudulent acts does not constitute a
ground for dismissal since such a defect can be
cured by a bill of particulars.52 Thus:
Failure to allege fraud or mistake with as much
particularity as is desirable is not fatal if the
general purport of the claim or defense is clear,
since all pleadings should be so construed as to
do substantial justice. Doubt as to the meaning
of the pleading may be resolved by seeking a
bill of particulars.
A bill of particulars may be ordered as to a
defense of fraud or mistake if the
circumstances constituting fraud or mistake are
not stated with the particularity required by the
rule.53
The above-stated rule, however, does not apply
to intra-corporate controversies. In Reyes, 54 we
pronounced that "in cases governed by the
Interim Rules of Procedure on Intra-Corporate
Controversies a bill of particulars is a prohibited
pleading. It is essential, therefore, for the
complaint to show on its face what are claimed
to be the fraudulent corporate acts if the
complainant wishes to invoke the court’s
special commercial jurisdiction." This is because
fraud in intra-corporate controversies must be
based on "devises and schemes employed by,
or any act of, the board of directors, business
associates, officers or partners, amounting to
fraud or misrepresentation which may be
detrimental to the interest of the public and/or
of the stockholders, partners, or members of
any corporation, partnership, or association,"
as stated under Rule 1, Section 1 (a)(1) of the
Interim Rules. The act of fraud or
misrepresentation complained of becomes a
criterion in determining whether the complaint
on its face has merits, or within the jurisdiction
of special commercial court, or merely a
nuisance suit.
It did not escape us that Gilbert, instead of
particularly describing the fraudulent acts that
he complained of, just made a sweeping denial
of the existence of stock certificates by claiming
that such were not necessary, GoodGold being
a mere family corporation.55 As sweeping and
bereft of particulars is his claim that he "is
unaware of any document signed by him that
would justify and support the transfer of his
shares to herein petitioners."56 Even more
telling is the contradiction between the denial
of the existence of stock certificates and the
denial of the transfer of his shares of stocks
"under his name under the books of the
corporations."
It is unexplained that while Gilbert questioned
the authenticity of his signatures indorsing the
stock certificates, and that of Atty. Emmanuel
Paras, the corporate secretary, he did not put in
issue as doubtful the signature of his father
which also appeared in the certificate as
President of the corporation. Notably, Gilbert,
during the entire controversy that started with
his 2004 complaint, failed to rebut the NBI
Report which authenticated all the signatures
appearing in the stock certificates.
Even beyond the vacant pleadings, its nature as
nuisance is palpable. To recapitulate, it was
only after five years following the redistribution
of GoodGold’s shares of stock, that Gilbert filed
with the RTC of Manila, a Complaint for the
"Declaration of Nullity of Transfers of Shares in
GoodGold and of General Information Sheets
and Minutes of Meeting, and for Damages with
Application for a Preliminary Injunctive Relief,"
against his mother, Simny, and his sisters,
Geraldine, Grace, and Gladys.57 Gilbert alleged,
among others, that no stock certificate ever
existed;58 that his signature at the back of the
spurious Stock Certificate Nos. 004-014 which
purportedly endorsed the same and that of the
corporate secretary, Emmanuel Paras, at the
obverse side of the certificates were forged,
and, hence, should be nullified.59 Gilbert
withdrew this complaint after the NBI
submitted a report to the RTC of Manila
authenticating Gilbert’s signature in the
endorsed certificates. And, it was only after
three years from the withdrawal of the Manila
complaint, that Gilbert again filed in 2008 a
complaint also for declaration of nullity of the
transfer of the shares of stock, this time with
the RTC of Mandaluyong. The caption of the
complaint is "Intra-Corporate Controversy: For
the Declaration of Nullity of Fraudulent
Transfers of Shares of Stock Certificates,
Fabricated Stock Certificates, Falsified General
Information Sheets, Minutes of Meetings, and
Damages with Application for the Issuance of a
Writ of Preliminary and Mandatory Injunction,"
docketed as SEC-MC08-112, against his mother,
Simny, his sisters, Geraldine, Gladys, and the
heirs of his late sister Grace.60 1âwphi1
When a stock certificate is endorsed
in blank by the owner thereof, it
constitutes what is termed as "street
certificate," so that upon its face, the
holder is entitled to demand its
transfer his name from the issuing
corporation.
With Gilbert’s failure to allege specific acts of
fraud in his complaint and his failure to rebut
the NBI report, this Court pronounces, as a
consequence thereof, that the signatures
appearing on the stock certificates, including
his blank endorsement thereon were authentic.
With the stock certificates having been
endorsed in blank by Gilbert, which he himself
delivered to his parents, the same can be
cancelled and transferred in the names of
herein petitioners.
In Santamaria v. Hongkong and Shanghai
Banking Corp.,61 this Court held that when a
stock certificate is endorsed in blank by the
owner thereof, it constitutes what is termed as
"street certificate," so that upon its face, the
holder is entitled to demand its transfer into his
name from the issuing corporation. Such
certificate is deemed quasi-negotiable, and as
such the transferee thereof is justified in
believing that it belongs to the holder and
transferor.1âwphi1
While there is a contrary ruling, as an exception
to the general rule enunciated above, what the
Court held in Neugene Marketing Inc., et al., v
CA,62 where stock certificates endorsed in blank
were stolen from the possession of the
beneficial owners thereof constraining this
Court to declare the transfer void for lack of
delivery and want of value, the same cannot
apply to Gilbert because the stock certificates
which Gilbert endorsed in blank were in the
undisturbed possession of his parents who
were the beneficial owners thereof and who
themselves as such owners caused the transfer
in their names. Indeed, even if Gilbert’s parents
were not the beneficial owners, an
endorsement in blank of the stock certificates
coupled with its delivery, entitles the holder
thereof to demand the transfer of said stock
certificates in his name from the issuing
corporation.63
Interestingly, Gilbert also used the above
discussed reasons as his arguments in Gilbert
Guy v. Court of Appeals, et a.l,64 a case earlier
decided by this Court. In that petition, Lincoln
Continental, a corporation purportedly owned
by Gilbert, filed with the RTC, Branch 24,
Manila, a Complaint for Annulment of the
Transfer of Shares of Stock against Gilbert’s
siblings, including his mother, Simny. The
complaint basically alleged that Lincoln
Continental owns 20,160 shares of stock of
Northern Islands; and that Gilbert’s siblings, in
order to oust him from the management of
Northern Islands, falsely transferred the said
shares of stock in his sisters’ names.65 This Court
dismissed Gilbert’s petition and ruled in favor
of his siblings viz:
One thing is clear. It was established before the
trial court, affirmed by the Court of Appeals,
that Lincoln Continental held the disputed
shares of stock of Northern Islands merely in
trust for the Guy sisters. In fact, the evidence
proffered by Lincoln Continental itself supports
this conclusion. It bears emphasis that this
factual finding by the trial court was affirmed
by the Court of Appeals, being supported by
evidence, and is, therefore, final and conclusive
upon this Court.
Article 1440 of the Civil Code provides that:
"ART. 1440. A person who establishes a trust is
called the trustor; one in whom confidence is
reposed as regards property for the benefit of
another person is known as the trustee; and
the person for whose benefit the trust has been
created is referred to as the beneficiary."
In the early case of Gayondato v. Treasurer of
the Philippine Islands, this Court defines trust,
in its technical sense, as "a right of property,
real or personal, held by one party for the
benefit of another." Differently stated, a trust is
"a fiduciary relationship with respect to
property, subjecting the person holding the
same to the obligation of dealing with the
property for the benefit of another person."
Both Lincoln Continental and Gilbert claim that
the latter holds legal title to the shares in
question. But record shows that there is no
evidence to support their claim. Rather, the
evidence on record clearly indicates that the
stock certificates representing the contested
shares are in respondents' possession.
Significantly, there is no proof to support his
allegation that the transfer of the shares of
stock to respondent sisters is fraudulent. As
aptly held by the Court of Appeals, fraud is
never presumed but must be established by
clear and convincing evidence. Gilbert failed to
discharge this burden. We agree with the Court
of Appeals that respondent sisters own the
shares of stocks, Gilbert being their mere
trustee. 66 (Underlining supplied).
This Court finds no cogent reason to divert
from the above stated ruling, these two cases
having similar facts.
WHEREFORE, premises considered, the
petitions in G.R. Nos. 189486 and 189699 are
hereby GRANTED. The Decision dated 27 May
2009 of the Court of Appeals in CA-G .R. SP No.
106405 and its Resolution dated 03 September
2009 are REVERSED and SET ASIDE. The
Court DECLARES that SEC-MC08-112 now
pending before the Regional Trial Court, Branch
211, Mandaluyong City, is a nuisance suit and
hereby ORDERS it to IMMEDIATELY DISMISS the
same for reasons discussed herein.
SO ORDERED.
G.R. No. 169276               MONIS VS VELASCO
DECISION
NACHURA, J.:
For review is the Court of Appeals (CA)
Decision1 dated July 13, 2005 in CA-G.R. CV No.
56998 affirming with modification the Regional
Trial Court (RTC) Decision2 dated April 24, 1997
in Civil Case No. 466 for Annulment of
Documents and Damages.
The facts, as culled from the records, are as
follows:
Rev. Fr. Patricio (Patricio), Magdalena Catalina
(Magdalena), Venancio, and respondent
Macaria, all surnamed Monis, as well as
respondent Andrea Monis - Velasco (Andrea),
are siblings. Venancio is the father of
petitioners Dionisia Monis Lagunilla and Rafael
Monis. During their lifetime, Patricio and
Magdalena acquired several properties which
included several parcels of land in the province
of La Union and another one situated in
Quezon City, with an area of 208.35 sq. m.
(otherwise known as the Quezon City
property).3 The Quezon City property was co-
owned by Patricio and Magdalena, together
with Andrea and Pedro Velasco.
After the death of Patricio and Magdalena, or
on February 24, 1993, Andrea and Macaria (to
the exclusion of Venancio’s children) executed
a Deed of Extrajudicial Settlement with
Donation4 (hereinafter referred to as the
subject Deed) involving the Quezon City
property, and donated the same to Andrea’s
son, Pedro Monis Velasco, Jr. (Pedro). By virtue
of said Deed, Transfer Certificate of Title (TCT)
No. RT-60455 (190472)5 was cancelled and a
new one (TCT No. 85837) was issued in the
name of Pedro.6
On June 1, 1993, petitioners instituted an
action for Annulment of Documents and
Damages7 before the Regional Trial Court (RTC)
of Balaoan, La Union against respondents. The
case was raffled to Branch 34 and was docketed
as Civil Case No. 466. In their complaint,
petitioners sought the annulment of the subject
Deed, allegedly because of the fraudulent act
committed by respondents in executing the
same. They claimed that respondents
misrepresented that they were the only
surviving heirs of Patricio and Magdalena when,
in fact, they (petitioners) were also surviving
heirs by virtue of their right to represent their
deceased father Venancio. In short, being
Patricio and Magdalena’s nephew and niece,
they were asserting their rights, as co-heirs, to
the Quezon City property. Respondents’
fraudulent act was, according to petitioners, a
ground for the annulment of the subject Deed.
As a consequence of the nullity of the
extrajudicial settlement, they further sought
the cancellation of the title and tax declarations
issued pursuant thereto, in the name of Pedro.
Respondents countered that nowhere in the
subject Deed did they assert to be the only
surviving heirs of Patricio and Magdalena.
Admittedly, however, they claimed to be the
only legitimate sisters of the deceased. They
added that annulment of the Deed was not
tenable, considering that petitioners already
received advances on their share of the
properties of the decedent; besides, there were
other properties that had not been the subject
of partition from which they could obtain
reparation, if they are so entitled. Contrary to
petitioners’ claim, respondents insisted that
there was no way that the subject Deed could
be annulled in the absence of any valid ground
to rely on.8
No amicable settlement was reached during the
pre-trial; thus, trial on the merits ensued.
After petitioners rested their case, they moved
for the amendment of the complaint to
implead additional party and to conform to the
evidence presented.9 Petitioners averred that
the resolution of the case would affect the
interest of Pedro as donee; hence, he is an
indispensable party. The RTC, however, denied
the motion, as the amendment of the
complaint would result in the introduction of a
different cause of action prejudicial to
respondents. The court further held that the
amendment of the complaint would unduly
delay the resolution of the case.
On April 24, 1997, the RTC decided in favor of
respondents, disposing, as follows:
WHEREFORE, taken in the above light, the
Court hereby orders the case DISMISSED and
further orders the plaintiffs to pay the
defendants jointly and severally the following,
thus:
1) ₱100,000.00 as moral damages;
2) ₱50,000.00 as exemplary damages;
3) ₱100,000.00 as attorney’s fees; and
4) To pay the costs of this suit.
SO ORDERED.10
Applying Article 887 of the Civil Code, the RTC
ruled that petitioners are not compulsory heirs;
thus, they could not invoke bad faith as a
ground to rescind the subject Deed. As to
respondents’ declaration that they were the
only surviving heirs of the decedents, the trial
court said that it was, in a way, a non-
recognition of petitioners’ claim that they, too,
are heirs. The court, likewise, gave credence to
respondents’ claim that petitioners had
previously received advances on their share of
the inheritance. As to the remedy of rescission,
the court declared that it was not available in
the instant case because of the existence of
other remedies that may be availed of by
petitioners, considering that there were other
properties from which they could obtain
reparation, assuming they are entitled.11
On appeal to the Court of Appeals, the
appellate court affirmed with modification the
trial court’s decision, viz.:
WHEREFORE, premises considered, the assailed
decision dated April 24, 1997 of the Regional
Trial Court of Balao[a]n, La Union in Civil Case
No. 466 is hereby AFFIRMED with
MODIFICATION, in that the award of exemplary
damages and attorney’s fees is deleted. No
pronouncement as to costs.
SO ORDERED.12
The appellate court made a definitive
conclusion that petitioners, together with
respondents, are heirs of Macaria and Patricio.
However, considering that petitioners are not
compulsory heirs, it agreed with the RTC that
they could not use "bad faith" as a ground to
rescind the contract as provided for in Article
1104 of the New Civil Code. The appellate court
also agreed with the trial court that bad faith
on the part of respondents was wanting. While
recognizing the doctrine that the subject Deed
was not binding on petitioners because they did
not participate therein, the appellate court
refused to annul the contract on the basis
thereof, in view of the existence of other
properties previously received by petitioners
and those that may still be the subject of
partition. The court further denied the prayer
to annul the donation made in favor of Pedro,
inasmuch as it was belatedly raised by
petitioners.13 The appellate court likewise
found the deletion of the award of exemplary
damages and attorney’s fees proper.141awphi1
Unsatisfied, petitioners come to this Court in
this petition for review on certiorari raising the
following issues:
I. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION
AND MANIFESTLY OVERLOOKED RELEVANT
FACTS NOT DISPUTED AND WHICH IF PROPERLY
CONSIDERED WOULD JUSTIFY A DIFFERENT
CONCLUSION THAT THERE IS FRAUD OR BAD
FAITH ON THE PART OF DEFENDANTS-
APPELLEES IN EXCLUDING PLAINTIFFS-
APPELLANTS FROM THE DEED OF EXTRA
JUDICIAL SETTLEMENT WITH DONATION.
II. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT "THE MERE ACT OF
REPUDIATING THE INTEREST OF A CO-OWNER
IS NOT SUFFICIENT TO SUPPORT A FINDING OF
BAD FAITH SINCE NO BAD FAITH CAN BE
ATTRIBUTED TO A PERSON WHO ONLY
EXERCISES A PRIVILEGE GRANTED BY LAW."
III. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT THERE IS ABSENCE OF
FRAUD OR BAD FAITH ON THE PART OF
DEFENDANTS-APPELLEES IN EXCLUDING
PLAINTIFFS-APPELLANTS IN THE EXTRA
JUDICIAL SETTLEMENT BASED ON AN
INFERENCE THAT IS MANIFESTLY MISTAKEN
THAT PLAINTIFFS-APPELLANTS HAVE ALREADY
OBTAINED THEIR ADVANCE OF INHERITANCE
FROM THE DECEDENTS.
IV. WHETHER OR NOT THE HONORABLE COURT
OF APPEALS COMMITTED AN ERROR OF LAW
AND GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT THE ASSAILED
EXTRAJUDICIAL SETTLEMENT CANNOT BE
ANNULLED SINCE THE MISREPRESENTATION IS
NOT SO GRAVE IN CHARACTER AS TO AMOUNT
TO BAD FAITH (AND) RULE 74, SECTION 1,
SECOND PARAGRAPH, DOES NOT DISCOUNT
THE POSSIBILITY THAT SOME HEIRS MAY HAVE
BEEN EXCLUDED IN THE EXECUTION OF THE
EXTRAJUDICIAL SETTLEMENT.
V. WHETHER OR NOT THE HONORABLE COURT
OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION TANTAMOUNT TO AN ERROR OF
LAW IN CONCLUDING THAT THE DEED OF
EXTRAJUDICIAL SETTLEMENT WITH DONATION
CANNOT BE ANNULLED.
VI. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION IN
AWARDING MORAL DAMAGES DESPITE
FINDING THAT THE SUIT WAS MADE IN GOOD
FAITH.
VII. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION IN
AFFIRMING THE DECISION OF THE REGIONAL
TRIAL COURT THAT THE MOTION TO AMEND
COMPLAINT TO IMPLEAD ADDITIONAL PARTY
AND TO CONFORM TO THE EVIDENCE
PRESENTED FILED BY THE PLAINTIFFS-
APPELLANTS IS NOT PROPER. 15
In fine, petitioners challenge the appellate
court’s conclusions on the validity of the
extrajudicial settlement with donation and the
denial of the motion to amend the complaint to
implead an indispensable party and conform to
the evidence presented.
Much as we would like to make a definitive
conclusion on the respective rights of all the
parties and decide, once and for all, their
interests over the subject property, we are
barred by a jurisdictional issue.
Jurisdiction is the power invested in courts for
administering justice, that is, to hear and
decide cases. For the court to exercise the
authority to dispose of the case on the merits,
it must acquire jurisdiction over the subject
matter and the parties.16
Courts acquire jurisdiction over a party plaintiff
upon the filing of the complaint. On the other
hand, jurisdiction over the person of a party
defendant is assured upon the service of
summons in the manner required by law or,
otherwise, by his voluntary appearance. As a
rule, if a defendant has not been summoned,
the court acquires no jurisdiction over his
person, and a personal judgment rendered
against such defendant is null and void. A
decision that is null and void for want of
jurisdiction of the trial court is not a decision in
contemplation of law and can never become
final and executory.17
Corollary to the issue of jurisdiction, and
equally important, is the mandatory rule on
joinder of indispensable parties set forth in
Section 7, Rule 3 of the Rules of Court, to wit:
SEC. 7. Compulsory joinder of indispensable
parties. – Parties in interest without whom no
final determination can be had of an action
shall be joined either as plaintiffs or
defendants.
The general rule with reference to parties to a
civil action requires the joinder of all necessary
parties, where possible, and the joinder of all
indispensable parties under any and all
conditions.18 The evident intent of the Rules on
the joinder of indispensable and necessary
parties is the complete determination of all
possible issues, not only between the parties
themselves but also as regards other persons
who may be affected by the judgment.19
In this case, petitioners challenge the denial of
their motion to amend the complaint to
implead Pedro who, they claim, is an
indispensable party to the case. We are,
therefore, compelled to address this important
question.
In Regner v. Logarta20 and Arcelona v. CA,21 we
laid down the test to determine if a party is an
indispensable party, viz.:
An indispensable party is a party who has an
interest in the controversy or subject matter
that a final adjudication cannot be made, in his
absence, without injuring or affecting that
interest, a party who has not only an interest in
the subject matter of the controversy, but also
has an interest of such nature that a final
decree cannot be made without affecting his
interest or leaving the controversy in such a
condition that its final determination may be
wholly inconsistent with equity and good
conscience. It has also been considered that an
indispensable party is a person in whose
absence there cannot be a determination
between the parties already before the court
which is effective, complete or equitable.
Further, an indispensable party is one who
must be included in an action before it may
properly go forward.
A person is not an indispensable party,
however, if his interest in the controversy or
subject matter is separable from the interest of
the other parties, so that it will not necessarily
be directly or injuriously affected by a decree
which does complete justice between them.
Also, a person is not an indispensable party if
his presence would merely permit complete
relief between him and those already parties to
the action, or if he has no interest in the subject
matter of the action. It is not a sufficient reason
to declare a person to be an indispensable
party that his presence will avoid multiple
litigation.22
In upholding the denial of the motion to amend
the complaint, the appellate court concluded
that the sole desire of petitioners in instituting
the case was the annulment of the extrajudicial
settlement. Effectively, it separated the
question of the validity of the extrajudicial
settlement from the validity of the donation.
Accordingly, the court said, the latter issue
could be threshed out in a separate proceeding
later. This explains why Pedro was not
considered an indispensable party by the trial
and appellate courts.1avvphi1
We beg to differ.
Even without having to scrutinize the records, a
mere reading of the assailed decision readily
reveals that Pedro is an indispensable party. At
the time of the filing of the complaint, the title
to the Quezon City property was already
registered in the name of Pedro, after TCT No.
60455 (190472) in the names of Pedro Velasco,
Andrea, Magdalena and Patricio Monis was
cancelled, pursuant to the extrajudicial
settlement with donation executed by
respondents. The central thrust of the
complaint was that respondents, by
themselves, could not have transferred the
Quezon City property to Pedro because
petitioners, as heirs of Patricio and Magdalena,
also have rights over it. Accordingly, petitioners
specifically prayed that the extrajudicial
settlement with donation be annulled and the
transfer certificate of title and tax declarations
(in the name of Pedro) issued pursuant thereto
be canceled. The pertinent portion of the
complaint is quoted for easy reference:
WHEREFORE, in view of the foregoing, it is
respectfully prayed that judgment be rendered
as follows –
1. By ordering the annulment of Annex "A"
hereof as well as the cancellation of transfer
certificate of title and tax declarations issued
pursuant thereto.23
If such prayer and thrust were to be denied (as
held by the trial and appellate courts), the
problem would be less obvious, as the status
quo would be maintained. However, if they
were to be upheld, Pedro’s title to the property
would undoubtedly be directly and injuriously
affected. Even if we only resolve the validity of
the extrajudicial settlement, there would be no
final adjudication of the case without involving
Pedro’s interest.
Verily, Pedro’s interest in the subject matter of
the suit and in the relief sought are so
inextricably intertwined with that of the other
parties. His legal presence as a party to the
proceedings is, therefore, an absolute
necessity.24 His interest in the controversy and
in the subject matter is not separable from the
interest of the other parties.
It is unfortunate that petitioners failed to
implead Pedro as defendant in their complaint.
Interestingly, however, they realized such
mistake, albeit belatedly, and thus sought the
amendment of the complaint to join him as a
defendant, but the RTC refused to grant the
same.
Well-settled is the rule that joinder of
indispensable parties is mandatory.25 It is a
condition sine qua non to the exercise of
judicial power.26 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.27 Without
the presence of indispensable parties to the
suit, the judgment of the court cannot attain
finality.28 One who is not a party to a case is not
bound by any decision of the court; otherwise,
he will be deprived of his right to due
process.29 That is why the case is generally
remanded to the court of origin for further
proceedings.30
In light of these premises, no final ruling can be
had on the validity of the extrajudicial
settlement. While we wish to abide by the
mandate on speedy disposition of cases, we
cannot render a premature judgment on the
merits. To do so could result in a possible
violation of due process. The inclusion of Pedro
is necessary for the effective and complete
resolution of the case and in order to accord all
parties the benefit of due process and fair
play.31
Nevertheless, as enunciated in Commissioner
Domingo v. Scheer,32 Lotte Phil. Co., Inc. v. Dela
Cruz,33 and PepsiCo, Inc. v. Emerald Pizza,
Inc.,34 the non-joinder of indispensable parties
is not a ground for the dismissal of an action.
The remedy is to implead the non-party
claimed to be indispensable. 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 at such times as are just. If the
plaintiff refuses to implead an indispensable
party despite the order of the court, then the
court may dismiss the complaint for the
plaintiff’s failure to comply with a lawful court
order.
In light of the foregoing, a remand of the case
to the trial court is imperative.
WHEREFORE, the Decision of the Court of
Appeals dated July 13, 2005 in CA-G.R. CV No.
56998 is SET ASIDE. Let the case be REMANDED
to the Regional Trial Court for the inclusion of
Pedro Velasco, Jr. as an indispensable party,
and for further proceedings.
SO ORDERED.
G.R. No. 151900 CHUA VS TORRES
The Court settles an issue, heretofore
undecided, on whether the absence of the
signature in the required verification and
certification against forum-shopping of a party
misjoined as a plaintiff is a valid ground for the
dismissal of the complaint. We rule in the
negative.
The relevant facts in this Petition for Review are
culled from the records.
On 24 October 2001, a complaint for damages
was lodged before the Regional Trial Court
(RTC) of Caloocan City, Branch 126.1 The
complaint was filed by Christine Chua, herein
petitioner, impleading her brother Jonathan
Chua as a necessary co-plaintiff. Named as
defendants in the suit were herein respondents
Jorge Torres and Antonio Beltran. Torres was
the owner of the 9th Avenue Caltex Service
Center (Caltex Service Center), while Beltran
was an employee of the said establishment as
the head of its Sales and Collection Division.2
The complaint alleged that on 3 April 2000,
Jonathan Chua issued in favor of the Caltex
Service Center his personal Rizal Commercial
Banking Corporation (RCBC) Check No. 0412802
in the amount of Nine Thousand Eight Hundred
Forty Nine Pesos and Twenty Centavos
(₱9,849.20) in payment for purchases of diesel
oil. However, the check was dishonored by the
drawee bank when presented for payment on
the ground that the account was closed.
Beltran then sent petitioner a demand letter
informing her of the dishonor of the check and
demanding the payment thereof. Petitioner
ignored the demand letter on the ground that
she was not the one who issued the said check.
Without bothering to ascertain who had
actually issued the check, Beltran instituted
against petitioner a criminal action for violation
of Batas Pambansa Bilang 22 (B.P. 22).
Subsequently, a criminal information was filed
against petitioner with the Metropolitan Trial
Court (MTC) of Caloocan City, Branch 50.3 The
MTC then issued a warrant of arrest against
petitioner. The police officers tasked with
serving the warrant looked for her in her
residence, in the auto repair shop of her
brother, and even at the Manila Central
University were she was enrolled as a medical
student, all to the alleged embarrassment and
"social humiliation" of petitioner.4
Beltran’s purported negligence amounted to
either malicious prosecution or serious
defamation in prosecuting petitioner resulting
from the issuance of a check she herself did not
draw, and served cause for a claim of moral
damages. On the other hand, Torres, as
employer of Beltran, was alleged to have failed
to observe the diligence of a good father of the
family to prevent the damage suffered by
petitioner. Exemplary damages and attorney’s
fees were likewise sought, thus bringing the
aggregate total of damages claimed to Two
Million Pesos (₱2,000,000.00), plus costs of
suit.5
Significantly, while Jonathan Chua was named
as a plaintiff to the suit, it was explicitly
qualified in the second paragraph of the
complaint that he was being "impleaded here-
in as a necessary party-plaintiff".6 There was no
allegation in the complaint of any damage or
injury sustained by Jonathan, and the prayer
therein expressly named petitioner as the only
party to whom respondents were sought to
recompense.7 Neither did Jonathan Chua sign
any verification or certification against forum-
shopping, although petitioner did sign an
attestation, wherein she identified herself as
"the principal plaintiff".8
Upon motion of respondents, the RTC ordered
the dismissal of the complaint9 on the ground
that Jonathan Chua had not executed a
certification against forum-shopping. The RTC
stressed that Section 5, Rule 7 of the Rules of
Civil Procedure, the rule requiring the
certification, makes no distinction whether the
plaintiff required to execute the certification is
a principal party, a nominal party or a necessary
party. Instead, the provision requires that a
plaintiff or principal party who files a complaint
or initiatory pleading execute such certification.
Jonathan Chua, being a plaintiff in this case,
was obliged to execute or sign such
certification.10 Hence, his failure to do so in
violation of the mandatory rule requiring the
certification against forum-shopping
constituted valid cause for the dismissal of the
petition.11
After the RTC denied the motion for
reconsideration12 lodged by petitioner, the
matter was elevated directly to this Court by
way of petition for review under Rule 45,
raising a purely legal question,13 cast, if
somewhat unwieldily, as "whether or not a co-
plaintiff impleaded only as a necessary party,
who however has no claim for relief or is not
asserting any claim for relief in the complaint,
should also make a certification against forum
shopping."14
Preliminarily, it bears noting that Jonathan
Chua did not sign as well any verification to the
complaint, ostensibly in violation of Section 7,
Rule 4 of the Rules of Civil Procedure. The RTC
failed to mention such fact, as does petitioner
in her present petition. In their arguments
before this Court, respondents do refer in
passing to the verification requirement15 , but
do not place any particular focus thereto. The
verification requirement is separate from the
certification requirement.16 It is noted that as a
matter of practice, the verification is usually
accomplished at the same time as the
certification against forum-shopping; hence the
customary nomenclature, "Verification and
Certification of Non Forum-Shopping" or its
variants. For this reason, it is quite possible that
the RTC meant to assail as well the failure of
Jonathan Chua to verify the complaint.
The verification requirement is significant, as it
is intended to secure an assurance that the
allegations in the pleading are true and correct
and not the product of the imagination or a
matter of speculation, and that the pleading is
filed in good faith.17 The absence of a proper
verification is cause to treat the pleading as
unsigned and dismissible.18 It would be as well
that the Court discuss whether under the
circumstances, Jonathan Chua is also required
to execute a verification in respect to
petitioner’s complaint.
Having established the proper parameters of
the petition, we proceed to the core issues. We
find the petition has merit, although we
appreciate the situation differently from
petitioner. Our decision proceeds from the
fundamental premise that Jonathan Chua was
misjoined as a party plaintiff in this case.
It is elementary that it is only in the name of a
real party in interest that a civil suit may be
prosecuted.19 Under Section 2, Rule 3 of the
Rules of Civil Procedure, a real party in interest
is the party who stands to be benefited or
injured by the judgment in the suit, or the party
entitled to the avails of the suit. "Interest"
within the meaning of the rule means material
interest, an interest in issue and to be affected
by the decree, as distinguished from mere
interest in the question involved, or a mere
incidental interest.20 One having no right or
interest to protect cannot invoke the
jurisdiction of the court as a party plaintiff in an
action.21 To qualify a person to be a real party in
interest in whose name an action must be
prosecuted, he must appear to be the present
real owner of the right sought to enforced.22
The subject complaint does not allege any
rights of Jonathan Chua violated by
respondents, present any rights of his to be
enforced, or seek in his behalf any rights to the
avails of suit. In short, Jonathan claims nothing,
and for nothing, in the subject complaint. If he
alone filed the complaint, it would have been
dismissed on the ground that the complaint
states no cause of action, instituted as it was by
a person who was not a real party in interest.
But was it proper for petitioner to have even
impleaded Jonathan as a co-plaintiff in the first
place? Petitioner alleged in her complaint that
Jonathan was a necessary party, and remains
consistent to that claim even before this Court.
She however fails to demonstrate how
Jonathan can be considered as a necessary
party, other than by noting that he was "the
one who really
issued the check in controversy."23 Such fact, if
proven, may establish the malice of
respondents in filing the criminal case against
petitioner for violation of B.P. 22, but does not
create the need to require Jonathan’s
participation as a necessary party.
Section 8, Rule 7 of the Rules of Civil Procedure
defines a necessary party as "one who is not
indispensable but who ought to be joined as a
party if complete relief is to be accorded as to
those already parties, or for a complete
determination or settlement of the claim
subject of the action."24 Necessary parties are
those whose presence is necessary to
adjudicate the whole controversy, but whose
interests are so far separable that a final decree
can be made in their absence without affecting
them.25
An example of a necessary party may be found
in Seno v. Mangubat.26 Petitioner therein sold
her property through a deed of sale to three
vendees. Two of the vendees then sold their
shares to the third buyer, who then sold the
property to another set of persons. Thereafter,
petitioner, who claimed that the true intent of
the first sale was an equitable mortgage, filed a
complaint seeking the reformation of the deed
of sale and the annulment of the second sale.
The question arose whether the two vendees
who had since disposed of their shares should
be considered as indispensable parties or
necessary parties. In concluding that they were
only necessary parties, the Court reasoned:
In the present case, there are no rights of
defendants Andres Evangelista and Bienvenido
Mangubat to be safeguarded if the sale should
be held to be in fact an absolute sale nor if the
sale is held to be an equitable mortgage.
Defendant Marcos Mangubat became the
absolute owner of the subject property by
virtue of the sale to him of the shares of the
aforementioned defendants in the
property. Said defendants no longer have any
interest in the subject property. However,
being parties to the instrument sought to be
reformed, their presence is necessary in order
to settle all the possible issues of the
controversy. Whether the disputed sale be
declared an absolute sale or an equitable
mortgage, the rights of all the defendants will
have been amply protected. Defendants-
spouses Luzame in any event may enforce their
rights against defendant Marcos Mangubat.27
In Seno, the persons deemed by the Court as
necessary parties may have had already
disposed of their interests in the property.
However, should the lower court therein grant
the prayer for the reformation of the deed of
sale, the ruling will undoubtedly have an effect
on such parties, on matters such as the
purchase price which they may have received,
and on whatever transmission of rights that
may have occurred between them and the
vendor.
In contrast, Jonathan Chua does not stand to be
affected should the RTC rule either favorably or
unfavorably of the complaint. This is due to the
nature of the cause of action of the complaint,
which alleges an injury personal to petitioner,
and the relief prayed for, which is to be
adjudicated solely to petitioner. There is no
allegation in the complaint alleging any
violation or omission of any right of Jonathan,
either arising from contract or from law.
It may be so that Jonathan may be called to
testify by his sister, in order to prove the
essential allegation that she did not issue the
check in question, and perhaps such testimony
would be vital to petitioner’s cause of action.
But this does not mean that Jonathan should be
deemed a necessary party, as such
circumstance would merely place him in the
same class as those witnesses whose testimony
would be necessary to prove the allegations of
the complaint. But the fact remains that
Jonathan would stand unaffected by the final
ruling on the complaint. The judicial
confirmation or rejection of the allegations
therein, or grant or denial of the reliefs prayed
for will not infringe on or augment any of his
rights under the law. If there would be any
effect to Jonathan of the RTC’s ultimate
decision on the complaint, it would be merely
emotional, arising from whatever ties of kinship
he may retain towards his sister, and no
different from whatever effects that may be
similarly sustained on petitioner’s immediate
family.
Since we are unconvinced by petitioner’s basic
premise that Jonathan was a necessary party, it
is unnecessary to directly settle the issue as
couched by petitioner of "whether or not a co-
plaintiff impleaded only as a necessary party,
who however has no claim for relief or is not
asserting any claim for relief in the complaint,
should also make a certification against forum
shopping."28 We can note, as the RTC did, that
Section 5, Rule 7 of the 1997 Rules of Civil
Procedure makes no distinctions that would
expressly exempt a necessary party from
executing the certification against forum
shopping. Nonetheless, there are dimensions to
the matter, heretofore unraised, that may
unsettle a strict application of the rule, such as
if the necessary party is impleaded as a plaintiff
or counterclaimant without his knowledge or
against his will.29 But these circumstances
relevant to a necessary party are not present in
this case, and thus require no further comment
upon for now.
Instead, what the Court may rule upon is
whether the absence of the signature of the
person misjoined as a party-plaintiff in either
the verification page or certification against
forum-shopping is ground for the dismissal of
the action. We rule that it is not so, and that
the RTC erred in dismissing the instant
complaint. There is no judicial precedent
affirming or rejecting such a view, but we are
comfortable with making such a
pronouncement. A misjoined party plaintiff has
no business participating in the case as a
plaintiff in the first place, and it would make
little sense to require the misjoined party in
complying with all the requirements expected
of plaintiffs.
At the same time, Section 11, Rule 3 of the
1997 Rules of Civil Procedure states:
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.30
Clearly, misjoinder of parties is not fatal to the
complaint. The rule prohibits dismissal of a suit
on the ground of non-joinder or misjoinder of
parties.31 Moreover, the dropping of misjoined
parties from the complaint may be done motu
proprio by the court, at any stage, without need
for a motion to such effect from the adverse
party.32 Section 11, Rule 3 indicates that the
misjoinder of parties, while erroneous, may be
corrected with ease through amendment,
without further hindrance to the prosecution of
the suit.
It should then follow that any act or omission
committed by a misjoined party plaintiff should
not be cause for impediment to the
prosecution of the case, much less for the
dismissal of the suit. After all, such party should
not have been included in the first place, and
no efficacy should be accorded to whatever act
or omission of
the party.33 Since the misjoined party plaintiff
receives no recognition from the court as either
an indispensable or necessary party-plaintiff, it
then follows that whatever action or inaction
the misjoined party may take on the
verification or certification against forum-
shopping is inconsequential. Hence, it should
not have mattered to the RTC that Jonathan
Chua had failed to sign the certification against
forum-shopping, since he was misjoined as a
plaintiff in the first place. The fact that
Jonathan was misjoined is clear on the face of
the complaint itself, and the error of the RTC in
dismissing the complaint is not obviated by the
fact that the adverse party failed to raise this
point. After all, the RTC could have motu
proprio dropped Jonathan as a plaintiff, for the
reasons above-stated which should have been
evident to it upon examination of the
complaint.
There may be a school of thought that would
nonetheless find some satisfaction in
petitioner’s woes before the RTC, as it was her
error in the first place of wrongfully impleading
her brother as a party plaintiff which ultimately
served as cause for the dismissal of the
complaint. The blame may in the final analysis
lie with petitioner, yet we should not construe
the rules of procedure to quench an
unnecessary thirst to punish at the expense of
the intellectual integrity of the rules. For our
Rules of Court do not regard the misjoinder of
parties as an error of fatal consequence, and
the logical extension of this principle is to
consider those procedural acts or omissions of
misjoined parties as of similar import.
WHEREFORE, the Petition is GRANTED.
The Orders dated 3 December 2001 and 15
January 2002 of the Regional Trial Court of
Caloocan City, Branch 126, in Civil Case No. C-
19863 are SET ASIDE, and the Complaint in the
aforementioned case is REINSTATED. The lower
court is enjoined to hear and decide the case
with deliberate dispatch. No pronouncement as
to costs.
SO ORDERED.
G.R. No. L-44339 SENO VS MANGUBAT
This is an appeal that was certified to this Court
by the Court of Appeals 1 from the order of the
Court of First Instance of Rizal, Branch 1, dated
September 29,1972 in Civil Case No. 12205
dismissing the action for reformation of
instrument and annulment of subsequent
sale. 2
This case stemmed from a complaint filed by
plaintiffs on August 29, 1969 seeking 1) the
reformation of a Deed of Sale executed in favor
of defendant Marcos Mangubat and, 2) the
annulment of a subsequent sale to defendant
spouses Francisco Luzame and Vergita Penaflor
of a parcel of land in Barrio Dongalo,
Paranaque, Rizal covered by OCT No. 1197 of
the Land Registry of Rizal.
The material allegations of the complaint so far
as they affect the present appeal are to the
following effect: that plaintiff Crisanta Seno, a
widow, approached defendant Marcos
Mangubat sometime in 1961 to negotiate with
him a mortgage over the subject parcel of land
so she can pay off a previous indebtedness;
that she had herein defendant agreed on a
mortgage for the sum of P15,000.00 with
interest of 2% a month payable every month
and that as long as the interest is being paid,
the mortgage over the property will not be
foreclosed; that on the assurance of defendant
Marcos Mangubat, a practicing lawyer, that he
win respect their true agreement on the
mortgage, plaintiff Crisanta F. Seno agreed to
the execution of a Deed of Absolute Sale over
the subject property for a consideration of
P5,000.00 in favor of defendant Marcos
Mangubat and certain Andres Evangelista and
Bienvenido Mangubat on July 17, 1961; 3 that
defendant Marcos Mangubat was able to
obtain a title in his name and the other alleged
vendees Andres Evangelista and Bienvenido
Mangubat; that on January 8, 1962 Andres
Evangelista and Bienvenido Mangubat executed
a Deed of Absolute Sale transferring their share
in the subject property to defendant Marcos
Mangubat; that defendant Marcos Mangubat
was able to obtain a title over the subject
property in his name by virtue of this latter
sale; that plaintiff Crisanta F. Seno continued
paying defendant Marcos Mangubat the
usurious 2% interest per month; that sometime
in 1963, when plaintiff Crisanta F. Seno failed to
pay the monthly interest of 2%, she was sued
for ejectment by defendant Marcos Mangubat
alleging non-payment of rentals; that sometime
in the later week of January 1969, plaintiff
Crisanta F. Seno learned that defendant Marcos
Mangubat sold the subject property in favor of
spouses Francisco Luzame and Vergita Penaflor
for the sum of P10,000.00 on January 14,
1969;4 that defendant spouses Francisco
Luzame and Vergita Penaflor bought the
property in bad faith since they had knowledge
of the circumstances surrounding the
transaction between plaintiff and defendant
Marcos Mangubat; that defendant spouses
Luzame filed an ejectment case against plaintiff
Crisanta Seno for alleged non-payment of
rentals.
On motion of defendant spouses Luzame and
Penaflor, the trial court ordered on October 20,
1975 the inclusion as defendants of Andres
Evangelista and Bienvenido Mangubat on the
ground that they are indispensable parties, on
December 29, 1971, plaintiffs filed their
amended complaint in compliance with the
court's order of October 20, impleading Andres
Evangelista and Bienvenido Mangubat as
defendants.
The newly impleaded defendants moved for
the dismissal of the case against them on the
ground of prescription which motion was
granted by the court in its order of July 3, 1972,
the dispositive portion of which reads —
xxx xxx xxx
Considering that under Art. 1144 of the Civil
Code of the Philippines, an action upon a
written contract must be brought within 10
years from the time the right of action accrued,
and considering further the opposition of
plaintiffs which we find to be justified and
meritorious, this Court resolves to dismiss as it
hereby dismisses the case only as against
defendants Andres Evangelista and Bienvenido
Mangubat.
xxx xxx xxx 5
Defendants Luzame and Penaflor in their
motion for reconsideration represented by
Atty. Jose Manacop and defendant Marcos
Mangubat in his Supplement to motion for
reconsideration or in support of Atty.
Manacop's motion for reconsideration asked
the court a quo to dismiss the case against all
the defendants. The court a quo in its order of
September 27, 1972 reconsidered its order of
July 3rd and dismissed the case against all the
defendants holding that the court is no longer
in a position to grant plaintiffs' demands,
principally the reformation of subject Deed of
Absolute Sale.
The motion for reconsideration filed by the
plaintiffs of the foregoing order was denied by
the trial court in its order of January 17,
1973; 6 hence, an appeal was brought before
the Court of Appeals praying for the reversal of
the orders of the court a quo dated September
27, 1972 and January 17, 1973 and for the
remand of the case to the court a quo for
further proceedings.
The Court of Appeals certified the instant case
to this Court holding that the assignment of
errors made by plaintiffs in their appeal raised
purely legal questions, to wit —
1) Are defendants Andres Evangelista and
Bienvenido Mangubat indispensable parties in
the case without whom no action can be
properly taken thereon?
2) If they are such, has the action prescribed
against them in view of Art. I 1 44, Civil Code?
3) If they are not, was the dismissal of said
defendants a legal grounds for dismissal of the
complaint as against the other defendants? and
4) Was the dismissal of the case without a
hearing on the merits in accordance with law? 7
The first issue We need to resolve is whether or
not defendants Andres Evangelista and
Bienvenido Mangubat are indispensable
parties. Plaintiffs contend that said defendants
being more dummies of defendant Marcos
Mangubat and therefore not real parties in
interest, there is no room for the application of
Sec. 7, Rule 3 of the Revised Rules of Court.
For the determination of this issue, We find it
necessary to consider the distinction between
indispensable and proper parties as clearly
stated in Sections 7 and 8, Rule 3 of the Revised
Rules of Court which provide:
Sec. 7. Compulsory joinder of indispensable
parties. — Parties in interest without whom no
final determination can be had of an action
shall be joined either as plaintiffs or
defendants.
Sec. 8. Joinder of proper parties. — When
persons who are not indispensable but who
ought to be parties if complete relief is to be
accorded as between those already parties,
have not been made parties and are subject to
the jurisdiction of the court as to both service
of process and venue, the court shall order
them summoned to appear in the action. But
the court may, in its discretion, proceed in the
action without making such persons parties,
and the judgment rendered therein shall be
without prejudice to the rights of such persons.
Under Section 7, indispensable parties must
always be joined either as plaintiffs or
defendants, for the court cannot proceed
without them. Necessary parties 8 must be
joined, under Section 8, in order to adjudicate
the whole controversy and avoid multiplicity of
suits. 9
Indispensable parties are those with such an
interest in the controversy that a final decree
would necessarily affect their rights, so that the
courts cannot proceed without their presence.
Necessary parties are those whose presence is
necessary to adjudicate the whole controversy,
but whose interests are so far separable that a
final decree can be made in their absence
without affecting them. 10
Defendants cite Alberto vs. Mananghala 11 to
support their theory that defendants Andres
Evangelista and Bienvenido Mangubat are
indispensable parties. Thus —
xxx xxx xxx
One of the issues raised by the parties is
whether the transactions carried out by and
between Arcadio Ramos and the deceased
Vicente Feliciano is a sale with pacto de retro or
simply an equitable mortgage. If it be held that
it is an equitable mortgage, then their right
would be defeated and they would be held
liable for warranty and eviction under the law
to Casimiro Mananghala This being so, it would
seem clear that the presence of all the heirs of
Vicente Feliciano in this case is indispensable in
order that they may protect their interests.
They are entitled to be heard. They may have a
valid defense which may have the effect of
defeating the claim of the plaintiffs. This
however, was not done, for some of the heirs
of Vicente Feliciano were not served with
summons and consequently have not entered
their appearance. This is in violation of Section
7, Rule 3 of the Rules of Court.
xxx xxx xxx
We, however, find this case inapplicable to the
case at bar.
In the present case, there are no rights of
defendants Andres Evangelista and Bienvenido
Mangubat to be safeguarded if the sale should
be held to be in fact an absolute sale nor if the
sale is held to be an equitable mortgage.
Defendant Marcos Mangubat became the
absolute owner of the subject property by
virtue of the sale to him of the shares of the
aforementioned defendants in the property.
Said defendants no longer have any interest in
the subject property. However, being parties to
the instrument sought to be reformed, their
presence is necessary in order to settle all the
possible issues of tile controversy. Whether the
disputed sale be declared an absolute sale or an
equitable mortgage, the rights of all the
defendants will have been amply protected.
Defendants-spouses Luzame in any event may
enforce their rights against defendant Marcos
Mangubat.
In fact the plaintiffs were not after defendants
Andres Evangelista and Bienvenido Mangubat
as shown by their non-inclusion in the
complaint and their opposition to the motion to
include said defendants in the complaint as
indispensable parties. It was only because they
were ordered by the court a quo that they
included the said defendants in the complaint.
The lower court erroneously held that the said
defendants are indispensable parties.
Notwithstanding, defendants Andres
Evangelista and Bienvenido Mangubat not
being indispensable parties but only proper
parties, their joinder as parties defendants was
correctly ordered being in accordance with Sec.
8 of Rule 3.
We, therefore, need to settle the next issue of
whether the action against them has prescribed
in view of Art. 1144, Civil Code, which provides:
The following actions must be brought ten
years from the time the right of action accrues:
1) Upon a written contract;
xxx xxx xxx
The complaint clearly alleged that the deed of
sale executed on July 17, 1961 did not express
the true intention of the parties and should be
reformed into the mortgage it actually was.
Such allegations are binding for purposes of
determining the motion to dismiss (which
hypothetically admits the allegations in the
complaint). The prescriptive period for such
actions based upon a written contract and for
reformation thereof is ten years as provided in
Article 1144 of the Civil Code. Such right to
reformation is expressly recognized in Article
1365 of the same Code which provides:
If two parties agree upon the mortgage or
pledge of real or personal property, but the
instrument states that the property is sold
absolutely or with a right of repurchase,
reformation of the instrument is proper. 12
Article 1605 of the Civil Code 13 in conjunction
with Article 1604 14 likewise allows the
apparent vendor to ask for the reformation of
the instrument.
Plaintiffs argue that:
A grave and palpable error was committed by
the court a quo in holding that the prescriptive
period must be counted from the date of
execution of the deed of sale on July 17, 1961
up to the date of filing of the Amended
Complaint on December 29, 1971.
The important reckoning point is the date of
filing of the original complaint on August 29,
1969. It has been held that amendments in
pleadings do not necessarily expunge those
previously filed; That amendments made, more
so when ordered by the court, relate back to
the date of the original complaint, as in the
case at bar, the claim asserted in the amended
pleading arose out of the same conduct,
transaction or occurrence, and that
amendment presupposes the existence of
something to be amended, and, therefore, the
tolling of the period should relate back to the
filing of the pleading sought to be amended
(Philippine Independent Church v. Mateo, et al.,
L-14793, April 28, 1961). 15
In the case of Pangasinan Transportation Co.
vs. Philippine Farming Co., Ltd., 16 this Court
held that where the original complaint states a
cause of action but does it imperfectly and
afterwards an amended complaint is filed
correcting the defect, the plea of prescription
will relate to the time of the filing of the
original complaint. However, in the case
of Aetna Insurance Co. vs. Luzon Stevedoring
Corporation, 17 We held that this rule would
not apply to the party impleaded for the first
time in the amended complaint.
In Aetna, the defendant Barber Lines Far East
Service was impleaded for the first time in the
amended complaint which was filed after the
one-year period for prescription. The order of
the lower court dismissing the amended
complaint against the said defendant was
affirmed by this Court.
In the instant case, defendants Andres
Evangelista and Bienvenido Mangubat were
only impleaded in the amended complaint of
December 29, 1971 or ten (10) years, five (5)
months and twelve (12) days from July 17, 1961
the date of execution of the subject Deed of
Absolute Sale, clearly more than the ten (10)
year prescriptive period.
Anent the third and fourth issues, the theory of
the plaintiffs is that the complaint should not
have been dismiss as against said defendants
but instead the court a quo should have
proceeded with a trial on the merits because
there is an issue of fact appearing on the
pleadings, that is, that defendants Andres
Evangelista and Bienvenido Mangubat were
mere dummies of defendant Marcos
Mangubat.
It should be remembereenvenidd that the court
a quo dismissed the complaint against
defendants Andres Evangelista and Bio
Mangubat upon their motion to dismiss on the
ground of prescription.
Section 3, Rule 16 relating to motion to
dismiss , provides that "after hearing, the court
may deny or grant the motion or allow
amendment, or may defer the hearing and
determination of the motion until the trial if the
ground alleged therein does not appear to be
indubitable."
A motion to dismiss on the ground of
prescription will be given due course only if the
complaint shows upon its face that the action
has already prescribed. 18 If it does not so
appear, the determination of the motion to
dismiss must be deferred until trial. 19
Under the circumstances of this case, the
ground of prescription alleged by
aforementioned defendants was apparent on
the face of the complaint. As earlier pointed
out in this decision, the action against said
defendants has prescribed. The court a
quo properly ordered its dismissal as what it
originally did in its order of July 3, 1972.
The plaintiffs now maintain that assuming the
action against defendants Andres Evangelista
and Bienvenido Mangubat had already
prescribed, this defense was personal to them
and could not legally encompass the position of
defendant Marcos Mangubat; that the latter
defendant, could be held solely responsible to
plaintiffs, having become absolute owner of the
property subject matter of the July 17, 1961
instrument, or in the least he could be held
accountable for his 1/3 share of the property.20
One case which the lower court particularly
applied to justify dismissal of the case against
the other defendants was Pillado vs.
Francisco. 21 In said case, plaintiffs filed an
action for the annulment of the contract of sale
of a certain real estate executed by the
Philippine National Bank (PNB) in favor of the
spouses Estela Francisco and Vivencio Lasala
Defendant PNB submitted an answer while
defendant spouses filed a motion to dismiss on
the ground that the complaint stated no cause
of action and that plaintiffs have no legal
capacity to sue. Said defendant spouses
subsequently filed an additional motion to
dismiss on the ground that the cause of action
of plaintiff, if any, had prescribed. The court
ordered the dismissal of the complaint which
dismissal became final. Plaintiffs then asked the
court to continue the case against PNB but the
latter moved for the dismissal on the ground
that the court had lost, or had been divested of
its jurisdiction over the case through the
release of the defendant spouses, who were
indispensable parties. The court granted the
motion to dismiss holding that defendant
spouses who were the vendees were
indispensable parties in an action for the
rescission of the sale. From this order, the
plaintiff appealed to this Court. This Court
affirmed the order holding that the
indispensable parties having been discharged
by the trial court, the Court is no longer in a
position to grant the plaintiff's demands,
principally the revocation of the Deed of Sale in
their favor.
As We have already held that defendants
Andres Evangelista and Bienvenido Mangubat
are not indispensable but proper
parties, Pillado cannot therefore, be applied to
the case at bar. In that case, the parties
discharged were indispensable being the
purchasers and the present holders of the
subject property. In the instant case, the parties
discharged were the original vendees who have
since transferred their interest in the subject
property to one of the original co-vendees, and
the latter after having been vested with
absolute title over the subject property sold the
same to defendants spouses Luzame. Whereas
in the former case, the court was no longer in a
position to grant the relief sought by the
plaintiffs, in the latter, the trial court may still
be able to grant plaintiffs' demands for
reformation of the instrument and annulment
of subsequent sale if after trial on the merits,
plaintiffs prove their allegations that
defendants Andres Evangelista and Bienvenido
Mangubat were in fact were dummies of
Marcos Mangubat and that the sale executed
on July 17, 1961 was in reality an equitable
mortgage.
By the dismissal of the case against defendants
Andres Evangelista and Bienvenido Mangubat,
the court a quo had lost jurisdiction over them.
We have already pointed out that the joinder of
proper parties is necessary in order to
determine all the possible issues of the
controversy; but if for some reason or another
it is not possible to join them, as when they are
out of the jurisdiction of the Court, the court
may proceed without them, and the judgment
that may be rendered shall be without
prejudice to their rights.22 Hence,
notwithstanding the absence of said
defendants, the court could still proceed with
the trial of the case as against the remaining
defendants in accordance with Sec. 8 of Rule 3.
Nevertheless, the court is constrained to affirm
the dismissal of the complaint against all the
defendants as there is merit in the argument
raised by defendants-appellees that plaintiffs
are barred by laches to bring suit against them.
Laches (or estoppel by laches) is unreasonable
delay in the bringing of a cause of action before
the courts of justice. 23 As defined by this Court,
"laches is 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 thereto either has
abandoned it or declined to assert it.24
A perusal of the records shows that from t he
time of the execution of the deed of sale on
July 17, 1961 to the time of the filing of the
present complaint on August 29, 1969 or a
period of 8 years, I month and 12 days,
plaintiffs never took any step to enforce their
rights which they claim to have despite the
several opportunities available to them.
Defendant Marcos Mangubat filed an
ejectment suit against plaintiff Crisanta Seno in
1963 and this fact was admitted by the
plaintiffs in their complaint. For failure of
plaintiff to appear in the case, a decision was
rendered by the trial court ordering plaintiffs to
vacate the subject property 25 which decision
was duly executed. 26
It further appears from the complaint that
plaintiffs were well aware of the transfer of the
title from the name of plaintiff Crisanta Seno to
the names of defendants Marcos Mangubat,
Andres Evangelista and Bienvenido Mangubat
and subsequently to the name of defendant
Marcos Mangubat alone as early as 1963 when
the ejectment case was filed against plaintiffs,
and also they did not do anything about it.
In January 1969, plaintiffs learned of the sale of
the subject property to defendants-spouses
Luzame. but it was only on August 29, 1969
when plaintiffs brought this action and only
after an ejectment case was filed by said
defendant spouses against plaintiff Crisanta
Seno before the Municipal Court of Paranaque,
Rizal on August 4, 1969.
As defendants-appellees contend, before the
nine-year period lapsed, plaintiffs never raised
a voice to protest against all these proceedings.
They chose to sleep on their rights and to rely
on defendants' alleged word that their true
agreement would be respected rather than
bring their grievances to a court of law.
However, when an ejectment case was filed
against them just when the 10-year prescriptive
period for bringing of their suit was nearly over,
they finally decided to stake their claim against
the defendants.
The essence of laches is not merely lapse of
time. It is essential that there be also
acquiescence in the alleged wrong or lack of
diligence in seeking a remedy. 27 The doctrine of
laches or of "stale demands" is based on public
policy which requires, for the peace of society,
the discouragement of stale claims and, unlike
the statute of limitations not a mere question
of time but is principally a question of the
inequity or unfairness of permitting a right or
claim to be enforced or asserted. 28
By the negligence of plaintiffs in asserting their
rights for an unreasonable length of time, they
are now forever precluded from enforcing
whatever right they may have against
defendants. Indeed, it is an indicia of the
infirmity of their claim.
Moreover, as against plaintiff's allegation that
the defendant spouses Luzame are purchasers
in bad faith. We hold that the legal
presumption of good faith on the part of said
defendant spouses must prevail.
Plaintiffs would have Us believe that defendant
spouses being their erstwhile neighbors and
friends had knowledge of the circumstances
surrounding the transaction between plaintiff
Crisanta Seno and Defendant Marcos
Mangubat which therefore makes them
purchasers in bad faith.
Defendant spouses, however, claim that they
came to know of the existence of the original
title of plaintiff Crisanta Seno only when they
verified the title to the land in 1969 when it was
being offered to them by co-defendant Marcos
Mangubat. They deny that they are neighbors
much less friends of plaintiffs,
In order that a purchaser of land with a Torrens
title may be considered as a purchaser in good
faith, it is enough that he examines the latest
certificate of title which in this case is that
issued in the name of the immediate
transferor. 29 The purchaser is not bound by the
original certificate of title but only by the
certificate of title of the person from whom he
has purchased the property. 30
Good faith, while it is always to be presumed in
the absence of proof to the contrary, requires a
well-founded belief that the person from whom
title was received was himself the owner of the
land, with the right to convey it. 31 In this
regard, a buyer of real estate should exercise
ordinary care in purchasing land, 32 so that one
who purchases real property should make
inquiries about the right of those in possession
thereof. 33
The well-known rule in this jurisdiction is that a
person dealing with a registered land has a
right to rely upon the face of the Torrens
Certificate of Title and to dispense with the
need of inquiring further, except when the
party concerned has actual knowledge of facts
and circumstances that would impel a
reasonably cautious man to make such
inquiry. 34
It is true that by the possession of plaintiffs of
the subject property, defendant spouses
Luzame should have been put on their guard
and should have taken precautionary steps in
ascertaining the interest of the possessors of
the land. The defendant spouses did verify the
title to the property with the Register of Deeds
and finding that the latest title was in the name
of defendant Marcos Mangubat, they, had
every reason to rely on such title. Besides,
there was the ejectment suit filed by defendant
Marcos Mangubat against plaintiff Crisanta
Seno which was decided in favor of the former.
The defendant spouses could not be faulted for
believing that the possession of the plaintiffs
was in the concept of lessee; in fact said
defendant spouses also filed an ejectment suit
against plaintiffs.
This Court had occasion to rule that possession
by the appellees, either by themselves or
through their predecessors in interest, if there
was such possession at all, would be unavailing
against the holder of a Torrens Certificate of
Title covering the parcels of land now in
question. 35
Thus, where innocent third persons relying on
the correctness of the certificate of title issued,
acquire rights over the property, the court
cannot disregard such rights and order the total
cancellation of the certificate for that would
impair public confidence in the certificate of
title; otherwise everyone dealing with property
registered under the torrens system would
have to inquire in every instance as to whether
the title had been regularly or irregularly issued
by the court. Indeed, this is contrary to the
evident purpose of the law. Every person
dealing with registered land may safely rely on
the correctness of the certificate of title issued
therefore and the law will in no way oblige him
to go behind the certificate to determine the
condition of the property. Stated differently, an
innocent purchaser for value relying on a
torrens title issued is protected . 36
We therefore hold and find that defendants
spouses Luzame are purchasers in good faith
and for value of the questioned property.
IN VIEW OF THE FOREGOING CONSIDERATIONS,
the order of dismissal dated September 29,
1972 and the order denying the motion for
reconsideration dated January 13, 1973 of the
Court of First Instance of Rizal, Branch I, are
hereby AFFIRMED. No costs.
SO ORDERED.
G.R. No. 176405             WEE VS CASTRO
Before this Court is a Petition for Review
on Certiorari1 under Rule 45 of the Revised
Rules of Court filed by petitioner Leo Wee,
seeking the reversal and setting aside of the
Decision2 dated 19 September 2006 and the
Resolution3 dated 25 January 2007 of the Court
of Appeals in CA-G.R. SP No. 90906. The
appellate court, in its assailed Decision,
reversed the dismissal of Civil Case. No. 1990,
an action for ejectment instituted by
respondent George de Castro, on his own
behalf and on behalf of Annie de Castro,
Felomina de Castro Uban and Jesus de
Castro4 against petitioner, by the Municipal
Trial Court (MTC) of Alaminos City, which was
affirmed by the Regional Trial Court (RTC),
Branch 54, Alaminos City, Pangasinan; and,
ruling in favor of the respondents, ordered the
petitioner to vacate the subject property. In its
assailed Resolution dated 25 January 2007, the
Court of Appeals refused to reconsider its
earlier Decision of 19 September 2006.
In their Complaint5 filed on 1 July 2002 with the
MTC of Alaminos City, docketed as Civil Case
No. 1990, respondents alleged that they are the
registered owners of the subject property, a
two-storey building erected on a parcel of land
registered under Transfer Certificate of Title
(TCT) No. 16193 in the Registry of Deeds of
Pangasinan, described and bounded as follows:
A parcel of land (Lot 13033-D-2, Psd-01550-
022319, being a portion of Lot 13033-D, Psd-
018529, LRC Rec. No. ____) situated in Pob.,
Alaminos City; bounded on the NW. along line
1-2 by Lot 13035-D-1 of the subdivision plan; on
the NE. along line 2-3 by Vericiano St.; on the
SE. along line 3-4 by Lot 13033-D-2 of the
subdivision plan; on the SW. along line 4-1 by
Lot 575, Numeriano Rabago. It is coverd by TCT
No. 16193 of the Register of Deeds of
Pangasinan (Alaminos City) and declared for
taxation purposes per T.D. No. 2075, and
assessed in the sum of P93,400.00.6
Respondents rented out the subject property to
petitioner on a month to month basis
for P9,000.00 per month.7 Both parties agreed
that effective 1 October 2001, the rental
payment shall be increased from P9,000.00
to P15,000.00. Petitioner, however, failed or
refused to pay the corresponding increase on
rent when his rental obligation for the month of
1 October 2001 became due. The rental dispute
was brought to the Lupon
Tagapagpamayapa of Poblacion, Alaminos,
Pangasinan, in an attempt to amicably settle
the matter but the parties failed to reach an
agreement, resulting in the issuance by
the Barangay Lupon of a Certification to file
action in court on 18 January 2002. On 10 June
2002, respondent George de Castro sent a
letter to petitioner terminating their lease
agreement and demanding that the latter
vacate and turn over the subject property to
respondents. Since petitioner stubbornly
refused to comply with said demand letter,
respondent George de Castro, together with his
siblings and co-respondents, Annie de Castro,
Felomina de Castro Uban and Jesus de Castro,
filed the Complaint for ejectment before the
MTC.
It must be noted, at this point, that although
the Complaint stated that it was being filed by
all of the respondents, the Verification and the
Certificate of Non-Forum Shopping were signed
by respondent George de Castro alone. He
would subsequently attach to his position
paper filed before the MTC on 28 October 2002
the Special Powers of Attorney (SPAs) executed
by his sisters Annie de Castro and Felomina de
Castro Uban dated 7 February 2002 and 14
March 2002 respectively, authorizing him to
institute the ejectment case against petitioner.
Petitioner, on the other hand, countered that
there was no agreement between the parties to
increase the monthly rentals and respondents'
demand for an increase was exorbitant. The
agreed monthly rental was only for the amount
of P9,000.00 and he was religiously paying the
same every month. Petitioner then argued that
respondents failed to comply with the
jurisdictional requirement of conciliation before
the Barangay Lupon prior to the filing of Civil
Case. No. 1990, meriting the dismissal of their
Complaint therein. The Certification to file
action issued by the Barangay Lupon appended
to the respondents' Complaint merely referred
to the issue of rental increase and not the
matter of ejectment. Petitioner asserted
further that the MTC lacked jurisdiction over
the ejectment suit, since respondents'
Complaint was devoid of any allegation that
there was an "unlawful withholding" of the
subject property by the petitioner.8
During the Pre-Trial Conference9 held before
the MTC, the parties stipulated that in May
2002, petitioner tendered to respondents the
sum of P9,000.00 as rental payment for the
month of January 2002; petitioner paid rentals
for the months of October 2001 to January
2002 but only in the amount of P9,000.00 per
month; respondents, thru counsel, sent a letter
to petitioner on 10 June 2002 terminating their
lease agreement which petitioner ignored; and
the Barangay Lupon did issue a Certification to
file action after the parties failed to reach an
agreement before it.
After the submission of the parties of their
respective Position Papers, the MTC, on 21
November 2002, rendered a
Decision10 dismissing respondents' Complaint in
Civil Case No. 1990 for failure to comply with
the prior conciliation requirement before
the Barangay Lupon. The decretal portion of
the MTC Decision reads:
WHEREFORE, premised considered, judgment is
hereby rendered ordering the dismissal of this
case. Costs against the [herein respondents].
On appeal, docketed as Civil Case No. A-2835,
the RTC of Alaminos, Pangasinan, Branch 54,
promulgated its Decision11 dated 27 June 2005
affirming the dismissal of respondents'
Complaint for ejectment after finding that the
appealed MTC Decision was based on facts and
law on the matter. The RTC declared that since
the original agreement entered into by the
parties was for petitioner to pay only the sum
of P9.000.00 per month for the rent of the
subject property, and no concession was
reached by the parties to increase such amount
to P15.000.00, petitioner cannot be faulted for
paying only the originally agreed upon monthly
rentals. Adopting petitioner's position, the RTC
declared that respondents' failure to refer the
matter to the Barangay court for conciliation
process barred the ejectment case, conciliation
before the Lupon being a condition sine qua
non in the filing of ejectment suits. The RTC
likewise agreed with petitioner in ruling that
the allegation in the Complaint was flawed,
since respondents failed to allege that there
was an "unlawful withholding" of possession of
the subject property, taking out Civil Case No.
1990 from the purview of an action for
unlawful detainer. Finally, the RTC decreed that
respondents' Complaint failed to comply with
the rule that a co-owner could not maintain an
action without joining all the other co-owners.
Thus, according to the dispositive portion of the
RTC Decision:
WHEREFORE the appellate Court finds no
cogent reason to disturb the findings of the
court a quo. The Decision dated November 21,
2002 appealed from is hereby AFFIRMED IN
TOTO.12
Undaunted, respondents filed a Petition for
Review on Certiorari13 with the Court of Appeals
where it was docketed as CA-G.R. SP No. 90906.
Respondents argued in their Petition that the
RTC gravely erred in ruling that their failure to
comply with the conciliation process was fatal
to their Complaint, since it is only respondent
George de Castro who resides in Alaminos City,
Pangasinan, while respondent Annie de Castro
resides in Pennsylvania, United States of
America (USA); respondent Felomina de Castro
Uban, in California, USA; and respondent Jesus
de Castro, now substituted by his wife,
Martiniana, resides in Manila. Respondents
further claimed that the MTC was not divested
of jurisdiction over their Complaint for
ejectment because of the mere absence therein
of the term "unlawful withholding" of their
subject property, considering that they had
sufficiently alleged the same in their Complaint,
albeit worded differently. Finally, respondents
posited that the fact that only respondent
George de Castro signed the Verification and
the Certificate of Non-Forum Shopping
attached to the Complaint was irrelevant since
the other respondents already executed Special
Powers of Attorney (SPAs) authorizing him to
act as their attorney-in-fact in the institution of
the ejectment suit against the petitioner.
On 19 September 2006, the Court of Appeals
rendered a Decision granting the respondents'
Petition and ordering petitioner to vacate the
subject property and turn over the same to
respondents. The Court of Appeals decreed:
WHEREFORE, premises considered, the instant
petition is GRANTED. The assailed Decision
dated June 27, 2005 issued by the RTC of
Alaminos City, Pangasinan, Branch 54, is
REVERSED and SET ASIDE. A new one is hereby
rendered ordering [herein petitioner] Leo Wee
to SURRENDER and VACATE the leased
premises in question as well as to pay the sum
of P15,000.00 per month reckoned from
March, 2002 until he shall have actually turned
over the possession thereof to petitioners plus
the rental arrearages of P30,000.00
representing unpaid increase in rent for the
period from October, 2001 to February, 2002,
with legal interest at 6% per annum to be
computed from June 7, 2002 until finality of
this decision and 12% thereafter until full
payment thereof. Respondent is likewise
hereby ordered to pay petitioners the amount
of P20,000.00 as and for attorney's fees and the
costs of suit.14
In a Resolution dated 25 January 2007, the
appellate court denied the Motion for
Reconsideration interposed by petitioner for
lack of merit.
Petitioner is now before this Court via the
Petition at bar, making the following
assignment of errors:
I. THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN DECLARING THAT
CONCILIATION PROCESS IS NOT A
JURISDICTIONAL REQUIREMENT THAT NON-
COMPLIANCE THEREWITH DOES NOT AFFECT
THE JURISDICTION IN EJECTMENT CASE;
II. THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN UPHOLDING THE
SUFFICIENCY OF THE ALLEGATIONS IN THE
COMPLAINT FOR EJECTMENT DESPITE THE
WANT OF ALLEGATION OF "UNLAWFUL
WITHOLDING PREMISES" (sic) QUESTIONED BY
PETITIONER;
III. THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN RULING THAT THE FILING
OF THE COMPLAINT OF RESPONDENT GEORGE
DE CASTRO WITHOUT JOINING ALL HIS OTHER
CO-OWNERS OVER THE SUBJECT PROPERTY IS
PROPER;
IV. THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN NOT APPLYING SUPREME
COURT CIRCULAR NO. 10 WHICH DIRECTS A
PLEADER TO INDICATE IN HIS PLEADINGS HIS
OFFICIAL RECEIPT OF HIS PAYMENT OF HIS IBP
DUES.15
Petitioner avers that respondents failed to go
through the conciliation process before the
Barangay Lupon, a jurisdictional defect that
bars the legal action for ejectment. The
Certification to file action dated 18 January
2002 issued by the Barangay Lupon, appended
by the respondents to their Complaint in Civil
Case No. 1990, is of no moment, for it attested
only that there was confrontation between the
parties on the matter of rental increase but not
on unlawful detainer of the subject property by
the petitioner. If it was the intention of the
respondents from the very beginning to eject
petitioner from the subject property, they
should have brought up the alleged unlawful
stay of the petitioner on the subject property
for conciliation before the Barangay Lupon.
The barangay justice system was established
primarily as a means of easing up the
congestion of cases in the judicial courts. This
could be accomplished through a proceeding
before the barangay courts which, according to
the one who conceived of the system, the late
Chief Justice Fred Ruiz Castro, is essentially
arbitration in character; and to make it truly
effective, it should also be compulsory. With
this primary objective of the barangay justice
system in mind, it would be wholly in keeping
with the underlying philosophy of Presidential
Decree No. 1508 (Katarungang Pambarangay
Law), which would be better served if an out-
of-court settlement of the case is reached
voluntarily by the parties.16 To ensure this
objective, Section 6 of Presidential Decree No.
1508 requires the parties to undergo a
conciliation process before the Lupon
Chairman or the Pangkat ng
Tagapagkasundo as a precondition to filing a
complaint in court subject to certain
exceptions. The said section has been declared
compulsory in nature.17
Presidential Decree No. 1508 is now
incorporated in Republic Act No. 7160 (The
Local Government Code), which took effect on
1 January 1992.
The pertinent provisions of the Local
Government Code making conciliation a
precondition to the filing of complaints in court
are reproduced below:
SEC. 412. Conciliation.- (a) Pre-condition to
filing of complaint in court. - No complaint,
petition, action, or proceeding involving any
matter within the authority of the lupon shall
be filed or instituted directly in court or any
other government office for adjudication,
unless there has been a confrontation between
the parties before the lupon chairman or the
pangkat, and that no conciliation or settlement
has been reached as certified by the lupon
secretary or pangkat secretary as attested to by
the lupon or pangkat chairman or unless the
settlement has been repudiated by the parties
thereto.
(b) Where parties may go directly to court. - The
parties may go directly to court in the following
instances:
(1) Where the accused is under detention;
(2) Where a person has otherwise been
deprived of personal liberty calling for habeas
corpus proceedings;
(3) Where actions are coupled with provisional
remedies such as preliminary injunction,
attachment, delivery of personal property, and
support pendente lite; and
(4) Where the action may otherwise be barred
by the statute of limitations.
(c) Conciliation among members of indigenous
cultural communities. - The customs and
traditions of indigenous cultural communities
shall be applied in settling disputes between
members of the cultural communities.
SEC. 408. Subject Matter for Amicable
Settlement; Exception Thereto. - The lupon of
each barangay shall have authority to bring
together the parties actually residing in the
same city or municipality for amicable
settlement of all disputes except:
(a) Where one party is the government or any
subdivision or instrumentality thereof;
(b) Where one party is a public officer or
employee, and the dispute relates to the
performance of his official functions;
(c) Offenses punishable by imprisonment
exceeding one (1) year or a fine exceeding Five
thousand pesos (P5,000.00);
(d) Offenses where there is no private offended
party;
(e) Where the dispute involves real properties
located in different cities or municipalities
unless the parties thereto agree to submit their
differences to amicable settlement by an
appropriate lupon;
(f) Disputes involving parties who actually
reside in barangays of different cities or
municipalities, except where such barangay
units adjoin each other and the parties thereto
agree to submit their differences to amicable
settlement by an appropriate lupon;
(g) Such other classes of disputes which the
President may determine in the interest of
justice or upon the recommendation of the
Secretary of Justice.
There is no question that the parties to this
case appeared before the Barangay Lupon for
conciliation proceedings. There is also no
dispute that the only matter referred to
the Barangay Lupon for conciliation was the
rental increase, and not the ejectment of
petitioner from the subject property. This is
apparent from a perusal of the Certification to
file action in court issued by
the Barangay Lupon on 18 January 2002, to
wit:
CERTIFICATION TO FILE COMPLAINTS
This is to certify that:
1. There was personal confrontation between
parties before the barangay Lupon regarding
rental increase of a commercial building but
conciliation failed;
2. Therefore, the corresponding dispute of the
above-entitled case may now be filed in
Court/Government Office.18 (Emphasis ours.)
The question now to be resolved by this Court
is whether the Certification dated 18 January
2002 issued by the Barangay Lupon stating that
no settlement was reached by the parties on
the matter of rental increase sufficient to
comply with the prior conciliation requirement
under the Katarungang Pambarangay Law to
authorize the respondents to institute the
ejectment suit against petitioner.
The Court rules affirmatively.
While it is true that the Certification to file
action dated 18 January 2002 of the Barangay
Lupon refers only to rental increase and not to
the ejectment of petitioner from the subject
property, the submission of the same for
conciliation before the Barangay
Lupon constitutes sufficient compliance with
the provisions of the Katarungang
Pambarangay Law. Given the particular
circumstances of the case at bar, the
conciliation proceedings for the amount of
monthly rental should logically and reasonably
include also the matter of the possession of the
property subject of the rental, the lease
agreement, and the violation of the terms
thereof.
We now proceed to discuss the meat of the
controversy.
The contract of lease between the parties did
not stipulate a fixed period. Hence, the parties
agreed to the payment of rentals on a monthly
basis. On this score, Article 1687 of the Civil
Code provides:
Art. 1687. If the period for the lease has not
been fixed, it is understood to be from year to
year, if the rent agreed upon is annual; from
month to month, if it is monthly; from week to
week, if the rent is weekly; and from day to
day, if the rent is to be paid daily. However,
even though a monthly rent is paid, and no
period for the lease has been set, the courts
may fix a longer term for the lease after the
lessee has occupied the premises for over one
year. If the rent is weekly, the courts may
likewise determine a longer period after the
lessee has been in possession for over six
months. In case of daily rent, the courts may
also fix a longer period after the lessee has
stayed in the place for over one month.
(Emphasis supplied.)
The rentals being paid monthly, the period of
such lease is deemed terminated at the end of
each month. Thus, respondents have every
right to demand the ejectment of petitioners at
the end of each month, the contract having
expired by operation of law. Without a lease
contract, petitioner has no right of possession
to the subject property and must vacate the
same. Respondents, thus, should be allowed to
resort to an action for ejectment before the
MTC to recover possession of the subject
property from petitioner.
Corollarily, petitioner's ejectment, in this case,
is only the reasonable consequence of his
unrelenting refusal to comply with the
respondents' demand for the payment of rental
increase agreed upon by both parties. Verily,
the lessor's right to rescind the contract of
lease for non-payment of the demanded
increased rental was recognized by this Court
in Chua v. Victorio19:
The right of rescission is statutorily recognized
in reciprocal obligations, such as contracts of
lease. In addition to the general remedy of
rescission granted under Article 1191 of the
Civil Code, there is an independent provision
granting the remedy of rescission for breach of
any of the lessor or lessee's statutory
obligations. Under Article 1659 of the Civil
Code, the aggrieved party may, at his option,
ask for (1) the rescission of the contract; (2)
rescission and indemnification for damages; or
(3) only indemnification for damages, allowing
the contract to remain in force.
Payment of the rent is one of a lessee's
statutory obligations, and, upon non-payment
by petitioners of the increased rental in
September 1994, the lessor acquired the right
to avail of any of the three remedies outlined
above. (Emphasis supplied.)
Petitioner next argues that respondent George
de Castro cannot maintain an action for
ejectment against petitioner, without joining all
his co-owners.
Article 487 of the New Civil Code is explicit on
this point:
ART. 487. Any one of the co-owners may bring
an action in ejectment.
This article covers all kinds of action for the
recovery of possession, i.e., forcible entry and
unlawful detainer (accion interdictal), recovery
of possession (accion publiciana), and recovery
of ownership (accion de reivindicacion). As
explained by the renowned civilist, Professor
Arturo M. Tolentino20:
A co-owner may bring such an action, without
the necessity of joining all the other co-owners
as co-plaintiffs, because the suit is deemed to
be instituted for the benefit of all. If the action
is for the benefit of the plaintiff alone, such that
he claims possession for himself and not for the
co-ownership, the action will not prosper.
(Emphasis added.)
In the more recent case of  Carandang v. Heirs
of De Guzman,21 this Court declared that a co-
owner is not even a necessary party to an
action for ejectment, for complete relief can be
afforded even in his absence, thus:
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
the 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
afforded in the suit even without their
participation, since the suit is presumed to have
been filed for the benefit of all co-owners.
Moreover, respondents Annie de Castro and
Felomina de Castro Uban each executed a
Special Power of Attorney, giving respondent
George de Castro the authority to initiate Civil
Case No. 1990.
A power of attorney is an instrument in writing
by which one person, as principal, appoints
another as his agent and confers upon him the
authority to perform certain specified acts or
kinds of acts on behalf of the principal. The
written authorization itself is the power of
attorney, and this is clearly indicated by the fact
that it has also been called a "letter of
attorney."22
Even then, the Court views the SPAs as mere
surplusage, such that the lack thereof does not
in any way affect the validity of the action for
ejectment instituted by respondent George de
Castro. This also disposes of petitioner's
contention that respondent George de Castro
lacked the authority to sign the Verification and
the Certificate of Non-Forum Shopping. As the
Court ruled in Mendoza v. Coronel23:
We likewise hold that the execution of the
certification against forum shopping by the
attorney-in-fact in the case at bar is not a
violation of the requirement that the parties
must personally sign the same. The attorney-in-
fact, who has authority to file, and who actually
filed the complaint as the representative of the
plaintiff co-owner, pursuant to a Special Power
of Attorney, is a party to the ejectment suit. In
fact, Section 1, Rule 70 of the Rules of Court
includes the representative of the owner in an
ejectment suit as one of the parties authorized
to institute the proceedings. (Emphasis
supplied.)
Failure by respondent George de Castro to
attach the said SPAs to the Complaint is
innocuous, since it is undisputed that he was
granted by his sisters the authority to file the
action for ejectment against petitioner prior to
the institution of Civil Case No. 1990. The SPAs
in his favor were respectively executed by
respondents Annie de Castro and Felomina de
Castro Uban on 7 February 2002 and 14 March
2002; while Civil Case No. 1990 was filed by
respondent George de Castro on his own behalf
and on behalf of his siblings only on 1 July 2002,
or way after he was given by his siblings the
authority to file said action. The Court quotes
with approval the following disquisition of the
Court of Appeals:
Moreover, records show that [herein
respondent] George de Castro was indeed
authorized by his sisters Annie de Castro and
Felomina de Castro Uban, to prosecute the case
in their behalf as shown by the Special Power of
Attorney dated February 7, 2002 and March 14,
2002. That these documents were appended
only to [respondent George de Castro's]
position paper is of no moment considering
that the authority conferred therein was given
prior to the institution of the complaint in July,
2002. x x x.24
Respondent deceased Jesus de Castro's failure
to sign the Verification and Certificate of Non-
Forum Shopping may be excused since he
already executed an Affidavit25 with respondent
George de Castro that he had personal
knowledge of the filing of Civil Case No. 1990.
In Torres v. Specialized Packaging Development
Corporation,26 the Court ruled that the personal
signing of the verification requirement was
deemed substantially complied with when, as
in the instant case, two out of 25 real parties-
in-interest, who undoubtedly have sufficient
knowledge and belief to swear to the truth of
the allegations in the petition, signed the
verification attached to it.
In the same vein, this Court is not persuaded by
petitioner's assertion that respondents' failure
to allege the jurisdictional fact that there was
"unlawful withholding" of the subject property
was fatal to their cause of action.
It is apodictic that what determines the nature
of an action as well as which court has
jurisdiction over it are the allegations in the
complaint and the character of the relief
sought. In an unlawful detainer case, the
defendant's possession was originally lawful
but ceased to be so upon the expiration of his
right to possess. Hence, the phrase "unlawful
withholding" has been held to imply possession
on the part of defendant, which was legal in the
beginning, having no other source than a
contract, express or implied, and which later
expired as a right and is being withheld by
defendant.27
In Barba v. Court of Appeals,28 the Court held
that although the phrase "unlawfully
withholding" was not actually used by therein
petitioner in her complaint, the Court held that
her allegations, nonetheless, amounted to an
unlawful withholding of the subject property by
therein private respondents, because they
continuously refused to vacate the premises
even after notice and demand.
In the Petition at bar, respondents alleged in
their Complaint that they are the registered
owners of the subject property; the subject
property was being occupied by the petitioner
pursuant to a monthly lease contract;
petitioner refused to accede to respondents'
demand for rental increase; the respondents
sent petitioner a letter terminating the lease
agreement and demanding that petitioner
vacate and turn over the possession of the
subject property to respondents; and despite
such demand, petitioner failed to surrender the
subject property to respondents.29 The
Complaint sufficiently alleges the unlawful
withholding of the subject property by
petitioner, constitutive of unlawful detainer,
although the exact words "unlawful
withholding" were not used. In an action for
unlawful detainer, an allegation that the
defendant is unlawfully withholding possession
from the plaintiff is deemed sufficient, without
necessarily employing the terminology of the
law.30
Petitioner's averment that the Court of Appeals
should have dismissed respondents' Petition in
light of the failure of their counsel to attach the
Official Receipt of his updated payment of
Integrated Bar of the Philippines (IBP) dues is
now moot and academic, since respondents'
counsel has already duly complied therewith. It
must be stressed that judicial cases do not
come and go through the portals of a court of
law by the mere mandate of
technicalities.31 Where a rigid application of the
rules will result in a manifest failure or
miscarriage of justice, technicalities should be
disregarded in order to resolve the case. 32
Finally, we agree in the ruling of the Court of
Appeals that petitioner is liable for the payment
of back rentals, attorney's fees and cost of the
suit. Respondents must be duly indemnified for
the loss of income from the subject property on
account of petitioner's refusal to vacate the
leased premises.
WHEREFORE, premises considered, the instant
Petition is DENIED. The Decision dated 19
September 2006 and Resolution dated 25
January 2007 of the Court of Appeals in CA-G.R.
SP No. 90906 are hereby AFFIRMED in toto.
Costs against petitioner.
SO ORDERED.
G.R. No. 178411               MAYOR OF
PARANAQUE VS EBIO
Before us is a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the January
31, 2007 Decision1 and June 8, 2007
Resolution2 of the Court of Appeals (CA) in CA-
G.R. SP No. 91350 allegedly for being contrary
to law and jurisprudence. The CA had reversed
the Order3 of the Regional Trial Court (RTC) of
Parañaque City, Branch 196, issued on April 29,
2005 in Civil Case No. 05-0155.
Below are the facts.
Respondents claim that they are the absolute
owners of a parcel of land consisting of 406
square meters, more or less, located at 9781
Vitalez Compound in Barangay Vitalez,
Parañaque City and covered by Tax Declaration
Nos. 01027 and 01472 in the name of
respondent Mario D. Ebio. Said land was an
accretion of Cut-cut creek. Respondents assert
that the original occupant and possessor of the
said parcel of land was their great grandfather,
Jose Vitalez. Sometime in 1930, Jose gave the
land to his son, Pedro Vitalez. From then on,
Pedro continuously and exclusively occupied
and possessed the said lot. In 1966, after
executing an affidavit declaring possession and
occupancy,4 Pedro was able to obtain a tax
declaration over the said property in his
name.5 Since then, respondents have been
religiously paying real property taxes for the
said property.6
Meanwhile, in 1961, respondent Mario Ebio
married Pedro’s daughter, Zenaida. Upon
Pedro’s advice, the couple established their
home on the said lot. In April 1964 and in
October 1971, Mario Ebio secured building
permits from the Parañaque municipal office
for the construction of their house within the
said compound.7 On April 21, 1987, Pedro
executed a notarized Transfer of Rights8 ceding
his claim over the entire parcel of land in favor
of Mario Ebio. Subsequently, the tax
declarations under Pedro’s name were
cancelled and new ones were issued in Mario
Ebio’s name.9
On March 30, 1999, the Office of
the Sangguniang Barangay of Vitalez passed
Resolution No. 08, series of 199910 seeking
assistance from the City Government of
Parañaque for the construction of an access
road along Cut-cut Creek located in the said
barangay. The proposed road, projected to be
eight (8) meters wide and sixty (60) meters
long, will run from Urma Drive to the main road
of Vitalez Compound11 traversing the lot
occupied by the respondents. When the city
government advised all the affected residents
to vacate the said area, respondents
immediately registered their opposition
thereto. As a result, the road project was
temporarily suspended.12
In January 2003, however, respondents were
surprised when several officials from the
barangay and the city planning office
proceeded to cut eight (8) coconut trees
planted on the said lot. Respondents filed
letter-complaints before the Regional Director
of the Bureau of Lands, the Department of
Interior and Local Government and the Office
of the Vice Mayor.13 On June 29, 2003,
the Sangguniang Barangay of Vitalez held a
meeting to discuss the construction of the
proposed road. In the said meeting,
respondents asserted their opposition to the
proposed project and their claim of ownership
over the affected property.14 On November 14,
2003, respondents attended another meeting
with officials from the city government, but no
definite agreement was reached by and among
the parties.15
On March 28, 2005, City Administrator Noli
Aldip sent a letter to the respondents ordering
them to vacate the area within the next thirty
(30) days, or be physically evicted from the said
property.16 Respondents sent a letter to the
Office of the City Administrator asserting, in
sum, their claim over the subject property and
expressing intent for a further dialogue.17 The
request remained unheeded.1avvphi1
Threatened of being evicted, respondents went
to the RTC of Parañaque City on April 21, 2005
and applied for a writ of preliminary injunction
against petitioners.18 In the course of the
proceedings, respondents admitted before the
trial court that they have a pending application
for the issuance of a sales patent before the
Department of Environment and Natural
Resources (DENR).19
On April 29, 2005, the RTC issued an
Order20 denying the petition for lack of merit.
The trial court reasoned that respondents were
not able to prove successfully that they have an
established right to the property since they
have not instituted an action for confirmation
of title and their application for sales patent has
not yet been granted. Additionally, they failed
to implead the Republic of the Philippines,
which is an indispensable party.
Respondents moved for reconsideration, but
the same was denied.21
Aggrieved, respondents elevated the matter to
the Court of Appeals. On January 31, 2007, the
Court of Appeals issued its Decision in favor of
the respondents. According to the Court of
Appeals--
The issue ultimately boils down to the question
of ownership of the lands adjoining Cutcut
Creek particularly Road Lot No. 8 (hereinafter
RL 8) and the accreted portion beside RL 8.
The evidentiary records of the instant case,
shows that RL 8 containing an area of 291
square meters is owned by Guaranteed Homes,
Inc. covered by TCT No. S-62176. The same RL 8
appears to have been donated by the
Guaranteed Homes to the City Government of
Parañaque on 22 March 1966 and which was
accepted by the then Mayor FLORENCIO
BERNABE on 5 April 1966. There is no evidence
however, when RL 8 has been intended as a
road lot.
On the other hand, the evidentiary records
reveal that PEDRO VITALEZ possessed the
accreted property since 1930 per his Affidavit
dated 21 March 1966 for the purpose of
declaring the said property for taxation
purposes. The property then became the
subject of Tax Declaration No. 20134 beginning
the year 1967 and the real property taxes
therefor had been paid for the years 1966,
1967, 1968, 1969, 1970, 1972, 1973, 1974,
1978, 1980, 1995, 1996, 1997, 1998, 1999,
2000, 2001, 2002, 2003, and 2004. Sometime in
1964 and 1971, construction permits were
issued in favor of Appellant MARIO EBIO for the
subject property. On 21 April 1987, PEDRO
VITALEZ transferred his rights in the accreted
property to MARIO EBIO and his successors-in-
interest.
Applying [Article 457 of the Civil Code
considering] the foregoing documentary
evidence, it could be concluded that
Guaranteed Homes is the owner of the
accreted property considering its ownership of
the adjoining RL 8 to which the accretion
attached. However, this is without the
application of the provisions of the Civil Code
on acquisitive prescription which is likewise
applicable in the instant case.
The subject of acquisitive prescription in the
instant case is the accreted portion which [was]
duly proven by the Appellants. It is clear that
since 1930, Appellants together with their
predecessor-in-interest, PEDRO VITALEZ[,] have
been in exclusive possession of the subject
property and starting 1964 had introduced
improvements thereon as evidenced by their
construction permits. Thus, even by
extraordinary acquisitive prescription[,]
Appellants have acquired ownership of the
property in question since 1930 even if the
adjoining RL 8 was subsequently registered in
the name of Guaranteed Homes. x x x.
Further, it was only in 1978 that Guaranteed
Homes was able to have RL 8 registered in its
name, which is almost fifty years from the time
PEDRO VITALEZ occupied the adjoining
accreted property in 1930.
We likewise note the continuous payment of
real property taxes of Appellants which bolster
their right over the subject property. x x x.
In sum, We are fully convinced and so hold that
the Appellants [have] amply proven their right
over the property in question.
WHEREFORE, premises considered, the instant
appeal is hereby GRANTED. The challenged
Order of the court a quo is REVERSED and SET
ASIDE.
SO ORDERED.22
On June 8, 2007, the appellate court denied
petitioners’ motion for reconsideration. Hence,
this petition raising the following assignment of
errors:
I. WHETHER OR NOT THE DECISION AND
RESOLUTION OF THE HONORABLE COURT OF
APPEALS THAT RESPONDENTS HAVE A RIGHT IN
ESSE IS IN ACCORD WITH THE LAW AND
ESTABLISHED JURISPRUDENCE[;]
II. WHETHER OR NOT THE DECISION AND
RESOLUTION OF THE HONORABLE COURT OF
APPEALS THAT THE SUBJECT LOT IS AVAILABLE
FOR ACQUISITIVE PRESCRIPTION IS IN ACCORD
WITH THE LAW AND ESTABLISHED
JURISPRUDENCE[;] AND
III. WHETHER OR NOT THE STATE IS AN
INDISPENSABLE PARTY TO THE COMPLAINT …
FILED BY RESPONDENTS IN THE LOWER
COURT.23
The issues may be narrowed down into two (2):
procedurally, whether the State is an
indispensable party to respondents’ action for
prohibitory injunction; and substantively,
whether the character of respondents’
possession and occupation of the subject
property entitles them to avail of the relief of
prohibitory injunction.
The petition is without merit.
An action for injunction is brought specifically
to restrain or command the performance of an
act.24 It is distinct from the ancillary remedy of
preliminary injunction, which cannot exist
except only as part or as an incident to an
independent action or proceeding. Moreover,
in an action for injunction, the auxiliary remedy
of a preliminary prohibitory or mandatory
injunction may issue.25
In the case at bar, respondents filed an action
for injunction to prevent the local government
of Parañaque City from proceeding with the
construction of an access road that will traverse
through a parcel of land which they claim is
owned by them by virtue of acquisitive
prescription.
Petitioners, however, argue that since the
creek, being a tributary of the river, is classified
as part of the public domain, any land that may
have formed along its banks through time
should also be considered as part of the public
domain. And respondents should have included
the State as it is an indispensable party to the
action.
We do not agree.
It is an uncontested fact that the subject land
was formed from the alluvial deposits that have
gradually settled along the banks of Cut-cut
creek. This being the case, the law that governs
ownership over the accreted portion is Article
84 of the Spanish Law of Waters of 1866, which
remains in effect,26 in relation to Article 457 of
the Civil Code.
Article 84 of the Spanish Law of Waters of
1866 specifically covers ownership over alluvial
deposits along the banks of a creek. It reads:
ART. 84. Accretions deposited gradually upon
lands contiguous to creeks, streams, rivers, and
lakes, by accessions or sediments from the
waters thereof, belong to the owners of such
lands.27
Interestingly, Article 457 of the Civil
Code states:
Art. 457. To the owners of lands adjoining the
banks of rivers belong the accretion which they
gradually receive from the effects of the
current of the waters.
It is therefore explicit from the foregoing
provisions that alluvial deposits along the banks
of a creek do not form part of the public
domain as the alluvial property automatically
belongs to the owner of the estate to which it
may have been added. The only restriction
provided for by law is that the owner of the
adjoining property must register the same
under the Torrens system; otherwise, the
alluvial property may be subject to acquisition
through prescription by third persons.28
In contrast, properties of public dominion
cannot be acquired by prescription. No matter
how long the possession of the properties has
been, there can be no prescription against the
State regarding property of public
domain.29 Even a city or municipality cannot
acquire them by prescription as against the
State.30
Hence, while it is true that a creek is a property
of public dominion,31 the land which is formed
by the gradual and imperceptible accumulation
of sediments along its banks does not form part
of the public domain by clear provision of law.
Moreover, an indispensable party is one whose
interest in the controversy is such that a final
decree would necessarily affect his/her right, so
that the court cannot proceed without their
presence.32 In contrast, a necessary party is one
whose presence in the proceedings is necessary
to adjudicate the whole controversy but whose
interest is separable such that a final decree
can be made in their absence without affecting
them.33
In the instant case, the action for prohibition
seeks to enjoin the city government of
Parañaque from proceeding with its
implementation of the road construction
project. The State is neither a necessary nor an
indispensable party to an action where no
positive act shall be required from it or where
no obligation shall be imposed upon it, such as
in the case at bar. Neither would it be an
indispensable party if none of its properties
shall be divested nor any of its rights infringed.
We also find that the character of possession
and ownership by the respondents over the
contested land entitles them to the avails of the
action.
A right in esse means a clear and unmistakable
right.34 A party seeking to avail of an injunctive
relief must prove that he or she possesses a
right in esse or one that is actual or existing.35 It
should not be contingent, abstract, or future
rights, or one which may never arise.36
In the case at bar, respondents assert that their
predecessor-in-interest, Pedro Vitalez, had
occupied and possessed the subject lot as early
as 1930. In 1964, respondent Mario Ebio
secured a permit from the local government of
Parañaque for the construction of their family
dwelling on the said lot. In 1966, Pedro
executed an affidavit of possession and
occupancy allowing him to declare the property
in his name for taxation purposes. Curiously, it
was also in 1966 when Guaranteed Homes, Inc.,
the registered owner of Road Lot No. 8 (RL 8)
which adjoins the land occupied by the
respondents, donated RL 8 to the local
government of Parañaque.
From these findings of fact by both the trial
court and the Court of Appeals, only one
conclusion can be made: that for more than
thirty (30) years, neither Guaranteed Homes,
Inc. nor the local government of Parañaque in
its corporate or private capacity sought to
register the accreted portion. Undoubtedly,
respondents are deemed to have acquired
ownership over the subject property through
prescription. Respondents can assert such right
despite the fact that they have yet to register
their title over the said lot. It must be
remembered that the purpose of land
registration is not the acquisition of lands, but
only the registration of title which the applicant
already possessed over the land. Registration
was never intended as a means of acquiring
ownership.37 A decree of registration merely
confirms, but does not confer, ownership.38
Did the filing of a sales patent application by
the respondents, which remains pending
before the DENR, estop them from filing an
injunction suit?
We answer in the negative.
Confirmation of an imperfect title over a parcel
of land may be done either through judicial
proceedings or through administrative process.
In the instant case, respondents admitted that
they opted to confirm their title over the
property administratively by filing an
application for sales patent.
Respondents’ application for sales patent,
however, should not be used to prejudice or
derogate what may be deemed as their vested
right over the subject property. The sales
patent application should instead be
considered as a mere superfluity particularly
since ownership over the land, which they seek
to buy from the State, is already vested upon
them by virtue of acquisitive prescription.
Moreover, the State does not have any
authority to convey a property through the
issuance of a grant or a patent if the land is no
longer a public land.39
Nemo dat quod dat non habet. No one can give
what he does not have. Such principle is equally
applicable even against a sovereign entity that
is the State.
WHEREFORE, the petition is DENIED for lack of
merit. The January 31, 2007 Decision, as well as
the July 8, 2007 Resolution, of the Court of
Appeals in CA-G.R. SP No. 91350 are hereby
AFFIRMED.
With costs against petitioners.
SO ORDERED.
G.R. No. L-72714 EMATA VS IAC
On July 18, 1985 the then Intermediate
Appellate Court promulgated a decision in AC-
G.R. CV No. 02939-R 1 affirming in toto the
decision of the Regional Trial Court of Manila,
Branch LV, in Civil Case No. 141977 2 an action
for replevin and damages.
The factual antecedents culminating in and
constituting the bases of both decisions had
their inchoation in petitioner's purchase of a
car on installment from Violago Motor Sales
Corporation (Violago, for brevity) with a down
payment of P 14,982.00. Petitioner likewise
executed in favor of the seller a promissory
note and a chattel mortgage over the car as
security for the payment of the note. Said
promissory note provides:
For value received, I/We, jointly and severally
promise to pay VIOLAGO MOTOR SALES
CORPORATION or order, at its office in the (sic)
San Fernando, Pampanga the principal sum of
fifty seven thousand two hundred four pesos
only (P 57,204.00) Philippine currency, which
amount includes interest at 12% per annum
based on the diminishing balance, the said
principal sum, to be payable, without need of
notice or demand, in installments of the
amounts following and at the dates hereinafter
set forth, to wit: P 1,589.00 monthly for 36
months due and payable on the 25th day of
each month starting SEPTEMBER 25, 1978 thru
and inclusive of AUGUST 25, 1981 ..., provided
that interest at 14% per annum shall be added
on each unpaid installment from maturity
hereof until fully paid. 3
Thus, the total amount that the petitioner was
supposed to pay was P 72,186.00, with P
57,204.00 as the balance after deducting the
down payment. The total amount payable was
P 22,246.00 more than the "list cash price" of P
49,940.00 for said vehicle.
After the execution of said documents, Violago
endorsed the promissory note and assigned the
chattel mortgage to Filinvest Credit Corporation
(hereafter, Filinvest for short) upon payment by
the latter of P 34,958.00, the unpaid balance of
the list cash price of the car. Three years later,
Filinvest assigned to private respondent
Servicewide Specialists, Inc. the remaining
installment balance due on and corresponding
to the period from February 25, 1981 to August
25, 1981.
Alleging non-payment of five (5) consecutive
installments from February 25 to June 25, 1981,
private respondent initiated the case in the trial
court for a writ of replevin to effect the seizure
of the car or, alternatively, for the payment by
petitioner of the sum of P 1,332.40, with
interest thereon of fourteen percent (14%) per
annum from July 10, 1981 until fully paid and,
additionally, for attorney's fees and costs of
suit.
Herein petitioner, in answer thereto and as
summarized by the court a quo, alleged that
"the promissory note does not express the true
intent and agreement of the parties, the same
having been procured through fraud, deceit,
trickery and misrepresentation, that the chattel
mortgage was intended to secure the payment
of P 34,958.00 which was the unpaid balance of
the purchase price of the Toyota car; that he
was made to sign the note and the mortgage in
blank; that he has paid, and even overpaid,
Filinvest by P 9,388.22; that the promissory
note by inflating its value and charging more
than the prescribed rates in violation of the
Financing Company Act (Republic Act No. 5980)
violates the Usury Law; that the note and the
mortgage are null and void; and that the
demand set forth in the complaint has long
been extinguished." 4 Furthermore, petitioner
claimed that Filinvest, aside from charging
usurious interest as earlier stated, violated the
provisions of the Truth in Lending Act (Republic
Act No. 3765) for failure to provide him a copy
of the disclosure statement containing entries
required by said law. He consequently set up a
counterclaim against Filinvest for various items
of damages and attorney's fees all amounting
to more than P 1,100,000.00. 5
On November 5, 1981, petitioner filed a
"Motion to Implead Filinvest Credit
Corporation" on the theory that "for all legal
purposes the corporation sought to be
impleaded is the real party in interest" because
it retained interest over the balance of the
petitioner's account in spite of its assignment to
private respondent. 6 An opposition thereto
was filed by private respondent corporation on
January 18, 1982. 7
Subsequently, in its order of April 26, 1982, the
court below held in abeyance the pre-trial
hearing of the case since, "(u)pon motion of
Atty. Melecio Virgilio Emata," said petitioner
was given a "Period of fifteen (15) days to file
the third-party complaint against the third
party defendant (Filinvest)." 8 Petitioner ,
however, did not file any third-party complaint,
hence the trial court set the case for pre-trial
on May 3, 1983, it being understood that
petitioner was no longer interested in
impleading the herein private respondent as a
third-party defendant therein.
On May 2, 1983, petitioner filed an urgent
motion to cancel the scheduled pre-trial and
the trial court reset the same to June 9, 1983.
Another motion for postponement of the
scheduled pre-trial filed by petitioner on June 8,
1983 was denied by the lower court, which
consequently issued an order declaring
petitioner as in default for failure to appear at
the pre-trial of June 9, 1983. Respondent
corporation was then allowed to present
evidence ex parte despite an opposition of
petitioner.
However, upon a subsequent motion of
petitioner, in its order of August 17, 1983 the
trial court not only lifted the default order but
also allowed him to cross-examine private
respondent's sole witness "as a last opportunity
to adduce evidence in support of the material
allegations of his answer." The same order
declared that the order of April 26, 1982,
hereinbefore stated, must be maintained since
petitioner had opted not to comply therewith,
hence his motion to implead Filinvest was in
effect already resolved in said order of April 26,
1982. 9
At the continuation of the trial on September 1,
1983, the court a quo, in order to 587654321
simplify the proceedings, allowed both parties
to submit their respective lists of payments
made by petitioner to respondent corporation,
with the court determining the proper
application of each payment. The parties then
filed their respective memoranda and
submitted the case for decision.
On March 6, 1984, judgment was rendered by
the trial court as follows:
WHEREFORE, premises considered, judgment is
hereby rendered against the defendant and in
favor of the plaintiff, ordering the former to
deliver to the latter the Toyota Car hereinabove
described, or to pay the latter the sum of P
11,332.40, plus interest thereon at the rate of
14% per annum.
In either case, the defendant is also ordered to
pay the plaintiff the following sums: P 2,800.00
as attorney's fees and P 424.50 as bonding fees.
Should the defendant fail to satisfy, or comply
with the foregoing, his bondsman or surety,
Sanpiro Insurance Corporation, shall be hable
therefor in accordance with the counter-bond.
With costs against the defendant. 10
Petitioner takes exception to respondent
court's affirmance of said decision, hence this
petition. Petitioner raises both procedural and
substantive issues. Initially, he complains that
the trial court erred in requiring him to file a
third- party complaint against Filinvest, instead
of impleading the latter either as party plaintiff
or defendant. 11 He insists that Filinvest is the
real party in interest in the present case and it
should be impleaded under Rule 3 of the Rules
of Court which provides:
Sec. 10. Unwilling co-plaintiff. -If the consent of
any party who should be joined as plaintiff can
not be obtained, he may be made a defendant
and the reason therefor shall be stated in the
complaint.
Sec. 11. Misjoinder and non-joinder of parties.
-Misjoinder of parties is not ground for
dismissal of an action. Parties may be dropped
or added by order of the court on motion of
any party or on its own initiative at any stage of
the action and on such terms as are just. Any
claim against a party may be severed and
proceeded with separately.
which he complements with a provision in Rule
6, to wit:
Sec. 14. Bringing new parties. When the
presence of parties other than those to the
original action is required for the granting of
complete relief in the determination of a
counterclaim or cross-claim, the court shall
order them to be brought in as defendants if
jurisdiction over them can be obtained.
Concededly, additional parties may be brought
in under the above-quoted provisions of the
Rules. A third-party complaint, however, is not
to be eschewed or disregarded in the
procedural scheme since it may, in fact, be the
very vehicle for impleading a third person as a
party to the case. Thus, for purposes of Section
14 of Rule 6, above quoted, the court may
authorize the filing of the proper third-party
complaint to implead the other parties not
included in the original complaint, in keeping
with the injunction that "all pleadings shall be
liberally construed so as to do substantial
justice." 12
We reject petitioner's complaint that the order
of the court a quo requiring the filing of a third-
party complaint is improper. A third- party
complaint is "a claim that a defending party
may, with leave of court, file against a person
not a party to the action, called the third- party
defendant, for contribution, indemnity,
subrogation or any other relief in respect of his
opponent's claim." 13 Obviously, a third-party
complaint against Filinvest, had petitioner filed
the same, would be a claim in respect of the
plaintiffs claim since the former arises from the
same transaction on which the plaintiffs claim is
based, that is, the promissory note which was
eventually assigned to private
respondent. 14 Although the petitioner did not
admit in his answer that any amount is due
from the corporation sought to be impleaded,
that is not indicative of nor does it support his
thesis of the alleged impropriety of a third-
party complaint. Apparently, petitioner failed
to take into consideration that the remedy is
also applicable where the defendant seeks "any
other relief in respect of his opponent's claim,"
a remedial grant of power broad enough to
include the relief he seeks in the case at bar.
Petitioner cannot rely on the provisions of
Section 10, Rule 3 which envisages a party who
should be joined as a plaintiff but who does not
assent to such joinder. Obviously and
necessarily, such unwilling party must be a real
party in interest. In the case at bar, Filinvest's
position and the evidence thereon was that it
was not a real party in interest, as it was no
longer entitled to the avails of the suit by
reason of the anterior assignment it made in
favor of private respondent. Hence, at the very
least, its capacity was in issue and it would be a
case of procedural petitio principii for the trial
court to have categorized it as an unwilling co-
plaintiff, with the procedural consequences
thereof, although such operative issue was still
unresolved. Furthermore, the option lies with
the plaintiff on whether or not to join an
additional party in his complaint. The original
plaintiff cannot be compelled, on the mere
representations of the defendant, to implead
anyone, especially if it does not appear that
such joinder is proper or is necessary for the
complete and expeditious adjudication of the
case.
Nor can the general rule in Section 11, Rule 3,
on the power to order the addition or dropping
of a party at any stage of action, be of solace to
the petitioner. This is a power addressed to the
sound discretion of the court to be exercised on
such terms as are just, and by this is meant that
it must be just to all the other
parties. 15 Obviously, given the facts of this
case, the trial court wisely exercised its
discretion in refusing to give in to the
unjustified importunings of petitioner.
Petitioner should be reminded that the courts,
as the arbiters of the rights of the parties, stand
in a better position and are clothed with ample
authority to rule on the procedural measures
that are proper in cases before them. If a party
believes that the order of the court is not in
accordance with law, he is not without other
alternative remedial avenues. If, on the other
hand, the order does not suffer from any legal
infirmities, the same is binding on the parties
and to this they must submit with grace. We
cannot but be displeased with petitioner's
unseemly motivation and stance when he
"adopted an attitude of inaction and
completely ignored" the order of the trial court
requiring the filing of a third-party complaint,
especially in view of the factual finding that it
was he who manifested on April 26, 1982 that
he would file said third party complaint . 16
Apart from all these considerations, the
inclusion of Filinvest would at any rate have
been a useless recourse in the light of the fact
that the arguments on which this petition is
moored are bereft of merit .
On the issue of usury, the present rule that
usury at present is legally non-existent 17 would
not apply to the instant case. The present
controversy arose before the adoption on
December 3, 1982 of Resolution No. 224 by the
Central Bank Monetary Board on which the
existing rule is based.
Nevertheless, the records of this case reveal
that the Usury Law, Act No. 2655, is not
applicable thereto. The amount added to the
cash price of the car is what is commonly
known as the "time price differential" and not
interest within the meaning of the Usury Law.
The law is applicable only in case of a loan or
forbearance of money, goods or credit which is
not the case here. The transaction involved
here being admittedly a conditional sale based
on an installment plan and not a loan, it has
been held that the alleged increase in the price
of the article sold cannot be considered a mere
pretext to cover a usurious loan. "The increase
in price, when the sale is on credit serves not
only to cover the expenses generally entailed
by such transactions on credit, but also to
encourage cash sales, so useful to commerce. It
is up to the purchaser to decide which price he
prefers in making the purchase. ... if on the
contrary, he prefers to buy on credit, he cannot
complain of the increase of the price demanded
by the vendor. " 18
Neither is the Usury Law applicable to the
assignment of indebtedness to Filinvest and to
private respondent. The Financing Company
Act provides for the rate of the purchase
discount that may be availed of by a financing
company. The purchase discount is defined as
the "difference between the value of the
receivable purchased or credit assigned, and
the net amount paid by the finance company
for such purchase or assignment, exclusive of
fees, service charges, interest and other
charges incident to the extension of the
credit." 19 Under Section 5 of the same Act, it is
provided that:
In case of assignment of credit or the buying of
installment papers, accounts receivable and the
evidences of indebtedness by financing
companies, the purchase discount, exclusive of
interest and other charges, shall be limited to
fourteen per cent (14%), or such percentage as
may be prescribed by the Monetary Board of
the value of the credit assigned or the value of
the installment papers, accounts .receivable
and other evidences of indebtedness purchased
baged on a period of twelve months or less,
and to one and one-sixth per cent (I -1/ 6%), or
such percentage as may be prescribed by the
Monetary Board, for each additional month or
fraction thereof in excess of twelve months,
regardless of the terms and conditions of the
assignment or purchase.
The petitioner avers that the amount of P
22,246.00, or forty-four and five-hundredths
percent (44.05%), added to the list cash price is
way above the purchase discount prescribed by
Republic Act No. 5980, as well as Central Bank
Circular No. 586 providing for nineteen percent
(19%) per annum as the effective rate of yield
from purchase of receivables. 20 We do not
have to unnecessarily clutter this decision with
unduly involved or extensively complex
computations to demonstrate the incorrectness
of petitioner's position. The finding of the trial
court, that the stipulated interest in the
promissory note is well within the allowable
rate, is adequately supported by the evidence
of record. Although, forty-four and five-
hundredths percent (44.05%) was added to the
list cash price of the car, the same was actually
spread over a three-year period of
amortization. Thus, whether it be fourteen
percent (14%) plus one and one-sixth percent
(1-1/6%) under Republic Act No. 5980 or
nineteen percent (19%) under Circular No. 586,
it is clear that the yield or purchase discount, as
the case may be, is within the limits prescribed
by law.
No violation of the Truth in Lending Act,
Republic Act No. 3765, was established either.
The disclosure statement furnished to
petitioner shows on its face that it contains all
the data required by law and that it was signed
by the seller on July 31, 1978 before the
assignment of the indebtedness to private
respondent. We agree with private respondent
that the petitioner, a practicing lawyer for more
than twenty years, would not be so gullible or
negligent as to sign documents in blank
knowing fully well the legal implications and
consequences of such action . 21 Of course,
petitioner does not deny that Filinvest had
nothing to do with the disclosure statement
since it is the private respondent which is
obligated to furnish, as in fact it did furnish,
petitioner a copy of said statement . 22
Regarding the computations of the petitioner
based on the formula provided by Circular No.
158 of the Central Bank implementing the Truth
in Lending Act, 23 petitioner should not confuse
"time price differential" with the "simple
annual rate" determined by the formula.
"Simple annual rate" is the uniform percentage
which represents the ratio, on an annual basis,
between the finance charges and the amount
to be financed. It is not the measure of the total
amount that is allowed to be added to the cash
price.
IN VIEW OF THE FOREGOING, no reversible
error having been committed by respondent
court, its assailed decision is hereby AFFIRMED
SO ORDERED
G.R. No. 179169               LEONIS VS VILLAMETER
This is a petition for review on certiorari1 under
Rule 45 of the Rules of Court, seeking to annul
and set aside the Decision2 dated May 3, 2007
and the Resolution3 dated July 23, 2007 of the
Court of Appeals (CA) in CA-G.R. SP No. 85594,
entitled "Leonis Navigation Co., Inc., et al. v.
Catalino U. Villamater, et al."
The antecedents of this case are as follows:
Private respondent Catalino U. Villamater
(Villamater) was hired as Chief Engineer for the
ship MV Nord Monaco, owned by petitioner
World Marine Panama, S.A., through the
services of petitioner Leonis Navigation Co., Inc.
(Leonis), as the latter’s local manning agent.
Consequent to this employment, Villamater, on
June 4, 2002, executed an employment
contract,4 incorporating the Standard Terms
and Conditions Governing the Employment of
Filipino Seafarers on Board Ocean-Going
Vessels as prescribed by the Philippine
Overseas Employment Administration (POEA).
Prior to his deployment, Villamater underwent
the required Pre-Employment Medical
Examination (PEME). He passed the PEME and
was declared "Fit to Work."5 Thereafter,
Villamater was deployed on June 26, 2002.
Sometime in October 2002, around four (4)
months after his deployment, Villamater
suffered intestinal bleeding and was given a
blood transfusion. Thereafter, he again felt
weak, lost considerable weight, and suffered
intermittent intestinal pain. He consulted a
physician in Hamburg, Germany, who advised
hospital confinement. Villamater was
diagnosed with Obstructive Adenocarcinoma of
the Sigmoid, with multiple liver metastases,
possibly local peritoneal carcinosis and
infiltration of the bladder, possibly lung
metastasis, and anemia; Candida Esophagitis;
and Chronic Gastritis. He was advised to
undergo chemotherapy and continuous
supportive treatment, such as pain-killers and
blood transfusion.6
Villamater was later repatriated, under medical
escort, as soon as he was deemed fit to travel.
As soon as he arrived in the Philippines,
Villamater was referred to company-designated
physicians. The diagnosis and the
recommended treatment abroad were
confirmed. He was advised to undergo six (6)
cycles of chemotherapy. However, Dr. Kelly Siy
Salvador, one of the company-designated
physicians, opined that Villamater’s condition
"appears to be not work-related," but
suggested a disability grading of 1.7
In the course of his chemotherapy, when no
noticeable improvement occurred, Villamater
filed a complaint8 before the Arbitration Branch
of the National Labor Relations Commission
(NLRC) for payment of permanent and total
disability benefits in the amount of
US$80,000.00, reimbursement of medical and
hospitalization expenses in the amount of
₱11,393.65, moral damages in the sum of
₱1,000,000.00, exemplary damages in the
amount of ₱1,000,000.00, as well as attorney’s
fees.
After the submission of the required position
papers, the Labor Arbiter rendered a
decision9 dated July 28, 2003 in favor of
Villamater, holding that his illness was
compensable, but denying his claim for moral
and exemplary damages. The Labor Arbiter
disposed as follows—
WHEREFORE, foregoing premises considered,
judgment is hereby rendered declaring
complainant’s illness to be compensable and
ordering respondents LEONIS NAVIGATION CO.,
INC. and WORLD MARINE PANAMA, S.A. liable
to pay, jointly and severally, complainant
CATALINO U. VILLAMATER, the amount of
US$60,000.00 or its Philippine Peso equivalent
at the time of actual payment, representing the
latter’s permanent total disability benefits plus
ten percent (10%) thereof as Attorney’s Fees.
All other claims are dismissed for lack of merit.
SO ORDERED.10
Petitioners appealed to the NLRC. Villamater
also filed his own appeal, questioning the
award of the Labor Arbiter and claiming that
the 100% degree of disability should be
compensated in the amount of US$80,000.00,
pursuant to Section 2, Article XXI of the ITF-
JSU/AMOSUP Collective Bargaining Agreement
(CBA) between petitioners and Associated
Marine Officers & Seamen’s Union of the
Philippines, which covered the employment
contract of Villamater.
On February 4, 2004, the NLRC issued its
resolution,11 dismissing the respective appeals
of both parties and affirming in toto the
decision of the Labor Arbiter.
Petitioners filed their motion for
reconsideration of the February 4, 2004
resolution, but the NLRC denied the same in its
resolution dated June 15, 2004.
Aggrieved, petitioners filed a petition for
certiorari under Rule 65 of the Rules of Court
before the CA. After the filing of the required
memoranda, the CA rendered its assailed May
3, 2007 Decision, dismissing the petition. The
appellate court, likewise, denied petitioners’
motion for reconsideration in its July 23, 2007
Resolution.
Hence, this petition based on the following
grounds, to wit:
First, the Court of Appeals erroneously held
that [the] Commission’s Dismissal Decision does
not constitute grave abuse of discretion
amounting to lack or excess of jurisdiction but
mere error of judgment, considering that the
decision lacks evidentiary support and is
contrary to both evidence on record and
prevailing law and jurisprudence.
Second, the Court of Appeals seriously erred in
upholding the NLRC’s decision to award Grade
1 Permanent and Total Disability Benefits in
favor of seaman Villamater despite the lack of
factual and legal basis to support such award,
and more importantly, when it disregarded
undisputed facts and substantial evidence
presented by petitioners which show that
seaman Villamater’s illness was not work-
related and hence, not compensable, as
provided by the Standard Terms of the POEA
Contract.
Third, the Court of Appeals erred in holding
that non-joinder of indispensable parties
warrant the outright dismissal of the Petition
for Review on Certiorari.
Fourth, the Court of Appeals erroneously held
that final and executory decisions or resolutions
of the NLRC render appeals to superior courts
moot and academic.
Last, the Court of Appeals seriously erred in
upholding the award of attorney’s fees
considering that the grant has neither factual
nor legal basis.12
Before delving into the merits of this petition,
we deem it fit to discuss the procedural issues
raised by petitioners.
First. It is worthy to note that the CA dismissed
the petition, considering that (1) the June 15,
2004 Resolution of the NLRC had already
become final and executory on June 26, 2004,
and the same was already recorded in the NLRC
Book of Entries of Judgments; and that (2) the
award of the Labor Arbiter was already
executed, thus, the case was closed and
terminated.
According to Sections 14 and 15, Rule VII of the
2005 Revised Rules of Procedure of the NLRC—
Section 14. Finality of decision of the
commission and entry of judgment. – a) Finality
of the Decisions, Resolutions or Orders of the
Commission. – Except as provided in Section 9
of Rule X, the decisions, resolutions or orders of
the Commission shall become final and
executory after ten (10) calendar days from
receipt thereof by the parties.
b) Entry of Judgment. – Upon the expiration of
the ten (10) calendar day period provided in
paragraph (a) of this Section, the decision,
resolution, or order shall be entered in a book
of entries of judgment.
The Executive Clerk or Deputy Executive Clerk
shall consider the decision, resolution or order
as final and executory after sixty (60) calendar
days from date of mailing in the absence of
return cards, certifications from the post office,
or other proof of service to parties.
Section 15. Motions for reconsideration. –
Motion for reconsideration of any decision,
resolution or order of the Commission shall not
be entertained except when based on palpable
or patent errors; provided that the motion is
under oath and filed within ten (10) calendar
days from receipt of decision, resolution or
order, with proof of service that a copy of the
same has been furnished, within the
reglementary period, the adverse party; and
provided further, that only one such motion
from the same party shall be entertained.
Should a motion for reconsideration be
entertained pursuant to this SECTION, the
resolution shall be executory after ten (10)
calendar days from receipt thereof.13
Petitioners received the June 15, 2004
resolution of the NLRC, denying their motion
for reconsideration, on June 16, 2004. They
filed their petition for certiorari before the CA
only on August 9, 2004,14 or 54 calendar days
from the date of notice of the June 15, 2004
resolution. Considering that the above-
mentioned 10-day period had lapsed without
petitioners filing the appropriate appeal, the
NLRC issued an Entry of Judgment dated June
28, 2004.
Moreover, by reason of the finality of the June
15, 2004 NLRC resolution, the Labor Arbiter
issued on July 29, 2004 a Writ of
Execution.15 Consequently, Leonis voluntarily
paid Villamater’s widow, Sonia M. Villamater
(Sonia), the amount of ₱3,649,800.00, with
Rizal Commercial and Banking Corporation
(RCBC) Manager’s Check No.
000000855016 dated August 12, 2004, as
evidenced by the Acknowledgment
Receipt17 dated August 13, 2004, and the
Cheque Voucher18 dated August 12, 2004.
Following the complete satisfaction of the
judgment award, the Labor Arbiter issued an
Order19 dated September 8, 2004 that reads—
There being complete satisfaction of the
judgment award as shown by the record upon
receipt of the complainant of the amount of
₱3,649,800.00, voluntarily paid by the
respondent, as full and final satisfaction of the
Writ of Execution dated July 29, 2004; and
finding the same to be not contrary to law,
morals, good custom, and public policy, and
pursuant to Section 14, Rule VII of the Rules of
Procedure of the National Labor Relations
Commission (NLRC), this case is hereby ordered
DISMISSED with prejudice, and considered
CLOSED and TERMINATED.
SO ORDERED.
Petitioners never moved for a reconsideration
of this Order regarding the voluntariness of
their payment to Sonia, as well as the dismissal
with prejudice and the concomitant
termination of the case.
However, petitioners argued that the finality of
the case did not render the petition for
certiorari before the CA moot and academic.
On this point, we agree with petitioners.
In the landmark case of St. Martin Funeral
Home v. NLRC,20 we ruled that judicial review of
decisions of the NLRC is sought via a petition
for certiorari under Rule 65 of the Rules of
Court, and the petition should be filed before
the CA, following the strict observance of the
hierarchy of courts. Under Rule 65, Section
4,21 petitioners are allowed sixty (60) days from
notice of the assailed order or resolution within
which to file the petition. Thus, although the
petition was not filed within the 10-day period,
petitioners reasonably filed their petition for
certiorari before the CA within the 60-day
reglementary period under Rule 65.
Further, a petition for certiorari does not
normally include an inquiry into the correctness
of its evaluation of the evidence. Errors of
judgment, as distinguished from errors of
jurisdiction, are not within the province of a
special civil action for certiorari, which is merely
confined to issues of jurisdiction or grave abuse
of discretion. It is, thus, incumbent upon
petitioners to satisfactorily establish that the
NLRC acted capriciously and whimsically in
order that the extraordinary writ of certiorari
will lie. By grave abuse of discretion is meant
such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction,
and it must be shown that the discretion was
exercised arbitrarily or despotically.
The CA, therefore, could grant the petition for
certiorari if it finds that the NLRC, in its assailed
decision or resolution, committed grave abuse
of discretion by capriciously, whimsically, or
arbitrarily disregarding evidence that is
material to or decisive of the controversy; and
it cannot make this determination without
looking into the evidence of the parties.
Necessarily, the appellate court can only
evaluate the materiality or significance of the
evidence, which is alleged to have been
capriciously, whimsically, or arbitrarily
disregarded by the NLRC, in relation to all other
evidence on record.22 Notably, if the CA grants
the petition and nullifies the
decision or resolution of the NLRC on the
ground of grave abuse of discretion amounting
to excess or lack of jurisdiction, the decision or
resolution of the NLRC is, in contemplation of
law, null and void ab initio; hence, the decision
or resolution never became final and
executory.23
In the recent case Bago v. National Labor
Relations Commission,24 we had occasion to
rule that although the CA may review the
decisions or resolutions of the NLRC on
jurisdictional and due process considerations,
particularly when the decisions or resolutions
have already been executed, this does not
affect the statutory finality of the NLRC
decisions or resolutions in view of Rule VIII,
Section 6 of the 2002 New Rules of Procedure
of the NLRC, viz.:
RULE VIII
SECTION 6. EFFECT OF FILING OF PETITION FOR
CERTIORARI ON EXECUTION. – A petition for
certiorari with the Court of Appeals or the
Supreme Court shall not stay the execution of
the assailed decision unless a temporary
restraining order is issued by the Court of
Appeals or the Supreme Court.25
Simply put, the execution of the final and
executory decision or resolution of the NLRC
shall proceed despite the pendency of a
petition for certiorari, unless it is restrained by
the proper court. In the present case,
petitioners already paid Villamater’s widow,
Sonia, the amount of ₱3,649,800.00,
representing the total and permanent disability
award plus attorney’s fees, pursuant to the
Writ of Execution issued by the Labor Arbiter.
Thereafter, an Order was issued declaring the
case as "closed and terminated." However,
although there was no motion for
reconsideration of this last Order, Sonia was,
nonetheless, estopped from claiming that the
controversy had already reached its end with
the issuance of the Order closing and
terminating the case. This is because the
Acknowledgment Receipt she signed when she
received petitioners’ payment was without
prejudice to the final outcome of the petition
for certiorari pending before the CA.
Second. We also agree with petitioners in their
position that the CA erred in dismissing outright
their petition for certiorari on the ground of
non-joinder of indispensable parties. It should
be noted that petitioners impleaded only the
then deceased Villamater26 as respondent to
the petition, excluding his heirs.
Rule 3, Section 7 of the Rules of Court defines
indispensable parties as those who are parties
in interest without whom there can be no final
determination of an action.27 They are those
parties who possess such an interest in the
controversy that a final decree would
necessarily affect their rights, so that the courts
cannot proceed without their presence.28 A
party is indispensable if his interest in the
subject matter of the suit and in the relief
sought is inextricably intertwined with the
other parties’ interest.29
Unquestionably, Villamater’s widow stands as
an indispensable party to this case.
Under Rule 3, Section 11 of the Rules of Court,
neither misjoinder nor non-joinder 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.
The proper remedy 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 an
opportunity to amend his complaint in order to
include indispensable parties. If the plaintiff
ordered to include the indispensable party
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.30
On the merits of this case, the questions to be
answered are: (1) Is Villamater entitled to total
and permanent disability benefits by reason of
his colon cancer? (2) If yes, would he also be
entitled to attorney’s fees?
As to Villamater’s entitlement to total and
permanent disability benefits, petitioners
argue, in essence, that colon cancer is not
among the occupational diseases listed under
Section 32-A of the POEA Standard Terms and
Conditions Governing the Employment of
Filipino Seafarers On-Board Ocean Going
Vessels (POEA Standard Contract), and that the
risk of contracting the same was not increased
by Villamater’s working conditions during his
deployment. Petitioners posit that Villamater
had familial history of colon cancer; and that,
although dietary considerations may be taken,
his diet -- which might have been high in fat
and low in fiber and could have thus increased
his predisposition to develop colon cancer --
might only be attributed to him, because it was
he who chose what he ate on board the vessels
he was assigned to. Petitioners also cited the
supposed declaration of their company-
designated physicians who attended to
Villamater that his disease was not work-
related.
We disagree.
It is true that under Section 32-A of the POEA
Standard Contract, only two types of cancers
are listed as occupational diseases – (1) Cancer
of the epithelial lining of the bladder (papilloma
of the bladder); and (2) cancer, epithellematous
or ulceration of the skin or of the corneal
surface of the eye due to tar, pitch, bitumen,
mineral oil or paraffin, or compound products
or residues of these substances. Section 20 of
the same Contract also states that those
illnesses not listed under Section 32 are
disputably presumed as work-related. Section
20 should, however, be read together with
Section 32-A on the conditions to be satisfied
for an illness to be compensable,31 to wit:
For an occupational disease and the resulting
disability or death to be compensable, all the
following conditions must be established:
1. The seafarer’s work must involve the risk
described herein;
2. The disease was contracted as a result of the
seafarer’s exposure to the described risks;
3. The disease was contracted within a period
of exposure and under such other factors
necessary to contract it;
4. There was no notorious negligence on the
part of the seafarer.
Colon cancer, also known as colorectal cancer
or large bowel cancer, includes cancerous
growths in the colon, rectum and appendix.
With 655,000 deaths worldwide per year, it is
the fifth most common form of cancer in the
United States of America and the third leading
cause of cancer-related deaths in the Western
World. Colorectal cancers arise from
adenomatous polyps in the colon. These
mushroom-shaped growths are usually benign,
but some develop into cancer over time.
Localized colon cancer is usually diagnosed
through colonoscopy.32
Tumors of the colon and rectum are growths
arising from the inner wall of the large
intestine. Benign tumors of the large intestine
are called polyps. Malignant tumors of the large
intestine are called cancers. Benign polyps can
be easily removed during colonoscopy and are
not life-threatening. If benign polyps are not
removed from the large intestine, they can
become malignant (cancerous) over time. Most
of the cancers of the large intestine are
believed to have developed as polyps.
Colorectal cancer can invade and damage
adjacent tissues and organs. Cancer cells can
also break away and spread to other parts of
the body (such as liver and lung) where new
tumors form. The spread of colon cancer to
distant organs is called metastasis of the colon
cancer. Once metastasis has occurred in
colorectal cancer, a complete cure of the
cancer is unlikely.33
Globally, colorectal cancer is the third leading
cause of cancer in males and the fourth leading
cause of cancer in females. The frequency of
colorectal cancer varies around the world. It is
common in the Western world and is rare in
Asia and in Africa. In countries where the
people have adopted western diets, the
incidence of colorectal cancer is increasing.34
Factors that increase a person’s risk of
colorectal cancer include high fat intake, a
family history of colorectal cancer and polyps,
the presence of polyps in the large intestine,
and chronic ulcerative colitis.35
Diets high in fat are believed to predispose
humans to colorectal cancer. In countries with
high colorectal cancer rates, the fat intake by
the population is much higher than in countries
with low cancer rates. It is believed that the
breakdown products of fat metabolism lead to
the formation of cancer-causing chemicals
(carcinogens). Diets high in vegetables and
high-fiber foods may rid the bowel of these
carcinogens and help reduce the risk of
cancer.36
A person’s genetic background is an important
factor in colon cancer risk. Among first-degree
relatives of colon-cancer patients, the lifetime
risk of developing colon cancer is 18%. Even
though family history of colon cancer is an
important risk factor, majority (80%) of colon
cancers occur sporadically in patients with no
family history of it. Approximately 20% of
cancers are associated with a family history of
colon cancer. And 5% of colon cancers are due
to hereditary colon cancer syndromes.
Hereditary colon cancer syndromes are
disorders where affected family members have
inherited cancer-causing genetic defects from
one or both of the parents.37
In the case of Villamater, it is manifest that the
interplay of age, hereditary, and dietary factors
contributed to the development of colon
cancer. By the time he signed his employment
contract on June 4, 2002, he was already 58
years old, having been born on October 5,
1943,38 an age at which the incidence of colon
cancer is more likely.39 He had a familial history
of colon cancer, with a brother who succumbed
to death and an uncle who underwent surgery
for the same illness.40 Both the Labor Arbiter
and the NLRC found his illness to be
compensable for permanent and total
disability, because they found that his dietary
provisions while at sea increased his risk of
contracting colon cancer because he had no
choice of what to eat on board except those
provided on the vessels and these consisted
mainly of high-fat, high-cholesterol, and low-
fiber foods.
While findings of the Labor Arbiter, which were
affirmed by the NLRC, are entitled to great
weight and are binding upon the courts,
nonetheless, we find it also worthy to note that
even during the proceedings before the Labor
Arbiter, Villamater cited that the foods
provided on board the vessels were mostly
meat, high in fat and high in cholesterol. On
this matter, noticeably, petitioners were silent
when they argued that Villamater’s affliction
was brought about by diet and genetics. It was
only after the Labor Arbiter issued his Decision,
finding colon cancer to be compensable
because the risk was increased by the victuals
provided on board, that petitioners started
claiming that the foods available on the vessels
also consisted of fresh fruits and vegetables,
not to mention fish and poultry. It is also worth
mentioning that while Dr. Salvador declared
that Villamater’s cancer "appears to be not
work-related," she nevertheless suggested to
petitioners Disability Grade 1, which, under the
POEA Standard Contract, "shall be considered
or shall constitute total and permanent
disability."41 During his confinement in
Hamburg, Germany, Villamater was diagnosed
to have colon cancer and was advised to
undergo chemotherapy and medical treatment,
including blood transfusions. These findings
were, in fact, confirmed by the findings of the
company-designated physicians. The statement
of Dr. Salvador that Villamater’s colon cancer
"appears to be not work-related" remained at
that, without any medical explanation to
support the same. However, this statement,
not definitive as it is, was negated by the same
doctor’s suggestion of Disability Grade 1. Under
Section 20-B of the Philippine Overseas
Employment Administration-Standard
Employment Contract (POEA-SEC), it is the
company-designated physician who must
certify that the seafarer has suffered a
permanent disability, whether total or partial,
due to either injury or illness, during the term
of his employment.42
On these points, we sustain the Labor Arbiter
and the NLRC in granting total and permanent
disability benefits in favor of Villamater, as it
was sufficiently shown that his having
contracted colon cancer was, at the very least,
aggravated by his working conditions,43 taking
into consideration his dietary provisions on
board, his age, and his job as Chief Engineer,
who was primarily in charge of the technical
and mechanical operations of the vessels to
ensure voyage safety. Jurisprudence provides
that to establish compensability of a non-
occupational disease, reasonable proof of
work-connection and not direct causal relation
is required. Probability, not the ultimate degree
of certainty, is the test of proof in
compensation proceedings.44
The Labor Arbiter correctly awarded Villamater
total and permanent disability benefits,
computed on the basis of the schedule
provided under the POEA Standard Contract,
considering that the schedule of payment of
benefits under the ITF-JSU/AMOSUP CBA refers
only to permanent disability as a result of an
accident or injury.45
By reason of Villamater’s entitlement to total
and permanent disability benefits, he (or in this
case his widow Sonia) is also entitled to the
award of attorney’s fees, not under Article
2208(2) of the Civil Code, "[w]hen the
defendant’s act or omission has compelled the
plaintiff to litigate with third persons or to incur
expenses to protect his interest," but under
Article 2208(8) of the same Code, involving
actions for indemnity under workmen’s
compensation and employer’s liability laws.
WHEREFORE, the petition is DENIED and the
assailed May 3, 2007 Decision and the July 23,
2007 Resolution of the Court of Appeals are
AFFIRMED. Costs against petitioners.
SO ORDERED.
G.R. No. 201816               HEIRS OF MESINA VS
HEIRS OF FIAN
The Case
Before Us is a Petition for Review under Rule 45
of the Decision1 dated April 29, 2011 of the
Court of Appeals (CA) in CA-G.R. CV No. 01366
and its Resolution dated April 12, 2012 denying
reconsideration.
The Facts
The late spouses Faustino and Genoveva
Mesina (spouses Mesina), during their lifetime,
bought from the spouses Domingo Fian Sr. and
MariaFian (spouses Fian) two parcels of land on
installment. The properties maybe described as
follows:
Parcel 1 – A parcel of land, Cadastral Lot No.
6791-Rem. situated in the Brgy. Of Gungab,
Poblacion, Albuera, Leyte. x x x Containing an
area of ONE THOUSAND SIX HUNDRED THIRTY
TWO (1,632) SQUARE METERS x x x.
Parcel 2 – A parcel of land, Cadastral Lot No.
6737-Rem, situated in the Brgy. of Gungab,
Poblacion, Albuera, Leyte. x x x Containing an
area of THREE THOUSAND SEVEN HUNDRED
THIRTY (3,730) SQUARE METERS x x x.2
Upon the death of the spouses Fian, their
heirs––whose names do not appear on the
records, claiming ownership of the parcels of
land and taking possession of them––refused to
acknowledge the payments for the lots and
denied that their late parents sold the property
to the spouses Mesina. Meanwhile, the spouses
Mesina passed away.
Notwithstanding repeated demands, the Heirs
of Fian refused to vacate the lots and to turn
possession over to the heirs of the spouses
Mesina, namely: Norman S. Mesina (Norman),
Victor S. Mesina (Victor), Maria Divina S.
Mesina (Maria) and Lorna Mesina-Barte
(Lorna). Thus, on August 8, 2005, Norman, as
attorney-in-fact of his siblings Victor, Maria and
Lorna, filed an action for quieting of title and
damages before the Regional Trial Court (RTC),
Branch 14 in Baybay, Leyte against the Heirs of
Fian, naming only Theresa Fian Yray (Theresa)
as the representative of the Heirs of Fian. The
case, entitled Heirs of Sps. Faustino S. Mesina &
Genoveva S. Mesina, represented by Norman
Mesina v. Heirs of Domingo Fian, Sr.,
represented by Theresa Fian Yray, was
docketed as Civil Case No. B-05-08-20. The
allegations of the Complaint on the parties
read:
1. Plaintiffs are the HEIRS OF SPS. FAUSTINO S.
MESINO and GENOVEVA S. MESINA, and
represented in this instance by NORMAN
MESINA as shown by the Special Power of
Attorneys x x x, of legal age, married, Filipino,
and a resident of Poblacion Albuera, Leyte,
where he may be served with court orders,
notices, and other processes, while defendants
are the HEIRS OF DOMINGO FIAN, SR., likewise
of legal ages, Filipinos, and residents of
Poblacion Albuera, Leyte, and respresented in
this instance of THERESA FIAN YRAY, where she
may be served with summons, court orders,
notices, and other processes.3
Thereafter, or on September 5, 2005,
respondent Theresa filed a Motion to Dismiss
the complaint, arguing that the complaint
states no cause of action and that the case
should be dismissed for gross violation of
Sections 1 and 2, Rule 3 of the Rules of Court,
which state in part:
Section 1. Who may be parties; plaintiff and
defendant. – Only natural or juridical persons,
or entities authorized by law may be parties in
a civil action. x x x
Section 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. x x x
She claims that the "Heirs of Mesina" could not
be considered as a juridical person or entity
authorized by law to file a civil action. Neither
could the "Heirs of Fian" be made as defendant,
not being a juridical person as well. She added
that since the names of all the heirs of the late
spouses Mesina and spouses Fian were not
individually named, the complaint is infirmed,
warranting its dismissal.
On November 24, 2005, petitioners filed their
Opposition to the Motion to Dismiss.
Ruling of the RTC
Finding merit in the motion to dismiss, the RTC,
on November 22, 2005, granted the motion and
dismissed the complaint, ruling that the Rules
of Court is explicit that only natural or juridical
persons or entities authorized by law may be
parties in a civil action. Also, nowhere in the
complaint are the Heirs of Fian individually
named. The RTC Order reads:
Anent the Motion to Dismiss filed by
defendant, Theresa Fian Yray through counsel,
finding merit in such motion, the same is
granted.
The Rules of Court is explicit that only natural
or juridical persons or entities authorized by
law may be parties in a civil action (Section 1,
Rule 3, Revised Rules of Court). Certainly, the
Heirs of Faurstino s. Mesina and Genoveva S.
Mesina, represented by Norman Mesina as
plaintiffs as well as Heirs of Domingo Fian, Sr.
represented by Theresa Fian Yray as
defendants, do not fall within the category as
natural or juridical persons as contemplated by
law to institute or defend civil actions. Said
heirs not having been individually named could
not be the real parties in interest. Hence, the
complaint states no cause of action.
Accordingly, the case is hereby dismissed.
SO ORDERED.4
On December 27, 2005, petitioners moved for
reconsideration of the November 22, 2005
Order of the RTC. The next day, or on
December 28, 2005, respondent Theresa filed
her Vehement Opposition to the motion for
reconsideration.
On February 29, 2006, the RTC issued its
Resolution denying the motion for
reconsideration. The dispositive portion of the
Resolution reads:
WHEREFORE, the motion prayed for must
necessary fail.
SO ORDERED.5
Aggrieved, petitioners appealed to the CA.
Ruling of the CA
In affirming the RTC, the CA, on April 29, 2011,
rendered its Decision, ruling that all the heirs of
the spouses Fian are indispensable parties and
should have been impleaded in the complaint.
The appellate court explained that this failure
to implead the other heirs of the late spouses
Fian is a legal obstacle to the trial court’s
exercise of judicial power over the case and any
order or judgment that would be rendered is a
nullity in view of the absence of indispensable
parties. The CA further held that the RTC
correctly dismissed the complaint for being
improperly verified. The CA disposed of the
appeal in this wise:
WHEREFORE, in view of all the foregoing, the
appeal of petitioners is DENIED for lack of
merit. The assailed November 22, 2005 Order
and February 28, 2006 Resolution both issued
by the Regional Trial Court, Branch 14 of
Baybay, Leyte are AFFIRMED.
SO ORDERED.6
Petitioners filed their Motion for
Reconsideration, which was denied by the CA in
its Resolution dated April 12, 2012.
Hence, this petition.
Assignment of Errors
Petitioner now comes before this Court,
presenting the following assigned errors, to wit:
A. THE CA ERRED IN AFFIRMING THE ORDER
AND RESOLUTION X X X OF RTC, BAYBAY, LEYTE
IN DISMISSING THE CASE ON THE GROUND
THAT THE COMPLAINT STATES NO CAUSE OF
ACTION;
B. PETITIONERS HAVE SUBSTANTIALLY
COMPLIED WITH THE RULE ON VERIFICATION
AND CERTIFICATION AGAINST FORUM
SHOPPING; AND
C. CASES SHOULD BE DECIDED ON THE MERITS
AND NOT ON MERE TECHNICALITIES.7
The Court’s Ruling
The petition is meritorious.
As regards the issue on failure to state a cause
of action, the CA ruled that the complaint
states no cause of action because all the heirs
of the spouses Fian are indispensable parties;
hence, they should have been impleaded in the
complaint.
The CA, affirming the RTC, held that the
dismissal of the complaint is called for in view
of its failure to state a cause of action. The CA
reasoned that:
Without the presence of all the heirs of spouses
Fian as defendants, the trial court could not
validly render judgment and grant relief to
petitioners. x x x 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. Hence,
the court a quo correctly ordered for the
dismissal of the action on the ground that the
complaint failed to name or implead all the
heirs of the late spouses Fian.8
Failure to state a cause of action refers to the
insufficiency of the pleading. A complaint states
a cause of action if it avers the existence of the
three essential elements of a cause of action,
namely:
(a) The legal right of the plaintiff;
(b) The correlative obligation of the defendant;
and
(c) The act or omission of the defendant in
violation of said right.9
By a simple reading of the elements of a failure
to state a cause of action, it can be readily seen
that the inclusion of Theresa’s co-heirs does not
fall under any of the above elements. The
infirmity is, in fact, not a failure to state a cause
of action but a non-joinder of an indispensable
party.
Non-joinder means the "failure to bring a
person who is a necessary party or in this case
an indispensable party into a lawsuit."10 An
indispensable party, on the other hand, is a
party-in-interest without whom no final
determination can be had of the action, and
who shall be joined either as plaintiff or
defendant.11
As such, this is properly a non-joinder of
indispensable party, the indispensable parties
who were not included in the complaint being
the other heirs of Fian, and not a failure of the
complaint to state a cause of action.
Having settled that, Our pronouncement in
Pamplona Plantation Company, Inc. v. Tinghil is
instructive as regards the proper course of
action on the part of the courts in cases of non-
joinder of indispensable parties, viz:
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. 12 x x x
(Emphasis Ours.)
Thus, the dismissal of the case for failure to
state a cause of action is improper. What the
trial court should have done is to direct
petitioner Norman Mesina to implead all the
heirs of Domingo Fian, Sr. as defendants within
a reasonable time from notice with a warning
that his failure to do so shall mean dismissal of
the complaint.
Anent the issue on defective verification,
Section 4, Rule 7 of the Rules of Court provides
as follows:
Sec. 4. Verification. – Except when otherwise
specifically required by law or rule, pleadings
need not be under oath, verified or
accompanied by affidavit.
A pleading is verified by an affidavit that the
affiant has read the pleading and that the
allegations therein are true and correct of his
personal knowledge or based on authentic
records. (Emphasis Ours.)
The alleged defective verification states that:
I, NORMAN S. MESINA, legal age, married,
Filipino, and a resident of Poblacion, Albuera,
Leyte, after having been duly sworn to in
accordance with law, hereby depose and say
that:
2. The allegations herein are true and correct to
the best of our knowledge;13 x x x
Both the RTC and the CA found said verification
defective, since the phrase "or based on
authentic records," as indicated under the
second paragraph of Sec. 4, Rule 7 as afore-
quoted, was omitted.
We do not agree.
That the verification of the complaint does not
include the phrase "or based on authentic
records" does not make the verification
defective. Notably, the provision used the
disjunctive word "or." The word "or" is a
disjunctive article indicating an alternative.14 As
such, "personal knowledge" and "authentic
records" need not concur in a verification as
they are to be taken separately.
Also, verification, like in most cases required by
the rules of procedure, is a formal requirement,
not jurisdictional. It is mainly intended to
secure an assurance that matters which are
alleged are done in good faith or are true and
correct and not of mere speculation. Thus,
when circumstances so warrant, as in the case
at hand, "the court may simply order the
correction of unverified pleadings or act on it
and waive strict compliance with the rules in
order that the ends of justice may thereby be
served."15
WHEREFORE, premises considered, the petition
is GRANTED. The assailed April 29, 2011
Decision and April 12, 2012 Resolution of the
CA in CA-G.R. CV No. 01366, and the November
22, 2005 Order and February 29,2006
Resolution of the RTC, Branch 14 in Baybay,
Leyte, dismissing the complaint in Civil Case No.
8-05-08-20, are hereby REVERSED and SET
ASIDE. Petitioner Norman Mesina is ORDERED
to implead all the Heirs of Domingo Fian, Sr. as
defendants in said civil case within thirty (30)
days from notice of finality of this Decision.
Failure on the part of petitioner Mesina to
comply with this directive shall result in the
dismissal of Civil Case No. B-05-08-20. Upon
compliance by petitioner Mesina with this
directive, the RTC, Branch 14 in Baybay, Leyte is
ORDERED to undertake appropriate steps and
proceedings to expedite adjudication of the
case.
SO ORDERED.