G.R. No.

152496               July 30, 2009

SPOUSES GERMAN ANUNCIACION and ANA FERMA ANUNCIACION and GAVINO G. CONEJOS, Petitioners, 
vs.
PERPETUA M. BOCANEGRA and GEORGE M. BOCANEGRA, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari, assailing the Decision,1 dated November 19, 2001, and the Resolution,2dated
March 31, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 65516. The CA decision affirmed the Orders dated
February 19, 20013 and May 16, 20014 of the Regional Trial Court (RTC) of Manila, Branch 40 in Civil Case No. 00-98813
which dismissed the complaint5 for Quieting of Title and Cancellation of TCT No. 122452 of petitioner spouses German
Anunciacion and Ana Ferma Anunciacion and their co-petitioner, Gavino G. Conejos.

The facts of the case are as follows:

On September 29, 2000, petitioners filed before the RTC, Manila, a complaint for Quieting of Title and Cancellation of
TCT No. 122452, docketed as Civil Case No. 00-98813. The complaint averred that defendants (respondents) may be
served with summons and legal processes through Atty. Rogelio G. Pizarro, Jr., with office address at 2830 Juan Luna
St., Tondo, Manila.6 The summons, together with the copies of the complaint, were then served on Atty. Pizarro. The
record shows that before the filing of the said complaint, Atty. Pizarro wrote a demand letter7 on behalf of respondents and
addressed to petitioner German Anunciacion, among others, demanding that they vacate the land owned by his clients
(respondents), who needed the same for their own use. The said demand letter reads:

2830 Juan Luna St.Tondo, Manila

August 19, 2000

Mr. German Anunciacion, Mesdames

Liwayway Nava, Evangeline Pineda,
and Ana Ferma
2982 Rizal Ave. Ext.
Sta. Cruz, Manila

Dear Sir and Mesdames:

I write in behalf of my clients, MS. PERPETUA M. BOCANEGRA and MR. GEORGE M. BOCANEGRA, the registered
owners of the parcel of land known as Lot 1-B (LRC) PSD-230517 located at 2982 Rizal Ave. Ext., Sta. Cruz, Manila, and
duly covered by Transfer Certificate of Title No. 122452, which you are presently occupying.

I would like to inform you that your occupation and possession of the said land is based on mere tolerance of the owners,
and without any payment on your part of any rental. Now, the owners need the subject property for their own use.

In view thereof, I hereby demand that you vacate the said land within a period of fifteen (15) days from receipt of this
letter. Otherwise, much to our regret, I shall be constrained to institute the proper criminal and/or civil action against you.

Trusting that you will give this matter your most serious and preferential attention.

Very truly yours,

ATTY. ROGELIO G. PIZARRO, JR.

On October 27, 2000, respondents, through their counsel, Atty. Norby C. Caparas, Jr., filed a Motion to Dismiss8 on the
ground that the complaint stated no cause of action. Petitioners filed their Comment on the Motion to Dismiss9on
November 6, 2000.

A Supplemental Motion to Dismiss and Reply to the Comment on the Motion to Dismiss10 dated November 13, 2000 was
filed by respondents, alleging an additional ground that petitioners failed to pay the required filing fee. The petitioners filed,
on November 27, 2000, their Opposition to the Supplemental Motion to Dismiss and Comment to the Reply to the
Comment on the Motion to Dismiss.11

Thereafter, respondents filed a Second Supplemental Motion to Dismiss and Manifestation dated November 27,
2000,12 citing the following grounds:

1.) That the court has no jurisdiction over the person of the defending party.

2.) That the court has no jurisdiction over the subject matter of the claim.
 3.) That the pleading asserting the claim states no cause of action.

Petitioners then filed their Additional Comment on the Motion to Dismiss, Supplemental Motion to Dismiss and Comment
on the Second Supplemental Motion to Dismiss.13

In its order of February 19, 2001, the trial court sustained the respondents and dismissed the complaint for lack of
jurisdiction over the persons of respondents as defendants.lavvph!l The trial court ruled as follows:

However, the Court finds for the defendants on the Second Supplemental Motion.

In point is Section 3, Rule 3 of the same Rules, which reads –

"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. x x x x"

In the case at bar Atty. Pizarro, Jr., has not been shown to be a trustee of an express trust, a guardian, or any of the
above for the action to be allowed to be defended by a representative.

The fact that Atty. Pizarro, Jr., was the lawyer of the defendants in the demand letters do not per se make him their
representative for purposes of the present action. To this effect, service on lawyer of defendant is an invalid service of
summons. (Cordova v. Provincial Sheriff of Iloilo, 89 SCRA 59)

Going to the other raised issue, Section 20, Rule 14 of the 1997 Rules of Civil Procedure provides –

"The defendant’s voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion
to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a
voluntary appearance."

The presentation of all objections then available as was done by the movants subserves the omnibus motion rule and the
concomitant policy against multiplicity of suits.1awphi1

WHEREFORE, premises considered, on the ground that the Court has no jurisdiction over the persons of the defendants,
the case is hereby DISMISSED.

The motion for reconsideration filed by the petitioners was denied for lack of merit.

Aggrieved, petitioners filed before the CA a Petition for Certiorari, seeking the nullification of the RTC Orders dated
February 19, 2001 and May 16, 2001, on the ground that the said orders were issued with grave abuse of discretion.

On November 19, 2001, the CA dismissed the petition upon finding that there was no waiver of the ground of lack of
jurisdiction on the part of respondents in the form of voluntary appearance. Applying Section 20, Rule 14 of the 1997
Rules of Civil Procedure, the CA held that although the grounds alleged in the two (2) earlier Motion to Dismiss and
Supplemental Motion to Dismiss were lack of cause of action and failure to pay the required filing fee, the filing of the said
motions did not constitute a waiver of the ground of lack of jurisdiction on their persons as defendants. The CA then
concluded that there was no voluntary appearance on the part of respondents/defendants despite the filing of the
aforesaid motions. The CA also rejected petitioners’ contention that the service made to Atty. Rogelio Pizarro, Jr. was
deemed service upon respondents/defendants, thus:

First of all, Atty. Rogelio Pizarro cannot be considered as counsel of record wherein We could apply the jurisprudential
rule that notice to counsel is notice to client. Atty. Pizarro cannot be deemed counsel on record since Defendants were not
the one’s (sic) who instituted the action, like plaintiffs who did the same thru counsel and therefore, obviously the one who
signed the pleadings is the counsel on record. Sadly, the Motion to Dismiss filed by Private Respondents were signed not
by Atty. Pizarro but by someone else. How then could Petitioners claim that Atty. Pizarro represents Private
Respondents?

Secondly, the fact that Atty. Pizarro was the one who wrote and signed the August 19, 2000 letter, on behalf of Private
Respondents, demanding that Petitioners vacate the premises of the former’s land does not fall under the substituted
service rule. To be sure, Section 7 of Rule 14 of the 1997 Rules, provide thus:

Sec. 7. Substituted Services – If, for justifiable causes the defendant cannot be served within a reasonable time as
provided in the preceding section; service maybe reflected (a) by leaving copies of the summons at the defendants’
residence with some person of suitable age and discretion then residing therein or (b) by leaving the copies at defendant
(sic) office or regular place of business with some competent person in charge thereof.

In the case at bench, service upon Atty. Pizarro did not fall under the aforequoted rule and therefore cannot qualify as
substituted service. Since the service made by Petitioners was defective, the Public Respondent court never did acquire
jurisdiction over the persons of defendants and therefore correctly ordered the dismissal of the complaint.14
Petitioners moved for a reconsideration of the decision but it, too, was denied by the CA in its Resolution of March 31,
2002.

Hence, the instant petition which raises the following assignment of errors:

1. THAT THE HONORABLE COURT OF APPEALS ERRED ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION OR IN EXCESS OF JURISDICTION WHEN IT DID NOT CONSIDER THAT
THE FILING OF THE MOTION TO DISMISS AND THE SUPPLEMENTAL MOTION TO DISMISS BY RESPONDENTS
AMOUNTS TO VOLUNTARY APPEARANCE BEFORE THE REGIONAL TRIAL COURT AND THEREFORE CONFERS
JURISDICTION OF THE REGIONAL TRIAL COURT ON THE PERSON OF RESPONDENTS.

2. THAT THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION
WHEN IT DID NOT CONSIDER THAT THE SECOND SUPPLEMENTAL MOTION ALLEGING THAT THE HONORABLE
TRIAL COURT HAD NO JURISDICTION OF THE PERSONS OF THE DEFENDANTS IS ALREADY LATE FOR THE
FIRST MOTIONS, NAMELY, THE "MOTION TO DISMISS" AND THE "SUPPLEMENTAL MOTION TO DISMISS AND
REPLY TO THE COMMENT TO THE MOTION TO DISMISS", WHICH HAD BEEN OPPOSSED, ONE AFTER THE
OTHER, BY PETITIONERS, HAD ALREADY CONFERRED JURISDICTION OF THE HONORABLE TRIAL COURT ON
THE PERSONS OF DEFENDANTS.

3. THAT THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION WHEN IT CONSIDERED THAT THESE 3 MOTIONS OF RESPONDENTS
ARE BEING TREATED AS OMNIBUS MOTION AND ARE COVERED BY SECTION 20 RULE 14 OF THE 1997 RULES
ON CIVIL PROCEDURE.

4. THAT THE HONORABLE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION WHEN IT DID NOT CONSIDER ATTY. ROGELIO PIZARRO, JR., AS THE AUTHORIZED
REPRESENTATIVE OF RESPONDENT TO RECEIVE THE SUMMONS AND COMPLAINT.

In the Resolution dated July 14, 2003, the Court gave due course to the petition and required the parties to submit their
respective memoranda. In compliance, the respondents filed their Memorandum on September 8, 2003,15while the
petitioners filed their Memorandum on September 24, 2003.16

We find merit in the petition.

While it is a settled doctrine that findings of fact of the CA are binding and not to be disturbed, they are subject to certain
exceptions for very compelling reasons, such as when: (1) the conclusion is a finding grounded entirely on speculation,
surmise and conjecture; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the
judgment is based on a misapprehension of facts; (5) the findings of fact of the CA are contrary to those of the trial court;
(6) said findings of fact are conclusions without citation of specific evidence on which they are based; and (7) the findings
of fact of the CA are premised on the supposed absence of evidence and contradicted by the evidence on record.17 The
Court finds here cogent reason to take exception from the general rule.

Respondents, through counsel, filed a motion to dismiss dated October 25, 2000,18 with only one ground, i.e., that the
pleading asserting the claim "states no cause of action." Under this ground, respondents raised the issues quoted
hereunder:

I. Defendants19 anchored their complaint on a WRONG Decree of Registration;

II. The Government of the Republic of the Philippines has recognized the authenticity of TCT No. 122452; and

III. Plaintiffs do NOT have the legal personality to ‘quiet the title’ of the subject property.

Section 20, Rule 14 of the 1997 Rules of Civil Procedure (the Rules) states:

Sec. 20. Voluntary Appearance – The defendant’s voluntary appearance in the action shall be equivalent to service of
summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the
defendant shall not be deemed a voluntary appearance. (Underscoring ours)

The filing of the above-mentioned Motion to Dismiss, without invoking the lack of jurisdiction over the person of the
respondents, is deemed a voluntary appearance on the part of the respondents under the aforequoted provision of the
Rules. The same conclusion can be drawn from the filing of the Supplemental Motion to Dismiss and Reply to the
Comment on the Motion to Dismiss dated November 13, 2000 which alleged, as an additional ground for the dismissal of
petitioners’ complaint, the failure of plaintiffs to pay the required filing fee again but failed to raise the alleged lack of
jurisdiction of the court over the person of the respondents.

It was only in respondents’ Second Supplemental Motion to Dismiss dated November 27, 2000 that respondents for the
first time raised the court’s lack of jurisdiction over their person as defendants on the ground that summons were allegedly
not properly served upon them. The filing of the said Second Supplemental Motion to Dismiss did not divest the court of
its jurisdiction over the person of the respondents who had earlier voluntarily appeared before the trial court by filing their
motion to dismiss and the supplemental motion to dismiss.lavvph!l The dismissal of the complaint on the ground of lack of
jurisdiction over the person of the respondents after they had voluntarily appeared before the trial court clearly constitutes
grave abuse of discretion amounting to lack of jurisdiction or in excess of jurisdiction on the part of the RTC.

Quite apart from their voluntary appearance, respondents’ Supplemental Motion to Dismiss and Second Supplemental
Motion to Dismiss were clearly in violation of Rule 15, Section 8 in relation to Rule 9, Section 1 of the Rules.

Rule 15, Section 8 of the Rules provides:

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. (emphasis ours)

Rule 9, Section 1, in turn, states:

Sec. 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 prior judgment or by statute of limitations, the court shall dismiss the claim.
(emphasis ours)

Applying the foregoing rules, respondents’ failure to raise the alleged lack of jurisdiction over their persons in their very
first motion to dismiss was fatal to their cause. They are already deemed to have waived that particular ground for
dismissal of the complaint. The trial court plainly abused its discretion when it dismissed the complaint on the ground of
lack of jurisdiction over the person of the defendants. Under the Rules, the only grounds the court could take cognizance
of, even if not pleaded in the motion to dismiss or answer, are: (a) lack of jurisdiction over the subject matter; (b) existence
of another action pending between the same parties for the same cause; and (c) bar by prior judgment or by statute of
limitations.

We likewise cannot approve the trial court’s act of entertaining supplemental motions to dismiss which raise grounds that
are already deemed waived. To do so would encourage lawyers and litigants to file piecemeal objections to a complaint in
order to delay or frustrate the prosecution of the plaintiff’s cause of action.

Although the CA correctly observed that Atty. Pizarro, as the lawyer of the respondents in the demand letters, does not
per se make him their representative for purposes of the present action, a scrutiny of the record shows that the address of
Atty. Pizarro and Atty. Norby Caparas, Jr., (the counsel who eventually entered his appearance for respondents) is the
same. This circumstance leads us to believe that respondents’ belated reliance on the purported improper service of
summons is a mere afterthought, if not a bad faith ploy to avoid answering the complaint.1avvphi1

At this point, we find it appropriate to cite Philippine American Life & General Insurance Company v. Breva,20 where this
Court held that:

The trial court did not commit grave abuse of discretion when it denied the motion to dismiss filed by the petitioner due to
lack of jurisdiction over its person. In denying the motion to dismiss, the CA correctly relied on the ruling in Lingner &
Fisher GMBH vs. Intermediate Appellate Court, thus:

A case should not be dismissed simply because an original summons was wrongfully served. It should be difficult to
conceive, for example, that when a defendant personally appears before a Court complaining that he had not been validly
summoned, that the case filed against him should be dismissed. An alias summons can be actually served on said
defendant

In the recent case of Teh vs. Court of Appeals, the petitioner therein also filed a motion to dismiss before filing his answer
as defendant in the trial court on the ground of failure to serve the summons on him. In that case, the Court agreed with
the appellate court's ruling that there was no abuse of discretion on the part of the trial court when the latter denied the
petitioner's motion to dismiss the complaint and ordered the issuance of an alias summons.

To be sure, a trial court should be cautious before dismissing complaints on the sole ground of improper service of
summons considering that it is well within its discretion to order the issuance and service of alias summons on the correct
person in the interest of substantial justice.

Accordingly, the Court finds that the CA erred in dismissing the petition and affirming the challenged orders of the RTC
which dismissed the complaint on the ground of lack of jurisdiction over the person of the respondents who were the
defendants.

WHEREFORE, the petition is hereby GRANTED. The CA’s Decision dated November 19, 2001 and the Resolution dated
March 31, 2002 in CA-G.R. SP No. 65516 affirming the Orders dated February 19, 2001 and May 16, 2001 of the RTC in
Civil Case No. 00-98813 are reversed and set aside. Consequently, Civil Case No. 00-98813 is hereby ordered
REINSTATED. Let the records of this case be remanded to the court of origin for further proceedings.

SO ORDERED.
G.R. No. 160895             October 30, 2006

JOSE R. MARTINEZ, petitioner, 
vs.
REPUBLIC OF THE PHILIPPINES, respondents.

DECISION

TINGA, J.:

The central issue presented in this Petition for Review is whether an order of general default issued by a trial court in a
land registration case bars the Republic of the Philippines, through the Office of the Solicitor General, from interposing an
appeal from the trial court’s subsequent decision in favor of the applicant.

The antecedent facts follow.

On 24 February 1999, petitioner Jose R. Martinez (Martinez) filed a petition for the registration in his name of three (3)
parcels of land included in the Cortes, Surigao del Sur Cadastre. The lots, individually identified as Lot No. 464-A, Lot No.
464-B, and Lot No. 370, Cad No. 597, collectively comprised around 3,700 square meters. Martinez alleged that he had
purchased lots in 1952 from his uncle, whose predecessors-in-interest were traceable up to the 1870s. It was claimed that
Martinez had remained in continuous possession of the lots; that the lots had remained unencumbered; and that they
became private property through prescription pursuant to Section 48(b) of Commonwealth Act No. 141. Martinez further
claimed that he had been constrained to initiate the proceedings because the Director of the Land Management Services
had failed to do so despite the completion of the cadastral survey of Cortes, Surigao del Sur.1

The case was docketed as Land Registration Case No. N-30 and raffled to the Regional Trial Court (RTC) of Surigao del
Sur, Branch 27. The Office of the Solicitor General (OSG) was furnished a copy of the petition. The trial court set the case
for hearing and directed the publication of the corresponding Notice of Hearing in the Official Gazette. On 30 September
1999, the OSG, in behalf of the Republic of the Philippines, opposed the petition on the grounds that appellee’s
possession was not in accordance with Section 48(b) of Commonwealth Act No. 141; that his muniments of title were
insufficient to prove bona-fide acquisition and possession of the subject parcels; and that the properties formed part of the
public domain and thus not susceptible to private appropriation.2

Despite the opposition filed by the OSG, the RTC issued an order of general default, even against the Republic of the
Philippines, on 29 March 2000. This ensued when during the hearing of even date, no party appeared before the Court to
oppose Martinez’s petition.3

Afterwards, the trial court proceeded to receive Martinez’s oral and documentary evidence in support of his petition. On 1
August 2000, the RTC rendered a Decision4 concluding that Martinez and his predecessors-in-interest had been for over
100 years in possession characterized as continuous, open, public, and in the concept of an owner. The RTC thus
decreed the registration of the three (3) lots in the name of Martinez.

From this Decision, the OSG filed a Notice of Appeal dated 28 August 2000,5 which was approved by the RTC. However,
after the records had been transmitted to the Court of Appeals, the RTC received a letter dated 21 February 20016 from
the Land Registration Authority (LRA) stating that only Lot Nos. 464-A and 464-B were referred to in the Notice of Hearing
published in the Official Gazette; and that Lot No. 370, Cad No. 597 had been deliberately omitted due to the lack of an
approved survey plan for that property. Accordingly, the LRA manifested that this lot should not have been adjudicated to
Martinez for lack of jurisdiction. This letter was referred by the RTC to the Court of Appeals for appropriate action.7

On 10 October 2003, the Court of Appeals promulgated the assailed Decision,8 reversing the RTC and instead ordering
the dismissal of the petition for registration. In light of the opposition filed by the OSG, the appellate court found the
evidence presented by Martinez as insufficient to support the registration of the subject lots. The Court of Appeals
concluded that the oral evidence presented by Martinez merely consisted of general declarations of ownership, without
alluding to specific acts of ownership performed by him or his predecessors-in-interest. It likewise debunked the
documentary evidence presented by Martinez, adjudging the same as either inadmissible or ineffective to establish proof
of ownership.

No motion for reconsideration appears to have been filed with the Court of Appeals by Martinez, who instead directly
assailed its Decision before this Court through the present petition.

We cannot help but observe that the petition, eight (8) pages in all, was apparently prepared with all deliberate effort to
attain nothing more but the perfunctory. The arguments raised center almost exclusively on the claim that the OSG no
longer had personality to oppose the petition, or appeal its allowance by the RTC, following the order of general default.
Starkly put, "the [OSG] has no personality to raise any issue at all under the circumstances pointed out
hereinabove."9 Otherwise, it is content in alleging that "[Martinez] presented sufficient and persuasive proof to substantiate
the fact that his title to Lot Nos. 464-A and 464-B is worth the confirmation he seeks to be done in this registration
case";10 and that the RTC had since issued a new Order dated 1 September 2003, confirming Martinez’s title over Lot No.
370.

In its Comment dated 24 May 2004,11 the OSG raises several substantial points, including the fact that it had duly
opposed Martinez’s application for registration before the RTC; that jurisprudence and the Rules of Court acknowledge
that a party in default is not precluded from appealing the unfavorable judgment; that the RTC had no jurisdiction over Lot
No. 370 since its technical description was not published in the Official Gazette; and that as found by the Court of Appeals
the evidence presented by Martinez is insufficient for registering the lots in his name.12 Despite an order from the Court
requiring him to file a Reply to the Comment, counsel for Martinez declined to do so, explaining, among others, that "he
felt he would only be taxing the collective patience of this [Court] if he merely repeats x x x what petitioner had succinctly
stated x x x on pages four (4) to seven (7) of his said petition." Counsel for petitioner was accordingly fined by the Court.13

The Court’s patience is taxed less by redundant pleadings than by insubstantial arguments. The inability of Martinez to
offer an effective rebuttal to the arguments of the OSG further debilitates what is an already weak petition.

The central question, as posed by Martinez, is whether the OSG could have still appealed the RTC decision after it had
been declared in default. The OSG argues that a party in default is not precluded from filing an appeal, citing Metropolitan
Bank & Trust Co. v. Court of Appeals,14 and asserts that "[t]he Rules of Court expressly provides that a party who has
been declared in default may appeal from the judgment rendered against him."15

There is error in that latter, unequivocal averment, though one which does not deter from the ultimate correctness of the
general postulate that a party declared in default is allowed to pose an appeal. Elaboration is in order.

We note at the onset that the OSG does not impute before this Court that the RTC acted improperly in declaring public
respondent in default, even though an opposition had been filed to Martinez’s petition. Under Section 26 of Presidential
Decree No. 1529, as amended, the order of default may be issued "[i]f no person appears and answers within the time
allowed." The RTC appears to have issued the order of general default simply on the premise that no oppositor appeared
before it on the hearing of 29 March 2000. But it cannot be denied that the OSG had already duly filed its Opposition to
Martinez’s petition long before the said hearing. As we held in Director of Lands v. Santiago:16

[The] opposition or answer, which is based on substantial grounds, having been formally filed, it was improper for
the respondent Judge taking cognizance of such registration case to declare the oppositor in default simply
because he failed to appear on the day set for the initial healing. The pertinent provision of law which states: "If no
person appears and answers within the time allowed, the court may at once upon motion of the applicant, no
reason to the contrary appearing, order a general default to be recorded . . . ," cannot be interpreted to mean that
the court can just disregard the answer before it, which has long been filed, for such an interpretation would be
nothing less than illogical, unwarranted, and unjust. Had the law intended that failure of the oppositor to appear on
the date of the initial hearing would be a ground for default despite his having filed an answer, it would have been
so stated in unmistakable terms, considering the serious consequences of an order of default. Especially in this
case where the greater public interest is involved as the land sought to be registered is alleged to be public land,
the respondent Judge should have received the applicant's evidence and set another date for the reception of the
oppositor's evidence. The oppositor in the Court below and petitioner herein should have been accorded ample
opportunity to establish the government's claim.17

Strangely, the OSG did not challenge the propriety of the default order, whether in its appeal before the Court of Appeals
or in its petition before this Court. It would thus be improper for the Court to make a pronouncement on the validity of the
default order since the same has not been put into issue. Nonetheless, we can, with comfort, proceed from same
apparent premise of the OSG that the default order was proper or regular.

The juridical utility of a declaration of default cannot be disputed. By forgoing the need for adversarial proceedings, it
affords the opportunity for the speedy resolution of cases even as it penalizes parties who fail to give regard or obedience
to the judicial processes.

The extent to which a party in default loses standing in court has been the subject of considerable jurisprudential debate.
Way back in 1920, in Velez v. Ramas,18 we declared that the defaulting defendant "loses his standing in court, he not
being entitled to the service of notices in the case, nor to appear in the suit in any way. He cannot adduce evidence; nor
can he be heard at the final hearing."19 These restrictions were controversially expanded in Lim Toco v. Go Fay,20 decided
in 1948, where a divided Court pronounced that a defendant in default had no right to appeal the judgment rendered by
the trial court, except where a motion to set aside the order of default had been filed. This, despite the point raised by
Justice Perfecto in dissent that there was no provision in the then Rules of Court or any law "depriving a defaulted
defendant of the right to be heard on appeal."21

The enactment of the 1964 Rules of Court incontestably countermanded the Lim Toco ruling. Section 2, Rule 41 therein
expressly stated that "[a] party who has been declared in default may likewise appeal from the judgment rendered against
him as contrary to the evidence or to the law, even if no petition for relief to set aside the order of default has been
presented by him in accordance with Rule 38."22 By clearly specifying that the right to appeal was available even if no
petition for relief to set aside the order of default had been filed, the then fresh Rules clearly rendered the Lim Toco ruling
as moot.

Another provision in the 1964 Rules concerning the effect of an order of default acknowledged that "a party declared in
default shall not be entitled to notice of subsequent proceedings, nor to take part in the trial."23 Though it might be argued
that appellate proceedings fall part of "the trial" since there is no final termination of the case as of then, the clear intent of
the 1964 Rules was to nonetheless allow the defaulted defendant to file an appeal from the trial court decision. Indeed,
jurisprudence applying the 1964 Rules was unhesitant to affirm a defaulted defendant’s right to appeal, as guaranteed
under Section 2 of Rule 41, even as Lim Toco was not explicitly abandoned.

In the 1965 case of Antonio, et al. v. Jacinto,24 the Court acknowledged that the prior necessity of a ruling setting aside the
order of default "however, was changed by the Revised Rules of Court. Under Rule 41, section 2, paragraph 3, a party
who has been declared in default may likewise appeal from the judgment rendered against him as contrary to the
evidence or to the law, even if no petition for relief to set aside the order of default has been presented by him in
accordance with Rule 38."25 It was further qualified in Matute v. Court of Appeals26 that the new availability of a defaulted
defendant’s right to appeal did not preclude "a defendant who has been illegally declared in default from pursuing a more
speedy and efficacious remedy, like a petition for certiorari to have the judgment by default set aside as a nullity."27

In Tanhu v. Ramolete,28 the Court cited with approval the commentaries of Chief Justice Moran, expressing the
reformulated doctrine that following Lim Toco, a defaulted defendant "cannot adduce evidence; nor can he be heard at the
final hearing, although [under Section 2, Rule 41,] he may appeal the judgment rendered against him on the merits."29

Thus, for around thirty-odd years, there was no cause to doubt that a defaulted defendant had the right to appeal the
adverse decision of the trial court even without seeking to set aside the order of default. Then, in 1997, the Rules of Civil
Procedure were amended, providing for a new Section 2, Rule 41. The new provision reads:

SECTION 1. Subject of appeal.—An appeal may be taken from a judgment or final order that completely disposes
of the case, or of a particular matter therein when declared by these Rules to be appealable.

No appeal may be taken from:

(a) An order denying a motion for new trial or reconsideration;

(b) An order denying a petition for relief or any similar motion seeking relief from judgment;

(c) An interlocutory order;

(d) An order disallowing or dismissing an appeal;

(e) An order denying a motion to set aside a judgment by consent, confession or compromise on the ground of
fraud, mistake or duress, or any other ground vitiating consent;

(f) An order of execution;

(g) A judgment or final order for or against or one or more of several parties or in separate claims, counterclaims,
cross-claims and third-party complaints, while the main case is pending, unless the court allows an appeal
therefrom; and

(h) An order dismissing an action without prejudice.

In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an
appropriate special civil action under Rule 65.

Evidently, the prior warrant that a defaulted defendant had the right to appeal was removed from Section 2, Rule 41. On
the other hand, Section 3 of Rule 9 of the 1997 Rules incorporated the particular effects on the parties of an order of
default:

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

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

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

(c) Effect of partial default.—When a pleading asserting a claim states a common cause of action against several
defending parties, some of whom answer and the others fail to do so, the court shall try the case against all upon
the answers thus filed and render judgment upon the evidence presented.

(d) Extent of relief to be awarded.—A judgment rendered against a party in default shall not exceed the amount or
be different in kind from that prayed for nor award unliquidated damages.

xxx
It cannot be escaped that the old provision expressly guaranteeing the right of a defendant declared in default to appeal
the adverse decision was not replicated in the 1997 Rules of Civil Procedure. Should this be taken as a sign that under
the 1997 Rules a defaulted defendant no longer has the right to appeal the trial court decision, or that the Lim
Toco doctrine has been reinstated?

If post-1997 jurisprudence and the published commentaries to the 1997 Rules were taken as an indication, the answer
should be in the negative. The right of a defaulted defendant to appeal remains extant.

By 1997, the doctrinal rule concerning the remedies of a party declared in default had evolved into a fairly comprehensive
restatement as offered in Lina v. Court of Appeals:30

a) The defendant in default may, at any time after discovery thereof and before judgment, file a motion, under
oath, to set aside the order of default on the ground that his failure to answer was due to fraud, accident, mistake
or excusable neglect, and that he has meritorious defenses; (Sec 3, Rule 18)

b) If the judgment has already been rendered when the defendant discovered the default, but before the same
has become final and executory, he may file a motion for new trial under Section 1(a) of Rule 37;

c) If the defendant discovered the default after the judgment has become final and executory, he may file a
petition for relief under Section 2 of Rule 38; and

d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if
no petition to set aside the order of default has been presented by him. (Sec. 2, Rule 41)31

The fourth remedy, that of appeal, is anchored on Section 2, Rule 41 of the 1964 Rules. Yet even after that provision’s
deletion under the 1997 Rules, the Court did not hesitate to expressly rely again on the Lina  doctrine, including the
pronouncement that a defaulted defendant may appeal from the judgment rendered against him. This can be seen in the
cases of Indiana Aerospace University v. Commission on Higher Education, 32  Tan v. Dumarpa,33and Crisologo v. Globe
Telecom, Inc.34

Annotated textbooks on the 1997 Rules of Civil Procedure similarly acknowledge that even under the new rules, a
defaulted defendant retains the right to appeal as previously confirmed under the old Section 2, Rule 41. In his textbook
on Civil Procedure, Justice Francisco answers the question "What are the remedies available to a defending party in
default?" with a reiteration of the Lina  doctrine, including the remedy that a defaulted defendant "may also appeal from the
judgment rendered against him as contrary to the evidence or to the law, even if no petition to set aside the order of
default has been presented by him."35 Justice Regalado also restates the Lina rule in his textbook on Civil Procedure,
opining that the remedies enumerated therein, even if under the former Rules of Procedure, "would hold true under the
present amended Rules."36 Former Court of Appeals Justice Herrerra likewise reiterates the Lina doctrine, though with the
caveat that an appeal from an order denying a petition for relief from judgment was no longer appealable under Section 1,
Rule 41 of the 1997 Rules.37 Herrera further adds:

Section 2, paragraph [2] of the former Rule 41, which allows an appeal from a denial of a petition for relief, was
deleted from the present Rule, and confined appeals to cases from a final judgment or final order that completely
disposes of the case, or of a particular matter therein, when declared by these rules to be appealable. A
judgment by default may be considered as one that completely disposes of the case.38

We are hard-pressed to find a published view that the enactment of the 1997 Rules of Civil Procedure accordingly
withdrew the right, previously granted under the 1964 Rules, of a defaulted defendant to appeal the judgment by default
against him. Neither is there any provision under the 1997 Rules which expressly denies the defaulted defendant such a
right. If it is perplexing why the 1997 Rules deleted the previous authorization under the old Section 2, Rule 41 (on subject
of appeal), it is perhaps worth noting that its counterpart provision in the 1997 Rules, now Section 1, Rule 41, is different
in orientation even as it also covers "subject of appeal." Unlike in the old provision, the bulk of the new provision is
devoted to enumerating the various rulings from which no appeal may be taken, and nowhere therein is a judgment by
default included. A declaration therein that a defaulted defendant may still appeal the judgment by default would have
seemed out of place.

Yet even if it were to assume the doubtful proposition that this contested right of appeal finds no anchor in the 1997 Rules,
the doctrine still exists, applying the principle of stare decisis. Jurisprudence applying the 1997 Rules has continued to
acknowledge the Lina doctrine which embodies this right to appeal as among the remedies of a defendant, and no
argument in this petition persuades the Court to rule otherwise.

In Rural Bank of Sta. Catalina v. Land Bank of the Philippines,39 the Court, through Justice Callejo, Sr., again provided a
comprehensive restatement of the remedies of the defending party declared in default, which we adopt for purposes of
this decision:

It bears stressing that a defending party declared in default loses his standing in court and his right to adduce
evidence and to present his defense. He, however, has the right to appeal from the judgment by default and assail
said judgment on the ground, inter alia, that the amount of the judgment is excessive or is different in kind from
that prayed for, or that the plaintiff failed to prove the material allegations of his complaint, or that the decision is
contrary to law. Such party declared in default is proscribed from seeking a modification or reversal of the assailed
decision on the basis of the evidence submitted by him in the Court of Appeals, for if it were otherwise, he would
thereby be allowed to regain his right to adduce evidence, a right which he lost in the trial court when he was
 declared in default, and which he failed to have vacated. In this case, the petitioner sought the modification of the
decision of the trial court based on the evidence submitted by it only in the Court of Appeals.40

If it cannot be made any clearer, we hold that a defendant party declared in default retains the right to appeal from the
judgment by default on the ground that the plaintiff failed to prove the material allegations of the complaint, or that the
decision is contrary to law, even without need of the prior filing of a motion to set aside the order of default. We reaffirm
that the Lim Toco doctrine, denying such right to appeal unless the order of default has been set aside, was no longer
controlling in this jurisdiction upon the effectivity of the 1964 Rules of Court, and up to this day.

Turning to the other issues, we affirm the conclusion of the Court of Appeals that Martinez failed to adduce the evidence
needed to secure the registration of the subject lots in his name.

It should be noted that the OSG, in appealing the case to the Court of Appeals, did not introduce any new evidence, but
simply pointed to the insufficiency of the evidence presented by Martinez before the trial court. The Court of Appeals was
careful to point out that the case against Martinez was established not by the OSG’s evidence, but by petitioner’s own
insufficient evidence. We adopt with approval the following findings arrived at by the Court of Appeals, thus:

The burden of proof in land registration cases is incumbent on the applicant who must show that he is the real and
absolute owner in fee simple of the land applied for. Unless the applicant succeeds in showing by clear and
convincing evidence that the property involved was acquired by him or his ancestors by any of the means
provided for the proper acquisition of public lands, the rule is settled that the property must be held to be a part of
the public domain. The applicant must, therefore, present competent and persuasive proof to substantiate his
claim. He may not rely on general statements, or mere conclusions of law other than factual evidence of
possession and title.

Considered in the light of the opposition filed by the Office of the Solicitor General, we find the evidence adduced
by appellee, on the whole, insufficient to support the registration of the subject parcels in his name. To prove the
provenance of the land, for one, all that appellee proffered by way of oral evidence is the following cursory
testimony during his direct examination, viz:

xxxx

Q You mentioned that you are the owner of these three (3) parcels of land. How did you begin the ownership of
the same?

A I bought it from my uncles Julian Martinez and Juan Martinez.

xxxx

Q x x x x Who took possession of these parcels of land from then on?

A I took possession, sir

Q As owner?

A Yes, as owner.

Q Up to the present who is in possession as owner of these parcels of land?

A I took possession.

Q Before Julian Martinez and Juan Martinez sold these parcels of land before you took possession who were the
owners and in possession of these?

A Hilarion Martinez, the father of my predecessors-in-interest and also my grandfather.

xxxx

Court:

Q Of your own knowledge[,] where [sic] did your grandfather Hilarion Martinez acquire these lands?

A According to my grandfather he bought that land from a certain Juan Casano in the year 1870’s[,] I think.

xxxx

Q By the way[,] when did your grandfather Hilarion Martinez die?

A Either in 1920 or 1921.

 Q Since you said your immediate predecessors-in-interest Julian Martinez and Juan Martinez inherited the same
from your grandfather. Can you say it the same that your predecessors-in-interest were the owners and
possessors of the same since 1921 up to the time they sold the land to you in 1952?

A Yes, sir.

xxxx

In the dreary tradition of most land registration cases, appellee has apparently taken the absence of
representation for appellant at the hearing of his petition as license to be perfunctory in the presentation
of his evidence. Actual possession of land, however, consists in the manifestation of acts of dominion
over it of such a nature as a party would naturally exercise over his own property. It is not enough for an
applicant to declare himself or his predecessors-in-interest the possessors and owners of the land for
which registration is sought. He must present specific acts of ownership to substantiate the claim and
cannot just offer general statements which are mere conclusions of law requiring evidentiary support and
substantiation.

The record shows that appellee did not fare any better with the documentary evidence he adduced before the trial
court. The October 20, 1952 Deed of Sale by which appellee claims to have purchased the subject parcels
from his uncle, Julian Martinez, was not translated from the vernacular in which it was executed and, by
said token, was inadmissible in evidence. Having submitted a white print copy of the survey plan for Lot
Nos. 464-A and 464-B, appellee also submitted the tracing cloth plan for Lot No. 370 which does not,
however, appear to be approved by the Director of Lands. In much the same manner that the submission of
the original tracing cloth plan is a mandatory statutory requirement which cannot be waived, the rule is settled that
a survey plan not approved by the Director of Lands is not admissible in evidence.41

These findings of the Court of Appeals, arrived at after a sufficiently extensive evaluation of the evidence, stand in
contrast to that contained in the RTC decision, encapsulated in a one-paragraph précis of the factual allegations of
Martinez concerning how he acquired possession of the subject properties. The Court of Appeals, of course, is an
appropriate trier of facts, and a comparison between the findings of fact of the Court of Appeals and that of the RTC
clearly demonstrates that it was the appellate court which reached a more thorough and considered evaluation of the
evidence.

As correctly held by the Court of Appeals, the burden of proof expected of the petitioner in a land registration case has not
been matched in this case.

WHEREFORE, the petition is DISMISSED. Costs against petitioner.

SO ORDERED.
G.R. No. 161211               July 17, 2013

SPOUSES CELSO DICO, SR. AND ANGELES DICO, Petitioners, 

vs.
VIZCAYA MANAGEMENT CORPORATION, Respondent.

DECISION

BERSAMIN, J.:

The prescription of actions for the reconveyance of real property based on implied trust is 10 years.

The Case

This appeal by petition for review on certiorari seeks to set aside the adverse decision promulgated on September 11,
2002,1 whereby the Court of Appeals (CA) reversed the decision rendered by the Regional Trial Court (RTC) of Negros
Occidental in favor of petitioners.

Antecedents

Celso Dico was the registered owner of Lot No. 486 of the Cadiz Cadastre, comprising an area of 67,300 square meters
and covered by Transfer Certificate of Title (TCT) No. 22922 of the land records of Negros Occidental. Lot No. 486 was
adjacent to Lot No. 29-B and Lot No. 1412 (formerly Lot No. 1118-B), both also of the Cadiz Cadastre. Celso and his wife
Angeles resided on Lot No. 486 since 1958. On May 30, 1964, Angeles filed in the District Office of the Bureau of Lands
in Bacolod City, her free patent application covering a portion of Lot No. 29-B. On his part, Celso also filed in the same
office an application for free patent covering Lot No. 1412. It does not appear, however, that the Bureau of Lands acted on
their applications.2

Respondent Vizcaya Management Corporation (VMC) was the registered owner under TCT No. T-41835 of Lot No. 29-B,
also of the Cadiz Cadastre, comprising an area of 369,606 square meters, more or less.3 VMC derived its title to Lot No.
29-B from Eduardo and Cesar, both surnamed Lopez, the registered owners under TCT No. T-14827, which emanated
from TCT No. RT-9933 (16739) in the names of Victoria, Eduardo and Cesar, all surnamed Lopez. TCT No. RT-9933
(16739) was a transfer from TCT No. T-14281, which had been transferred from Original Certificate of Title (OCT) No.
21331 in the name of Negros Philippines Lumber Company. OCT No. 21331 was issued pursuant to Decree No. 190483
of G.L.R.O. Cadastral Record No. 196.

VMC likewise claimed to be the owner of Lot No. 1412, formerly known as Lot No. 1118-B, also of the Cadiz Cadastre,
containing an area of 85,239 square meters, more or less, and registered in its name under TCT No. T-41834.4 Lot Nos.
1426-B, with an area of 6,635 square meters covered by TCT No. T-24135, and 1426-C, with an area of 6,107 square
meters covered by TCT No. T-24136, appear to be registered in the names of Eduardo Lopez and Cesar Lopez, who had
earlier formed VMC.

In 1967, VMC, then newly formed, caused the consolidation and subdivision of Lot No. 29-B, Lot No. 1412, Lot No. 1426-
B, and Lot No. 1426-C. The consolidation-subdivision plan was prepared by Engr. Ricardo Quilop and filed in the Land
Registration Commission (LRC), renamed National Land Titles and Deeds Registration Administration, but presently
known as the Land Registration Authority. The consolidation-subdivision plan was assigned the number (LRC) PCS-6611.
On July 26, 1967, LRC Commissioner Antonio L. Noblejas approved the consolidation-subdivision plan, resulting in Lot
No. 29-B, Lot No. 1412, Lot No. 1426-B, and Lot No. 1426-C being consolidated and subdivided as follows: Lot No. 1 with
an area of 238,518 square meters under TCT No. T-47854; Lot No. 2 with an area of 216,176 square meters under TCT
No. T-47855; Lot No. 3 with an area of 11,496 square meters under TCT No. T-47856; and Lot No. 4 with an area of
15,392 square meters under TCT No. T-47857.5 In all, the total landholding of VMC after the consolidation was 481,583
square meters.

VMC proceeded to develop the Don Eusebio Subdivision project using Lot No. 1 of the consolidation-subdivision plan
under (LRC) PCS-6611. The subdivision plan under PSD-102560 subdivided Lot No. 1 into 547 small lots. Subsequently,
VMC also developed the Cristina Village Subdivision project using Lots Nos. 2, 3, and 4 under (LRC) PCS-6611. Under
PSD-12746 of the subdivision plan for Cristina Village Subdivision, consolidated Lots Nos. 2, 3, and 4 were subdivided
into 348 small lots. Starting 1971, VMC sold lots in its Don Eusebio Subdivision and Cristina Village Subdivision. In 1981,
VMC filed against the Dicos a complaint for unlawful detainer in the City Court of Cadiz (Civil Case No. 649). On April 24,
1981, the City Court of Cadiz rendered its decision in favor of VMC, ordering the Dicos to demolish the concrete water
gate or sluice gate (locally known as trampahan) located inside Lot No. 1, Block 3 of the Cristina Village Subdivision.
Inasmuch as the Dicos did not appeal, the decision attained finality. On July 3, 1981, the City Court of Cadiz issued a writ
of execution. On November 11, 1985, a second alias writ of execution was issued.

On May 12, 1986, the Dicos commenced an action for the annulment and cancellation of the titles of VMC (Civil Case No.
180-C), impleading VMC, the National Land Titles and Deeds Registration Administration, and the Director of the Bureau
of Lands. On March 12, 1987, the Dicos amended the complaint. They averred, among others, that they were the
registered owners of Lot No. 486 and the possessors-by-succession of Lot No. 1412 (formerly Lot No. 1118) and Lot No.
489; that VMC had land-grabbed a portion of their Lot No. 486 totaling 111,966 square meters allegedly brought about by
the expansion of Cristina Village Subdivision; and that on May 30, 1964 they had filed free patent applications in the
Bureau of Lands for Lot No. 1412 and Lot No. 489.6 They prayed that the possession of Lot No. 486, Lot No. 1412, and
Lot No. 489 be restored to them; and that the judgment in Civil Case No. 649 be annulled.
Celso died during the pendency of the action, and was substituted by Angeles and their children pursuant to the order of
November 22, 1991.

Ruling of the RTC

On January 8, 1998, the RTC ruled in favor of the Dicos, viz:

WHEREFORE, IN VIEW OF THE FOREGOING, judgement is rendered in favor of the plaintiffs and against the
defendants in this wise:

1. The plaintiffs are hereby declared absolute owners of the 111,959 square meter portion of Lot 486 and the
defendant Vizcaya Management Corporation, its agent, representatives and any persons acting in its behalf are
hereby ordered to peacefully vacate the said premises and to turn over the possession of the 111, 959 square
meters, a portion of Lot 486 Cadiz Cadastre, in favor of the plaintiffs;

2. The Certificate of Titles from RT-9933 (16739) and all other titles derived therefrom are all hereby declared
spurious and ordered cancelled;

3. That defendant Vizcaya Management Corporation is hereby ordered to pay plaintiffs ₱3,000.00 as monthly
rental on the 111, 959 square meters, portion of Lot 486, Cadiz Cadastre, which the defendant Vizcaya
Management Corporation had occupied from May 12, 1986 until the plaintiff’s property is fully restored to the
latter;

4. That defendant Vizcaya Management Corporation is hereby ordered to pay the plaintiffs the sum of
₱100,000.00 by way of attorney’s fees and ₱100,000.00 by way of moral damages and ₱50,000.00 for exemplary
damages;

5. That defendant National Land Titles and Deeds Administration is hereby ordered to make the necessary
rectification on the titles of the defendants;

6. The Solicitor General is hereby directed to look into the possibility of reversion of Lots 29-A, 29-B and 1412,
Cadiz Cadastre in favor of the Government and initiate the Escheat proceedings thereon;

7. The counterclaims of the defendants are ordered dismissed; and

8. Defendants to pay the costs.

SO ORDERED.7

Ruling of the CA

On appeal, VMC assigned the following errors, to wit:

THE TRIAL COURT ERRED IN NOT DISMISSING PLAINTIFFS’ COMPLAINT FOR BEING BARRED BY
PRESCRIPTION AND/OR LACHES AND FOR LACK OF CAUSE OF ACTION.

II

THE TRIAL COURT ERRED IN CAPRICIOUSLY DISREGARDING THE CONCLUSIVENESS AND INDEFEASIBILITY
OF THE SUBJECT CERTIFICATES OF TITLE AND IN IGNORING WELL-ENTRENCHED DOCTRINES, PRINCIPLES
AND PRESUMPTIONS OF REGULARITY AND VALIDITY ATTENDANT TO THEIR ISSUANCES.

III

THE TRIAL COURT ERRED IN HOLDING THAT IN THE CONSOLIDATION AND SUBDIVISION OF THE LOTS
COMPRISING THE EUSEBIO AND CRISTINA SUBDIVISIONS, VMC UNJUSTIFIABLY INCREASED THE AREA OF
LOT NO. 29-B AND ENCROACHED ON LOT 486.

IV

THE TRIAL COURT ERRED IN HOLDING THAT LOT NOS. 29-B AND 1412 REVERTED BACK (sic) TO THE
GOVERNMENT AND IN DIRECTING THE SOLICITOR GENERAL TO INITIATE ESCHEAT PROCEEDINGS THEREON.

V
THE TRIAL COURT ERRED IN DECLARING THAT TRANSFER CERTIFICATE OF TITLE ("TCT") NO. RT-9933
(EXHIBIT "K") IS A SPURIOUS TITLE AND IN ORDERING SAID TITLE, AND ALL TITLES DERIVED THEREFROM,
CANCELLED.

VI

THE TRIAL COURT ERRED IN RULING THAT THERE WAS FRAUD IN VMC’S ACQUISITION OF LOT NOS. 29-B AND
1412.

VII

THE TRIAL COURT ERRED IN NOT FINDING THAT THE DESIGNATION OF LOT NO. 1246-B AND 1246-C IN THE
TECHNICAL DESCRIPTIONS OF THE TITLES OF LOT NOS. 1 TO 4 IS MERELY TYPROGRAPHICAL ERROR.

VIII

THE TRIAL COURT ERRED IN ORDERING VMC TO PAY RENTALS, DAMAGES AND COSTS TO PLAINTIFFS AND IN
DISMISSING THE COUNTERCLAIMS PLEADED BY VMC.8

As earlier mentioned, the CA reversed the RTC through its decision promulgated on September 11, 2002,9 ruling as
follows:

WHEREFORE, in view of the foregoing, and finding the appeal impressed with merit, the same is hereby GRANTED. The
Decision dated January 8, 1998 of Branch 60 of the Regional Trial Court of Negros Occidental in Civil Case No. 180-C is
hereby REVERSED and SET ASIDE, and a new judgment is hereby rendered as follows:

1. Civil Case No. 180-C is DISMISSED for lack of merit.

2. Defendant-appellant Vizcaya Management Corporation is declared the absolute owner of Lot No. 29-B under
TCT No. T-41835.

3. Defendant-appellant Vizcaya Management Corporation is declared the absolute owner of Lot No. 1412 under
TCT No. T-41834.

4. Original Certificate of Title No. 21331 and Transfer Certificate of Title No. RT-9933 (16739) are declared valid
and genuine;

5. Plaintiffs-appellees Angeles Dico, et al. are declared the absolute owners of Lot No. 486 under TCT No. T-
22922;

6. The Decision dated April 24, 1981 of the City Court of Cadiz in Civil Case No. 649 is hereby declared VALID
and UPHELD; and

7. No cost.

SO ORDERED.10

On October 7, 2003, the CA denied the Dicos’ motion for reconsideration.11

Issues

Hence, this appeal, wherein the Dicos contend that the CA erred in holding that prescription and/or laches already barred
them from asserting their right;12 in accepting the theory of VMC that the consolidation of Lot No. 1246-B and Lot No.
1246-C had resulted from a merely typographical error;13 in reversing the decision of the RTC despite its finding that VMC
had committed land grabbing;14 and in reversing the RTC based on non-existing evidence that was contradicted by the
evidence on records.15

In its comment,16 VMC counters that the petition for review should not be given due course because petitioners came to
court with unclean hands; that the petition was filed out of time even with the extension given by the Court; that the
petition was fatally defective in form and in substance; and that the dismissal of the complaint was in accord with
applicable laws and jurisprudence. In their reply,17 the Dicos reiterate that the findings and conclusions of the RTC were
supported by evidence establishing fraud, encroachment and other anomalies perpetrated by VMC; that the rules of
procedure must not be rigidly applied to override substantial justice; and that VMC could not validly invoke the
indefeasibility of its titles to defeat their right over the encroached land.

The decisive issue is whether prescription already barred petitioners’ cause of action. All the other issues are subsumed
therein.

Ruling
We find and hold that the action of the Dicos for reconveyance was properly dismissed.

To start with, the CA’s explanations for reversing the RTC were very thorough, well-founded and well-reasoned, to wit:

Granting arguendo that fraud intervened in the procurement of the Certificates of Title to Lot No. 29-B and plaintiffs-
appellees had the personality to seek the reconveyance thereof on the basis of implied or constructive trust, their
complaint filed on May 12, 1986, or about 29 years after the issuance of the certificate of title to defendant-appellant,
indeed came too late. They were deemed to have discovered the fraud as early as September 20, 1934 when TCT No.
RT-9933 (16739) of the Lopezes was recorded or on November 10, 1956 when TCT No. T-41835 of defendant-appellant
was registered. Their right to seek reconveyance of a portion of Lot No. 29-B, if it existed at all, had already prescribed.
Plaintiffs-appellees also contend that defendant-appellant secured its Certificate of Title to Lot No. 1412 through fraud.
They contend that Celso Dico had filed with the Bureau of Lands his Free Patent Application (Exh. "D", pp. 733-735,
Records Vol. 3) with respect to Lot No. 1412. On the other hand, the evidence on record shows that Lot No. 1412,
formerly Lot No. 1118-B, appears to have been already registered in the name of defendant-appellant under TCT No. T-
41834 (Exh. "11").

We fail to see the fraud allegedly committed by defendant-appellant in securing its Certificate of Title to Lot No. 1412. In
their vain effort to show that Celso Dico filed a Free Patent Application for Lot No. 1412, plaintiffs-appellees presented his
alleged Free Patent Application, Exhibit "D". Said Exhibit "D", however, is without evidentiary weight since while the name
of plaintiff-appellee Angeles Dico, as applicant therein, appears in the Application for Free Patent, the Joint Affidavit in
support thereof, and Notice of Application for Free Patent, the signature of one Celso Dico was only clearly super-
imposed thereon to make it appear he was the applicant. Exhibit "D" is, in fact, a forged document.

Thus, the court a quo erred when it concluded that defendant-appellant’s title to Lot No. 1412 came from a doubtful
source. There is no evidence on record that clearly showed the fraud allegedly employed by defendant-appellant when it
secured its title to Lot No. 1412. Moreover, plaintiffs-appellees have not established their personality to seek the
reconveyance of Lot No. 1412 as they are not the registered owners thereof.

In fine, Lots Nos. 29-B and 1412 did not revert to the government, as they are already the private properties of defendant-
appellant corporation. Anent the issue of encroachment on Lot No. 486 by defendant-appellant, the court a quo found that
defendant-appellant encroached on Lot 486 when it consolidated and subdivided the contested lots.

The court a quo ruled, thus:

"From the evidence presented as revealed by the records of the case, this Court is of the judicious finding that defendant
Viscaya (sic) had encroached on lot 486 considering that even if it claims it has a title over lot 29-B, still it had exceeded
its area of possession over lot 29-B. Exhibits "J", "K" and "L" reveal that lot 29-B only contains an area of 369,606 square
meters, however, when defendant Vizcaya caused the consolidation of their lots the total area which is supposed to be
369,606 square meters was increased. Basing on defendants’ exhibits "3" to "6" this Court finds that TCT No. 1735 (lot 1)
has an area of 238,518 square meters, TCT No. 1736 (Lot 2), 216,176 square meters, TCT No. 1737 (Lot 3) 11,496
square meters and TCT No. 1738, 15,392 square meters which when added together will sum up to a total of 481,582
square meters, clearly exceeding the original area of 369,606 square meters appearing and described in

Exhibits "J":, "K" and "L".

"Likewise, this Court further finds after an exhausted (sic) examination of the records, that defendant Vizcaya increased
the area on the plan of Cristina Village Subdivision which is Lot 2 contrary to what is contained in TCT No. 1736 (Exhibits
"P-1" and "4") containing an area of only 216,176 square meters.

"The increase in area in the title of defendant Vizcaya is 111,976 square meters. This area was taken from the portion of
Lot 486 of the plaintiffs covered by TCT No. T-22922 (Exh. "E") and which was derived from OCT No. 0-3146 (21337)
adjacent to Lot 29-B (Exh. "J") and later became Lot 2 covered by TCT No. (T-47855) 1736, Lot 1 covered by TCT No. (T-
47854) 1735 (Exh. "P") Lot 3 covered by TCT No. (T-47856) 1737 (Exh. "P-2") and Lot 4 covered by TCT No. (T-47857)
1738 (Exh. "P-3"). To the mind of this Court, the intrustion (sic) of the defendants over the area of Lot 486 is a clear and
willful manipulation hatched between defendant Vizcaya and its surveyor without regard to the existing technical and (sic)
descriptions of the adjacent lot, particularly the lot belonging to the plaintiffs. Upon close examination of all the evidence
on record, it appears that the method and scheme employed in order to hide and confuse the increase in the area was to
consolidate lots 29-B, 1246-B, 1246-C and 1412 and then subdivide these lots into several parts to become lots 1, 2, 3
and 4 with its corresponding titles, technical descriptions and already containing variable but increased areas can no
longer be ascertained or if ascertained the same can be done with greater difficulty as the one tasked to unravel these
confusing mazes (sic) of lots will have to dig deep into the history of the original titles. What this Court finds amusing,
however, is the fact that Lots 1246-B and 1246-C were consolidated with Lots 29-B and 1412 which former lots are
located in Barangay Tinampa-an, Cadiz City while Lots 29-B and 1412 are located in the City Proper and are non
adjacent or contigeous (sic) lots.

"The claim of the defendants that the plaintiffs cannot establish a better right or title to real properties over and above a
valid and existing title, cannot be given credence by this Court considering that a torrens title cannot cover fraud, and
more particularly so, because Lot 486 is also titled property registered in the name of the plaintiff Dico." (pp. 30-31,
Decision; pp. 79-80, Rollo)

We do not agree with the above findings of the court a quo. The documentary evidence found in the records reveals that
defendant-appellant had two lots titled in its name, namely: Lot No. 29-B comprising an area of 369,606 square meters,
containing identical technical description as appearing in plaintiffs-appellees’ Exhs. "J", "K" and "L" and Lot No. 1412,
formerly 1118-B, comprising an area of 85,239 square meters covered by TCT No. T-41834 (Exh. "11"). Further, Eduardo
and Cesar Lopez were the registered owners of Lot No. 1426-B comprising an area of 6,635 square meters, covered by
TCT No. T-21435 (Exh. "9") and Lot No. 1426-C comprising an area of 6,107 square meters, covered by TCT No. T-
21436 (Exh. "10"). As contended by defendant-appellant, it caused the consolidation and subdivision of these four lots
following the approved consolidation-subdivision plan (Exh. "7", p. 958, Records Vol. 4) it submitted to the then Land
Registration Commission. The said approved consolidation-subdivision plan was assigned the number (LRC) PCS-6611.
Hence, adding the land area of the four consolidated lots, the total landholding of defendant-appellant after the approved
consolidation-subdivision plan would be 467,587 square meters only, thus:

Lot No. Area in Square Meters

Lot No. 29-B 369,606 square meters

Lot No. 1412 85,239 square meters

Lot No. 1426-B 6,635 square meters

Lot No. 1426-C 6,107 square meters

Total 467,587 square meters

Defendant-appellant’s approved consolidation-subdivision plan (Exh. "7") reveals that it was a consolidation-subdivision of
Lots Nos. 29-B (Exh. "L"; Exh. "8"), PSD-5573; 1426-B (Exh. "9") & 1426-C (Exh. "10"), PSD-44080, and 1412 (Exh. "11"),
all of Cadiz Cadastre, which contained a total area of 481,583 square meters. However, the total land area of the four
consolidated lots as added above is only 467,587 square meters. Clearly, there exists an excess of 13,996 square
meters, which was included in the approved consolidation-subdivision plan of defendant-appellant. Worth noting is the fact
that defendant-appellant’s approved consolidation-subdivision plan contained a handwritten entry which stated that the "x
x x area is increased by 13996 sq.m" (Exh. "7", p. 958, Records Vol. 4).

Thus, the court a quo erred when it concluded that there was an excess of 111,959 square meters in defendant-
appellant’s landholdings. We agree with the contention of defendant-appellant that the basis for computing its total
landholding should not be limited to the land area of Lot No. 29-B since three (3) other individual lots were included in the
consolidation-subdivision survey. The evidence on record reveals that Lots Nos. 1412, 1426-B and 1426-C were included
in the approved consolidation-subdivision plan (Exh. "7").

Further, the Trial Court’s finding that defendant-appellant encroached by 111,959 square meters on Lot 486 belonging to
plaintiffs-appellees finds no justifiable support from the evidence on record. Lot No. 486 under TCT No. T-22922 (Exh. "E",
p. 736, Records Vol. 3) in the name of Celso Dico contained an area of 67,300 square meters only. Following the Trial
Court’s reasoning, defendant-appellant shall return to plaintiffs-appellees 111,959 square meters it allegedly land grabbed
from Lot No. 486. Thus, Lot No. 486 would now contain an area of 179,259 square meters, substantially increased by
111,959 square meters which is clearly beyond what is stated in TCT No. T-22922.

As We have found earlier, the excess in defendant-appellant’s landholding is only 13,996 square meters.

It is likewise the contention of plaintiffs-appellees that PCS-6611 does not exist in the records of the then Land
Registration Commission, as evidenced by the Certifications (Exhs. "Q" and "R", pp. 758-758A, Records Vol. 3) issued by
the Subdivision and Consolidation Division, Vault Section I, Land Registration Authority.

The court a quo ruled:

"x x x. Thus, the defendants failed to overcome the preponderance of evidence presented by the plaintiffs, particularly on
Certifications (Exhs. "Q" and "R") certifying to the effect that Pcs-6611 is not existing x x x" (p. 34, Decision).

We cannot agree with conclusion of the court a quo. The evidence on record clearly reveals that defendant-appellant
presented a copy of the approved consolidation-subdivision plan (Exh. "7") prominently showing the number (LRC) PCS-
6611 assigned by the Land Registration Commission, which is located at the bottom-right portion of the document. The
Certifications (Exhs. "Q" and "R") issued by the then Land Registration Authority are not conclusive proof of the non-
existence of the original of the consolidation-subdivision plan (LRC) PCS-6611 together with all the survey records
pertaining thereto. As correctly pointed out by defendant-appellant, the person who issued said certifications was not
presented in court to identify and affirm the veracity of their contents. Thus, as between the approved consolidation-
subdivision plan (Exh. "7") and the certifications (Exhs. "Q" and "R"), the former carries greater evidentiary weight.

Granting arguendo that no records pertaining to (LRC) PCS-6611 could be found in the Vault Section of the then Land
Registration Commission, the existence of (LRC) PCS-6611 was already established with the presentation in evidence of
a copy of the said approved consolidation-subdivision plan (Exh. "’7") prominently reflecting therein the number (LRC)
PCS-6611 assigned by the Land Registration Commission. The authenticity and existence of (LRC) PCS-6611 within the
records of the Land Registration Commission (now Land Registration Authority) was established by the fact that it was
used as a basis for the approval of the consolidation-subdivision plan for the Don Eusebio Subdivision under (LRC) PSD-
102560 (Exh. "14", "14-A", "14-B", pp. 983-985, Records, Vol. 4) and Cristina Village Subdivision under (LRC) PCS-12746
(Exh. "16", p. 982, Records, Vol. 4). In Exhibits "14" and "16", (LRC) PCS-6611 was clearly reflected as the source of the
consolidated lots.

Lastly, defendant-appellant contends that the court a quo erred in finding that there was no typographical error committed
in designating Lots Nos. 1246-B and 1246-C instead of 1426-B and 1426-C, respectively, in its approved consolidation-
subdivision plan.

The court a quo ruled:

"x x x. What this Court finds amusing, however, is the fact that Lots 1246-B and 1246-C were consolidated with Lots 29-B
and 1412 which former lots are located in Barangay Tinampa-an, Cadiz City while Lots 29-B and 1412 are located in the
City Proper and are non adjacent or contigeous (sic) lots.

"x x x x

"Granting arguendo, that the denomination of Lots 1246-B and 1246-C are merely typographical errors of Lots 1426-B and
1426-C as claimed by defendant Vizcaya, this Court, upon judicious evaluation of the records cannot accept the argument
relied upon by the defendants since it is obvious from the evidence that defendant Vizcaya employs a retained surveyor
for purposes of their subdivision, and despite the technical knowledge of its surveyor it did not bother to correct the error if
indeed it is one, on the lots subject matter of the case, but had invoked the said ground only during the litigation proper"
(pp. 30-35, Decision; pp. 179-184, Rollo).

Defendant-appellant contends that it failed to correct this typographical error as such fact came to its knowledge only
during the trial and two years after issuance of TCT No. T-47854-57 (Exhs. "P", "P-1" to "P-3"; Exhs. "3" to "6", pp. 750-
756 Records Vol. 3), these Certificates of Title were subsequently cancelled and new TCTs were issued. On the other
hand, plaintiffs-appellees contend that Lots Nos. 1246-B and 1246-C could not be possibly consolidated with Lot No. 29-B
because the former lots were situated some 4 kilometers away from defendant-appellant’s subdivision area, besides
being owned by other persons.

We agree with defendant-appellant.

While we agree with plaintiffs-appellees’ assertion that consolidation of non-contiguous and non-adjacent lots are not
possible especially so when the lots are situated considerably far from each other, the case at hand does not fall under
this scenario. As correctly explained by defendant-appellant there was a typographical error in the technical description of
its consolidated lots in that what was stated therein as included in the consolidation plan were Lots Nos. 1246-B and
1246-C, Psd-44080, instead of Lots Nos. 1426-B and 1426-C, Psd-44080.

Worth noting are the technical description of the subject lots before and after their consolidation. –

Transfer Certificate of Title No. T-24135 (Exh. "9") covering Lot No. 1426-B reads:

"A parcel of land (Lot No. 1426-B of the subdivision plan Psd-44080, being a portion of Lot 1426 of the Cadastral Survey
of Cadiz, G.L.R.O. Cad. Record No. 196), situated in the Poblacion, Municipality of Cadiz, Province of Negros Occidental,
Bounded on the NE., by Lot 1426-A of the subdivision plan; on the SE., by Lot No. 1423 of Cadiz, Cad.; and on the SW.,
by Lot 1426-C of the subdivision plan. x x x"

Transfer Certificate of Title No. T-24136 (Exh. "10") covering Lot No. 1426-C reads.

"A parcel of land (Lot No. 1426-C of the subdivision plan Psd-44080, being a portion of Lot 1426 of the Cadastral Survey
of Cadiz, G.L.R.O. Cad. Record No. 196), situated in the Poblacion, Municipality of Cadiz, Province of Negros Occidental,
Bounded on the NE., by Lot 1426-B of the subdivision plan; on the SE., by Lot 1423 of Cadiz Cad., and on the SW., by
Calle Cabahug. x x x."

On the other hand, the technical descriptions of the properties covered by Transfer Certificates of Title Nos. T-47854 to T-
47857 pertaining to Lot Nos. 1 to 4 (Exhs. "P", "P-1" to "P-3) read:

Transfer Certification of Title No. T-14754:

"A parcel of land (Lot 1 of the consolidation-subdivision plan (LRC) Pcs-6611, being a portion of the consolidation of Lots
29-B, Psd-5573, 1246-B, & 1246-C, Psd-44080 & 1412, Cadiz Cad., LRC (GLRO) Cad. Rec. No. 196), situated in the City
of Cadiz, Island of Negros x x x containing an area of two hundred thirty-eight thousand five hundred eighteen (238, 518)
square meters, more or less. x x x."

Transfer Certificate of Title No. T-14755:

"A parcel of land (Lot 2 of the consolidation-subdivision plan (LRC) Pcs-6611, being a portion of the consolidation of Lots
29-B, Psd-5573, 1246-B, & 1246-C, Psd-44080 & 1412, Cadiz Cad., LRC (GLRO) Cad. Rec. No. 196, situated in the City
of Cadiz, Island of Negros x x x containing an area of TWO HUNDRED SIXTEEN THOUSAND ONE HUNDRED
SEVENTY-SIX (216,176) Square Meters, more or less. x x x."

Transfer Certificate of Title No. T-14756:

"A parcel of land (Lot 3 of the consolidation-subdivision plan (LRC) Pcs-6611, being a portion of the consolidation of Lots
29B, Psd-5573, 1246-B, & 1246-C, Psd-44080 & 1412, Cadiz Cad., LRC (GLRO) Cad. Rec. No. 196), situated in the City
of Cadiz, Island of Negros x x x containing an area of eleven thousand four hundred ninety-six (11,496) square meters,
more or less. x x x."

Transfer Certificate of Title No. T-14757:

"A parcel of land (Lot 4 of the consolidation-subdivision plan (LRC) Pcs-6611, being a portion of the consolidation of Lots
29-B, Psd-5573, 1246-B, & 1246-C, Psd-44080 & 1412, Cadiz Cad., LRC (GLRO) Cad. Rec. No. 196), situated in the City
of Cadiz, Island of Negros. Bounded on the NE., points 31 to 1 and 1 to 6 by Lot 1426-A, Psd-44080 x x x containing an
area of fifteen thousand three hundred ninety-two (15,932) square meters, more or less. x x x."

As can be gleaned clearly from the foregoing, Lots Nos. 1426-B and 1426-C came from Psd-44080. In the same way that
Lots Nos. 1246-B and 1246-C came from Psd-44080. Defendant-appellant submitted a certified copy of the Cadastral
Map of Cadiz (Exh. "12", p. 986, Records Vol. 4) showing that adjacent to Lot No. 29-B was Lot No. 1426 and being
continguous, these lots could be consolidated. Even plaintiffs-appellees’ witness Engr. Luvimin Canoy testified on the
possibility that a typographical error might have been committed in listing the lot numbers in the title (pp. 39-41, TSN,
September 9, 1992).

There was no evidence to the effect that defendant-appellant caused the erroneous designation of Lots Nos. 1426-B and
1426-C as Lots Nos. 1246-B and 1246-C, respectively, when it consolidated these lots. The error indeed was only
typographical as the subject lots all came from Psd-44080. In the absence of evidence that defendant-appellant employed
fraud in consolidating these lots, a typographical error in the designation of lot numbers in the Certificates of Title would
not warrant their cancellation. An amendment may cure the error. It has been aptly ruled in one case that in the interest of
justice and equity, the title-holder may not be made to bear the unfavorable effect of the mistake or negligence of the
State’s agents, in the absence of proof of his complicity in a fraud or of manifest damage to third persons (Republic vs.
Court of Appeals, 301 SCRA 366).18

We have examined the factual bases of the CA in reaching its decision, and have found that its aforequoted findings of
fact and conclusions were based on the evidence presented at the trial. In view of this, the Court accepts the findings of
fact and conclusions of the CA, not just because we are not a trier of facts, but, more importantly, because the CA
creditably performed its main task of conducting a thorough review of the evidence and records of the case in order to
eruditely and carefully address each of the issues raised and argued by the Dicos.

Secondly, the CA correctly pointed out that under Article 1456 of the Civil Code, the person obtaining property through
mistake or fraud is considered by force of law a trustee of an implied trust for the benefit of the person from whom the
property comes. Under Article 1144, Civil Code, an action upon an obligation created by law must be brought within 10
years from the time the right of action accrues. Consequently, an action for reconveyance based on implied or
constructive trust prescribes in 10 years.

Here, the CA observed that even granting that fraud intervened in the issuance of the transfer certificates of title, and even
assuming that the Dicos had the personality to demand the reconveyance of the affected property on the basis of implied
or constructive trust, the filing of their complaint for that purpose only on May 12, 1986 proved too late for them.

That observation was correct and in accord with law and jurisprudence.1âwphi1 Verily, the reckoning point for purposes of
the Dicos’ demand of reconveyance based on fraud was their discovery of the fraud. Such discovery was properly pegged
on the date of the registration of the transfer certificates of title in the adverse parties’ names, because registration was a
constructive notice to the whole world.19 The long period of 29 years that had meanwhile lapsed from the issuance of the
pertinent transfer certificate of title on September 30, 1934 (the date of recording of TCT No. RT-9933 (16739) in the
name of the Lopezes) or on November 10, 1956 (the date of recording of TCT No. T-41835 in VMC’s name) was way
beyond the prescriptive period of 10 years.

And, lastly, the insistence of the Dicos that prescription could not be used by the CA to bar their claim for reconveyance
by virtue of VMC’s failure to aver them m a motion to dismiss or m the answer was unwarranted.

We agree with VMC's contention to the contrary. Although defenses and objections not pleaded in a motion to dismiss or
in an answer are deemed waived, it was really incorrect for the Dicos to insist that prescription could not be appreciated
against them for that reason. Their insistence was contrary to Section l, Rule 9 of the Rules of Court, which provides as
follows:

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. (2a)

Under the rule, the defenses of lack of jurisdiction over the subject matter, litis pendentia, res judicata, and prescription of
action may be raised at any stage of the proceedings, even for the first time on appeal, except that the objection to the
lack of jurisdiction over the subject matter may be barred by laches.20

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on September II, 2002; and
ORDERS the petitioners to pay the costs of suit. SO ORDERED.
G.R. No. 165770               August 9, 2010

HEIRS OF FRANCISCA MEDRANO, namely YOLANDA R. MEDRANO, ALFONSO R. MEDRANO, JR., EDITA M.
ALFARO, MARITES M. PALENTINOS, and GIOVANNI MEDRANO, represented by their legal representative,
Marites Medrano-Palentinos, Petitioners, 
vs.
ESTANISLAO DE VERA, Respondent.

DECISION

DEL CASTILLO, J.:

In cases where the subject property is transferred by the defendant during the pendency of the litigation, the interest of the
transferee pendente lite cannot be considered independent of the interest of his transferors. If the transferee files an
answer while the transferor is declared in default, the case should be tried on the basis of the transferee’s answer and
with the participation of the transferee.

This Petition for Review on Certiorari1 assails the June 25, 2004 Decision2 of the Court of Appeals (CA) in CA-G.R. SP
No. 80053, which contained the following dispositive portion:

WHEREFORE, premises considered, the petition is hereby GRANTED and this Court orders that the case be remanded
to the court a quo for further trial.

SO ORDERED.3

Likewise assailed is the appellate court’s October 6, 2004 Resolution4 denying petitioners’ Motion for Reconsideration.

Factual Antecedents

This case concerns a 463-square meter parcel of land5 covered by Transfer Certificate of Title (TCT) No. 41860 in the
name of Flaviana De Gracia (Flaviana). In 1980, Flaviana died6 intestate, leaving her half-sisters Hilaria Martin-Paguyo
(Hilaria) and Elena Martin-Alvarado (Elena) as her compulsory heirs.

In September 1982, Hilaria and Elena, by virtue of a private document denominated "Tapno Maamoan ti
Sangalobongan,"7 waived all their hereditary rights to Flaviana’s land in favor of Francisca Medrano (Medrano). It stated
that the waiver was done in favor of Medrano in consideration of the expenses that she incurred for Flaviana’s medication,
hospitalization, wake and burial. In the same year, Medrano built her concrete bungalow on the land in question without
any objection from Hilaria and Elena or from their children.

When Hilaria and Elena died, some of their children affirmed the contents of the private document executed by their
deceased mothers. To that end, they executed separate Deeds of Confirmation of Private Document and Renunciation of
Rights in favor of Medrano.8 They likewise affirmed in said documents that Medrano had been occupying and possessing
the subject property as owner since September 1982.

Due to the refusal of the other children9 to sign a similar renunciation, Medrano filed a Complaint10 on April 27, 2001 for
quieting of title, reconveyance, reformation of instrument, and/or partition with damages against Pelagia M. Paguyo-Diaz
(Pelagia), Faustina Paguyo-Asumio (Faustina), Jesus Paguyo (Jesus), Veneranda Paguyo-Abrenica, Emilio a.k.a. Antonio
Alvarado, Francisca Alvarado-Diaz (Francisca) and Estrellita Alvarado-Cordero (Estrellita). The case was docketed as
Civil Case No. U-7316 and raffled to Branch 48 of the Regional Trial Court (RTC) of Urdaneta, Pangasinan. Medrano then
caused the annotation of a notice of lis pendens on TCT No. 4186011 on May 3, 2001.

Summons upon the original complaint was duly served upon Pelagia and Estrellita .12

On August 29, 2001, Medrano filed an Amended Complaint13 impleading the widow and children of Antonio Alvarado, in
view of the latter’s death.14 Summons upon the amended complaint was served upon the other defendants,15 but no longer
served upon Pelagia and Estrellita.

On April 2, 2002, respondent Estanislao D. De Vera (De Vera) filed an Answer with Counterclaim.16 De Vera presented
himself as the real party-in-interest on the ground that some of the named defendants (Faustina, Pelagia, Francisca,
Elena Kongco-Alvarado, Jesus, and Estrellita) had executed a Deed of Renunciation of Rights17 in his favor on March 23,
2002. He maintained that the "Tapno Maamoan ti Sangalobongan" that was executed by the defendants’ predecessors in
favor of Medrano was null and void for want of consideration. Thus, while some children affirmed the renunciation of their
deceased mothers’ rights in the lot in favor of Medrano, the other children renounced their hereditary rights in favor of De
Vera.

Medrano filed a Motion to Expunge Answer with Counterclaim of Estanislao D. De Vera and to Declare Defendants in
Default.18 She argued that respondent De Vera had no personality to answer the complaint since he was not authorized by
the named defendants to answer in their behalf.

In an Order,19 dated July 30, 2002, the trial court disagreed with Medrano’s argument and admitted De Vera’s Answer with
Counterclaim. The trial court opined that De Vera did not need a special power of attorney from the defendants because
he did not answer the complaint in their behalf. De Vera made a voluntary appearance in the case as the transferee of the
defendants’ rights to the subject property. The trial court further explained that when the presence of other parties is
required for granting complete relief, the court shall order them to be brought in as defendants. While it was unsure
whether De Vera was an indispensable party to the case, the trial court opined that at the very least he was a necessary
party for granting complete relief. It thus held that the admission of De Vera’s Answer with Counterclaim is proper in order
to avoid multiplicity of suits.20 In the same Order, the court declared the named defendants in default for not answering the
complaint despite valid service of summons. Thus, it appears that the court a quo treated the named defendants and De
Vera as distinct and separate parties.

Medrano’s response to the aforesaid order was two-fold. With regard to the order declaring the named defendants in
default, Medrano filed on February 13, 2003 a Motion to Set Reception of Evidence Before the Branch Clerk of
Court.21 She argued that she could present evidence ex parte against the defaulting defendants on the ground that she
presented alternative causes of action against them in her complaint. Her cause of action on the basis of acquisitive
prescription can be raised solely against the defaulting original defendants.22 She thus prayed to be allowed to present
evidence ex parte with respect to her claim of acquisitive prescription against the defaulting defendants. As for the order
admitting De Vera’s Answer with Counterclaim, Medrano filed on February 21, 2003 a Motion for Reconsideration of
Order dated July 30, 2002.23 She asked the court to order De Vera to file a pleading-in-intervention so that he could be
properly named as a defendant in the case.

In an Order24 dated March 6, 2003, the trial court resolved to grant Medrano’s Motion to Set Reception of Evidence. It
ordered the conduct of ex parte presentation of evidence on the same day and the continuation thereof to proceed on
March 10, 2003. Thus, Medrano presented her evidence ex parte on the set dates. On March 10, 2003, the case was
submitted for resolution.25

Given the court’s standing order which admitted De Vera’s Answer with Counterclaim, De Vera filed a Motion to Set the
Case for Preliminary Conference on March 27, 2003.26

The trial court resolved petitioners’ and De Vera’s respective pending motions in its March 31, 2003 Order.27 The trial
court granted Medrano’s motion and set aside its Order which admitted De Vera’s Answer with Counterclaim. Citing Rule
19 of the Rules of Court, the court ordered De Vera to file a pleading-in-intervention so that he could be recognized as a
party-defendant. As a necessary consequence to this ruling, the trial court denied De Vera’s motion to set the case for
preliminary conference for prematurity.

De Vera did not comply with the court’s order despite service upon his lawyer, Atty. Simplicio M. Sevilleja, on April 2,
2003.

Ruling of the Regional Trial Court

The RTC rendered its Decision28 on April 21, 2003. It ruled that ownership over the titled property has vested in petitioners
by virtue of good faith possession for more than 10 years; thus, it was no longer necessary to compel the defendants -
heirs of Hilaria and Elena - to execute an instrument to confirm Medrano’s rightful ownership over the land.

The trial court likewise held that the private document denominated as "Tapno Maamoan Ti Sangalobongan" sufficiently
conveyed to Medrano the subject property. The court held that the conveyance was done in consideration of the various
expenses that Medrano incurred for Flaviana’s benefit. While the court conceded that the parcel of land was not
adequately described in the "Tapno Maamoan ti Sangalobongan," its location, metes and bounds were nonetheless
confirmed by the defendants’ siblings in their respective deeds of confirmation.

The dispositive portion of the Decision reads, in toto:

WHEREFORE, judgment is hereby rendered:

(1) Declaring [Medrano], substituted by her heirs, as the rightful and lawful owner of the land covered by T.C.T.
No. 41860;29

(2) Ordering the Register of Deeds of Tayug, Pangasinan to cancel T.C.T. No. 41860 and to issue another
Transfer Certificate of Title in the name of [Medrano];

All other claims are hereby denied for lack of merit.

SO ORDERED.30

De Vera filed a Motion for Reconsideration31 arguing that he was an indispensable party who was not given an opportunity
to present his evidence in the case. He also maintained that Medrano was not the owner of the property, but a mere
administratrix of the land as evidenced by the records in SP Proc. No. 137577.32

De Vera’s motion was denied33 for lack of merit on July 22, 2003. The court noted that De Vera had no legal personality to
file a motion for reconsideration because he did not file a pleading-in-intervention. The trial court explained it would have
allowed De Vera to present his evidence in the case had he complied with the court’s order to file a pleading-in-
intervention.
On September 10, 2003, De Vera filed a Manifestation34 informing the trial court of his intention to file a petition
for certiorari and mandamus before the CA, pursuant to Rule 41, Section 1, second paragraph and Rule 65 of the Rules of
Court.

On October 7, 2003, petitioners filed a Motion for Entry of Judgment and Execution35 before the trial court. They also filed
a Counter-Manifestation36 to De Vera’s Manifestation. Petitioners insisted that De Vera, as a transferee pendente lite, was
bound by the final judgment or decree rendered against his transferors. Even assuming that De Vera had a right to
appeal, the period therefor had already lapsed on August 12, 2003.

In its Order37 dated December 10, 2003, the court a quo maintained that De Vera was not a party to the suit, hence his
appeal would not stay the finality and execution of judgment. Thus the trial court ordered the entry of judgment in Civil
Case No. U-7316. The writ of execution was issued on December 12, 2003.

De Vera sought reconsideration38 of the above order but the same was denied39 on the basis that De Vera had no
personality to assail any order, resolution, or decision of the trial court in Civil Case No. U-7316.

The Register of Deeds of Tayug, Pangasinan complied with the writ by canceling TCT No. 41860 in the name of Flaviana
De Gracia and issuing TCT No. 65635 in the names of petitioners40 on April 19, 2004.

Proceedings before the Court of Appeals

De Vera argued in his Petition for Certiorari and Mandamus41 before the CA that the trial court erred in declaring the
defendants in default and sought a writ compelling the trial court to try the case anew. He insisted that he stepped into the
shoes of the defendants with regard to the subject property by virtue of the quitclaim that the defendants executed in his
favor. Thus, the trial court should have considered the defendants as properly substituted by De Vera when he filed his
Answer.

The standing order of the trial court with regard to De Vera at the time that it allowed Medrano to present her evidence
was to admit De Vera’s Answer with Counterclaim. Thus, De Vera argued that it was improper for the trial court to have
allowed Medrano to present her evidence ex parte because it had yet to rule on whether De Vera had personality to
participate in the proceedings.

Ruling of the Court of Appeals

The appellate court agreed with De Vera. The CA noted that the ex parte presentation of evidence took place on March 6
and 10, 2003; while the Motion to Expunge Answer and Require Filing of Pleading-in-Intervention was granted much later
on March 31, 2003. The CA held that the trial court gravely abused its discretion by allowing Medrano to present her
evidence ex parte while De Vera’s personality to participate in the case still remained unresolved. The premature ex parte
presentation of evidence rendered a pleading-in-intervention moot and academic.

The CA pointed out that the trial court should have exercised its authority to order the substitution of the original
defendants instead of requiring De Vera to file a pleading-in-intervention. This is allowed under Rule 3, Section 19 of the
Rules of Court. Since a transferee pendente lite is a proper party42 to the case, the court can order his outright substitution
for the original defendants.

The CA further held that De Vera’s failure to file the necessary pleading-in-intervention was a technical defect that could
have been easily cured. The trial court could have settled the controversy completely on its merits had it admitted De
Vera’s Answer with Counterclaim. Not affording De Vera his right to adduce evidence is not only a manifest grave abuse
of discretion amounting to lack or excess of jurisdiction but also runs counter to the avowed policy of avoiding multiplicity
of suits.

The appellate court then ordered the case remanded to the trial court to afford De Vera an opportunity to present his
evidence.

Petitioners filed a Motion for Reconsideration,43 which motion was denied44 for lack of merit on October 6, 2004.

Issues

Whether De Vera could participate in Civil Case No. U-7316

without filing a motion to intervene

II

Whether De Vera is bound by the judgment against his transferors

III
Whether it was proper for the CA to take cognizance of respondent’s Petition for Certiorari and Mandamus

Our Ruling

We sustain the CA’s ruling that the trial court gravely abused its discretion in refusing to allow De Vera to participate in the
case and requiring him to file a motion to intervene.

The trial court misjudged De Vera’s interest in Civil Case No. U-7316. It held that De Vera’s right to participate in the case
was independent of the named defendants. Because of its ruling that De Vera had an "independent interest," the trial
court considered his interest as separate from Medrano’s claims against the named defendants, and allowed the latter to
be tried separately. Thus, it admitted De Vera’s Answer with Counterclaim but declared the named defendants in default
and allowed the ex parte presentation of evidence by Medrano against the named defendants.

The trial court’s approach is seriously flawed because De Vera’s interest is not independent of or severable from the
interest of the named defendants. De Vera is a transferee pendente lite of the named defendants (by virtue of the Deed of
Renunciation of Rights that was executed in his favor during the pendency of Civil Case No. U-7316). His rights were
derived from the named defendants and, as transferee pendente lite, he would be bound by any judgment against his
transferors under the rules of res judicata.45 Thus, De Vera’s interest cannot be considered and tried separately from the
interest of the named defendants.

It was therefore wrong for the trial court to have tried Medrano’s case against the named defendants (by allowing
Medrano to present evidence ex parte against them) after it had already admitted De Vera’s answer. What the trial court
should have done is to treat De Vera (as transferee pendente lite) as having been joined as a party-defendant, and to try
the case on the basis of the answer De Vera had filed and with De Vera’s participation. As transferee pendente lite, De
Vera may be allowed to join the original defendants under Rule 3, Section 19:

SEC. 19. Transfer of interest. – In case of any transfer of interest, the action may be continued by or against the original
party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or
joined with the original party. (Emphasis supplied)

The above provision gives the trial court discretion to allow or disallow the substitution or joinder by the transferee.
Discretion is permitted because, in general, the transferee’s interest is deemed by law as adequately represented and
protected by the participation of his transferors in the case. There may be no need for the transferee pendente lite to be
substituted or joined in the case because, in legal contemplation, he is not really denied protection as his interest is one
and the same as his transferors, who are already parties to the case.46

While the rule allows for discretion, the paramount consideration for the exercise thereof should be the protection of the
parties’ interests and their rights to due process. In the instant case, the circumstances demanded that the trial court
exercise its discretion in favor of allowing De Vera to join in the action and participate in the trial. It will be remembered
that the trial court had already admitted De Vera’s answer when it declared the original defendants in default. As there
was a transferee pendente lite whose answer had already been admitted, the trial court should have tried the case on the
basis of that answer, based on Rule 9, Section 3(c):

Effect of partial default. – When a pleading asserting a claim states a common cause of action against several defending
parties, some of whom answer and the others fail to do so, the court shall try the case against all upon the answers thus
filed and render judgment upon the evidence presented.

Thus, the default of the original defendants should not result in the ex parte presentation of evidence because De Vera (a
transferee pendente lite who may thus be joined as defendant under Rule 3, Section 19) filed an answer. The trial court
should have tried the case based on De Vera’s answer, which answer is deemed to have been adopted by the non-
answering defendants.47

To proceed with the ex parte presentation of evidence against the named defendants after De Vera’s answer had been
admitted would not only be a violation of Rule 9, Section 3(c), but would also be a gross disregard of De Vera’s right to
due process. This is because the ex parte presentation of evidence would result in a default judgment which would bind
not just the defaulting defendants, but also De Vera, precisely because he is a transferee pendente lite.48 This would result
in an anomaly wherein De Vera would be bound by a default judgment even if he had filed an answer and expressed a
desire to participate in the case.

We note that under Rule 3, Section 19, the substitution or joinder of the transferee is "upon motion", and De Vera did not
file any motion for substitution or joinder. However, this technical flaw may be disregarded for the fact remains that the
court had already admitted his answer and such answer was on record when the ex parte presentation of evidence was
allowed by the court. Because De Vera’s answer had already been admitted, the court should not have allowed the ex
parte presentation of evidence.

We are not persuaded by petitioners’ insistence that De Vera could not have participated in the case because he did not
file a motion to intervene. The purpose of intervention is to enable a stranger to an action to become a party in order for
him to protect his interest and for the court to settle all conflicting claims. Intervention is allowed to avoid multiplicity of
suits more than on due process considerations. The intervenor can choose not to participate in the case and he will not be
bound by the judgment.
In this case, De Vera is not a stranger to the action but a transferee pendente lite. As mentioned, a transferee pendente
lite is deemed joined in the pending action from the moment when the transfer of interest is perfected.49His participation in
the case should have been allowed by due process considerations.50

We likewise adopt with approval the appellate court’s observation that De Vera’s failure to file a pleading-in-intervention
will not change the long foregone violation of his right to due process. The ex parte presentation of evidence had already
been terminated when the trial court required De Vera to file his pleading-in-intervention. Even if he complied with the
order to file a pleading-in-intervention, the damage had already been done. The precipitate course of action taken by the
trial court rendered compliance with its order moot.

Given the Court’s finding that the ex parte presentation of evidence constituted a violation of due process rights, the trial
court’s judgment by default cannot bind De Vera. A void judgment cannot attain finality and its execution has no basis in
law. The case should be remanded to the trial court for trial based on De Vera’s answer and with his participation.

Certiorari petition before the CA proper

Petitioners point out that De Vera admitted receiving the trial court’s Order denying his motion for reconsideration on July
28, 2003. Thus he only had until August 12, 2003 to file an appeal of the decision. Having lost his right to appeal by
allowing the period therefor to lapse, respondent has also lost his right to file a petition for certiorari before the CA. A
special civil action for certiorari is not a substitute for the lost remedy of appeal.

Respondent argues that a Rule 65 certiorari petition before the CA is proper because an ordinary appeal would not have
been speedy and adequate remedy to properly relieve him from the injurious effects of the trial court’s orders.

We agree with respondent that ordinary appeal was not an adequate remedy under the circumstances of the case. An
appeal seeks to correct errors of judgment committed by a court, which has jurisdiction over the person and the subject
matter of the dispute. In the instant case, the trial court maintained that it had no jurisdiction over De Vera because it did
not consider him a party to the case. Its stance is that De Vera, as a non-party to the case, could not participate therein,
much less assail any of the orders, resolutions, or judgments of the trial court. An appeal would have been an illusory
remedy in this situation because his notice of appeal would have certainly been denied on the ground that he is not a
party to the case.

On the other hand, certiorari is an extraordinary remedy for the correction of errors of jurisdiction. It is proper if the court
acted without or in grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal or any
plain, speedy, and adequate remedy in law. Given the circumstance that the final decision in Civil Case No. U-7316
prejudices De Vera’s rights despite the fact that he was not recognized as a party thereto and was not allowed to assail
any portion thereof, De Vera’s remedy was to annul the trial court proceedings on the ground that it was conducted with
grave abuse of discretion amounting to lack of jurisdiction. With such annulment, the trial court should hear the case anew
with De Vera fully participating therein.

WHEREFORE, the petition is DENIED. The June 25, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 80053
and its October 6, 2004 Resolution are AFFIRMED.

Costs against petitioners.

SO ORDERED.
G.R. No. 153567             February 18, 2008

LIBRADA M. AQUINO, petitioner, 
vs.
ERNEST S. AURE1, respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari2 under Rule 45 of the Revised Rules of Court filed by petitioner
Librada M. Aquino (Aquino), seeking the reversal and the setting aside of the Decision3 dated 17 October 2001 and the
Resolution4 dated 8 May 2002 of the Court of Appeals in CA-G.R. SP No. 63733. The appellate court, in its assailed
Decision and Resolution, reversed the Decision5 of the Regional Trial Court (RTC) of Quezon City, Branch 88, affirming
the Decision6 of the Metropolitan Trial Court (MeTC) of Quezon City, Branch 32, which dismissed respondent Ernesto
Aure’s (Aure) complaint for ejectment on the ground, inter alia, of failure to comply with barangay conciliation proceedings.

The subject of the present controversy is a parcel of land situated in Roxas District, Quezon City, with an area of 449
square meters and covered by Transfer Certificate of Title (TCT) No. 205447 registered with the Registry of Deeds of
Quezon City (subject property).7

Aure and E.S. Aure Lending Investors, Inc. (Aure Lending) filed a Complaint for ejectment against Aquino before the
MeTC docketed as Civil Case No. 17450. In their Complaint, Aure and Aure Lending alleged that they acquired the
subject property from Aquino and her husband Manuel (spouses Aquino) by virtue of a Deed of Sale8 executed on 4 June
1996. Aure claimed that after the spouses Aquino received substantial consideration for the sale of the subject property,
they refused to vacate the same.9

In her Answer,10 Aquino countered that the Complaint in Civil Case No. 17450 lacks cause of action for Aure and Aure
Lending do not have any legal right over the subject property. Aquino admitted that there was a sale but such was
governed by the Memorandum of Agreement11 (MOA) signed by Aure. As stated in the MOA, Aure shall secure a loan
from a bank or financial institution in his own name using the subject property as collateral and turn over the proceeds
thereof to the spouses Aquino. However, even after Aure successfully secured a loan, the spouses Aquino did not receive
the proceeds thereon or benefited therefrom.

On 20 April 1999, the MeTC rendered a Decision in Civil Case No. 17450 in favor of Aquino and dismissed the Complaint
for ejectment of Aure and Aure Lending for non-compliance with the barangay conciliation process, among other grounds.
The MeTC observed that Aure and Aquino are residents of the same barangay but there is no showing that any attempt
has been made to settle the case amicably at the barangay level. The MeTC further observed that Aure Lending was
improperly included as plaintiff in Civil Case No. 17450 for it did not stand to be injured or benefited by the suit. Finally, the
MeTC ruled that since the question of ownership was put in issue, the action was converted from a mere detainer suit to
one "incapable of pecuniary estimation" which properly rests within the original exclusive jurisdiction of the RTC. The
dispositive portion of the MeTC Decision reads:

WHEREFORE, premises considered, let this case be, as it is, hereby ordered DISMISSED. [Aquino’s]
counterclaim is likewise dismissed.12

On appeal, the RTC affirmed the dismissal of the Complaint on the same ground that the dispute was not brought before
the Barangay Council for conciliation before it was filed in court. In a Decision dated 14 December 2000, the RTC
stressed that the barangay conciliation process is a conditio sine qua non  for the filing of an ejectment complaint involving
residents of the same barangay, and failure to comply therewith constitutes sufficient cause for the dismissal of the action.
The RTC likewise validated the ruling of the MeTC that the main issue involved in Civil Case No. 17450 is incapable of
pecuniary estimation and cognizable by the RTC. Hence, the RTC ruled:

WHEREFORE, finding no reversible error in the appealed judgment, it is hereby affirmed in its entirety.13

Aure’s Motion for Reconsideration was denied by the RTC in an Order14 dated 27 February 2001.

Undaunted, Aure appealed the adverse RTC Decision with the Court of Appeals arguing that the lower court erred in
dismissing his Complaint for lack of cause of action. Aure asserted that misjoinder of parties was not a proper ground for
dismissal of his Complaint and that the MeTC should have only ordered the exclusion of Aure Lending as plaintiff without
prejudice to the continuation of the proceedings in Civil Case No. 17450 until the final determination thereof. Aure further
asseverated that mere allegation of ownership should not divest the MeTC of jurisdiction over the ejectment suit since
jurisdiction over the subject matter is conferred by law and should not depend on the defenses and objections raised by
the parties. Finally, Aure contended that the MeTC erred in dismissing his Complaint with prejudice on the ground of non-
compliance with barangay conciliation process. He was not given the opportunity to rectify the procedural defect by going
through the barangay mediation proceedings and, thereafter, refile the Complaint.15

On 17 October 2001, the Court of Appeals rendered a Decision, reversing the MeTC and RTC Decisions and remanding
the case to the MeTC for further proceedings and final determination of the substantive rights of the parties. The appellate
court declared that the failure of Aure to subject the matter to barangay conciliation is not a jurisdictional flaw and it will not
affect the sufficiency of Aure’s Complaint since Aquino failed to seasonably raise such issue in her Answer. The Court of
Appeals further ruled that mere allegation of ownership does not deprive the MeTC of jurisdiction over the ejectment case
for jurisdiction over the subject matter is conferred by law and is determined by the allegations advanced by the plaintiff in
his complaint. Hence, mere assertion of ownership by the defendant in an ejectment case will not oust the MeTC of its
summary jurisdiction over the same. The decretal part of the Court of Appeals Decision reads:

WHEREFORE, premises considered, the petition is hereby GRANTED - and the decisions of the trial courts below
REVERSED and SET ASIDE. Let the records be remanded back to the court a quo  for further proceedings – for an
eventual decision of the substantive rights of the disputants.16

In a Resolution dated 8 May 2002, the Court of Appeals denied the Motion for Reconsideration interposed by Aquino for it
was merely a rehash of the arguments set forth in her previous pleadings which were already considered and passed
upon by the appellate court in its assailed Decision.

Aquino is now before this Court via  the Petition at bar raising the following issues:

I.

WHETHER OR NOT NON-COMPLIANCE WITH THE BARANGAY CONCILIATION PROCEEDINGS IS A

JURISDICTIONAL DEFECT THAT WARRANTS THE DISMISSAL OF THE COMPLAINT.

II.

WHETHER OR NOT ALLEGATION OF OWNERSHIP OUSTS THE MeTC OF ITS JURISDICTION OVER AN
EJECTMENT CASE.

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 conceptor 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, otherwise known as the Katarungang
Pambarangay Law, and the policy behind it would be better served if an out-of-court settlement of the case is reached
voluntarily by the parties.17

The primordial objective of Presidential Decree No. 1508 is to reduce the number of court litigations and prevent the
deterioration of the quality of justice which has been brought by the indiscriminate filing of cases in the courts.18 To ensure
this objective, Section 6 of Presidential Decree No. 150819 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
exceptions20 which are inapplicable to this case. The said section has been declared compulsory in nature.21

Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160, otherwise known as The Local Government
Code, which took effect on 1 January 1992.

The pertinent provisions of the Local Government Code making conciliation a precondition to filing of complaints in court,
read:

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 chairman 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 Therein. – 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 dispute herein that the present case was never referred to the Barangay Lupon for conciliation before Aure
and Aure Lending instituted Civil Case No. 17450. In fact, no allegation of such barangay conciliation proceedings was
made in Aure and Aure Lending’s Complaint before the MeTC. The only issue to be resolved is whether non-recourse to
the barangay conciliation process is a jurisdictional flaw that warrants the dismissal of the ejectment suit filed with the
MeTC.

Aquino posits that failure to resort to barangay conciliation makes the action for ejectment premature and, hence,
dismissible. She likewise avers that this objection was timely raised during the pre-trial and even subsequently in her
Position Paper submitted to the MeTC.

We do not agree.

It is true that the precise technical effect of failure to comply with the requirement of Section 412 of the Local Government
Code on barangay conciliation (previously contained in Section 5 of Presidential Decree No. 1508) is much the same
effect produced by non-exhaustion of administrative remedies -- the complaint becomes afflicted with the vice of pre-
maturity; and the controversy there alleged is not ripe for judicial determination. The complaint becomes vulnerable to a
motion to dismiss.22 Nevertheless, the conciliation process is not a jurisdictional requirement, so that non-
compliance therewith cannot affect the jurisdiction which the court has otherwise acquired over the subject
matter or over the person of the defendant.23

As enunciated in the landmark case of Royales v. Intermediate Appellate Court24:

Ordinarily, non-compliance with the condition precedent prescribed by P.D. 1508 could affect the sufficiency of the
plaintiff's cause of action and make his complaint vulnerable to dismissal on ground of lack of cause of action or
prematurity; but the same would not prevent a court of competent jurisdiction from exercising its power of
adjudication over the case before it, where the defendants, as in this case, failed to object to such
exercise of jurisdiction in their answer and even during the entire proceedings a quo.

While petitioners could have prevented the trial court from exercising jurisdiction over the case by seasonably
taking exception thereto, they instead invoked the very same jurisdiction by filing an answer and seeking
affirmative relief from it. What is more, they participated in the trial of the case by cross-examining respondent
Planas. Upon this premise, petitioners cannot now be allowed belatedly to adopt an inconsistent posture
by attacking the jurisdiction of the court to which they had submitted themselves voluntarily.x x x
(Emphasis supplied.)

In the case at bar, we similarly find that Aquino cannot be allowed to attack the jurisdiction of the MeTC over Civil Case
No. 17450 after having submitted herself voluntarily thereto. We have scrupulously examined Aquino’s Answer before the
MeTC in Civil Case No. 17450 and there is utter lack of any objection on her part to any deficiency in the complaint which
could oust the MeTC of its jurisdcition.

We thus quote with approval the disquisition of the Court of Appeals:

Moreover, the Court takes note that the defendant [Aquino] herself did not raise in defense the aforesaid lack of
conciliation proceedings in her answer, which raises the exclusive affirmative defense of simulation. By this
acquiescence, defendant [Aquino] is deemed to have waived such objection. As held in a case of similar
circumstances, the failure of a defendant [Aquino] in an ejectment suit to specifically allege the fact that there was
no compliance with the barangay conciliation procedure constitutes a waiver of that defense. x x x.25

By Aquino’s failure to seasonably object to the deficiency in the Complaint, she is deemed to have already acquiesced or
waived any defect attendant thereto. Consequently, Aquino cannot thereafter move for the dismissal of the ejectment suit
for Aure and Aure Lending’s failure to resort to the barangay conciliation process, since she is already precluded from
doing so. The fact that Aquino raised such objection during the pre-trial and in her Position Paper is of no moment, for the
issue of non-recourse to barangay mediation proceedings should be impleaded in her Answer.
As provided under Section 1, Rule 9 of the 1997 Rules of Civil Procedure:

Sec. 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. (Emphasis supplied.)

While the aforequoted provision applies to a pleading (specifically, an Answer) or a motion to dismiss, a similar or identical
rule is provided for all other motions in Section 8 of Rule 15 of the same Rule which states:

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.

The spirit that surrounds the foregoing statutory norm is to require the party filing a pleading or motion to raise all available
exceptions for relief during the single opportunity so that single or multiple objections may be avoided.26 It is clear and
categorical in Section 1, Rule 9 of the Revised Rules of Court that failure to raise defenses and objections in a motion to
dismiss or in an answer is deemed a waiver thereof; and basic is the rule in statutory construction that when the law is
clear and free from any doubt or ambiguity, there is no room for construction or interpretation.27 As has been our
consistent ruling, where the law speaks in clear and categorical language, there is no occasion for interpretation; there is
only room for application.28 Thus, although Aquino’s defense of non-compliance with Presidential Decree No. 1508 is
meritorious, procedurally, such defense is no longer available for failure to plead the same in the Answer as required by
the omnibus motion rule.

Neither could the MeTC dismiss Civil Case No. 17450 motu proprio. The 1997 Rules of Civil Procedure provide only three
instances when the court may motu proprio dismiss the claim, and that is when the pleadings or evidence on the record
show that (1) the court has no jurisdiction over the subject matter; (2) there is another cause of action pending between
the same parties for the same cause; or (3) where the action is barred by a prior judgment or by a statute of limitations.
Thus, it is clear that a court may not motu proprio dismiss a case on the ground of failure to comply with the requirement
for barangay conciliation, this ground not being among those mentioned for the dismissal by the trial court of a case on its
own initiative.

Aquino further argues that the issue of possession in the instant case cannot be resolved by the MeTC without first
adjudicating the question of ownership, since the Deed of Sale vesting Aure with the legal right over the subject property
is simulated.

Again, we do not agree. Jurisdiction in ejectment cases is determined by the allegations pleaded in the complaint. As long
as these allegations demonstrate a cause of action either for forcible entry or for unlawful detainer, the court acquires
jurisdiction over the subject matter. This principle holds, even if the facts proved during the trial do not support the cause
of action thus alleged, in which instance the court -- after acquiring jurisdiction -- may resolve to dismiss the action for
insufficiency of evidence.

The necessary allegations in a Complaint for ejectment are set forth in Section 1, Rule 70 of the Rules of Court, which
reads:

SECTION 1. Who may institute proceedings, and when. – Subject to the provisions of the next succeeding
section, a person deprived of the possession of any land or building by force, intimidation, threat, strategy, or
stealth, or a lessor, vendor, vendee, or other person against whom the possession of any land or building is
unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract,
express or implied, or the legal representatives or assigns of any such lessor, vendor, vendee, or other person
may at any time within one (1) year after such unlawful deprivation or withholding of possession, bring an action in
the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession,
or any person or persons claiming under them, for the restitution of such possession, together with damages and
costs.

In the case at bar, the Complaint filed by Aure and Aure Lending on 2 April 1997, alleged as follows:

2. [Aure and Aure Lending] became the owners of a house and lot located at No. 37 Salazar Street corner
Encarnacion Street, B.F. Homes, Quezon City by virtue of a deed of absolute sale executed by [the spouses
Aquino] in favor of [Aure and Aure Lending] although registered in the name of x x x Ernesto S. Aure; title to the
said property had already been issued in the name of [Aure] as shown by a transfer Certificate of Title , a copy of
which is hereto attached and made an integral part hereof as Annex A;

3. However, despite the sale thus transferring ownership of the subject premises to [Aure and Aure Lending] as
above-stated and consequently terminating [Aquino’s] right of possession over the subject property, [Aquino]
together with her family, is continuously occupying the subject premises notwithstanding several demands made
by [Aure and Aure Lending] against [Aquino] and all persons claiming right under her to vacate the subject
premises and surrender possession thereof to [Aure and Aure Lending] causing damage and prejudice to [Aure
and Aure Lending] and making [Aquino’s] occupancy together with those actually occupying the subject premises
claiming right under her, illegal.29
It can be inferred from the foregoing that Aure, together with Aure Lending, sought the possession of the subject property
which was never surrendered by Aquino after the perfection of the Deed of Sale, which gives rise to a cause of action for
an ejectment suit cognizable by the MeTC. Aure’s assertion of possession over the subject property is based on his
ownership thereof as evidenced by TCT No. 156802 bearing his name. That Aquino impugned the validity of Aure’s title
over the subject property and claimed that the Deed of Sale was simulated should not divest the MeTC of jurisdiction over
the ejectment case.30

As extensively discussed by the eminent jurist Florenz D. Regalado in Refugia v. Court of Appeals31:

As the law on forcible entry and unlawful detainer cases now stands, even where the defendant raises the
question of ownership in his pleadings and the question of possession cannot be resolved without deciding the
issue of ownership, the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts
nevertheless have the undoubted competence to resolve the issue of ownership albeit only to determine the issue
of possession.

x x x. The law, as revised, now provides instead that when the question of possession cannot be resolved
without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the
issue of possession. On its face, the new Rule on Summary Procedure was extended to include within the
jurisdiction of the inferior courts ejectment cases which likewise involve the issue of ownership. This does not
mean, however, that blanket authority to adjudicate the issue of ownership in ejectment suits has been thus
conferred on the inferior courts.

At the outset, it must here be stressed that the resolution of this particular issue concerns and applies only to
forcible entry and unlawful detainer cases where the issue of possession is intimately intertwined with the issue of
ownership. It finds no proper application where it is otherwise, that is, where ownership is not in issue, or where
the principal and main issue raised in the allegations of the complaint as well as the relief prayed for make out not
a case for ejectment but one for recovery of ownership.

Apropos thereto, this Court ruled in Hilario v. Court of Appeals32:

Thus, an adjudication made therein regarding the issue of ownership should be regarded as merely provisional
and, therefore, would not bar or prejudice an action between the same parties involving title to the land. The
foregoing doctrine is a necessary consequence of the nature of forcible entry and unlawful detainer cases where
the only issue to be settled is the physical or material possession over the real property, that is, possession de
facto and not possession de jure."

In other words, inferior courts are now "conditionally vested with adjudicatory power over the issue of title or ownership
raised by the parties in an ejectment suit." These courts shall resolve the question of ownership raised as an incident in an
ejectment case where a determination thereof is necessary for a proper and complete adjudication of the issue of
possession.33

WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision dated 17 October
2001 and its Resolution dated 8 May 2002 in CA-G.R. SP No. 63733 are hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.
G.R. No. 161657               October 4, 2007

REPUBLIC OF THE PHILIPPINES, Petitioner, 

vs.
HON. VICENTE A. HIDALGO, in his capacity as Presiding Judge of the Regional Trial Court of Manila, Branch 37,
CARMELO V. CACHERO, in his capacity as Sheriff IV, Regional Trial Court of Manila, and TARCILA LAPERAL
MENDOZA, Respondents.

DECISION

GARCIA, J.:

Via this verified petition for certiorari and prohibition under Rule 65 of the Rules of Court, the Republic of the Philippines
("Republic," for short), thru the Office of the Solicitor General (OSG), comes to this Court to nullify and set aside the
decision dated August 27, 2003 and other related issuances of the Regional Trial Court (RTC) of Manila, Branch 37, in
its Civil Case No. 99-94075. In directly invoking the Court’s original jurisdiction to issue the extraordinary writs of certiorari
and prohibition, without challenge from any of the respondents, the Republic gave as justification therefor the fact that the
case involves an over TWO BILLION PESO judgment against the State, allegedly rendered in blatant violation of the
Constitution, law and jurisprudence.

By any standard, the case indeed involves a colossal sum of money which, on the face of the assailed decision, shall be
the liability of the national government or, in fine, the taxpayers. This consideration, juxtaposed with the constitutional and
legal questions surrounding the controversy, presents special and compelling reasons of public interests why direct
recourse to the Court should be allowed, as an exception to the policy on hierarchy of courts.

At the core of the litigation is a 4,924.60-square meter lot once covered by Transfer Certificate of Title (TCT) No. 118527
of the Registry of Deeds of Manila in the name of the herein private respondent Tarcila Laperal Mendoza (Mendoza),
married to Perfecto Mendoza. The lot is situated at No. 1440 Arlegui St., San Miguel, Manila, near the Malacañang Palace
complex. On this lot, hereinafter referred to as the Arlegui property, now stands the Presidential Guest House which was
home to two (2) former Presidents of the Republic and now appears to be used as office building of the Office of the
President.1

The facts:

Sometime in June 1999, Mendoza filed a suit with the RTC of Manila for reconveyance and the corresponding declaration
of nullity of a deed of sale and title against the Republic, the Register of Deeds of Manila and one Atty. Fidel Vivar. In her
complaint, as later amended, docketed as Civil Case No. 99-94075 and eventually raffled to Branch 35 of the court,
Mendoza essentially alleged being the owner of the disputed Arlegui property which the Republic forcibly dispossessed
her of and over which the Register of Deeds of Manila issued TCT No. 118911 in the name of the Republic.

Answering, the Republic set up, among other affirmative defenses, the State’s immunity from suit.

The intervening legal tussles are not essential to this narration. What is material is that in an Order of March 17, 2000, the
RTC of Manila, Branch 35, dismissed Mendoza’s complaint. The court would also deny, in another order dated May 12,
2000, Mendoza’s omnibus motion for reconsideration. On a petition for certiorari, however, the Court of Appeals (CA),
in CA-G.R. SP No. 60749, reversed the trial court’s assailed orders and remanded the case to the court a quo for further
proceedings.2 On appeal, this Court, in G.R. No. 155231, sustained the CA’s reversal action.3

From Branch 35 of the trial court whose then presiding judge inhibited himself from hearing the remanded Civil Case No.
99-94075, the case was re-raffled to Branch 37 thereof, presided by the respondent judge.

On May 5, 2003, Mendoza filed a Motion for Leave of Court to file a Third Amended Complaint with a copy of the intended
third amended complaint thereto attached. In the May 16, 2003 setting to hear the motion, the RTC, in open court and in
the presence of the Republic’s counsel, admitted the third amended complaint, ordered the Republic to file its answer
thereto within five (5) days from May 16, 2003 and set a date for pre-trial.

In her adverted third amended complaint for recovery and reconveyance of the Arlegui property, Mendoza sought the
declaration of nullity of a supposed deed of sale dated July 15, 1975 which provided the instrumentation toward the
issuance of TCT No. 118911 in the name of the Republic. And aside from the cancellation of TCT No. 118911, Mendoza
also asked for the reinstatement of her TCT No. 118527.4 In the same third amended complaint, Mendoza averred that,
since time immemorial, she and her predecessors-in-interest had been in peaceful and adverse possession of the
property as well as of the owner’s duplicate copy of TCT No. 118527. Such possession, she added, continued "until the
first week of July 1975 when a group of armed men representing themselves to be members of the Presidential Security
Group [PSG] of the then President Ferdinand E. Marcos, had forcibly entered [her] residence and ordered [her] to turn
over to them her … Copy of TCT No. 118525 … and compelled her and the members of her household to vacate the
same …; thus, out of fear for their lives, [she] handed her Owner’s Duplicate Certificate Copy of TCT No. 118527 and had
left and/or vacated the subject property." Mendoza further alleged the following:

1. Per verification, TCT No. 118527 had already been cancelled by virtue of a deed of sale in favor of the Republic
allegedly executed by her and her deceased husband on July 15, 1975 and acknowledged before Fidel Vivar
which deed was annotated at the back of TCT No. 118527 under PE: 2035/T-118911 dated July 28, 1975; and
 2. That the aforementioned deed of sale is fictitious as she (Mendoza) and her husband have not executed any
deed of conveyance covering the disputed property in favor of the Republic, let alone appearing before Fidel
Vivar.

Inter alia, she prayed for the following:

4. Ordering the … Republic to pay plaintiff [Mendoza] a reasonable compensation or rental for the use or
occupancy of the subject property in the sum of FIVE HUNDRED THOUSAND (P500,000.00) PESOS a month
with a five (5%) per cent yearly increase, plus interest thereon at the legal rate, beginning July 1975 until it finally
vacates the same;

5. Ordering the … Republic to pay plaintiff’s counsel a sum equivalent to TWENTY FIVE (25%) PER CENT of the
current value of the subject property and/or whatever amount is recovered under the premises; Further, plaintiff
prays for such other relief, just and equitable under the premises.

On May 21, 2003, the Republic, represented by the OSG, filed a Motion for Extension (With Motion for Cancellation of
scheduled pre-trial). In it, the Republic manifested its inability to simply adopt its previous answer and, accordingly, asked
that it be given a period of thirty (30) days from May 21, 2003 or until June 20, 2003 within which to submit an
Answer.5 June 20, 2003 came and went, but no answer was filed. On July 18, 2003 and again on August 19, 2003, the
OSG moved for a 30-day extension at each instance. The filing of the last two motions for extension proved to be an idle
gesture, however, since the trial court had meanwhile issued an order6 dated July 7, 2003 declaring the petitioner
Republic as in default and allowing the private respondent to present her evidence ex-parte.

The evidence for the private respondent, as plaintiff a quo, consisted of her testimony denying having executed the
alleged deed of sale dated July 15, 1975 which paved the way for the issuance of TCT No. 118911. According to her, said
deed is fictitious or inexistent, as evidenced by separate certifications, the first (Exh. "E"), issued by the Register of
Deeds for Manila and the second (Exh. "F"), by the Office of Clerk of Court, RTC Manila. Exhibit "E"7states that a copy of
the supposed conveying deed cannot, despite diligent efforts of records personnel, be located, while Exhibit "F"8 states
that Fidel Vivar was not a commissioned notary public for and in the City of Manila for the year 1975. Three other
witnesses9 testified, albeit their testimonies revolved around the appraisal and rental values of the Arlegui property.

Eventually, the trial court rendered a judgment by default10 for Mendoza and against the Republic. To the trial court, the
Republic had veritably confiscated Mendoza’s property, and deprived her not only of the use thereof but also denied her
of the income she could have had otherwise realized during all the years she was illegally dispossessed of the same.

Dated August 27, 2003, the trial court’s decision dispositively reads as follows:

WHEREFORE, judgment is hereby rendered:

1. Declaring the deed of sale dated July 15, 1975, annotated at the back of [TCT] No. 118527 as PE:2035/T-
118911, as non-existent and/or fictitious, and, therefore, null and void from the beginning;

2. Declaring that [TCT] No. 118911 of the defendant Republic of the Philippines has no basis, thereby making it
null and void from the beginning;

3. Ordering the defendant Register of Deeds for the City of Manila to reinstate plaintiff [Mendoza’s TCT] No.
118527;

4. Ordering the defendant Republic … to pay just compensation in the sum of ONE HUNDRED FORTY THREE
MILLION SIX HUNDRED THOUSAND (P143,600,000.00) PESOS, plus interest at the legal rate, until the whole
amount is paid in full for the acquisition of the subject property;

5. Ordering the plaintiff, upon payment of the just compensation for the acquisition of her property, to execute the
necessary deed of conveyance in favor of the defendant Republic …; and, on the other hand, directing the
defendant Register of Deeds, upon presentation of the said deed of conveyance, to cancel plaintiff’s TCT No.
118527 and to issue, in lieu thereof, a new Transfer Certificate of Title in favor of the defendant Republic;

6. Ordering the defendant Republic … to pay the plaintiff the sum of ONE BILLION FOUR HUNDRED EIGHTY
MILLION SIX HUNDRED TWENTY SEVEN THOUSAND SIX HUNDRED EIGHTY
EIGHT (P1,480,627,688.00) PESOS, representing the reasonable rental for the use of the subject property, the
interest thereon at the legal rate, and the opportunity cost at the rate of three (3%) per cent per annum,
commencing July 1975 continuously up to July 30, 2003, plus an additional interest at the legal rate, commencing
from this date until the whole amount is paid in full;

7. Ordering the defendant Republic … to pay the plaintiff attorney’s fee, in an amount equivalent to FIFTEEN
(15%) PER CENT of the amount due to the plaintiff.

With pronouncement as to the costs of suit.

SO ORDERED. (Words in bracket and emphasis added.)

Subsequently, the Republic moved for, but was denied, a new trial per order of the trial court of October 7, 2003.11Denied
also was its subsequent plea for reconsideration.12 These twin denial orders were followed by several orders and
processes issued by the trial court on separate dates as hereunder indicated:

1. November 27, 2003 - - Certificate of Finality declaring the August 27, 2003 decision final and executory.13

2. December 17, 2003 - - Order denying the Notice of Appeal filed on November 27, 2003, the same having been
filed beyond the reglementary period.14

3. December 19, 2003 - - Order15 granting the private respondent’s motion for execution.

4. December 22, 2003 - - Writ of Execution.16

Hence, this petition for certiorari.

By Resolution17 of November 20, 2006, the case was set for oral arguments. On January 22, 2007, when this case was
called for the purpose, both parties manifested their willingness to settle the case amicably, for which reason the Court
gave them up to February 28, 2007 to submit the compromise agreement for approval. Following several approved
extensions of the February 28, 2007 deadline, the OSG, on August 6, 2007, manifested that it is submitting the case for
resolution on the merits owing to the inability of the parties to agree on an acceptable compromise.

In this recourse, the petitioner urges the Court to strike down as a nullity the trial court’s order declaring it in default and
the judgment by default that followed. Sought to be nullified, too, also on the ground that they were issued in grave abuse
of discretion amounting to lack or in excess of jurisdiction, are the orders and processes enumerated immediately above
issued after the rendition of the default judgment.

Petitioner lists five (5) overlapping grounds for allowing its petition. It starts off by impugning the order of default and the
judgment by default. To the petitioner, the respondent judge committed serious jurisdictional error when he proceeded to
hear the case and eventually awarded the private respondent a staggering amount without so much as giving the
petitioner the opportunity to present its defense.

Petitioner’s posture is simply without merit.

Deprivation of procedural due process is obviously the petitioner’s threshold theme. Due process, in its procedural aspect,
guarantees in the minimum the opportunity to be heard.18 Grave abuse of discretion, however, cannot plausibly be laid at
the doorstep of the respondent judge on account of his having issued the default order against the petitioner, then
proceeding with the hearing and eventually rendering a default judgment. For, what the respondent judge did hew with
what Section 3, Rule 9 of the Rules of Court prescribes and allows in the event the defending party fails to seasonably file
a responsive pleading. The provision reads:

SEC. 3. Default; declaration of.- If the defending party fails to answer within the time allowed therefor, the court shall,
upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party
in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading may
warrant, unless the court in its discretion requires the claimant to submit evidence ….19

While the ideal lies in avoiding orders of default,20 the policy of the law being to have every litigated case tried on its full
merits,21 the act of the respondent judge in rendering the default judgment after an order of default was properly issued
cannot be struck down as a case of grave abuse of discretion.

The term "grave abuse of discretion," in its juridical sense, connotes capricious, despotic, oppressive or whimsical
exercise of judgment as is equivalent to lack of jurisdiction.22 The abuse must be of such degree as to amount to an
evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, as where the power is exercised in a
capricious manner. The word "capricious," usually used in tandem with "arbitrary," conveys the notion of willful and
unreasoning action.23

Under the premises, the mere issuance by the trial court of the order of default followed by a judgment by default can
easily be sustained as correct and doubtless within its jurisdiction. Surely, a disposition directing the Republic to pay an
enormous sum without the trial court hearing its side does not, without more, vitiate, on due procedural ground, the validity
of the default judgment. The petitioner may have indeed been deprived of such hearing, but this does not mean that its
right to due process had been violated. For, consequent to being declared in default, the defaulting defendant is deemed
to have waived his right to be heard or to take part in the trial. The handling solicitors simply squandered the Republic’s
opportunity to be heard. But more importantly, the law itself imposes such deprivation of the right to participate as a form
of penalty against one unwilling without justification to join issue upon the allegations tendered by the plaintiff.

And going to another point, the petitioner would ascribe jurisdictional error on the respondent judge for denying its motion
for new trial based on any or a mix of the following factors, viz., (1) the failure to file an answer is attributable to the
negligence of the former handling solicitor; (2) the meritorious nature of the petitioner’s defense; and (3) the value of the
property involved.

The Court is not convinced. Even as the Court particularly notes what the trial court had said on the matter of negligence:
that all of the petitioner’s pleadings below bear at least three signatures, that of the handling solicitor, the assistant
solicitor and the Solicitor General himself, and hence accountability should go up all the way to the top of the totem pole of
authority, the cited reasons advanced by the petitioner for a new trial are not recognized under Section 1, Rule 37 of the
Rules of Court for such recourse.24 Withal, there is no cogent reason to disturb the denial by the trial court of the motion
for new trial and the denial of the reiterative motion for reconsideration.

Then, too, the issuance by the trial court of the Order dated December 17, 200325 denying the petitioner’s notice of appeal
after the court caused the issuance on November 27, 2003 of a certificate of finality of its August 27, 2003 decision can
hardly be described as arbitrary, as the petitioner would have this Court believe. In this regard, the Court takes stock of
the following key events and material dates set forth in the assailed December 17, 2003 order, supra: (a) The petitioner,
thru the OSG, received on August 29, 2003 a copy of the RTC decision in this case, hence had up to September 13,
2003, a Saturday, within which to perfect an appeal; (b) On September 15, 2003, a Monday, the OSG filed its motion for
new trial, which the RTC denied, the OSG receiving a copy of the order of denial on October 9, 2003; and (c) On October
24, 2003, the OSG sought reconsideration of the order denying the motion for new trial. The motion for reconsideration
was denied per Order dated November 25, 2003, a copy of which the OSG received on the same date.

Given the foregoing time perspective, what the trial court wrote in its aforementioned impugned order of December 17,
2003 merits approval:

In the case at bar, it is clear that the motion for new trial filed on the fifteenth (15th) day after the decision was received on
August 29, 2003 was denied and the moving party has only the remaining period from notice of notice of denial within
which to file a notice of appeal. xxx

Accordingly, when defendants [Republic et al.] filed their motion for new trial on the last day of the fifteen day (15)
prescribed for taking an appeal, which motion was subsequently denied, they had one (1) day from receipt of a copy of
the order denying … new trial within which to perfect [an] appeal …. Since defendants had received a copy of the order
denying their motion for new trial on 09 October 2003, reckoned from that date, they only have one (1) day left within
which to file the notice of appeal. But instead of doing so, the defendants filed a motion for reconsideration which was
later declared by the Court as pro forma motion in the Order dated 25 November 2003. The running of the prescriptive
period, therefore, can not be interrupted by a pro forma motion. Hence the filing of the notice of appeal on 27 November
2007 came much too late for by then the judgment had already become final and executory.26 (Words in bracket added;
Emphasis in the original.)

It cannot be over-emphasized at this stage that the special civil action of certiorari is limited to resolving only errors of
jurisdiction; it is not a remedy to correct errors of judgment. Hence, the petitioner’s lament, partly covered by and
discussed under the first ground for allowing its petition, about the trial court taking cognizance of the case
notwithstanding private respondent’s claim or action being barred by prescription and/or laches cannot be considered
favorably. For, let alone the fact that an action for the declaration of the inexistence of a contract, as here, does not
prescribe;27 that a void transfer of property can be recovered by accion reivindicatoria;28 and that the legal fiction of
indefeasibility of a Torrens title cannot be used as a shield to perpetuate fraud,29 the trial court’s disinclination not to
appreciate in favor of the Republic the general principles of prescription or laches constitutes, at best, errors of judgment
not correctable by certiorari.

The evidence adduced below indeed adequately supports a conclusion that the Office of the President, during the
administration of then President Marcos, wrested possession of the property in question and somehow secured a
certificate of title over it without a conveying deed having been executed to legally justify the cancellation of the old title
(TCT No. 118527) in the name of the private respondent and the issuance of a new one (TCT No. 118911) in the name of
petitioner Republic. Accordingly, granting private respondent’s basic plea for recovery of the Arlegui property, which was
legally hers all along, and the reinstatement of her cancelled certificate of title are legally correct as they are morally right.
While not exactly convenient because the Office of the President presently uses it for mix residence and office purposes,
restoring private respondent to her possession of the Arlegui property is still legally and physically feasible. For what is
before us, after all, is a registered owner of a piece of land who, during the early days of the martial law regime, lost
possession thereof to the Government which appropriated the same for some public use, but without going through the
legal process of expropriation, let alone paying such owner just compensation.

The Court cannot, however, stop with just restoring the private respondent to her possession and ownership of her
property. The restoration ought to be complemented by some form of monetary compensation for having been unjustly
deprived of the beneficial use thereof, but not, however, in the varying amounts and level fixed in the assailed decision of
the trial court and set to be executed by the equally assailed writ of execution. The Court finds the monetary award set
forth therein to be erroneous. And the error relates to basic fundamentals of law as to constitute grave abuse of discretion.

As may be noted, private respondent fixed the assessed value of her Arlegui property at ₱2,388,990.00. And in the
prayer portion of her third amended complaint for recovery, she asked to be restored to the possession of her property
and that the petitioner be ordered to pay her, as reasonable compensation or rental use or occupancy thereof, the sum of
₱500,000.00 a month, or ₱6 Million a year, with a five percent (5%) yearly increase plus interest at the legal rate
beginning July 1975. From July 1975 when the PSG allegedly took over the subject property to July 2003, a month before
the trial court rendered judgment, or a period of 28 years, private respondent’s total rental claim would, per the OSG’s
computation, only amount to ₱371,440,426.00. In its assailed decision, however, the trial court ordered the petitioner to
pay private respondent the total amount of over ₱1.48 Billion or the mind-boggling amount of ₱1,480,627,688.00, to be
exact, representing the reasonable rental for the property, the interest rate thereon at the legal rate and the opportunity
cost. This figure is on top of the ₱143,600,000.00 which represents the acquisition cost of the disputed property. All told,
the trial court would have the Republic pay the total amount of about ₱1.624 Billion, exclusive of interest, for the taking of
a property with a declared assessed value of ₱2,388,900.00. This is not to mention the award of attorney’s fees in an
amount equivalent to 15% of the amount due the private respondent.
In doing so, the respondent judge brazenly went around the explicit command of Rule 9, Section 3(d) of the Rules of
Court30 which defines the extent of the relief that may be awarded in a judgment by default, i.e., only so much as has been
alleged and proved. The court acts in excess of jurisdiction if it awards an amount beyond the claim made in the
complaint or beyond that proved by the evidence.31 While a defaulted defendant may be said to be at the mercy of the trial
court, the Rules of Court and certainly the imperatives of fair play see to it that any decision against him must be in
accordance with law.32 In the abstract, this means that the judgment must not be characterized by outrageous one-
sidedness, but by what is fair, just and equitable that always underlie the enactment of a law.

Given the above perspective, the obvious question that comes to mind is the level of compensation which – for the use
and occupancy of the Arlegui property - would be fair to both the petitioner and the private respondent and, at the same
time, be within acceptable legal bounds. The process of balancing the interests of both parties is not an easy one. But
surely, the Arlegui property cannot possibly be assigned, even perhaps at the present real estate business standards, a
monthly rental value of at least ₱500,000.00 or ₱6,000,000.00 a year, the amount private respondent particularly sought
and attempted to prove. This asking figure is clearly unconscionable, if not downright ridiculous, attendant circumstances
considered. To the Court, an award of ₱20,000.00 a month for the use and occupancy of the Arlegui property, while
perhaps a little bit arbitrary, is reasonable and may be granted pro hac viceconsidering the following hard realities which
the Court takes stock of:

1. The property is relatively small in terms of actual area and had an assessed value of only P2,388,900.00;

2. What the martial law regime took over was not exactly an area with a new and imposing structure, if there was
any; and

3. The Arlegui property had minimal rental value during the relatively long martial law years, given the very
restrictive entry and egress conditions prevailing at the vicinity at that time and even after.

To be sure, the grant of monetary award is not without parallel. In Alfonso v. Pasay City,33 a case where a registered
owner also lost possession of a piece of lot to a municipality which took it for a public purposes without instituting
expropriation proceedings or paying any compensation for the lot, the Court, citing Herrera v. Auditor General,34ordered
payment of just compensation but in the form of interest when a return of the property was no longer feasible.

The award of attorney’s fees equivalent to 15% of the amount due the private respondent, as reduced herein, is affirmed.

The assessment of costs of suit against the petitioner is, however, nullified, costs not being allowed against the Republic,
unless otherwise provided by law.35

The assailed trial court’s issuance of the writ of execution36 against government funds to satisfy its money judgment is also
nullified. It is basic that government funds and properties may not be seized under writs of execution or garnishment to
satisfy such judgments.37 Republic v. Palacio38 teaches that a judgment against the State generally operates merely to
liquidate and establish the plaintiff’s claim in the absence of express provision; otherwise, they can not be enforced by
processes of law.

Albeit title to the Arlegui property remains in the name of the petitioner Republic, it is actually the Office of the
President which has beneficial possession of and use over it since the 1975 takeover. Accordingly, and in accord with the
elementary sense of justice, it behooves that office to make the appropriate budgetary arrangements towards paying
private respondent what is due her under the premises. This, to us, is the right thing to do. The imperatives of fair dealing
demand no less. And the Court would be remiss in the discharge of its duties as dispenser of justice if it does not exhort
the Office of the President to comply with what, in law and equity, is its obligation. If the same office will undertake to pay
its obligation with reasonable dispatch or in a manner acceptable to the private respondent, then simple justice, while
perhaps delayed, will have its day. Private respondent is in the twilight of her life, being now over 90 years of age.39 Any
delay in the implementation of this disposition would be a bitter cut.1âwphi1

WHEREFORE, the decision of the Regional Trial Court of Manila dated August 27, 2003 insofar as it nullified TCT No.
118911 of petitioner Republic of the Philippines and ordered the Register of Deeds of Manila to reinstate private
respondent Tarcila L. Mendoza’s TCT No. 118527, or to issue her a new certificate of title is AFFIRMED. Should it be
necessary, the Register of Deeds of Manila shall execute the necessary conveying deed to effect the reinstatement of title
or the issuance of a new title to her.

It is MODIFIED in the sense that for the use and occupancy of the Arlegui property, petitioner Republic is ordered to pay
private respondent the reasonable amount of ₱20,000.00 a month beginning July 1975 until it vacates the same and the
possession thereof restored to the private respondent, plus an additional interest of 6% per annum on the total amount
due upon the finality of this Decision until the same is fully paid. Petitioner is further ordered to pay private respondent
attorney's fees equivalent to 15% of the amount due her under the premises.

Accordingly, a writ of certiorari is hereby ISSUED in the sense that:

1. The respondent court’s assailed decision of August 27, 2003 insofar as it ordered the petitioner Republic of the
Philippines to pay private respondent Tarcila L. Mendoza the sum of One Billion Four Hundred Eighty Million Six
Hundred Twenty Seven Thousand Six Hundred Eighty Eight Pesos (₱1,480,627,688.00) representing the
purported rental use of the property in question, the interest thereon and the opportunity cost at the rate of 3% per
annum plus the interest at the legal rate added thereon is nullified. The portion assessing the petitioner Republic
for costs of suit is also declared null and void.
 2. The Order of the respondent court dated December 19, 2003 for the issuance of a writ of execution and the
Writ of Execution dated December 22, 2003 against government funds are hereby declared null and void.
Accordingly, the presiding judge of the respondent court, the private respondent, their agents and persons acting
for and in their behalves are permanently enjoined from enforcing said writ of execution.

However, consistent with the basic tenets of justice, fairness and equity, petitioner Republic, thru the Office of the
President, is hereby strongly enjoined to take the necessary steps, and, with reasonable dispatch, make the appropriate
budgetary arrangements to pay private respondent Tarcila L. Mendoza or her assigns the amount adjudged due her under
this disposition.

SO ORDERED.

G.R. No. 193494

LUI ENTERPRISES, INC., Petitioners, 

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

DECISION

LEONEN, J.:

There should be no inexplicable delay in the filing of a motion to set aside order of default. Even when a motion is filed
within the required period, excusable negligence must be properly alleged and proven.

This is a petition for review on certiorari of the Court of Appeals' decision1 dated May 24, 2010 and resoluticm2dated
August 13, 2010 in CA- G.R. CV No. 88023. The Court of Appeals affirmed in toto the Regional

Trial Court of Makati’s decision3 dated July 4, 2006.

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

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

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

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

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

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

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

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

To support its argument, Lui Enterprises cited a writ of preliminary injunction19 dated July 2, 2003 issued by the Regional
Trial Court of Davao, ordering Lui Enterprises and the Philippine Bank of Communications "[to maintain] status quo"20 with
respect to the rent. By virtue of the writ of preliminary injunction, Lui Enterprises argued that it should continue collecting
the rental payments from its lessees until the nullification of deed of dation in payment case was resolved. The writ of
preliminary injunction dated July 2, 2003 reads:
WHEREAS, on June 30, 2003, the Court issued an Order, a portion of which is quoted:

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

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

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

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

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

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

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

As to the writ of preliminary injunction issued by the Regional Trial Court of Davao, Zuellig Pharma argued that the writ
only pertained to properties owned by Lui Enterprises. Under the writ of preliminary injunction, the Regional Trial Court of
Davao enjoined the July 3, 2003 auction sale of Lui Enterprises’ properties, the proceeds of which were supposed to
satisfy its obligations to the Philippine Bank of Communications. As early as April 21, 2001, however, the Philippine Bank
of Communications already owned the leased property as evidenced by Transfer Certificate of Title No. 336962. Thus, the
writ of preliminary injunction did not apply to the leased property.30

Considering that Lui Enterprises filed its motion to dismiss beyond the 15-day period to file an answer, Zuellig Pharma
moved that Lui Enterprises be declared in default.31

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

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

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

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

ORDER

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

xxxx

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

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

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

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

The Regional Trial Court of Makati only noted the manifestation with prayer dated April 15, 2004.39

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

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

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

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

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

ORDER

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

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

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

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

Since the April 1, 2004 status quo order was a necessary implement of the writ of preliminary injunction issued on June
30, 2003, it follows that plaintiff's right to collect and receive rental payments which he enjoyed prior to the filing of this
case, must be respected and protected and maintained until the case is resolved. As such, all rentals due from the above-
enumerated lessees must be remitted to and collectedby the Plaintiffs.

Status quo simply means the last actual peaceable uncontested status that preceded the actual controversy. (Searth
Commodities Corp. v. Court ofAppeals, 207 SCRA 622).

As such, the [Philippine Bank of Communications] [is] hereby directed to forthwith inform [Zuellig Pharma] of the April 1,
2004 status quo order and the succeeding September 14, 2004 Order, and consequently, for the said lessee to remit all
rentals due from February 23, 2003 and onwards to [Lui Enterprises] in the meanwhile that the status quo order is
subsisting.
In its manifestation and motion to dismiss, Lui Enterprises reiterated its prayer for the dismissal of the interpleader case to
prevent "the possibility of [the Regional Trial Court, Branch 143, Makati City] and [the Regional Trial Court, Branch 16,
Davao City] rendering conflicting rulings [on the same issue of which corporation has the better right to the rental
payments]."48

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

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

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

Lui Enterprises appealed to the Court of Appeals.54

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

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

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

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

Thus, in its decision59 promulgated on May 24, 2010, the Court of Appeals dismissed Lui Enterprises’appeal and
affirmed in toto the Regional Trial Court of Makati’s decision.

Lui Enterprises filed a motion for reconsideration.60

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

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

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

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

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

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

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

The issues for our resolution are:

I. Whether the Court of Appeals erred in dismissing Lui Enterprises’ appeal for lack of subject index, page
references to the record, table of cases, textbooks and statutes cited, and the statement of issues in Lui
Enterprises’appellant’s brief;
 II. Whether the Regional Trial Court of Makati erred in denying Lui Enterprises’motion to set aside order of default;

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

IV. Whether Zuellig Pharma was entitled to attorney’s fees.

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

Lui Enterprises did not comply with the rules on the contents of the appellant’s brief

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

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

xxxx

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

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

Section 13. Contents of the appellant’s brief. – The appellant’s brief shall contain, in the order herein indicated, the
following:

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

xxxx

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

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

xxxx

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

xxxx

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

Except for cases provided in the Constitution,70 appeal is a "purely statutory right."71 The right to appeal "must be
exercised in the manner prescribed by law"72 and requires strict compliance with the Rules of Court on
appeals.73Otherwise, the appeal shall be dismissed, and its dismissal shall not be a deprivation of due process of law.

In Mendoza v. United Coconut Planters Bank, Inc.,74 this court sustained the Court of Appeals’ dismissal of Mendoza’s
appeal. Mendoza’s appellant’s brief lacked a subject index, assignment of errors, and page references to the record.
In De Liano v. Court of Appeals,75 this court also sustained the dismissal of De Liano’s appeal. De Liano’s appellant’s brief
lacked a subject index, a table of cases and authorities, and page references to the record.

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

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

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

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

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

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

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

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

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

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

II

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

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

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

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

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

However, the defendant declared in default "does not [waive] all of [his or her] rights."107 He or she still has the right to
"receive notice of subsequent proceedings."108 Also, the plaintiff must still present evidence supporting his or her
allegations "despite the default of [the defendant]."109
Default, therefore, is not meant to punish the defendant but to enforce the prompt filing of the answer to the complaint. For
a defendant without good defenses, default saves him or her "the embarrassment of openly appearing to defend the
indefensible."110 As this court explained in Gochangco v. The Court of First Instance of Negros Occidental, Branch

IV:111

It does make sense for a defendant without defenses, and who accepts the correctness of the specific relief prayed for in
the complaint, to forego the filing of the answer or any sort of intervention in the action at all. For even if he did intervene,
the result would be the same: since he would be unable to establish any good defense, having none in fact, judgment
would inevitably go against him. And this would be an acceptable result, if not being in his power to alter or prevent it,
provided that the judgment did not go beyond or differ from the specific relief stated in the complaint. x x x.112 (Emphasis in
the original)

On the other hand, for a defendant with good defenses, "it would be unnatural for him [or her] not to set x x x up [his or her
defenses] properly and timely."113 Thus, "it must be presumed that some insuperable cause prevented him [or her] from
[answering the complaint]."114 In which case, his or her proper remedy depends on when he or she discovered the default
and whether the default judgment was already rendered by the trial court.

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

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

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

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

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

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

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

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

Also, the remedies against default become narrower and narrower as the trial nears judgment. The defendant enjoys the
most liberality from this court with a motion to set aside order of default, as he or she has no default judgment to contend
with, and he or she has the whole period before judgment to remedy his or her default.

With a motion for new trial, the defendant must file the motion within the period for taking an appeal123 or within 15 days
from notice of the default judgment. Although a default judgment has already been rendered, the filing of the motion for
new trial tolls the reglementary period of appeal, and the default judgment cannot be executed against the defendant.

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

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

Similar to an appeal, a petition for certiorari does not allow the defendant to present evidence on his or her behalf. The
defendant can only argue that the trial court committed grave abuse of discretion in declaring him or her in default.
Thus, should a defendant prefer to present evidence on his or her behalf, he or she must file either a motion to set aside
order of default, motion for new trial, or a petition for relief from judgment.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

III

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

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

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

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

xxxx

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

xxxx

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

The requisites of litis pendentia are:

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

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

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

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

In this case, there is no litis pendentia since there is no identity of parties in the nullification of deed of dation in payment
case and the interpleader case. Zuellig Pharma is not a party to the nullification case filed in the Davao trial court.

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

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

Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of Appeals 147 as authority to set aside the
subsequently filed interpleader case. In this cited case, petitioner Progressive Development Corporation, Inc. entered into
a lease contract with Westin Seafood Market, Inc. The latter failed to pay rent. Thus, Progressive Development
Corporation, Inc. repossessed the leased premises, inventoried the movable properties inside the leased premises, and
scheduled the public sale of the inventoried properties as they agreed upon in their lease contract.

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

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

Progressive Development Corporation, Inc. does not apply in this case. The action for forcible entry with damages and the
subsequent action for damages were filed by the same plaintiff against the same defendant. There is identity of parties in
both cases.
In this case, the nullification of deed of dation in payment case was filed by Lui Enterprises against the Philippine Bank of
Communications. The interpleader case was filed by Zuellig Pharma against Lui Enterprises and the Philippine Bank of
Communications. A different plaintiff filed the interpleader case against Lui Enterprises and the Philippine Bank of
Communications. Thus, there is no identity of parties, and the first requisite of litis pendentia is absent.

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

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

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

x x x [T]he issuance of the said writ by the RTC ofAgoo, La Union not only seeks to enjoin Branch 9 of the RTC of Manila
from proceeding with the foreclosure case but also has the effect of pre-empting the latter’s orders. x x x.151

Compania General de Tabacos de Filipinas is not an authority for the claim that a court can issue a writ of preliminary
injunction against a co- equal court.1âwphi1 The cited sentence was taken out of context. In Compania General de
Tabacos de Filipinas, this court held that the Regional Trial Court ofAgoo had no power to issue a writ of preliminary
injunction against the Regional Trial Court of Manila.152 Acourt cannot enjoin the proceedings of a co-equal court.

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

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

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

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

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

IV

The Court of Appeals erred in awarding attorney’s fees

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

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

(1)When exemplary damages are awarded;

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

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

(4)In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5)Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just
and demandable claim;
 (6)In actions for legal support;

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

(8)In actions for indemnity under workmen’s compensation and employer’s liability laws;

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

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

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

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

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

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

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

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

SO ORDERED.