Rule 3: Parties To Civil Actions

Outline: Rule 3 - Parties to Civil Actions CIVIL PROCEDURE
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Lesson for August 5, 2014
Tuesday

Parties to Civil Actions

- MR Holdings v. Sheriff Bajar, G.R. No. 138104, April 11, 2002
Real parties in interest
- Carlos v. Sandoval, G.R. No. 179922, December 16, 2008
Indispensable parties
- De Castro v. CA, G.R. No. 115838, July 18, 2002
Necessary parties
- Carandang v. Heirs of De Guzman, G.R. No. 160347, November 29, 2006
Indigent parties
- Sps. Algura v. Naga City, G.R. No. 150135, October 30, 2006
- Tokio Marine Malayan Insurance Co. Inc. v. Valdez, G.R. No. 150107, January 28, 2008
Representatives as parties
- Brioso v. Rili-Mariano, G.R. No. 132765, January 31, 2003
- State Investment House v. CA, G.R. No. 106795, November 16, 1999
Alternative defendants
- Perpetual Savings Bank v. Fajardo, G.R. No. 79760, June 28,1993
Compulsory and permissive joinder of parties
- Puentevella v. Far Eastern Air Transport, G.R. No. L-4958, March 30, 1954
- Relucio v. Lopez, G.R. No. 138497, January 16, 2002
- De Galicia v. Mercado, G.R. No. 146744, March 6, 2006
- Flores v. Hon. Mallare-Phillipps, G.R. No. L-66620, September 24, 1986
- Plasabas v. CA, G.R. No. 166519, March 31, 2009
Misjoinder and non-joinder of parties
- Nufable v. Nufable, G.R. No. 126950, July 2, 1999
- Republic v. Herbieto, G.R. No. 156117, May 26, 2005
Class suit
- Mathay v. The Consolidated Bank & Trust Co., G.R. No. L-23136, Augsut 26, 1974
- Juana Complex I Homeowners Association v. Fil-Estate Land Inc., G.R. No. 152272, March 5, 2012
Suits against entities without juridical personality
- Lapanday v. Estita, G.R. No. 162109, January 21, 2005
Effect of death of party-litigant
- Lavia v. CA, G.R. No. 78295, April 10, 1989
- Lawas v. CA, G.R. No. L-45809, December 12, 1986

Case Digest: Rule 3 - Parties to Civil Actions CIVIL PROCEDURE

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Parties to Civil Actions
MR HOLDINGS vs SHERIFF BAJAR
G.R. No. 138104, April 11, 2002

Facts:
Under a "Principal Loan Agreement"

and "Complementary
Loan Agreement," Asian Development Bank (ADB), a multilateral
development finance institution, agreed to extend to Marcopper
Mining Corporation (Marcopper) a loan to finance the latters
mining project, Marinduque.
ADB and Placer Dome, Inc., (Placer Dome), a foreign
corporation which owns 40% of Marcopper, executed a "Support
and Standby Credit Agreement" whereby the latter agreed to
provide Marcopper with cash flow support for the payment of its
obligations to ADB.
To secure the loan, Marcopper executed in favor of ADB a
"Deed of Real Estate and Chattel Mortgage", covering substantially
all of its (Marcoppers) properties and assets in Marinduque. It was
registered with the Register of Deeds. When Marcopper defaulted in
the payment of its loan obligation, Placer Dome, presumably to
preserve its international credit standing, agreed to have its
subsidiary corporation, petitioner MR Holding, Ltd., assumed
Marcoppers obligation to ADB in the amount of US$ 18,453,450.02.
Consequently, in an "Assignment Agreement", ADB
assigned to petitioner all its rights, interests and obligations under
the principal and complementary loan agreements, ("Deed of Real
Estate and Chattel Mortgage," and "Support and Standby Credit
Agreement"). Marcopper likewise executed a "Deed of Assignment"
in favor of petitioner. Under its provisions, Marcopper assigns,
transfers, cedes and conveys to petitioner, its assigns and/or
successors-in-interest all of its (Marcoppers) properties, mining
equipment and facilities.
Meanwhile, it appeared that Solidbank Corporation
(Solidbank) obtained a Partial Judgment

against Marcopper from the
RTC. RTC of Manila issued a writ of execution pending appeal
directing Carlos P. Bajar, respondent sheriff, to require Marcopper
"to pay the sums of money to satisfy the Partial Judgment."
Thereafter, respondent Bajar issued two notices of levy on
Marcoppers personal and real properties, and over all its stocks of
scrap iron and unserviceable mining equipment, and issued two
notices setting the public auction sale of the levied properties at the
Marcopper mine site.
Having learned of the scheduled auction sale, petitioner
served an "Affidavit of Third-Party Claim" upon respondent sheriffs,
asserting its ownership over all Marcoppers mining properties,
equipment and facilities by virtue of the "Deed of Assignment."
Upon the denial of its "Affidavit of ThirdParty Claim" by
the RTC of Manila, petitioner commenced with the RTC of
Marinduque, a complaint for reivindication of properties, etc., with
prayer for preliminary injunction and temporary restraining order
against respondents Solidbank, Marcopper, and sheriffs Bajar and
Jandusay.
Judge Ansaldo denied petitioners application for a writ of
preliminary injunction on the ground that a) petitioner has no legal
capacity to sue, it being a foreign corporation doing business in the
Philippines without license; b) an injunction will amount "to staying
the execution of a final judgment by a court of co-equal and
concurrent jurisdiction;" and c) the validity of the "Assignment
Agreement" and the "Deed of Assignment" has been "put into
serious question by the timing of their execution and registration."
Petitioner elevated the matter to the Court of Appeals on
a Petition for Certiorari, Prohibition and Mandamus. CA rendered a
Decision holding that Judge Ansaldo did not commit grave abuse of
discretion in denying petitioners prayer for a writ of preliminary
injunction.
Petitioner: it has the legal capacity to sue and seek redress
from Philippine courts as it is a non-resident foreign corporation not
doing business in the Philippines and suing on isolated transactions.
CA: agreed that the finding of the respondent court that
petitioner petitioner has no legal capacity to sue in the 8hilippine
courts because it is a foreign corporation doing business here
6ithout license. The Deeds of Assignment executed by Marcopper,
through its President, Atty. Teodulo C. Gabor, Jr., were clearly made
in bad faith and in fraud of creditors, particularly private respondent
Solidbank. The first Assignment Agreement purportedly executed
was entered into after Solidbank had filed a case against Marcopper
for collection of sum of money before Regional Trial Court. The
second Deed of Assignment was entered into by President Gabor
after Solidbank had filed its Motion for Partial Summary Judgment,
after the rendition by Regional Trial Court of Manila of a Partial
Summary Judgment and after the said trial court had issued a writ of
execution, and which judgment was later affirmed by the Court of
Appeals. While the assignments (which were not registered with the
Registry of Property as required by Article 1625 of the new Civil
Code) may be valid between the parties thereof, it produces no
effect as against third parties. The purported execution of the Deeds
of Assignment in favor of petitioner was in violation of Article 1387
of the New Civil Code.
Hence, the present Petition for Review on Certiorari by MR
Holdings, Ltd. Petitioner alleged that it is not doing business in the
8hilippines and characterized its participation in the assignment
contracts (whereby Marcoppers assets were transferred to it) as
mere isolated acts that cannot foreclose its right to sue in local
courts.

Issue:
Whether or not petitioner has no legal capacity to sue in
the Philippine courts because it is a foreign corporation doing
business here without license.

Held:
No.
The Supreme Court emphasized the following rules when
it comes to foreign corporations doing business here in the
Philippines:
1. if a foreign corporation does business in the
Philippines without a license, it cannot sue before the Philippine
courts;
2. if a foreign corporation is not doing business in the
Philippines, it needs no license to sue before Philippine courts
on an isolated transaction or on a cause of action entirely
independent of any business transaction;

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3. if a foreign corporation does business in the Philippines
with the required license, it can sue before Philippine courts on
any transaction.

Apparently, it is not the absence of the prescribed license
but the "doing (of) business" in the Philippines without such license
which debars the foreign corporation from access to our courts.
The question whether or not a foreign corporation is doing
business is dependent principally upon the facts and circumstances
of each particular case, considered in the light of the purposes and
language of the pertinent statute or statutes involved and of the
general principles governing the jurisdictional authority of the state
over such corporations.
The phrase doing business shall include soliciting orders,
service contracts, opening offices, whether called liaison offices or
branches; appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country for a
period or periods totalling one hundred eight(y) (180) days or more;
participating in the management, supervision or control of any
domestic business, firm, entity, or corporation in the Philippines;
and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the
performance of acts or works; or the exercise of some of the
functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business
organization; Provided, however, That the phrase doing business
shall not be deemed to include mere investment as a shareholder by
a foreign entity in domestic corporations duly registered to do
business, and/or the exercise of rights as such investor, nor having a
nominee director or officer to represent its interests in such
corporation, nor appointing a representative or distributor
domiciled in the Philippines which transacts business in its own
name and for its own account. (RA 7042, Foreign Investment Act of
1991)
Court of Appeals categorized as "doing business"
petitioners participation under the "Assignment Agreement" and
the "Deed of Assignment." This is simply untenable. The expression
"doing business" should not be given such a strict and literal
construction as to make it apply to any corporate dealing whatever.
Court of Appeals holding that petitioner was determined
to be "doing business" in the Philippines is based mainly on
conjectures and speculation. In concluding that the "unmistakable
intention" of petitioner is to continue Marcoppers business, the
Court of Appeals hangs on the wobbly premise that "there is no
other way for petitioner to recover its huge financial investments
which it poured into Marcoppers rehabilitation without it
(petitioner) continuing Marcoppers business in the country." This is
a mere presumption. Absent overt acts of petitioner from which we
may directly infer its intention to continue Marcoppers business, we
cannot give our concurrence. Significantly, a view subscribed upon
by many authorities is that the mere ownership by a foreign
corporation of a property in a certain state, unaccompanied by its
active use in furtherance of the business for which it was formed, is
insufficient in itself to constitute doing business. Even if a foreign
corporation purchased and took conveyances of a mining claim, did
some assessment work thereon, and endeavored to sell it, its acts
will not constitute the doing of business so as to subject the
corporation to the statutory requirements for the transacting of
business
Petitioner was engaged only in isolated acts or
transactions. Single or isolated acts, contracts, or transactions of
foreign corporations are not regarded as a doing or carrying on of
business. Typical examples of these are the making of a single
contract, sale, sale with the taking of a note and mortgage in the
state to secure payment therefor, purchase, or note, or the mere
commission of a tort. In these instances, there is no purpose to do
any other business within the country.

Real parties in interest
CARLOS vs SANDOVAL
G.R. No. 179922, December 16, 2008

Definitions:
Confession of judgment- refers to a type of contract (or a clause with
such a provision) in which a party agrees to let the other
party enter a judgment against her or him.
Summary judgment a procedural device used during civil litigation
to promptly and expeditiously dispose of a case without
trial. It is used when there is no dispute as to the material
facts of the case and a party is entitled to judgment as a
matter of law.
Judgment of the pleadings a judgment rendered by the court prior
to a verdict because no material issue of fact exists and
one party or other is entitled to a judgment as a matter of
law.
Facts:
Only a spouse can initiate an action to sever the marital
bond for marriages solemnized during the effectivity of the Family
Code, except cases commenced prior to March 15, 2003. The nullity
and annulment of a marriage cannot be declared in a judgment on
the pleadings, summary judgment, or confession of judgment.
Sps Felix Carlos and Felipa Elemia died intestate. They left
six parcels of land to their compulsory heirs, Teofilo Carlos and
petitioner Juan De Dios Carlos. During the lifetime of Felix Carlos, he
agreed to transfer his estate to Teofilo. The agreement was made in
order to avoid the payment of inheritance taxes. Teofilo, in turn,
undertook to deliver and turn over the share of the other legal heir,
petitioner Juan De Dios Carlos.
(3) parcels of land were transferred and registered in the
name of Teofilo. Parcel No. 4 was registered in the name of
petitioner. Teofilo died intestate. He was survived by respondents
Felicidad and their son, Teofilo Carlos II (Teofilo II). Upon Teofilo's
death, Parcel Nos. 5 & 6 were registered in the name of respondent
Felicidad and co-respondent, Teofilo II.
Petitioner instituted a suit against respondents before the
RTC. In the said case, the parties submitted and caused the approval

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of a partial compromise agreement. Under the compromise, the
parties acknowledged their respective shares in the proceeds from
the sale of a portion of the first parcel of land. This includes the
remaining 6,691-square-meter portion of said land.
The parties executed a deed of extrajudicial partition,
dividing the remaining land of the first parcel between them.
Petitioner and respondents entered into two more contracts
wherein the parties equally divided between them the third and
fourth parcels of land.
Petitioner commenced an action against respondents before the
court a quo with the following causes of action: (a) declaration of
nullity of marriage; (b) status of a child; (c) recovery of property; (d)
reconveyance; and (e) sum of money and damages. The complaint
was raffled to Branch 256 of the RTC in Muntinlupa.
Petitioner asserted that the marriage between his late
brother Teofilo and respondent Felicidad was a nullity in view of the
absence of the required marriage license. He likewise maintained
that his deceased brother was neither the natural nor the adoptive
father of respondent Teofilo Carlos II.
Petitioner likewise sought the avoidance of the contracts
he entered into with respondent Felicidad with respect to the
subject real properties. He also prayed for the cancellation of the
certificates of title issued in the name of respondents. He argued
that the properties covered by such certificates of title, including the
sums received by respondents as proceeds, should be reconveyed to
him. Finally, petitioner claimed indemnification as and by way of
moral and exemplary damages, attorney's fees, litigation expenses,
and costs of suit.
Respondents contended that the dearth of details
regarding the requisite marriage license did not invalidate Felicidad's
marriage to Teofilo. Respondents declared that Teofilo II was the
illegitimate child of the deceased Teofilo Carlos with another
woman. On the grounds of lack of cause of action and lack of
jurisdiction over the subject matter, respondents prayed for the
dismissal of the case before the trial court. They also asked that their
counterclaims for moral and exemplary damages, as well as
attorney's fees, be granted.
But before the parties could even proceed to pre-trial,
respondents moved for summary judgment. Attached to the motion
was the affidavit of the justice of the peace who solemnized the
marriage. Respondents also submitted the Certificate of Live Birth of
respondent Teofilo II. In the certificate, the late Teofilo Carlos and
respondent Felicidad were designated as parents.
Petitioner opposed the motion for summary judgment on
the ground of irregularity of the contract evidencing the marriage. In
the same breath, petitioner lodged his own motion for summary
judgment. Petitioner presented a certification from the Local Civil
Registrar of Calumpit, Bulacan, certifying that there is no record of
birth of respondent Teofilo II.
Petitioner also incorporated in the counter-motion for
summary judgment the testimony of respondent Felicidad in
another case.
RTC: In favor of the petitioner. Summary of judgment of
the petitioner, granted.
CA: Respondents argued that the trial court acted without
or in excess of jurisdiction in rendering summary judgment annulling
the marriage of Teofilo, Sr. and Felicidad and in declaring Teofilo II as
not an illegitimate child of Teofilo, Sr. CA reversed and set aside the
RTC ruling. Petitioner moved for reconsideration and for the
inhibition of the ponente, Justice Rebecca De Guia-Salvador. The CA
denied the twin motions.

Issue:
Whether or not the petitioner is a real party in interest.

Held:
The case must be remanded to determine whether or not
petitioner is a real-party-in-interest to seek the declaration of
nullity of the marriage in controversy.

The records reveal that Teofilo was predeceased by his
parents. He had no other siblings but petitioner. Thus, if Teofilo II is
finally found and proven to be not a legitimate, illegitimate, or
adopted son of Teofilo, petitioner succeeds to the other half of the
estate of his brother, the first half being allotted to the widow
pursuant to Article 1001 of the New Civil Code. This makes
petitioner a real-party-interest to seek the declaration of absolute
nullity of marriage of his deceased brother with respondent
Felicidad. If the subject marriage is found to be void ab initio,
petitioner succeeds to the entire estate.
It bears stressing, however, that the legal personality of
petitioner to bring the nullity of marriage case is contingent upon
the final declaration that Teofilo II is not a legitimate, adopted, or
illegitimate son of Teofilo.
Records reveal that when Teofilo died intestate in 1992,
his only surviving compulsory heirs are respondent Felicidad and
their son, Teofilo II. Under the law on succession, successional rights
are transmitted from the moment of death of the decedent and the
compulsory heirs are called to succeed by operation of law.
Upon Teofilo's death in 1992, all his property, rights and
obligations to the extent of the value of the inheritance are
transmitted to his compulsory heirs. These heirs were respondents
Felicidad and Teofilo II, as the surviving spouse and child,
respectively.
Under Article 887 of the Civil, a brother is not among those
considered as compulsory heirs. But although a collateral relative,
such as a brother, does not fall within the ambit of a compulsory
heir, he still has a right to succeed to the estate.
Under Articles 1001 and 1003 of the New Civil Code, only
the presence of descendants, ascendants or illegitimate children
excludes collateral relatives from succeeding to the estate of the
decedent. The presence of legitimate, illegitimate, or adopted child
or children of the deceased precludes succession by collateral
relatives. Conversely, if there are no descendants, ascendants,
illegitimate children, or a surviving spouse, the collateral relatives
shall succeed to the entire estate of the decedent.
If respondent Teofilo II is declared and finally proven not
to be the legitimate, illegitimate, or adopted son of Teofilo,
petitioner would then have a personality to seek the nullity of
marriage of his deceased brother with respondent Felicidad. This is
so, considering that collateral relatives, like a brother and sister,

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acquire successional right over the estate if the decedent dies
without issue and without ascendants in the direct line.
If Teofilo II is proven to be a legitimate, illegitimate, or
legally adopted son of Teofilo, then petitioner has no legal
personality to ask for the nullity of marriage of his deceased brother
and respondent Felicidad. This is based on the ground that he has no
successional right to be protected, hence, does not have proper
interest. For although the marriage in controversy may be found to
be void from the beginning, still, petitioner would not inherit. This is
because the presence of descendant, illegitimate, or even an
adopted child

excludes the collateral relatives from inheriting from
the decedent.
Thus, the Court finds that a remand of the case for trial on
the merits to determine the validity or nullity of the subject
marriage is called for. But the RTC is strictly instructed to dismiss
the nullity of marriage case for lack of cause of action if it is proven
by evidence that Teofilo II is a legitimate, illegitimate, or legally
adopted son of Teofilo Carlos, the deceased brother of petitioner.

Indispensable parties
DE CASTRO vs CA
G.R. No. 115838, July 18, 2002

Facts:
Appellants

were co-owners of 4 lots. In a letter, appellee was
authorized by appellants to act as real estate broker in the sale of
these properties, five percent (5%) of which will be given to the
agent as commission. It was appellee who first found Times Transit
Corporation who bought (2) lots only. Appellee apparently felt
short changed because according to him, his total commission
should be P352,500.00 which is five percent (5%) of the agreed price
of P7,050,000.00 paid by Times Transit Corporation to and that it
was he who introduced the buyer to appellants and unceasingly
facilitated the negotiation which ultimately led to the
consummation of the sale.
Private respondent Francisco Artigo ("Artigo" for brevity)
sued petitioners Constante A. De Castro ("Constante" for brevity)
and Corazon A. De Castro ("Corazon" for brevity) to collect the
unpaid balance of his broker's commission from the De Castros
before the CA.
Appellants argued that although appellants readily
concede that it was appellee who first introduced Times Transit
Corp. to them, appellee was not designated by them as their
exclusive real estate agent but that in fact there were more or less
eighteen (18) others whose collective efforts in the long run dwarfed
those of appellee's, considering that the first negotiation for the sale
where appellee took active participation failed and it was these
other agents who successfully brokered in the second negotiation.
Furthermore, the purchase price for the two lots was only P3.6
million as appearing in the deed of sale and not P7.05 million as
alleged by appellee. Thus, even assuming that appellee is entitled to
the entire commission, he would only be getting 5% of the P3.6
million, or P180,000.00."
The De Castros argued that Artigo's complaint should have
been dismissed for failure to implead all the co-owners of the two
lots. The De Castros claim that Artigo always knew that the two lots
were co-owned by Constante and Corazon with their other siblings
Jose and Carmela whom Constante merely represented. The De
Castros contend that failure to implead such indispensable parties is
fatal to the complaint since Artigo, as agent of all the four co-
owners, would be paid with funds co-owned by the four co-owners.
CA: Artigo is entitled to the 5% commission on the
purchase price as provided in the contract of agency. Artigo's
complaint is not dismissible for failure to implead as indispensable
parties the other co-owners of the two lots. The Court of Appeals
explained that it is not necessary to implead the other co-owners
since the action is exclusively based on a contract of agency
between Artigo and Constante. Trial court did not err in admitting
parol evidence to prove the true amount paid by Times Transit to
the De Castros for the two lots. The Court of Appeals ruled that
evidence aliunde could be presented to prove that the actual
purchase price was P7.05 million and not P3.6 million as appearing
in the deed of sale. Evidence aliunde is admissible considering that
Artigo is not a party, but a mere witness in the deed of sale between
the De Castros and Times Transit. The Court of Appeals explained
that, "the rule that oral evidence is inadmissible to vary the terms of
written instruments is generally applied only in suits between
parties to the instrument and strangers to the contract are not
bound by it." Besides, Artigo was not suing under the deed of sale,
but solely under the contract of agency. Thus, the Court of Appeals
upheld the trial court's finding that the purchase price was P7.05
million and not P3.6 million.

Issue:
Whether or not the complaint merits dismissal for failure
to implead other co-owners as indispensable parties. (De Castros
contention)

Held:
No. The De Castros' contentions are devoid of legal basis.
An indispensable party is one whose interest will be
affected by the court's action in the litigation, and without whom no
final determination of the case can be had. The joinder of
indispensable parties is mandatory and courts cannot proceed
without their presence. Whenever it appears to the court in the
course of a proceeding that an indispensable party has not been
joined, it is the duty of the court to stop the trial and order the
inclusion of such party. However, the rule on mandatory joinder of
indispensable parties is not applicable to the instant case.
Constante signed the note as owner and as representative
of the other co-owners. Under this note, a contract of agency was
clearly constituted between Constante and Artigo. Whether
Constante appointed Artigo as agent, in Constante's individual or
representative capacity, or both, the De Castros cannot seek the
dismissal of the case for failure to implead the other co-owners as
indispensable parties. The De Castros admit that the other co-
owners are solidarily liable under the contract of agency.

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The solidary liability of the four co-owners, however,
militates against the De Castros' theory that the other co-owners
should be impleaded as indispensable parties.
The rule in this article applies even when the
appointments were made by the principals in separate acts,
provided that they are for the same transaction. The solidarity arises
from the common interest of the principals, and not from the act of
constituting the agency. By virtue of this solidarity, the agent can
recover from any principal the whole compensation and indemnity
owing to him by the others. The parties, however, may, by express
agreement, negate this solidary responsibility. The solidarity does
not disappear by the mere partition effected by the principals after
the accomplishment of the agency.
If the undertaking is one in which several are interested,
but only some create the agency, only the latter are solidarily liable,
without prejudice to the effects of negotiorum gestio with respect to
the others. And if the power granted includes various transactions
some of which are common and others are not, only those
interested in each transaction shall be liable for it.

Necessary parties
CARANDANG vs HEIRS OF DE GUZMAN
G.R. No. 160347, November 29, 2006

Definitions:
Real party in interest the party who stands to be
benefited or injured by the judgment of the suit, or the party
entitled to the avails of the suit.
Indispensable party a party in interest without whom no
final determination can be had of an action
Necessary party one who is not indispensable but who
ought to be joined as a party if complete relief is to be accorded as
to those already parties, or for a complete determination or
settlement of the claim subject of the action
Pro-forma parties those who are required to be joined as
co-parties in suits by or against another party as may be provided by
the applicable substantive law or procedural rule.

Nature of the case:
This case reached the Supreme Court as an appeal to the
decision of the CA ruling against the spouses Carandang and denying
their motion for reconsideration. The CA affirmed the RTCs decision
that Milagros de Guzman, the decedents wife, is not an
indispensable party in the complaint, hence, her non-inclusion in the
case does not warrant a dismissal of the complaint.

Facts:
Sps Carandang and the decedent Quirino de Guzman were
stockholders and corporate officers of Mabuhay Broadcasting
System (MBS). The Carandangs have equities at 54 % while Quirino
has 46%.
When the capital stock of MBS was increased, the
Carandangs subscribed P345,000 from it, P293,250 from the said
amount was loaned by Quirino to the Carandangs. In the subsequent
increase in MBS capital stock, the Carandangs subscribed again to
the increase in the amount of P93,750. But, P43,125 out of the
mentioned amount was again loaned by Quirino.
When Quirino sent a demand letter to the Carandangs for
the payment of the loan, the Carandangs refused to pay. They
contend that a pre-incorporation agreement was executed between
Arcadio Carandang and Quirino, whereby Quirino promised to pay
for the stock subscriptions of the Arcadio without cost, in
consideration for Arcadios technical expertise, his newly purchased
equipment, and his skill in repairing and upgrading
radio/communication equipment therefore, there is no
indebtedness on the part of the Carandangs.
Thereafter, Quirino filed a complaint seeking to recover
the P336,375 total amount of the loan together with damages.
The RTC ruled in favor of Quirino De Guzman and ordered
the Carandangs to pay the loan plus interest, attorneys fees, and
costs of suit.
The Carandangs appealed the trial courts decision to the
CA, but the CA affirmed the same.
The subsequent Motion for Reconsideration filed by the
Carandangs were also denied. Carandang then filed before this
Court the instant Petition for Review on Certiorari before the SC.

Issue:
1. Whether or not the RTC should have dismissed the case
for failure to state a cause of action, considering that Milagros de
Guzman, allegedly an indispensable party, was not included as a
party-plaintiff. No
2. Whether or not the RTC Decision is void for failing to
comply with Section 16, Rule 3 of the Rules of Court. No

Held:
1. Carandang: Since three of the four checks used to pay
their stock subscriptions were issued in the name of Milagros de
Guzman, the latter should be considered an indispensable party.
Being such, the spouses Carandang claim, the failure to join Mrs. de
Guzman as a party-plaintiff should cause the dismissal of the action
because "(i)f a suit is not brought in the name of or against the real
party in interest, a motion to dismiss may be filed on the ground
that the complaint states no cause of action."
CA: The joint account of spouses Quirino A de Guzman and
Milagros de Guzman from which the four (4) checks were drawn is
part of their conjugal property and under both the Civil Code and
the Family Code the husband alone may institute an action for the
recovery or protection of the spouses conjugal property.

The Court of Appeals is correct. Petitioners erroneously
interchange the terms "real party in interest" and "indispensable
party." A real party in interest is the party who stands to be
benefited or injured by the judgment of the suit, or the party
entitled to the avails of the suit.

On the other hand, an indispensable
party is a party in interest without whom no final determination can
be had of an action, in contrast to a necessary party, which is one

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who is not indispensable but who ought to be joined as a party if
complete relief is to be accorded as to those already parties, or for a
complete determination or settlement of the claim subject of the
action.
The spouses Carandang are indeed correct that "(i)f a suit
is not brought in the name of or against the real party in interest, a
motion to dismiss may be filed on the ground that the complaint
states no cause of action."However, what dismissal on this ground
entails is an examination of whether the parties presently pleaded
are interested in the outcome of the litigation, and not whether all
persons interested in such outcome are actually pleaded. The
latter query is relevant in discussions concerning indispensable and
necessary parties, but not in discussions concerning real parties in
interest. Both indispensable and necessary parties are considered
as real parties in interest, since both classes of parties stand to be
benefited or injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the
effectivity of the Family Code on 3 August 1988. As they did not
execute any marriage settlement, the regime of conjugal
partnership of gains govern their property relations. All property
acquired during the marriage, whether the acquisition appears to
have been made, contracted or registered in the name of one or
both spouses, is presumed to be conjugal unless the contrary is
proved. Credits are personal properties, acquired during the time
the loan or other credit transaction was executed. Therefore, credits
loaned during the time of the marriage are presumed to be conjugal
property.
Consequently, assuming that the four checks created a
debt for which the spouses Carandang are liable, such credits are
presumed to be conjugal property. There being no evidence to the
contrary, such presumption subsists. As such, Quirino de Guzman,
being a co-owner of specific partnership property,

is certainly a real
party in interest. Dismissal on the ground of failure to state a cause
of action, by reason that the suit was allegedly not brought by a real
party in interest, is therefore unwarranted.
When an indispensable party is not before the court, the
action should likewise be dismissed. The absence of an
indispensable party renders all subsequent actuations of the court
void, for want of authority to act, not only as to the absent parties
but even as to those present.On the other hand, the non-joinder of
necessary parties do not result in the dismissal of the case. Instead,
Section 9, Rule 3 of the Rules of Court provides for the
consequences of such non-joinder:

Sec. 9. Non-joinder of necessary parties to be
pleaded. Whenever in any pleading in which a claim is
asserted a necessary party is not joined, the pleader shall
set forth his name, if known, and shall state why he is
omitted. Should the court find the reason for the omission
unmeritorious, it may order the inclusion of the omitted
necessary party if jurisdiction over his person may be
obtained.
The failure to comply with the order for his
inclusion, without justifiable cause, shall be deemed a
waiver of the claim against such party.
The non-inclusion of a necessary party does not
prevent the court from proceeding in the action, and the
judgment rendered therein shall be without prejudice to
the rights of such necessary party.

Non-compliance with the order for the inclusion of a
necessary party would not warrant the dismissal of the complaint.
This is an exception to Section 3, Rule 17 which allows the dismissal
of the complaint for failure to comply with an order of the court, as
Section 9, Rule 3 specifically provides for the effect of such non-
inclusion: it shall not prevent the court from proceeding in the
action, and the judgment rendered therein shall be without
prejudice to the rights of such necessary party. Section 11, Rule 3
likewise provides that the non-joinder of parties is not a ground for
the dismissal of the action.
Other than the indispensable and necessary parties, there
is a third set of parties: the pro-forma parties, which are those who
are required to be joined as co-parties in suits by or against another
party as may be provided by the applicable substantive law or
procedural rule.

An example is provided by Section 4, Rule 3 of the
Rules of Court:
Sec. 4. Spouses as parties. Husband and wife
shall sue or be sued jointly, except as provided by law.

Pro-forma parties can either be indispensable, necessary
or neither indispensable nor necessary. The third case occurs if, for
example, a husband files an action to recover a property which he
claims to be part of his exclusive property. The wife may have no
legal interest in such property, but the rules nevertheless require
that she be joined as a party.
In cases of pro-forma parties who are neither
indispensable nor necessary, the general rule under Section 11, Rule
3 must be followed: such non-joinder is not a ground for dismissal.
Hence, in a case concerning an action to recover a sum of money,
we held that the failure to join the spouse in that case was not a
jurisdictional defect.

The non-joinder of a spouse does not warrant
dismissal as it is merely a formal requirement which may be cured
by amendment.

Conversely, in the instances that the pro-forma parties are
also indispensable or necessary parties, the rules concerning
indispensable or necessary parties, as the case may be, should be
applied. Thus, dismissal is warranted only if the pro-forma party not
joined in the complaint is an indispensable party.
Milagros de Guzman, being presumed to be a co-owner of
the credits allegedly extended to the spouses Carandang, seems to
be either an indispensable or a necessary party. If she is an
indispensable party, dismissal would be proper. If she is merely a
necessary party, dismissal is not warranted, whether or not there
was an order for her inclusion in the complaint pursuant to Section
9, Rule 3.
In sum, in suits to recover properties, all co-owners are
real parties in interest. However, pursuant to Article 487 of the
Civil Code and relevant jurisprudence, any one of them may bring
an action, any kind of action, for the recovery of co-owned
properties. Therefore, only one of the co-owners, namely the co-
owner who filed the suit for the recovery of the co-owned

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property, is an indispensable party thereto. The other co-owners
are not indispensable parties. They are not even necessary parties,
for a complete relief can be accorded in the suit even without their
participation, since the suit is presumed to have been filed for the
benefit of all co-owners.
Milagros de Guzman is not an indispensable party in the
action for the recovery of the allegedly loaned money to the
spouses Carandang. As such, she need not have been impleaded in
said suit, and dismissal of the suit is not warranted by her not
being a party thereto.

2. RTC Decision is valid despite the failure to comply with
Section 16, Rule 3 of the Rules of Court, because of the express
waiver of the heirs to the jurisdiction over their persons, and
because there had been, before the promulgation of the RTC
Decision, no further proceedings requiring the appearance of de
Guzmans counsel.
Carandang: Decision of the RTC, having been rendered
after the death of Quirino de Guzman, is void for failing to comply
with Section 16, Rule 3 of the Rules of Court, which provides:

SEC. 16. Death of party; duty of counsel.
Whenever a party to a pending action dies, and
the claim is not thereby extinguished, it shall be
the duty of his counsel to inform the court
within thirty (30) days after such death of the
fact thereof, and to give the name and address
of his legal representative or representatives.
Failure of counsel to comply with this duty shall
be a ground for disciplinary action.
The heirs of the deceased may be
allowed to be substituted for the deceased,
without requiring the appointment of an
executor or administrator and the court may
appoint a guardian ad litem for the minor heirs.
The court shall forthwith order the
legal representative or representatives to appear
and be substituted within a period of thirty (30)
days from notice.
If no legal representative is named by
the counsel for the deceased party, or if the one
so named shall fail to appear within the specified
period, the court may order the opposing party,
within a specified time, to procure the
appointment of an executor or administrator for
the estate of the deceased and the latter shall
immediately appear for and on behalf of the
deceased. The court charges in procuring such
appointment, if defrayed by the opposing party,
may be recovered as costs.

The spouses Carandang posits that such failure to comply
with the above rule renders void the decision of the RTC, Thus, it has
been held that when a party dies in an action that survives and no
order is issued by the court for the appearance of the legal
representative or of the heirs of the deceased in substitution of the
deceased, and as a matter of fact no substitution has ever been
effected, the trial held by the court without such legal
representatives or heirs and the judgment rendered after such trial
are null and void because the court acquired no jurisdiction over the
persons of the legal representatives or of the heirs upon whom the
trial and judgment would be binding.
In the present case, there had been no court order for the
legal representative of the deceased to appear, nor had any such
legal representative appeared in court to be substituted for the
deceased; neither had the complainant ever procured the
appointment of such legal representative of the deceased, including
appellant, ever asked to be substituted for the deceased.
As a result, no valid substitution was effected,
consequently, the court never acquired jurisdiction over appellant
for the purpose of making her a party to the case and making the
decision binding upon her, either personally or as a representative
of the estate of her deceased mother.
However, unlike jurisdiction over the subject matter which
is conferred by law and is not subject to the discretion of the parties,

jurisdiction over the person of the parties to the case may be waived
either expressly or impliedly. Implied waiver comes in the form of
either voluntary appearance or a failure to object.
In the cases cited by the spouses Carandang, we held that
there had been no valid substitution by the heirs of the deceased
party, and therefore the judgment cannot be made binding upon
them.
In the case at bar, not only do the heirs of de Guzman
interpose no objection to the jurisdiction of the court over their
persons; they are actually claiming and embracing such jurisdiction.
In doing so, their waiver is not even merely implied (by their
participation in the appeal of said Decision), but express (by their
explicit espousal of such view in both the Court of Appeals and in
this Court). The heirs of de Guzman had no objection to being bound
by the Decision of the RTC.
Thus, lack of jurisdiction over the person, being subject to
waiver, is a personal defense which can only be asserted by the
party who can thereby waive it by silence.
The underlying principle therefor is not really because
substitution of heirs is a jurisdictional requirement, but because
non-compliance therewith results in the undeniable violation of the
right to due process of those who, though not duly notified of the
proceedings, are substantially affected by the decision rendered
therein.

Such violation of due process can only be asserted by the
persons whose rights are claimed to have been violated, namely the
heirs to whom the adverse judgment is sought to be enforced.


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Indigent parties
SPS. ALGURA vs NAGA CITY
G.R. No. 150135, October 30, 2006

Anyone who has ever struggled with poverty
knows how extremely expensive it is to be poor.
James Baldwin

Facts:
Sps Antonio and Lorencita S.J. Algura filed a Verified Complaint
for damages against the Naga City Government and its officers,
arising from the alleged illegal demolition of their residence and
boarding house and for payment of lost income derived from fees
paid by their boarders amounting to PhP 7,000.00 monthly.
Petitioners filed an Ex-Parte Motion to Litigate as Indigent
Litigants, to which petitioner Antonio Algura's Pay Slip No. 2457360
was appended, showing a gross monthly income of (PhP 10,474.00)
and a net pay of (PhP 3,616.99) for the month July 1999. Also
attached as Annex "B" to the motion was a Certification issued by
the Office of the City Assessor of Naga City, which stated that
petitioners had no property declared in their name for taxation
purposes.
Finding that petitioners' motion to litigate as indigent litigants
was meritorious, Executive Judge Atienza of the Naga City RTC
granted petitioners' plea for exemption from filing fees.
Respondents filed an Answer with Counterclaim arguing that
the defenses of the petitioners in the complaint had no cause of
action, the spouses' boarding house blocked the road right of way,
and said structure was a nuisance per se.
Praying that the counterclaim of defendants (respondents) be
dismissed, petitioners then filed their Reply with Ex-Parte Request
for a Pre-Trial Setting

before the Naga City RTC. A pre-trial was held
wherein respondents asked for five (5) days within which to file a
Motion to Disqualify Petitioners as Indigent Litigants.
Respondents filed a Motion to Disqualify the Plaintiffs for
Non-Payment of Filing Fees.

They asserted that in addition to the
more than PhP 3,000.00 net income of petitioner Algura, who is a
member of the Philippine National Police, spouse Lorencita Algura
also had a mini-store and a computer shop on the ground floor of
their residence. Also, respondents claimed that petitioners' second
floor was used as their residence and as a boarding house, from
which they earned more than PhP 3,000.00 a month. In addition, it
was claimed that petitioners derived additional income from their
computer shop patronized by students and from several boarders
who paid rentals to them. Hence, respondents concluded that
petitioners were not indigent litigants.
Petitioners subsequently interposed their Opposition to
the Motion to respondents' motion to disqualify them for non-
payment of filing fees.
RTC issued an Order disqualifying petitioners as indigent
litigants on the ground that they failed to substantiate their claim for
exemption from payment of legal fees and to comply with the third
paragraph of Rule 141, Section 18 of the Revised Rules of Court
directing them to pay the requisite filing fees.
Petitioners filed a Motion for Reconsideration.
Respondents then filed their Comment/Objections to petitioner's
Motion for Reconsideration.
Trial court issued an Order giving petitioners the
opportunity to comply with the requisites laid down in Section 18,
Rule 141, for them to qualify as indigent litigants.
Petitioners submitted their Compliance attaching their
affidavits to comply with the requirements of then Rule 141, Section
18 of the Rules of Court and in support of their claim to be declared
as indigent litigants which they claimed that the demolition of their
small dwelling deprived her of a monthly income amounting to PhP
7,000.00. She, her husband, and their six (6) minor children had to
rely mainly on her husband's salary as a policeman which provided
them a monthly amount of PhP 3,500.00, more or less. Also, they did
not own any real property as certified by the assessor's office of
Naga City. More so, according to her, the meager net income from
her small sari-sari store and the rentals of some boarders, plus the
salary of her husband, were not enough to pay the family's basic
necessities.
petitioners also submitted the affidavit of Erlinda Bangate,
who attested under oath, that she personally knew spouses Antonio
Algura and Lorencita Algura, who were her neighbors.
RTC Acting Presiding Judge Andres B. Barsaga, Jr. issued
Order denying the petitioners' Motion for Reconsideration.
Judge Barsaga ratiocinated that the pay slip of Antonio F.
Algura showed that the "GROSS INCOME or TOTAL EARNINGS of
plaintiff Algura [was] 10,474.00 which amount [was] over and
above the amount mentioned in the first paragraph of Rule 141,
Section 18 for pauper litigants residing outside Metro Manila." Said
rule provides that the gross income of the litigant should not exceed
PhP 3,000.00 a month and shall not own real estate with an
assessed value of PhP 50,000.00. The trial court found that, in
Lorencita S.J. Algura's May 13, 2000 Affidavit, nowhere was it stated
that she and her immediate family did not earn a gross income of
PhP 3,000.00.

Issue:
Whether or not the petitioners should be considered as
indigent litigants who qualify for exemption from paying filing fees.

Held:
No. There was no hearing on the matter hence the case
was remanded back to the lower court. In this case, the Supreme
Court reconciled the provisions of Sec. 21, Rule 3 and Sec. 19, Rule
141 (then Sec. 16, Rule 141).
Sec. 21, Rule 3, merely provides a general statement that
indigent litigants may not be required to pay the filing fees. On the
other hand, Sec. 19, Rule 141 provides the specific standards that a
party must meet before he can be qualified as an indigent party and
thus be exempt from paying the required fees.
If Sec. 19, Rule 141 (in this case, then Sec. 16, Rule 141) is
strictly applied, then the spouses could not qualify because their
income exceeds P1.5k, which was the threshold prior to 2000. But if
Sec. 21, Rule 3 is to be applied, the applicant (the Spouses) should
be given a chance in a hearing to satisfy the court that
notwithstanding the evidence presented by the opposing party

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(Naga), they have no money or property sufficient and available for
food, shelter and other basic necessities for their family, and are
thus, qualified as indigent litigants under said Rule. Therefore, the
court should have conducted a trial in order to let the spouses
satisfy the court that indeed the income theyre having, even though
above the P1.5k limit, was not sufficient to cover food, shelter, and
their other basic needs.

____________________________________________

Discussion of the SC

RTC incorrectly applied Rule 141, Section 18 on Legal
Fees when the applicable rules at that time were Rule 3, Section 21
on Indigent Party which took effect on July 1, 1997 and Rule 141,
Section 16 on Pauper Litigants which became effective on July 19,
1984 up to February 28, 2000.
The old Section 16, Rule 141 requires applicants to file an
ex-parte motion to litigate as a pauper litigant by submitting an
affidavit which contains the two requirements: a) income
requirementthe applicants should not have a gross monthly
income of more than PhP 1,500.00, and b) property requirement
they should not own property with an assessed value of not more
than PhP 18,000.00.
The position of petitioners on the need to use Rule 3,
Section 21 on their application to litigate as indigent litigants
brings to the fore the issue on whether a trial court has to apply
both Rule 141, Section 16 and Rule 3, Section 21 on such
applications or should the court apply only Rule 141, Section 16
and discard Rule 3, Section 21 as having been superseded by Rule
141, Section 16 on Legal Fees.
The Court ruled that Rule 3, Section 21 and Rule 141,
Section 16 (later amended as Rule 141, Section 18 on March 1, 2000
and subsequently amended by Rule 141, Section 19 on August 16,
2003, which is now the present rule) are still valid and enforceable
rules on indigent litigants.
The fact that Section 22 which became Rule 3, Section 21
on indigent litigant was retained in the rules of procedure, even
elaborating on the meaning of an indigent party, and was also
strengthened by the addition of a third paragraph on the right to
contest the grant of authority to litigate only goes to show that
there was no intent at all to consider said rule as expunged from the
1997 Rules of Civil Procedure.
Furthermore, Rule 141 on indigent litigants was amended
twice: first on March 1, 2000 and the second on August 16, 2004;
and yet, despite these two amendments, there was no attempt to
delete Section 21 from said Rule 3. This clearly evinces the desire of
the Court to maintain the two (2) rules on indigent litigants to cover
applications to litigate as an indigent litigant.
Instead of declaring that Rule 3, Section 21 has been
superseded and impliedly amended by Section 18 and later Section
19 of Rule 141, the Court finds that the two rules can and should be
harmonized. The two (2) rules can stand together and are
compatible with each other. When an application to litigate as an
indigent litigant is filed, the court shall scrutinize the affidavits and
supporting documents submitted by the applicant to determine if
the applicant complies with the income and property standards
prescribed in the present Section 19 of Rule 141that is, the
applicant's gross income and that of the applicant's immediate
family do not exceed an amount double the monthly minimum wage
of an employee; and the applicant does not own real property with a
fair market value of more than Three Hundred Thousand Pesos (PhP
300,000.00). If the trial court finds that the applicant meets the
income and property requirements, the authority to litigate as
indigent litigant is automatically granted and the grant is a matter of
right.
However, if the trial court finds that one or both
requirements have not been met, then it would set a hearing to
enable the applicant to prove that the applicant has "no money or
property sufficient and available for food, shelter and basic
necessities for himself and his family." In that hearing, the adverse
party may adduce countervailing evidence to disprove the evidence
presented by the applicant; after which the trial court will rule on
the application depending on the evidence adduced. In addition,
Section 21 of Rule 3 also provides that the adverse party may later
still contest the grant of such authority at any time before judgment
is rendered by the trial court, possibly based on newly discovered
evidence not obtained at the time the application was heard. If the
court determines after hearing, that the party declared as an
indigent is in fact a person with sufficient income or property, the
proper docket and other lawful fees shall be assessed and collected
by the clerk of court. If payment is not made within the time fixed by
the court, execution shall issue or the payment of prescribed fees
shall be made, without prejudice to such other sanctions as the
court may impose.
The trial court should have applied Rule 3, Section 21 to
the application of the Alguras after their affidavits and supporting
documents showed that petitioners did not satisfy the twin
requirements on gross monthly income and ownership of real
property under Rule 141. Instead of disqualifying the Alguras as
indigent litigants, the trial court should have called a hearing as
required by Rule 3, Section 21 to enable the petitioners to adduce
evidence to show that they didn't have property and money
sufficient and available for food, shelter, and basic necessities for
them and their family. In that hearing, the respondents would have
had the right to also present evidence to refute the allegations and
evidence in support of the application of the petitioners to litigate as
indigent litigants. Since this Court is not a trier of facts, it will have to
remand the case to the trial court to determine whether petitioners
can be considered as indigent litigants using the standards set in
Rule 3, Section 21.
Recapitulating the rules on indigent litigants, therefore, if
the applicant for exemption meets the salary and property
requirements under Section 19 of Rule 141, then the grant of the
application is mandatory. On the other hand, when the application
does not satisfy one or both requirements, then the application
should not be denied outright; instead, the court should apply the
"indigency test" under Section 21 of Rule 3 and use its sound
discretion in determining the merits of the prayer for exemption.


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______________________________________________

History of suits in forma pauperis (pauper litigant)

When the Rules of Court took effect on January 1, 1964,
the rule on pauper litigants was found in Rule 3, Section 22 which
provided that:

Section 22. Pauper litigant.Any court may authorize a
litigant to prosecute his action or defense as a pauper
upon a proper showing that he has no means to that effect
by affidavits, certificate of the corresponding provincial,
city or municipal treasurer, or otherwise. Such authority[,]
once given[,] shall include an exemption from payment of
legal fees and from filing appeal bond, printed record and
printed brief. The legal fees shall be a lien to any judgment
rendered in the case [favorable] to the pauper, unless the
court otherwise provides.

From the same Rules of Court, Rule 141 on Legal Fees, on
the other hand, did not contain any provision on pauper litigants.

On July 19, 1984, the Court, in Administrative Matter No.
83-6-389-0 (formerly G.R. No. 64274), approved the
recommendation of the Committee on the Revision of Rates and
Charges of Court Fees, through its Chairman, then Justice Felix V.
Makasiar, to revise the fees in Rule 141 of the Rules of Court to
generate funds to effectively cover administrative costs for services
rendered by the courts.

A provision on pauper litigants was inserted
which reads:
Section 16. Pauper-litigants exempt from payment of court
fees.Pauper-litigants include wage earners whose gross
income do not exceed P2,000.00 a month or P24,000.00 a
year for those residing in Metro Manila, and P1,500.00 a
month or P18,000.00 a year for those residing outside
Metro Manila, or those who do not own real property with
an assessed value of not more than P24,000.00, or not
more than P18,000.00 as the case may be.
Such exemption shall include exemption from
payment of fees for filing appeal bond, printed record and
printed brief.
The legal fees shall be a lien on the monetary or
property judgment rendered in favor of the pauper-
litigant.
To be entitled to the exemption herein provided,
the pauper-litigant shall execute an affidavit that he does
not earn the gross income abovementioned, nor own any
real property with the assessed value afore-mentioned
[sic], supported by a certification to that effect by the
provincial, city or town assessor or treasurer.

When the Rules of Court on Civil Procedure were amended
by the 1997 Rules of Civil Procedure (inclusive of Rules 1 to 71) in
Supreme Court Resolution in Bar Matter No. 803 dated April 8, 1997,
which became effective on July 1, 1997, Rule 3, Section 22 of the
Revised Rules of Court was superseded by Rule 3, Section 21 of said
1997 Rules of Civil Procedure, as follows:

Section 21. Indigent party.A party may be authorized to
litigate his action, claim or defense as an indigent if the
court, upon an ex parte application and hearing, is
satisfied that the party is one who has no money or
necessities for himself and his family.
Such authority shall include an exemption from
payment of docket and other lawful fees, and of
transcripts of stenographic notes which the court may
order to be furnished him. The amount of the docket and
other lawful fees which the indigent was exempted from
paying shall be a lien on any judgment rendered in the
case favorable to the indigent, unless the court otherwise
provides.
Any adverse party may contest the grant of such
authority at any time before judgment is rendered by the
trial court. If the court should determine after hearing that
the party declared as an indigent is in fact a person with
sufficient income or property, the proper docket and other
lawful fees shall be assessed and collected by the clerk of
court. If payment is not made within the time fixed by the
court, execution shall issue for the payment thereof,
without prejudice to such other sanctions as the court may
impose.

At the time the Rules on Civil Procedure were amended
by the Court in Bar Matter No. 803, however, there was no
amendment made on Rule 141, Section 16 on pauper litigants.

On March 1, 2000, Rule 141 on Legal Fees was amended
by the Court in A.M. No. 00-2-01-SC, whereby certain fees were
increased or adjusted. In this Resolution, the Court amended Section
16 of Rule 141, making it Section 18, which now reads:

Section 18. Pauper-litigants exempt from payment of legal
fees.Pauper litigants (a) whose gross income and that of
their immediate family do not exceed four thousand
(P4,000.00) pesos a month if residing in Metro Manila, and
three thousand (P3,000.00) pesos a month if residing
outside Metro Manila, and (b) who do not own real
property with an assessed value of more than fifty
thousand (P50,000.00) pesos shall be exempt from the
payment of legal fees.
The legal fees shall be a lien on any judgment
rendered in the case favorably to the pauper litigant,
unless the court otherwise provides.
To be entitled to the exemption herein provided,
the litigant shall execute an affidavit that he and his
immediate family do not earn the gross income
abovementioned, nor do they own any real property with
the assessed value aforementioned, supported by an
affidavit of a disinterested person attesting to the truth of
the litigant's affidavit.

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Any falsity in the affidavit of a litigant or
disinterested person shall be sufficient cause to strike out
the pleading of that party, without prejudice to whatever
criminal liability may have been incurred.

It can be readily seen that the rule on pauper litigants was
inserted in Rule 141 without revoking or amending Section 21 of
Rule 3, which provides for the exemption of pauper litigants from
payment of filing fees. Thus, on March 1, 2000, there were two
existing rules on pauper litigants; namely, Rule 3, Section 21 and
Rule 141, Section 18.
On August 16, 2004, Section 18 of Rule 141 was further
amended in Administrative Matter No. 04-2-04-SC, which became
effective on the same date. It then became Section 19 of Rule 141,
to wit:
Sec. 19. Indigent litigants exempt from payment of legal
fees. INDIGENT LITIGANTS (A) WHOSE GROSS INCOME
AND THAT OF THEIR IMMEDIATE FAMILY DO NOT EXCEED
AN AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE
OF AN EMPLOYEE AND (B) WHO DO NOT OWN REAL
PROPERTY WITH A FAIR MARKET VALUE AS STATED IN THE
CURRENT TAX DECLARATION OF MORE THAN THREE
HUNDRED THOUSAND (P300,000.00) PESOS SHALL BE
EXEMPT FROM PAYMENT OF LEGAL FEES.
The legal fees shall be a lien on any judgment
rendered in the case favorable to the indigent litigant
unless the court otherwise provides.
To be entitled to the exemption herein
provided, the litigant shall execute an affidavit that he
and his immediate family do not earn a gross income
abovementioned, and they do not own any real property
with the fair value aforementioned, supported by an
affidavit of a disinterested person attesting to the truth
of the litigant's affidavit. The current tax declaration, if
any, shall be attached to the litigant's affidavit.
Any falsity in the affidavit of litigant or
disinterested person shall be sufficient cause to dismiss
the complaint or action or to strike out the pleading of
that party, without prejudice to whatever criminal liability
may have been incurred. (Emphasis supplied.)

Amendments to Rule 141 (including the amendment to
Rule 141, Section 18) were made to implement RA 9227 which
brought about new increases in filing fees. Specifically, in the August
16, 2004 amendment, the ceiling for the gross income of litigants
applying for exemption and that of their immediate family was
increased from PhP 4,000.00 a month in Metro Manila and PhP
3,000.00 a month outside Metro Manila, to double the monthly
minimum wage of an employee; and the maximum value of the
property owned by the applicant was increased from an assessed
value of PhP 50,000.00 to a maximum market value of PhP
300,000.00, to be able to accommodate more indigent litigants and
promote easier access to justice by the poor and the marginalized in
the wake of these new increases in filing fees.
Even if there was an amendment to Rule 141 on August
16, 2004, there was still no amendment or recall of Rule 3, Section
21 on indigent litigants.

Indigent parties
TOKIO MARINE MALAYAN INSURANCE CO. INC. vs VALDEZ
G.R. No. 150107, January 28, 2008

Facts:
Tokio Marine Malayan Insurance Company Incorporated
(Tokio Marine), petitioner in these cases, is a domestic corporation
engaged in the insurance business. The individual petitioners are its
corporate officers, except Antonio B. Lapid, one of Tokio Marine's
consultants.
Jorge Valdez, respondent in these cases, was a former unit
manager of Tokio Marine pursuant to a Unit Management Contract
entered into between them.
Respondent filed with the Regional Trial Court a complaint
for damages against petitioners. He alleged therein that petitioners
violated the terms of the Unit Management Contract by refusing to
pay him his "commissions," and bonuses. Respondent prayed for the
reliefs.
Respondent filed with the trial court an "Urgent Ex Parte
Motion For Authority To Litigate As Indigent Plaintiff."
The trial court issued an order which allows the plaintiff to
litigate as pauper there being sufficient showing that he is an
indigent. He does not own any real property in the City of Manila or
elsewhere.
The trial court directs the Clerk of Court to accept the
complaint for filing without payment of filing fees, however, shall
constitute a lien upon any judgment to be rendered in favor of the
plaintiff.
Petitioners filed their separate motions to dismiss the
complaint.
The trial court denied petitioners' motions to dismiss and
petitioners motions for reconsideration.
Petitioners filed a petition for certiorari with prayer for a
temporary restraining order and preliminary injunction with the
Court of Appeals assailing the order of the trial court denying their
motions to dismiss.
The Court of Appeals issued a resolution directing the
issuance of a writ of preliminary injunction restraining the trial court
from conducting further proceedings.
Respondent filed with the Court of Appeals an "Urgent
Notice of Taking of Deposition Upon Oral Examination of Private
Respondent Jorge Valdez For Purposes of the Above-Captioned
Pending Case And For Such Other Legal Purposes As May Be
Warranted By Existing Law and Jurisprudence." It appears that
respondent was already 75 years old and sickly.

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Petitioners filed with the Court of Appeals a petition to
cite respondent in contempt of court. Petitioners alleged that in
filing with the appellate court an urgent notice of taking his
deposition, respondent violated the preliminary injunction issued by
the said court.
The deposition of respondent was taken by Atty. Alberto
A. Aguja, a Notary Public for Manila. On the same date, he filed with
the Court of Appeals respondent's deposition.
The Court of Appeals rendered its decision dismissing the
petitions and lifting and dissolving the writ of preliminary injunction
previously issued for lack of merit.
Hence, the instant consolidated petitions.

Issue:
Whether or not that the Court of Appeals erred in denying
their motion to dismiss respondent's complaint in civil case for
nonpayment of docket fees.

Held:
No. It is hornbook law that courts acquire jurisdiction
over any case only upon payment of the prescribed docket fee. As
we held in Magaspi v. Ramolete, the correct docket fees must be
paid before courts can act on a petition or complaint. The exception
to the rule on payment of docket fees is provided in Section 21, Rule
3 of the 1997 Rules of Civil Procedure, as amended, thus:
SEC. 21. Indigent party. - A party may be authorized
to litigate his action, claim or defense as an indigent if the
court, upon an ex parte application and hearing, is satisfied that
the party is one who has no money or property sufficient and
available for food, shelter and basic necessities for himself and
his family.
Such authority shall include an exemption from
payment of docket and other lawful fees and of transcripts of
stenographic notes which the court may order to be furnished
him. The amount of the docket and other lawful fees which the
indigent was exempted from paying shall be a lien on any
judgment rendered in the case favorable to the indigent, unless
the court otherwise provides.
Any adverse party may contest the grant of such
authority at any time before judgment is rendered by the trial
court. If the court should determine after hearing that the party
declared as an indigent is in fact a person with sufficient
income or property, the proper docket and other lawful fees
shall be assessed and collected by the clerk of court. If payment
is not made within the time fixed by the court, execution shall
issue or the payment thereof, without prejudice to such other
sanctions as the court may impose.

The guidelines for determining whether a party
qualifies as an indigent litigant are provided for in Section 19, Rule
141, of the Revised Rules of Court, which reads:

SEC. 19. Indigent litigants exempt from payment of legal
fees. - INDIGENT LITIGANT (A) WHOSE GROSS INCOME AND
THAT OF THEIR IMMEDIATE FAMILY DO NOT EXCEED AN
AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE OF AN
EMPLOYEE AND (B) WHO DO NOT OWN REAL PROPERTY WITH
A FAIR MARKET VALUE AS STATED IN THE CURRENT TAX
DECLARATION OF MORE THAN THREE HUNDRED THOUSAND
PESOS (P300,000.00) SHALL BE EXEMPT FROM THE PAYMENT
OF LEGAL FEES.
The legal fees shall be a lien on any judgment rendered in
the case favorable to the indigent unless the court otherwise
provides.
To be entitled to the exemption herein provided, the
litigant shall execute an affidavit that he and his immediate
family do not earn a gross income abovementioned nor they
own any real property with the fair value aforementioned,
supported by an affidavit of a disinterested person attesting to
the truth of the litigant's affidavit. The current tax declaration,
if any, shall be attached to the litigant's affidavit.
Any falsity in the affidavit of the litigant or disinterested
person shall be sufficient cause to dismiss the complaint or
action or to strike out the pleading of that party, without
prejudice to whatever criminal liability may have been incurred.

For purposes of a suit in forma pauperis, an indigent
litigant is not really a pauper, but is properly a person who is an
indigent although not a public charge, meaning that he has no
property or income sufficient for his support aside from his labor,
even if he is self-supporting when able to work and in employment.
The term "immediate family" includes those members of the same
household who are bound together by ties of relationship but does
not include those who are living apart from the particular household
of which the individual is a member.
In the instant cases, petitioners maintain that
respondent's ex parte motion to litigate as an indigent is defective
since it was not accompanied or supported by the affidavits of his
children, the immediate members of his family. The argument lacks
merit. Section 19 clearly states that it is the litigant alone who shall
execute the affidavit. The Rule does not require that all members of
the litigant's immediate family must likewise execute sworn
statements in support of the petition. Expressio unius est exclusio
alterius.
Petitioners next argue that respondent's ex parte
motion is not supported by sufficient evidence to show his indigent
status. Suffice it to state that the Supreme Court is, first and
foremost, a court of law. It is not its function to analyze and weigh
all over again the evidence or premises supportive of factual
determination. Thus, petitioners cannot now ask the Supreme Court
to review the evidence anew.
The Supreme Court denied the petitions. The challenged
decision of the Court of Appeals is affirmed.


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BRIOSO vs RILI-MARIANO
G.R. No. 132765, January 31, 2003

Facts:
The Spouses Mariano, through the Land Bank of the
Philippines (Land Bank), repurchased the property that they
previously sold to Glicerio Brioso (Glicerio) within the period
specified in the parties' pacto de retro sale. Despite repeated
demands, Glicerio refused to deliver the entire property. The
Spouses Mariano filed a complaint for recovery of possession of real
property. The Spouses Mariano sought to repossess six (6) lots
(properties).
Defendants, through their counsels, Atty. Pardalis and
Salvador, asserted that the Spouses Mariano had no cause of action
against Glicerio because the latter had already lost all interest in the
land. Defendants claimed that Glicerio installed his son Ernesto, his
daughter Concepcion and his employee Eusebio as tenants of the
property before the repurchase, therefore, they were bona fide
cultivators-possessors of the land. Also, the titles to the properties
had already been transferred to the Land Bank. The complaint was
defective as it failed to implead Land Bank and Concepcion's
husband as indispensable parties.
Spouses Mariano amended their complaint to implead
Land Bank and Concepcion spouse, Marcos Nolasco (Marcos).
During the pre-trial, upon the Spouses Mariano's motion,
the complaint was dismissed against Land Bank, Ernesto and
Eusebio. Thereafter, trial against the remaining defendants, namely,
Glicerio, Concepcion, Marcos and Salvador, ensued.
Glicerio died. Defendants, through Atty. Pardalis, filed a
Notice of Death of Glicerio Brioso. Spouses Mariano's counsel filed a
Motion for Substitution of Deceased Defendant which Atty. Pardalis
received. The trial court issued an order admitting the motion of
Atty. Grageda to substitute the deceased defendant Glicerio Brioso.
Trial continued. Defendants adduced their evidence. The
trial court rendered a decision finding and holding that the
preponderance of evidence is in favor of the plaintiffs. Judgment is
rendered in favor of the plaintiffs and against the defendants
Concepcion Brioso-Nolasco and her husband, Salvador Brioso and
the substitute defendants for deceased defendant Glicerio Brioso
who are ordered to pay, jointly and severally, the plaintiffs. The
defendants are also directed to immediately turn over the physical
and material possession of 3 lots to the plaintiffs.
Dissatisfied, Marcos and Glicerio's heirs, namely, Felicidad
Z. Brioso (Felicidad), Bener Z. Brioso (Bener), Julito Z. Brioso (Julito),
Glicerio Z. Brioso, Jr. (Glicerio, Jr.), Ernesto, Concepcion and Salvador
filed an appeal with the Court of Appeals.
In the Court of Appeals, petitioners maintained that the
substitution of Glicerio was invalid as the trial court failed to comply
with the Rules of Court on the substitution of a deceased party.
Considering that the substitution was null and void, petitioners
alleged that the trial court did not acquire jurisdiction over their
persons. Hence, the entire proceedings in the trial court and the
judgment rendered by the trial court were void.
The Court of Appeals sustained the decision of the trial
court. In ruling that there was a valid substitution of the deceased
party, the Court of Appeals quoted Section 17, Rule 3 of the old
Rules of Court. The Court of Appeals held that the trial court
acquired jurisdiction over the persons of the petitioners. Thus, the
decision of the trial court is valid and binding upon all of the
petitioners. The Court of Appeals anchored its ruling on the fact that
the records show that on Atty. Augusto Pardales, counsel for
defendants, filed a notice of death informing the court that
defendant Glicerio R. Brioso died. Counsel for the plaintiffs
accordingly filed a Motion for Substitution of Deceased Defendant.
Heirs of Glicerio Brioso, namely: Mrs. Felicidad Z. Brioso,
Benet Z. Brioso, Julito Z. Brioso, Glicerio Z. Brioso, Jr., Ernesto Z.
Brioso, Concepcion Brioso-Nolasco, and Salvador Z. Brioso, were
made substitute defendants in the case. Their counsels were
definitely aware of such substitution. In fact, one of them, Atty.
Salvador Z. Brioso, was one of the counsels of the defendants. It was
the duty of said counsels to inform the heirs of the substitution after
the court had issued the order granting the motion of the plaintiffs.
Moreover, Ernesto Brioso cannot deny the fact that he
knew of the pendency of the action and the substitution of the heirs
because he participated as a witness for the defendants even after
the case against him was earlier dismissed. The court had acquired
jurisdiction over the persons of the heirs and the judgment is
thereby binding upon all of them.
Court of Appeals denied petitioners Motion for
Reconsideration. Hence, this petition.

Issue:
Whether there was a valid substitution of deceased
Glicerio.

Held:
The petition is partly meritorious.
Petitioners assert that the trial court failed to comply with
the clear language of Section 17, Rule 3 of the old Rules of Court
which provides as follows:

"Death of a party. After a party dies and the claim is not
thereby extinguished, the court shall order, upon proper notice,
the legal representative of the deceased, within a period of
thirty (30) days, or within such time as may be granted. If the
legal representative fails to appear within said time, the court
may order the opposing party to procure the appointment of a
legal representative of the deceased within a time to be
specified by the court, and the representative shall immediately
appear for and on behalf of the interest of the deceased. The
court charges involved in procuring such appointment, if
defrayed by the opposing party, may be recovered as costs. The
heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or
administrator and the court may appoint guardian ad litem for
the minor heirs."

Petitioners allege that, as there was no appointed
administrator for the estate of the deceased defendant, the trial
court should have ordered the heirs to appear personally before it
and manifest whether they were willing to substitute Glicerio.

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Petitioners further aver that if none of the heirs appeared or
manifested to act as substitutes, the trial court should have ordered
the adverse party to procure the appointment of a legal
representative of the deceased who should appear for and on behalf
of the deceased's interest.
Petitioners also harp on their failure to receive a copy of
the Spouses Mariano's motion for substitution of Glicerio as well as
the order of the trial court admitting the motion. Petitioners argue
that, even if they received a copy of the order, the same did not
grant the Spouses Mariano's motion for substitution. Since they
were not aware of the purported substitution because of the lack of
service on them of the motion and the order, petitioners insist that
the entire proceedings in the trial court were void for lack of
jurisdiction over their persons.
It must be pointed out that, contrary to the Spouses
Mariano's view, their complaint for recovery of possession of real
property is an action which survives the death of a party. Such being
the case, the rule on substitution of a deceased party is clearly
applicable.
Under the express terms of Section 17 of the old Rules, in
case of the death of a party and due notice is given to the trial court,
it is the duty of the court to order the deceased's legal
representative or heir to appear for the deceased. Otherwise, "the
trial held by the court without appearance of the deceased's legal
representative or substitution of heirs and the judgment rendered
after trial, are null and void."
Non-compliance with the rule on substitution of a
deceased party renders the proceedings and judgment of the trial
court infirm because the court acquired no jurisdiction over the
persons of the legal representatives or of the heirs on whom the
trial and the judgment would be binding. In other words, a party's
right to due process is at stake, as we enunciated in Vda. de Salazar
v. Court of Appeals, thus

"We should not lose sight of the principle underlying the
general rule that formal substitution of heirs must be
effectuated for them to be bound by a subsequent judgment.
Such had been the general rule established not because the
rule on substitution of heirs and that on appointment of a legal
representative are jurisdictional requirements per se but
because non-compliance therewith results in the undeniable
violation of the right to due process of those who, though not
duly notified of the proceedings, are substantially affected by
the decision rendered therein."

In the instant case, it is true that the trial court, after
receiving a notice of Glicerio's death, failed to order the appearance
of his legal representative or heirs. Instead, the trial court issued an
order merely admitting respondents' motion for substitution. There
was no court order for Glicerio's legal representative to appear, nor
did any such legal representative ever appear in court to be
substituted for Glicerio. Neither did the respondents ever procure
the appointment of such legal representative, nor did Glicerio's heirs
ever ask to be substituted for Glicerio. Clearly, the trial court failed
to observe the proper procedure in substituting Glicerio. As a result,
contrary to the Court of Appeals' decision, no valid substitution
transpired in the present case.
Thus, we rule that the proceedings and judgment of the
trial court are void as to Felicidad, Glicerio, Jr., Bener and Julito.
There is no iota of proof that they were apprised of the litigation
against Glicerio. There is no indication that they authorized Atty.
Pardalis to represent them or any showing that they appeared in the
proceedings. Given these facts, the trial court clearly did not acquire
jurisdiction over their persons. Such being the case, these heirs
cannot be bound by the judgment of the trial court.
Despite the trial court's failure to adhere to the rule on
substitution of a deceased party, its judgment remains valid and
binding on the following heirs, namely, Salvador, Concepcion and
Ernesto. Formal substitution of heirs is not necessary when the heirs
themselves voluntarily appeared, shared in the case and presented
evidence in defense of deceased defendant. This is precisely
because, despite the court's non-compliance with the rule on
substitution, the heirs' right to due process was obviously not
impaired. In other words, the purpose of the rule on substitution of
a deceased party was already achieved. The following facts indicate
plainly that there was active participation of these heirs in the
defense of Glicerio after his death.
First, Salvador and Concepcion were among the original
defendants in the case. Needless to state, the trial court, even
before Glicerio's death, already acquired jurisdiction over the
persons of these heirs. Hence, the rule on substitution of a deceased
party is no longer required as to Salvador and Concepcion because
they were already impleaded as defendants. In fact, Salvador, a
lawyer son of Glicerio, was also one of the counsels for defendants.
Second, the lengthy testimonies of Salvador,
Concepcion and Ernesto show that they defended their deceased
father. Both Concepcion and Salvador testified in defense not only of
themselves but also of their deceased father. As to Ernesto, while he
was dropped as a defendant, he testified and admitted that he was
one of the substitutes of Glicerio. Ernesto understood that he was a
substitute defendant in the case.
Third, Atty. Pardalis continued to represent Glicerio
even after the latter's demise. Acting on Glicerio's behalf, Atty.
Pardalis presented the testimonies of Salvador, Concepcion and
Ernesto, to prove, among others, that Glicerio no longer had any
interest in the Properties. These pieces of evidence clearly negate
petitioners' contention that Atty. Pardalis ceased to be Glicerio's
counsel upon the latter's death.
Assuming that Atty. Pardalis no longer represented
Glicerio after his death, he remained as counsel for Salvador,
Concepcion and Marcos. He should have questioned immediately
the validity of the proceedings absent any formal substitution of
Glicerio. Yet, despite the court's alleged lack of jurisdiction over the
persons of his clients, Atty. Pardalis never bothered to challenge the
same, not until after the trial court rendered its adverse decision.
Lastly, Atty. Pardalis received a copy of respondents'
motion for substitution and the trial court's order admitting the
motion. Upon receipt of the motion and the order, Atty. Pardalis
should have immediately opposed the same for failure to comply
with the rule on substitution. However, Atty. Pardalis did not
question the motion and the order, not until after the trial court

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rendered its decision. His long silence, which certainly binds his
clients, can be construed as defendants' submission to the court's
jurisdiction. The acquiescence of defendants and their counsel on
the trial court's jurisdiction effectively precluded them from
questioning the proceedings in the trial court.
In Ferreria et al. v. Vda. de Gonzales, et al., Manolita
Gonzales (one of the heirs of deceased defendant) was not served
notice and, more importantly, never appeared in court, unlike
Salvador, Concepcion and Ernesto who appeared and even testified
regarding their father's interest in the Properties. In sum, with the
active participation of Salvador, Concepcion and Ernesto, the trial
court acquired jurisdiction over their persons. Accordingly, the
proceedings and the decision of the trial court are valid with respect
to these heirs.
The instant petition is partly granted. The decision of
the Court of Appeals is MODIFIED. As to Bener Brioso, Julito Brioso
and Glicerio Brioso, Jr., the decision of the Regional Trial Court is
void for lack of jurisdiction. As to Felicidad Brioso, Concepcion B.
Nolasco, Marcos Nolasco, Salvador Brioso and Ernesto Brioso, the
decision of the Regional Trial Court is valid.

STATE INVESTMENT HOUSE vs CA
G.R. No. 106795, November 16, 1999

Facts:
Defendant Cheng Ban Yek Co., Inc. (CBY) is a domestic
corporation engaged in the business of manufacturing edible oil
bearing the brand "Baguio Oil", and in the conduct of its business, it
has incurred millions of pesos of obligations with plaintiff-petitioner
State Investment House, Inc. (SIHI) and many other creditors,
including defendant Allied Banking Corporation (Allied).
Defendant CBY, plaintiff SIHI, and other creditors of CBY
entered into an Agreement for the restructuring of CBY's existing
obligations to its creditors, but excluding defendant Allied and other
creditors who did not sign said Agreement.
To secure the prompt and full payment of all amounts
owed by CBY to its creditors who participated in said Agreement and
as required thereunder, the parties thereto executed a Mortgage
Indenture with CBY and FOUR SEAS as Mortgagors and SIHI and 15
other creditors of CBY as mortgagees involving 23 parcels of
registered lands and the improvements therein, which Mortgage
Indenture was subsequently modified several times. As additional
security to said Agreement, the parties also agreed that the Existing
Comprehensive Surety Agreement previously executed by defendant
Alfredo Ching would continue to subsist and that he would remain
jointly and severally liable with CBY for the payment of the amounts
owed by the latter to the creditors who were parties to the
aforesaid Agreement.
CBY defaulted in the payment of its obligations. In a letter,
the CBY Creditors' Committee declared all of CBY's obligations due
and payable. This letter was followed by a letter of plaintiff SIHI
likewise declaring all of CBY's particular obligations to it immediately
due and payable. SIHI notified the Creditors' Committee of CBY that
it would institute proceedings for the enforcement of the remedies
granted under the Mortgage Indenture and in a resolution said
Creditors' Committee authorized SIHI to institute the appropriate
foreclosure proceedings provided that the proceeds of the
foreclosure sale would be distributed and applied to all of CBY's
obligations under the terms of the Agreement.
Plaintiff SIHI filed with the trial court against CBY, FOUR
SEAS and Alfredo Ching, and impleading twenty-two (22) other
creditors of CBY including herein petitioner Allied, allegedly because
they hold inferior or subordinate mortgage rights to the properties
sought to be foreclosed.
Defendant Allied filed its Answer to the complaint, denying
that its interests in the mortgaged properties in question are
subordinate in right to that of plaintiff SIHI; alleging that it was not a
party to the Agreement attached to the complaint and, therefore,
not bound by its provisions; likewise denying that it was a party to
the Fourth Amendatory Agreement also attached to the complaint
which it claimed "was never valid, binding and effective for lack of
consent on the part of the other creditors as shown by the fact that
they did not sign the same"; claiming that defendant CBY owes it the
principal amount P10 million, exclusive of interest, service charges,
penalties, and attorneys fees; alleging that as defendant CBY's
biggest, single, creditor, plaintiff SIHI "was able to work its way and
secure for its representatives/nominees/designees key positions in
defendant CBY, including but not limited to seats with full voting
rights in defendant CBY's Board of Directors, Executive Committee,
and Creditors' Committee, and that in taking control and
management of CBY's operations, it "committed irregularities,
abuses excesses, and other acts inimical to defendant CBY draining
its resources and driving the latter to the financial quagmire it now
faces, to the prejudice of herein defendant creditors", as a
consequence of which acts, CBY allegedly suffered losses of not less
than P50 million or such amount as may be proved at the trial, which
losses it claims represent assets of CBY answerable to its creditors
other than plaintiff SIHI; and that plaintiff should be held liable for
such losses, as well as for defendant Allied's moral damages and
attorney's fees. Defendant Allied prayed for the dismissal of the
complaint or, in the alternative, for plaintiff to be ordered to pay
CBY's creditors including Allied the amount of P50 million to be
deducted from the proceeds of the foreclosure sale of the
mortgaged properties in question to be distributed among CBY's
creditors, and that plaintiff be also ordered to pay Allied moral
damages and attorney's fees.
Plaintiff SIHI, for the consideration of P33 million, entered
into a Deed of Assignment with FIL-NIPPON transferring to the latter
all its rights, interests, claims, and causes of action arising out of the
Agreement and certain promissory notes and mortgages contracts
upon which said civil case was brought, and in which Deed of
Assignment FIL-NIPPON also agreed to assume all the obligations of
SIHI as party-plaintiff in said civil case.
FIL-NIPPON filed a "Motion for Substitution of Party
Plaintiff" in lieu of plaintiff SIHI, which motion was opposed by
defendant Allied on the grounds that it has a counterclaim against
SIHI arising from irregularities, excesses, abuses and inimical acts

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committed by it in managing defendant CBY; that as long as said
counterclaim has not been finally resolved, the substitution of
plaintiff SIHI would be improper; and that if at all, FIL-NIPPON can
intervene and be a co-plaintiff.
The trial court granted the motion for substitution and
denied Allieds motion for reconsideration.
Allied filed a petition for certiorari in the Court of Appeals
(CA). The CA granted the petition and ordered SIHI to continue as
plaintiff with the other private respondent FIL-NIPPON ordered
impleaded therein as co-plaintiff.
CA ruled that even without substitution, Fil-Nippon, as
assignee of all of SIHI's rights, interests claims and causes of action
arising out of the Agreement, would be bound by any judgment for
or against SIHI. SIHI had no choice but to actively participate in the
civil case in order to defend its assignee Fil-Nippon against Allied's
permissive counterclaim. Fil-Nippon cannot be substituted as debtor
under said counterclaim without its consent in view of Art. 1293 of
the Civil Code which provides that novation which consists in
substituting a new debtor in the place of the original one cannot be
made without the consent of the creditor.

Issue:
Whether or not CA erred in ruling that the substitution of
SIHI by its assignee Fil-Nippon is improper.

Held:
No. Supreme Court (SC) found no merit in the petition.
The rule on substitution of parties in case of transfer of
interest is found in Section 19, Rule 3, which states:

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.

It has been held that a transferee pendente lite does not
have to be included or impleaded by name in order to be bound by
the judgment because the action or suit may be continued for or
against the original party or the transferor and still be binding on the
transferee.
SC has ruled that a transferee pendente lite is a proper
party in the case but it is not an indispensable party.
CA did not err in ruling that SIHI should continue to be the
plaintiff, and Fil-Nippon should be impleaded as co-plaintiff. The
order of the trial court authorizing the substitution of parties failed
to take into account the fact that there is a counterclaim for
damages contained in Allied Bank's Answer arising from the alleged
inimical acts committed by SIHI in manipulating the operations of
CBY that drained the latter's resources to the prejudice of its
creditors. The counterclaim for damages is severable and
independent of SIHI's cause of action under the Agreement entered
into by SIHI, CBY and other creditors of CBY for the restructuring of
CBY's existing obligations. As aptly ruled by the CA, the alleged acts
of SIHI that gave rise to the complaint (counterclaim) for damages
do not arise out of the foreclosure of mortgage which is the subject
of civil case.
Although Fil-Nippon became an assignee of all of SIHI's
rights, interests, claims, and causes of action arising out of the
Agreement, the counterclaim for actual and moral damages and
attorney's fees filed by Allied Bank was in no way contemplated in
the assignment. It was accordingly error to discharge SIHI as original
plaintiff from the case.
The CA also correctly pointed out that Fil-Nippon could not
be substituted as debtor of Allied with respect to the counterclaim
for damages without the latter's consent.

Art. 1293 of the Civil Code of the Philippines
Novation which consists in substituting a new debtor in the
place of the original one, may be made even without the
knowledge or against the will of the latter but not without the
consent of the creditor. . . ."

Private respondent SIHI anwered that the above-quoted
article finds no application to this case because Sec. 17.7 of the
Agreement which it and its creditors had executed expressly allows
the assignment which it had made in favor of FIL-NIPPON. But Allied
was not a party to the Agreement in question as shown by the fact
that it never signed the same; hence, it is not bound by said
Agreement including the provision therein allowing the parties to
assign their respective rights thereunder.
No reversible error in the decision and resolution appealed
from, the instant petition is denied.

Alternative defendants
PERPETUAL SAVINGS BANK vs FAJARDO
G.R. No. 79760, June 28,1993

Facts:
J.J. Mining and Exploration Corporation (J.J. Mining)
executed and delivered to petitioner Perpetual Savings Bank (Bank)
a promissory note in the amount of 750,000.00 payable in one
lump sum upon maturity with interest at 23% per annum. The note
also contained, inter alia, a clause providing for penalty interest at
the rate of 3% per month on the amount due, compounded
monthly. The promissory note was executed for J.J. Mining by
respondents Fajardo and Del Mundo who are said to be officers of
J.J. Mining; respondent Del Mundo was also counsel for J.J. Mining.
Upon maturity of the promissory note, neither J.J. Mining
nor anyone else paid the amount of the indebtedness,
notwithstanding petitioner's repeated written demands for
payment.
Petitioner Bank filed a complaint with the Regional Trial
Court (RTC) against J.J. Mining, Jose Emmanuel Jalandoni and
respondents Fajardo and Del Mundo, for collection of the amounts

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due under the promissory note. In its complaint petitioner Bank
alleged, among other things, the following:

Defendants Fajardo and Del Mundo are impleaded herein as
agents/or representatives of Defendant Corporation who were
signatories in the Promissory Note or alternatively, in their
personal capacities if it be shown that they contracted the loan
fully knowing that the Defendant Corporation would be unable
to pay the same upon maturity and/or that they used the
proceeds of the loan for their own personal benefit;
Defendant Jose Jalandoni is impleaded herein in his
personal capacity also as alternative Defendant, as the owner
of 94% of the subscribed capital stock Defendant Corporation if
it be shown that the corporate privilege of Defendant
Corporation was used by Defendant Jalandoni to secure the
loan and the proceeds thereof for his own personal benefit fully
knowing that the Defendant Corporation was with inadequate
capital to meet its debts and thereby evade the obligation
under the Promissory Note.
Defendant Corporation for value received thru
Defendants Fajardo and Del Mundo, executed and delivered to
Plaintiff a Promissory Note in the sum of 750,000.00 payable
in lumpsum upon maturity with interest at 23% per annum.
Upon maturity of the Promissory Note, Defendants
defaulted and failed to satisfy the entire amount of
indebtedness.
Per the records of the Securities & Exchange
Commission, the paid-up capital of Defendant Corporation
amounts to only 100,000.00.
Pursuant to such records, Defendant Jalandoni and
his spouse Maria Theresa Jalandoni own 94 % of the total
shares of stock of Defendant Corporation giving them total
control of the corporation.
Despite the fact that the paid up capital of Defendant
Corporation was only 100,000.00 it managed to borrow
750,000.00 from Plaintiff Bank secured only by shares of stocks
of Pamana Mining Corp. also owned by Defendant Jalandoni.

Respondents Fajardo and Del Mundo filed a Motion to
Dismiss on the ground that the complaint had failed to state a cause
of action against them. Petitioner Bank filed an Opposition to the
Motion to Dismiss, citing paragraph 1.6 of its complaint and
invoking, among other things, Section 13, Rule 3 of the Rules of
Court, provides that:

Alternative defendants. Where the plaintiff is uncertain
against which of several persons he is entitled to relief, he may
join any or all of them as defendants in the alternative,
although aright to relief against one may be inconsistent with a
right to relief against the other.

The RTC denied respondents' Motion to Dismiss and
denied respondents motion for reconsideration.
Respondents went directly to the Supreme Court (SC) on
Petition for Certiorari. SC referred the case to the Court of Appeals
(CA). CA granted respondents' petition and reversed and set aside
trial court's orders and dismissed Bank's complaint.
Bank brought Petition for Review on Certiorari.

Issue:
Whether or not the rule on alternative defendants set out
in Section 13, Rule 3 of the Rules of Court applicable to the case at
bar.

Held:
Paragraph 1.6 of petitioner Bank's complaint:
Defendants Fajardo and Del Mundo are impleaded herein as
signatories in the Promissory Note or alternatively, in their
personal capacities if it be shown that they contracted the loan
fully knowing that the Defendant Corporation would be unable
to pay the same upon maturity, and/or that they used the
proceeds of the loan for their own personal benefit.

Examination of paragraph 1.6 shows that petitioner Bank
there seeks to distinguish between (a) respondents Fajardo and Del
Mundo in their capacity as "agents and/or representative of" J.J.
Mining; and (b) respondents Fajardo and Del Mundo in their
individual and personal capacities. As noted earlier, the text of the
promissory note shows that respondents Fajardo and Del Mundo
had signed for and in behalf of J.J. Mining.
Respondents Fajardo and Del Mundo were, in the same
complaint, and in the alternative, sued in their personal and
individual capacities.
Analysis of the allegations of the petitioner Bank's
complaint thus shows that the defendants who are being sued in the
alternative are the following:

(a) the borrowing corporation, J.J. Mining; and

(b) respondents Fajardo and Del Mundo in their personal and
individual capacities,

SC observes that the CA found that Section 13, Rule 3 of
the Rules of Court not applicable to the present case. The Court of
Appeals said on this point:

Bank also invokes the rule on alternative defendants found in
Section 13, Rule 3 of the Revised Rules of Court.

Private respondent was never "uncertain" against which of
several persons it is entitled to relief. As shown in the
complaint which were previously cited, it was dead sure, as
night follows day, that the "defendant corporation for value
received thru" petitioners, "executed and delivered to plaintiff
a promissory note" for the amount P750,000.00.

SC believes that the CA was in error. Firstly, the state of
mind of petitioner Bank whether it was "uncertain" or whether it
was "dead sure as night follows day" against which of several
defendants it is entitled to relief is, of course, immaterial, except

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to the extent that such state of minds is externalized by the
allegations of the complaint. Petitioner Bank in its complaint, had
pleaded, with sufficient clarity, its claimed rights against alternative
defendants: the borrower corporation and respondents Fajardo and
Del Mundo. That the rights pleaded against the borrower
corporation are prima facie inconsistent with the rights pleaded
against respondents Fajardo and Del Mundo, is also clear: either the
borrower corporation alone is liable; or respondents Fajardo and Del
Mundo are alone liable in lieu of J.J. Mining; or respondents Fajardo
and Del Mundo are solidarily liable with J.J. Mining.
The essential thing is that petitioner Bank must be given
an opportunity to prove its allegations in all necessary detail at the
trial on the merits. There the respondents will have the opportunity
to controvert and refute petitioner's detailed assertions.
Court of Appeals decision is reversed and set aside. The
trial courts orders are reinstated. This case is remanded to the trial
court for further proceedings not inconsistent with this Decision.

PUENTEVELLA vs FAR EASTERN AIR TRANSPORT
G.R. No. L-4958, March 30, 1954

Facts:
This action was instituted in the Court of First Instance by
the plaintiffs, who are owners of certain lands adjacent to the City of
Bacolod which the U.S. Army converted into an airfield, known as
the Bacolod City Airstrip No. 2, to recover from the defendants the
value of the use and occupation of said airfield by them.
The lands in question were occupied by the U.S. Army. It
constructed thereon, with or without the consent of the owners,
permanent improvements in the form of runways for the landing
and taking-off of planes, parking places therefor, and approaches
thereto. It afterwards entered into a contract of lease with the
owners, by virtue of which the United States Government was given
authority to use and occupy the lands in question for the period
from April 1, 1945, to October 15, 1945, at a monthly rental.
In November 1945, the defendant Far Eastern Air
Transport, Inc. (FEATI) began to use the said airstrip. Formal
authority for its use was extended by the U.S. Army on November
23, 1945. When the FEATI began to use the airstrip, the owner of the
lands occupied by the airstrip objected to the Army authorities, and
also appealed to the American High Commissioner in the Philippines,
as well as the manager of the FEATI, for a clarification of the status
of the airstrip, but nothing was done in this respect. One of the
owners later learned that the U.S. Army continued occupying the
airstrip, and while no objection thereto was made, he did object to
the use of the airstrip by the Commonwealth Government. As early
as April 20, 1946, the Commonwealth Government, through the
Director of the Bureau of Aeronautics, had offered to lease the lands
covered by the airstrip, and it advised the plaintiffs that the
Commonwealth Government was under the obligation of furnishing
airway facilities and airports to all transportation companies and
that it was willing to deal with the owners for a lease of their
properties. In spite of the absence of any action on the offer of
lease, the Bureau of Aeronautics maintained and operated the
airstrip for the purpose of commercial operations from April 1946
and had sufficient funds to pay for the lease of the lands included in
the airfield. The owners expressly stated to the Bureau of
Aeronautics that while "they are willing to give the fullest
cooperation to the Republic insofar as the use by the Government of
their properties, . . . , they reserve to themselves the right of full
enjoyment of ownership and the fruits thereof, in their particular
dealing with the private air lines engaged in commercial aviation."
This status of the occupation of the airstrip appears to be
in a nebulous state, although it can be clearly inferred from the
various documents presented at the trial that even after the
termination of the period of the lease signed by the U.S. Army,
which lease was originally to end in October, 1945, the U.S. Army
continued occupying the airstrip. On April 22, 1947, it was formally
transferred from the Foreign Liquidation Commission to the Surplus
Property Commission at the procurement cost of $116,760. The
Surplus Property Commission adopted the policy of retaining the
Bacolod Airstrip No. 2, as the Bureau of Aeronautics had requested it
for the furtherance of civil aviation. In this connection, it may be
well to note that since July 31, 1946, the Bureau of Aeronautics had
advised the defendant Philippine Air Lines that the Bacolod Airstrip
had already been released by the U.S. Army, and that the said
Bureau was assuming the responsibility of paying rentals for said
strip. On August 29, 1946, it certified that all landing fields and
airports in the Philippines, including that of the City of Bacolod, are
maintained and operated by it and are available to all aircraft of
Philippine registry, free of landing charges, in line with the policy of
the Government to promote civil aviation.
The FEATI, Philippine Air Lines and the Commercial Air
Lines began using the airstrip in question.
Plaintiffs sought to make the defendants directly
responsible to them for the use of the airstrip, irrespective of and
notwithstanding the fact that the U.S. Army and subsequently the
Bureau of Aeronautics of the Commonwealth Government, actually
occupied, maintained, and operated the airways for the benefit of
commercial aviation.
FEATI alleged as special defense that the Bacolod Airstrip
has become an airport and landing field open and available to all
commercial aircraft by virtue of the provisions of law and in
accordance with the regulations issued by the Bureau of
Aeronautics. The Philippine Air Lines alleged as special defense that
the airstrip is maintained by the Government of the Republic of the
Philippines, under the control and administration of the Director of
the Bureau of Aeronautics, and that the responsibility for the
payment of rentals to the owners rested on the Bureau of
Aeronautics.
The lower court held that the defendants did not properly
derive the authority to use the airstrip from the United States Army
of Liberation; that the obligations of the Bureau of Aeronautics to
provide landing fields for companies engaged in commercial aviation
refers only to airstrip legally acquired by the government and that
since the Bureau of Aeronautics recognized the plaintiffs as entitled

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to rentals, it is estopped from alleging that it can dispose of these
properties without the consent of the owners; and that as the acts
of the defendants are not justified in law, they are directly
responsible to the plaintiffs for the value of the use and enjoyment
of the properties in question.

Issue:
Whether or not the trial court erred in not ordering the
inclusion of the Philippine Government (or the Bureau of
Aeronautics) as an indispensable party in the final determination of
the issues raised by the defendants.

Held:
Yes. A careful consideration of the circumstances
surrounding the use of the airfield by the defendants clearly reveals
that any responsibility that they may have for their use of the
airfield can not be distinguished or dissociated from that of the
Bureau of Aeronautics. In the first place, the U.S. Army gave the
defendants the authority to use the airfield. After the turn-over of
the airfield to the Philippine Government was made, the Bureau of
Aeronautics occupied the airfield, maintained and operated it, and,
pursuant to the policy that the Philippine Government had adopted
of furnishing airport facilities in the interest of commercial aviation
(Commonwealth Act No. 168, section 6 (c)), it assured the
defendants that it would itself obtain the lease of the land from the
owners. Certainly, no separate or distinct responsibility for the use
of the airstrip on the part of the defendants may arise
independently of that of the Bureau of Aeronautics, not only
because the latter and the defendants jointly occupied the airstrip,
but mainly because the said Bureau permitted and encouraged the
defendants to use the airstrip, assuring them that it had the
necessary funds to pay for the use and occupation of the lands. The
defendants can not be held liable without making the Bureau of
Aeronautics partly or wholly responsible for said liability. The
decision appealed from itself discloses the necessity of a finding as
to the Bureau of Aeronautics also. It declared that the Bureau of
Aeronautics is estopped from alleging that it can dispose of the
properties without the consent of the plaintiffs, as it recognizes that
the latter are entitled to rentals. The Bureau of Aeronautics has so
much interest in the controversy, and its responsibility for the relief
sought so bound up with the defendants, that its presence as a party
to the action is an absolute necessity, without which the lower court
should not have proceeded. Furthermore, it has been held that it is
enough that the absence of a party may leave the controversy in
such a situation that the final determination may be inconsistent
with equity and good conscience. To hold the defendants liable
without determining the corresponding liability of the Bureau of
Aeronautics, which permitted and encouraged the defendants to
use the airstrip, would be clearly iniquitous.
It would be noted that the provisions of the code
procedure on parties were taken from the rules of equity and not
from the rule of common law, and, therefore, a great amount of
latitude is allowed in the inclusion of the parties to a case. The
evident aim and intent of the rules regarding the joinder of
indispensable and necessary parties is the complete determination
of all possible issues, not only between parties themselves but also
as regards to other persons who may be affected by the judgment.
Pursuant to this intent, we hold that the Bureau of Aeronautics is an
indispensable party in so far as the determination of the liability of
the defendants for the use of the airstrip is concerned.
The principle involved has been briefly stated as follows:

Where the result of the suit is dependent upon the validity of
the right or title of an absent person, as suit for an injunction
against one who is acting under the charter of another, or a suit
between lessees of different persons for the same property,
the absent party is indispensable.

The judgment is set aside and the case ordered remanded
to the court a quo, with the instruction that the Bureau of
Aeronautics be made a party defendant, and that thereafter the
action proceed in accordance with the rules.

RELUCIO vs LOPEZ
G.R. No. 138497, January 16, 2002

Facts:
Respondent filed before the RTC-Makati, a Petition for
Appointment as Sole Administratrix of Conjugal Partnership of
Properties, Forfeiture, etc. against her husband, Alberto Lopez, and
the herein petitioner.
She alleged that sometime in 1968, her husband
abandoned her and their 4 legitimate children and maintained an
illicit relationship and cohabited with petitioner Relucio; that his
husband arrogated unto himself the full and exclusive control and
administration of the conjugal properties, spending and using the
same for his sole gain and benefit to the exclusion of their family;
that during his cohabitation with the petitioner since 1976, they
have amassed a fortune (commercial and residential lots, cars,
buildings, stockholdings, etc.), which were registered under their
names (Alberto and Imelda) singly or jointly; that their conjugal
properties has been sold, disposed of, or alienated, and either spent
the proceeds thereof by Alberto for his sole benefit and that of the
petitioner and their 2 illegitimate children or permanently and
fraudulently placed them beyond the reach of the respondent and
their children.
Petitioner then filed a Motion to Dismiss contending that
the respondent has no cause of action against her.
The trial court denied her motion holding that she is
impleaded as a necessary or indispensable party because some of
the subject properties are registered in her name and Alberto, or
solely in her name. Her motion for reconsideration was likewise
denied. She appealed with the CA via petition for certiorari, but it
was also denied as well as her motion for reconsideration. Hence,
the present petition for review.

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Issue:
Whether or not the petitioners inclusion as party
defendant is essential in the proceedings for a complete
adjudication of the controversy.

Held:
NO. A real party in interest is one who stands "to be
benefited or injured by the judgment of the suit." In this case,
petitioner would not be affected by any judgment in special
proceedings case filed by the respondent.
If petitioner is not a real party in interest, she cannot be an
indispensable party. An indispensable party is one without whom
there can be no final determination of an action. Petitioner's
participation in the case is not indispensable. Certainly, the trial
court can issue a judgment ordering Alberto J. Lopez to make an
accounting of his conjugal partnership with respondent, and give
support to respondent and their children, and dissolve Alberto J.
Lopez' conjugal partnership with respondent, and forfeit Alberto J.
Lopez' share in property co-owned by him and petitioner. Such
judgment would be perfectly valid and enforceable against Alberto J.
Lopez.
Nor can petitioner be a necessary party in the case. A
necessary party as one who is not indispensable, but who ought to
be joined as party if complete relief is to be accorded those already
parties, or for a complete determination or settlement of the claim
subject of the action. In the context of her petition in the lower
court, respondent would be accorded complete relief if Alberto J.
Lopez were ordered to account for his alleged conjugal partnership
property with respondent, give support to respondent and her
children, turn over his share in the co-ownership with petitioner and
dissolve his conjugal partnership or absolute community property
with respondent.
Judgment: WHEREFORE, the Court GRANTS the petition
and REVERSES the decision of the Court of Appeals. The Court
DISMISSES Special Proceedings M-3630 of the Regional Trial Court,
Makati, Branch 141 as against petitioner.
NOTE: The Supreme Court also ruled that the respondent
has no cause of action against the petitioner because nowhere in
the allegations does it appear that relief is sought against the
petitioner, it is all against her husband, and that the petitioner has
nothing to do will all the relief prayed for by the respondent.

DE GALICIA vs MERCADO
G.R. No. 146744, March 6, 2006
Background of the case:
Petitioner was a business partner of Carmen Arciaga in RCL
Enterprises. He was asked by Arciaga to co-sign with her a Philbank
check for P50,000.00 payable to cash. Allegedly, without his
knowledge and consent, Arciaga rediscounted the check with
respondent Mercado at 8% interest. Later, respondent presented
the check for payment but it was dishonored for insufficiency of
funds. Mercado then filed a complaint for estafa and for violation of
BP Bldg. 22 against petitioner and Arciaga.
Petitioner countered by filing before the RTC-Manila, a
case for the declaration of nullity of the agreement to pay interest
between respondent and his partner, Arciaga, praying that the
agreement, together with the rediscounted check, be declared void
for being contrary to public policy.
After trial, the RTC ruled to dismiss the case for lack of
jurisdiction and the corresponding MR thereto was denied, holding
that the complaint is one for recovery of a sum of money; Arciaga, as
one of the parties in the rediscounting agreement was not a party to
the case; and that the amount of P50,000.00 is below the
jurisdictional amount vested in the RTC. Hence, the filing of this
petition under Rule 45, on a pure questions of law.

Issue:
Whether or not Arciaga, as one of the parties in the
rediscounting agreement, should be impleaded as defendant

Held:
YES, notwithstanding the RTCs jurisdiction on the subject
case, the SC sustains the dismissal of the subject complaint for its
failure to implead an indispensable party.
Under Rule 3, Section 7 of the 1997 Rules of Civil
Procedure, an indispensable party is a party-in-interest without
whom there can be no final determination of an action. The
interests of such indispensable party in the subject matter of the suit
and the relief are so bound with those of the other parties that his
legal presence as a party to the proceeding is an absolute necessity.
As a rule, an indispensable partys interest in the subject
matter is such that a complete and efficient determination of the
equities and rights of the parties is not possible if he is not joined.
Here, we hold that Arciaga was an indispensable party to
the suit filed by petitioner against respondent. Her interest in the
suit was intertwined with the rights and interest of both petitioner
and respondent. She was as involved in the suit as petitioner and
respondent, being a co-signatory of the re-discounted check and
being privy to the assailed agreement. Had the subject complaint
been resolved on the merits, any judgment made by the trial court
was going to affect not only respondent but Arciaga as well.
Unfortunately, due to the failure of petitioner to implead her in the
complaint, any judgment therein could not bind her. It was as if the
complaint had not been filed at all.
Citing Aracelona v. Court of Appeals, the Court held that
the joinder of all indispensable parties must be made under any and
all conditions, their presence being a sine qua non (meaning:
without this essential ingredient, nothing would occur or there is
nothing) for the exercise of the judicial power.
There, we ruled that when an indispensable party is not
before the court, the action should be dismissed. It is interesting to
note that petitioner filed the subject complaint after respondent
initiated a complaint for estafa and violation of BP 22. The filing of
the complaint for declaration of nullity of the agreement to pay
interest and the nullity of the check appeared to be an afterthought
and an attempt to affect the outcome of the criminal complaint
against him. WHEREFORE, the petition is hereby DENIED.

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FLORES vs HON. MALLARE-PHILLIPPS
G.R. No. L-66620, September 24, 1986

Background of the case:
Appeal by certiorari from the Order of the respondent
Judge, without attaching a copy of his complaint in the erroneous
belief that the entire original record of the case shall be transmitted
to SC.

Facts:
As can be gleaned from the Order appealed from,
petitioner Flores filed a complaint before the RTC against Binongcal
and Calion. The first cause of action was against Binongcal for
alleged refusal to pay the cost of truck tires which he purchased on
credit from the petitioner on various occasions from August to
October 1981 in the amount of P11,643.00; and the second cause of
action was against Calion for allegedly refusing to pay the cost of
truck tires which he also purchased on credit on several occasions
from March 1981 to January 1982 in the amount of P10,212.00.
The counsel of Binongcal filed a Motion to Dismiss for lack
of jurisdiction since the amount of the demand against him was only
P11,643.00 which is outside the jurisdiction of RTC; he also alleged
that although the totality of the complaint amounts to more than
P20,000.00, his obligation was separate and distinct from that of the
other respondent (Calion). During the hearing of the said motion,
the counsel for Calion joined in moving for the dismissal of the
complaint. The RTC dismissed the complaint for lack of jurisdiction
over the opposition of the petitioner. Hence, the present appeal by
certiorari.

Issue:
Whether or not the totality rule is applicable in the
present case.

Held:
NO, the SC ruled that the application of the totality rule
under Sec. 33(l) of BP 129 and Sec. 11 of the Interim Rules is subject
to the requirements for permissive joinder of parties under Sec. 6 of
Rule 3 which provides as follows:
Permissive joinder of parties.- All persons in whom or
against whom any right to relief in respect to or arising out of the
same transaction or series of transactions is alleged to exist,
whether jointly, severally, or in the alternative, may, except as
otherwise provided in these rules, join as plaintiffs or be joined as
defendants in one complaint, where any question of law or fact
common to all such plaintiffs or to all such defendants may arise in
the action; but the court may make such orders as may be just to
prevent any plaintiff or defendant from being embarrassed or put to
expense in connection with any proceedings in which he may have
no interest.
There is no difference between the former and present
rules in cases where a plaintiff sues a defendant on two or more
separate causes of action. In such cases, the amount of the demand
shall be the totality of the claims in all the causes of action
irrespective of whether the causes of action arose out of the same
or different transactions. If the total demand exceeds twenty
thousand pesos, then the regional trial court has jurisdiction.
Needless to state, if the causes of action are separate and
independent, their joinder in one complaint is permissive and not
mandatory, and any cause of action where the amount of the
demand is twenty thousand pesos or less may be the subject of a
separate complaint filed with a metropolitan or municipal trial court.
Under the present law, the totality rule is applied also to
cases where two or more plaintiffs having separate causes of action
against a defendant join in a single complaint, as well as to cases
where a plaintiff has separate causes of action against two or more
defendants joined in a single complaint. However, the causes of
action in favor of the two or more plaintiffs or against the two or
more defendants should arise out of the same transaction or series
of transactions and there should be a common question of law or
fact, as provided in Section 6 of Rule 3.
In other words, in cases of permissive joinder of parties,
whether as plaintiffs or as defendants, under Section 6 of Rule 3, the
total of all the claims shall now furnish the jurisdictional test.
Needless to state also, if instead of joining or being joined in one
complaint, separate actions are filed by or against the parties, the
amount demanded in each complaint shall furnish the jurisdictional
test. In the case at bar, the lower court correctly held that the
jurisdictional test is subject to the rules on joinder of parties
pursuant to Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules
of Court and that, after a careful scrutiny of the complaint, it
appears that there is a misjoinder of parties for the reason that the
claims against respondents Binongcal and Calion are separate and
distinct and neither of which falls within its jurisdiction.
WHEREFORE, the order appealed from is affirmed, without
pronouncement as to costs.

NOTES: Sec. 33(l) of BP 129:
Provided, that where there are several claims or causes
of action between the same or different parties, embodied in the
same complaint, the amount of the demand shall be the totality of
the claims in all the causes of action, irrespective of whether the
causes of action arose out of the same or different transactions.

Section 11 of Interim Rules:
Application of the totality rule.- In actions where the
jurisdiction of the court is dependent on the amount involved, the
test of jurisdiction shall be the aggregate sum of all the money
demands, exclusive only of interest and costs, irrespective of
whether or not the separate claims are owned by or due to different
parties. If any demand is for damages in a civil action, the amount
thereof must be specifically alleged.
Section 88 of the Judiciary Act of 1948 as amended which
reads as follows:
... Where there are several claims or causes of action
between the same parties embodied in the same complaint, the
amount of the demand shall be the totality of the demand in all the
causes of action, irrespective of whether the causes of action arose
out of the same or different transactions; but where the claims or
causes of action joined in a single complaint are separately owned

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by or due to different parties, each separate claim shall furnish the
jurisdictional test. ...

Case doctrines:
Vda. de Rosario vs. Justice of the Peace, 99 Phil. 693: ,
"where the claims or causes of action joined in a single complaint
are separately owned by or due to different parties, each separate
claim shall furnish the jurisdictional test" (Section 88 of the Judiciary
Act of 1948 as amended, supra).
As worded, the former rule applied only to cases of
permissive joinder of parties plaintiff. However, it was also
applicable to cases of permissive joinder of parties defendant

Brillo vs. Buklatan, thus: Furthermore, the first cause of
action is composed of separate claims against several defendants of
different amounts each of which is not more than P2,000 and falls
under the jurisdiction of the justice of the peace court under section
88 of Republic Act No, 296. The several claims do not seem to arise
from the same transaction or series of transactions and there seem
to be no questions of law or of fact common to all the defendants as
may warrant their joinder under Rule 3, section 6. Therefore, if new
complaints are to be filed in the name of the real party in interest
they should be filed in the justice of the peace court. (87 Phil. 519,
520, reiterated in Gacula vs. Martinez, 88 Phil. 142, 146)
The difference between the former and present rules in
cases of permissive joinder of parties may be illustrated by the two
cases which were cited in the case of Vda. de Rosario vs. Justice of
the Peace (supra) as exceptions to the totality rule.

Soriano y Cia vs. Jose (86 Phil. 523): where twenty-nine
dismissed employees joined in a complaint against the defendant to
collect their respective claims, each of which was within the
jurisdiction of the municipal court although the total exceeded the
jurisdictional amount, this Court held that under the law then the
municipal court had jurisdiction. In said case, although the plaintiffs'
demands were separate, distinct and independent of one another,
their joint suit was authorized under Section 6 of Rule 3 and each
separate claim furnished the jurisdictional test.

International Colleges, Inc. vs. Argonza (90 Phil. 470):
where twenty-five dismissed teachers jointly sued the defendant for
unpaid salaries, this Court also held that the municipal court had
jurisdiction because the amount of each claim was within, although
the total exceeded, its jurisdiction and it was a case of permissive
joinder of parties plaintiff under Section 6 of Rule 3.
Under the present law, the two cases above cited
(assuming they do not fall under the Labor Code) would be under
the jurisdiction of the regional trial court. Similarly, in the abovecited
cases of Brillo vs. Buklatan and Gacula vs. Martinez (supra), if the
separate claims against the several defendants arose out of the
same transaction or series of transactions and there is a common
question of law or fact, they would now be under the jurisdiction of
the regional trial court.
PLASABAS vs CA
G.R. No. 166519, March 31, 2009

Facts:
Petitioners filed before the CFI (now RTC) a complaint for
recovery of title to property with damages against the respondents
over a parcel of coconut land declared under a tax declaration in the
name of Nieves, praying that judgment be rendered confirming their
rights and legal title to the subject property and ordering the
defendants to vacate the occupied portion and to pay damages.
Respondents denied the allegation of ownership
contending that the subject property was inherited by all the parties
from their common ancestor, Francisco Plasabas.
In the course of the trial, it was revealed that Nieves was
not the sole and absolute owner of the property, but also her
siblings, Jose, Victor and Victoria.
After resting their case, respondents raised in their
memorandum the argument that the case should have been
terminated at inception for petitioners failure to implead
indispensable parties the co-owners (Jose, Victor and Victoria).
The trial court dismissed without prejudice the case
without ruling on the merits, holding that some important
indispensable consideration is conspicuously wanting or missing, as
observed by the defendants and based its ruling under Section 7,
Rule 3 of the Rules of Court which provides:
x x x Compulsory joinder of indispensable parties.
Parties in interest without whom no final determination can be had
of an action shall be joined either as plaintiffs or defendants.
It also held that the petitioners have no complete legal
personality to sue by themselves alone without joining her siblings
who are as indispensable as Nieves in the final determination of the
case. Not impleading them, any judgment would have no
effectiveness. They are that indispensable that a final decree would
necessarily affect their rights, so that the lower court cannot
proceed without their presence.
Aggrieved, petitioners elevated the case to the CA which
affirmed the ruling of the lower court, and further declared that the
non-joinder of the indispensable parties would violate the principle
of due process. With the denial of their motion for reconsideration,
petitioners filed the instant petition.

Issue:
Whether or not petitioners siblings (Jose, Victor and
Victoria) are indispensable parties

Held:
NO. Petitioners, in their complaint, do not have to implead
their co-owners as parties. The only exception to this rule is when
the action is for the benefit of the plaintiff alone who claims to be
the sole owner and is, thus, entitled to the possession thereof. In
such a case, the action will not prosper unless the plaintiff impleads
the other co-owners who are indispensable parties.
Here, the allegation of petitioners in their complaint that
they are the sole owners of the property in litigation is immaterial,
considering that they acknowledged during the trial that the

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property is co-owned by Nieves and her siblings, and that petitioners
have been authorized by the co-owners to pursue the case on the
latters behalf. Impleading the other co-owners is, therefore, not
mandatory, because, as mentioned earlier, the suit is deemed to be
instituted for the benefit of all.
In any event, the trial and appellate courts committed
reversible error when they summarily dismissed the case, after both
parties had rested their cases following a protracted trial
commencing in 1974, on the sole ground of failure to implead
indispensable parties.
The rule is settled that the non-joinder of indispensable
parties is not a ground for the dismissal of an action. The remedy is
to implead the non-party claimed to be indispensable. Parties may
be added by order of the court on motion of the party or on its own
initiative at any stage of the action and/or at such times as are just.
If petitioner refuses to implead an indispensable party despite the
order of the court, the latter may dismiss the complaint/petition for
the plaintiffs/petitioner's failure to comply therewith.
WHEREFORE, premises considered, the instant petition is
GRANTED, and the case is REMANDED to the trial court for
appropriate proceedings. The trial court is further DIRECTED to
decide on the merits of the civil case WITH DISPATCH.

NOTE: An indispensable party is a party who has such an
interest in the controversy or subject matter that a final adjudication
cannot be made, in his absence, without inquiring or affecting such
interest; a party who has not only an interest of such a nature that a
final decree cannot be made without affecting his interest or leaving
the controversy in such a condition that its final determination may
be wholly inconsistent with equity and good conscience.
Article 487 of the Civil Code provides that any one of the co-
owners may bring an action for ejectment. The article covers all
kinds of actions for the recovery of possession, including an accion
publiciana and a reivindicatory action. A co-owner may file suit
without necessarily joining all the other co-owners as co-plaintiffs
because the suit is deemed to be instituted for the benefit of all. Any
judgment of the court in favor of the plaintiff will benefit the other
co-owners, but if the judgment is adverse, the same cannot
prejudice the rights of the unimpleaded co-owners.

NUFABLE vs NUFABLE
G.R. No. 126950, July 2, 1999

REMEDIAL LAW; CIVIL PROCEDURE; PLEADINGS; OBJECTIONS NOT
PLEADED IN THE ANSWER ARE DEEMED WAIVED. Petitioners
contend that DBP was never impleaded as party defendant when it
was the duty of private respondents to implead the bank and ask for
the annulment of documents evidencing the banks ownership of
the disputed land. Private respondents, however, alleged that the
non-inclusion of DBP as a necessary party was not questioned by
petitioners from the time the Complaint was filed until the case was
finished. It was only after the adverse decision by the respondent
Court of Appeals that petitioners raised the issue. As petitioners
never raised this issue in their Answer, pursuant to Section 2, Rule 9
of the Rules of Court, defenses and objections not pleaded either in
a motion or in the answer are deemed waived.

ID.; ID.; PARTIES; INDISPENSABLE AND NECESSARY PARTIES;
ELUCIDATED. The rule is that indispensable parties, i.e., parties in
interest without whom no final determination can be had of an
action, shall be joined either as plaintiffs or defendants; the
inclusion as a party being compulsory. On the other hand, in case of
proper or necessary parties, i.e., persons who are not indispensable
but ought to be parties if complete relief is to be accorded as
between those already parties, the court may, in its discretion,
proceed in the action without making such persons parties, and the
judgment rendered therein shall be without prejudice to the rights
of such persons. Proper parties, therefore, have been described as
parties whose presence is necessary in order to adjudicate the
whole controversy, but whose interests are so far separable that a
final decree can be made in their absence without affecting them.
Any claim against a party may be severed and proceeded with
separately.

ID.; ID.; ID.; NECESSARY PARTY IN CASE AT BAR NEED NOT BE
IMPLEADED. Private respondents do not question the legality of
the foreclosure of the mortgaged property and the subsequent sale
of the same to DBP. The subject property was already purchased by
petitioner Nelson from DBP and the latter, by such sale, transferred
its rights and obligations to the former. Clearly, petitioners interest
in the controversy is distinct and separable from the interest of DBP
and a final determination can be had of the action despite the non-
inclusion of DBP as party-defendant. Hence, DBP, not being an
indispensable party, did not have to be impleaded in this case.

Facts:
Edras Nufable owned a parcel of an untitled land. He died
in August 1965 and was survived by his children, namely: Angel
Custodio, Generosa, Vilflor and Marcelo. A petition for probate of
will was filed by the heirs before the CFI and was admitted in an
Order issued by the CFI. In June 1996, the settlement of estate of the
late Esdras was approved by the same court, and, as therein stated,
the heirs have agreed that the untitled parcel of land remains
undivided for community ownership. However, two months earlier
(March 1966) from said approval, Angel and wife mortgaged the
entire parcel of land to DBP until it was foreclosed in 1973. Later, in
1980, Nelson, the son of Angel, purchased the same lot from DBP.
Generosa, Vilflor and Marcelo then filed an action to annul
fraudulent transactions, to quiet title and to recover damages
against the herein petitioners (without impleading DBP). The Court
of Appeals reversed the appealed decision and set aside, and ruled
that the plaintiffs are the rightful co-owners of the subject property
and entitled to possession of 3/4 southern portion thereof and
Nelson to 1/4 portion. Nelson filed a motion for reconsideration but
it was denied for lack of merit. Hence, the present petition.


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Issue:
Whether or not the DBP is an indispensable party in this
case

Held:
NO. Private respondents do not question the legality of
the foreclosure of the mortgaged property and the subsequent sale
of the same to DBP. The subject property was already purchased by
petitioner Nelson from DBP and the latter, by such sale, transferred
its rights and obligations to the former. Clearly, petitioners interest
in the controversy is distinct and separable from the interest of DBP
and a final determination can be had of the action despite the non-
WHEREFORE, there being no reversible error in the
decision appealed from, the petition for review on certiorari is
hereby DENIED.
NOTE: It should be stated that petitioners never raised this
issue in their Answer and pursuant to Section 2, Rule 9 of the Rules
of Court, defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived.
Nonetheless, the rule is that indispensable parties, i.e.,
parties in interest without whom no final determination can be had
of an action, shall be joined either as plaintiffs or defendants; the
inclusion as a party being compulsory. On the other hand, in case of
proper or necessary parties, i.e., persons who are not indispensable
but ought to be parties if complete relief is to be accorded as
between those already parties, the court may, in its discretion,
proceed in the action without making such persons parties, and the
of such persons. Proper parties, therefore, have been described as
parties whose presence is necessary in order to adjudicate the
whole controversy, but whose interests are so far separable that a
final decree can be made in their absence without affecting them.
Any claim against a party may be severed and proceeded with
separately.
Another issue:
When Esdras died in 1965, his heirs acquired successional
rights over the property. Hence, Angel and wife had no rights to
morttgage the entire property. The fact that DBP succeeded in
consolidating ownership over the same in its name does not
terminate the existing co-ownership. It merely held that portion
thereof in trust for the private respondents. And when Nelson
purchased the said property, he merely stepped into the shoes of
DBP and acquired whatever rights and obligations appertaining
thereto.
REPUBLIC vs HERBIETO
G.R. No. 156117, May 26, 2005

Facts:
Jeremias and David Herbieto filed with the MTC a single
application for registration of two parcels of land, Lots No. 8422 and
8423 (Subject Lots), located in Cabangahan, Consolacion,
Cebu. They claimed that they purchased from their parents the
subject lots. They submitted set of documents including
Certifications by the Community Environment and Natural
Resources Office (CENRO) of the DENR on its finding that the Subject
Lots are alienable and disposable, by virtue of Forestry
Administrative Order.
Republics argument: Petitioner Republic filed an
Opposition to the respondents application. (1) Respondents failed
to comply with the period of adverse possession of the Subject Lots
required by law; (2) Respondents muniments of title were not
genuine; (3) The Subject Lots were part of the public domain.
All owners of the land adjoining the Subject Lots were sent
copies of the Notice of Initial Hearing. It was posted in a conspicuous
place on the Subject Lots, as well as on the bulletin board of the
municipal building where the Subject Lots were located. The Notice
was also published in the Official Gazette and The Freeman Banat
News.
MTC (1) Ordering the registration and confirmation of
the title of the subject lots; (2) MTC Order declaring its judgment as
final and executor; (3) Directing the Administrator of the Land
Registration Authority (LRA) to issue a decree of registration for the
Subject Lots.
CA affirmed the ruling of the MTC.
Hence, this petition.

Issues:
1. Whether or not MTC had jurisdiction over the case.
2. Whether or not the Subject Lots were part of the public domain
belonging to the Republic and were not subject to private
appropriation.

Held:
Issue #1: Whether or not MTC has jurisdiction over the
case.
The Court held that the MTC had no jurisdiction to
proceed with and hear the application for registration but for
reasons different from those presented by petitioner Republic. The
misjoinder of causes of action and parties does not affect the
jurisdiction of the MTC to hear and proceed with respondents
application for registration.
Petitioners argument: Respondents filed a single
application for registration of the Subject Lots even though they
were not co-owners. Respondents were actually seeking the
individual and separate registration of Lots No. 8422 and 8423.
Republic believes that the procedural irregularity committed by the
respondents was fatal to their case, depriving the MTC of jurisdiction
to proceed with and hear their application for registration of the
Subject Lots. Incorrect

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This procedural lapse committed by the respondents
should not affect the jurisdiction of the MTC to proceed with and
hear their application for registration of the Subject Lots.
The Property Registration Decree recognizes and expressly
allows the following situations: (1) the filing of a single application
by several applicants for as long as they are co-owners of the parcel
of land sought to be registered; and (2) the filing of a single
application for registration of several parcels of land provided that
the same are located within the same province.
The Property Registration Decree is silent, however, as to
the present situation wherein two applicants filed a single
application for two parcels of land, but are seeking the separate and
individual registration of the parcels of land in their respective
names. Since the Property Registration Decree failed to provide for
such a situation, then this Court refers to the Rules of Court to
determine the proper course of action.
Considering every application for land registration filed in
strict accordance with the Property Registration Decree as a single
cause of action, then the defect in the joint application for
registration filed by the respondents with the MTC constitutes a
misjoinder of causes of action and parties. Instead of a single or
joint application for registration, respondents should have filed
separate applications for registration.
Misjoinder of causes of action and parties do not involve a
question of jurisdiction of the court to hear and proceed with the
case. They are not even accepted grounds for dismissal thereof.
Instead, under the Rules of Court, the misjoinder of causes of action
and parties involve an implied admission of the courts
jurisdiction. It acknowledges the power of the court, acting upon
the motion of a party to the case or on its own initiative, to order
the severance of the misjoined cause of action, to be proceeded
with separately (in case of misjoinder of causes of action); and/or
the dropping of a party and the severance of any claim against said
misjoined party, also to be proceeded with separately (in case of
misjoinder of parties).
The misjoinder of causes of action and parties in the
present Petition may have been corrected by the MTC motu
propio or on motion of the petitioner Republic. It is regrettable,
however, that the MTC failed to detect the misjoinder when the
application for registration was still pending before it; and more
regrettable that the petitioner Republic did not call the attention of
the MTC to the fact by filing a motion for severance of the causes of
action and parties, raising the issue of misjoinder only before this
Court.
Respondents, however, failed to comply with the
publication requirements mandated by the Property Registration
Decree, thus, the MTC was not invested with jurisdiction as a land
registration court.
A land registration case is a proceeding in rem, and
jurisdiction in rem cannot be acquired unless there be constructive
seizure of the land through publication and service of notice. Section
23 of the Property Registration Decree requires that the public be
given Notice of the Initial Hearing of the application for land
registration by means of (1) publication; (2) mailing; and (3) posting.
In the case at bar, the initial hearing was set by the MTC
on Sept. 3, 1999. The Notice was printed in the issue of the Official
Gazette on Aug. 2, 1999, and officially released on Aug. 10, 1999. It
was published in The Freeman Banat News, a daily newspaper
printed in Cebu City and circulated in Cebu and in the rest of Visayas
and Mindanao, only on Dec. 19, 1999.
The late publication is tantamount to no publication at all.
MTC failed to constructively seize the Subject Lots and to acquire
jurisdiction over the application for registration. The MTC Judgment
ordering the registration and confirmation of the title, as well as the
MTC Order declaring its judgment final and executory, and directing
the LRA Administrator to issue a decree of registration for the
Subject Lots, are both null and void for having been issued by the
MTC without jurisdiction.

Issue #2: Whether or not the Subject Lots were part of
the public domain belonging to the Republic and were not subject
to private appropriation.
Respondents failed to comply with the required period of
possession of the Subject Lots for the judicial confirmation or
legalization of imperfect or incomplete title. Their application filed
with the MTC did not state the statutory basis for their title to the
Subject Lots. They only alleged that they obtained title to the
Subject Lots by purchase from their parents on 25 June 1976. No
public land can be acquired by private persons without any grant,
express or implied, from the government; and it is indispensable
that the person claiming title to public land should show that his title
was acquired from the State or any other mode of acquisition
recognized by law.
Respondents application for registration of the Subject
Lots must have complied with the substantial requirements under
Section 48(b) of the Public Land Act and the procedural
requirements under the Property Registration Decree.
Petition, granted.

Class suit
MATHAY vs THE CONSOLIDATED BANK & TRUST CO.
G.R. No. L-23136, Augsut 26, 1974

The complaint in this case as a class suit contained six
causes of action.

First cause of action:
Plaintiffs-appellants claim that they were stockholders in
the Consolidated Mines, Inc. (CMI). The stockholders of the CMI,
including the plaintiffs-appellants, passed a Resolution.
xxx (c) that all stockholders of the CMI would be entitled to
subscribe to the capital stock of the proposed Bank; (d) That the
Board of Directors of the CMI be authorized to declare a "special
dividend" in an amount it would fix, which the subscribing
stockholders might authorize to be paid directly to the treasurer of
the proposed Bank in payment of the subscriptions. xxx
Plaintiffs-appellants claim that the President and members
of the Board of Directors of the CMI, who are the individuals-

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defendants-appellees in the instant case, constituted themselves as
the Interim Board of Organizers. The Board sent out to the CMI
stockholders circular letters with "Pre-Incorporation Agreement to
Subscribe" forms that provided that the payment of the subscription
should be made in cash from time to time or by the application of
the special dividend declared by the CMI, otherwise such
subscription right shall be deemed to have been waived and
released in favor of the Board of Organizers of the Defendant Bank
and their assignees.
The Board of Organizers caused the execution of the
Articles or Incorporation of the proposed Bank indicating an original
subscription of 50,000 shares worth P5,000,000 subscribed and paid
only by six of the individuals-defendants-appellees thereby
excluding the plaintiffs-appellants and the other CMI subscribing
stockholders who had already subscribed. The execution of said
Articles of Incorporation was in violation of law and in breach of
trust and contractual agreement as a means to gain control of
Defendant Bank by Defendant Individuals and persons or entities
chosen by them and for their personal profit or gain in disregard of
the rights of Plaintiffs and other CMI Subscribing Stockholders.
The individuals-defendants-appellees and the persons
chosen by them had unlawfully acquired stockholdings in the
defendant-appellee Bank in excess of what they were lawfully
entitled and held such shares "in trust" for the plaintiffs-appellants
and the other CMI stockholders.
As relief on the first cause of action, plaintiffs-appellants
prayed that the subscriptions and share holdings acquired by the
individuals-defendants- appellees and the persons chosen by them,
to the extent that plaintiffs-appellants and the other CMI
stockholders had been deprived of their right to subscribe, be
annulled and transferred to plaintiffs-appellants and other CMI
subscribing stockholders.

Second cause of action: Plaintiffs-appellants claim that the
defendants-appellees A. Madrigal, J. Madrigal, Caram, Jr., and
Tecson "falsely certified to the calling of a special stockholders'
meeting allegedly pursuant to due notice and call of Defendant
Bank" although plaintiffs-appellants and other CMI stockholders
were not notified, and amended the Articles of Incorporation
increasing the number of Directors from 6 to 7, and had the illegally
created Position of Director filled up by defendant-appellee
Olondriz, who was not competent or qualified to hold such position.

Third cause of action: Plaintiffs-appellants claimed actual damages
in an amount equivalent to the difference between the par value of
the shares they were entitled, but failed, to acquire and the higher
market value of the same shares.

Fourth, fifth and sixth causes of action: Moral and exemplary
damages, and attorney's fees respectively.

Sevilla, one of the original plaintiffs, withdrew. Azada,
Pertierra, de Stevens (who later withdrew as intervenors-appellants)
and de Amoyo, filed a motion to intervene, and to join the plaintiffs-
appellants on record.
Defendants-appellees, except Caram, Jr., filed a motion to
dismiss because plaintiffs-appellants had no legal standing or
capacity to institute the alleged class suit.
Appellants, plaintiffs and intervenors, filed a verified
petition for a writ of preliminary injunction to enjoin defendants-
appellees from considering or ratifying by resolution, at the meeting
of the stockholders of defendant-appellee Bank to be held, the
unlawful apportionment of the shares of the defendant-appellee
Bank and the illegal amendment to its Articles of Incorporation
increasing the number of Directors. The Court, after hearing,
granted the writ, but subsequently set it aside upon the appellees'
filing a counter bond.
Defendants-appellees, except Caram, Jr., filed a motion to
dismiss. The stockholders, except Caram, Jr., who abstained, had
unanimously, at their regular annual meeting held, ratified and
confirmed all the actuations of the organizers-directors in the
incorporation, organization and establishment of the Bank.

RTC granted the motion to dismiss. The class suit could not
be maintained because of the absence of a showing in the complaint
that the plaintiffs-appellants were sufficiently numerous and
representative, and that the complaint failed to state a cause of
action.

CA affirmed the ruling of the RTC. Hence, this appeal.
Appellants argument: The propriety of a class suit should
be determined by the common interest in the subject matter of the
controversy. A common interest in this case consisted not only in
the recovery of the shares of which the appellants were unlawfully
deprived, but also in divesting the individuals-defendants-appellees
and the person or entities chosen by them of control of the appellee
Bank. The court should have treated the suit as an action under Rule
3, section 6, of the Rules of Court which permits a joinder of parties.
Defendants-appellees argument:
The plaintiffs-appellants did not sue in their individual capacities for
the protection of their individual interests. That the plaintiffs
appellants of record could not be considered numerous and
representative, as said plaintiffs-appellants were only four out of
1,500 stockholders, and owned only 8 shares out of the 80,000
shares of stock of the appellee Bank.

Issues:
(1) Whether the instant action could be maintained as a class suit.
(2) Whether the complaint stated a cause of action.

Held:
Issue #1: Whether the instant action could be maintained
as a class suit.
Section 12 of Rule 3 of the Rules of Court provides that:
Sec. 12. Class suit When the subject matter of the controversy is
one of common or general interest to many persons, and the parties
are so numerous that it is impracticable to bring them all before the
court, one or more may sue or defend for the benefit of -ill. But in
such case the court shall make sure that the parties actually before it
are sufficiently numerous and representative so that all interests

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concerned are fully protected. Any party in interest shall have a right
to intervene in protection of his individual interest.
Elements for the maintenance of a class suit:
(1) That the subject matter of the controversy be one of common or
general interest to many persons, and
(2) That such persons be so numerous as to make it impracticable to
bring them all to the court.
An action does not become a class suit merely because it is
designated as such in the pleadings. Whether the suit is or is not a
class quit depends upon the attending facts, and the complaint, or
other pleading initiating the class action should allege the existence
of the necessary facts, to wit, the existence of a subject matter of
common interest, and the existence of a class and the number of
persons in the alleged class,

in order that the court might be enabled
to determine whether the members of the class are so numerous as
to make it impracticable to bring them all before the court, to
contrast the number appearing on the record with the number in
the class and to determine whether claimants on record adequately
represent the class and the subject matter of general or common
interest.
The complaint in the instant case explicitly declared that
the plaintiffs-appellants instituted the "present class suit under
Section 12, Rule 3, of the Rules of Court in behalf of CMI subscribing
stockholders"

but did not state the number of said CMI subscribing
stockholders so that the trial court could not infer, much less make
sure as explicitly required by the sufficiently numerous and
representative in order that all statutory provision, that the parties
actually before it were interests concerned might be fully protected,
and that it was impracticable to bring such a large number of parties
before the court.
The statute also requires, as a prerequisite to a class suit,
that the subject-matter of the controversy be of common or general
interest to numerous persons. By the phrase "subject matter of the
action" is meant "the physical facts, the things real or personal, the
money, lands, chattels, and the like, in relation to which the suit is
prosecuted, and not the delict or wrong committed by the
defendant."
The interest that appellants, plaintiffs and intervenors, and
the CMI stockholders had in the subject matter of this suit the
portion of stocks offering of the Bank left unsubscribed by CMI
stockholders who failed to exercise their right to subscribe was
several, not common or general in the sense required by the statute.
Each one of the appellants and the CMI stockholders had
determinable interest; each one had a right, if any, only to his
respective portion of the stocks. No one of them had any right to, or
any interest in, the stock to which another was entitled.

Issue #2: Whether the complaint stated a cause of action.
Section 3 of Rule 6 of the Rules of Court provides that the
complaint must state the ultimate facts constituting the plaintiff's
cause of action. Hence, where the complaint states ultimate facts
that constitute the three essential elements of a cause of action, the
complaint states a cause of action; otherwise, the complaint must
succumb to a motion to dismiss on that ground.
Pursuant to the first cause of action: The facts did not
show that appellants were entitled to subscribe to the capital stock
of the proposed Bank, for said right depended on a condition
precedent, which was, that they were qualified under the law to
become stockholders of the Bank, and there was no direct averment
in the complaint of the facts that qualified them to become
stockholders of the Bank. The allegation of the fact that they
subscribed to the stock did not, by necessary implication, show that
they were possessed of the necessary qualifications to become
stockholders of the proposed Bank. Pursuant to the second cause of
action: The calling of a special meeting was "falsely certified", that
the seventh position of Director was "illegally created" and that
defendant Olondriz was "not competent or qualified" to be a
director are mere conclusions of law, the same not being necessarily
inferable from the ultimate facts stated in the first and second
causes of action. The third, fourth, fifth and sixth causes of action
depended on the first cause of action did not state ultimate facts
sufficient to constitute a cause of action. Said causes of action would
also be fatally defective.
The complaint failed to state ultimate facts to constitute a
cause of action, it becomes unnecessary to discuss the other
assignments of errors.
Petition, dismissed.

Class suit
JUANA COMPLEX I HOMEOWNERS ASSOCIATION vs FIL-ESTATE
LAND INC.
G.R. No. 152272, March 5, 2012

Facts:
Juana Complex I Homeowners Association, Inc. (JCHA),
together with individual residents of Juana Complex I and other
neighboring subdivisions instituted a complaint for damages, in its
own behalf and as a class suit representing the regular commuters
and motorists of Juana Complex I and neighboring subdivisions who
were deprived of the use of La Paz Road, against Fil-Estate Land,
Inc. (Fil-Estate), Fil-estate Ecocentrum Corporation (FEEC), La Paz
Housing & Development Corporation (La Paz), and Warbird Security
Agency and their respective officers (collectively referred as Fil-
Estate, et al.).
JCHA, et al. were regular commuters and motorists who
constantly travelled towards the direction of Manila and Calamba.
They used the entry and exit toll gates of South Luzon
Expressway (SLEX) by passing through right-of-way public road
known as La Paz Road. They had been using La Paz Road for more
than 10 years. In August 1998, Fil-estate excavated the La Paz Road
which led to SLEX so JCHA, et al. would not be able to pass through
the said road. The La Paz Road was restored by the residents to
make it passable but Fil-estate excavated the road again. JCHA
reported the matter to the Municipal Government and the Office of
the Municipal Engineer but the latter failed to repair the road to
make it passable and safe to motorists and pedestrians. The act of
Fil-estate in excavating La Paz Road caused inconvenience to the

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commuters and motorists because traffic was re-routed to narrow
streets that caused terrible traffic congestion and hazard. Its
permanent closure would not only prejudice their right to free and
unhampered use of the property but would also cause great damage
and irreparable injury.
JCHA, et al. prayed for the immediate issuance of a TRO or
a writ of preliminary injunction (WPI) to enjoin Fil-Estate, et al. from
stopping and intimidating them in their use of La Paz Road.
RTC A TRO was issued ordering Fil-Estate, et al, to stop
preventing or harassing the commuters and motorists from using
the La Paz Road. RTC issued an Order

granting the WPI and required
JCHA, et al. to post a bond. In its MR, Fil-Estate, et al. claims that
JCHA, et al. failed to satisfy the requirements for the issuance of a
WPI. RTC, in its Omnibus Order, denied both the motion to dismiss
and the motion for reconsideration filed by Fil-Estate, et al. Fil-
Estate, et al. filed a petition for certiorari and prohibition before the
CA to annul (1) the Order and (2) the Omnibus Order.
Fil-Estates argument:
(1) Complaint failed to state a cause of action and that it was
improperly filed as a class suit.
(2) JCHA, et al. failed to show that they had a clear and unmistakable
right to the use of La Paz Road; and
(3) La Paz Road was a torrens registered private road and there was
neither a voluntary nor legal easement constituted over it.
CA The CA ruled that the complaint sufficiently stated a
cause of action. It sustained the RTC ruling that the complaint was
properly filed as a class suit.
Hence, these petitions (G.R. No. 152272 and G.R. No.
152397) for review.

Issues:
(1) Whether or not the complaint states a cause of action;
(2) Whether the complaint has been properly filed as a class suit;
and
(3) Whether or not a WPI is warranted.

Held:
Issue 1: Whether or not the complaint states a cause of
action --- The Court finds the allegations in the complaint sufficient
to establish a cause of action.
JCHA, et al.s averments in the complaint show a
demandable right over La Paz Road. These are: (1) their right to use
the road on the basis of their allegation that they had been using the
road for more than 10 years; and (2) an easement of a right of way
has been constituted over the said roads. There is no other road as
wide as La Paz Road existing in the vicinity and it is the shortest,
convenient and safe route towards SLEX Halang that the commuters
and motorists may use.
There is an alleged violation of such right committed by Fil-
Estate, et al. when they excavated the road and prevented the
commuters and motorists from using the same. JCHA, et al.
consequently suffered injury and that a valid judgment could have
been rendered in accordance with the relief sought therein.

Issue 2: Whether the complaint has been properly filed as
a class suit --- The Court finds the opposition without merit.
Section 12, Rule 3 of the Rules of Court defines a class suit,
as follows:
Sec. 12. Class suit. When the subject matter of the
controversy is one of common or general interest to many
persons so numerous that it is impracticable to join all as
parties, a number of them which the court finds to be
sufficiently numerous and representative as to fully
protect the interests of all concerned may sue or defend
for the benefit of all. Any party in interest shall have the
right to intervene to protect his individual interest.

The necessary elements for the maintenance of a class suit
are:
1) the subject matter of controversy is one of common or general
interest to many persons;
2) the parties affected are so numerous that it is impracticable to
bring them all to court; and
3) the parties bringing the class suit are sufficiently numerous or
representative of the class and can fully protect the interests of all
concerned.

In this case, the suit is clearly one that benefits all
commuters and motorists who use La Paz Road.
As correctly ruled by the CA, the closure and excavation of
the La Paz Road, is initially shown to be of common or general
interest to many persons. The records reveal that numerous
individuals have filed manifestations with the lower court, conveying
their intention to join private respondents in the suit and claiming
that they are similarly situated with private respondents for they
were also prejudiced by the acts of petitioners in closing and
excavating the La Paz Road. Moreover, the individuals sought to be
represented by private respondents in the suit are so numerous that
it is impracticable to join them all as parties and be named
individually as plaintiffs in the complaint. These individuals claim to
be residents of various barangays in Bian, Laguna and other
barangays in San Pedro, Laguna.

Issue 3: Whether or not a WPI is warranted.
A writ of preliminary injunction is available to prevent a
threatened or continuous irremediable injury to parties before their
claims can be thoroughly studied and adjudicated. The requisites for
its issuance are: (1) The existence of a clear and unmistakable right
that must be protected; and (2) An urgent and paramount necessity
for the writ to prevent serious damage.
JCHA, et al. failed to establish a prima facie proof of
violation of their right to justify the issuance of a WPI. Their right to
the use of La Paz Road is disputable since they have no clear legal
right therein. The case should be further heard by the RTC so that
the parties can fully prove their respective positions on the issues.
Petitions, denied.


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Suits against entities without juridical personality
LAPANDAY vs ESTITA
G.R. No. 162109, January 21, 2005

Facts:
The instant petition involves a vast tract of an agricultural
land located at Malalag, Davao del Sur. The land was leased by the
Government to Orval Hughes for a period of 25 years under Lease
Application No. 815 (E-172). The lease expired, it having been
extended for 3 years. Hughes died and was survived by his 5 heirs
who then filed their Sales Application with the Bureau of
Lands. Teodulo Tocao, et al., filed a protest against the sales
application.
The Office of the President (OP) gave due course to the
applications to cover only 317 but awarded 399 hectares to 133
protesters [led by Teodulo Tocao] at 3 hectares each. The Ministry of
Natural Resources issued an Order implementing said decision.
However, the 133 petitioners listed in the said Order were not in
possession of the land allotted to them. So, they formed the
Malalag Land Petitioners Association, Inc. (The Association) headed
by one Cecilio R. Mangubat Sr.
On the other hand, those in possession of the land sought
the assistance of the Malalag Ventures Plantation Inc., in its
development into a viable banana production project to which the
corporation acceded.
The SC in Minister of Natural Resources vs. Heirs of Orval
Hughes sustained the OP decision and it became final and
executory.
The association, through its president Mr. Mangubat, sent
a letter to the management of petitioner Lapanday Group of
Companies, Inc. manifesting that they were no longer interested in
the government grant under the Order of the Ministry of Natural
Resources and offered to transfer and waive whatever interest they
have over the subject land for a monetary consideration.
Mr. Mangubat was the first to relinquish his right for
P54,000.00. The individual respondents allegedly followed suit. He
facilitated the relinquishment in the Office of the Commission on the
Settlement of Land Problems (COSLAP).
The individual respondents filed [against Lapanday and/or
L.S. Ventures, Inc., the Heirs of Orval Hughes, the DENR/COSLAP and
Cecilio Mangubat, Sr.] the following cases: forcible entry,
reinstatement, nullification of affidavits of quitclaims,
relinquishment, waiver and any other documents on disposition of
lands before the Provincial Agrarian Reform Adjudication Board
(PARAD). They alleged that since 1947, they had been the share
tenants-tillers, openly and continuously, of the late Orval Hughes
and his heirs and they remained as such on the 317 hectares land.
They further averred against Lapanday and/or L.S.
Ventures, Hughes heirs and Cecilio Mangubat Sr., conspiring
together, misled them to receive P54,000.00 each as rentals on their
respective landholdings and deceived to sign receipts in English
which turned out to be affidavits of quitclaims in favor of the
petitioner.
Lapanday Agricultural & Development Corporation
opposed said actions for being factually and legally baseless, there
being no entity by the name of Lapanday and L.S. Ventures Inc.
which has agricultural operation in Davao del Sur. The fact is that
said company had already merged with Lapanday Agricultural and
Development Corporation.
DAR Provincial Agrarian Reform Adjudicator rendered
judgment in favor of the Malalag Ventures Plantation, Inc. and
declared the property as covered by the Comprehensive Agrarian
Reform Program or CARP. The heirs of Orval Hughes were ordered
to reinstate the Malalag Land Petitioners Association. Leasehold
tenancy shall be observed collectively.
Upon MR, Provincial Agrarian Reform Adjudicator
modified his decision by directing Lapanday and/or L.S. Ventures,
Inc. to turn over the area involved for CARP coverage, and ordering
the Hughes heirs to reinstate the members of the Davao del Sur
Farmers Association (DASUFRA) as leasehold tenants of the subject
land.
The Lapanday and/or L.S. Ventures, Inc. appealed to the
Department of Agrarian Reform Adjudication Board (DARAB). The
DARAB held that the Provincial Agrarian Reform Adjudicator had no
jurisdiction to declare the entire 716-hectare landholding as covered
by the CARP and that the only issue within his competence is to find
out whether sufficient grounds exist to warrant respondents
dispossession from the 317-hectare portion thereof which was
earlier awarded to the heirs of Orval Hughes.
The Provincial Adjudicators resolution was therefore
modified, 1. Ordering heirs of Orval Hughes to vacate the premises
of the 133 hectares which were awarded to 133 awardees;
2. Ordering respondents Lapanday and/or L.S. Ventures and Hughes
heirs to restore petitioners Maximo Estita, et al., to their respective
farmlots within the 317 hectares owned by the Hughes Heirs; and
3. Declaring the nullity of the quitclaims allegedly executed by
petitioners.

Lapanday and/or L.S. Ventures, Inc., this time under the
name Lapanday Agricultural & Development Corporation elevated
the case to the CA.
CA upheld the validity of the DARAB decision. The
individual respondents who received the amount of P54,000.00
were ordered to return the same to the petitioner.

Issues:
(1) Whether or not the Department of Agrarian Reform thru its
Provincial Agrarian Reform Adjudicator, the DARAB and the Court of
Appeals all erred in assuming jurisdiction over an issue covering a
public land. No
(2) Whether or not the above-mentioned bodies erred in rendering
judgment against Lapanday and/or L.S. Ventures, Inc. even as it is
not a real party-in-interest in the case. No

Held:
Issue #1: Whether or not the Department of Agrarian
Reform thru its Provincial Agrarian Reform Adjudicator, the DARAB
and the Court of Appeals all erred in assuming jurisdiction over an
issue covering a public land. No
The land in question has ceased to be public, as in fact it is
already titled. As found by both the DARAB and the CA, the 317-

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hectare land awarded to the Hughes Heirs is covered by an original
certificate of title No. P-4712, and its existence was never refuted by
the petitioner. CARP covers all public and private agricultural lands,
with the DAR vested with primary jurisdiction to determine and
adjudicate, through its adjudication boards, agrarian reform
matters, and exclusive jurisdiction over all matters involving the
implementation of the agrarian reform program,
[13]
we rule and so
hold, contrary to petitioners assertion, that the DAR, thru its
Provincial Agrarian Reform Adjudicator at Digos, Davao del Sur
correctly took cognizance of the case in the first instance.

Issue #2: Whether or not the above-mentioned
government bodies erred in rendering judgment against Lapanday
and/or L.S. Ventures, Inc. even as it is not a real party-in-interest in
the case. No
Petitioners argument: The DARAB decision, as affirmed by
the CA, ordering Lapanday and/or L.S. Ventures Inc. to restore
Maximo Estita et al. to their respective farm lots within the 317
hectares owned by the Hughes Heirs, has no valid force and effect
against petitioner because it is not a real party-in-interest, pointing
out that Lapanday and/or L.S. Ventures, Inc., are separate and
distinct from petitioners corporate personality. Petitioner asserts
that Lapanday has no juridical personality, while the corporate life
of L.S. Ventures Inc. has ceased when said entity merged with
petitioner in 1996. Incorrect
It is basic in the law of procedure that misjoinder of parties
is not a ground for the dismissal of an action, as parties may be
dropped or added by order of the court on motion of any party or on
its own initiative at any stage of the proceedings and on such terms
as are just. Also, there is the rule that objections to defects in parties
should be made at the earliest opportunity, that is, at the moment
such defect becomes apparent, by a motion to strike the names of
the parties wrongly impleaded. For, objections to misjoinder cannot
be raised for the first time on appeal.
In the case at bar, petitioner did not file a motion to strike
its name in all the proceedings below. As correctly found by the CA,
petitioner corporation filed an Answer thereby submitting to the
jurisdiction of the Board. The same answer bears the name
LAPANDAY AND/OR L.S. VENTURES, INC., signed by its
representative amd assisted by its counsel. This alone negates the
petitioners stance that there is no entity by the name of Lapanday
and that L.S. Ventures, Inc. is seperate and distinct from any
company. Such admission made by the petitioner in the course of
the proceedings in this case, does not require proof. Petitioners
filing of an Answer has thereby cured whatever jurisdictional defect
it now raises.
Assuming that Lapanday does not have a juridical
personality, it may nonetheless be sued under such a name
considering that respondents commonly know petitioner by the
name Lapanday Group of Companies. Under Section 15, Rule 3, of
the 1997 Rules of Civil Procedure,
SEC. 15. Entity without juridical personality as defendant.
When two or more persons not organized as an entity
with juridical personality enter into a transaction, they
may be sued under the name by which they are generally
or commonly known

Petitioners argument: Respondents are not real parties-
in-interest and are bereft of any legal personality to file and initiate
the complaint for forcible entry, etc. before the office of the
Provincial Agrarian Reform Adjudicator because they are not tenant-
tillers of the land in dispute. Therefore, respondents are not entitled
to be restored thereto. Incorrect
The Provincial Agrarian Reform Adjudicator, the DARAB
and the Court of Appeals were one in upholding the tenancy status
of the respondents. The evidence adduced by the respondents
clearly indicate that they were tenant-tillers of the 317-hectare land
owned by the heirs of Orval Hughes. The heirs of Orval Hughes as
former landlords of the respondents, never denied the tenancy
status of the latter, as in fact they did not even bother to answer
respondents complaint for forcible entry, etc. As tenant-tillers of
the 317-hectare land owned by the heirs of Orval Hughes,
respondents are undeniably parties-in-interest to this controversy.
As such, they have the legal personality to institute the action in the
office of the Provincial Agrarian Reform Adjudicator.
Petitioners argument: The respondents interests over the
subject land have already been waived when quitclaims to that
effect were allegedly executed and signed by them. Incorrect
Waivers of rights and/or interests over landholdings awarded by the
government are invalid for being violative of the agrarian reform
laws. Petition, denied.

LAVIA vs CA
G.R. No. 78295, April 10, 1989

Two petitions were filed before the SC:
(1) GR No. 78295 contempt resolution of the CA, and
(2) GR No. 79917 its decision in a special civil action of certiorari

G.R. No. 78295

Facts:
Maria Carmen Gabriel, single, 72y/o, executed a
donation mortis causa in favor of her widowed sister-in-law, Josefina
C. Gabriel, 75y/o, over a parcel of land in Sampaloc, Manila. The
donation was thumbmarked by Carmen and notarized. It was
accepted by the donee. Carmen executed a Last Will And Testament.
She bequeathed the Sampaloc property to her cousin and
companion, Remedios Muyot, and willed a small lot in Antipolo,
Rizal to Josefina. She named Concepcion De Garcia, as executrix of
her will. Carmen executed a General Power of Attorney appointing
Muyot, as her attomey-in-fact. Josefina registered an adverse claim
on the title of the Sampaloc property based on the donation made
by Carmen in her favor. Muyot hired the services of Atty. Celso D.
Lavia.
Carmen thumbmarked an "AFFIDAVIT OF DENIAL"
repudiating the donation of the Sampaloc property to Josefina
because it was allegedly procured through fraud and trickery. She

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had no intention of donating the property to Josefina who had not
done her any favor and in fact abandoned her during her illness. She
also thumbmarked a "REVOCATION OF DONATION" and thereafter
notarized.
Muyot sold the Sampaloc property to Virgilio D. Cebrero.
Eight days after, Carmen passed away. Josefina filed a complaint
before the RTC against Carmen's estate and the Register of Deeds to
annul the Deed of Revocation of Donation. She alleged that the deed
of revocation was false and fictitious. She asked the court to appoint
an administrator ad litem for the estate of Carmen. Upon filing the
complaint, she caused to be recorded a Notice of Lis Pendens on the
title of the property.
Without appointing a special administrator for Carmen's
estate, the court caused summons to be served on the estate. The
summons was received by Muyot. The Cebreros registered the sale
of the Sampaloc property to them and obtained a TCT in their
names.
Josefina's complaint was amended:
(1) To implead Muyot and the Cebrero spouses as additional
defendants;
(2) To nullify Muyot's General Power of Attorney and the sale of the
Sampaloc property to the Cebrero spouses.
Atty. Lavia filed an Amended Answer with Compulsory
Counter-claim for the Estate and Muyot. Josefina filed a motion to
disqualify him on the ground that his authority as counsel for
Carmen was extinguished upon her death. She also assailed the
service of summons to the decedent's Estate through Muyot and
reiterated her motion for the appointment of a special administrator
for the Estate.
RTC Judge Vicencio denied Josefina's motion to disqualify
Atty. Lavia. He also denied the motion to appoint a special
administrator for the Estate since the deceased left a Will naming an
executrix. He sustained his court's jurisdiction over the Estate based
on the service of summons upon Muyot.
Cebrero filed a motion to cancel the notice of lis
pendens on the Sampaloc property. Before Judge Vicencio could act
on it, Josefina filed a petition for certiorari in the CA assailing Judge
Vicencio's order and praying for a writ of preliminary injunction to
stop him from further proceeding in the case.
CA issued a restraining order ordering the lower court to
desist from proceeding with the case until further orders. In spite of
this, Judge Vicencio issued an order cancelling the notice of lis
pendens because he believed the CAs restraining order has expired.
CA set aside Judge Vicencio's order and required him, his
branch clerk of court and Attorney Lavia to show cause why they
should not be punished for contempt of court. The CA held that the
20-day limitation on the life of a restraining order did not apply to it
but only to lower court "judges" as provided under Section 5 of BP
Blg. 224.
While the CA was aware that Section 8 of the Interim Rules
uses the word "court" instead of "judges," it opined that the Interim
Rules was not meant to effect, modify or alter BP 224 since BP 224
governs the exclusive subject of restraining orders, whereas the
Interim Rules treats of the broad Judiciary Reorganization Act of
1981. BP 224 is a legislative act laying down a substantive policy
regulating the issuance and effectivity of restraining orders issued by
'judges,' specifically decreeing a limitation of 20 days to such orders
of 'judges'.
CA further observed that the application of BP Blg. 224 to
"judges" only "springs from practical considerations evident from
the Rule itself." Rule 58, as amended by BP 224 requires-upon
issuance of a restraining order and within 20 days from said
issuance-that 'the judge must cause an order to be served on the
defendant, requiring him to show cause, at a specified time and
place, why the injunction should not be granted, and determine
within the same period whether or not the preliminary injunction
shall be granted. Certainly, while these pressing time and procedural
constraints may reasonably be brought to bear upon the RTC whose
injunctive writs may be enforced only within the narrow confines of
their respective regions (Sec. 3[a], Interim Rules and Guidelines),
they cannot sensibly be imposed upon the CA and SC whose
territorial jurisdiction stretches to the many ends of the countrys
broad archipelago.
Lavia, Muyot, and Cebrero filed before the SC a petition
for certiorari and prohibition (G.R. No. 78295) assailing that
resolution. They prayed that the CA be enjoined from further
proceeding in CA-G.R. SP No. 11260. SC ordered the respondents to
comment.
SC rendered a divided opinion in another case
(Delbros case) defining the scope of BP Blg. 224. It states that The
applicability of Sec. 5, B.P. Blg. 224 to the then IAC, now the Court of
Appeals, can hardly be doubted. The Interim Rules and Guidelines
were promulgated to implement the Judiciary Reorganization Act of
1981 (B.P. Blg. 129) which include the IAC among the courts
organized thereunder. This is emphasized in the preamble of the
Interim Rules which states that the same shall apply to all inferior
courts according to the Constitution. The term 'inferior courts' as
used therein refers to all courts except the Supreme Court, the
Sandiganbayan and the Court of Tax Appeals.

Issue #1: Whether petitioners' disobedience of the CAs
restraining order was contemptuous. Yes

Held:
SC sustains Judge Vicencio's interpretation of BP Blg. 224.
However, this circumstance does not excuse his defiance of the CAs
restraining order.
Before the promulgation of the Delbros decision, there
existed no jurisprudence interpreting "judges" as used in BP Blg.
224, to include the justices of the CA also. Out of respect for the
second highest court of the land, he should have obeyed its explicit
mandate for him to desist from proceeding "until further orders."
His disobedience of that lawful order of the Court was
contemptuous.

G.R. No. 79917

During the pendency of G.R. No. 78295, CA granted Josefina's
petition:
(1) Annulling the assailed order;

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(2) Declaring that the lower court did not acquire jurisdiction over
the person of the estate of Carmen;
(3) Ordering Atty. Celso Lavia to refrain from representing the
estate of the deceased Carmen; and
(4) Declaring that all pleadings, motions and papers filed by Atty.
Lavia are sham and ordered expunged from the records of said
case.

SC granted a 30 days extension. Attorney Lavia, Muyot, and the
Cebrero spouses appealed by certiorari to the SC.

Ruling of the CA
(1) Attorney Lavia may not appear as counsel for the estate of
Carmen because his authority as her counsel was extinguished upon
Carmen's death (Art. 1919, Civil Code).
(2) Remedios Muyot was not capacitated to receive summons for
the estate because the general power of attorney constituting her as
agent of the deceased became inoperative upon the death of the
principal. The service of summons upon her was void.
(3) A special administrator need not be appointed for the estate as
the last will and testament of Carmen had been allowed probate in a
Special Proceeeding and letters testamentary had been issued to the
duly designated executrix, Concepcion M. De Garcia to represent the
Estate.

Issue #2: Whether or not Atty. Lavia's authority as
counsel for Carmen P. Gabriel was extinguished upon her death.
Yes

Held:
Petitioner's argument:
(1) That the service of the summons on Remedios Muyot was valid
and sufficient to vest jurisdiction in the Court over the Estate of
Carmen P. Gabriel, because Remedios Muyot was Carmen P.
Gabriels attorney-in-fact.
(2) That the agency was "constituted in the common interest of the
principal and the agent" and that hence it was not extinguished by
the death of the principal is refuted by the instrument itself which
explicitly provided that the powers conferred on the agent were to
be exercised for the "sole benefit" of the principal, Carmen P.
Gabriel.
The estate of a dead person may only be summoned
through the executor or administrator of his estate for it is
the executor or administrator who may sue or be sued (Sec. 3, Rule
3, Rules of Court) and who may bring or defend actions for the
recovery or protection of the property or rights of the deceased
(Sec. 2, Rule 87, Rules of Court).
The general power of attorney appointing Remedios as
Carmen's agent or attorney-in- fact was extinguished upon Carmen's
demise. Thereafter, Remedios was bereft of authority to represent
Carmen.
Carmen's death likewise divested Attorney Lavia of
authority to represent her as counsel. A dead client has no
personality and cannot be represented by an attorney.
Petition, dismissed.

LAWAS vs CA
G.R. No. L-45809, December 12, 1986

Facts:
Private respondent Pacifico Pelaez filed a Complaint
against petitioner's father, Pedro Sepulveda, for ownership and
partition of certain parcels of land. Defendant Pedro Sepulveda filed
his Answer resisting the claim and raising the special defenses of
laches, prescription and failure to ventilate in a previous special
proceeding. During the presentation of evidence for the plaintiff, the
defendant died. The counsels for the deceased defendant filed a
notice of death wherein were enumerated the thirteen children and
surviving spouse of the deceased.
Then, Petitioner filed a petition for letters of
administration and she was appointed judicial administratrix of the
estate of her late father. At the hearing of the case, Attys. Domingo
Antigua and Serafin Branzuela, former counsels for the deceased
defendant, manifested in open court that with the death of their
client, their contract with him was also terminated and none of the
thirteen children nor the surviving spouse had renewed the
contract, but instead they had engaged the services of other lawyers
in the intestate proceedings.
On January 13, 1976, the respondent trial judge issued
three orders. The first order substituted the heirs of the deceased
defendant, namely, his thirteen children and surviving spouse, as
defendants; the second order authorized Atty. Teodoro Almase,
counsel for the plaintiff, to present his evidence in the absence of
Attys. Antigua and Branzuela and the third order treated the case
submitted for decision, after the plaintiff had presented his evidence
and rested his case, and directed that said counsels and the fourteen
heirs of the deceased defendant be furnished copies thereof.
The respondent trial judge rendered a decision against the
heirs of the deceased defendant. Thereafter, ten of the children of
the deceased defendant, who apparently did not know that a
decision had already been rendered, filed an Answer in-substitution
of the deceased defendant through their counsel Atty. Jesus Yray,
which was denied by the trial court.
Then, the widow and two other children of the deceased
defendant filed a motion for substitution and for reconsideration of
the decision of trial court. The respondent trial judge issued an order
setting aside his decision and setting the case in the calendar for
cross-examination of the plaintiff, Pacifico Pelaez, with a proviso
that said order was applicable only to the three heirs who had filed
the motion. Thereafter, the respondent trial judge lifted the order
setting aside his decision, despite the verbal petition for
postponement of the hearing made by one of the three heirs on the
ground of the absence of their counsel.
Petitioner, who had been appointed judicial administratrix
of the estate of the deceased defendant and who was one of the
heirs who had filed an Answer on February 19, 1976, filed a motion
to intervene and/or substitute the deceased defendant. The
respondent trial judge denied the motion for the reason that the
decision had already become final.
Petitioner then filed a special civil action of certiorari with
the Court of Appeals to annul the proceedings in the respondent

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trial court. However, the Court of Appeals dismissed the petition for
certiorari. Hence, the present appeal.

Issues:
Whether or not the proceedings conducted by the trial
court after the death of the defendant are valid

Held:
No. The Court held that proceedings conducted by the
respondent trial judge after the death of the deceased defendant
are null and void.
The former counsels for the deceased defendant, Pedro
Sepulveda, complied with this rule by filing a notice of death on May
21, 1975. They also correctly manifested in open court at the
hearing of the case on November 27, 1975, that with the death of
their client their contract with him was also terminated and none of
the heirs of the deceased had renewed the contract, and the heirs
had instead engaged the services of other lawyers in the intestate
proceedings.
Both the respondent trial judge and the Court of Appeals
erred in considering the former counsels of the deceased defendant
as counsels for the heirs of the deceased. The statement in the
decision of the Court of Appeals that "the appearance of the lawyers
of their deceased father in court on January 13, 1976 (Annex K)
carries the presumption that they were authorized by the heirs of
the deceased defendant" is erroneous. As this Court held in People
vs. Florendo, "the attorneys for the offended party ceased to be the
attorneys for the deceased upon the death of the latter, the
principal. "
In the order of the respondent trial judge dated November
10, 1976, mention was made of the delayed arrival of Attys. Antigua
and Branzuela at the hearing on January 13, 1976 and of their being
allowed to cross-examine the plaintiff himself.
The refusal of said former counsels of the deceased
defendant to cross-examine the plaintiff was justified
... in view of the intervening event of appellant's death and
the interposition of the equally established principle that the
relationship of attorney and client is terminated by the death of the
client, as acknowledged by respondent court itself as well as
respondents. In the absence of a retainer from the heirs or
authorized representatives of his deceased defendant the attorney
would have no further power or authority to appear or take any
further action in the case, save to inform the court of the client's
death and take the necessary steps to safeguard the decedent's
rights in the case.
Moreover, as above stated, petitioner had as early as May
5, 1975 filed a petition for letters of administration, and the same
was granted.
Under the Rules of Court, priority is given to the legal
representative of the deceased, that is, the executor or
administrator of his estate. It is only in cases of unreasonable delay
in the appointment of an executor or administrator, or in cases
where the heirs resort to an extrajudicial settlement of the estate,
that the court may adopt the alternative of allowing the heirs of the
deceased to be substituted for the deceased.
In the case at bar, in view of the pendency of Special
Proceeding No. 37-SF Intestate Estate of Pedro Sepulveda, and the
pending application of petitioner to be appointed judicial
administratrix of the estate, the respondent trial judge should have
awaited the appointment of petitioner and granted her motion to
substitute the deceased defendant.
While the lower courts correctly held that the death of
Pedro Sepulveda did not obliterate his verified Answer to the
Complaint filed by private respondent and that the Answer filed by
the ten heirs and the Answer filed by the Administratrix were both
unnecessary, the said heirs or the administratrix could, with leave of
court, file an Amended Answer.

Full Text Cases: Rule 3 - Parties to Civil Actions CIVIL PROCEDURE

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G.R. No. 138104 April 11, 2002
MR HOLDINGS, LTD., petitioner,
vs.
SHERIFF CARLOS P. BAJAR, SHERIFF FERDINAND M. JANDUSAY,
SOLIDBANK CORPORATION, AND MARCOPPER MINING
CORPORATION, respondents.
SANDOVAL-GUTIERREZ, J.:
In the present Petition for Review on Certiorari, petitioner MR
Holdings, Ltd. assails the a) Decision
1
dated January 8, 1999 of the
Court of Appeals in CA-G.R. SP No. 49226 finding no grave abuse of
discretion on the part of Judge Leonardo P. Ansaldo of the Regional
Trial Court (RTC), Branch 94, Boac, Marinduque, in denying
petitioners application for a writ of preliminary injunction;
2
and b)
Resolution
3
dated March 29, 1999 denying petitioners motion for
reconsideration.
The facts of the case are as follows:
Under a "Principal Loan Agreement"
4
and "Complementary Loan
Agreement,"
5
both dated November 4, 1992, Asian Development
Bank (ADB), a multilateral development finance institution, agreed
to extend to Marcopper Mining Corporation (Marcopper) a loan in
the aggregate amount of US$40,000,000.00 to finance the latters
mining project at Sta. Cruz, Marinduque. The principal loan of US$
15,000,000.00 was sourced from ADBs ordinary capital resources,
while the complementary loan of US$ 25,000,000.00 was funded by
the Bank of Nova Scotia, a participating finance institution.
On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign
corporation which owns 40% of Marcopper, executed a "Support
and Standby Credit Agreement" whereby the latter agreed to
provide Marcopper with cash flow support for the payment of its
obligations to ADB.
To secure the loan, Marcopper executed in favor of ADB a "Deed of
Real Estate and Chattel Mortgage"
6
dated November 11, 1992,
covering substantially all of its (Marcoppers) properties and assets
in Marinduque. It was registered with the Register of Deeds on
November 12, 1992.
When Marcopper defaulted in the payment of its loan obligation,
Placer Dome, in fulfillment of its undertaking under the "Support
and Standby Credit Agreement," and presumably to preserve its
international credit standing, agreed to have its subsidiary
corporation, petitioner MR Holding, Ltd., assumed Marcoppers
obligation to ADB in the amount of US$ 18,453,450.02.
Consequently, in an "Assignment Agreement"
7
dated March 20,
1997, ADB assigned to petitioner all its rights, interests and
obligations under the principal and complementary loan
agreements, ("Deed of Real Estate and Chattel Mortgage," and
"Support and Standby Credit Agreement"). On December 8, 1997,
Marcopper likewise executed a "Deed of Assignment"
8
in favor of
petitioner. Under its provisions, Marcopper assigns, transfers, cedes
and conveys to petitioner, its assigns and/or successors-in-interest
all of its (Marcoppers) properties, mining equipment and facilities,
to wit:
Land and Mining Rights
Building and Other Structures
Other Land Improvements
Machineries & Equipment, and Warehouse Inventory
Mine/Mobile Equipment
Transportation Equipment and Furniture & Fixtures
Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation
(Solidbank) obtained a Partial Judgment
9
against Marcopper from the
RTC, Branch 26, Manila, in Civil Case No. 96-80083 entitled
"Solidbank Corporation vs. Marcopper Mining Corporation, John E.
Loney, Jose E. Reyes and Teodulo C. Gabor, Jr.," the decretal portion
of which reads:
"WHEREFORE, PREMISES CONSIDERED, partial judgment
is hereby rendered ordering defendant Marcopper Mining
Corporation, as follows:
1. To pay plaintiff Solidbank the sum of Fifty Two
Million Nine Hundred Seventy Thousand Pesos
Seven Hundred Fifty Six and 89/100 only (PHP
52,970,756.89), plus interest and charges until
fully paid;
2. To pay an amount equivalent to Ten Percent
(10%) of above-stated amount as attorneys
fees; and
3. To pay the costs of suit.
"SO ORDERED."
Upon Solidbanks motion, the RTC of Manila issued a writ of
execution pending appeal directing Carlos P. Bajar, respondent
sheriff, to require Marcopper "to pay the sums of money to satisfy
the Partial Judgment."
10
Thereafter, respondent Bajar issued two
notices of levy on Marcoppers personal and real properties, and
over all its stocks of scrap iron and unserviceable mining
equipment.
11
Together with sheriff Ferdinand M. Jandusay (also a
respondent) of the RTC, Branch 94, Boac, Marinduque, respondent
Bajar issued two notices setting the public auction sale of the levied
properties on August 27, 1998 at the Marcopper mine site.
12

Having learned of the scheduled auction sale, petitioner served an
"Affidavit of Third-Party Claim"
13
upon respondent sheriffs on
August 26, 1998, asserting its ownership over all Marcoppers
mining properties, equipment and facilities by virtue of the "Deed of
Assignment."
Upon the denial of its "Affidavit of ThirdParty Claim" by the RTC of
Manila,
14
petitioner commenced with the RTC of Boac, Marinduque,
presided by Judge Leonardo P. Ansaldo, a complaint for
reivindication of properties, etc., with prayer for preliminary
injunction and temporary restraining order against respondents
Solidbank, Marcopper, and sheriffs Bajar and Jandusay.
15
The case
was docketed as Civil Case No. 98-13.

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In an Order
16
dated October 6, 1998, Judge Ansaldo denied
petitioners application for a writ of preliminary injunction on the
ground that a) petitioner has no legal capacity to sue, it being a
foreign corporation doing business in the Philippines without
license; b) an injunction will amount "to staying the execution of a
final judgment by a court of co-equal and concurrent jurisdiction;"
and c) the validity of the "Assignment Agreement" and the "Deed of
Assignment" has been "put into serious question by the timing of
their execution and registration."
Unsatisfied, petitioner elevated the matter to the Court of Appeals
on a Petition for Certiorari, Prohibition and Mandamus, docketed
therein as CA-G.R. SP No. 49226. On January 8, 1999, the Court of
Appeals rendered a Decision holding that Judge Ansaldo did not
commit grave abuse of discretion in denying petitioners prayer for a
writ of preliminary injunction, ratiocinating as follows:
"Petitioner contends that it has the legal capacity to sue
and seek redress from Philippine courts as it is a non-
resident foreign corporation not doing business in the
Philippines and suing on isolated transactions.
x x x x x x
"We agree with the finding of the respondent court that
petitioner is not suing on an isolated transaction as it
claims to be, as it is very obvious from the deed of
assignment and its relationships with Marcopper and
Placer Dome, Inc. that its unmistakable intention is to
continue the operations of Marcopper and shield its
properties/assets from the reach of legitimate creditors,
even those holding valid and executory court judgments
against it. There is no other way for petitioner to recover
its huge financial investments which it poured into
Marcoppers rehabilitation and the local situs where the
Deeds of Assignment were executed, without petitioner
continuing to do business in the country.
x x x x x x
"While petitioner may just be an assignee to
the Deeds of Assignment, it may still fall within
the meaning of "doing business" in light of the
Supreme Court ruling in the case of Far East
International Import and Export Corporation vs.
Nankai Kogyo Co., 6 SCRA 725, that:
Where a single act or transaction however is not merely
incidental or casual but indicates the foreign
corporations intention to do other business in the
Philippines, said single act or transaction constitutes
doing or engaging in or transacting business in the
Philippines.
"Furthermore, the court went further by declaring that
even a single act may constitute doing business if it is
intended to be the beginning of a series of transactions.
(Far East International Import and Export Corporation vs.
Nankai Kogyo Co. supra).
"On the issue of whether petitioner is the bona fide owner
of all the mining facilities and equipment of Marcopper,
petitioner relies heavily on the Assignment Agreement
allegedly executed on March 20, 1997 wherein all the
rights and interest of Asian Development Bank (ADB) in a
purported Loan Agreement were ceded and transferred in
favor of the petitioner as assignee, in addition to a
subsequent Deed of Assignment dated December 28, 1997
conveying absolutely all the properties, mining equipment
and facilities of Marcopper in favor of petitioner.
"The Deeds of Assignment executed in favor of petitioner
cannot be binding on the judgment creditor, private
respondent Solidbank, under the general legal principle
that contracts can only bind the parties who had entered
into it, and it cannot favor or prejudice a third person
(Quano vs. Court of Appeals, 211 SCRA 40). Moreover, by
express stipulation, the said deeds shall be governed,
interpreted and construed in accordance with laws of New
York.1wphi1.nt
"The Deeds of Assignment executed by Marcopper,
through its President, Atty. Teodulo C. Gabor, Jr., were
clearly made in bad faith and in fraud of creditors,
particularly private respondent Solidbank. The first
Assignment Agreement purportedly executed on March
20, 1997 was entered into after Solidbank had filed on
September 19, 1996 a case against Marcopper for
collection of sum of money before Branch 26 of the
Regional Trial Court docketed as Civil Case No. 96-80083.
The second Deed of Assignment purportedly executed on
December 28, 1997 was entered into by President Gabor
after Solidbank had filed its Motion for Partial Summary
Judgment, after the rendition by Branch 26 of the
Regional Trial Court of Manila of a Partial Summary
Judgment and after the said trial court had issued a writ
of execution, and which judgment was later affirmed by
the Court of Appeals. While the assignments (which were
not registered with the Registry of Property as required by
Article 1625 of the new Civil Code) may be valid between
the parties thereof, it produces no effect as against third
parties. The purported execution of the Deeds of
Assignment in favor of petitioner was in violation of Article
1387 of the New Civil Code x x x." (Emphasis Supplied)
Hence, the present Petition for Review on Certiorari by MR Holdings,
Ltd. moored on the following grounds:
"A. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN COMPLETELY DISREGARDING AS A
MATERIAL FACT OF THE CASE THE EXISTENCE OF THE
PRIOR, REGISTERED 1992 DEED OF REAL ESTATE AND
CHATTEL MORTGAGE CREATING A LIEN OVER THE LEVIED
PROPERTIES, SUBJECT OF THE ASSIGNMENT AGREEMENT
DATED MARCH 20, 1997, THUS, MATERIALLY
CONTRIBUTING TO THE SAID COURTS MISPERCEPTION
AND MISAPPRECIATION OF THE MERITS OF PETITIONERS
CASE.
B. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN MAKING A FACTUAL FINDING
THAT THE SAID ASSIGNMENT AGREEMENT IS NOT
REGISTERED, THE SAME BEING CONTRARY TO THE FACTS
ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE

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SAID COURTS MISPERCEPTION AND MISAPPRECIATION
OF THE MERITS OF PETITIONERS CASE.
C. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN MAKING A FACTUAL FINDING ON
THE EXISTENCE OF AN ATTACHMENT ON THE PROPERTIES
SUBJECT OF INSTANT CASE, THE SAME BEING CONTRARY
TO THE FACTS ON RECORD, THUS, MATERIALLY
CONTRIBUTING TO THE SAID COURTS MISPERCEPTION
AND MISAPPRECIATION OF THE MERITS OF PETITIONERS
CASE.
D. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING THAT THE SAID
ASSIGNMENT AGREEMENT AND THE DEED OF
ASSIGNMENT ARE NOT BINDING ON RESPONDENT
SOLIDBANK WHO IS NOT A PARTY THERETO, THE SAME
BEING CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE ON PRIOR REGISTERED MORTGAGE
LIENS AND ON PREFERENCE OF CREDITS.
E. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN FINDING THAT THE
AFOREMENTIONED ASSIGNMENT AGREEMENT AND DEED
OF ASSIGNMENT ARE SHAM, SIMULATED, OF DUBIOUS
CHARACTER, AND WERE MADE IN BAD FAITH AND IN
FRAUD OF CREDITORS, PARTICULARLY RESPONDENT
SOLIDBANK, THE SAME BEING IN COMPLETE DISREGARD
OF, VIZ: (1) THE LAW AND ESTABLISHED JURISPRUDENCE
ON PRIOR, REGISTERED MORTGAGE LIENS AND ON
PREFERENCE OF CREDITS, BY REASON OF WHICH THERE
EXISTS NO CAUSAL CONNECTION BETWEEN THE SAID
CONTRACTS AND THE PROCEEDINGS IN CIVIL CASE NO.
96-80083; (2) THAT THE ASIAN DEVELOPMENT BANK
WILL NOT OR COULD NOT HAVE AGREED TO A SHAM;
SIMULATED, DUBIOUS AND FRAUDULENT TRANSACTION;
AND (3) THAT RESPONDENT SOLIDBANKS BIGGEST
STOCKHOLDER, THE BANK OF NOVA SCOTIA, WAS A
MAJOR BENEFICIARY OF THE ASSIGNMENT AGREEMENT
IN QUESTION.
F. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING THAT PETITIONER IS
WITHOUT LEGAL CAPACITY TO SUE AND SEEK REDRESS
FROM PHILIPPINE COURTS, IT BEING THE CASE THAT
SECTION 133 OF THE CORPORATION CODE IS WITHOUT
APPLICATION TO PETITIONER, AND IT BEING THE CASE
THAT THE SAID COURT MERELY RELIED ON SURMISES
AND CONJECTURES IN OPINING THAT PETITIONER
INTENDS TO DO BUSINESS IN THE PHILIPPINES.
G. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING THAT RESPONDENT
MARCOPPER, PLACER DOME, INC., AND PETITIONER ARE
ONE AND THE SAME ENTITY, THE SAME BEING WITHOUT
FACTUAL OR LEGAL BASIS.
H. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING PETITIONER GUILTY OF
FORUM SHOPPING, IT BEING CLEAR THAT NEITHER LITIS
PENDENTIA NOR RES JUDICATA MAY BAR THE INSTANT
REIVINDICATORY ACTION, AND IT BEING CLEAR THAT AS
THIRD-PARTY CLAIMANT, THE LAW AFFORDS PETITIONER
THE RIGHT TO FILE SUCH REIVINDICATORY ACTION.
I. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN RENDERING A DECISION WHICH IN
EFFECT SERVES AS JUDGMENT ON THE MERITS OF THE
CASE.
J. THE SHERIFFS LEVY AND SALE, THE SHERIFFS
CERTIFICATE OF SALE DATED OCTOBER 12, 1998, THE
RTC-MANILA ORDER DATED FEBRUARY 12, 1999, AND
THE RTC-BOAC ORDER DATED NOVEMBER 25, 1998 ARE
NULL AND VOID.
K. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN AFFIRMING THE DENIAL BY THE
RTC-BOAC OF PETITIONERS APPLICATION FOR
PRELIMINARY INJUNCTION, THE SAME BEING IN TOTAL
DISREGARD OF PETITIONERS RIGHT AS ASSIGNEE OF A
PRIOR, REGISTERED MORTGAGE LIEN, AND IN
DISREGARD OF THE LAW AND JURISPRUDENCE ON
PREFERENCE OF CREDIT."
In its petition, petitioner alleges that it is not "doing business" in the
Philippines and characterizes its participation in the assignment
contracts (whereby Marcoppers assets where transferred to it) as
mere isolated acts that cannot foreclose its right to sue in local
courts. Petitioner likewise maintains that the two assignment
contracts, although executed during the pendency of Civil Case No.
96-80083 in the RTC of Manila, are not fraudulent conveyances as
they were supported by valuable considerations. Moreover, they
were executed in connection with prior transactions that took place
as early as 1992 which involved ADB, a reputable financial
institution. Petitioner further claims that when it paid Marcoppers
obligation to ADB, it stepped into the latters shoes and acquired its
(ADBS) rights, titles, and interests under the "Deed of Real Estate
and Chattel Mortgage." Lastly, petitioner asserts its existence as a
corporation, separate and distinct from Placer Dome and
Marcopper.
In its comment, Solidbank avers that: a) petitioner is "doing
business" in the Philippines and this is evidenced by the "huge
investment" it poured into the assignment contracts; b) granting
that petitioner is not doing business in the Philippines, the nature of
its transaction reveals an "intention to do business" or "to begin a
series of transaction" in the country; c) petitioner, Marcopper and
Placer Dome are one and the same entity, petitioner being then a
wholly-owned subsidiary of Placer Dome, which, in turn, owns 40%
of Marcopper; d) the timing under which the assignments contracts
were executed shows that petitioners purpose was to defeat any
judgment favorable to it (Solidbank); and e) petitioner violated the
rule on forum shopping since the object of Civil Case No. 98-13 (at
RTC, Boac, Marinduque) is similar to the other cases filed by
Marcopper in order to forestall the sale of the levied properties.
Marcopper, in a separate comment, states that it is merely a
nominal party to the present case and that its principal concerns are
being ventilated in another case.
The petition is impressed with merit.

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Crucial to the outcome of this case is our resolution of the following
issues: 1) Does petitioner have the legal capacity to sue? 2) Was the
Deed of Assignment between Marcopper and petitioner executed in
fraud of creditors? 3) Are petitioner MR Holdings, Ltd., Placer Dome,
and Marcopper one and the same entity? and 4) Is petitioner guilty
of forum shopping?
We shall resolve the issues in seriatim.
I
The Court of Appeals ruled that petitioner has no legal capacity to
sue in the Philippine courts because it is a foreign corporation doing
business here without license. A review of this ruling does not pose
much complexity as the principles governing a foreign corporations
right to sue in local courts have long been settled by our Corporation
Law.
17
These principles may be condensed in three statements, to
wit: a) if a foreign corporation does business in the Philippines
without a license, it cannot sue before the Philippine courts;
18
b) if a
foreign corporation is not doing business in the Philippines, it needs
no license to sue before Philippine courts on an isolated
transaction
19
or on a cause of action entirely independent of any
business transaction;
20
and c) if a foreign corporation does business
in the Philippines with the required license, it can sue before
Philippine courts on any transaction. Apparently, it is not the
absence of the prescribed license but the "doing (of) business" in the
Philippines without such license which debars the foreign
corporation from access to our courts.
21

The task at hand requires us to weigh the facts vis--vis the
established principles. The question whether or not a foreign
corporation is doing business is dependent principally upon the facts
and circumstances of each particular case, considered in the light of
the purposes and language of the pertinent statute or statutes
involved and of the general principles governing the jurisdictional
authority of the state over such corporations.
22

Batas Pambansa Blg. 68, otherwise known as "The Corporation Code
of the Philippines," is silent as to what constitutes doing" or
"transacting" business in the Philippines. Fortunately, jurisprudence
has supplied the deficiency and has held that the term "implies a
continuity of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts or works or
the exercise of some of the functions normally incident to, and in
progressive prosecution of, the purpose and object for which the
corporation was organized."
23
In Mentholatum Co. Inc., vs.
Mangaliman,
24
this Court laid down the test to determine whether a
foreign company is "doing business," thus:
" x x x The true test, however, seems to be whether the
foreign corporation is continuing the body or substance
of the business or enterprise for which it was organized
or whether it has substantially retired from it and turned
it over to another. (Traction Cos. vs. Collectors of Int.
Revenue [C.C.A., Ohio], 223 F. 984,987.) x x x."
The traditional case law definition has metamorphosed into a
statutory definition, having been adopted with some qualifications
in various pieces of legislation in our jurisdiction. For instance,
Republic Act No. 7042, otherwise known as the "Foreign Investment
Act of 1991," defines "doing business" as follows:
"d) The phrase doing business shall include soliciting
orders, service contracts, opening offices, whether called
liaison offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any
calendar year stay in the country for a period or periods
totalling one hundred eight(y) (180) days or more;
participating in the management, supervision or control of
any domestic business, firm, entity, or corporation in the
Philippines; and any other act or acts that imply a
continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or
works; or the exercise of some of the functions normally
incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the
business organization; Provided, however, That the phrase
doing business shall not be deemed to include mere
investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business,
and/or the exercise of rights as such investor, nor having a
nominee director or officer to represent its interests in
such corporation, nor appointing a representative or
distributor domiciled in the Philippines which transacts
business in its own name and for its own account."
(Emphasis supplied)
25

Likewise, Section 1 of Republic Act No. 5455,
26
provides that:
"SECTION. 1. Definition and scope of this Act. - (1) x x x the
phrase doing business shall include soliciting orders,
purchases, service contracts, opening offices, whether
called liaison offices or branches; appointing
representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the
Philippines for a period or periods totaling one hundred
eighty days or more; participating in the management,
supervision or control of any domestic business firm,
entity or corporation in the Philippines; and any other act
or acts that imply a continuity of commercial dealings or
arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and
object of the business organization."
There are other statutes
27
defining the term "doing business" in the
same tenor as those above-quoted, and as may be observed, one
common denominator among them all is the concept of
"continuity."
In the case at bar, the Court of Appeals categorized as "doing
business" petitioners participation under the "Assignment
Agreement" and the "Deed of Assignment." This is simply untenable.
The expression "doing business" should not be given such a strict
and literal construction as to make it apply to any corporate dealing
whatever.
28
At this early stage and with petitioners acts or
transactions limited to the assignment contracts, it cannot be said
that it had performed acts intended to continue the business for
which it was organized. It may not be amiss to point out that the
purpose or business for which petitioner was organized is not
discernible in the records. No effort was exerted by the Court of
Appeals to establish the nexus between petitioners business and
the acts supposed to constitute "doing business." Thus, whether
the assignment contracts were incidental to petitioners business

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or were continuation thereof is beyond determination. We cannot
apply the case cited by the Court of Appeals, Far East Intl Import
and Export Corp. vs. Nankai Kogyo Co., Ltd.,
29
which held that a
single act may still constitute "doing business" if "it is not merely
incidental or casual, but is of such character as distinctly to indicate
a purpose on the part of the foreign corporation to do other
business in the state." In said case, there was an express admission
from an official of the foreign corporation that he was sent to the
Philippines to look into the operation of mines, thereby revealing
the foreign corporations desire to continue engaging in business
here. But in the case at bar, there is no evidence of similar desire or
intent. Unarguably, petitioner may, as the Court of Appeals
suggested, decide to operate Marcoppers mining business, but, of
course, at this stage, that is a mere speculation. Or it may decide to
sell the credit secured by the mining properties to an offshore
investor, in which case the acts will still be isolated transactions. To
see through the present facts an intention on the part of petitioner
to start a series of business transaction is to rest on assumptions or
probabilities falling short of actual proof. Courts should never base
its judgments on a state of facts so inadequately developed that it
cannot be determined where inference ends and conjecture
begins.
Indeed, the Court of Appeals holding that petitioner was
determined to be "doing business" in the Philippines is based mainly
on conjectures and speculation. In concluding that the
"unmistakable intention" of petitioner is to continue Marcoppers
business, the Court of Appeals hangs on the wobbly premise that
"there is no other way for petitioner to recover its huge financial
investments which it poured into Marcoppers rehabilitation without
it (petitioner) continuing Marcoppers business in the country."
30

This is a mere presumption. Absent overt acts of petitioner from
which we may directly infer its intention to continue Marcoppers
business, we cannot give our concurrence. Significantly, a view
subscribed upon by many authorities is that the mere ownership by
a foreign corporation of a property in a certain state,
unaccompanied by its active use in furtherance of the business for
which it was formed, is insufficient in itself to constitute doing
business.
31
In Chittim vs. Belle Fourche Bentonite Products Co.,
32
it
was held that even if a foreign corporation purchased and took
conveyances of a mining claim, did some assessment work
thereon, and endeavored to sell it, its acts will not constitute the
doing of business so as to subject the corporation to the statutory
requirements for the transacting of business. On the same vein,
petitioner, a foreign corporation, which becomes the assignee of
mining properties, facilities and equipment cannot be automatically
considered as doing business, nor presumed to have the intention of
engaging in mining business.
One important point. Long before petitioner assumed Marcoppers
debt to ADB and became their assignee under the two assignment
contracts, there already existed a "Support and Standby Credit
Agreement" between ADB and Placer Dome whereby the latter
bound itself to provide cash flow support for Marcoppers payment
of its obligations to ADB. Plainly, petitioners payment of US$
18,453,450.12 to ADB was more of a fulfillment of an obligation
under the "Support and Standby Credit Agreement" rather than an
investment. That petitioner had to step into the shoes of ADB as
Marcoppers creditor was just a necessary legal consequence of the
transactions that transpired. Also, we must hasten to add that the
"Support and Standby Credit Agreement" was executed four (4)
years prior to Marcoppers insovency, hence, the alleged "intention
of petitioner to continue Marcoppers business" could have no basis
for at that time, Marcoppers fate cannot yet be determined.
In the final analysis, we are convinced that petitioner was engaged
only in isolated acts or transactions. Single or isolated acts,
contracts, or transactions of foreign corporations are not regarded
as a doing or carrying on of business. Typical examples of these are
the making of a single contract, sale, sale with the taking of a note
and mortgage in the state to secure payment therefor, purchase, or
note, or the mere commission of a tort.
33
In these instances, there is
no purpose to do any other business within the country.
II
Solidbank contends that from the chronology and timing of events, it
is evident that there existed a pre-set pattern of response on the
part of Marcopper to defeat whatever court ruling that may be
rendered in favor of Solidbank.
We are not convinced.
While it may appear, at initial glance, that the assignment contracts
are in the nature of fraudulent conveyances, however, a closer look
at the events that transpired prior to the execution of those
contracts gives rise to a different conclusion. The obvious flaw in the
Court of Appeals Decision lies in its constricted view of the facts
obtaining in the case. In its factual narration, the Court of Appeals
definitely left out some events. We shall see later the significance of
those events.
Article 1387 of the Civil Code of the Philippines provides:
"Art. 1387. All contracts by virtue of which the debtor
alienates property by gratuitous title are presumed to
have been entered into in fraud of creditors, when the
donor did not reserve sufficient property to pay all debts
contracted before the donation.
Alienations by onerous title are also presumed
fraudulent when made by persons against whom some
judgment has been rendered in any instance or some writ
of attachment has been issued. The decision or
attachment need not refer to the property alienated, and
need not have been obtained by the party seeking
rescission.
In addition to these presumptions, the design to defraud
creditors may be proved in any other manner recognized
by law and of evidence.
This article presumes the existence of fraud made by a debtor. Thus,
in the absence of satisfactory evidence to the contrary, an alienation
of a property will be held fraudulent if it is made after a judgment
has been rendered against the debtor making the alienation.
34
This
presumption of fraud is not conclusive and may be rebutted by
satisfactory and convincing evidence. All that is necessary is to
establish affirmatively that the conveyance is made in good faith
and for a sufficient and valuable consideration.
35

The "Assignment Agreement" and the "Deed of Assignment" were
executed for valuable considerations. Patent from the "Assignment
Agreement" is the fact that petitioner assumed the payment of US$
18,453,450.12 to ADB in satisfaction of Marcoppers remaining debt
as of March 20, 1997.
36
Solidbank cannot deny this fact considering
that a substantial portion of the said payment, in the sum of US$

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13,886,791.06, was remitted in favor of the Bank of Nova Scotia, its
major stockholder.
37

The facts of the case so far show that the assignment contracts were
executed in good faith. The execution of the "Assignment
Agreement" on March 20, 1997 and the "Deed of Assignment" on
December 8,1997 is not the alpha of this case. While the execution
of these assignment contracts almost coincided with the rendition
on May 7, 1997 of the Partial Judgment in Civil Case No. 96-80083 by
the Manila RTC, however, there was no intention on the part of
petitioner to defeat Solidbanks claim. It bears reiterating that as
early as November 4, 1992, Placer Dome had already bound itself
under a "Support and Standby Credit Agreement" to provide
Marcopper with cash flow support for the payment to ADB of its
obligations. When Marcopper ceased operations on account of
disastrous mine tailings spill into the Boac River and ADB pressed for
payment of the loan, Placer Dome agreed to have its subsidiary,
herein petitioner, paid ADB the amount of US $18,453,450.12.
Thereupon, ADB and Marcopper executed, respectively, in favor of
petitioner an "Assignment Agreement" and a "Deed of Assignment."
Obviously, the assignment contracts were connected with
transactions that happened long before the rendition in 1997 of the
Partial Judgment in Civil Case No. 96-80083 by the Manila RTC.
Those contracts cannot be viewed in isolation. If we may add, it is
highly inconceivable that ADB, a reputable international financial
organization, will connive with Marcopper to feign or simulate a
contract in 1992 just to defraud Solidbank for its claim four years
thereafter. And it is equally incredible for petitioner to be paying the
huge sum of US $ 18,453,450.12 to ADB only for the purpose of
defrauding Solidbank of the sum of P52,970,756.89.
It is said that the test as to whether or not a conveyance is
fraudulent is -- does it prejudice the rights of creditors?
38
We cannot
see how Solidbanks right was prejudiced by the assignment
contracts considering that substantially all of Marcoppers
properties were already covered by the registered "Deed of Real
Estate and Chattel Mortgage" executed by Marcopper in favor of
ADB as early as November 11, 1992. As such, Solidbank cannot
assert a better right than ADB, the latter being a preferred creditor.
It is basic that mortgaged properties answer primarily for the
mortgaged credit, not for the judgment credit of the mortgagors
unsecured creditor. Considering that petitioner assumed
Marcoppers debt to ADB, it follows that Solidbanks right as
judgment creditor over the subject properties must give way to that
of the former.1wphi1.nt
III
The record is lacking in circumstances that would suggest that
petitioner corporation, Placer Dome and Marcopper are one and the
same entity. While admittedly, petitioner is a wholly-owned
subsidiary of Placer Dome, which in turn, which, in turn, was then a
minority stockholder of Marcopper, however, the mere fact that a
corporation owns all of the stocks of another corporation, taken
alone is not sufficient to justify their being treated as one entity. If
used to perform legitimate functions, a subsidiarys separate
existence shall be respected, and the liability of the parent
corporation as well as the subsidiary will be confined to those arising
in their respective business.
39

The recent case of Philippine National Bank vs. Ritratto Group Inc.,
40

outlines the circumstances which are useful in the determination of
whether a subsidiary is but a mere instrumentality of the parent-
corporation, to wit:
(a) The parent corporation owns all or most of the capital
stock of the subsidiary.
(b) The parent and subsidiary corporations have common
directors or officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital
stock of the subsidiary or otherwise causes its
incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other
expenses or losses of the subsidiary.
(g) The subsidiary has substantially no business except
with the parent corporation or no assets except those
conveyed to or by the parent corporation.
(h) In the papers of the parent corporation or in the
statements of its officers, the subsidiary is described as a
department or division of the parent corporation, or its
business or financial responsibility is referred to as the
parent corporations own.
(i) The parent corporation uses the property of the
subsidiary as its own.
(j) The directors or executives of the subsidiary do not act
independently in the interest of the subsidiary, but take
their orders from the parent corporation.
(k) The formal legal requirements of the subsidiary are not
observed.
In this catena of circumstances, what is only extant in the records is
the matter of stock ownership. There are no other factors
indicative that petitioner is a mere instrumentality of Marcopper
or Placer Dome. The mere fact that Placer Dome agreed, under the
terms of the "Support and Standby Credit Agreement" to provide
Marcopper with cash flow support in paying its obligations to ADB,
does not mean that its personality has merged with that of
Marcopper. This singular undertaking, performed by Placer Dome
with its own stockholders in Canada and elsewhere, is not a
sufficient ground to merge its corporate personality with Marcopper
which has its own set of shareholders, dominated mostly by Filipino
citizens. The same view applies to petitioners payment of
Marcoppers remaining debt to ADB.
With the foregoing considerations and the absence of fraud in the
transaction of the three foreign corporations, we find it improper to
pierce the veil of corporate fiction that equitable doctrine
developed to address situations where the corporate personality of
a corporation is abused or used for wrongful purposes.
IV

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On the issue of forum shopping, there could have been a violation of
the rules thereon if petitioner and Marcopper were indeed one and
the same entity. But since petitioner has a separate personality, it
has the right to pursue its third-party claim by filing the independent
reivindicatory action with the RTC of Boac, Marinduque, pursuant to
Rule 39, Section 16 of the 1997 Rules of Civil Procedures. This
remedy has been recognized in a long line of cases decided by this
Court.
41
In Rodriguez vs. Court of Appeals,
42
we held:
". . . It has long been settled in this jurisdiction that the
claim of ownership of a third party over properties levied
for execution of a judgment presents no issue for
determination by the court issuing the writ of execution.
. . .Thus, when a property levied upon by the sheriff
pursuant to a writ of execution is claimed by third person
in a sworn statement of ownership thereof, as prescribed
by the rules, an entirely different matter calling for a new
adjudication arises. And dealing as it does with the all
important question of title, it is reasonable to require the
filing of proper pleadings and the holding of a trial on the
matter in view of the requirements of due process.
. . . In other words, construing Section 17 of Rule 39 of the
Revised Rules of Court (now Section 16 of the 1997 Rules
of Civil Procedure), the rights of third-party claimants over
certain properties levied upon by the sheriff to satisfy the
judgment may not be taken up in the case where such
claims are presented but in a separate and independent
action instituted by the claimants." (Emphasis supplied)
This "reivindicatory action" has for its object the recovery of
ownership or possession of the property seized by the sheriff,
despite the third party claim, as well as damages resulting
therefrom, and it may be brought against the sheriff and such other
parties as may be alleged to have connived with him in the
supposedly wrongful execution proceedings, such as the judgment
creditor himself. Such action is an entirely separate and distinct
action from that in which execution has been issued. Thus, there
being no identity of parties and cause of action between Civil Case
No. 98-13 (RTC, Boac) and those cases filed by Marcopper, including
Civil Case No. 96-80083 (RTC, Manila) as to give rise to res judicata
or litis pendentia, Solidbanks allegation of forum-shopping cannot
prosper.
43

All considered, we find petitioner to be entitled to the issuance of a
writ of preliminary injunction. Section 3, Rule 58 of the 1997 Rules of
Civil Procedure provides:
"SEC. 3 Grounds for issuance of preliminary injunction. A
preliminary injunction may be granted when it is
established:
(a) That the applicant is entitled to the relief demanded,
and the whole or part of such relief consists in restraining
the commission or continuance of the act or acts
complained of, or in requiring the performance of an act
or acts, either for a limited period or perpetually;
(b) That the commission, continuance or non-performance
of the acts or acts complained of during the litigation
would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing,
threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation
of the rights of the applicant respecting the subject of the
action or proceeding, and tending to render the judgment
ineffectual."
Petitioners right to stop the further execution of the properties
covered by the assignment contracts is clear under the facts so far
established. An execution can be issued only against a party and not
against one who did not have his day in court.
44
The duty of the
sheriff is to levy the property of the judgment debtor not that of a
third person. For, as the saying goes, one mans goods shall not be
sold for another man's debts.
45
To allow the execution of
petitioners properties would surely work injustice to it and render
the judgment on the reivindicatory action, should it be favorable,
ineffectual. In Arabay, Inc., vs. Salvador,
46
this Court held that an
injunction is a proper remedy to prevent a sheriff from selling the
property of one person for the purpose of paying the debts of
another; and that while the general rule is that no court has
authority to interfere by injunction with the judgments or decrees of
another court of equal or concurrent or coordinate jurisdiction,
however, it is not so when a third-party claimant is involved. We
quote the instructive words of Justice Querube C. Makalintal in
Abiera vs. Court of Appeals,
47
thus:
"The rationale of the decision in the Herald Publishing
Company case
48
is peculiarly applicable to the one before
Us, and removes it from the general doctrine enunciated
in the decisions cited by the respondents and quoted
earlier herein.
1. Under Section 17 of Rule 39 a third person who claims
property levied upon on execution may vindicate such
claim by action. Obviously a judgment rendered in his
favor, that is, declaring him to be the owner of the
property, would not constitute interference with the
powers or processes of the court which rendered the
judgment to enforce which the execution was levied. If
that be so and it is so because the property, being that
of a stranger, is not subject to levy then an
interlocutory order such as injunction, upon a claim and
prima facie showing of ownership by the claimant,
cannot be considered as such interference either."
WHEREFORE, the petition is GRANTED. The assailed Decision dated
January 8, 1999 and the Resolution dated March 29, 1999 of the
Court of Appeals in CA G.R. No. 49226 are set aside. Upon filing of a
bond of P1,000,000.00, respondent sheriffs are restrained from
further implementing the writ of execution issued in Civil Case No.
96-80083 by the RTC, Branch 26, Manila, until further orders from
this Court. The RTC, Branch 94, Boac, Marinduque, is directed to
dispose of Civil Case No. 98-13 with dispatch.
SO ORDERED.


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G.R. No. 179922 December 16, 2008
JUAN DE DIOS CARLOS, petitioner,
vs.
FELICIDAD SANDOVAL, also known as FELICIDAD S. VDA. DE
CARLOS or FELICIDAD SANDOVAL CARLOS or FELICIDAD SANDOVAL
VDA. DE CARLOS, and TEOFILO CARLOS II, respondents.
D E C I S I O N
REYES, R.T., J.:
ONLY a spouse can initiate an action to sever the marital bond for
marriages solemnized during the effectivity of the Family Code,
except cases commenced prior to March 15, 2003. The nullity and
annulment of a marriage cannot be declared in a judgment on the
pleadings, summary judgment, or confession of judgment.
We pronounce these principles as We review on certiorari the
Decision
1
of the Court of Appeals (CA) which reversed and set aside
the summary judgment
2
of the Regional Trial Court (RTC) in an
action for declaration of nullity of marriage, status of a child,
recovery of property, reconveyance, sum of money, and damages.
The Facts
The events that led to the institution of the instant suitare unveiled
as follows:
Spouses Felix B. Carlos and Felipa Elemia died intestate. They left six
parcels of land to their compulsory heirs, Teofilo Carlos and
petitioner Juan De Dios Carlos. The lots are particularly described as
follows:
Parcel No. 1
Lot No. 162 of the MUNTINLUPA ESTATE SUBDIVISION,
Case No. 6137 of the Court of Land Registration.
Exemption from the provisions of Article 567 of the Civil
Code is specifically reserved.
Area: 1 hectare, 06 ares, 07 centares.
Parcel No. 2
A parcel of land (Lot No. 159-B), being a portion of Lot 159,
situated in the Bo. of Alabang, Municipality of Muntinlupa,
Province of Rizal, x x x containing an area of Thirteen
Thousand Four Hundred Forty One (13,441) square
meters.
Parcel No. 3
A parcel of land (Lot 159-B-2 of the subd. plan [LRC] Psd-
325903, approved as a non-subd. project), being a portion
of Lot 159-B [LRC] Psd- Alabang, Mun. of Muntinlupa,
Metro Manila, Island of Luzon. Bounded on the NE, points
2 to 4 by Lot 155, Muntinlupa Estate; on the SE, point 4 to
5 by Lot 159-B-5; on the S, points 5 to 1 by Lot 159-B-3; on
the W, points 1 to 2 by Lot 159-B-1 (Road widening) all of
the subd. plan, containing an area of ONE HUNDRED
THIRTY (130) SQ. METERS, more or less.
PARCEL No. 4
A parcel of land (Lot 28-C of the subd. plan Psd-13-007090,
being a portion of Lot 28, Muntinlupa Estate, L.R.C. Rec.
No. 6137), situated in the Bo. of Alabang, Mun. of
Muntinlupa, Metro Manila. Bounded on the NE, along lines
1-2 by Lot 27, Muntinlupa Estate; on the East & SE, along
lines 2 to 6 by Mangangata River; and on the West., along
line 6-1, by Lot 28-B of the subd. plan x x x containing an
area of ONE THUSAND AND SEVENTY-SIX (1,076) SQUARE
METERS.
PARCEL No. 5
PARCELA DE TERRENO No. 50, Manzana No. 18, de la subd.
de Solocan. Linda por el NW, con la parcela 49; por el NE,
con la parcela 36; por el SE, con la parcela 51; y por el SW,
con la calle Dos Castillas. Partiendo de un punto marcado 1
en el plano, el cual se halla a S. gds. 01'W, 72.50 mts.
Desde el punto 1 de esta manzana, que es un mojon de
concreto de la Ciudad de Manila, situado on el esquina E.
que forman las Calles Laong Laan y Dos. Castillas,
continiendo un extension superficial de CIENTO
CINCUENTA (150) METROS CUADRADOS.
PARCEL No. 6
PARCELA DE TERRENO No. 51, Manzana No. 18, de la subd.
De Solocon. Linda por el NW, con la parcela 50; por el NE,
con la parcela 37; por el SE, con la parcela 52; por el SW,
con la Calle Dos Castillas. Partiendo de un punto Marcado
1 en el plano, el cual se halla at S. 43 gds. 01'E, 82.50 mts.
Desde el punto 1 de esta manzana, que es un mojon de
concreto de la Ciudad de Manila, situado on el esquina E.
que forman las Calles Laong Laan y Dos. Castillas,
continiendo una extension superficial de CIENTO
CINCUENTA (150) METROS CUADRADOS.
3

During the lifetime of Felix Carlos, he agreed to transfer his estate to
Teofilo. The agreement was made in order to avoid the payment of
inheritance taxes. Teofilo, in turn, undertook to deliver and turn
over the share of the other legal heir, petitioner Juan De Dios Carlos.
Eventually, the first three (3) parcels of land were transferred and
registered in the name of Teofilo. These three (3) lots are now
covered by Transfer Certificate of Title (TCT) No. 234824 issued by
the Registry of Deeds of Makati City; TCT No. 139061 issued by the
Registry of Deeds of Makati City; and TCT No. 139058 issued by the
Registry of Deeds of Makati City.
Parcel No. 4 was registered in the name of petitioner. The lot is now
covered by TCT No. 160401 issued by the Registry of Deeds of
Makati City.
On May 13, 1992, Teofilo died intestate. He was survived by
respondents Felicidad and their son, Teofilo Carlos II (Teofilo II).
Upon Teofilo's death, Parcel Nos. 5 & 6 were registered in the name
of respondent Felicidad and co-respondent, Teofilo II. The said two

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(2) parcels of land are covered by TCT Nos. 219877 and 210878,
respectively, issued by the Registry of Deeds of Manila.
In 1994, petitioner instituted a suit against respondents before the
RTC in Muntinlupa City, docketed as Civil Case No. 94-1964. In the
said case, the parties submitted and caused the approval of a partial
compromise agreement. Under the compromise, the parties
acknowledged their respective shares in the proceeds from the sale
of a portion of the first parcel of land. This includes the remaining
6,691-square-meter portion of said land.
On September 17, 1994, the parties executed a deed of extrajudicial
partition, dividing the remaining land of the first parcel between
them.
Meanwhile, in a separate case entitled Rillo v. Carlos,
4
2,331 square
meters of the second parcel of land were adjudicated in favor of
plaintiffs Rillo. The remaining 10,000-square meter portion was later
divided between petitioner and respondents.
The division was incorporated in a supplemental compromise
agreement executed on August 17, 1994, with respect to Civil Case
No. 94-1964. The parties submitted the supplemental compromise
agreement, which was approved accordingly.
Petitioner and respondents entered into two more contracts in
August 1994. Under the contracts, the parties equally divided
between them the third and fourth parcels of land.
In August 1995, petitioner commenced an action, docketed as Civil
Case No. 95-135, against respondents before the court a quo with
the following causes of action: (a) declaration of nullity of marriage;
(b) status of a child; (c) recovery of property; (d) reconveyance; and
(e) sum of money and damages. The complaint was raffled to Branch
256 of the RTC in Muntinlupa.
In his complaint, petitioner asserted that the marriage between his
late brother Teofilo and respondent Felicidad was a nullity in view of
the absence of the required marriage license. He likewise
maintained that his deceased brother was neither the natural nor
the adoptive father of respondent Teofilo Carlos II.
Petitioner likewise sought the avoidance of the contracts he entered
into with respondent Felicidad with respect to the subject real
properties. He also prayed for the cancellation of the certificates of
title issued in the name of respondents. He argued that the
properties covered by such certificates of title, including the sums
received by respondents as proceeds, should be reconveyed to him.
Finally, petitioner claimed indemnification as and by way of moral
and exemplary damages, attorney's fees, litigation expenses, and
costs of suit.
On October 16, 1995, respondents submitted their answer. They
denied the material averments of petitioner's complaint.
Respondents contended that the dearth of details regarding the
requisite marriage license did not invalidate Felicidad's marriage to
Teofilo. Respondents declared that Teofilo II was the illegitimate
child of the deceased Teofilo Carlos with another woman.
On the grounds of lack of cause of action and lack of jurisdiction
over the subject matter, respondents prayed for the dismissal of the
case before the trial court. They also asked that their counterclaims
for moral and exemplary damages, as well as attorney's fees, be
granted.
But before the parties could even proceed to pre-trial, respondents
moved for summary judgment. Attached to the motion was the
affidavit of the justice of the peace who solemnized the marriage.
Respondents also submitted the Certificate of Live Birth of
respondent Teofilo II. In the certificate, the late Teofilo Carlos and
respondent Felicidad were designated as parents.
On January 5, 1996, petitioner opposed the motion for summary
judgment on the ground of irregularity of the contract evidencing
the marriage. In the same breath, petitioner lodged his own motion
for summary judgment. Petitioner presented a certification from the
Local Civil Registrar of Calumpit, Bulacan, certifying that there is no
record of birth of respondent Teofilo II.
Petitioner also incorporated in the counter-motion for summary
judgment the testimony of respondent Felicidad in another case.
Said testimony was made in Civil Case No. 89-2384, entitled Carlos v.
Gorospe, before the RTC Branch 255, Las Pias. In her testimony,
respondent Felicidad narrated that co-respondent Teofilo II is her
child with Teofilo.
5

Subsequently, the Office of the City Prosecutor of Muntinlupa
submitted to the trial court its report and manifestation, discounting
the possibility of collusion between the parties.
RTC and CA Dispositions
On April 8, 1996, the RTC rendered judgment, disposing as follows:
WHEREFORE, premises considered, defendant's (respondent's)
Motion for Summary Judgment is hereby denied. Plaintiff's
(petitioner's) Counter-Motion for Summary Judgment is hereby
granted and summary judgment is hereby rendered in favor of
plaintiff as follows:
1. Declaring the marriage between defendant Felicidad Sandoval
and Teofilo Carlos solemnized at Silang, Cavite on May 14, 1962,
evidenced by the Marriage Certificate submitted in this case, null
and void ab initio for lack of the requisite marriage license;
2. Declaring that the defendant minor, Teofilo S. Carlos II, is not the
natural, illegitimate, or legally adopted child of the late Teofilo E.
Carlos;
3. Ordering defendant Sandoval to pay and restitute to plaintiff the
sum of P18,924,800.00 together with the interest thereon at the
legal rate from date of filing of the instant complaint until fully paid;
4. Declaring plaintiff as the sole and exclusive owner of the parcel of
land, less the portion adjudicated to plaintiffs in Civil Case No.
11975, covered by TCT No. 139061 of the Register of Deeds of
Makati City, and ordering said Register of Deeds to cancel said title
and to issue another title in the sole name of plaintiff herein;

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5. Declaring the Contract, Annex "K" of complaint, between plaintiff
and defendant Sandoval null and void, and ordering the Register of
Deeds of Makati City to cancel TCT No. 139058 in the name of
Teofilo Carlos, and to issue another title in the sole name of plaintiff
herein;
6. Declaring the Contract, Annex M of the complaint, between
plaintiff and defendant Sandoval null and void;
7. Ordering the cancellation of TCT No. 210877 in the names of
defendant Sandoval and defendant minor Teofilo S. Carlos II and
ordering the Register of Deeds of Manila to issue another title in the
exclusive name of plaintiff herein;
8. Ordering the cancellation of TCT No. 210878 in the name of
defendant Sandoval and defendant Minor Teofilo S. Carlos II and
ordering the Register of Deeds of Manila to issue another title in the
sole name of plaintiff herein.
Let this case be set for hearing for the reception of plaintiff's
evidence on his claim for moral damages, exemplary damages,
attorney's fees, appearance fees, and litigation expenses on June 7,
1996 at 1:30 o'clock in the afternoon.
SO ORDERED.
6

Dissatisfied, respondents appealed to the CA. In the appeal,
respondents argued, inter alia, that the trial court acted without or
in excess of jurisdiction in rendering summary judgment annulling
the marriage of Teofilo, Sr. and Felicidad and in declaring Teofilo II as
not an illegitimate child of Teofilo, Sr.
On October 15, 2002, the CA reversed and set aside the RTC ruling,
disposing as follows:
WHEREFORE, the summary judgment appealed from is
REVERSED and SET ASIDE and in lieu thereof, a new one is
entered REMANDING the case to the court of origin for
further proceedings.
SO ORDERED.
7

The CA opined:
We find the rendition of the herein appealed summary judgment by
the court a quo contrary to law and public policy as ensconced in the
aforesaid safeguards. The fact that it was appellants who first sought
summary judgment from the trial court, did not justify the grant
thereof in favor of appellee. Not being an action "to recover upon a
claim" or "to obtain a declaratory relief," the rule on summary
judgment apply (sic) to an action to annul a marriage. The mere fact
that no genuine issue was presented and the desire to expedite the
disposition of the case cannot justify a misinterpretation of the rule.
The first paragraph of Article 88 and 101 of the Civil Code expressly
prohibit the rendition of decree of annulment of a marriage upon a
stipulation of facts or a confession of judgment. Yet, the affidavits
annexed to the petition for summary judgment practically amount
to these methods explicitly proscribed by the law.
We are not unmindful of appellee's argument that the
foregoing safeguards have traditionally been applied to
prevent collusion of spouses in the matter of dissolution of
marriages and that the death of Teofilo Carlos on May 13,
1992 had effectively dissolved the marriage herein
impugned. The fact, however, that appellee's own brother
and appellant Felicidad Sandoval lived together as
husband and wife for thirty years and that the annulment
of their marriage is the very means by which the latter is
sought to be deprived of her participation in the estate left
by the former call for a closer and more thorough inquiry
into the circumstances surrounding the case. Rather that
the summary nature by which the court a quo resolved the
issues in the case, the rule is to the effect that the material
facts alleged in the complaint for annulment of marriage
should always be proved. Section 1, Rule 19 of the Revised
Rules of Court provides:
"Section 1. Judgment on the pleadings. - Where
an answer fails to tender an issue, or otherwise
admits the material allegations of the adverse
party's pleading, the court may, on motion of
that party, direct judgment on such pleading. But
in actions for annulment of marriage or for legal
separation, the material facts alleged in the
complaint shall always be proved."
(Underscoring supplied)
Moreover, even if We were to sustain the applicability of the rules
on summary judgment to the case at bench, Our perusal of the
record shows that the finding of the court a quo for appellee would
still not be warranted. While it may be readily conceded that a valid
marriage license is among the formal requisites of marriage, the
absence of which renders the marriage void ab initio pursuant to
Article 80(3) in relation to Article 58 of the Civil Code the failure to
reflect the serial number of the marriage license on the marriage
contract evidencing the marriage between Teofilo Carlos and
appellant Felicidad Sandoval, although irregular, is not as fatal as
appellee represents it to be. Aside from the dearth of evidence to
the contrary, appellant Felicidad Sandoval's affirmation of the
existence of said marriage license is corroborated by the following
statement in the affidavit executed by Godofredo Fojas, then Justice
of the Peace who officiated the impugned marriage, to wit:
"That as far as I could remember, there was a marriage license
issued at Silang, Cavite on May 14, 1962 as basis of the said marriage
contract executed by Teofilo Carlos and Felicidad Sandoval, but the
number of said marriage license was inadvertently not placed in the
marriage contract for the reason that it was the Office Clerk who
filled up the blanks in the Marriage Contract who in turn, may have
overlooked the same."
Rather than the inferences merely drawn by the trial
court, We are of the considered view that the veracity and
credibility of the foregoing statement as well as the
motivations underlying the same should be properly
threshed out in a trial of the case on the merits.
If the non-presentation of the marriage contract - the
primary evidence of marriage - is not proof that a marriage
did not take place, neither should appellants' non-
presentation of the subject marriage license be taken as
proof that the same was not procured. The burden of
proof to show the nullity of the marriage, it must be

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emphasized, rests upon the plaintiff and any doubt should
be resolved in favor of the validity of the marriage.
Considering that the burden of proof also rests on the
party who disputes the legitimacy of a particular party, the
same may be said of the trial court's rejection of the
relationship between appellant Teofilo Carlos II and his
putative father on the basis of the inconsistencies in
appellant Felicidad Sandoval's statements. Although it had
effectively disavowed appellant's prior claims regarding
the legitimacy of appellant Teofilo Carlos II, the averment
in the answer that he is the illegitimate son of appellee's
brother, to Our mind, did not altogether foreclose the
possibility of the said appellant's illegitimate filiation, his
right to prove the same or, for that matter, his entitlement
to inheritance rights as such.
Without trial on the merits having been conducted in the
case, We find appellee's bare allegation that appellant
Teofilo Carlos II was merely purchased from an indigent
couple by appellant Felicidad Sandoval, on the whole,
insufficient to support what could well be a minor's total
forfeiture of the rights arising from his putative filiation.
Inconsistent though it may be to her previous statements,
appellant Felicidad Sandoval's declaration regarding the
illegitimate filiation of Teofilo Carlos II is more credible
when considered in the light of the fact that, during the
last eight years of his life, Teofilo Carlos allowed said
appellant the use of his name and the shelter of his
household. The least that the trial court could have done
in the premises was to conduct a trial on the merits in
order to be able to thoroughly resolve the issues
pertaining to the filiation of appellant Teofilo Carlos II.
8

On November 22, 2006, petitioner moved for reconsideration and
for the inhibition of the ponente, Justice Rebecca De Guia-Salvador.
The CA denied the twin motions.
Issues
In this petition under Rule 45, petitioner hoists the following issues:
1. That, in reversing and setting aside the Summary
Judgment under the Decision, Annex A hereof, and in
denying petitioner's Motion for reconsideration under the
Resolution, Annex F hereof, with respect to the nullity of
the impugned marriage, petitioner respectfully submits
that the Court of Appeals committed a grave reversible
error in applying Articles 88 and 101 of the Civil Code,
despite the fact that the circumstances of this case are
different from that contemplated and intended by law, or
has otherwise decided a question of substance not
theretofore decided by the Supreme Court, or has decided
it in a manner probably not in accord with law or with the
applicable decisions of this Honorable Court;
2. That in setting aside and reversing the Summary
Judgment and, in lieu thereof, entering another remanding
the case to the court of origin for further proceedings,
petitioner most respectfully submits that the Court of
Appeals committed a serious reversible error in applying
Section 1, Rule 19 (now Section 1, Rule 34) of the Rules of
Court providing for judgment on the pleadings, instead of
Rule 35 governing Summary Judgments;
3. That in reversing and setting aside the Summary
Judgment and, in lieu thereof, entering another remanding
the case to the court of origin for further proceedings,
petitioner most respectfully submits that the Court of
Appeals committed grave abuse of discretion, disregarded
judicial admissions, made findings on ground of
speculations, surmises, and conjectures, or otherwise
committed misapplications of the laws and
misapprehension of the facts.
9
Essentially, the Court is tasked to resolve whether a marriage may
be declared void ab initio through a judgment on the pleadings or a
summary judgment and without the benefit of a trial. But there are
other procedural issues, including the capacity of one who is not a
spouse in bringing the action for nullity of marriage.
Our Ruling
I. The grounds for declaration of absolute nullity of marriage must
be proved. Neither judgment on the pleadings nor summary
judgment is allowed. So is confession of judgment disallowed.
Petitioner faults the CA in applying Section 1, Rule 19
10
of the
Revised Rules of Court, which provides:
SECTION 1. Judgment on the pleadings. - Where an answer
fails to tender an issue, or otherwise admits the material
allegations of the adverse party's pleading, the court may,
on motion of that party, direct judgment on such pleading.
But in actions for annulment of marriage or for legal
separation, the material facts alleged in the complaint
shall always be proved.
He argues that the CA should have applied Rule 35 of the Rules of
Court governing summary judgment, instead of the rule on
judgment on the pleadings.
Petitioner is misguided. The CA did not limit its finding solely within
the provisions of the Rule on judgment on the pleadings. In
disagreeing with the trial court, the CA likewise considered the
provisions on summary judgments, to wit:
Moreover, even if We are to sustain the applicability of the
rules on summary judgment to the case at bench, Our
perusal of the record shows that the finding of the court a
quo for appellee would still not be warranted. x x x
11

But whether it is based on judgment on the pleadings or summary
judgment, the CA was correct in reversing the summary judgment
rendered by the trial court. Both the rules on judgment on the
pleadings and summary judgments have no place in cases of
declaration of absolute nullity of marriage and even in annulment of
marriage.
With the advent of A.M. No. 02-11-10-SC, known as "Rule on
Declaration of Absolute Nullity of Void Marriages and Annulment of
Voidable Marriages," the question on the application of summary
judgments or even judgment on the pleadings in cases of nullity or

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annulment of marriage has been stamped with clarity. The
significant principle laid down by the said Rule, which took effect on
March 15, 2003
12
is found in Section 17, viz.:
SEC. 17. Trial. - (1) The presiding judge shall personally
conduct the trial of the case. No delegation of evidence to
a commissioner shall be allowed except as to matters
involving property relations of the spouses.
(2) The grounds for declaration of absolute nullity or
annulment of marriage must be proved. No judgment on
the pleadings, summary judgment, or confession of
judgment shall be allowed. (Underscoring supplied)
Likewise instructive is the Court's pronouncement in Republic v.
Sandiganbayan.
13
In that case, We excluded actions for nullity or
annulment of marriage from the application of summary judgments.
Prescinding from the foregoing discussion, save for
annulment of marriage or declaration of its nullity or for
legal separation, summary judgment is applicable to all
kinds of actions.
14
By issuing said summary judgment, the trial court has divested the
State of its lawful right and duty to intervene in the case. The
participation of the State is not terminated by the declaration of the
public prosecutor that no collusion exists between the parties. The
State should have been given the opportunity to present
controverting evidence before the judgment was rendered.
15

Both the Civil Code and the Family Code ordain that the court should
order the prosecuting attorney to appear and intervene for the
State. It is at this stage when the public prosecutor sees to it that
there is no suppression of evidence. Concomitantly, even if there is
no suppression of evidence, the public prosecutor has to make sure
that the evidence to be presented or laid down before the court is
not fabricated.
To further bolster its role towards the preservation of marriage, the
Rule on Declaration of Absolute Nullity of Void Marriages reiterates
the duty of the public prosecutor, viz.:
SEC. 13. Effect of failure to appear at the pre-trial. - (a) x x
x
(b) x x x If there is no collusion, the court shall require the
public prosecutor to intervene for the State during the trial
on the merits to prevent suppression or fabrication of
evidence. (Underscoring supplied)
Truly, only the active participation of the public prosecutor or the
Solicitor General will ensure that the interest of the State is
represented and protected in proceedings for declaration of nullity
of marriages by preventing the fabrication or suppression of
evidence.
16

II. A petition for declaration of absolute nullity of void marriage
may be filed solely by the husband or wife. Exceptions: (1) Nullity
of marriage cases commenced before the effectivity of A.M. No.
02-11-10-SC; and (2) Marriages celebrated during the effectivity of
the Civil Code.
Under the Rule on Declaration of Absolute Nullity of Void
Marriages and Annulment of Voidable Marriages, the petition for
declaration of absolute nullity of marriage may not be filed by any
party outside of the marriage. The Rule made it exclusively a right of
the spouses by stating:
SEC. 2. Petition for declaration of absolute nullity of void
marriages. -
(a) Who may file. - A petition for declaration of absolute
nullity of void marriage may be filed solely by the husband
or the wife. (Underscoring supplied)
Section 2(a) of the Rule makes it the sole right of the husband or the
wife to file a petition for declaration of absolute nullity of void
marriage. The rationale of the Rule is enlightening, viz.:
Only an aggrieved or injured spouse may file a petition for
annulment of voidable marriages or declaration of
absolute nullity of void marriages. Such petition cannot be
filed by compulsory or intestate heirs of the spouses or by
the State. The Committee is of the belief that they do not
have a legal right to file the petition. Compulsory or
intestate heirs have only inchoate rights prior to the death
of their predecessor, and, hence, can only question the
validity of the marriage of the spouses upon the death of a
spouse in a proceeding for the settlement of the estate of
the deceased spouse filed in the regular courts. On the
other hand, the concern of the State is to preserve
marriage and not to seek its dissolution.
17
(Underscoring
supplied)
The new Rule recognizes that the husband and the wife are the sole
architects of a healthy, loving, peaceful marriage. They are the only
ones who can decide when and how to build the foundations of
marriage. The spouses alone are the engineers of their marital life.
They are simultaneously the directors and actors of their
matrimonial true-to-life play. Hence, they alone can and should
decide when to take a cut, but only in accordance with the grounds
allowed by law.
The innovation incorporated in A.M. No. 02-11-10-SC sets forth a
demarcation line between marriages covered by the Family Code
and those solemnized under the Civil Code. The Rule extends only to
marriages entered into during the effectivity of the Family Code
which took effect on August 3, 1988.
18

The advent of the Rule on Declaration of Absolute Nullity of Void
Marriages marks the beginning of the end of the right of the heirs of
the deceased spouse to bring a nullity of marriage case against the
surviving spouse. But the Rule never intended to deprive the
compulsory or intestate heirs of their successional rights.
While A.M. No. 02-11-10-SC declares that a petition for declaration
of absolute nullity of marriage may be filed solely by the husband or
the wife, it does not mean that the compulsory or intestate heirs are
without any recourse under the law. They can still protect their
successional right, for, as stated in the Rationale of the Rules on
Annulment of Voidable Marriages and Declaration of Absolute
Nullity of Void Marriages, compulsory or intestate heirs can still
question the validity of the marriage of the spouses, not in a
proceeding for declaration of nullity but upon the death of a spouse

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in a proceeding for the settlement of the estate of the deceased
spouse filed in the regular courts.
19

It is emphasized, however, that the Rule does not apply to cases
already commenced before March 15, 2003 although the marriage
involved is within the coverage of the Family Code. This is so, as the
new Rule which became effective on March 15, 2003
20
is prospective
in its application. Thus, the Court held in Enrico v. Heirs of Sps.
Medinaceli,
21
viz.:
As has been emphasized, A.M. No. 02-11-10-SC covers
marriages under the Family Code of the Philippines, and is
prospective in its application.
22
Petitioner commenced the nullity of marriage case against
respondent Felicidad in 1995. The marriage in controversy was
celebrated on May 14, 1962. Which law would govern depends upon
when the marriage took place.
23

The marriage having been solemnized prior to the effectivity of the
Family Code, the applicable law is the Civil Code which was the law
in effect at the time of its celebration.
24
But the Civil Code is silent as
to who may bring an action to declare the marriage void. Does this
mean that any person can bring an action for the declaration of
nullity of marriage?
We respond in the negative. The absence of a provision in the Civil
Code cannot be construed as a license for any person to institute a
nullity of marriage case. Such person must appear to be the party
who stands to be benefited or injured by the judgment in the suit, or
the party entitled to the avails of the suit.
25
Elsewise stated, plaintiff
must be the real party-in-interest. For it is basic in procedural law
that every action must be prosecuted and defended in the name of
the real party-in-interest.
26

Interest within the meaning of the rule means material interest or
an interest in issue to be affected by the decree or judgment of the
case, as distinguished from mere curiosity about the question
involved or a mere incidental interest. One having no material
interest to protect cannot invoke the jurisdiction of the court as
plaintiff in an action. When plaintiff is not the real party-in-interest,
the case is dismissible on the ground of lack of cause of action.
27

Illuminating on this point is Amor-Catalan v. Court of Appeals,
28

where the Court held:
True, under the New Civil Code which is the law in force at
the time the respondents were married, or even in the
Family Code, there is no specific provision as to who can
file a petition to declare the nullity of marriage; however,
only a party who can demonstrate "proper interest" can
file the same. A petition to declare the nullity of marriage,
like any other actions, must be prosecuted or defended in
the name of the real party-in-interest and must be based
on a cause of action. Thus, in Nial v. Badayog, the Court
held that the children have the personality to file the
petition to declare the nullity of marriage of their
deceased father to their stepmother as it affects their
successional rights.
x x x x
In fine, petitioner's personality to file the petition to declare the
nullity of marriage cannot be ascertained because of the absence of
the divorce decree and the foreign law allowing it. Hence, a remand
of the case to the trial court for reception of additional evidence is
necessary to determine whether respondent Orlando was granted a
divorce decree and whether the foreign law which granted the same
allows or restricts remarriage. If it is proved that a valid divorce
decree was obtained and the same did not allow respondent
Orlando's remarriage, then the trial court should declare
respondent's marriage as bigamous and void ab initio but reduced
the amount of moral damages from P300,000.00 to P50,000.00 and
exemplary damages from P200,000.00 to P25,000.00. On the
contrary, if it is proved that a valid divorce decree was obtained
which allowed Orlando to remarry, then the trial court must dismiss
the instant petition to declare nullity of marriage on the ground that
petitioner Felicitas Amor-Catalan lacks legal personality to file the
same.
29
III. The case must be remanded to determine whether or not
petitioner is a real-party-in-interest to seek the declaration of
nullity of the marriage in controversy.
In the case at bench, the records reveal that when Teofilo died
intestate in 1992, his only surviving compulsory heirs are respondent
Felicidad and their son, Teofilo II. Under the law on succession,
successional rights are transmitted from the moment of death of the
decedent and the compulsory heirs are called to succeed by
operation of law.
30

Upon Teofilo's death in 1992, all his property, rights and obligations
to the extent of the value of the inheritance are transmitted to his
compulsory heirs. These heirs were respondents Felicidad and
Teofilo II, as the surviving spouse and child, respectively.
Article 887 of the Civil Code outlined who are compulsory heirs, to
wit:
(1) Legitimate children and descendants, with respect to their
legitimate parents and ascendants;
(2) In default of the foregoing, legitimate parents and ascendants,
with respect to their legitimate children and descendants;
(3) The widow or widower;
(4) Acknowledged natural children, and natural children by legal
fiction;
(5) Other illegitimate children referred to in Article 287 of the Civil
Code.
31

Clearly, a brother is not among those considered as compulsory
heirs. But although a collateral relative, such as a brother, does not
fall within the ambit of a compulsory heir, he still has a right to
succeed to the estate. Articles 1001 and 1003 of the New Civil Code
provide:
ART. 1001. Should brothers and sisters or their children survive with
the widow or widower, the latter shall be entitled to one-half of the
inheritance and the brothers and sisters or their children to the
other half.

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ART. 1003. If there are no descendants, ascendants, illegitimate
children, or a surviving spouse, the collateral relatives shall succeed
to the entire estate of the deceased in accordance with the
following articles. (Underscoring supplied)
Indeed, only the presence of descendants, ascendants or illegitimate
children excludes collateral relatives from succeeding to the estate
of the decedent. The presence of legitimate, illegitimate, or adopted
child or children of the deceased precludes succession by collateral
relatives.
32
Conversely, if there are no descendants, ascendants,
illegitimate children, or a surviving spouse, the collateral relatives
shall succeed to the entire estate of the decedent.
33

If respondent Teofilo II is declared and finally proven not to be the
legitimate, illegitimate, or adopted son of Teofilo, petitioner would
then have a personality to seek the nullity of marriage of his
deceased brother with respondent Felicidad. This is so, considering
that collateral relatives, like a brother and sister, acquire
successional right over the estate if the decedent dies without issue
and without ascendants in the direct line.
The records reveal that Teofilo was predeceased by his parents. He
had no other siblings but petitioner. Thus, if Teofilo II is finally found
and proven to be not a legitimate, illegitimate, or adopted son of
Teofilo, petitioner succeeds to the other half of the estate of his
brother, the first half being allotted to the widow pursuant to Article
1001 of the New Civil Code. This makes petitioner a real-party-
interest to seek the declaration of absolute nullity of marriage of his
deceased brother with respondent Felicidad. If the subject marriage
is found to be void ab initio, petitioner succeeds to the entire estate.
It bears stressing, however, that the legal personality of petitioner to
bring the nullity of marriage case is contingent upon the final
declaration that Teofilo II is not a legitimate, adopted, or illegitimate
son of Teofilo.
If Teofilo II is proven to be a legitimate, illegitimate, or legally
adopted son of Teofilo, then petitioner has no legal personality to
ask for the nullity of marriage of his deceased brother and
respondent Felicidad. This is based on the ground that he has no
successional right to be protected, hence, does not have proper
interest. For although the marriage in controversy may be found to
be void from the beginning, still, petitioner would not inherit. This is
because the presence of descendant, illegitimate,
34
or even an
adopted child
35
excludes the collateral relatives from inheriting from
the decedent.
Thus, the Court finds that a remand of the case for trial on the
merits to determine the validity or nullity of the subject marriage is
called for. But the RTC is strictly instructed to dismiss the nullity of
marriage case for lack of cause of action if it is proven by evidence
that Teofilo II is a legitimate, illegitimate, or legally adopted son of
Teofilo Carlos, the deceased brother of petitioner.
IV. Remand of the case regarding the question of filiation of
respondent Teofilo II is proper and in order. There is a need to
vacate the disposition of the trial court as to the other causes of
action before it.
Petitioner did not assign as error or interpose as issue the ruling of
the CA on the remand of the case concerning the filiation of
respondent Teofilo II. This notwithstanding, We should not leave the
matter hanging in limbo.
This Court has the authority to review matters not specifically raised
or assigned as error by the parties, if their consideration is necessary
in arriving at a just resolution of the case.
36

We agree with the CA that without trial on the merits having been
conducted in the case, petitioner's bare allegation that respondent
Teofilo II was adopted from an indigent couple is insufficient to
support a total forfeiture of rights arising from his putative filiation.
However, We are not inclined to support its pronouncement that
the declaration of respondent Felicidad as to the illegitimate filiation
of respondent Teofilo II is more credible. For the guidance of the
appellate court, such declaration of respondent Felicidad should not
be afforded credence. We remind the CA of the guaranty provided
by Article 167 of the Family Code to protect the status of legitimacy
of a child, to wit:
ARTICLE 167. The child shall be considered legitimate
although the mother may have declared against its
legitimacy or may have been sentenced as an adulteress.
It is stressed that Felicidad's declaration against the legitimate status
of Teofilo II is the very act that is proscribed by Article 167 of the
Family Code. The language of the law is unmistakable. An assertion
by the mother against the legitimacy of her child cannot affect the
legitimacy of a child born or conceived within a valid marriage.
37

Finally, the disposition of the trial court in favor of petitioner for
causes of action concerning reconveyance, recovery of property, and
sum of money must be vacated. This has to be so, as said disposition
was made on the basis of its finding that the marriage in controversy
was null and void ab initio.
WHEREFORE, the appealed Decision is MODIFIED as follows:
1. The case is REMANDED to the Regional Trial Court in regard to the
action on the status and filiation of respondent Teofilo Carlos II and
the validity or nullity of marriage between respondent Felicidad
Sandoval and the late Teofilo Carlos;
2. If Teofilo Carlos II is proven to be the legitimate, or illegitimate, or
legally adopted son of the late Teofilo Carlos, the RTC is strictly
INSTRUCTED to DISMISS the action for nullity of marriage for lack of
cause of action;
3. The disposition of the RTC in Nos. 1 to 8 of the fallo of its decision
is VACATED AND SET ASIDE.
The Regional Trial Court is ORDERED to conduct trial on the merits
with dispatch and to give this case priority in its calendar. No costs.
SO ORDERED.

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G.R. No. 115838 July 18, 2002
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE CASTRO,
petitioners,
vs.
COURT OF APPEALS and FRANCISCO ARTIGO, respondents.
CARPIO, J.:
The Case
Before us is a Petition for Review on Certiorari
1
seeking to annul the
Decision of the Court of Appeals
2
dated May 4, 1994 in CA-G.R. CV
No. 37996, which affirmed in toto the decision
3
of the Regional Trial
Court of Quezon City, Branch 80, in Civil Case No. Q-89-2631. The
trial court disposed as follows:
"WHEREFORE, the Court finds defendants Constante and
Corazon Amor de Castro jointly and solidarily liable to
plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorney's fees;
d) To pay the cost of this suit.
Quezon City, Metro Manila, December 20, 1991."
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo ("Artigo" for
brevity) sued petitioners Constante A. De Castro ("Constante" for
brevity) and Corazon A. De Castro ("Corazon" for brevity) to collect
the unpaid balance of his broker's commission from the De Castros.
4

The Court of Appeals summarized the facts in this wise:
"x x x. Appellants
5
were co-owners of four (4) lots located
at EDSA corner New York and Denver Streets in Cubao,
Quezon City. In a letter dated January 24, 1984 (Exhibit "A-
1, p. 144, Records), appellee
6
was authorized by appellants
to act as real estate broker in the sale of these properties
for the amount of P23,000,000.00, five percent (5%) of
which will be given to the agent as commission. It was
appellee who first found Times Transit Corporation,
represented by its president Mr. Rondaris, as prospective
buyer which desired to buy two (2) lots only, specifically
lots 14 and 15. Eventually, sometime in May of 1985, the
sale of lots 14 and 15 was consummated. Appellee
received from appellants P48,893.76 as commission.
It was then that the rift between the contending parties
soon emerged. Appellee apparently felt short changed
because according to him, his total commission should be
P352,500.00 which is five percent (5%) of the agreed price
of P7,050,000.00 paid by Times Transit Corporation to
appellants for the two (2) lots, and that it was he who
introduced the buyer to appellants and unceasingly
facilitated the negotiation which ultimately led to the
consummation of the sale. Hence, he sued below to collect
the balance of P303,606.24 after having received
P48,893.76 in advance.1wphi1.nt
On the other hand, appellants completely traverse
appellee's claims and essentially argue that appellee is
selfishly asking for more than what he truly deserved as
commission to the prejudice of other agents who were
more instrumental in the consummation of the sale.
Although appellants readily concede that it was appellee
who first introduced Times Transit Corp. to them, appellee
was not designated by them as their exclusive real estate
agent but that in fact there were more or less eighteen
(18) others whose collective efforts in the long run
dwarfed those of appellee's, considering that the first
negotiation for the sale where appellee took active
participation failed and it was these other agents who
successfully brokered in the second negotiation. But
despite this and out of appellants' "pure liberality,
beneficence and magnanimity", appellee nevertheless was
given the largest cut in the commission (P48,893.76),
although on the principle of quantum meruit he would
have certainly been entitled to less. So appellee should not
have been heard to complain of getting only a pittance
when he actually got the lion's share of the commission
and worse, he should not have been allowed to get the
entire commission. Furthermore, the purchase price for
the two lots was only P3.6 million as appearing in the deed
of sale and not P7.05 million as alleged by appellee. Thus,
even assuming that appellee is entitled to the entire
commission, he would only be getting 5% of the P3.6
million, or P180,000.00."
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo
to act as agent in the sale of two lots in Cubao, Quezon City. The
handwritten authorization letter signed by Constante clearly
established a contract of agency between Constante and Artigo.
Thus, Artigo sought prospective buyers and found Times Transit
Corporation ("Times Transit" for brevity). Artigo facilitated the
negotiations which eventually led to the sale of the two lots.
Therefore, the Court of Appeals decided that Artigo is entitled to the
5% commission on the purchase price as provided in the contract of
agency.
Second. The Court of Appeals ruled that Artigo's complaint is not
dismissible for failure to implead as indispensable parties the other
co-owners of the two lots. The Court of Appeals explained that it is
not necessary to implead the other co-owners since the action is
exclusively based on a contract of agency between Artigo and
Constante.
Third. The Court of Appeals likewise declared that the trial court did
not err in admitting parol evidence to prove the true amount paid by
Times Transit to the De Castros for the two lots. The Court of
Appeals ruled that evidence aliunde could be presented to prove
that the actual purchase price was P7.05 million and not P3.6 million
as appearing in the deed of sale. Evidence aliunde is admissible
considering that Artigo is not a party, but a mere witness in the deed
of sale between the De Castros and Times Transit. The Court of

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Appeals explained that, "the rule that oral evidence is inadmissible
to vary the terms of written instruments is generally applied only in
suits between parties to the instrument and strangers to the
contract are not bound by it." Besides, Artigo was not suing under
the deed of sale, but solely under the contract of agency. Thus, the
Court of Appeals upheld the trial court's finding that the purchase
price was P7.05 million and not P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -
I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR
FAILURE TO IMPLEAD INDISPENSABLE PARTIES-IN-
INTEREST;
II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON
THE GROUND THAT ARTIGO'S CLAIM HAS BEEN
EXTINGUISHED BY FULL PAYMENT, WAIVER, OR
ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED
TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES AND
ATTORNEY'S FEES;
VI. NOT AWARDING THE DE CASTRO'S MORAL AND
EXEMPLARY DAMAGES, AND ATTORNEY'S FEES.
The Court's Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for failure to
implead other co-owners as indispensable parties
The De Castros argue that Artigo's complaint should have been
dismissed for failure to implead all the co-owners of the two lots.
The De Castros claim that Artigo always knew that the two lots were
co-owned by Constante and Corazon with their other siblings Jose
and Carmela whom Constante merely represented. The De Castros
contend that failure to implead such indispensable parties is fatal to
the complaint since Artigo, as agent of all the four co-owners, would
be paid with funds co-owned by the four co-owners.
The De Castros' contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by the
court's action in the litigation, and without whom no final
determination of the case can be had.
7
The joinder of indispensable
parties is mandatory and courts cannot proceed without their
presence.
8
Whenever it appears to the court in the course of a
proceeding that an indispensable party has not been joined, it is the
duty of the court to stop the trial and order the inclusion of such
party.
9

However, the rule on mandatory joinder of indispensable parties is
not applicable to the instant case.
There is no dispute that Constante appointed Artigo in a
handwritten note dated January 24, 1984 to sell the properties of
the De Castros for P23 million at a 5 percent commission. The
authority was on a first come, first serve basis. The authority reads
in full:
"24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is authorized as
our real estate broker in connection with the sale of our
property located at Edsa Corner New York & Denver,
Cubao, Quezon City.
Asking price P 23,000,000.00 with 5% commission as
agent's fee.
C.C. de Castro
owner & representing
co-owners
This authority is on a first-come
First serve basis CAC"
Constante signed the note as owner and as representative of the
other co-owners. Under this note, a contract of agency was clearly
constituted between Constante and Artigo. Whether Constante
appointed Artigo as agent, in Constante's individual or
representative capacity, or both, the De Castros cannot seek the
dismissal of the case for failure to implead the other co-owners as
indispensable parties. The De Castros admit that the other co-
owners are solidarily liable under the contract of agency,
10
citing
Article 1915 of the Civil Code, which reads:
Art. 1915. If two or more persons have appointed an agent
for a common transaction or undertaking, they shall be
solidarily liable to the agent for all the consequences of
the agency.
The solidary liability of the four co-owners, however, militates
against the De Castros' theory that the other co-owners should be
impleaded as indispensable parties. A noted commentator explained
Article 1915 thus
"The rule in this article applies even when the
appointments were made by the principals in separate
acts, provided that they are for the same transaction. The
solidarity arises from the common interest of the
principals, and not from the act of constituting the
agency. By virtue of this solidarity, the agent can recover
from any principal the whole compensation and
indemnity owing to him by the others. The parties,
however, may, by express agreement, negate this solidary
responsibility. The solidarity does not disappear by the

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mere partition effected by the principals after the
accomplishment of the agency.
If the undertaking is one in which several are interested,
but only some create the agency, only the latter are
solidarily liable, without prejudice to the effects of
negotiorum gestio with respect to the others. And if the
power granted includes various transactions some of
which are common and others are not, only those
interested in each transaction shall be liable for it."
11

When the law expressly provides for solidarity of the obligation, as
in the liability of co-principals in a contract of agency, each obligor
may be compelled to pay the entire obligation.
12
The agent may
recover the whole compensation from any one of the co-principals,
as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor may
sue any of the solidary debtors. This article reads:
Art. 1216. The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously.
The demand made against one of them shall not be an
obstacle to those which may subsequently be directed
against the others, so long as the debt has not been fully
collected.
Thus, the Court has ruled in Operators Incorporated vs. American
Biscuit Co., Inc.
13
that
"x x x solidarity does not make a solidary obligor an
indispensable party in a suit filed by the creditor. Article
1216 of the Civil Code says that the creditor `may proceed
against anyone of the solidary debtors or some or all of
them simultaneously'." (Emphasis supplied)
Second Issue: whether Artigo's claim has been extinguished by full
payment, waiver or abandonment
The De Castros claim that Artigo was fully paid on June 14, 1985,
that is, Artigo was given "his proportionate share and no longer
entitled to any balance." According to them, Artigo was just one of
the agents involved in the sale and entitled to a "proportionate
share" in the commission. They assert that Artigo did absolutely
nothing during the second negotiation but to sign as a witness in the
deed of sale. He did not even prepare the documents for the
transaction as an active real estate broker usually does.
The De Castros' arguments are flimsy.
A contract of agency which is not contrary to law, public order,
public policy, morals or good custom is a valid contract, and
constitutes the law between the parties.
14
The contract of agency
entered into by Constante with Artigo is the law between them and
both are bound to comply with its terms and conditions in good
faith.
The mere fact that "other agents" intervened in the consummation
of the sale and were paid their respective commissions cannot vary
the terms of the contract of agency granting Artigo a 5 percent
commission based on the selling price. These "other agents" turned
out to be employees of Times Transit, the buyer Artigo introduced to
the De Castros. This prompted the trial court to observe:
"The alleged `second group' of agents came into the
picture only during the so-called `second negotiation' and
it is amusing to note that these (sic) second group,
prominent among whom are Atty. Del Castillo and Ms.
Prudencio, happened to be employees of Times Transit,
the buyer of the properties. And their efforts were limited
to convincing Constante to 'part away' with the properties
because the redemption period of the foreclosed
properties is around the corner, so to speak. (tsn. June 6,
1991).
x x x
To accept Constante's version of the story is to open the
floodgates of fraud and deceit. A seller could always
pretend rejection of the offer and wait for sometime for
others to renew it who are much willing to accept a
commission far less than the original broker. The
immorality in the instant case easily presents itself if one
has to consider that the alleged `second group' are the
employees of the buyer, Times Transit and they have not
bettered the offer secured by Mr. Artigo for P7 million.
It is to be noted also that while Constante was too
particular about the unrenewed real estate broker's
license of Mr. Artigo, he did not bother at all to inquire as
to the licenses of Prudencio and Castillo. (tsn, April 11,
1991, pp. 39-40)."
15
(Emphasis supplied)
In any event, we find that the 5 percent real estate broker's
commission is reasonable and within the standard practice in the
real estate industry for transactions of this nature.
The De Castros also contend that Artigo's inaction as well as failure
to protest estops him from recovering more than what was actually
paid him. The De Castros cite Article 1235 of the Civil Code which
reads:
Art. 1235. When the obligee accepts the performance,
knowing its incompleteness and irregularity, and without
expressing any protest or objection, the obligation is
deemed fully complied with.
The De Castros' reliance on Article 1235 of the Civil Code is
misplaced. Artigo's acceptance of partial payment of his commission
neither amounts to a waiver of the balance nor puts him in estoppel.
This is the import of Article 1235 which was explained in this wise:
"The word accept, as used in Article 1235 of the Civil Code,
means to take as satisfactory or sufficient, or agree to an
incomplete or irregular performance. Hence, the mere
receipt of a partial payment is not equivalent to the
required acceptance of performance as would extinguish
the whole obligation."
16
(Emphasis supplied)
There is thus a clear distinction between acceptance and mere
receipt. In this case, it is evident that Artigo merely received the
partial payment without waiving the balance. Thus, there is no
estoppel to speak of.

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The De Castros further argue that laches should apply because
Artigo did not file his complaint in court until May 29, 1989, or
almost four years later. Hence, Artigo's claim for the balance of his
commission is barred by laches.
Laches means the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due
diligence could or should have been done earlier. It is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has
abandoned it or declined to assert it.
17

Artigo disputes the claim that he neglected to assert his rights. He
was appointed as agent on January 24, 1984. The two lots were
finally sold in June 1985. As found by the trial court, Artigo
demanded in April and July of 1985 the payment of his commission
by Constante on the basis of the selling price of P7.05 million but
there was no response from Constante.
18
After it became clear that
his demands for payment have fallen on deaf ears, Artigo decided to
sue on May 29, 1989.
Actions upon a written contract, such as a contract of agency, must
be brought within ten years from the time the right of action
accrues.
19
The right of action accrues from the moment the breach
of right or duty occurs. From this moment, the creditor can institute
the action even as the ten-year prescriptive period begins to run.
20

The De Castros admit that Artigo's claim was filed within the ten-
year prescriptive period. The De Castros, however, still maintain that
Artigo's cause of action is barred by laches. Laches does not apply
because only four years had lapsed from the time of the sale in June
1985. Artigo made a demand in July 1985 and filed the action in
court on May 29, 1989, well within the ten-year prescriptive period.
This does not constitute an unreasonable delay in asserting one's
right. The Court has ruled, "a delay within the prescriptive period is
sanctioned by law and is not considered to be a delay that would
bar relief."
21
In explaining that laches applies only in the absence of
a statutory prescriptive period, the Court has stated -
"Laches is recourse in equity. Equity, however, is applied
only in the absence, never in contravention, of statutory
law. Thus, laches, cannot, as a rule, be used to abate a
collection suit filed within the prescriptive period
mandated by the Civil Code."
22

Clearly, the De Castros' defense of laches finds no support in law,
equity or jurisprudence.
Third issue: whether the determination of the purchase price was
made in violation of the Rules on Evidence
The De Castros want the Court to re-examine the probative value of
the evidence adduced in the trial court to determine whether the
actual selling price of the two lots was P7.05 million and not P3.6
million. The De Castros contend that it is erroneous to base the 5
percent commission on a purchase price of P7.05 million as ordered
by the trial court and the appellate court. The De Castros insist that
the purchase price is P3.6 million as expressly stated in the deed of
sale, the due execution and authenticity of which was admitted
during the trial.
The De Castros believe that the trial and appellate courts committed
a mistake in considering incompetent evidence and disregarding the
best evidence and parole evidence rules. They claim that the Court
of Appeals erroneously affirmed sub silentio the trial court's reliance
on the various correspondences between Constante and Times
Transit which were mere photocopies that do not satisfy the best
evidence rule. Further, these letters covered only the first
negotiations between Constante and Times Transit which failed;
hence, these are immaterial in determining the final purchase price.
The De Castros further argue that if there was an undervaluation,
Artigo who signed as witness benefited therefrom, and being equally
guilty, should be left where he presently stands. They likewise claim
that the Court of Appeals erred in relying on evidence which were
not offered for the purpose considered by the trial court.
Specifically, Exhibits "B", "C", "D" and "E" were not offered to prove
that the purchase price was P7.05 Million. Finally, they argue that
the courts a quo erred in giving credence to the perjured testimony
of Artigo. They want the entire testimony of Artigo rejected as a
falsehood because he was lying when he claimed at the outset that
he was a licensed real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as found by the
trial court and affirmed by the Court of Appeals, or P3.6 Million as
claimed by the De Castros, is a question of fact and not of law.
Inevitably, this calls for an inquiry into the facts and evidence on
record. This we can not do.
It is not the function of this Court to re-examine the evidence
submitted by the parties, or analyze or weigh the evidence again.
23

This Court is not the proper venue to consider a factual issue as it is
not a trier of facts. In petitions for review on certiorari as a mode of
appeal under Rule 45, a petitioner can only raise questions of law.
Our pronouncement in the case of Cormero vs. Court of Appeals
24

bears reiteration:
"At the outset, it is evident from the errors assigned that
the petition is anchored on a plea to review the factual
conclusion reached by the respondent court. Such task
however is foreclosed by the rule that in petitions for
certiorari as a mode of appeal, like this one, only questions
of law distinctly set forth may be raised. These questions
have been defined as those that do not call for any
examination of the probative value of the evidence
presented by the parties. (Uniland Resources vs.
Development Bank of the Philippines, 200 SCRA 751 [1991]
citing Goduco vs. Court of appeals, et al., 119 Phil. 531;
Hernandez vs. Court of Appeals, 149 SCRA 67). And when
this court is asked to go over the proof presented by the
parties, and analyze, assess and weigh them to ascertain if
the trial court and the appellate court were correct in
according superior credit to this or that piece of evidence
and eventually, to the totality of the evidence of one party
or the other, the court cannot and will not do the same.
(Elayda vs. Court of Appeals, 199 SCRA 349 [1991]). Thus,
in the absence of any showing that the findings
complained of are totally devoid of support in the record,
or that they are so glaringly erroneous as to constitute
serious abuse of discretion, such findings must stand, for
this court is not expected or required to examine or
contrast the oral and documentary evidence submitted by
the parties. (Morales vs. Court of Appeals, 197 SCRA 391

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[1991] citing Santa Ana vs. Hernandez, 18 SCRA 973
[1966])."
We find no reason to depart from this principle. The trial and
appellate courts are in a much better position to evaluate properly
the evidence. Hence, we find no other recourse but to affirm their
finding on the actual purchase price.1wphi1.nt
Fourth Issue: whether award of moral damages and attorney's fees
is proper
The De Castros claim that Artigo failed to prove that he is entitled to
moral damages and attorney's fees. The De Castros, however, cite
no concrete reason except to say that they are the ones entitled to
damages since the case was filed to harass and extort money from
them.
Law and jurisprudence support the award of moral damages and
attorney's fees in favor of Artigo. The award of damages and
attorney's fees is left to the sound discretion of the court, and if
such discretion is well exercised, as in this case, it will not be
disturbed on appeal.
25
Moral damages may be awarded when in a
breach of contract the defendant acted in bad faith, or in wanton
disregard of his contractual obligation.
26
On the other hand,
attorney's fees are awarded in instances where "the defendant
acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim."
27
There is no
reason to disturb the trial court's finding that "the defendants' lack
of good faith and unkind treatment of the plaintiff in refusing to give
his due commission deserve censure." This warrants the award of
P25,000.00 in moral damages and P 45,000.00 in attorney's fees.
The amounts are, in our view, fair and reasonable. Having found a
buyer for the two lots, Artigo had already performed his part of the
bargain under the contract of agency. The De Castros should have
exercised fairness and good judgment in dealing with Artigo by
fulfilling their own part of the bargain - paying Artigo his 5 percent
broker's commission based on the actual purchase price of the two
lots.
WHEREFORE, the petition is denied for lack of merit. The Decision of
the Court of Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is
AFFIRMED in toto.
SO ORDERED.


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G.R. No. 160347 November 29, 2006
ARCADIO and MARIA LUISA CARANDANG, Petitioners,
vs.
HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE
GUZMAN, VICTOR DE GUZMAN, REYNALDO DE GUZMAN, CYNTHIA
G. RAGASA and QUIRINO DE GUZMAN, JR., Respondents.
D E C I S I O N
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari assailing the Court of
Appeals Decision
1
and Resolution affirming the Regional Trial Court
(RTC) Decision rendering herein petitioners Arcadio and Luisa
Carandang [hereinafter referred to as spouses Carandang] jointly
and severally liable for their loan to Quirino A. de Guzman.
The Court of Appeals summarized the facts as follows:
[Quirino de Guzman] and [the Spouses Carandang] are stockholders
as well as corporate officers of Mabuhay Broadcasting System (MBS
for brevity), with equities at fifty four percent (54%) and forty six
percent (46%) respectively.
On November 26, 1983, the capital stock of MBS was increased,
from P500,000 to P1.5 million and P345,000 of this increase was
subscribed by [the spouses Carandang]. Thereafter, on March 3,
1989, MBS again increased its capital stock, from P1.5 million to P3
million, [the spouses Carandang] yet again subscribed to the
increase. They subscribed to P93,750 worth of newly issued capital
stock.
[De Guzman] claims that, part of the payment for these
subscriptions were paid by him, P293,250 for the November 26,
1983 capital stock increase and P43,125 for the March 3, 1989
Capital Stock increase or a total of P336,375. Thus, on March 31,
1992, [de Guzman] sent a demand letter to [the spouses Carandang]
for the payment of said total amount.
[The spouses Carandang] refused to pay the amount, contending
that a pre-incorporation agreement was executed between [Arcadio
Carandang] and [de Guzman], whereby the latter promised to pay
for the stock subscriptions of the former without cost, in
consideration for [Arcadio Carandangs] technical expertise, his
newly purchased equipment, and his skill in repairing and upgrading
radio/communication equipment therefore, there is no
indebtedness on their part [sic].
On June 5, 1992, [de Guzman] filed his complaint, seeking to recover
the P336,375 together with damages. After trial on the merits, the
trial court disposed of the case in this wise:
"WHEREFORE, premises considered, judgment is hereby rendered in
favor of [de Guzman]. Accordingly, [the spouses Carandang] are
ordered to jointly and severally pay [de Guzman], to wit:
(1) P336,375.00 representing [the spouses Carandangs]
loan to de Guzman;
(2) interest on the preceding amount at the rate of twelve
percent (12%) per annum from June 5, 1992 when this
complaint was filed until the principal amount shall have
been fully paid;
(3) P20,000.00 as attorneys fees;
(4) Costs of suit.
The spouses Carandang appealed the RTC Decision to the Court of
Appeals, which affirmed the same in the 22 April 2003 assailed
Decision:
WHEREFORE, in view of all the foregoing the assailed Decision is
hereby AFFIRMED. No costs.
2

The Motion for Reconsideration filed by the spouses Carandang was
similarly denied by the Court of Appeals in the 6 October 2003
assailed Resolution:
WHEREFORE, in view thereof, the motion for reconsideration is
hereby DENIED and our Decision of April 22, 2003, which is based on
applicable law and jurisprudence on the matter is hereby AFFIRMED
and REITERATED.
3

The spouses Carandang then filed before this Court the instant
Petition for Review on Certiorari, bringing forth the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED MANIFEST ERROR IN FAILING TO STRICTLY COMPLY
WITH SECTION 16, RULE 3 OF THE 1997 RULES OF CIVIL PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN ITS FINDING THAT THERE IS AN ALLEGED LOAN FOR
WHICH PETITIONERS ARE LIABLE, CONTRARY TO EXPRESS
PROVISIONS OF BOOK IV, TITLE XI, OF THE NEW CIVIL CODE
PERTAINING TO LOANS.
III.
ERRED IN FINDING THAT THE RESPONDENTS WERE ABLE TO
DISCHARGE THEIR BURDEN OF PROOF, IN COMPLETE DISREGARD OF
THE REVISED RULES ON EVIDENCE.
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR WHEN IT FAILED TO APPLY
SECTIONS 2 AND 7, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
V.
ERRED IN FINDING THAT THE PURPORTED LIABILITY OF PETITIONERS

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ARE JOINT AND SOLIDARY, IN VIOLATION OF ARTICLE 1207 OF THE
NEW CIVIL CODE.
4

Whether or not the RTC Decision is void for failing to comply with
Section 16, Rule 3 of the Rules of Court
The spouses Carandang claims that the Decision of the RTC, having
been rendered after the death of Quirino de Guzman, is void for
failing to comply with Section 16, Rule 3 of the Rules of Court, which
provides:
SEC. 16. Death of party; duty of counsel. Whenever a party to a
pending action dies, and the claim is not thereby extinguished, it
shall be the duty of his counsel to inform the court within thirty (30)
days after such death of the fact thereof, and to give the name and
address of his legal representative or representatives. Failure of
counsel to comply with this duty shall be a ground for disciplinary
action.
The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or
administrator and the court may appoint a guardian ad litem for the
minor heirs.
The court shall forthwith order the legal representative or
representatives to appear and be substituted within a period of
thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased
party, or if the one so named shall fail to appear within the specified
period, the court may order the opposing party, within a specified
time, to procure the appointment of an executor or administrator
for the estate of the deceased and the latter shall immediately
appear for and on behalf of the deceased. The court charges in
procuring such appointment, if defrayed by the opposing party, may
be recovered as costs.
The spouses Carandang posits that such failure to comply with the
above rule renders void the decision of the RTC, in adherence to the
following pronouncements in Vda. de Haberer v. Court of Appeals
5

and Ferreria v. Vda. de Gonzales
6
:
Thus, it has been held that when a party dies in an action that
survives and no order is issued by the court for the appearance of
the legal representative or of the heirs of the deceased in
substitution of the deceased, and as a matter of fact no substitution
has ever been effected, the trial held by the court without such legal
representatives or heirs and the judgment rendered after such trial
are null and void because the court acquired no jurisdiction over the
persons of the legal representatives or of the heirs upon whom the
trial and judgment would be binding.
7

In the present case, there had been no court order for the legal
representative of the deceased to appear, nor had any such legal
representative appeared in court to be substituted for the deceased;
neither had the complainant ever procured the appointment of such
legal representative of the deceased, including appellant, ever asked
to be substituted for the deceased. As a result, no valid substitution
was effected, consequently, the court never acquired jurisdiction
over appellant for the purpose of making her a party to the case and
making the decision binding upon her, either personally or as a
representative of the estate of her deceased mother.
8

However, unlike jurisdiction over the subject matter which is
conferred by law and is not subject to the discretion of the parties,
9

jurisdiction over the person of the parties to the case may be waived
either expressly or impliedly.
10
Implied waiver comes in the form of
either voluntary appearance or a failure to object.
11

In the cases cited by the spouses Carandang, we held that there had
been no valid substitution by the heirs of the deceased party, and
therefore the judgment cannot be made binding upon them. In the
case at bar, not only do the heirs of de Guzman interpose no
objection to the jurisdiction of the court over their persons; they are
actually claiming and embracing such jurisdiction. In doing so, their
waiver is not even merely implied (by their participation in the
appeal of said Decision), but express (by their explicit espousal of
such view in both the Court of Appeals and in this Court). The heirs
of de Guzman had no objection to being bound by the Decision of
the RTC.
Thus, lack of jurisdiction over the person, being subject to waiver, is
a personal defense which can only be asserted by the party who can
thereby waive it by silence.
It also pays to look into the spirit behind the general rule requiring a
formal substitution of heirs. The underlying principle therefor is not
really because substitution of heirs is a jurisdictional requirement,
but because non-compliance therewith results in the undeniable
violation of the right to due process of those who, though not duly
notified of the proceedings, are substantially affected by the
decision rendered therein.
12
Such violation of due process can only
be asserted by the persons whose rights are claimed to have been
violated, namely the heirs to whom the adverse judgment is sought
to be enforced.
Care should, however, be taken in applying the foregoing
conclusions. In People v. Florendo,
13
where we likewise held that the
proceedings that took place after the death of the party are void, we
gave another reason for such nullity: "the attorneys for the offended
party ceased to be the attorneys for the deceased upon the death of
the latter, the principal x x x." Nevertheless, the case at bar had
already been submitted for decision before the RTC on 4 June 1998,
several months before the passing away of de Guzman on 19
February 1999. Hence, no further proceedings requiring the
appearance of de Guzmans counsel were conducted before the
promulgation of the RTC Decision. Consequently, de Guzmans
counsel cannot be said to have no authority to appear in trial, as trial
had already ceased upon the death of de Guzman.
In sum, the RTC Decision is valid despite the failure to comply with
Section 16, Rule 3 of the Rules of Court, because of the express
waiver of the heirs to the jurisdiction over their persons, and
because there had been, before the promulgation of the RTC
Decision, no further proceedings requiring the appearance of de
Guzmans counsel.
Before proceeding with the substantive aspects of the case,
however, there is still one more procedural issue to tackle, the
fourth issue presented by the spouses Carandang on the non-
inclusion in the complaint of an indispensable party.
Whether or not the RTC should have dismissed the case for failure to
state a cause of action, considering that Milagros de Guzman,

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allegedly an indispensable party, was not included as a party-
plaintiff
The spouses Carandang claim that, since three of the four checks
used to pay their stock subscriptions were issued in the name of
Milagros de Guzman, the latter should be considered an
indispensable party. Being such, the spouses Carandang claim, the
failure to join Mrs. de Guzman as a party-plaintiff should cause the
dismissal of the action because "(i)f a suit is not brought in the name
of or against the real party in interest, a motion to dismiss may be
filed on the ground that the complaint states no cause of action."
14

The Court of Appeals held:
We disagree. The joint account of spouses Quirino A de Guzman and
Milagros de Guzman from which the four (4) checks were drawn is
part of their conjugal property and under both the Civil Code and
the Family Code the husband alone may institute an action for the
recovery or protection of the spouses conjugal property.
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held
that "x x x Under the New Civil Code, the husband is the
administrator of the conjugal partnership. In fact, he is the sole
administrator, and the wife is not entitled as a matter of right to join
him in this endeavor. The husband may defend the conjugal
partnership in a suit or action without being joined by the wife. x x x
Under the Family Code, the administration of the conjugal property
belongs to the husband and the wife jointly. However, unlike an act
of alienation or encumbrance where the consent of both spouses is
required, joint management or administration does not require that
the husband and wife always act together. Each spouse may validly
exercise full power of management alone, subject to the
intervention of the court in proper cases as provided under Article
124 of the Family Code. x x x."
The Court of Appeals is correct. Petitioners erroneously interchange
the terms "real party in interest" and "indispensable party." A real
party in interest is the party who stands to be benefited or injured
by the judgment of the suit, or the party entitled to the avails of the
suit.
15
On the other hand, an indispensable party is a party in
action,
16
in contrast to a necessary party, which is one who is not
indispensable but who ought to be joined as a party if complete
relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action.
17

The spouses Carandang are indeed correct that "(i)f a suit is not
brought in the name of or against the real party in interest, a motion
to dismiss may be filed on the ground that the complaint states no
cause of action."
18
However, what dismissal on this ground entails is
an examination of whether the parties presently pleaded are
interested in the outcome of the litigation, and not whether all
persons interested in such outcome are actually pleaded. The latter
query is relevant in discussions concerning indispensable and
necessary parties, but not in discussions concerning real parties in
interest. Both indispensable and necessary parties are considered as
real parties in interest, since both classes of parties stand to be
benefited or injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the effectivity
of the Family Code on 3 August 1988. As they did not execute any
marriage settlement, the regime of conjugal partnership of gains
govern their property relations.
19

All property acquired during the marriage, whether the acquisition
appears to have been made, contracted or registered in the name of
one or both spouses, is presumed to be conjugal unless the contrary
is proved.
20
Credits are personal properties,
21
acquired during the
time the loan or other credit transaction was executed. Therefore,
credits loaned during the time of the marriage are presumed to be
conjugal property.
Consequently, assuming that the four checks created a debt for
which the spouses Carandang are liable, such credits are presumed
to be conjugal property. There being no evidence to the contrary,
such presumption subsists. As such, Quirino de Guzman, being a co-
owner of specific partnership property,
22
is certainly a real party in
interest. Dismissal on the ground of failure to state a cause of action,
by reason that the suit was allegedly not brought by a real party in
interest, is therefore unwarranted.
So now we come to the discussion concerning indispensable and
necessary parties. When an indispensable party is not before the
court, the action should likewise be dismissed.
23
The absence of an
indispensable party renders all subsequent actuations of the court
void, for want of authority to act, not only as to the absent parties
but even as to those present.
24
On the other hand, the non-joinder
of necessary parties do not result in the dismissal of the case.
Instead, Section 9, Rule 3 of the Rules of Court provides for the
consequences of such non-joinder:
Sec. 9. Non-joinder of necessary parties to be pleaded. Whenever
in any pleading in which a claim is asserted a necessary party is not
joined, the pleader shall set forth his name, if known, and shall state
why he is omitted. Should the court find the reason for the omission
unmeritorious, it may order the inclusion of the omitted necessary
party if jurisdiction over his person may be obtained.
The failure to comply with the order for his inclusion, without
justifiable cause, shall be deemed a waiver of the claim against such
party.
The non-inclusion of a necessary party does not prevent the court
from proceeding in the action, and the judgment rendered therein
shall be without prejudice to the rights of such necessary party.
Non-compliance with the order for the inclusion of a necessary party
would not warrant the dismissal of the complaint. This is an
exception to Section 3, Rule 17 which allows the dismissal of the
complaint for failure to comply with an order of the court, as Section
9, Rule 3 specifically provides for the effect of such non-inclusion: it
shall not prevent the court from proceeding in the action, and the
of such necessary party. Section 11, Rule 3 likewise provides that the
non-joinder of parties is not a ground for the dismissal of the action.
Other than the indispensable and necessary parties, there is a third
set of parties: the pro-forma parties, which are those who are
required to be joined as co-parties in suits by or against another
party as may be provided by the applicable substantive law or
procedural rule.
25
An example is provided by Section 4, Rule 3 of the
Rules of Court:

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Sec. 4. Spouses as parties. Husband and wife shall sue or be sued
jointly, except as provided by law.
Pro-forma parties can either be indispensable, necessary or neither
indispensable nor necessary. The third case occurs if, for example, a
husband files an action to recover a property which he claims to be
part of his exclusive property. The wife may have no legal interest in
such property, but the rules nevertheless require that she be joined
as a party.
In cases of pro-forma parties who are neither indispensable nor
necessary, the general rule under Section 11, Rule 3 must be
followed: such non-joinder is not a ground for dismissal. Hence, in a
case concerning an action to recover a sum of money, we held that
the failure to join the spouse in that case was not a jurisdictional
defect.
26
The non-joinder of a spouse does not warrant dismissal as
it is merely a formal requirement which may be cured by
amendment.
27

Conversely, in the instances that the pro-forma parties are also
indispensable or necessary parties, the rules concerning
indispensable or necessary parties, as the case may be, should be
applied. Thus, dismissal is warranted only if the pro-forma party not
joined in the complaint is an indispensable party.
Milagros de Guzman, being presumed to be a co-owner of the
credits allegedly extended to the spouses Carandang, seems to be
either an indispensable or a necessary party. If she is an
indispensable party, dismissal would be proper. If she is merely a
necessary party, dismissal is not warranted, whether or not there
was an order for her inclusion in the complaint pursuant to Section
9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on
the contract of partnership in all that is not in conflict with what is
expressly determined in this Chapter or by the spouses in their
marriage settlements.
This provision is practically the same as the Civil Code provision it
superceded:
Art. 147. The conjugal partnership shall be governed by the rules on
the contract of partnership in all that is not in conflict with what is
expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a]
partner is a co-owner with the other partners of specific partnership
property." Taken with the presumption of the conjugal nature of the
funds used to finance the four checks used to pay for petitioners
stock subscriptions, and with the presumption that the credits
themselves are part of conjugal funds, Article 1811 makes Quirino
and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de
Guzman may separately bring an action for the recovery thereof. In
the fairly recent cases of Baloloy v. Hular
28
and Adlawan v.
Adlawan,
29
we held that, in a co-ownership, co-owners may bring
actions for the recovery of co-owned property without the necessity
of joining all the other co-owners as co-plaintiffs because the suit is
presumed to have been filed for the benefit of his co-owners. In the
latter case and in that of De Guia v. Court of Appeals,
30
we also held
that Article 487 of the Civil Code, which provides that any of the co-
owners may bring an action for ejectment, covers all kinds of action
for the recovery of possession.
31

In sum, in suits to recover properties, all co-owners are real parties
in interest. However, pursuant to Article 487 of the Civil Code and
relevant jurisprudence, any one of them may bring an action, any
kind of action, for the recovery of co-owned properties. Therefore,
only one of the co-owners, namely the co-owner who filed the suit
for the recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are
not even necessary parties, for a complete relief can be accorded in
the suit even without their participation, since the suit is presumed
to have been filed for the benefit of all co-owners.
32

We therefore hold that Milagros de Guzman is not an indispensable
party in the action for the recovery of the allegedly loaned money to
the spouses Carandang. As such, she need not have been impleaded
in said suit, and dismissal of the suit is not warranted by her not
being a party thereto.
Whether or not respondents were able to prove the loan sought to
be collected from petitioners
In the second and third issues presented by the spouses Carandang,
they claim that the de Guzmans failed to prove the alleged loan for
which the spouses Carandang were held liable. As previously stated,
spouses Quirino and Milagros de Guzman paid for the stock
subscriptions of the spouses Carandang, amounting to P336,375.00.
The de Guzmans claim that these payments were in the form of
loans and/or advances and it was agreed upon between the late
Quirino de Guzman, Sr. and the spouses Carandang that the latter
would repay him. Petitioners, on the other hand, argue that there
was an oral pre-incorporation agreement wherein it was agreed that
Arcardio Carandang would always maintain his 46% equity
participation in the corporation even if the capital structures were
increased, and that Quirino de Guzman would personally pay the
equity shares/stock subscriptions of Arcardio Carandang with no
cost to the latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth assigned error that [the de
Guzmans] failed to prove by preponderance of evidence, either the
existence of the purported loan or the non-payment thereof.
Simply put, preponderance of evidence means that the evidence as
a whole adduced by one side is superior to that of the other. The
concept of preponderance of evidence refers to evidence that is of
greater weight, or more convincing, than that which is offered in
opposition to it; it means probability of truth.
[The spouses Carandang] admitted that it was indeed [the de
Guzmans] who paid their stock subscriptions and their reason for
not reimbursing the latter is the alleged pre-incorporation
agreement, to which they offer no clear proof as to its existence.
It is a basic rule in evidence that each party must prove his
affirmative allegation. Thus, the plaintiff or complainant has to
prove his affirmative allegations in the complaints and the

meikimouse

defendant or respondent has to prove the affirmative allegations in
his affirmative defenses and counterclaims.
33

The spouses Carandang, however, insist that the de Guzmans have
not proven the loan itself, having presented evidence only of the
payment in favor of the Carandangs. They claim:
It is an undeniable fact that payment is not equivalent to a loan. For
instance, if Mr. "A" decides to pay for Mr. "Bs" obligation, that
payment by Mr. "A" cannot, by any stretch of imagination, possibly
mean that there is now a loan by Mr. "B" to Mr. "A". There is a
possibility that such payment by Mr. "A" is purely out of generosity
or that there is a mutual agreement between them. As applied to
the instant case, that mutual agreement is the pre-incorporation
agreement (supra) existing between Mr. de Guzman and the
petitioners --- to the effect that the former shall be responsible for
paying stock subscriptions of the latter. Thus, when Mr. de Guzman
paid for the stock subscriptions of the petitioners, there was no loan
to speak of, but only a compliance with the pre-incorporation
agreement.
34

The spouses Carandang are mistaken. If indeed a Mr. "A" decides to
pay for a Mr. "Bs" obligation, the presumption is that Mr. "B" is
indebted to Mr. "A" for such amount that has been paid. This is
pursuant to Articles 1236 and 1237 of the Civil Code, which provide:
Art. 1236. The creditor is not bound to accept payment or
performance by a third person who has no interest in the fulfillment
of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he
has paid, except that if he paid without the knowledge or against
the will of the debtor, he can recover only insofar as the payment
has been beneficial to the debtor.
Art. 1237. Whoever pays on behalf of the debtor without the
knowledge or against the will of the latter, cannot compel the
creditor to subrogate him in his rights, such as those arising from a
mortgage, guarantee, or penalty.
Articles 1236 and 1237 are clear that, even in cases where the
debtor has no knowledge of payment by a third person, and even in
cases where the third person paid against the will of the debtor,
such payment would produce a debt in favor of the paying third
person. In fact, the only consequences for the failure to inform or
get the consent of the debtor are the following: (1) the third person
can recover only insofar as the payment has been beneficial to the
debtor; and (2) the third person is not subrogated to the rights of
the creditor, such as those arising from a mortgage, guarantee or
penalty.
35

We say, however, that this is merely a presumption. By virtue of the
parties freedom to contract, the parties could stipulate otherwise
and thus, as suggested by the spouses Carandang, there is indeed a
possibility that such payment by Mr. "A" was purely out of
generosity or that there was a mutual agreement between them.
But such mutual agreement, being an exception to presumed course
of events as laid down by Articles 1236 and 1237, must be
adequately proven.
The de Guzmans have successfully proven their payment of the
spouses Carandangs stock subscriptions. These payments were, in
fact, admitted by the spouses Carandang. Consequently, it is now up
to the spouses Carandang to prove the existence of the pre-
incorporation agreement that was their defense to the purported
loan.
Unfortunately for the spouses Carandang, the only testimony which
touched on the existence and substance of the pre-incorporation
agreement, that of petitioner Arcardio Carandang, was stricken off
the record because he did not submit himself to a cross-examination
of the opposing party. On the other hand, the testimonies of Romeo
Saavedra,
36
Roberto S. Carandang,
37
Gertrudes Z. Esteban,
38
Ceferino
Basilio,
39
and Ma. Luisa Carandang
40
touched on matters other than
the existence and substance of the pre-incorporation agreement. So
aside from the fact that these witnesses had no personal knowledge
as to the alleged existence of the pre-incorporation agreement, the
testimonies of these witnesses did not even mention the existence
of a pre-incorporation agreement.
Worse, the testimonies of petitioners Arcadio Carandang and Ma.
Luisa Carandang even contradicted the existence of a pre-
incorporation agreement because when they were asked by their
counsel regarding the matter of the check payments made by the
late Quirino A. de Guzman, Sr. in their behalf, they said that they
had already paid for it thereby negating their own defense that
there was a pre-incorporation agreement excusing themselves from
paying Mr. de Guzman the amounts he advanced or loaned to them.
This basic and irrefutable fact can be gleaned from their testimonies
which the private respondents are quoting for easy reference:
a. With respect to the testimony of Ma. Luisa Carandang
Q: Now, can you tell this Honorable Court how do you feel with
respect to the Complaint of the plaintiff in this case charging you
that you paid for this year and asking enough to paid (sic) your tax?
A: We have paid already, so, we are not liable for anything payment
(sic).
41

b. With respect to the testimony of Arcadio Carandang
"Q: How much?
A: P40,000.00 to P50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there
were receipts issued for the payment of your shares; which receipts
were marked as Exhibits "G" to "L" (Plaintiff).
Im showing to you these receipts so marked by the plaintiff as their
exhibits which were issued in the name of Ma. Luisa Carandang,
your wife; and also, Arcadio M. Carandang. Will you please go over
this Official Receipt and state for the records, who made for the
payment stated in these receipts in your name?
A: I paid for those shares."
42

There being no testimony or documentary evidence proving the
existence of the pre-incorporation agreement, the spouses
Carandang are forced to rely upon an alleged admission by the
original plaintiff of the existence of the pre-incorporation
agreement.

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Petitioners claim that the late Quirino A. de Guzman, Sr. had
admitted the existence of the pre-incorporation agreement by virtue
of paragraphs 13 and 14 of their Answer and paragraph 4 of private
respondents Reply.
Paragraphs 13 and 14 of petitioners Answer dated 7 July 1992 state
in full:
13. Sometime in November, 1973 or thereabout, herein plaintiff
invited defendant Arcadio M. Carandang to a joint venture by
pooling together their technical expertise, equipments, financial
resources and franchise. Plaintiff proposed to defendant and
mutually agreed on the following:
1. That they would organize a corporation known as
Mabuhay Broadcasting Systems, Inc.
2. Considering the technical expertise and talent of
defendant Arcadio M. Carandang and his new equipments
he bought, and his skill in repairing and modifying
radio/communication equipments into high proficiency,
said defendant would have an equity participation in the
corporation of 46%, and plaintiff 54% because of his
financial resources and franchise.
3. That defendant would always maintain his 46% equity
participation in the corporation even if the capital
structures are increased, and that plaintiff would
personally pay the equity shares/stock subscriptions of
defendant with no cost to the latter.
4. That because of defendants expertise in the trade
including the marketing aspects, he would be the
President and General Manager, and plaintiff the
Chairman of the Board.
5. That considering their past and trustworthy relations,
they would maintain such relations in the joint venture
without any mental reservation for their common benefit
and success of the business.
14. Having mutually agreed on the above arrangements,
the single proprietorship of plaintiff was immediately
spun-off into a corporation now known as Mabuhay
Broadcasting System, Inc. The incorporators are plaintiff
and his family members/nominees controlling jointly 54%
of the stocks and defendant Arcadio M. Carandang
controlling singly 46% as previously agreed.
43

Meanwhile, paragraphs 3 and 4 of private respondents Reply dated
29 July 1992 state in full:
3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer
only insofar the plaintiff and defendant Arcadio M. Carandang
organized a corporation known as Mabuhay Broadcasting Systems,
Inc. Plaintiff specifically denies the other allegations in paragraph 13
of the Answer, the same being devoid of any legal or factual bases.
The truth of the matter is that defendant Arcadio M. Carandang was
not able to pay plaintiff the agreed amount of the lease for a
number of months forcing the plaintiff to terminate lease.
Additionally, the records would show that it was the defendant
Arcadio M. Carandang who proposed a joint venture with the
plaintiff.
It appears that plaintiff agreed to the formation of the corporation
principally because of a directive of then President Marcos indicating
the need to broaden the ownership of radio broadcasting stations.
The plaintiff owned the franchise, the radio transmitter, the antenna
tower, the building containing the radio transmitter and other
equipment. Verily, he would be placed in a great disadvantage if he
would still have to personally pay for the shares of defendant
Arcadio M. Carandang.
4. Plaintiff admits the allegations in paragraph 14 of the Answer.
44

In effect, the spouses Carandang are relying on the fact that Quirino
de Guzman stated that he admitted paragraph 14 of the Answer,
which incidentally contained the opening clause "(h)aving mutually
agreed on the above arrangements, x x x."
Admissions, however, should be clear and unambiguous. This
purported admission by Quirino de Guzman reeks of ambiguity, as
the clause "(h)aving mutually agreed on the above arrangements,"
seems to be a mere introduction to the statement that the single
proprietorship of Quirino de Guzman had been converted into a
corporation. If Quirino de Guzman had meant to admit paragraph
13.3, he could have easily said so, as he did the other paragraphs he
categorically admitted. Instead, Quirino de Guzman expressly stated
the opposite: that "(p)laintiff specifically denies the other allegations
of paragraph 13 of the Answer."
45
The Reply furthermore states that
the only portion of paragraph 13 which Quirino de Guzman had
admitted is paragraph 13.1, and only insofar as it said that Quirino
de Guzman and Arcardio Carandang organized Mabuhay
Broadcasting Systems, Inc.
46

All the foregoing considered, we hold that Quirino de Guzman had
not admitted the alleged pre-incorporation agreement. As there was
no admission, and as the testimony of Arcardio Carandang was
stricken off the record, we are constrained to rule that there was no
pre-incorporation agreement rendering Quirino de Guzman liable
for the spouses Carandangs stock subscription. The payment by the
spouses de Guzman of the stock subscriptions of the spouses
Carandang are therefore by way of loan which the spouses
Carandang are liable to pay.1wphi1
Whether or not the liability of the spouses Carandang is joint and
solidary
Finally, the Court of Appeals also upheld the RTC Decision insofar as
it decreed a solidary liability. According to the Court of Appeals:
With regards (sic) the tenth assigned error, [the spouses Carandang]
contend that:
"There is absolutely no evidence, testimonial or documentary,
showing that the purported obligation of [the spouses Carandang] is
joint and solidary. x x x
"Furthermore, the purported obligation of [the spouses Carandang]
does not at all qualify as one of the obligations required by law to be
solidary x x x."

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It is apparent from the facts of the case that [the spouses
Carandang] were married way before the effectivity of the Family
Code hence; their property regime is conjugal partnership under the
Civil Code.
It must be noted that for marriages governed by the rules of
conjugal partnership of gains, an obligation entered into by the
husband and wife is chargeable against their conjugal partnership
and it is the partnership, which is primarily bound for its repayment.
Thus, when the spouses are sued for the enforcement of the
obligation entered into by them, they are being impleaded in their
capacity as representatives of the conjugal partnership and not as
independent debtors, such that the concept of joint and solidary
liability, as between them, does not apply.
47

The Court of Appeals is correct insofar as it held that when the
spouses are sued for the enforcement of the obligation entered into
by them, they are being impleaded in their capacity as
representatives of the conjugal partnership and not as independent
debtors. Hence, either of them may be sued for the whole amount,
similar to that of a solidary liability, although the amount is
chargeable against their conjugal partnership property. Thus, in the
case cited by the Court of Appeals, Alipio v. Court of Appeals,
48
the
two sets of defendant-spouses therein were held liable for
P25,300.00 each, chargeable to their respective conjugal
partnerships.
WHEREFORE, the Decision of the Court of Appeals, affirming the
judgment rendered against the spouses Carandang, is hereby
AFFIRMED with the following MODIFICATION: The spouses
Carandang are ORDERED to pay the following amounts from their
conjugal partnership properties:
(1) P336,375.00 representing the spouses Carandangs
loan to Quirino de Guzman; and
(2) Interest on the preceding amount at the rate of twelve
percent (12%) per annum from 5 June 1992 when the
complaint was filed until the principal amount can be fully
paid; and
(3) P20,000.00 as attorneys fees.
No costs.
SO ORDERED.


meikimouse

G.R. No. 150135 October 30, 2006
SPOUSES ANTONIO F. ALGURA and LORENCITA S.J. ALGURA,
petitioners,
vs.
THE LOCAL GOVERNMENT UNIT OF THE CITY OF NAGA, ATTY.
MANUEL TEOXON, ENGR. LEON PALMIANO, NATHAN SERGIO and
BENJAMIN NAVARRO, SR., respondents.

D E C I S I O N

VELASCO, JR., J.:
Anyone who has ever struggled with poverty
knows how extremely expensive it is to be poor.
James Baldwin
The Constitution affords litigantsmoneyed or poorequal access
to the courts; moreover, it specifically provides that poverty shall
not bar any person from having access to the courts.
1
Accordingly,
laws and rules must be formulated, interpreted, and implemented
pursuant to the intent and spirit of this constitutional provision. As
such, filing fees, though one of the essential elements in court
procedures, should not be an obstacle to poor litigants' opportunity
to seek redress for their grievances before the courts.
The Case
This Petition for Review on Certiorari seeks the annulment of the
September 11, 2001 Order of the Regional Trial Court (RTC) of Naga
City, Branch 27, in Civil Case No. 99-4403 entitled Spouses Antonio F.
Algura and Lorencita S.J. Algura v. The Local Government Unit of the
City of Naga, et al., dismissing the case for failure of petitioners
Algura spouses to pay the required filing fees.
2
Since the instant
petition involves only a question of law based on facts established
from the pleadings and documents submitted by the parties,
3
the
Court gives due course to the instant petition sanctioned under
Section 2(c) of Rule 41 on Appeal from the RTCs, and governed by
Rule 45 of the 1997 Rules of Civil Procedure.
The Facts
On September 1, 1999, spouses Antonio F. Algura and Lorencita S.J.
Algura filed a Verified Complaint dated August 30, 1999
4
for
damages against the Naga City Government and its officers, arising
from the alleged illegal demolition of their residence and boarding
house and for payment of lost income derived from fees paid by
their boarders amounting to PhP 7,000.00 monthly.
Simultaneously, petitioners filed an Ex-Parte Motion to Litigate as
Indigent Litigants,
5
to which petitioner Antonio Algura's Pay Slip No.
2457360 (Annex "A" of motion) was appended, showing a gross
monthly income of Ten Thousand Four Hundred Seventy Four Pesos
(PhP 10,474.00) and a net pay of Three Thousand Six Hundred
Sixteen Pesos and Ninety Nine Centavos (PhP 3,616.99) for [the
month of] July 1999.
6
Also attached as Annex "B" to the motion was
a July 14, 1999 Certification
7
issued by the Office of the City Assessor
of Naga City, which stated that petitioners had no property declared
in their name for taxation purposes.
Finding that petitioners' motion to litigate as indigent litigants was
meritorious, Executive Judge Jose T. Atienza of the Naga City RTC, in
the September 1, 1999 Order,
8
granted petitioners' plea for
exemption from filing fees.
Meanwhile, as a result of respondent Naga City Government's
demolition of a portion of petitioners' house, the Alguras allegedly
lost a monthly income of PhP 7,000.00 from their boarders' rentals.
With the loss of the rentals, the meager income from Lorencita
Algura's sari-sari store and Antonio Algura's small take home pay
became insufficient for the expenses of the Algura spouses and their
six (6) children for their basic needs including food, bills, clothes, and
schooling, among others.
On October 13, 1999, respondents filed an Answer with
Counterclaim dated October 10, 1999,
9
arguing that the defenses of
the petitioners in the complaint had no cause of action, the spouses'
boarding house blocked the road right of way, and said structure
was a nuisance per se.
Praying that the counterclaim of defendants (respondents) be
dismissed, petitioners then filed their Reply with Ex-Parte Request
for a Pre-Trial Setting
10
before the Naga City RTC on October 19,
1999. On February 3, 2000, a pre-trial was held wherein respondents
asked for five (5) days within which to file a Motion to Disqualify
Petitioners as Indigent Litigants.
On March 13, 2000, respondents filed a Motion to Disqualify the
Plaintiffs for Non-Payment of Filing Fees dated March 10, 2000.
11

They asserted that in addition to the more than PhP 3,000.00 net
income of petitioner Antonio Algura, who is a member of the
Philippine National Police, spouse Lorencita Algura also had a mini-
store and a computer shop on the ground floor of their residence
along Bayawas St., Sta. Cruz, Naga City. Also, respondents claimed
that petitioners' second floor was used as their residence and as a
boarding house, from which they earned more than PhP 3,000.00 a
month. In addition, it was claimed that petitioners derived
additional income from their computer shop patronized by students
and from several boarders who paid rentals to them. Hence,
respondents concluded that petitioners were not indigent litigants.
On March 28, 2000, petitioners subsequently interposed their
Opposition to the Motion
12
to respondents' motion to disqualify
them for non-payment of filing fees.
On April 14, 2000, the Naga City RTC issued an Order disqualifying
petitioners as indigent litigants on the ground that they failed to
substantiate their claim for exemption from payment of legal fees
and to comply with the third paragraph of Rule 141, Section 18 of
the Revised Rules of Courtdirecting them to pay the requisite filing
fees.
13

On April 28, 2000, petitioners filed a Motion for Reconsideration of
the April 14, 2000 Order. On May 8, 2000, respondents then filed
their Comment/Objections to petitioner's Motion for
Reconsideration.

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On May 5, 2000, the trial court issued an Order
14
giving petitioners
the opportunity to comply with the requisites laid down in Section
18, Rule 141, for them to qualify as indigent litigants.
On May 13, 2000, petitioners submitted their Compliance
15

attaching the affidavits of petitioner Lorencita Algura
16
and Erlinda
Bangate,
17
to comply with the requirements of then Rule 141,
Section 18 of the Rules of Court and in support of their claim to be
declared as indigent litigants.
In her May 13, 2000 Affidavit, petitioner Lorencita Algura claimed
that the demolition of their small dwelling deprived her of a monthly
income amounting to PhP 7,000.00. She, her husband, and their six
(6) minor children had to rely mainly on her husband's salary as a
policeman which provided them a monthly amount of PhP 3,500.00,
more or less. Also, they did not own any real property as certified by
the assessor's office of Naga City. More so, according to her, the
meager net income from her small sari-sari store and the rentals of
some boarders, plus the salary of her husband, were not enough to
pay the family's basic necessities.
To buttress their position as qualified indigent litigants, petitioners
also submitted the affidavit of Erlinda Bangate, who attested under
oath, that she personally knew spouses Antonio Algura and
Lorencita Algura, who were her neighbors; that they derived
substantial income from their boarders; that they lost said income
from their boarders' rentals when the Local Government Unit of the
City of Naga, through its officers, demolished part of their house
because from that time, only a few boarders could be
accommodated; that the income from the small store, the boarders,
and the meager salary of Antonio Algura were insufficient for their
basic necessities like food and clothing, considering that the Algura
spouses had six (6) children; and that she knew that petitioners did
not own any real property.
Thereafter, Naga City RTC Acting Presiding Judge Andres B. Barsaga,
Jr. issued his July 17, 2000
18
Order denying the petitioners' Motion
for Reconsideration.
Judge Barsaga ratiocinated that the pay slip of Antonio F. Algura
showed that the "GROSS INCOME or TOTAL EARNINGS of plaintiff
Algura [was] 10,474.00 which amount [was] over and above the
amount mentioned in the first paragraph of Rule 141, Section 18 for
pauper litigants residing outside Metro Manila."
19
Said rule provides
that the gross income of the litigant should not exceed PhP 3,000.00
a month and shall not own real estate with an assessed value of PhP
50,000.00. The trial court found that, in Lorencita S.J. Algura's May
13, 2000 Affidavit, nowhere was it stated that she and her
immediate family did not earn a gross income of PhP 3,000.00.
The Issue
Unconvinced of the said ruling, the Alguras instituted the instant
petition raising a solitary issue for the consideration of the Court:
whether petitioners should be considered as indigent litigants who
qualify for exemption from paying filing fees.
The Ruling of the Court
The petition is meritorious.
A review of the history of the Rules of Court on suits in forma
pauperis (pauper litigant) is necessary before the Court rules on the
issue of the Algura spouses' claim to exemption from paying filing
fees.
When the Rules of Court took effect on January 1, 1964, the rule on
pauper litigants was found in Rule 3, Section 22 which provided that:
Section 22. Pauper litigant.Any court may authorize a
litigant to prosecute his action or defense as a pauper
upon a proper showing that he has no means to that effect
by affidavits, certificate of the corresponding provincial,
city or municipal treasurer, or otherwise. Such authority[,]
once given[,] shall include an exemption from payment of
legal fees and from filing appeal bond, printed record and
printed brief. The legal fees shall be a lien to any judgment
rendered in the case [favorable] to the pauper, unless the
court otherwise provides.
From the same Rules of Court, Rule 141 on Legal Fees, on the other
hand, did not contain any provision on pauper litigants.
On July 19, 1984, the Court, in Administrative Matter No. 83-6-389-0
(formerly G.R. No. 64274), approved the recommendation of the
Committee on the Revision of Rates and Charges of Court Fees,
through its Chairman, then Justice Felix V. Makasiar, to revise the
fees in Rule 141 of the Rules of Court to generate funds to
effectively cover administrative costs for services rendered by the
courts.
20
A provision on pauper litigants was inserted which reads:
Section 16. Pauper-litigants exempt from payment of court
fees.Pauper-litigants include wage earners whose gross
income do not exceed P2,000.00 a month or P24,000.00 a
year for those residing in Metro Manila, and P1,500.00 a
month or P18,000.00 a year for those residing outside
Metro Manila, or those who do not own real property with
an assessed value of not more than P24,000.00, or not
more than P18,000.00 as the case may be.
Such exemption shall include exemption from payment of
fees for filing appeal bond, printed record and printed
brief.
The legal fees shall be a lien on the monetary or property
judgment rendered in favor of the pauper-litigant.
pauper-litigant shall execute an affidavit that he does not
earn the gross income abovementioned, nor own any real
property with the assessed value afore-mentioned [sic],
supported by a certification to that effect by the
provincial, city or town assessor or treasurer.
When the Rules of Court on Civil Procedure were amended by the
1997 Rules of Civil Procedure (inclusive of Rules 1 to 71) in Supreme
Court Resolution in Bar Matter No. 803 dated April 8, 1997, which
became effective on July 1, 1997, Rule 3, Section 22 of the Revised
Rules of Court was superseded by Rule 3, Section 21 of said 1997
Rules of Civil Procedure, as follows:
Section 21. Indigent party.A party may be authorized to

meikimouse

Such authority shall include an exemption from payment
of docket and other lawful fees, and of transcripts of
stenographic notes which the court may order to be
furnished him. The amount of the docket and other lawful
fees which the indigent was exempted from paying shall
be a lien on any judgment rendered in the case favorable
to the indigent, unless the court otherwise provides.
Any adverse party may contest the grant of such authority
at any time before judgment is rendered by the trial court.
If the court should determine after hearing that the party
income or property, the proper docket and other lawful
fees shall be assessed and collected by the clerk of court. If
payment is not made within the time fixed by the court,
execution shall issue for the payment thereof, without
prejudice to such other sanctions as the court may impose.
At the time the Rules on Civil Procedure were amended by the Court
in Bar Matter No. 803, however, there was no amendment made on
Rule 141, Section 16 on pauper litigants.
On March 1, 2000, Rule 141 on Legal Fees was amended by the
Court in A.M. No. 00-2-01-SC, whereby certain fees were increased
or adjusted. In this Resolution, the Court amended Section 16 of
Rule 141, making it Section 18, which now reads:
Section 18. Pauper-litigants exempt from payment of legal
fees.Pauper litigants (a) whose gross income and that of
their immediate family do not exceed four thousand
(P4,000.00) pesos a month if residing in Metro Manila, and
three thousand (P3,000.00) pesos a month if residing
outside Metro Manila, and (b) who do not own real
property with an assessed value of more than fifty
thousand (P50,000.00) pesos shall be exempt from the
payment of legal fees.
the case favorably to the pauper litigant, unless the court
otherwise provides.
litigant shall execute an affidavit that he and his
immediate family do not earn the gross income
abovementioned, nor do they own any real property with
the assessed value aforementioned, supported by an
affidavit of a disinterested person attesting to the truth of
the litigant's affidavit.
Any falsity in the affidavit of a litigant or disinterested
person shall be sufficient cause to strike out the pleading
of that party, without prejudice to whatever criminal
liability may have been incurred.
It can be readily seen that the rule on pauper litigants was inserted
in Rule 141 without revoking or amending Section 21 of Rule 3,
which provides for the exemption of pauper litigants from payment
of filing fees. Thus, on March 1, 2000, there were two existing rules
on pauper litigants; namely, Rule 3, Section 21 and Rule 141,
Section 18.
On August 16, 2004, Section 18 of Rule 141 was further amended in
Administrative Matter No. 04-2-04-SC, which became effective on
the same date. It then became Section 19 of Rule 141, to wit:
Sec. 19. Indigent litigants exempt from payment of legal
fees. INDIGENT LITIGANTS (A) WHOSE GROSS INCOME
AN AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE
OF AN EMPLOYEE AND (B) WHO DO NOT OWN REAL
HUNDRED THOUSAND (P300,000.00) PESOS SHALL BE
EXEMPT FROM PAYMENT OF LEGAL FEES.
the case favorable to the indigent litigant unless the court
otherwise provides.
immediate family do not earn a gross income
abovementioned, and they do not own any real property
with the fair value aforementioned, supported by an
affidavit of a disinterested person attesting to the truth
of the litigant's affidavit. The current tax declaration, if
any, shall be attached to the litigant's affidavit.
Any falsity in the affidavit of litigant or disinterested
prejudice to whatever criminal liability may have been
incurred. (Emphasis supplied.)
Amendments to Rule 141 (including the amendment to Rule 141,
Section 18) were made to implement RA 9227 which brought about
new increases in filing fees. Specifically, in the August 16, 2004
amendment, the ceiling for the gross income of litigants applying for
exemption and that of their immediate family was increased from
PhP 4,000.00 a month in Metro Manila and PhP 3,000.00 a month
outside Metro Manila, to double the monthly minimum wage of an
employee; and the maximum value of the property owned by the
applicant was increased from an assessed value of PhP 50,000.00 to
a maximum market value of PhP 300,000.00, to be able to
accommodate more indigent litigants and promote easier access to
justice by the poor and the marginalized in the wake of these new
increases in filing fees.
Even if there was an amendment to Rule 141 on August 16, 2004,
there was still no amendment or recall of Rule 3, Section 21 on
indigent litigants.
With this historical backdrop, let us now move on to the sole issue
whether petitioners are exempt from the payment of filing fees.
It is undisputed that the Complaint (Civil Case No. 99-4403) was filed
on September 1, 1999. However, the Naga City RTC, in its April 14,
2000 and July 17, 2000 Orders, incorrectly applied Rule 141, Section
18 on Legal Fees when the applicable rules at that time were Rule 3,

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Section 21 on Indigent Party which took effect on July 1, 1997 and
Rule 141, Section 16 on Pauper Litigants which became effective on
July 19, 1984 up to February 28, 2000.
The old Section 16, Rule 141 requires applicants to file an ex-parte
motion to litigate as a pauper litigant by submitting an affidavit that
they do not have a gross income of PhP 2,000.00 a month or PhP
24,000.00 a year for those residing in Metro Manila and PhP
1,500.00 a month or PhP 18,000.00 a year for those residing outside
Metro Manila or those who do not own real property with an
assessed value of not more than PhP 24,000.00 or not more than
PhP 18,000.00 as the case may be. Thus, there are two
requirements: a) income requirementthe applicants should not
have a gross monthly income of more than PhP 1,500.00, and b)
property requirementthey should not own property with an
assessed value of not more than PhP 18,000.00.
In the case at bar, petitioners Alguras submitted the Affidavits of
petitioner Lorencita Algura and neighbor Erlinda Bangate, the pay
slip of petitioner Antonio F. Algura showing a gross monthly income
of PhP 10,474.00,
21
and a Certification of the Naga City assessor
stating that petitioners do not have property declared in their
names for taxation.
22
Undoubtedly, petitioners do not own real
property as shown by the Certification of the Naga City assessor and
so the property requirement is met. However with respect to the
income requirement, it is clear that the gross monthly income of PhP
10,474.00 of petitioner Antonio F. Algura and the PhP 3,000.00
income of Lorencita Algura when combined, were above the PhP
1,500.00 monthly income threshold prescribed by then Rule 141,
Section 16 and therefore, the income requirement was not satisfied.
The trial court was therefore correct in disqualifying petitioners
Alguras as indigent litigants although the court should have applied
Rule 141, Section 16 which was in effect at the time of the filing of
the application on September 1, 1999. Even if Rule 141, Section 18
(which superseded Rule 141, Section 16 on March 1, 2000) were
applied, still the application could not have been granted as the
combined PhP 13,474.00 income of petitioners was beyond the PhP
3,000.00 monthly income threshold.
Unrelenting, petitioners however argue in their Motion for
Reconsideration of the April 14, 2000 Order disqualifying them as
indigent litigants
23
that the rules have been relaxed by relying on
Rule 3, Section 21 of the 1997 Rules of Civil procedure which
authorizes parties to litigate their action as indigents if the court is
satisfied that the party is "one who has no money or property
sufficient and available for food, shelter and basic necessities for
himself and his family." The trial court did not give credence to this
view of petitioners and simply applied Rule 141 but ignored Rule 3,
Section 21 on Indigent Party.
The position of petitioners on the need to use Rule 3, Section 21 on
their application to litigate as indigent litigants brings to the fore the
issue on whether a trial court has to apply both Rule 141, Section 16
and Rule 3, Section 21 on such applications or should the court apply
only Rule 141, Section 16 and discard Rule 3, Section 21 as having
been superseded by Rule 141, Section 16 on Legal Fees.
The Court rules that Rule 3, Section 21 and Rule 141, Section 16
(later amended as Rule 141, Section 18 on March 1, 2000 and
subsequently amended by Rule 141, Section 19 on August 16, 2003,
which is now the present rule) are still valid and enforceable rules on
indigent litigants.
For one, the history of the two seemingly conflicting rules readily
reveals that it was not the intent of the Court to consider the old
Section 22 of Rule 3, which took effect on January 1, 1994 to have
been amended and superseded by Rule 141, Section 16, which took
effect on July 19, 1984 through A.M. No. 83-6-389-0. If that is the
case, then the Supreme Court, upon the recommendation of the
Committee on the Revision on Rules, could have already deleted
Section 22 from Rule 3 when it amended Rules 1 to 71 and approved
the 1997 Rules of Civil Procedure, which took effect on July 1, 1997.
The fact that Section 22 which became Rule 3, Section 21 on
indigent litigant was retained in the rules of procedure, even
elaborating on the meaning of an indigent party, and was also
strengthened by the addition of a third paragraph on the right to
contest the grant of authority to litigate only goes to show that
there was no intent at all to consider said rule as expunged from the
1997 Rules of Civil Procedure.
Furthermore, Rule 141 on indigent litigants was amended twice: first
on March 1, 2000 and the second on August 16, 2004; and yet,
despite these two amendments, there was no attempt to delete
Section 21 from said Rule 3. This clearly evinces the desire of the
Court to maintain the two (2) rules on indigent litigants to cover
applications to litigate as an indigent litigant.
It may be argued that Rule 3, Section 21 has been impliedly repealed
by the recent 2000 and 2004 amendments to Rule 141 on legal fees.
This position is bereft of merit. Implied repeals are frowned upon
unless the intent of the framers of the rules is unequivocal. It has
been consistently ruled that:
(r)epeals by implication are not favored, and will not be
decreed, unless it is manifest that the legislature so
intended. As laws are presumed to be passed with
deliberation and with full knowledge of all existing ones on
the subject, it is but reasonable to conclude that in passing
a statute[,] it was not intended to interfere with or
abrogate any former law relating to same matter, unless
the repugnancy between the two is not only irreconcilable,
but also clear and convincing, and flowing necessarily from
the language used, unless the later act fully embraces the
subject matter of the earlier, or unless the reason for the
earlier act is beyond peradventure removed. Hence, every
effort must be used to make all acts stand and if, by any
reasonable construction they can be reconciled, the later
act will not operate as a repeal of the earlier.
24
(Emphasis
supplied).
Instead of declaring that Rule 3, Section 21 has been superseded and
impliedly amended by Section 18 and later Section 19 of Rule 141,
the Court finds that the two rules can and should be harmonized.
The Court opts to reconcile Rule 3, Section 21 and Rule 141, Section
19 because it is a settled principle that when conflicts are seen
between two provisions, all efforts must be made to harmonize
them. Hence, "every statute [or rule] must be so construed and
harmonized with other statutes [or rules] as to form a uniform
system of jurisprudence."
25

In Manila Jockey Club, Inc. v. Court of Appeals, this Court enunciated
that in the interpretation of seemingly conflicting laws, efforts must
be made to first harmonize them. This Court thus ruled:

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Consequently, every statute should be construed in such a
way that will harmonize it with existing laws. This principle
is expressed in the legal maxim 'interpretare et concordare
leges legibus est optimus interpretandi,' that is, to
interpret and to do it in such a way as to harmonize laws
with laws is the best method of interpretation.
26

In the light of the foregoing considerations, therefore, the two (2)
rules can stand together and are compatible with each other. When
an application to litigate as an indigent litigant is filed, the court shall
scrutinize the affidavits and supporting documents submitted by the
applicant to determine if the applicant complies with the income
and property standards prescribed in the present Section 19 of Rule
141that is, the applicant's gross income and that of the applicant's
immediate family do not exceed an amount double the monthly
minimum wage of an employee; and the applicant does not own real
property with a fair market value of more than Three Hundred
Thousand Pesos (PhP 300,000.00). If the trial court finds that the
applicant meets the income and property requirements, the
authority to litigate as indigent litigant is automatically granted and
the grant is a matter of right.
However, if the trial court finds that one or both requirements have
not been met, then it would set a hearing to enable the applicant to
prove that the applicant has "no money or property sufficient and
available for food, shelter and basic necessities for himself and his
family." In that hearing, the adverse party may adduce
countervailing evidence to disprove the evidence presented by the
applicant; after which the trial court will rule on the application
depending on the evidence adduced. In addition, Section 21 of Rule
3 also provides that the adverse party may later still contest the
grant of such authority at any time before judgment is rendered by
the trial court, possibly based on newly discovered evidence not
obtained at the time the application was heard. If the court
determines after hearing, that the party declared as an indigent is in
fact a person with sufficient income or property, the proper docket
and other lawful fees shall be assessed and collected by the clerk of
court. If payment is not made within the time fixed by the court,
execution shall issue or the payment of prescribed fees shall be
made, without prejudice to such other sanctions as the court may
impose.
The Court concedes that Rule 141, Section 19 provides specific
standards while Rule 3, Section 21 does not clearly draw the limits of
the entitlement to the exemption. Knowing that the litigants may
abuse the grant of authority, the trial court must use sound
discretion and scrutinize evidence strictly in granting exemptions,
aware that the applicant has not hurdled the precise standards
under Rule 141. The trial court must also guard against abuse and
misuse of the privilege to litigate as an indigent litigant to prevent
the filing of exorbitant claims which would otherwise be regulated
by a legal fee requirement.
Thus, the trial court should have applied Rule 3, Section 21 to the
application of the Alguras after their affidavits and supporting
documents showed that petitioners did not satisfy the twin
requirements on gross monthly income and ownership of real
property under Rule 141. Instead of disqualifying the Alguras as
indigent litigants, the trial court should have called a hearing as
required by Rule 3, Section 21 to enable the petitioners to adduce
evidence to show that they didn't have property and money
sufficient and available for food, shelter, and basic necessities for
them and their family.
27
In that hearing, the respondents would
have had the right to also present evidence to refute the allegations
and evidence in support of the application of the petitioners to
litigate as indigent litigants. Since this Court is not a trier of facts, it
will have to remand the case to the trial court to determine whether
petitioners can be considered as indigent litigants using the
standards set in Rule 3, Section 21.
Recapitulating the rules on indigent litigants, therefore, if the
applicant for exemption meets the salary and property requirements
under Section 19 of Rule 141, then the grant of the application is
mandatory. On the other hand, when the application does not
satisfy one or both requirements, then the application should not be
denied outright; instead, the court should apply the "indigency test"
under Section 21 of Rule 3 and use its sound discretion in
determining the merits of the prayer for exemption.
Access to justice by the impoverished is held sacrosanct under
Article III, Section 11 of the 1987 Constitution. The Action Program
for Judicial Reforms (APJR) itself, initiated by former Chief Justice
Hilario G. Davide, Jr., placed prime importance on 'easy access to
justice by the poor' as one of its six major components. Likewise, the
judicial philosophy of Liberty and Prosperity of Chief Justice Artemio
V. Panganiban makes it imperative that the courts shall not only
safeguard but also enhance the rights of individualswhich are
considered sacred under the 1987 Constitution. Without doubt, one
of the most precious rights which must be shielded and secured is
the unhampered access to the justice system by the poor, the
underprivileged, and the marginalized.
WHEREFORE, the petition is GRANTED and the April 14, 2000 Order
granting the disqualification of petitioners, the July 17, 2000 Order
denying petitioners' Motion for Reconsideration, and the September
11, 2001 Order dismissing the case in Civil Case No. RTC-99-4403
before the Naga City RTC, Branch 27 are ANNULLED and SET ASIDE.
Furthermore, the Naga City RTC is ordered to set the "Ex-Parte
Motion to Litigate as Indigent Litigants" for hearing and apply Rule 3,
Section 21 of the 1997 Rules of Civil Procedure to determine
whether petitioners can qualify as indigent litigants.
No costs.
SO ORDERED.


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G.R. No. 150107 January 28, 2008
TOKIO MARINE MALAYAN INSURANCE COMPANY INCORPORATED,
ALMA PEALOSA, KIMIO HOSAKA, SUMITOMI NISHIDA, TERESITA
H. QUIAMBAO and ANTONIO B. LAPID, petitioners,
vs.
JORGE VALDEZ, respondent.
x ------------------------------------------ x
G.R. No. 150108 January 28, 2008
TOKIO MARINE MALAYAN INSURANCE COMPANY INCORPORATED
and TERESITA H. QUIAMBAO, petitioners,
vs.
JORGE VALDEZ, respondent.
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
For our resolution are two (2) consolidated petitions for review on
certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, seeking to reverse the Decision
1
of the Court of Appeals
dated September 13, 2001 in the consolidated cases CA-G.R. SP No.
52914 and CA-G.R. SP No. 56579.
Tokio Marine Malayan Insurance Company Incorporated (Tokio
Marine), petitioner in these cases, is a domestic corporation
engaged in the insurance business. The individual petitioners are its
corporate officers, except Antonio B. Lapid, one of Tokio Marine's
consultants.
Jorge Valdez, respondent in these cases, was a former unit manager
of Tokio Marine pursuant to a Unit Management Contract entered
into between them on August 16, 1977.
On October 15, 1998, respondent filed with the Regional Trial Court,
Branch 35, Manila a complaint for damages against petitioners,
docketed as Civil Case No. 98-91356. He alleged therein that
petitioners violated the terms of the Unit Management Contract by
refusing to pay him, among others, his "commissions," and bonuses.
Respondent prayed for the following reliefs: a) actual damages in
the total amount of P71,866,205.67 and the corresponding
interests; b) moral damages of P10,000,000.00; c) exemplary
damages amounting to P10,000,000.00; d) attorney's fees
corresponding to 30% of the said amounts; and e) costs of the suit.
Eventually, respondent filed with the trial court an "Urgent Ex Parte
Motion For Authority To Litigate As Indigent Plaintiff."
On October 28, 1998, the trial court issued an Order, the pertinent
portions of which read:
The Court hereby allows the plaintiff to litigate as pauper
there being sufficient showing that he is an indigent. He
does not own any real property in the City of Manila or
elsewhere.
The Court therefore directs the Clerk of Court to accept
the complaint for filing without payment of filing fees
computed as SIX HUNDRED FIFTEEN THOUSAND SIX
HUNDRED SEVENTY TWO AND EIGHTY-THREE CENTAVOS
(P615,672.83) which amount, however, shall constitute a
lien upon any judgment to be rendered in favor of the
plaintiff.
On December 11, 1998, petitioners filed their separate motions to
dismiss the complaint.
On December 17, 1998, respondent manifested before the trial
court that he filed various criminal complaints against petitioners
with the Office of the City Prosecutor of Makati City.
On January 20, 1999, the trial court issued an Order
2
denying
petitioners' motions to dismiss. They then filed motions for
reconsideration, but they were likewise denied.
On March 12, 1999, petitioners filed their "Answer Ad Cautelam" in
Civil Case No. 98-91356.
On May 24, 1999, petitioners filed a petition for certiorari with
prayer for a temporary restraining order and preliminary injunction
with the Court of Appeals assailing the Order of the trial court dated
January 20, 1999 denying their motions to dismiss, docketed as CA-
G.R. SP No. 52914.
On October 15, 1999, the Court of Appeals issued a Resolution
directing the issuance of a writ of preliminary injunction restraining
the trial court from conducting further proceedings in Civil Case No.
98-91356 during the pendency of CA-G.R. SP No. 52914.
Then on December 7, 1999, respondent filed with the Court of
Appeals an "Urgent Notice of Taking of Deposition Upon Oral
Examination of Private Respondent Jorge Valdez For Purposes of the
Above-Captioned Pending Case And For Such Other Legal Purposes
As May Be Warranted By Existing Law and Jurisprudence." It appears
that respondent was already 75 years old and sickly.
On December 13, 1999, petitioners filed with the Court of Appeals a
petition to cite respondent in contempt of court, docketed as CA-
G.R. SP No. 56579. Petitioners alleged therein that in filing with the
appellate court an urgent notice of taking his deposition, respondent
violated the preliminary injunction issued by the said court.
Subsequently, CA-G.R. SP No. 56579 was consolidated with CA-G.R.
SP No. 52914.
On December 14, 1999, the deposition of respondent was taken by
Atty. Alberto A. Aguja, a Notary Public for Manila. On the same date,
he filed with the Court of Appeals respondent's deposition.
On September 13, 2001, the Court of Appeals rendered its Decision
in the consolidated cases CA-G.R. SP No. 52914 and CA-G.R. SP No.
56579 dismissing the petitions and lifting and dissolving the writ of
preliminary injunction previously issued, thus:
WHEREFORE, for lack of merit, the consolidated petitions
filed by the petitioners are hereby DISMISSED. The writ of
preliminary injunction dated October 18, 1999 issued by
this Court enjoining further proceedings in Civil Case No.

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98-91356, pending before the Regional Trial Court of
Manila, Branch 35 is hereby LIFTED and DISSOLVED.
SO ORDERED.
Hence, the instant consolidated petitions.
Petitioners contend that the Court of Appeals erred: (1) in denying
their motion to dismiss respondent's complaint in Civil Case No. 98-
91356 for nonpayment of docket fees; (2) for not finding that
respondent engaged in forum shopping; and (3) in not declaring that
he is guilty of contempt of court.
On the first issue, it is hornbook law that courts acquire jurisdiction
over any case only upon payment of the prescribed docket fee.
3
As
we held in Magaspi v. Ramolete,
4
the correct docket fees must be
paid before courts can act on a petition or complaint. The exception
to the rule on payment of docket fees is provided in Section 21, Rule
3 of the 1997 Rules of Civil Procedure, as amended, thus:
SEC. 21. Indigent party. - A party may be authorized to
Such authority shall include an exemption from payment
of docket and other lawful fees and of transcripts of
stenographic notes which the court may order to be
furnished him. The amount of the docket and other lawful
fees which the indigent was exempted from paying shall
be a lien on any judgment rendered in the case favorable
to the indigent, unless the court otherwise provides.
Any adverse party may contest the grant of such authority
at any time before judgment is rendered by the trial court.
If the court should determine after hearing that the party
income or property, the proper docket and other lawful
fees shall be assessed and collected by the clerk of court. If
payment is not made within the time fixed by the court,
execution shall issue or the payment thereof, without
prejudice to such other sanctions as the court may impose.
The guidelines for determining whether a party qualifies as an
indigent litigant are provided for in Section 19, Rule 141,
5
of the
Revised Rules of Court, which reads:
SEC. 19. Indigent litigants exempt from payment of legal
fees. - INDIGENT LITIGANT (A) WHOSE GROSS INCOME
AN AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE OF
AN EMPLOYEE AND (B) WHO DO NOT OWN REAL
HUNDRED THOUSAND PESOS (P300,000.00) SHALL BE
EXEMPT FROM THE PAYMENT OF LEGAL FEES.
the case favorable to the indigent unless the court
otherwise provides.
immediate family do not earn a gross income
abovementioned nor they own any real property with the
fair value aforementioned, supported by an affidavit of a
disinterested person attesting to the truth of the litigant's
affidavit. The current tax declaration, if any, shall be
attached to the litigant's affidavit.
Any falsity in the affidavit of the litigant or disinterested
prejudice to whatever criminal liability may have been
incurred.
For purposes of a suit in forma pauperis, an indigent litigant is not
really a pauper, but is properly a person who is an indigent although
not a public charge, meaning that he has no property or income
sufficient for his support aside from his labor, even if he is self-
supporting when able to work and in employment.
6
The term
"immediate family" includes those members of the same household
who are bound together by ties of relationship but does not include
those who are living apart from the particular household of which
the individual is a member.
7

In the instant cases, petitioners maintain that respondent's ex parte
motion to litigate as an indigent is defective since it was not
accompanied or supported by the affidavits of his children, the
immediate members of his family. The argument lacks merit. Section
19 clearly states that it is the litigant alone who shall execute the
affidavit. The Rule does not require that all members of the litigant's
immediate family must likewise execute sworn statements in
support of the petition. Expressio unius est exclusio alterius.
Petitioners next argue that respondent's ex parte motion is not
supported by sufficient evidence to show his indigent status.
8
Suffice
it to state that this Court is, first and foremost, a court of law. It is
not its function to analyze and weigh all over again the evidence or
premises supportive of factual determination.
9
Thus, petitioners
cannot now ask us to review the evidence anew.
Anent the second issue, petitioners insist that respondent
committed forum shopping when he failed to report to the trial
court that he filed criminal cases against petitioners with the Office
of the City Prosecutor of Makati City.
Gatmaytan v. Court of Appeals
10
describes forum shopping as the
act of a litigant who "repetitively availed of several judicial remedies
in different courts, simultaneously or successively, all substantially
founded on the same transactions and the same essential facts and
circumstances, and all raising substantially the same issues either
pending in, or already resolved adversely by some other courtto
increase his chances of obtaining a favorable decision if not in one
court, then in another." Differently put, it is "the filing of multiple
suits involving the same parties for the same cause of action, either
simultaneously or successively, for the purpose of obtaining a
favorable judgment."
11

The rationale against forum shopping is that a party should not be
allowed to pursue simultaneous remedies in two different courts as
it constitutes abuse of court processes, which tends to degrade the
administration of justice, wreaks havoc upon orderly judicial

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procedure, and adds to the congestion of the heavily burdened
dockets of the courts.
12

Section 5, Rule 7 of the 1997 Rules of Civil Procedure, as amended,
provides:
SEC. 5. Certification against forum shopping. - The plaintiff
or principal party shall certify under oath in the complaint
or other initiatory pleading asserting a claim for relief, or
in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not
theretofore commenced any action or filed any claim
involving the same issues in any court, tribunal, or quasi-
judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of
the present status thereof; and (c) if he should thereafter
learn that same or similar action or claim has been filed
or is pending, he shall report that fact within five (5) days
therefrom to the court wherein his aforesaid complaint
or initiatory pleading has been filed.
Failure to comply with the foregoing requirement shall not
be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of
the case without prejudice, unless otherwise provided,
upon motion and after hearing. The submission of a false
certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt of
court, without prejudice to the corresponding
administrative and criminal actions. If the acts of the party
or his counsel clearly constitute willful and deliberate
forum shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct
contempt, as well as a cause for administrative sanctions.
Respondent's Certificate of Non-Forum Shopping attached to the
complaint in Civil Case No. 98-91356 reads:
FURTHER, that he has not heretofore commenced any
other action or proceeding involving the same issues in the
Supreme Court, the Court of Appeals, or any other tribunal
or agency, except the criminal case for SWINDLING
(ESTAFA) under Art. 315, paragraph 1 (b) and for
FALSIFICATION BY PRIVATE INDIVIDUALS OF PRIVATE
DOCUMENTS under Art. 172, paragraph 2 of the Revised
Penal Code to be filed before the Makati Prosecutor's
Office, criminal case for violation of the Insurance Code of
the Philippines to be filed before the Makati Prosecutor's
Office, and the administrative case for violation of the
Insurance Code Commission; that to the best of his
knowledge no such other action is pending in the Supreme
Court and Court of Appeals.
We agree with the Court of Appeals that the foregoing certification
is a substantial compliance with Section 5 of Rule 7. Moreover, it
should be recalled that respondent manifested before the trial court
on December 16, 1998 that he actually filed criminal cases against
petitioners with the Office of the City Prosecutor of Makati City.
On the final issue, petitioners claim that the deposition of
respondent taken on December 14, 1999 violated the injunction
issued by the Court of Appeals on October 15, 1999. Such act,
petitioners assert, is tantamount to indirect contempt of court.
Contempt of court is "a defiance of the authority, justice or dignity
of the court: such conduct as tends to bring the authority and
administration of the law into disrespect or to interfere with or
prejudice parties litigants or their witnesses during litigation."
13

Succinctly, it is the despising of the authority, justice, or dignity of
the court.
14
Rule 71 provides for two forms of contumacious acts -
direct and indirect.
Indirect contempt refers to contumacious acts perpetrated outside
of the sitting of the court and may include misbehavior of an officer
of a court in the performance of his official duties or in his official
transactions, disobedience of or resistance to a lawful writ, process,
order, judgment, or command of a court, or injunction granted by a
court or a judge, any abuse or any unlawful interference with the
process or proceedings of a court not constituting direct contempt,
or any improper conduct tending directly or indirectly to impede,
obstruct or degrade the administration of justice.
15
It is governed by
Section 3, Rule 71 of the 1997 Rules of Civil Procedure, as amended,
which provides:
SEC. 3. Indirect contempt to be punished after charge and
hearing. - After a charge in writing has been filed and an
opportunity given to the respondent to comment thereon
within such period as may be fixed by the court and to be
heard by himself or by counsel, a person guilty of any of
the following acts may be punished for indirect contempt:
(a) Misbehavior of an officer of court in the performance
of his official duties or in his official transactions;
(b) Disobedience of or resistance to a lawful writ, process,
order, or judgment of a court, including the act of a person
who, after being dispossessed or rejected from any real
property by the judgment or process of any court of
competent jurisdiction, enters or attempts or induces
another to enter into or upon such real property, for the
purpose of executing acts of ownership or possession, or
in any manner disturbs the possession given to the person
adjudged to be entitled thereto;
(c) Any abuse of or any unlawful interference with the
process or proceeding of a court not constituting direct
contempt under Section 1 of this Rule;
(d) Any improper conduct tending directly or indirectly to
impede, obstruct, or degrade the administration of justice;
(e) Assuming to be an attorney or an officer of a court and
acting as such without authority;
(f) Failure to obey a subpoena duly served;
(g) The rescue, or attempted rescue, of any person or
property in the custody of an officer by virtue of an order
or process of a court held by him.

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But nothing in this section shall be so construed as to prevent the
court from issuing process to bring the respondent into court, or
from holding him in custody pending such proceedings.
Before one may be convicted of indirect contempt, there must be
compliance with the following requisites: (a) a charge in writing to
be filed; (b) an opportunity for respondent to comment thereon
within such period as may be fixed by the court; and (c) an
opportunity to be heard by himself or by counsel.
16
Records show
that these requirements were complied with.
The Court of Appeals, in CA-G.R. SP No. 56579, dismissed the charge
for indirect contempt, holding that respondent's deposition was
done in good faith, thus:
It should be emphasized that what triggered the holding of
private respondent's deposition last December 14, 1999
was the use by the petitioners of the June 09 and 28, 1999
depositions when at that time no orders were issued by Us
enjoining any proceedings below. The use of the
petitioners of June 09 and 28 depositions have been
vigorously objected to by the private respondent,
contending that there was a misunderstanding created
when the private respondent was cross-examined by the
counsel for the petitioners, and in his honest belief to
clarify such misunderstanding in the previous
depositions, the December 14, 1999 deposition was
taken.
We see no reason to depart from the foregoing findings by the
appellate court. Moreover, the taking of respondent's deposition is
not a part of the court proceedings in Civil Case No. 98-91356,
hence, not covered by the writ of injunction issued by the Court of
Appeals. Let it be stressed at this point that we have always abided
by the dogma that courts must exercise their contempt powers
sparingly.
In sum, we rule that the Court of Appeals did not err in dismissing
the petitions in CA-G.R. SP No. 52914 and CA-G.R. SP No. 56579.
WHEREFORE, we DENY the petitions. The challenged Decision of the
Court of Appeals in CA-G.R. SP No. 52914 and CA-G.R. SP No. 56579
is AFFIRMED. Costs against petitioners.
SO ORDERED.


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G.R. No. 132765 January 31, 2003
GLICERIO R. BRIOSO, substituted by FELICIDAD Z. BRIOSO, BENER Z.
BRIOSO, JULITO Z. BRIOSO, GLICERIO Z. BRIOSO, JR., and ERNESTO
Z. BRIOSO, CONCEPCION B. NOLASCO, MARCOS NOLASCO and
SALVADOR Z. BRIOSO, petitioners,
vs.
SALVADORA RILI-MARIANO and LEONARDO C. MARIANO,
respondents.
CARPIO, J.:
The Case
This petition for review on certiorari
1
seeks to reverse the Decision
2

of the Court of Appeals dated September 2, 1997 in CA-G.R. CV No.
51347, as well as the Resolution dated January 21, 1998 denying the
motion for reconsideration. The Court of Appeals in its assailed
Decision affirmed the Decision
3
of the Regional Trial Court, Branch
29, Libmanan, Camarines Sur. The trial court ordered petitioners to
turn over possession of certain properties to respondents and to pay
respondents damages and attorney's fees.
The Facts
On February 1, 1975, the Spouses Salvadora Rili-Mariano and
Leonardo C. Mariano ("Spouses Mariano" for brevity), through the
Land Bank of the Philippines ("Land Bank" for brevity), repurchased
the property that they previously sold to Glicerio Brioso ("Glicerio"
for brevity) within the period specified in the parties' pacto de retro
sale. Despite repeated demands, however, Glicerio refused to
deliver the entire property to the Spouses Mariano. Thus, on May
27, 1977, the Spouses Mariano filed a complaint
4
for recovery of
possession of real property against Glicerio, Ernesto Brioso
("Ernesto" for brevity), Concepcion Brioso-Nolasco ("Concepcion"
for brevity), Eusebio Nocedal ("Eusebio" for brevity) and Salvador
Brioso ("Salvador" for brevity). The Spouses Mariano sought to
repossess Lots 715, 716, 718, 722, 724 and 725 ("Properties" for
brevity), which constitute portions of a riceland containing an area
of 19.5229 hectares and situated at Potot, Libmanan, Camarines Sur.
Defendants, through their counsels, Augusto Pardalis ("Atty.
Pardalis" for brevity) and Salvador, asserted that the Spouses
Mariano had no cause of action against Glicerio because the latter
had already lost all interest in the land. Defendants claimed that
Glicerio installed his son Ernesto, his daughter Concepcion and his
employee Eusebio as tenants of the property before the repurchase,
therefore, they were bona fide cultivators-possessors of the land.
Defendants also averred that the titles to the Properties had already
been transferred to the Land Bank. Defendants added that the
complaint was defective as it failed to implead Land Bank and
Concepcion's husband as indispensable parties. As part of their
counterclaim, defendants alleged that the Spouses Mariano failed to
comply with their obligation to replace the Land Bank bonds (which
Spouses Mariano used to partly pay the repurchase price) with cash.
Subsequently, Spouses Mariano amended their complaint to
implead Land Bank and Concepcion spouse, Marcos Nolasco
("Marcos" for brevity).
5

During the pre-trial, upon the Spouses Mariano's motion, the
complaint was dismissed against Land Bank, Ernesto and Eusebio.
6

Thereafter, trial against the remaining defendants, namely, Glicerio,
Concepcion, Marcos and Salvador, ensued.
On August 30, 1987, Glicerio died. Accordingly, defendants, through
Atty. Pardalis, filed a Notice of Death of Glicerio Brioso.
7

Subsequently, the Spouses Mariano's counsel filed a Motion for
Substitution of Deceased Defendant
8
which Atty. Pardalis received.
Acting on the motion for substitution, the trial court issued an
Order
9
which reads:
"The motion of Atty. Grageda to substitute the deceased
defendant Glicerio Brioso is hereby admitted.
SO ORDERED."
Trial on the merits continued. Accordingly, defendants adduced their
evidence. Part of defendants' evidence consisted of the testimonies
of Salvador, Concepcion and Ernesto.
10

On July 14, 1995, the trial court rendered a decision, the dispositive
portion of which reads:
"WHEREFORE, premises considered, after proper
evaluation of the evidence presented by both parties, this
Court finds and holds that the preponderance of evidence
is in favor of the plaintiffs. Hence, judgment is rendered in
favor of the plaintiffs and against the defendants
Concepcion Brioso-Nolasco and her husband,
11
Salvador
Brioso and the substitute defendants for deceased
defendant Glicerio Brioso who are ordered to pay the
plaintiffs, jointly and severally, in the proportion stated
earlier:
a) P303,972.46, for actual damages;
b) P147,000.00 for transportation, hotel and
representation expenses;
c) P95,000.00 for income loss from employment
and business activities;
d) P20,000.00 for attorney's fees;
e) P150,000.00 for moral damages;
f) P50,000.00 for exemplary damages; and
g) to pay the cost.
All these amounts shall earn interest at 6% per annum
until fully paid by the defendants.
The defendants are also directed to immediately turn over
the physical and material possession of Lots 716, 722 and
725 to the plaintiffs as reflected in Exh. D.
SO ORDERED."
12

Dissatisfied with the adverse decision, Marcos and Glicerio's heirs,
namely, Felicidad Z. Brioso ("Felicidad" for brevity), Bener Z. Brioso

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("Bener" for brevity), Julito Z. Brioso ("Julito" for brevity), Glicerio Z.
Brioso, Jr. ("Glicerio, Jr." for brevity), Ernesto, Concepcion and
Salvador filed an appeal with the Court of Appeals.
In the Court of Appeals, petitioners presented, among others, the
issue of whether there was a valid substitution of the deceased
party, the main issue presented in the instant petition. Petitioners
maintained that the substitution of Glicerio was invalid as the trial
court failed to comply with the Rules of Court on the substitution of
a deceased party. Considering that the substitution was null and
void, petitioners alleged that the trial court did not acquire
jurisdiction over their persons. Hence, the entire proceedings in the
trial court and the judgment rendered by the trial court were void.
The Ruling of the Court of Appeals
The Court of Appeals sustained the decision of the trial court. In
ruling that there was a valid substitution of the deceased party, the
Court of Appeals quoted Section 17, Rule 3 of the old Rules of Court.
The Court of Appeals held that the trial court acquired jurisdiction
over the persons of the petitioners. Thus, the decision of the trial
court is valid and binding upon all of the petitioners. The Court of
Appeals anchored its ruling on the following factual findings:
"In this case, the records show that on September 23,
1987, Atty. Augusto Pardales(sic), counsel for defendants,
filed a notice of death informing the court that defendant
Glicerio R. Brioso died on August 30, 1987 (p. 316,
Records). Counsel for the plaintiffs accordingly filed a
Motion for Substitution of Deceased Defendant on
October 5, 1987 (p. 318, Records). The trial court on
October 8, 1987 issued an Order which reads:
xxx xxx xxx
Subsequently, the heirs of Glicerio Brioso, namely: Mrs. Felicidad Z.
Brioso, Benet(sic) Z. Brioso, Julito Z. Brioso, Glicerio Z. Brioso, Jr.,
Ernesto Z. Brioso, Concepcion Brioso-Nolasco, and Salvador Z.
Brioso, were made substitute defendants in the case. Their counsels
were definitely aware of such substitution. In fact, one of them,
Atty. Salvador Z. Brioso, was one of the counsels of the defendants.
It was the duty of said counsels to inform the heirs of the
substitution after the court had issued the order granting the motion
of the plaintiffs.
Moreover, Ernesto Brioso cannot deny the fact that he knew of the
pendency of the action and the substitution of the heirs because he
participated as a witness for the defendants even after the case
against him was earlier dismissed. Undoubtedly, the court had
acquired jurisdiction over the persons of the heirs and the judgment
is thereby binding upon all of them."
13

Petitioners filed a Motion for Reconsideration of the above decision.
Finding no new issues or arguments raised in the motion, the Court
of Appeals denied the same.
14

The Issues
Petitioners posed these "two-fold issues"
15
for resolution:
1. Whether there was a valid substitution of deceased
Glicerio; and
2. Whether the trial court acquired jurisdiction over the
persons of the petitioners.
The Court's Ruling
The petition is partly meritorious.
Petitioners assert that the trial court failed to comply with the clear
language of Section 17, Rule 3 of the old Rules of Court which
provides as follows:
"Death of a party. After a party dies and the claim is not
thereby extinguished, the court shall order, upon proper
notice, the legal representative of the deceased, within a
period of thirty (30) days, or within such time as may be
granted. If the legal representative fails to appear within
said time, the court may order the opposing party to
procure the appointment of a legal representative of the
deceased within a time to be specified by the court, and
the representative shall immediately appear for and on
behalf of the interest of the deceased. The court charges
involved in procuring such appointment, if defrayed by the
opposing party, may be recovered as costs. The heirs of
the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an
executor or administrator and the court may appoint
guardian ad litem for the minor heirs."
16

Petitioners allege that, as there was no appointed administrator for
the estate of the deceased defendant, the trial court should have
ordered the heirs to appear personally before it and manifest
whether they were willing to substitute Glicerio. Petitioners further
aver that if none of the heirs appeared or manifested to act as
substitutes, the trial court should have ordered the adverse party to
procure the appointment of a legal representative of the deceased
who should appear for and on behalf of the deceased's interest.
Petitioners also harp on their failure to receive a copy of the Spouses
Mariano's motion for substitution of Glicerio as well as the Order of
the trial court admitting the motion. Petitioners argue that, even if
they received a copy of the Order, the same did not grant the
Spouses Mariano's motion for substitution. Since they were not
aware of the purported substitution because of the lack of service
on them of the motion and the Order, petitioners insist that the
entire proceedings in the trial court were void for lack of jurisdiction
over their persons.
It must be pointed out that, contrary to the Spouses Mariano's view,
their complaint for recovery of possession of real property is an
action which survives the death of a party.
17
Such being the case, the
rule on substitution of a deceased party is clearly applicable.
Under the express terms of Section 17 of the old Rules, in case of
the death of a party and due notice is given to the trial court, it is the
duty of the court to order the deceased's legal representative or heir
to appear for the deceased.
18
Otherwise, "the trial held by the court
without appearance of the deceased's legal representative or
substitution of heirs and the judgment rendered after trial, are null
and void."
19


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Non-compliance with the rule on substitution of a deceased party
renders the proceedings and judgment of the trial court infirm
because the court acquired no jurisdiction over the persons of the
legal representatives or of the heirs on whom the trial and the
judgment would be binding. In other words, a party's right to due
process is at stake, as we enunciated in Vda. de Salazar v. Court of
Appeals,
20
thus
"We should not lose sight of the principle underlying the general
rule that formal substitution of heirs must be effectuated for them
to be bound by a subsequent judgment. Such had been the general
rule established not because the rule on substitution of heirs and
that on appointment of a legal representative are jurisdictional
requirements per se but because non-compliance therewith results
in the undeniable violation of the right to due process of those who,
though not duly notified of the proceedings, are substantially
affected by the decision rendered therein." (Emphasis supplied.)
In the instant case, it is true that the trial court, after receiving a
notice of Glicerio's death, failed to order the appearance of his legal
representative or heirs. Instead, the trial court issued an Order
merely admitting respondents' motion for substitution. There was
no court order for Glicerio's legal representative to appear, nor did
any such legal representative ever appear in court to be substituted
for Glicerio. Neither did the respondents ever procure the
appointment of such legal representative, nor did Glicerio's heirs
ever ask to be substituted for Glicerio. Clearly, the trial court failed
to observe the proper procedure in substituting Glicerio. As a result,
contrary to the Court of Appeals' decision, no valid substitution
transpired in the present case.
21

Thus, we rule that the proceedings and judgment of the trial court
are void as to Felicidad, Glicerio, Jr., Bener and Julito. There is no
iota of proof that they were apprised of the litigation against
Glicerio. There is no indication that they authorized Atty. Pardalis to
represent them or any showing that they appeared in the
proceedings. Given these facts, the trial court clearly did not acquire
jurisdiction over their persons. Such being the case, these heirs
cannot be bound by the judgment of the trial court, as we have
pronounced in Ferreria, et al. v. Vda. de Gonzales, et al.,
22
thus
"Inasmuch as Manolita Gonzales was never validly served a copy of
the order granting the substitution and that furthermore, a valid
substitution was never effected, consequently, the court never
acquired jurisdiction over Manolita Gonzales for the purpose of
making her a party to the case and making the decision binding
upon her, either personally or as legal representative of the estate
of her mother Manuela."
However, despite the trial court's failure to adhere to the rule on
substitution of a deceased party, its judgment remains valid and
binding on the following heirs, namely, Salvador, Concepcion and
Ernesto. Formal substitution of heirs is not necessary when the heirs
themselves voluntarily appeared, shared in the case and presented
evidence in defense of deceased defendant.
23
This is precisely
because, despite the court's non-compliance with the rule on
substitution, the heirs' right to due process was obviously not
impaired.
24
In other words, the purpose of the rule on substitution
of a deceased party was already achieved. The following facts
indicate plainly that there was active participation of these heirs in
the defense of Glicerio after his death.
First, Salvador and Concepcion were among the original defendants
in the case. Needless to state, the trial court, even before Glicerio's
death, already acquired jurisdiction over the persons of these heirs.
Hence, the rule on substitution of a deceased party is no longer
required as to Salvador and Concepcion because they were already
impleaded as defendants. In fact, Salvador, a lawyer son of Glicerio,
was also one of the counsels for defendants.
Second, the lengthy testimonies of Salvador, Concepcion and
Ernesto show that they defended their deceased father. Both
Concepcion and Salvador testified in defense not only of themselves
but also of their deceased father. As to Ernesto, while he was
dropped as a defendant, he testified and admitted that he was one
of the substitutes of Glicerio, thus
"INTERPRETER: Please state your name and other personal
circumstances.
WITNESS: ERNESTO BRIOSO, 45 years old, widower, farmer
and residing at Puro-Batia, Libmanan, Camarines Sur.
INTERPRETER: Your witness is now ready.
ATTY. PARDALIS: With the permission of the Honorable
Court.
COURT: Proceed.
Q: Are you one of the defendants in this case who was
substituted for the late Glicerio R. Brioso?
A: Yes sir.
xxx xxx xxx"
25

This shows that Ernesto understood that he was a substitute
defendant in the case.
Third, Atty. Pardalis continued to represent Glicerio even after the
latter's demise. Acting on Glicerio's behalf, Atty. Pardalis presented
the testimonies of Salvador, Concepcion and Ernesto, to prove,
among others, that Glicerio no longer had any interest in the
Properties. These pieces of evidence clearly negate petitioners'
contention that Atty. Pardalis ceased to be Glicerio's counsel upon
the latter's death.
Assuming that Atty. Pardalis no longer represented Glicerio after his
death, he remained as counsel for Salvador, Concepcion and
Marcos. He should have questioned immediately the validity of the
proceedings absent any formal substitution of Glicerio. Yet, despite
the court's alleged lack of jurisdiction over the persons of his clients,
Atty. Pardalis never bothered to challenge the same, not until after
the trial court rendered its adverse decision.
Lastly, Atty. Pardalis received a copy of respondents' motion for
substitution and the trial court's Order admitting the motion. Upon
receipt of the motion and the Order, Atty. Pardalis should have
immediately opposed the same for failure to comply with the rule
on substitution. However, Atty. Pardalis did not question the motion
and the Order, not until after the trial court rendered its decision.
His long silence, which certainly binds his clients, can be construed

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as defendants' submission to the court's jurisdiction. The
acquiescence of defendants and their counsel on the trial court's
jurisdiction effectively precluded them from questioning the
proceedings in the trial court.
In Ferreria et al. v. Vda. de Gonzales, et al.,
26
Manolita Gonzales (one
of the heirs of deceased defendant) was not served notice and,
more importantly, never appeared in court, unlike Salvador,
Concepcion and Ernesto who appeared and even testified regarding
their father's interest in the Properties. In sum, with the active
participation of Salvador, Concepcion and Ernesto, the trial court
acquired jurisdiction over their persons. Accordingly, the
proceedings and the decision of the trial court are valid with respect
to these heirs.
As regards Marcos Nolasco, he was impleaded as a defendant
primarily because he and Concepcion were among the actual
possessors of the Properties. It was even defendants' contention
that the complaint was defective for failure to implead Marcos as he
was an indispensable party.
27
Accordingly, the Spouses Mariano
impleaded Marcos as a defendant, without whom no final
determination can be had of the action.
28
With Marcos' inclusion as
a party, it is beyond dispute that the trial court acquired jurisdiction
over his person. Therefore, the proceedings and judgment of the
trial court are valid and binding upon Marcos.
WHEREFORE, the instant petition is partly GRANTED. The Decision
of the Court of Appeals dated September 2, 1997 is MODIFIED. As to
Bener Brioso, Julito Brioso and Glicerio Brioso, Jr., the Decision of
the Regional Trial Court, Branch 29, Libmanan, Camarines Sur, is void
for lack of jurisdiction. As to Felicidad Brioso, Concepcion B. Nolasco,
Marcos Nolasco, Salvador Brioso and Ernesto Brioso, the Decision of
the Regional Trial Court, Branch 29, Libmanan, Camarines Sur, is
valid.
SO ORDERED.


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G.R. No. 106795 November 16, 1999
STATE INVESTMENT HOUSE, INC., petitioner,
vs.
COURT OF APPEALS and ALLIED BANKING CORPORATION,
respondents.

GONZAGA-REYES, J.:
Petitioner State Investment House, Inc. ("SIHI") appeals from the
Decision dated June 11, 1992 and the Resolution dated August 21,
1992 rendered by the Court of Appeals in CA-G.R. SP No. 27142
entitled "Allied Banking Corp. vs. Hon. Martin S. Villarama, Jr., et al."
SIHI is the plaintiff in Civil Case No. 59449 entitled "State Investment
House, Inc. vs. Cheng Ban Yek Co., Inc. et al.", an action for
foreclosure of mortgage.
The antecedents are recited in the questioned decision as follows:
(1) Defendant CBY is a domestic corporation
engaged in the business of manufacturing edible
oil bearing the brand "Baguio Oil", and in the
conduct of its business, it has incurred millions of
pesos of obligations with plaintiff SIHI and many
other creditors, including defendant Allied
Banking Corporation (ALLIED for short) who is
the creditor of SIHI in the principal amount of
P10 million, exclusive of interests, service
charges, penalties, and attorney's fees.
(2) On December 28, 1982, defendant CBY,
plaintiff SIHI, and other creditors of CBY entered
into an Agreement for the restructuring of CBY's
existing obligations to its creditors, but excluding
defendant ALLIED and several other creditors
who did not sign said Agreement (pp. 72-72,
Rollo).
(3) To secure the prompt and full payment of all
amounts owed by CBY to its creditors who
participated in said Agreement and as required
thereunder, the parties thereto executed a
Mortgage Indenture dated December 28, 1982
with CBY and FOUR SEAS as Mortgagors and SIHI
and 15 other creditors of CBY as mortgagees
involving 23 parcels of registered lands and the
improvements therein (pp. 17-19, id.), which
Mortgage Indenture was subsequently modified
several times (pp. 19-20, id.). Moreover, as
additional security to said Agreement, the
parties also agreed that the Existing
Comprehensive Surety Agreement previously
executed by defendant Alfredo Ching would
continue to subsist and that he would remain
jointly and severally liable with CBY for the
payment of the amounts owed by the latter to
the creditors who were parties to the aforesaid
Agreement (p. 20, id.).
(4) On June 28, 1986, CBY defaulted in the
payment of its obligations, and in a letter dated
August 8, 1988, the CBY Creditors' Committee,
pursuant to the aforesaid Agreement and
Mortgage Indenture, declared all of CBY's
obligations due and payable (p. 24, id.). This
letter was followed by a letter dated August 9,
1989 of plaintiff SIHI likewise declaring all of
CBY's particular obligations to it immediately due
and payable (id.). Then on April 16, 1990, SIHI
notified the Creditors' Committee of CBY that it
would institute proceedings for the enforcement
of the remedies granted under the Mortgage
Indenture earlier mentioned, and in a resolution
dated April 20, 1990, said Creditors' Committee
authorized SIHI to institute the appropriate
foreclosure proceedings provided that the
proceeds of the foreclosure sale would be
distributed and applied to all of CBY's obligations
under the terms of the Agreement previously
mentioned (p. 25, id.).
(5) Hence, plaintiff SIHI filed on May 10, 1990,
C.C. No. 59559 with the respondent court
against CBY, FOUR SEAS, and Alfredo Ching, and
impleading twenty-two (22) other creditors of
CBY including herein petitioner ALLIED, allegedly
because they hold inferior or subordinate
mortgage rights to the properties sought to be
foreclosed (pp. 8-28, id.).
(6) On January 31, 1991, defendant ALLIED filed
its Answer to the complaint, denying that its
interests in the mortgaged properties in
question are subordinate in right to that of
plaintiff SIHI; alleging that it was not a party to
the Agreement attached to the complaint as
Annex "B" and, therefore, not bound by its
provisions; likewise denying that it was a party to
the Fourth Amendatory Agreement also
attached to the complaint as its Annex "S" which
it claimed "was never valid, binding and effective
for lack of consent on the part of the other
creditors as shown by the fact that they did not
sign the same"; claiming that defendant CBY
owes it the principal amount P10 million,
exclusive of interest, service charges, penalties,
and attorneys fees; alleging that as defendant
CBY's biggest, single, creditor, plaintiff SIHI "was
able to work its way and secure for its
representatives/nominees/designees key
positions in defendant CBY, including but not
limited to seats with full voting rights in
defendant CBY's Board of Directors, Executive
Committee, and Creditors' Committee, and that
in taking control and management of CBY's
operations, it "committed irregularities, abuses
excesses, and other acts inimical to defendant
CBY draining its resources and driving the latter
to the financial quagmire it now faces, to the
prejudice of herein defendant creditors", as a
consequence of which acts, CBY allegedly
suffered losses of not less than P50 million or
such amount as may be proved at the trial,

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which losses it claims represent assets of CBY
answerable to its creditors other than plaintiff
SIHI; and that plaintiff should be held liable for
such losses, as well as for defendant ALLIED's
moral damages and attorney's fees which it
alleged in its counterclaim (pp. 29-33, id.).
Defendant ALLIED thus prayed for the dismissal
of the complaint or, in the alternative, for
plaintiff to be ordered to pay CBY's creditors
including ALLIED the amount of P50 million to be
deducted from the proceeds of the foreclosure
sale of the mortgaged properties in question to
be distributed among CBY's creditors, and that
plaintiff be also ordered to pay ALLIED moral
damages and attorney's fees (29-34, id.).
(7) However, on January 31, 1991, plaintiff SIHI,
for the consideration of P33 million, entered into
a Deed of Assignment with FIL-NIPPON
transferring to the latter all its rights, interests,
claims, and causes of action arising out of the
Agreement mentioned in and annexed to its
complaint in C. C. No. 59449 and certain
promissory notes and mortgages contracts upon
which said civil case was brought, and in which
Deed of Assignment FIL-NIPPON also agreed to
assume all the obligations of SIHI as party-
plaintiff in said civil case (pp. 40-44, 64, id.).
(8) Thereafter, FIL-NIPPON filed in C. C. No.
59449 on April 16, 1991 a "Motion for
Substitution of Party Plaintiff" in lieu of plaintiff
SIHI (pp. 35-39, id.), which motion was opposed
by defendant ALLIED on the grounds that it has a
counterclaim against SIHI arising from
irregularities, excesses, abuses and inimical acts
committed by it in managing defendant CBY;
that as long as said counterclaim has not been
finally resolved, the substitution of plaintiff SIHI
would be improper; and that if at all, FIL-NIPPON
can intervene and be a co-plaintiff in C. C. No.
59449 (pp. 45-46, id.).
(9) On July 4, 1991, the respondent court, finding
no legal basis for the objections of ALLIED and
another defendant, Producers Bank of the
Philippines, to the motion for substitution of
movant Fil-NIPPON for plaintiff SIHI, granted the
motion for substitution (p. 8, id.). and when
defendant ALLIED moved for a reconsideration
of said order, it denied the motion for
reconsideration on August 22, 1991 (p. 9, id.)."
1

Allied Banking Corp. ("Allied") filed a petition for certiorari in the
Court of Appeals assailing the above mentioned orders of the
Regional Trial Court granting Fil-Nippon's motion for substitution of
SIHI as plaintiff in Civil Case No. 59449.
The Court of Appeals granted the petition and ordered SIHI to
continue as plaintiff. The dispositive portion of the decision, now
assailed in the instant petition, reads:
WHEREFORE, the instant petition is GRANTED;
the respondent court's orders of July 4, 1991 and
August 22, 1991 are hereby SET ASIDE; and
herein private respondent State Investment
House, Inc. (SIHI) shall continue to be the
plaintiff in C. C. No. 59449 before the
respondent court, with the other private
respondent herein Fil-Nippon Holdings, Inc. (FIL-
NIPPON) ordered impleaded therein as co-
plaintiff.
2

In this petition for review on certiorari, SIHI submits the following
grounds:
(1)
THE CA ERRED IN FINDING THAT ALLIED'S
PERMISSIVE COUNTERCLAIMS CREATE A
DEBTOR-CREDITOR RELATIONSHIP BETWEEN SIHI
AND ALLIED; ALLIED IS NOT SIHI'S CREDITOR.
(2)
THE CA ERRED IN FINDING THAT A WITNESS
WHO MAY BE CALLED TO TESTIFY HAS A
MATERIAL INTEREST IN CASE AS TO MAKE HIM A
PARTY-LITIGANT.
(3)
THE CA ERRED IN NOT FINDING THAT
SUBSTITUTION OF A PARTY-PLAINTIFF PENDENTE
LITE IS ALLOWED AND IS LARGELY A MATTER OF
DISCRETION; THE LOWER COURT DID NOT
COMMIT ARBITRARINESS OR GRAVE ABUSE OF
DISCRETION IN ALLOWING THE SUBSTITUTION.
3

We find no merit in the petition.
The issue is whether respondent court erred in ruling that the
substitution of SIHI by its assignee Fil-Nippon in C. C. No. 59449 is
improper.
Respondent court ruled that even without substitution Fil-Nippon,
as assignee of all of SIHI's rights, interests claims and causes of
action arising out of the Agreement, would be bound by any
judgment for or against SIHI. Moreover, Allied had a counterclaim
for damages against SIHI of not less than P50 million allegedly
caused by SIHI's taking over the control and management of
defendant CBY (Cheng Ban Yek Co. Inc.) through its men which it had
put in key positions in the latter's Board of Directors, Executive
Committee and Creditors Committee, and who allegedly committed
gross mismanagement, nepotism, irregularities, abuses, excesses
and other acts inimical to CBY which drained the latter's resources
and drove it to the financial quagmire that now faces it to the
prejudice of all its creditors. Such acts of SIHI do not arise out of the
foreclosure of mortgage which is the subject of C. C. No. 59449 but
constitute a permissive counterclaim. Moreover, SIHI had no choice
but to actively participate in C. C. No. 59449 in order to defend its
assignee Fil-Nippon against Allied's permissive counterclaim. Finally,
Fil-Nippon cannot be substituted as debtor under said counterclaim
without its consent in view of Article 1293 of the Civil Code which

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provides that novation which consists in substituting a new debtor in
the place of the original one cannot be made without the consent of
the creditor.
It is petitioner's position, in defending the substitution of parties
ordered by the trial court, that Allied is not SIHI's creditor; what
Allied admitted is that it is a creditor of CBY for P10 million. Equally
important is that Allied's permissive counterclaim for damages does
not make SIHI a debtor/obligor of Allied, as a counterclaim is not a
source of obligation until a judgment is issued upholding it.
Petitioner also submits that even assuming that SIHI, or its officers
or employees, can be compelled to be witnesses regarding Allied's
permissive counterclaim, the same does not justify the retention of
SIHI as party plaintiff below. In fine, petitioner SIHI contends that the
trial court did not commit grave abuse of discretion in allowing the
substitution of parties that should be corrected by certiorari.
On the other hand, respondent Allied submits that the substitution
was improper; for as long as the counterclaim is not finally resolved,
the substitution of party plaintiff despite the objection of private
respondent and which may result in the discharge of the petitioner
as original plaintiff, would be improper. If at all, Fil-Nippon can
intervene in the case below and be co-plaintiff with SIHI. Allied also
points out that the counterclaim for damages is based on quasi-
delict, which is a legal source of obligation.
The rule on substitution of parties in case of transfer of interest is
found in Section 19, Rule 3, which states:
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.
It has been held that a transferee pendente lite does not have to be
included or impleaded by name in order to be bound by the
judgment because the action or suit may be continued for or against
the original party or the transferor and still be binding on the
transferee.
4

More specifically , this Court has ruled that a transferee pendente
lite is a proper party in the case but it is not an indispensable party.
5

Respondent court did not err in ruling that SIHI should continue to
be the plaintiff, and Fil-Nippon should be impleaded as co-plaintiff.
The order of the trial court authorizing the substitution of parties
failed to take into account the fact that there is a counterclaim for
damages contained in Allied Bank's Answer arising from the alleged
inimical acts committed by SIHI in manipulating the operations of
CBY that drained the latter's resources to the prejudice of its
creditors. The counterclaim for damages is severable and
independent of SIHI's cause of action under the Agreement dated
December 28, 1982 entered into by SIHI, CBY and other creditors of
CBY for the restructuring of CBY's existing obligations. As aptly ruled
by the Court of Appeals, the alleged acts of SIHI that gave rise to the
complaint (counterclaim) for damages do not arise out of the
foreclosure of mortgage which is the subject of C. C. No. 59449. Thus

Upon the other hand, if the substitution of party-
plaintiff sought by FIL-NIPPON is granted, what
would happen to petitioner ALLIED's claim for
damages of not less than P50 million in its
answer allegedly caused by plaintiff SIHI's taking
over the control and management of defendant
CBY's through its men which it had put in key
positions in the latter's Board of Directors,
Executive Committee, and Creditors' Committee,
and who allegedly committed gross
mismanagement, nepotism, irregularities,
abuses, excesses and other acts inimical to
defendant CBY which drained its resources and
drove it to the financial quagmire that its faces
at present, to the prejudice of all its creditors?
Can petitioner ALLIED still prove and recover
these damages against FIL-NIPPON if the latter is
substituted as party-plaintiff in C. C. No. 59449?
We do not think so, for the subject-matter of the
Deed of Assignment between plaintiff SIHI and
FIL-NIPPON (see pp. 40-44, 64, Rollo) are certain
credits, rights, claims and interests which SIHI
has against the principal defendants CBY, FOUR
SEAS, and Alfredo Ching in C. C. No. 59449, and
its SIHI's right to foreclose certain mortgages in
favor of SIHI and other creditors of CBY arising
out of the agreement between CBY and its
creditors, including SIHI, attached to the
complaint in C. C. No. 59449. True that SIHI's
assignee FIL-NIPPON also assumed all the risks
attendant to said civil case and agreed not to
have any recourse or claim against SIHI
regardless of the outcome of said case or if it is
prevented for any reason from foreclosing the
properties subject-matter of the case, but such
assumption of risk clearly does not include
liability for the purely personal acts of abuses,
irregularities, nepotism, etc. which petitioner
ALLIED charged plaintiff SIHI to have committed
while managing and taking over the control of
the business of defendant CBY which acts do not
arise out of the foreclosure of mortgage which is
the subject-matter of C. C. No. 59449, but which
constitute, as even private respondent FIL-
NIPPON admitted in its Comment to the instant
petition, a permissive counterclaim in said civil
case (p. 61, Rollo). Respondent FIL-NIPPON,
impliedly recognizing that it cannot be liable for
said alleged acts of SIHI, even suggests that after
plaintiff SIHI is dropped from C. C. No. 59449,
petitioner ALLIED can bring original plaintiff SIHI
back into said case by filing a third-party
complaint against the latter. But why should
petitioner ALLIED resort to such a run-about
process to hold SIHI liable for the
aforementioned alleged personal acts of
mismanagement and abuses while in the control
of defendant CBY, when it has already claimed
the damages supposedly arising from said acts in
a permissive counterclaim in its answer to SIHI's
complaint and the Rules allow it to do so?
6

Thus, although Fil-Nippon became an assignee of all of SIHI's rights,
interests, claims, and causes of action arising out of the Agreement,

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the counterclaim for actual and moral damages and attorney's fees
filed by Allied Bank was in no way contemplated in the assignment.
It was accordingly error to discharge SIHI as original plaintiff from
the case.
The Court of Appeals also correctly pointed out that Fil-Nippon could
not be substituted as debtor of Allied with respect to the
counterclaim for damages without the latter's consent; thus:
But there is yet still another reason why the
respondent court should not have allowed the
substitution of plaintiff SIHI's assignee Fil-Nippon
as party-plaintiff in C. C. No. 59449, and it is
petitioner ALLIED's contention, which we find
valid and tenable, that plaintiff SIHI is its
debtor/obligor as far as its permissive
counterclaim for damages in its answer is
concerned, and that FIL-NIPPON cannot be
substituted as its debtor under said counterclaim
without its consent, in view of Art. 1293 of the
Civil Code of the Philippines providing
that
Novation which consists in
substituting a new debtor in
the place of the original one,
may be made even without
the knowledge or against the
will of the latter but not
without the consent of the
creditor. . . ." (Emphasis ours)
Private respondent SIHI answers this argument
in its Comment to the instant petition by saying
that the above-quoted article finds no
application to this case because Sec. 17.7 of the
Agreement which it and its creditors had
executed expressly allows the assignment which
it had made in favor of FIL-NIPPON (p. 67, Rollo).
But as pointed out by petitioner ALLIED in its
Reply to SIHI's aforesaid Comment, it was not a
party to the Agreement in question as shown by
the fact that it never signed the same (see p. 82,
Rollo); hence, it is not bound by said Agreement
including the provision therein allowing the
parties to assign their respective rights
thereunder.
7

As stated earlier, Fil-Nippon, as transferee of SIHI's interests
pendente lite, is not even an indispensable party in the case.
It bears emphasis that Allied claims to be not a party to the
Agreement dated December 28, 1982 and therefore not bound by it.
Even assuming that Fil-Nippon agreed to assume all the obligations
of SIHI in the case and not only those arising under the said
Agreement, the assignment cannot bind or prejudice Allied who did
not consent to the assignment. It was improvident for the trial court
to discharge SIHI on the basis alone of the transfer of its interests
under the Agreement to Fil-Nippon. The counterclaim for actual,
moral and other damages should be pursued and enforced against
the real party-in-interest, which is SIHI, which cannot be discharged
from the case over the opposition of Allied.
WHEREFORE, there being no reversible error in the decision and
resolution appealed from, the instant petition is denied.
No pronouncement as to costs.
SO ORDERED.


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G.R. No. 79760 June 28, 1993
PERPETUAL SAVINGS BANK, HON. JOSE L. COSCOLLUELA, Presiding
Judge, Regional Trial Court, NCJR, Branch 146, petitioners,
vs.
JOSE ORO B. FAJARDO and EMMANUEL F. DEL MUNDO,
respondents.
Yngson & Associates for petitioner.
Cruz, Enverga, Fajardo & Del Mundo for respondents.

FELICIANO, J.:
On 29 December 1982, J.J. Mining and Exploration Corporation ("J.J.
Mining") executed and delivered to petitioner Perpetual Savings
Bank ("Bank") a promissory note in the amount, of P750,000.00
payable in one lump sum upon maturity on 29 January 1984, with
interest at 23% per annum. The note also contained, inter alia, a
clause providing for penalty interest at the rate of 3% per month on
the amount due, compounded monthly. The promissory note was
executed for J.J. Mining by respondents Jose Oro B. Fajardo and
Emmanuel F. Del Mundo. Messrs. Fajardo and Del Mundo are said to
be officers of J.J. Mining; respondent Del Mundo was apparently also
counsel for J.J. Mining.
1

Upon maturity of the promissory note, neither J.J. Mining nor
anyone else paid the amount of the indebtedness, notwithstanding
petitioner's repeated written demands for payment.
On 31 July 1986, petitioner Bank filed a complaint with the Regional
Trial Court, Makati, Metro Manila (Civil Case No. 14501) against J.J.
Mining, Jose Emmanuel Jalandoni and herein respondents Fajardo
and Del Mundo, for collection of the amounts due under the
promissory note. In its complaint petitioner Bank alleged, among
other things, the following:
1.6. Defendants Fajardo and Del Mundo are
impleaded herein as agents/or representatives
of Defendant Corporation who were signatories
in the Promissory Note or alternatively, in their
personal capacities if it be shown that they
contracted the loan fully knowing that the
Defendant Corporation would be unable to pay
the same upon maturity and/or that they used
the proceeds of the loan for their own personal
benefit;
1.7. Defendant Jose Jalandoni is impleaded
herein in his personal capacity also as alternative
Defendant, as the owner of 94% of the
subscribed capital stock Defendant Corporation
if it be shown that the corporate privilege of
Defendant Corporation was used by Defendant
Jalandoni to secure the loan and the proceeds
thereof for his own personal benefit fully
knowing that the Defendant Corporation was
with inadequate capital to meet its debts and
thereby evade the obligation under the
Promissory Note.
xxx xxx xxx
2.1. On 29 December 1982, Defendant
Corporation for value received thru Defendants
Fajardo and Del Mundo, executed and delivered
to Plaintiff a Promissory Note in the sum of
Seven Hundred Fifty Thousand Pesos
(P750,000.00) payable in lumpsum upon
maturity, thereof on 29 January 1984 with
interest at 23% per annum from the date
thereof;
2.2. Upon maturity of the Promissory Note,
Defendants defaulted and failed to satisfy the
entire amount of indebtedness.
xxx xxx xxx
3.1. Per the records of the Securities & Exchange
Commission, the paid-up capital of Defendant
Corporation amounts to only P100,000.00,
broken down as follows:
Name and Address Amount
Amount
of Stockholders Subsribed
Paid
1. Jose Emmanuel Jalandoni P368,000.00
P92,000.00
44 San Mateo
Bo. Capitolyo
Pasig, Rizal
2. Maria Theresa Jalandoni 8,000.00 2,000.00
44 San Mateo
Bo. Capitolyo,
Pasig, Rizal
3. Florentino Ampil 8,000.00 2,000.00
Bian, Laguna
4. Rafael Hocson 8,000.00 2,000.00
Bian, Laguna
5. Tranquilino Mendiola 8,000.00 2,000.00
Mandaluyong, Rizal
P400,000.00 P100,000.00
(Copy of the Articles of Incorporation of
Defendant Corporation is herewith attached as
Annex "E" and made an integral part hereof.)
3.2. Pursuant to such records, Defendant
Jalandoni and his spouse Maria Theresa
Jalandoni own 94 % of the total shares of stock
of Defendant Corporation giving them total
control of the corporation;

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3.3. Despite the fact that the paid up capital of
Defendant Corporation was only P100,000.00 it
managed to borrow P750,000.00 from Plaintiff
Bank secured only by shares of stocks of Pamana
Mining Corp. also owned by Defendant
Jalandoni. (Copy of Pledge of Shares of Stock is
herewith attached as ANNEX "F" and made an
integral part hereof.)
xxx xxx xxx
Respondents Fajardo and Del Mundo filed a Motion to Dismiss on
the ground that the complaint had failed to state a cause of action
against them. Petitioner Bank filed an Opposition to the Motion to
Dismiss, citing paragraph 1.6 of its complaint and invoking, among
other things, Section 13, Rule 3 of the Rules of Court, provides that:
Alternative defendants. Where the plaintiff is
uncertain against which of several persons he is
entitled to relief, he may join any or all of them
as defendants in the alternative, although aright
to relief against one may be inconsistent with a
right to relief against the other.
Respondents in turn filed a Reply to petitioner Bank's Opposition.
The Regional Trial Court then resolved respondents' Motion to
Dismiss by issuing an Order dated 9 October 1986 denying that
Motion "considering that the grounds raised by [respondents]
Emmanuel F. Del Mundo and Jose V. Fajardo in their motion to
dismiss are not indubitable."
2

Respondents Del Mundo and Fajardo moved for reconsideration of
the trial court's Order. After additional pleadings and counter-
pleadings, the trial court denied the Motion for Reconsideration.
Respondents Fajardo and Del Mundo then went directly to this
Court on Petition for Certiorari (G.R. No. 77100, entitled "Jose Oro B.
Fajardo and Emmanuel E. Del Mundo v. Hon. Jose Coscolluela, etc.,
et al."). On 23 February 1987, however, this Court resolved to refer
the case to the Court of Appeals.
Before the Court of Appeals, respondents Fajardo and Del Mundo
basically alleged that petitioner Bank's complaint did not set forth
any cause of action as against them personally, and that Section 13,
Rule 3 of the Rules of Court on alternative defendants was not
applicable to the case at bar. On 25 August 1987, the Court of
Appeals rendered a Decision which granted respondents' Petition
and reversed and set aside the trial court's Orders which had denied
respondents' Motion to Dismiss and Motion for Reconsideration,
and dismissed petitioner Bank's complaint in Civil Case No. 14501.
In the present Petition for Review on Certiorari brought by the Bank
now represented by a Liquidator, the parties have raised the
following issues for our consideration:
1. Did the complaint filed in Civil Case No. 14501
state a cause of action against respondents
Fajardo and Del Mundo, as distinguished from
J.J. Mining, on whose behalf they had purported
to act?
2. Is the rule on alternative defendants set out in
Section 13, Rule 3 of the Rules of Court
applicable to the case at bar?
These two (2) issues are obviously related one to the other and need
to be addressed together.
Paragraph 1.6 of petitioner Bank's complaint is quoted again in full
for convenience:
1.6 Defendants Fajardo and Del Mundo are impleaded herein as
signatories in the Promissory Note or alternatively, in their personal
capacities if it be shown that they contracted the loan fully knowing
that the Defendant Corporation would be unable to pay the same
upon maturity, and/or that they used the proceeds of the loan for
their own personal benefit.
xxx xxx xxx
(Emphasis supplied)
Examination of paragraph 1.6 shows that petitioner Bank there
seeks to distinguish between (a) respondents Fajardo and Del
Mundo in their capacity as "agents and/or representative of" J.J.
Mining; and (b) respondents Fajardo and Del Mundo in their
individual and personal capacities. As noted earlier, the text of the
promissory note shows that respondents Fajardo and Del Mundo
had signed for and in behalf of J.J. Mining.
If it be assumed that respondents Fajardo and Del Mundo were
properly authorized, and acted within the scope of their authority, to
sign for and in behalf of J.J. Mining when the latter borrowed
P750,000 from petitioner Bank and signed the promissory note in
that connection, then it is J.J. Mining as maker of the note which is
directly liable to petitioner Bank for repayment of such loan, and not
Messrs. Fajardo and Del Mundo who merely acted for J.J. Mining in
that transaction.
3
This follows from the elementary proposition that
J.J. Mining, the borrowing corporation, has a personality separate
and distinct from the persons who have been duly authorized to
represent the corporation in that particular transaction.
If it be assumed, upon other hand, that when Fajardo and Del
Mundo purported to act for and in behalf of J.J. Mining in executing
the promissory note here involved, were either not authorized at all
to do so or somehow acted in excess of their authority as agents or
representatives of J.J. Mining, then in principle Fajardo and Del
Mundo would be personally liable upon the promisorry note, instead
of the borrower corporation.
4
J.J. Mining as a separate juridical
person would not be so liable, unless it be shown that J.J. Mining
actually received all or part of the proceeds of the loan and
(presumably) benefited from such loan proceeds, and to that extent,
had impliedly ratified the transaction.
5

Respondents Fajardo and Del Mundo were, in the same complaint,
and in the alternative, sued in their personal and individual
capacities. In this respect, the complaint alleges two (2)
distinguishable bases for sustaining the suit. Firstly, Fajardo and Del
Mundo are being sued as tort-feasors who contracted the loan
although they allegedly knew that the apparent principal obligor, J.J.
Mining, would never be able to pay the loan upon maturity. The
cause of action here is basically fraudulent inducement,

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concealment or misrepresentation exercised upon petitioner Bank
which was misled into granting and releasing the loan.
6
The second
basis for suing Fajardo and Del Mundo in their personal and
individual capacities is that they allegedly used the proceeds of the
loan for their own personal benefit, rather than for the benefit of
the borrower corporation.
7
In respect of these twin, related, bases
for personal liability to the creditor, the Bank stated in paragraph 2.1
of its complaint that J.J. Mining had "received value" "thru
[respondents] Fajardo and Del Mundo." Thus, the Bank has alleged
that the proceeds of the loan were delivered to the borrower
corporation by delivering them to respondents Fajardo and Del
Mundo. The Bank has also stressed, in paragraph 3.1 of its
complaint, that the paid-up capital of the borrower corporation, was
only P100,000.00 which, according to petitioner Bank, was obviously
disproportionately small compared to the P750,000.00 borrowed
from the Bank.
Analysis of the allegations of the petitioner Bank's complaint thus
shows, firstly, that the defendants who are being sued in the
alternative are the following:
(a) the borrowing corporation, J.J. Mining; and
(b) respondents Fajardo and Del Mundo in their
personal and individual capacities,
and, secondly, that two (2) alternative but related grounds for
holding Fajardo and Del Mundo responsible to petitioner Bank,
personally and individually, have been pleaded by the Bank. There is,
as previously noted, a third possible basis for seeking to hold Fajardo
and Del Mundo liable in their personal capacities: that they acted
without or in excess of their authority as agents or representatives
of the borrower corporation. This third basis, however, was not
explicitly set out by the Bank in its complaint. The complaint did not
directly allege that respondents Fajardo and Del Mundo had acted
without or in excess of their authority as agents and representatives
of J.J. Mining, in executing the Promissory Note for J.J. Mining and
receiving the proceeds thereof. However, such an allegation may be
said to have been implicitly made along with the allegation that
respondents had knowingly induced petitioner to grant the loan
though J.J. Mining had no capacity to pay, or with the allegation that
respondents had converted the loan proceeds to their personal
benefit.
The familiar test for determining whether a complaint did or did not
state a cause of action against the defendants is whether or not,
admitting hypothetically the truth of the allegations of fact made in
the complaint, a judge may validly grant the relief demanded in the
complaint. In Rava Development Corporation v. Court of Appeals,
8

the Court elaborated on this established standard in the following
manner:
The rule is that a defendant moving to dismiss a
complaint on the ground of lack of cause of
action is regarded as having hypothetically
admitted all the averments thereof. The test of
the sufficiency of the facts found in a petition as
constituting a cause of action is whether or not,
admitting the facts alleged, the court can render
a valid judgment upon the same in accordance
with the prayer thereof (Consolidated Bank and
Trust Corp. v. Court of Appeals, 197 SCRA 663
[1991]).
In determining the existence of a cause of action,
only the statements in the complaint may
properly be considered. It is error for the court to
take cognizance of external facts or hold
preliminary hearings to determine their
existence. If the allegation in a complaint furnish
sufficient basis by which the complaint may be
maintained, the same should not be dismissed
regardless of the defenses that may be assessed
by the defendants (supra).
A careful review of the records of this case
reveals that the allegations set forth in the
complaint sufficiently establish a cause of action.
The following are the requisites for the existence
of a cause of action: (1) a right in favor of the
plaintiff by whatever means and under whatever
law it arises or is created; (2) an obligation on
the part of the named defendant to respect, or
not to violate such right; and (3) an act or
omission on the part of the said defendants
constituting a violation of the plaintiff's right or a
breach of the obligation of the defendant to the
plaintiff (Heirs of Ildefonso Coscolluela, Sr., Inc.
v. Rico General Insurance Corporation, 179 SCRA
511 [1989])."
9
(Emphasis supplied)
In its Decision, the Court of Appeals said, among other things, that
petitioner Bank's complaint did not state a cause of action against
respondents Fajardo and Del Mundo in their personal and individual
capacities for the reason that no evidence had been presented to
support such alleged liability on the "so called alternative cause of
action." The Court of Appeals said:
Petitioners' participation, if any, in the execution
of the promissory note in question, is that
merely of agents and/or representatives of
defendant corporation. Their alleged liability in
the so-called alternative cause of action is
predicted on hearsay and/or third-hand
information. According to private respondent,
herein petitioners "must have known" the capital
structure of the corporation and therefore, they
are guilty of fraud because through false
representations they succeeded in inducing
plaintiff-respondent to grant or release the loan
with full knowledge on their part that defendant
corporation was in no position to comply with
the obligation it had assumed.
But what is the factual basis of private-
respondents allegations. Saved for its allegation
in its Opposition to defendants-petitioners
Motion to Dismiss that the latter "must have
known" the capital structure of the corporation
and its allegation in the complaint that "if it be
shown" that defendants-petitioners "contracted
the loan fully knowing that defendant
corporation would be unable to pay the same
upon maturity", there is no evidence on record
showing that defendants-petitioners had such a
knowledge of the financial incapacity of
defendant corporation to meet its financial

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obligations at its maturity. Private respondents'
allegation in the complaint are based on pure
speculations and fantasies and nothing more."
10

(Emphasis supplied)
We consider that the Court of Appeals here was in reversible error.
It was quite premature for the Court of Appeals to consider evidence
(or lack of evidence) outside the four corners of the complaint and
to reach the above conclusion, since the fraud consisting of false
representations has yet to be proved by petitioner Bank in the
course of the trial before the court a quo. By the same token,
respondents' innocence and non-utilization, or fraud and
conversion, of the loan proceeds for their private and personal
benefit are precisely defenses to be proved by respondents in the
course of the trial. Evidently, the Court of Appeals overlooked the
fact that the trial has yet to begin; for it assumed as real and
established the defenses which need to be proved during that trial.
Having examined the record here carefully, and while the complaint
filed in the trial court is not exactly a model of draftmanship, we
consider that it substantially meets the established test and that the
complaint does state cause(s) of action not only against the
borrower corporation, J.J. Mining, but also against respondents
Fajardo and Del Mundo in their personal and individual capacities.
Turning to the applicability of Section 13, Rule 3 of the Rules of
Court to the complaint in the case at bar, the Court observes that
the Court of Appeals found that Section not applicable to the
present case. The Court of Appeals said on this point:
Private respondent [petitioner Bank] also
invokes the rule on alternative defendants found
in Section 13, Rule 3 of the Revised Rules of
Court which state:
xxx xxx xxx
But private respondents was never "uncertain"
against which of several persons it is entitled to
relief. As shown in paragraph 2.1 of the
complaint which were previously cited, it was
dead sure, as night follows day, that the
"defendant corporation for value received thru"
petitioners, "executed and delivered to plaintiff
a promissory note" for the amount P750,000.00.
11

We believe that here, too, the Court of Appeals was in
error. Firstly, the state of mind of petitioner Bank
whether it was "uncertain" or whether it was "dead sure
as night follows day" against which of several defendants it
is entitled to relief is, of course, immaterial, except to
the extent that such state of minds is externalized by the
allegations of the complaint. Petitioner Bank, in paragraph
1.6 in relation to paragraphs 2.1 and 2.2 of its complaint,
had pleaded, with sufficient clarity, its claimed rights
against alternative defendants: the borrower corporation
and respondents Fajardo and Del Mundo. That the rights
pleaded against the borrower corporation are prima facie
inconsistent with the rights pleaded against respondents
Fajardo and Del Mundo, is also clear: either the borrower
corporation alone is liable; or respondents Fajardo and Del
Mundo are alone liable in lieu of J.J. Mining; or
respondents Fajardo and Del Mundo are solidarily liable
with J.J. Mining.
To bolster its position, petitioner Bank in its Memorandum filed with
this Court referred to certain additional circumstances which are, of
course, more properly alleged and proved before the trial court:
1. that, at the present, J.J. Mining is no longer a
going concern "its office and assets nowhere to
be found;" and
2. that J.J. Mining has outstanding obligations to
different banks which, like petitioner Bank, are
undergoing liquidation i.e., Admiral Savings
and Loan Bank; Development Bank of Rizal; and
petitioner Bank in the aggregate principal
amount (as of 1984) of P2,750,000.00; that in
the transactions with all three (3) banks, the
signatories of the promisorry notes were the two
(2) respondents in the case at bar, Messrs.
Fajardo and Del Mundo.
12

The essential thing is that petitioner Bank must be given an
opportunity to prove its allegations in all necessary detail at the trial
on the merits. There the respondents will have the opportunity to
controvert and refute petitioner's detailed assertions.
13

WHEREFORE, for all the foregoing, the Decision of the Court of
Appeals dated 25 August 1987 in C.A.-G.R. SP No. 11547 is hereby
REVERSED and SET ASIDE. The Orders of the trial court dated 9
October 1986 and 22 December 1986 in Civil Case No. 14501 are
hereby REINSTATED. This case is hereby REMANDED to the trial
court for further proceedings not inconsistent with this Decision.
Costs against respondents.
SO ORDERED.


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G.R. No. L-4958 March 30, 1954
MONICO PUENTEVELLA, JR., CARMEN GONZAGA, TEOFILO
GENSOLI, LUIS HERVIAS, ANTONIO P. CIOCON, ROSARIO GENSOLIN,
MARGARITA TULO, DOLORES TANPINCO, ANGELES JARDELEZA,
DOLORES ESTROLOGO, TOMAS JAMILE, and BENJAMIN A.
LEDESMA, plaintiffs-appellees,
vs.
FAR EASTERN AIR TRANSPORT, INC., PHILIPPINE AIR LINES, INC.,
and COMMERCIAL AIR LINES, INC., defendants, FAR EASTERN AIR
TRANSPORT, INC., and PHILIPPINE AIR LINES, INC., defendants-
appellants.
Pablo S. Rivera for appellees.
Daniel Me. Gomez, Ozaeta, Roxas, Lichauco and Picazo for
appellants.
LABRADOR, J.:
This action was instituted in the Court of First Instance of Occidental
Negros by the plaintiffs, who are owners of certain lands adjacent to
the City of Bacolod which the U.S. Army converted into an airfield,
known as the Bacolod City Airstrip No. 2, to recover from the
defendants the value of the use and occupation of said airfield by
them.
The lands in question were occupied by the U.S. Army around the
month of April, 1945. It constructed thereon, with or without the
consent of the owners, permanent improvements in the form of
runways for the landing and taking-off of planes, parking places
therefor, and approaches thereto. It afterwards enter into a contract
of lease with the owners, by virtue of which the United States
Government was given authority to use and occupy the lands in
question for the period from April 1, 1945, to October 15, 1945, at a
monthly rental of one-half centavo per square meter.
In the month of November, 1945, the defendant Far Eastern Air
Transport, Inc. (FEATI), began to use the said airstrip. Formal
authority for its use was extended by the U.S. Army on November
23, 1945 (Exhibit 5). When the FEATI began to use the airstrip, the
owner of the lands occupied by the airstrip objected to the Army
authorities (Exhibit A), and also appealed to the American High
Commissioner in the Philippines (Exhibit A-2), as well as the manager
of the FEATI (Exhibit A-4), for a clarification of the status of the
airstrip, but nothing was done in this respect. One of the owners
later learned that the U.S. Army continued occupying the airstrip,
and while no objection thereto was made, he did object to the use
of the airstrip by the Commonwealth Government (Exhibit 6). As
early as April 20, 1946, the Commonwealth Government, through
the Director of the Bureau of Aeronautics, had offered to lease the
lands covered by the airstrip at one-half centavo per square meter
per month (Exhibit 7), and it advised the plaintiffs that the
Commonwealth Government was under the obligation of furnishing
airway facilities and airports to all transportation companies and
that it was willing to deal with the owners for a lease of their
properties at the rate of one-half centavo per square meter per
month (Exhibit 12). In spite of the absence of any action on the offer
of lease, the Bureau of Aeronautics maintained and operated the
airstrip for the purpose of commercial operations from April, 1946
and had sufficient funds to pay for the lease of the lands included in
the airfield from March 1, 1946, to December 31, 1946 (Exhibit 14).
The owners, however, expressly states to the Bureau of Aeronautics
that while "they are willing to give the fullest cooperation to the
Republic insofar as the use by the Government of their properties, . .
. , they reserve to themselves the right of full enjoyment of
ownership and the fruits thereof, in their particular dealing with the
private air lines engaged in commercial aviation." (Exhibit 11).
This status of the occupation of the airstrip appears to be in a
nebulous state, although it can be clearly inferred from the various
documents presented at the trial that even after the termination of
the period of the lease signed by the U.S. Army, which lease was
originally to end in October, 1945, the U.S. Army continued
occupying the airstrip. On April 22, 1947, it was formally transferred
from the Foreign Liquidation Commission to the Surplus Property
Commission at the procurement cost of $116,760 (t.s.n., pp. 295-
296). The Surplus Property Commission adopted the policy of
retaining the Bacolod Airstrip No. 2, as the Bureau of Aeronautics
had requested it for the furtherance of civil aviation (Exhibit 1). In
this connection, it may be well to note that since July 31, 1946, the
Bureau of Aeronautics had advised the defendant Philippine Air
Lines that the Bacolod Airstrip had already been released by the U.S.
Army, and that the said Bureau was assuming the responsibility of
paying rentals for said strip (Exhibit 13). And on August 29, 1946, it
certified that all landing fields and airports in the Philippines,
including that of the City of Bacolod, are maintained and operated
by it and are available to all aircraft of Philippine registry, free of
landing charges, in line with the policy of the Government to
promote civil aviation (Exhibit 14).
The FEATI began using the airstrip in question in November, 1945,
the Philippine Air Lines on July 16, 1946, and the Commercial Air
Lines in January, 1947.
It can be gleaned from the pleadings and from the communications
coursed between the parties that the plaintiffs herein seek to make
the defendants directly responsible to them for the use of the
airstrip, irrespective of and notwithstanding the fact that the U.S.
Army, and subsequently the Bureau of Aeronautics of the
Commonwealth Government, actually occupied, maintained, and
operated the airways for the benefit of commercial aviation.
In the answer of the FEATI, it is alleged as special defense that the
Bacolod Airstrip has become an airport and landing field open and
available to all commercial aircraft by virtue of the provisions of law
and in accordance with the regulations issued by the Bureau of
Aeronautics. On the other hand, in its answer to the complaint, the
Philippine Air Lines alleged as special defense that the airstrip is
maintained by the Government of the Republic of the Philippines,
under the control and administration of the Director of the Bureau
of Aeronautics, and that the responsibility for the payment of rentals
to the owners rested on the bureau of Aeronautics. Three of the
issues that were tried in the court below are, as stated in the
decision, as follows:
1. Whether the defendant companies had legal authority
to use the properties in question on the alleged authority
of the Commanding General of the United States Air Force
in the Pacific, without the consent of the owners;
2. Whether the Bureau of Aeronautics may exempt the
defendant companies, for the use of the airstrip in
question, from paying compensation to the plaintiffs on
the ground that the said Bureau had the obligation under
the law of providing grounding facilities to the planes of

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the defendant companies, and that it is the responsibility
of that Bureau to make such payments;
3. Whether the defendants are directly responsible to the
plaintiffs for the use and enjoyment of their properties.
On the first issue the lower court held that the defendants did not
properly derive the authority to use the airstrip in question from the
United States Army of Liberation. On the second it held that the
obligations of the Bureau of Aeronautics to provide landing fields for
companies engaged in commercial aviation refers only to airstrip
legally acquired by the government and that since the Bureau of
Aeronautics recognized the plaintiffs as entitled to rentals, it is
stopped from alleging that it can dispose of these properties without
the consent of the owners. As to the third it held that as the acts of
the defendants are not justified in law, they are directly responsible
to the plaintiffs for the value of the use and enjoyment of the
properties in question.
One of the assignments of error made in this appeal is that the trial
court erred in not ordering the inclusion of the Philippine
Government (or the Bureau of Aeronautics) as an indispensable
party in the final determination of the issues raised by the
defendants. It will be noted that if this assignment of error is to be
sustained, judgment must be reversed, and it would be unnecessary
for us to consider all the other assignments of error raised in the
appeal.
The tendency or effect of the evidence submitted by the defendants,
which is not disputed by plaintiffs, is that they have the
authorization of the Bureau of Aeronautics to use the airfield in
question (Exhibits 5,7,9,10,13,14). AS a matter of fact, the judgment
of the court a quo on the second issue contains a finding that the
Bureau of Aeronautics recognized that the plaintiffs are entitled to
rentals and is stopped from alleging that it can dispose of these
properties without the consent of the owners thereof, which holding
reveals the indivisibility of the relationship between the defendants
and the Bureau of Aeronautics, as the former had been authorized
to use the airfield and the latter had given said authority under the
express obligation of making with the plaintiffs the necessary
arrangements for the use of the land in question as an airfield, and
the resulting need of including the Bureau of Aeronautics as a party
defendant in order to determine in a just and equitable manner the
final responsibility of defendants for the use by them of the airfield.
A careful consideration of the circumstances surrounding the use of
the airfield by the defendants clearly reveals that any responsibility
that they may have for their use of the airfield can not be
distinguished or dissociated from that of the Bureau of Aeronautics.
In the first place, the U.S. Army gave the defendants the authority to
use the airfield. After the turn-over of the airfield to the Philippine
Government was made, the Bureau of Aeronautics occupied the
airfield, maintained and operated it, and, pursuant to the policy that
the Philippine Government had adopted of furnishing airport
facilities in the interest of commercial aviation (Commonwealth Act
No. 168, section 6 (c)), it assured the defendants that it would itself
obtain the lease of the land from the owners. Certainly, no separate
or distinct responsibility for the use of the airstrip on the part of the
defendants may arise independently of that of the Bureau of
Aeronautics, not only because the latter and the defendants jointly
occupied the airstrip, but mainly because the said Bureau permitted
and encouraged the defendants to use the airstrip, assuring them
that it had the necessary funds to pay for the use and occupation of
the lands. The defendants can not be held liable without making the
Bureau of Aeronautics partly or wholly responsible for said liability.
The decision appealed from itself discloses the necessity of a finding
as to the Bureau of Aeronautics also. It declared that the Bureau of
Aeronautics is estopped from alleging that it can dispose of the
properties without the consent of the plaintiffs, as it recognizes that
the latter are entitled to rentals. The Bureau of Aeronautics has so
much interest in the controversy, and its responsibility for the relief
sought so bound up with the defendants, that its presence as a party
to the action is an absolute necessity, without which the lower court
should not have proceeded. (170 Fed. 2d series, p. 654).
Furthermore, it has been held that it is enough that the absence of a
party may leave the controversy in such a situation that the final
determination may be inconsistent with equity and good
conscience. (Davis vs. Henry, C.C.A. Ky, 266 F. 261, 265, 21 W &P
173; State of Washington, vs. United States, et al., 87 F. (2) 421, 427-
428.) To hold the defendants liable without determining the
corresponding liability of the Bureau of Aeronautics, which
permitted and encouraged the defendants to use the airstrip, would
be clearly inequitous.
It would be noted that the provisions of the code procedure on
parties were taken from the rules of equity and not from the rule of
common law, and, therefore, a great amount of latitude is allowed
in the inclusion of the parties to a case. The evident aim and intent
of the rules regarding the joinder of indispensable and necessary
parties is the complete determination of all possible issues, not only
between parties themselves but also as regards to other persons
who may be affected by the judgment. Pursuant to this intent, we
hold that the Bureau of Aeronautics is an indispensable party in so
far as the determination of the liability of the defendants for the use
of the airstrip is concerned.
In Mallow, et al, vs. Hinde, 6 Law Ed. 599, the complaint charges one
Taylor of conspiracy with Hinde, but neither Taylor, from whom
Hinde obtained his title or right to the land in litigation, nor the
other parties from whom the plaintiffs in turn, derived their right,
were made parties. The Supreme Court of the United States held:
In this case, the complainants have no rights separable
from, and independent of, the rights of persons not made
parties. The rights of those not before the court lie at the
very foundation of the claim or right by the plaintiffs, and
a final decision cannot be made between the rights of
others not made parties.
In Garcia vs. Reyes, et al., 17 Phil. 127, the plaintiff seeks to annul
the transfer of a house that belonged to the defendant's father, and
which was sold at public auction by the sheriff to the plaintiff. The
complaint alleges that prior to the sale by the sheriff, the deceased
father of the defendant transferred his said house to Messrs.
Chicote, Miranda & Sierra, a law firm, and this, in turn,
transferred the same to Rafael Sierra, one of the members of said
firm, who afterwards made a gift of the house to the minor
defendants. It was held that all the persons who intervened in the
transfers from the original owner to the defendants in the case are
parties necessary to the suit, because the transfers and donation are
asked to be declared null and void.
The principle involved has been briefly stated as follows:
Where the result of the suit is dependent upon the validity
of the right or title of an absent person, as suit for an

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injunction against one who is acting under the charter of
another, or a suit between lessees of different persons for
the same property, the absent party is indispensable,
(Moore's Federal Practice, Vol. 2, p. 2151, citing Northern
Indiana RR. Co. vs. Michigan Cent. RR. Co. (1853) 15 How.
233, 14 Law Ed. 674; McConnell vs. Dennis (C.C.A. 8th,
1907) 153 Fed. 547; South Penn Oil Co. vs. Miller (C.C.A.
4th, 1909) 175 729.)
In view of the foregoing considerations, the judgment is hereby set
aside and the case ordered remanded to the court a quo, with the
instruction that the Bureau of Aeronautics be made a party
defendant, and that thereafter the action proceed in accordance
with the rules.
Paras, C.J., Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo,
Bautista Angelo, Concepcion and Diokno, JJ., concur.


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G.R. No. 138497 January 16, 2002
IMELDA RELUCIO, petitioner,
vs.
ANGELINA MEJIA LOPEZ, respondent.
PARDO, J.:
The Case
The case is a petition for review on certiorari
1
seeking to set aside
the decision
2
of the Court of Appeals that denied a petition for
certiorari assailing the trial court's order denying petitioner's motion
to dismiss the case against her inclusion as party defendant therein.
The Facts
The facts, as found by the Court of Appeals, are as follows:
"On September 15, 1993, herein private respondent Angelina Mejia
Lopez (plaintiff below) filed a petition for "APPOINTMENT AS SOLE
ADMINISTRATIX OF CONJUGAL PARTNERSHIP OF PROPERTIES,
FORFEITURE, ETC.," against defendant Alberto Lopez and petition
Imelda Relucio, docketed as Spec. Proc. M-3630, in the Regional Trial
Court of Makati, Branch 141. In the petition, private-respondent
alleged that sometime in 1968, defendant Lopez, who is legally
married to the private respondent, abandoned the latter and their
four legitimate children; that he arrogated unto himself full and
exclusive control and administration of the conjugal properties,
spending and using the same for his sole gain and benefit to the
total exclusion of the private respondent and their four children;
that defendant Lopez, after abandoning his family, maintained an
illicit relationship and cohabited with herein petitioner since 1976.
"It was further alleged that defendant Lopez and petitioner Relucio,
during their period of cohabitation since 1976, have amassed a
fortune consisting mainly of stockholdings in Lopez-owned or
controlled corporations, residential, agricultural, commercial lots,
houses, apartments and buildings, cars and other motor vehicles,
bank accounts and jewelry. These properties, which are in the
names of defendant Lopez and petitioner Relucio singly or jointly or
their dummies and proxies, have been acquired principally if not
solely through the actual contribution of money, property and
industry of defendant Lopez with minimal, if not nil, actual
contribution from petitioner Relucio.
"In order to avoid defendant Lopez obligations as a father and
husband, he excluded the private respondent and their four children
from sharing or benefiting from the conjugal properties and the
income or fruits there from. As such, defendant Lopez either did not
place them in his name or otherwise removed, transferred, stashed
away or concealed them from the private-respondent. He placed
substantial portions of these conjugal properties in the name of
petitioner Relucio.1wphi1.nt
"It was also averred that in the past twenty five years since
defendant Lopez abandoned the private-respondent, he has sold,
disposed of, alienated, transferred, assigned, canceled, removed or
stashed away properties, assets and income belonging to the
conjugal partnership with the private-respondent and either spent
the proceeds thereof for his sole benefit and that of petitioner
Relucio and their two illegitimate children or permanently and
fraudulently placed them beyond the reach of the private-
respondent and their four children.
"On December 8, 1993, a Motion to Dismiss the Petition was filed by
herein petitioner on the ground that private respondent has no
cause of action against her.
"An Order dated February 10, 1994 was issued by herein respondent
Judge denying petitioner Relucio's Motion to Dismiss on the ground
that she is impleaded as a necessary or indispensable party because
some of the subject properties are registered in her name and
defendant Lopez, or solely in her name.
"Subsequently thereafter, petitioner Relucio filed a Motion for
Reconsideration to the Order of the respondent Judge dated
February 10, 1994 but the same was likewise denied in the Order
dated May 31, 1994."
3

On June 21, 1994, petitioner filed with the Court of Appeals a
petition for certiorari assailing the trial court's denial of her motion
to dismiss.
4

On May 31, 1996, the Court of Appeals promulgated a decision
denying the petition.
5
On June 26, 1996, petitioner filed a motion for
reconsideration.
6
However, on April 6, 1996, the Court of Appeals
denied petitioner's motion for reconsideration.
7

Hence, this appeal.
8

The Issues
1. Whether respondent's petition for appointment as sole
administratrix of the conjugal property, accounting, etc. against her
husband Alberto J. Lopez established a cause of action against
petitioner.
2. Whether petitioner's inclusion as party defendant is essential in
the proceedings for a complete adjudication of the controversy.
9

The Court's Ruling
We grant the petition. We resolve the issues in seriatim.
First issue: whether a cause of action exists against petitioner in the
proceedings below. "A cause of action is an act or omission of one
party the defendant in violation of the legal right of the other."
10
The
elements of a cause of action are:
(1) a right in favor of the plaintiff by whatever means and
under whatever law it arises or is created;
(2) an obligation on the part of the named defendant to
respect or not to violate such right; and
(3) an act or omission on the part of such defendant in
violation of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff
for which the latter may maintain an action for recovery of
damages.
11


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A cause of action is sufficient if a valid judgment may be rendered
thereon if the alleged facts were admitted or proved.
12

In order to sustain a motion to dismiss for lack of cause of action,
the complaint must show that the claim for relief does not exist,
rather than that a claim has been merely defectively stated or is
ambiguous, indefinite or uncertain.
13

Hence, to determine the sufficiency of the cause of action alleged in
Special Proceedings M-3630, we assays its allegations.
In Part Two on the "Nature of [the] Complaint," respondent Angelina
Mejia Lopez summarized the causes of action alleged in the
complaint below.
The complaint is by an aggrieved wife against her husband.
Nowhere in the allegations does it appear that relief is sought
against petitioner. Respondent's causes of action were all against
her husband.
The first cause of action is for judicial appointment of respondent as
administratrix of the conjugal partnership or absolute community
property arising from her marriage to Alberto J. Lopez. Petitioner is a
complete stranger to this cause of action. Article 128 of the Family
Code refers only to spouses, to wit:
"If a spouse without just cause abandons the other or fails
to comply with his or her obligations to the family, the
aggrieved spouse may petition the court for receivership,
for judicial separation of property, or for authority to be
the sole administrator of the conjugal partnership
property xxx"
The administration of the property of the marriage is entirely
between them, to the exclusion of all other persons. Respondent
alleges that Alberto J. Lopez is her husband. Therefore, her first
cause of action is against Alberto J. Lopez. There is no right-duty
relation between petitioner and respondent that can possibly
support a cause of action. In fact, none of the three elements of a
cause of action exists.
The second cause of action is for an accounting "by respondent
husband."
14
The accounting of conjugal partnership arises from or is
an incident of marriage.
Petitioner has nothing to do with the marriage between respondent
Alberto J. Lopez. Hence, no cause of action can exist against
petitioner on this ground.
Respondent's alternative cause of action is for forfeiture of Alberto
J. Lopez' share in the co-owned property "acquired during his illicit
relationship and cohabitation with [petitioner]"
15
and for the
"dissolution of the conjugal partnership of gains between him
[Alberto J. Lopez] and the [respondent]."
The third cause of action is essentially for forfeiture of Alberto J.
Lopez' share in property co-owned by him and petitioner. It does not
involve the issue of validity of the co-ownership between Alberto J.
Lopez and petitioner. The issue is whether there is basis in law to
forfeit Alberto J. Lopez' share, if any there be, in property co-owned
by him with petitioner.
Respondent's asserted right to forfeit extends to Alberto J. Lopez'
share alone. Failure of Alberto J. Lopez to surrender such share,
assuming the trial court finds in respondent's favor, results in a
breach of an obligation to respondent and gives rise to a cause of
action.
16
Such cause of action, however, pertains to Alberto J. Lopez,
not petitioner.
The respondent also sought support. Support cannot be compelled
from a stranger.
The action in Special Proceedings M-3630 is, to use respondent
Angelina M. Lopez' own words, one by "an aggrieved wife against
her husband."
17
References to petitioner in the common and specific
allegations of fact in the complaint are merely incidental, to set forth
facts and circumstances that prove the causes of action alleged
against Alberto J. Lopez.
Finally, as to the moral damages, respondent's claim for moral
damages is against Alberto J. Lopez, not petitioner.
To sustain a cause of action for moral damages, the complaint must
have the character of an action for interference with marital or
family relations under the Civil Code.
A real party in interest is one who stands "to be benefited or injured
by the judgment of the suit."
18
In this case, petitioner would not be
affected by any judgment in Special Proceedings M-3630.
If petitioner is not a real party in interest, she cannot be an
indispensable party. An indispensable party is one without whom
there can be no final determination of an action.
19
Petitioner's
participation in Special Proceedings M-36-30 is not indispensable.
Certainly, the trial court can issue a judgment ordering Alberto J.
Lopez to make an accounting of his conjugal partnership with
respondent, and give support to respondent and their children, and
dissolve Alberto J. Lopez' conjugal partnership with respondent, and
forfeit Alberto J. Lopez' share in property co-owned by him and
petitioner. Such judgment would be perfectly valid and enforceable
against Alberto J. Lopez.
Nor can petitioner be a necessary party in Special Proceedings M-
3630. A necessary party as one who is not indispensable but who
ought to be joined as party if complete relief is to be accorded those
already parties, or for a complete determination or settlement of
the claim subject of the action.
20
In the context of her petition in the
lower court, respondent would be accorded complete relief if
Alberto J. Lopez were ordered to account for his alleged conjugal
partnership property with respondent, give support to respondent
and her children, turn over his share in the co-ownership with
petitioner and dissolve his conjugal partnership or absolute
community property with respondent.
The Judgment
WHEREFORE, the Court GRANTS the petition and REVERSES the
decision of the Court of Appeals.
21
The Court DISMISSES Special
Proceedings M-3630 of the Regional Trial Court, Makati, Branch 141
as against petitioner.1wphi1.nt

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No costs.
SO ORDERED.


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G.R. No. 146744 March 6, 2006
ROBERT G. DE GALICIA, Petitioner,
vs.
MELY MERCADO, Respondent.
D E C I S I O N
CORONA, J.:
Petitioner Robert G. de Galicia was a business partner in RCL
Enterprises. On or about December 15, 1997, he was asked by his
partner Carmen Arciaga to co-sign with her a Philbank check for
P50,000 payable to cash. Allegedly without his knowledge and
consent, Arciaga rediscounted the check with respondent Mely
Mercado at 8% interest. Respondent gave Arciaga the sum of
P46,000, representing the value of the check less 8% as interest.
Later, respondent presented the check for payment but it was
dishonored for insufficiency of funds. She then filed a complaint for
estafa and for violation of Batas Pambansa Blg. (BP) 22
1
against
petitioner and Carmen Arciaga. Petitioner countered by filing in the
Regional Trial Court (RTC) of Manila, Branch 32, a case for the
declaration of nullity of the agreement to pay interest between
respondent and his partner, Arciaga. He prayed that the agreement,
together with the rediscounted check, be declared void for being
contrary to public policy.
After trial, the RTC, in an order dated November 21, 2000, dismissed
petitioners case for lack of jurisdiction. In another order dated
January 15, 2001, it also denied his motion for reconsideration.
Treating the complaint as one for recovery of a sum of money, the
trial court ruled:
Even granting in arguendo, that the action seeks to have the
agreement (?) between defendant Mely Mercado and one Carmen
Arciaga with respect to the payment of interest to be declared null
and void, this Court is in a quandary because one of the parties
(Carmen Arciaga) in the so-called agreement is not a party to the
present case.
Also, even considering and computing the interest rate at 8% or 5%,
it is still within the rate of P50,000 and way below the jurisdictional
amount vested in the Regional Trial Court.
The present action is treated by this Court as one for the recovery of
sum of money, construing the same from the facts alleged in the
complaint xxx with the present action/complaint having no title of
the action.
A reading of the instant case indicates that the principal relief
sought is for the declaration of the subject check in the amount of
P50,000 a nullity. Hence, capable of pecuniary estimation, the so-
called agreement merely an incident thereto.
After going over the entire record of this case, and further
considering that every court has the power to review and amend
its findings and conclusions, this Court finds no reversible error to
reconsider its assailed order (dated November 21, 2000).
WHEREFORE, the assailed Order (supra) [D]ismissing this case,
[S]tands. The Motion for Reconsideration, for lack of merit, is hereby
DENIED.
2

Via this petition for review under Rule 45 of the 1997 Rules of Civil
Procedure, on a pure question of law, petitioner assigns this error to
the abovementioned order:
THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT FOR LACK
OF JURISDICTION OVER ITS SUBJECT MATTER SIMPLY BECAUSE THE
AMOUNT INVOLVED [WAS] ONLY P50,000.00.
3

In his memorandum,
4
petitioner insisted that the complaint for
declaration of nullity of the agreement between respondent and
Arciaga was within the jurisdiction of the RTC. According to
petitioner, the subject matter of the complaint was not for the
recovery of a sum of money but for the nullification of the
agreement to pay interest, with a prayer to also nullify the check, in
which case the action was not capable of pecuniary estimation. He
argued that it was error for the trial court to dismiss the complaint
on the basis merely that the amount involved was P50,000.
Respondent, however, contends that the dismissal by the RTC of the
complaint was warranted since the action essentially involved the
nullification of the check amounting to P50,000. She insisted that
the amount was outside the RTCs jurisdiction, thus, it could not
possibly take cognizance of the case. Respondent added that the
RTC did not err in dismissing the complaint because Arciaga, as an
indispensable party, was not impleaded.
Under BP 129,
5
the RTC shall exercise exclusive jurisdiction on the
following actions:
(1) In all civil actions in which the subject of the litigation is
incapable of pecuniary estimation;
(2) In all civil actions which involve the title to, or
possession of, real property, or any interest therein, where
the assessed value of the property involve[d] exceeds
Twenty [T]housand [P]esos (P20,000.00) or for civil actions
in Metro Manila, where such value exceeds Fifty
[T]housand [P]esos (P50,000.00) except actions for forcible
entry into and unlawful detainer of lands or buildings,
original jurisdiction over which is conferred upon the
Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts.
xxx xxx xxx
In determining whether or not the subject matter of an action is
capable of pecuniary estimation, the Court, in the early case of
Singsong v. Isabella Sawmill,
6
laid down the following criterion:
xxx this Court has adopted the criterion of first ascertaining the
nature of the principal action or remedy sought. If it is primarily for
the recovery of a sum of money, the claim is considered capable of
pecuniary estimation, and whether jurisdiction is in the municipal
courts or in the courts of first instance (now RTC) would depend on
the amount involved. However, where the basic issue is something
other than the right to recover a sum of money, where the money
claim is purely incidental to, or a consequence of, the principal
relief sought, this Court has considered such actions as cases where

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the subject of the litigation may not be estimated in terms of
money, and are cognizable by the courts of first instance (RTC).
(emphasis supplied)
Based on the foregoing criterion, the subject of the action before
the trial court was indeed incapable of pecuniary estimation and
therefore cognizable by the RTC.
A perusal of the complaint
7
reveals that it primarily sought to annul
the agreement under which Arciaga obligated herself to pay
respondent interest on the amount of the rediscounted check. What
was being assailed was the payment of interest. Petitioner was not
seeking recovery of a sum of money as found by the trial court. The
records do not show that he asked for payment of the amount of
the check. Besides, it was not for petitioner to ask for
reimbursement of the amount of the check but respondent who
gave P46,000 to petitioners business partner, Arciaga.
Nevertheless, notwithstanding the RTCs jurisdiction on the subject
case, this Court sustains the dismissal of the subject complaint for its
failure to implead an indispensable party.
Under Rule 3, Section 7 of the 1997 Rules of Civil Procedure, an
indispensable party is a party-in-interest without whom there can be
no final determination of an action. The interests of such
indispensable party in the subject matter of the suit and the relief
are so bound with those of the other parties that his legal presence
as a party to the proceeding is an absolute necessity.
8
As a rule, an
indispensable partys interest in the subject matter is such that a
complete and efficient determination of the equities and rights of
the parties is not possible if he is not joined.
9

Here, we hold that Arciaga was an indispensable party to the suit
filed by petitioner against respondent. Her interest in the suit was
intertwined with the rights and interest of both petitioner and
respondent. She was as involved in the suit as petitioner and
respondent, being a co-signatory of the re-discounted check and
being privy to the assailed agreement. Had the subject complaint
been resolved on the merits, any judgment made by the trial court
was going to affect not only respondent but Arciaga as well.
Unfortunately, due to the failure of petitioner to implead her in the
complaint, any judgment therein could not bind her. It was as if the
complaint had not been filed at all.
In Aracelona v. Court of Appeals,
10
the Court held that the joinder of
all indispensable parties must be made under any and all conditions,
their presence being a sine qua non for the exercise of the judicial
power. There, we ruled that when an indispensable party is not
before the court, the action should be dismissed.
11

It is interesting to note that petitioner filed the subject complaint
after respondent initiated a complaint for estafa and violation of BP
22.
12
The filing of the complaint for declaration of nullity of the
agreement to pay interest and the nullity of the check appeared to
be an afterthought and an attempt to affect the outcome of the
criminal complaint against him.
WHEREFORE, the petition is hereby DENIED.
No costs.
SO ORDERED.


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G.R. No. L-66620 September 24, 1986
REMEDIO V. FLORES, petitioner,
vs.
HON. JUDGE HEILIA S. MALLARE-PHILLIPPS, IGNACIO BINONGCAL &
FERNANDO CALION, respondents.
Lucio A. Dixon for respondent F. Calion.

FERIA, J.:
The Court rules that the application of the totality rule under Section
33(l) of Batas Pambansa Blg. 129 and Section 11 of the Interim Rules
is subject to the requirements for the permissive joinder of parties
under Section 6 of Rule 3 which provides as follows:
Permissive joinder of parties.-All persons in
whom or against whom any right to relief in
respect to or arising out of the same transaction
or series of transactions is alleged to exist,
whether jointly, severally, or in the alternative,
may, except as otherwise provided in these
rules, join as plaintiffs or be joined as defendants
in one complaint, where any question of law or
fact common to all such plaintiffs or to all such
defendants may arise in the action; but the court
may make such orders as may be just to prevent
any plaintiff or defendant from being
embarrassed or put to expense in connection
with any proceedings in which he may have no
interest.
Petitioner has appealed by certiorari from the order of Judge Heilia
S. Mallare-Phillipps of the Regional Trial Court of Baguio City and
Benguet Province which dismissed his complaint for lack of
jurisdiction. Petitioner did not attach to his petition a copy of his
complaint in the erroneous belief that the entire original record of
the case shall be transmitted to this Court pursuant to the second
paragraph of Section 39 of BP129. This provision applies only to
ordinary appeals from the regional trial court to the Court of
Appeals (Section 20 of the Interim Rules). Appeals to this Court by
petition for review on certiorari are governed by Rule 45 of the Rules
of Court (Section 25 of the Interim Rules).
However, the order appealed from states that the first cause of
action alleged in the complaint was against respondent Ignacio
Binongcal for refusing to pay the amount of P11,643.00 representing
cost of truck tires which he purchased on credit from petitioner on
various occasions from August to October, 1981; and the second
cause of action was against respondent Fernando Calion for
allegedly refusing to pay the amount of P10,212.00 representing
cost of truck tires which he purchased on credit from petitioner on
several occasions from March, 1981 to January, 1982.
On December 15, 1983, counsel for respondent Binongcal filed a
Motion to Dismiss on the ground of lack of jurisdiction since the
amount of the demand against said respondent was only
P11,643.00, and under Section 19(8) of BP129 the regional trial
court shall exercise exclusive original jurisdiction if the amount of
the demand is more than twenty thousand pesos (P20,000.00). It
was further averred in said motion that although another person,
Fernando Calion, was allegedly indebted to petitioner in the amount
of P10,212.00, his obligation was separate and distinct from that of
the other respondent. At the hearing of said Motion to Dismiss,
counsel for respondent Calion joined in moving for the dismissal of
the complaint on the ground of lack of jurisdiction. Counsel for
petitioner opposed the Motion to Dismiss. As above stated, the trial
court dismissed the complaint for lack of jurisdiction.
Petitioner maintains that the lower court has jurisdiction over the
case following the "novel" totality rule introduced in Section 33(l) of
BP129 and Section 11 of the Interim Rules.
The pertinent portion of Section 33(l) of BP129 reads as follows:
... Provided,That where there are several claims
or causes of action between the same or
different parties, embodied in the same
complaint, the amount of the demand shall be
the totality of the claims in all the causes of
action, irrespective of whether the causes of
action arose out of the same or different
transactions. ...
Section 11 of the Interim Rules provides thus:
Application of the totality rule.-In actions where
the jurisdiction of the court is dependent on the
amount involved, the test of jurisdiction shall be
the aggregate sum of all the money demands,
exclusive only of interest and costs, irrespective
of whether or not the separate claims are owned
by or due to different parties. If any demand is
for damages in a civil action, the amount thereof
must be specifically alleged.
Petitioner compares the above-quoted provisions with the pertinent
portion of the former rule under Section 88 of the Judiciary Act of
1948 as amended which reads as follows:
... Where there are several claims or causes of
action between the same parties embodied in
the same complaint, the amount of the demand
shall be the totality of the demand in all the
causes of action, irrespective of whether the
causes of action arose out of the same or
different transactions; but where the claims or
causes of action joined in a single complaint are
separately owned by or due to different parties,
each separate claim shall furnish the
jurisdictional test. ...
and argues that with the deletion of the proviso in the former rule,
the totality rule was reduced to clarity and brevity and the
jurisdictional test is the totality of the claims in all, not in each, of
the causes of action, irrespective of whether the causes of action
arose out of the same or different transactions.
This argument is partly correct. There is no difference between the
former and present rules in cases where a plaintiff sues a defendant
on two or more separate causes of action. In such cases, the amount
of the demand shall be the totality of the claims in all the causes of

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action irrespective of whether the causes of action arose out of the
same or different transactions. If the total demand exceeds twenty
thousand pesos, then the regional trial court has jurisdiction.
Needless to state, if the causes of action are separate and
independent, their joinder in one complaint is permissive and not
mandatory, and any cause of action where the amount of the
demand is twenty thousand pesos or less may be the subject of a
separate complaint filed with a metropolitan or municipal trial court.
On the other hand, there is a difference between the former and
present rules in cases where two or more plaintiffs having separate
causes of action against a defendant join in a single complaint.
Under the former rule, "where the claims or causes of action joined
in a single complaint are separately owned by or due to different
parties, each separate claim shall furnish the jurisdictional test"
(Section 88 of the Judiciary Act of 1948 as amended, supra). This was
based on the ruling in the case of Vda. de Rosario vs. Justice of the
Peace, 99 Phil. 693. As worded, the former rule applied only to cases
of permissive joinder of parties plaintiff. However, it was also
applicable to cases of permissive joinder of parties defendant, as
may be deduced from the ruling in the case of Brillo vs. Buklatan,
thus:
Furthermore, the first cause of action is
composed of separate claims against several
defendants of different amounts each of which is
not more than P2,000 and falls under the
jurisdiction of the justice of the peace court
under section 88 of Republic Act No, 296. The
several claims do not seem to arise from the
same transaction or series of transactions and
there seem to be no questions of law or of fact
common to all the defendants as may warrant
their joinder under Rule 3, section 6. Therefore,
if new complaints are to be filed in the name of
the real party in interest they should be filed in
the justice of the peace court. (87 Phil. 519, 520,
reiterated in Gacula vs. Martinez, 88 Phil. 142,
146)
Under the present law, the totality rule is applied also to cases
where two or more plaintiffs having separate causes of action
against a defendant join in a single complaint, as well as to cases
where a plaintiff has separate causes of action against two or more
defendants joined in a single complaint. However, the causes of
action in favor of the two or more plaintiffs or against the two or
more defendants should arise out of the same transaction or series
of transactions and there should be a common question of law or
fact, as provided in Section 6 of Rule 3.
The difference between the former and present rules in cases of
permissive joinder of parties may be illustrated by the two cases
which were cited in the case of Vda. de Rosario vs. Justice of the
Peace (supra) as exceptions to the totality rule. In the case of
Soriano y Cia vs. Jose (86 Phil. 523), where twenty-nine dismissed
employees joined in a complaint against the defendant to collect
their respective claims, each of which was within the jurisdiction of
the municipal court although the total exceeded the jurisdictional
amount, this Court held that under the law then the municipal court
had jurisdiction. In said case, although the plaintiffs' demands were
separate, distinct and independent of one another, their joint suit
was authorized under Section 6 of Rule 3 and each separate claim
furnished the jurisdictional test. In the case of International Colleges,
Inc. vs. Argonza (90 Phil. 470), where twenty-five dismissed teachers
jointly sued the defendant for unpaid salaries, this Court also held
that the municipal court had jurisdiction because the amount of
each claim was within, although the total exceeded, its jurisdiction
and it was a case of permissive joinder of parties plaintiff under
Section 6 of Rule 3.
Under the present law, the two cases above cited (assuming they do
not fall under the Labor Code) would be under the jurisdiction of the
regional trial court. Similarly, in the abovecited cases of Brillo vs.
Buklatan and Gacula vs. Martinez (supra), if the separate claims
against the several defendants arose out of the same transaction or
series of transactions and there is a common question of law or fact,
they would now be under the jurisdiction of the regional trial court.
In other words, in cases of permissive joinder of parties, whether as
plaintiffs or as defendants, under Section 6 of Rule 3, the total of all
the claims shall now furnish the jurisdictional test. Needless to state
also, if instead of joining or being joined in one complaint separate
actions are filed by or against the parties, the amount demanded in
each complaint shall furnish the jurisdictional test.
In the case at bar, the lower court correctly held that the
jurisdictional test is subject to the rules on joinder of parties
pursuant to Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules
of Court and that, after a careful scrutiny of the complaint, it
appears that there is a misjoinder of parties for the reason that the
claims against respondents Binongcal and Calion are separate and
distinct and neither of which falls within its jurisdiction.
WHEREFORE, the order appealed from is affirmed, without
pronouncement as to costs.
SO ORDERED.


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G.R. No. 166519 March 31, 2009
NIEVES PLASABAS and MARCOS MALAZARTE, Petitioners,
vs.
COURT OF APPEALS (Special Former Ninth Division), DOMINADOR
LUMEN, and AURORA AUNZO, Respondents.
D E C I S I O N
NACHURA, J.:
Assailed in this petition for review on certiorari under Rule 45 of the
Rules of Court are the May 12, 2004 Decision
1
of the Court of
Appeals (CA) in CA-G.R. CV No. 43085 and the December 1, 2004
Resolution
2
denying reconsideration of the challenged decision.
The pertinent facts and proceedings follow.
In 1974, petitioners
3
filed a complaint for recovery of title to
property with damages before the Court of First Instance (now,
Regional Trial Court [RTC]) of Maasin, Southern Leyte against
respondents. The case was docketed as Civil Case No. R-1949. The
property subject of the case was a parcel of coconut land in
Canturing, Maasin, Southern Leyte, declared under Tax Declaration
No. 3587 in the name of petitioner Nieves with an area of 2.6360
hectares.
4
In their complaint, petitioners prayed that judgment be
rendered confirming their rights and legal title to the subject
property and ordering the defendants to vacate the occupied
portion and to pay damages.
5

Respondents, for their part, denied petitioners allegation of
ownership and possession of the premises, and interposed, as their
main defense, that the subject land was inherited by all the parties
from their common ancestor, Francisco Plasabas.
6

Revealed in the course of the trial was that petitioner Nieves,
contrary to her allegations in the complaint, was not the sole and
absolute owner of the land. Based on the testimonies of petitioners
witnesses, the property passed on from Francisco to his son,
Leoncio; then to Jovita Talam, petitioner Nieves grandmother; then
to Antonina Talam, her mother; and then to her and her siblings
Jose, Victor and Victoria.
7

After resting their case, respondents raised in their memorandum
the argument that the case should have been terminated at
inception for petitioners failure to implead indispensable parties,
the other co-owners Jose, Victor and Victoria.
In its April 19, 1993 Order,
8
the trial court, without ruling on the
merits, dismissed the case without prejudice, thus:
This Court, much as it wants to decide the instant case on the
merits, being one of the old inherited cases left behind, finds
difficulty if not impossibility of doing so at this stage of the
proceedings when both parties have already rested their cases.
Reluctantly, it agrees with the defendants in the observation that
some important indispensable consideration is conspicuously
wanting or missing.
It is not the Courts wish to turn its back on the crucial part of the
case, which is the pronouncement of the judgment to settle the
issues raised in the pleadings of the parties once and for all, after all
the time, effort and expense spent in going through the trial
process.
But, rules are rules. They have to be followed, to arrive at a fair and
just verdict. Section 7, Rule 3 of the Rules of Court provides:
"x x x Compulsory joinder of indispensable parties. Parties in
action shall be joined either as plaintiffs or defendants."
What the Court wants to say here is that the instant case should
have been dismissed without prejudice a long time ago for lack of
cause of action as the plaintiffs spouses Marcos Malazarte and
Nieves Plasabas Malazarte have no complete legal personality to sue
by themselves alone without joining the brothers and sisters of
Nieves who are as INDISPENSABLE as the latter in the final
determination of the case. Not impleading them, any judgment
would have no effectiveness.
They are that indispensable that a final decree would necessarily
affect their rights, so that the Court cannot proceed without their
presence. There are abundant authorities in this regard. Thus
"The general rule with reference to the making of parties in a civil
action requires the joinder of all indispensable parties under any and
all conditions, their presence being a sine qua non of the exercise of
judicial power. (Borlasa v. Polistico, 47 Phil. 345, 348) For this
reason, our Supreme Court has held that when it appears of record
that there are other persons interested in the subject matter of the
litigation, who are not made parties to the action, it is the duty of
the court to suspend the trial until such parties are made either
plaintiffs or defendants. (Pobre, et al. v. Blanco, 17 Phil. 156). x x x
Where the petition failed to join as party defendant the person
interested in sustaining the proceeding in the court, the same should
be dismissed. x x x When an indispensable party is not before the
court, the action should be dismissed. (People, et al. v. Rodriguez, et
al., G.R. Nos. L-14059-62, September 30, 1959) (sic)
"Parties in interest without whom no final determination can be had
of an action shall be joined either as plaintiffs or defendants. (Sec. 7,
Rule 3, Rules of Court). The burden of procuring the presence of all
indispensable parties is on the plaintiff. (39 Amjur [sic] 885). The
evident purpose of the rule is to prevent the multiplicity of suits by
requiring the person arresting a right against the defendant to
include with him, either as co-plaintiffs or as co-defendants, all
persons standing in the same position, so that the whole matter in
dispute may be determined once and for all in one litigation.
(Palarca v. Baginsi, 38 Phil. 177, 178).
"An indispensable party is a party who has such an interest in the
controversy or subject matter that a final adjudication cannot be
made, in his absence, without inquiring or affecting such interest; a
party who has not only an interest of such a nature that a final
decree cannot be made without affecting his interest or leaving the
controversy in such a condition that its final determination may be
wholly inconsistent with equity and good conscience. (67 C.J.S. 892).
Indispensable parties are those without whom no action can be
finally determined." (Sanidad v. Cabataje, 5 Phil. 204)
WHEREFORE, IN VIEW OF ALL THE FOREGOING CONSIDERATIONS,
both the complaint and the counterclaim in the instant case are

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ordered DISMISSED without prejudice. No pronouncement as to
costs.
SO ORDERED.
9

Aggrieved, petitioners elevated the case to the CA. In the challenged
May 12, 2004 Decision,
10
the appellate court affirmed the ruling of
the trial court. The CA, further, declared that the non-joinder of the
indispensable parties would violate the principle of due process, and
that Article 487 of the Civil Code could not be applied considering
that the complaint was not for ejectment, but for recovery of title or
a reivindicatory action.
11

With their motion for reconsideration denied in the further assailed
December 1, 2004 Resolution,
12
petitioners filed the instant petition.
The Court grants the petition and remands the case to the trial court
for disposition on the merits.
Article 487 of the Civil Code provides that any one of the co-owners
may bring an action for ejectment.1avvphi1.zw+ The article covers
all kinds of actions for the recovery of possession, including an
accion publiciana and a reivindicatory action. A co-owner may file
suit without necessarily joining all the other co-owners as co-
plaintiffs because the suit is deemed to be instituted for the benefit
of all. Any judgment of the court in favor of the plaintiff will benefit
the other co-owners, but if the judgment is adverse, the same
cannot prejudice the rights of the unimpleaded co-owners.
13

With this disquisition, there is no need to determine whether
petitioners complaint is one for ejectment or for recovery of title.
To repeat, Article 487 of the Civil Code applies to both actions.
Thus, petitioners, in their complaint, do not have to implead their
co-owners as parties. The only exception to this rule is when the
action is for the benefit of the plaintiff alone who claims to be the
sole owner and is, thus, entitled to the possession thereof. In such a
case, the action will not prosper unless the plaintiff impleads the
other co-owners who are indispensable parties.
14

Here, the allegation of petitioners in their complaint that they are
the sole owners of the property in litigation is immaterial,
considering that they acknowledged during the trial that the
property is co-owned by Nieves and her siblings, and that petitioners
have been authorized by the co-owners to pursue the case on the
latters behalf.
15
Impleading the other co-owners is, therefore, not
mandatory, because, as mentioned earlier, the suit is deemed to be
instituted for the benefit of all.
In any event, the trial and appellate courts committed reversible
error when they summarily dismissed the case, after both parties
had rested their cases following a protracted trial commencing in
1974, on the sole ground of failure to implead indispensable parties.
The rule is settled that the non-joinder of indispensable parties is
not a ground for the dismissal of an action. The remedy is to implead
the non-party claimed to be indispensable. Parties may be added by
order of the court on motion of the party or on its own initiative at
any stage of the action and/or at such times as are just. If petitioner
refuses to implead an indispensable party despite the order of the
court, the latter may dismiss the complaint/petition for the
plaintiffs/petitioner's failure to comply therewith.
16

WHEREFORE, premises considered, the instant petition is GRANTED,
and the case is REMANDED to the trial court for appropriate
proceedings. The trial court is further DIRECTED to decide on the
merits of the civil case WITH DISPATCH.
SO ORDERED.


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G.R. No. 126950 July 2, 1999
NELSON NUFABLE, SILMOR NUFABLE and AQUILINA NUFABLE,
petitioners,
vs.
GENEROSA NUFABLE, VILFOR NUFABLE, MARCELO NUFABLE, and
the COURT OF APPEALS, respondents.

GONZAGA-REYES, J.:
This petition for review on certiorari seeks to reverse and set aside
the Decision dated November 25, 1995 of the Fifth Division
1
of the
Court of Appeals for allegedly being contrary to law.
The following facts as found by the Court of Appeals are undisputed:
Edras Nufable owned at Poblacion, Manjuyod, Negros Oriental,
consisting of 948 square meters, more or less. He died on August 9,
1965 and was survived by his children, namely: Angel Custodio,
Generosa, Vilfor and Marcelo, all surnamed Nufable. Upon petition
for probate filed by said heirs and after due publication and hearing,
the then Court of First Instance of Negros Oriental (Branch II) issued
an Order dated March 30, 1966 admitting to probate the last will
and testament executed by the deceased Edras Nufable (Exhs. B, C
and C-1).
On June 6, 1966 the same court issued an Order approving the
Settlement of Estate submitted by the heirs of the late ESdras
Nufable, portions of which read:
KNOW ALL MEN BY THESE PRESENTS:
We, ANGEL CUSTODIO NUFABLE, GENEROSA NUFABLE, VILFOR
NUFABLE and MARCELO NUFABLE, all of legal ages (sic), Filipinos,
and with residence and postal address at Manjuyod, Negros
Oriental, Philippines,
HEREBY DECLARE AND
MAKE MANIFEST
1. That on August 9, 1965, Rev. Fr. Esdras Nufable died leaving (a)
Last Will and Testament (marked Exh. G) disposing (of) his
properties or estate in favor of his four legitimate children, namely:
Angel Custodio Nufable, Generosa Nufable, Vilfor Nufable and
Marcelo Nufable;
2. That on March 30, 1966 the said Last Will and Testament was
probated by the Honorable Court, Court of First Instance of Negros
Oriental, and is embodied in the same order appointing an
Administratrix, Generosa Nufable, but to qualify only if she put up a
necessary bond of P1,000.00;
3. That herein legitimate children prefer not to appoint an
Administratrix, as agreed upon (by) all the heirs, because they have
no objection as to the manner of disposition of their share made by
the testator, the expenses of the proceedings and that they have
already taken possession of their respective shares in accordance
with the will;
4. That the herein heirs agreed, as they hereby agree to settle the
estate in accordance with the terms and condition of the will in the
following manner, to wit:
a) That the parcel of land situated in Poblacion Manjuyod, Negros
Oriental remains undivided for community ownership but respecting
conditions imposed therein (sic) in the will;
xxx xxx xxx
(Exhs. "E" and "E-1")
Two months earlier, or on March 15, 1966, spouses Angel Custodio
and Aquilina Nufable mortgaged the entire property located at
Manjuyod to the Development Bank of the Philippines [DBP] (Pre-
trial Order, dated January 7, 1992, p. 103, Original Records). Said
mortgagors became delinquent for which reason the mortgaged
property was foreclosed by DBP on February 26, 1973 (id.).
On January 11, 1980, Nelson Nufable, the son of Angel Custodio
Nufable (who died on August 29, 1978 [TSN, Testimony of Nelson
Nufable, Hearing of August 18, 1992, p. 17]), purchased said
property from DBP (Exh. "1").
Generosa, Vilfor and Marcelo, all surnamed Nufable filed with the
lower court a complaint dated July 25, 1985 "To Annul Fraudulent
Transactions, to Quiet Title and To Recover Damages' against Nelson
Nufable, and wife, Silmor Nufable and his mother Aquilina Nufable.
Plaintiffs pray:
WHEREFORE, plaintiffs pray this Honorable Court that after trial
judgment be rendered ordering:
(a) That the said Deed of Sale (Annex "C") executed by the
Development Bank of the Philippines in favor of the defendants be
declared null and void as far as the three fourths (3/4) rights which
belongs (sic) to the plaintiffs are concerned;
(b) That the said three fourths (3/4) rights over the above parcel in
question be declared as belonging to the plaintiffs at one fourth
right to each of them;
(c) To order the defendants to pay jointly and severally to the
plaintiffs by way of actual and moral damages the amount of
P10,000.00 and another P5,000.00 as Attorney's fees, and to pay the
costs.
(d) Plus any other amount which this Court may deem just and
equitable. (p. 6, Original Records)
In their Answer, defendants contend:
4. Paragraph 4 is denied, the truth being that the late Angel Nufable
was the exclusive owner of said property, that as such owner he
mortgaged the same to the Development Bank of the Philippines on
March 15, 1966, that said mortgage was foreclosed and the DBP
became the successful bidder at the auction sale, that ownership
was consolidated in the name of the DBP, and that defendant
Nelson Nufable bought said property from the DBP thereafter.
During this period, the plaintiffs never questioned the transactions
which were public, never filed any third party claim nor attempted

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to redeem said property as redemptioners, and that said Deed of
Sale, Annex "B" to the complaint, is fictitious, not being supported
by any consideration; (pp. 20-21, id.)
The Deed of Sale (Annex "B"), referred to by the
parties is a notarized Deed of Sale, dated July 12,
1966 (marked as Exhibit "H") by virtue of which,
spouses Angel and Aquilina Nufable, as vendors,
sold 3/4 portion of the subject property to
herein plaintiffs for and in consideration of
P1,000.00 (Exh. "5").
2

On November 29, 1995, the Court of Appeals rendered judgment,
the dispositive portion
3
of which reads:
WHEREFORE, the appealed decision of the lower court is REVERSED
and SET ASIDE. A new judgment is hereby entered declaring
plaintiffs-appellants as the rightful co-owners of the subject
property and entitled to possession of 3/4 southern portion thereof;
and defendant-appellee Nelson Nufable to 1/4 portion.
No award on damages.
No costs.
Defendants-appellees' Motion for Reconsideration was denied for
lack of merit in the Resolution of the Court of Appeals
4
dated
October 2, 1996.
Hence, the present petition. Petitioners raise the following grounds
for the petition:
1. Honorable Court of Appeals erred in considering as controlling the
probate of the Last Will and Testament of Esdras Nufable, the
probate thereof not being an issue in this case;
2. The Honorable Court of Appeals erred in not considering the fact
that the Development Bank of the Philippines became absolute,
exclusive, legal and rightful owner of the land in question, from
whom petitioner Nelson Nufable acquired the same by purchase and
that, therefore, no award can be made in favor of private
respondent unless and until the Development Bank of the
Philippines' title thereto is first declared null and void by the court.
The Court of Appeals, in its decision, stated that the trial court failed
to take into consideration the probated will of the late Esdras
Nufable bequeathing the subject property to all his four children.
5
In
the present petition, petitioner present the issue of whether or not
the Last Will and Testament of Esdras Nufable and its subsequent
probate are pertinent and material to the question of the right of
ownership of petitioner Nelson Nufable who purchased the land in
question from, and as acquired property of, the Development Bank
of the Philippines (DBP, for short). They contend that the probate of
the Last Will Testament and of Esdras Nufable did not determine the
ownership of the land in question as against third
parties.1wphi1.nt
As a general rule, courts in probate proceedings are limited only to
passing upon the extrinsic validity of the will sought to be probated,
the due execution thereof, the testator's testamentary capacity and
the compliance with the requisites or solemnities prescribes by law.
Said court at this stage of the proceedings is not called to rule on the
rule on the intrinsic validity or efficacy of the will.
6
The question of
the intrinsic validity of a will normally comes only after the court has
declared that the will has been duly authenticated.
The records show that upon petition for probate filed by the heirs of
the late Esdras Nufable, an Order dated March 30, 1966 was issued
by then Court of First Instance of Negros Oriental, Branch II,
admitting to probate the last will and testament executed by the
decedent.
7
Thereafter, on June 6, 1966, the same court approved
the Settlement of Estate submitted by the heirs of the late Esdras
Nufable wherein they agreed "(T)hat the parcel land situated in
Poblacion Manjuyod, Negros Oriental remains undivided for
community ownership but respecting conditions imposed therein
(sic) in the will."
8
In paragraph 3 thereof, they stated that "they have
no objection as to the manner of disposition of their share made by
the testator, the expenses of the proceeding and that they have
already taken possession of their respective shares in accordance
with the will." Verily, it was the heirs of the late Esdras Nufable who
agreed among themselves on the disposition of their shares. The
probate court simply approved the agreement among the heirs
which approval was necessary for the validity of any disposition of
the decedent's estate.
9

It should likewise be noted that the late Esdras Nufable died on
August 9, 1965. When the entire property located at Manjuyod was
mortgaged on March 15, 1966 by his son Angel Custodio with DBP,
the other heirs of Esdras namely: Generosa, Vilfor and Marcelo
had already acquired successional rights over the said property. This
is so because of the principle contained in Article 777 of the Civil
Code to the effect that the rights to the succession are transmitted
from the moment of death of the decedent. Accordingly, for the
purpose of transmission of rights, it does not matter whether the
Last Will and Testament of the late Esdras Nufable was admitted on
March 30, 1966 or thereafter or that the Settlement of Estate was
approved on June 6, 1966 or months later. It is to be noted that the
probated will of the late Esdras Nufable specifically referred to the
subject property in stating that "the land situated in the Poblacion,
Manjuyod, Negros Oriental, should not be divided because this must
remain in common for them, but it is necessary to allow anyone of
them brothers and sisters to construct a house therein."
10
It was
therefor the will of the decedent that the subject property should
undivided, although the restriction should not exceed twenty (20)
years pursuant to Article 870
11
of the Civil Code.
Thus, when Angel Nufable and his spouses mortgaged the subject
property to DBP on March 15, 1966, they had no right to mortgage
the entire property. Angel's right over the subject property was
limited only to 1/4 pro indiviso share. As co-owner of the subject
property, Angel's right to sell, assign or mortgage is limited to that
portion that may be allotted to him upon termination of the co-
ownership. Well-entrenched is the rule that a co-owner can only
alienate his pro indiviso share in the co-owned property.
12

The Court of Appeals did not err in ruling that Angel Custodio
Nufable "had no right to mortgage the subject property in its
entirety. His right to encumber said property was limited only to 1/4
pro indiviso share of the property in question."
13
Article 493 of the
Civil Code spells out the rights or co-owners over a co-owned
property. Pursuant to said Article, a co-owner shall have full
ownership of his part and of the fruits and benefits pertaining
thereto. He has the right to alienate, assign or mortgage it, and even
substitute another person in its enjoyment. As a mere part owner,

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he cannot alienate the shares of the other co-owners. The
prohibition is premised on the elementary rule that "no one can give
what he does not have."
14

Moreover, respondents stipulated that they were not aware of the
mortgage by petitioners of the subject property.
15
This being the
case, a co-owner does not lose his part ownership of a co-owned
property when his share is mortgaged by another co-owner without
the former's knowledge and consent
16
as in the case at bar. It has
likewise been ruled that the mortgage of the inherited property is
not binding against co-heirs who never benefitted.
17

Furthermore, the Deed of Sale dated June 17, 1966 marked as
Exhibit "H" executed by spouses Angel and Aquilina Nufable in favor
of respondents Generosa, Vilfor and Marcelo wherein the former
sold, ceded and transferred back to the latter the 3/4 portion of the
subject property bolsters respondents' claim that there was co-
ownership. Petitioner Nelson himself claimed that he was aware of
the aforesaid Deed of Sale.
18

Anent the second ground of the petition, petitioners allege that the
Development Bank of the Philippines acquired ownership of the land
in question through foreclosure, purchase and consolidation of
ownership. Petitioners argue that if petitioner Nelson Nufable had
not bought said land from the DBP, private respondents, in order to
acquire said property, must sue said bank for the recovery thereof,
and in so doing, must allege grounds for the annulment of
documents evidencing the bank's ownership thereof. Petitioners
contend that since petitioner Nelson Nufable simply bought the
whole land from the bank, they cannot be deprived of the
ownership of 3/4 without making any pronouncement as to the
legality or illegality of the bank's ownership of said land. It is argued
that there was no evidence to warrant declaration of nullity of the
bank's acquisition of said land; and that neither was there a finding
by the court that the bank illegally acquired the said property.
As adverted to above, when the subject property was mortgaged by
Angel Custodio, he had no right to mortgage the entire property but
only with respect to his 1/4 pro indiviso share as the property was
subject to the successional rights of the other heirs of the late
Esdras. Moreover, in case of foreclosure; a sale would result in the
transmission of title to the buyer which is feasible only if the seller
can be in a position to convey ownership of the things sold.
19
And in
one case,
20
it was held that a foreclosure would be ineffective
unless the mortgagor has title to the property to be foreclosed.
Therefore, as regards the remaining 3/4 pro indiviso share, the same
was held in trust for the party rightfully entitled thereto,
21
who are
the private respondents herein.
Pursuant to Article 1451 of the Civil Code, when land passes by
succession to any person and he causes the legal title to be put in
the name of another, a trust is established by implication of law for
the benefit of the true owner. Likewise, under Article 1456 of the
same Code, if property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property
comes. In the case of Noel vs. Court of Appeals,
22
this Court held
that "a buyer of a parcel of land at a public auction to satisfy a
judgment against a widow acquired only one-half interest on the
land corresponding to the share of the widow and the other half
belonging to the heirs of her husband became impressed with a
constructive trust in behalf of said heirs."
Neither does the fact that DBP succeeded in consolidating
ownership over the subject property in its name terminate the
existing co-ownership. Registration of property is not a means of
acquiring ownership.
23
When the subject property was sold to and
consolidated in the name of DBP, it being the winning bidder in the
public auction, DBP merely held the 3/4 portion in trust for the
private respondents. When petitioner Nelson purchased the said
property, he merely stepped into the shoes of DBP and acquired
whatever rights and obligations appertain thereto.
This brings us to the issue of whether or not the DBP should have
been impleaded as party-defendant in the case at bar. Petitioners
contend that DBP was never impleaded and that due process
requires that DBP be impleaded so that it can defend its sale to
petitioner Nelson Nufable; and that it was the duty of private
respondents, and not of petitioner Nelson, to implead the bank and
ask for the annulment of documents evidencing the bank's
ownership of the disputed land.
In the Rejoinder to the Reply, private respondents that the non-
inclusion of DBP as a "necessary party" was not questioned by
petitioners from the time the Complaint was filed until the case was
"finished." It was only after the adverse decision by the respondent
Court of Appeals that petitioners raised the issue.
At the outset, it should be stated petitioners never raised this issue
in their Answers and pursuant to Section 2, Rule 9 of the Rules of
Court, defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived.
Nonetheless, the rule is that indispensable parties, i.e., parties in
action, shall be joined either as plaintiffs or defendants; the
inclusion as a party, i.e., persons who are not indispensable but
ought to be parties if complete relief is to be accorded as between
those already parties, the court may, in its discretion, proceed in the
action without making such persons parties, and the judgment
rendered therein shall be without prejudice to the rights of such
persons.
25
Proper parties, therefore, have been described as parties
whose presence in necessary in order to adjudicate the whole
controversy, but whose interests are so far separable that a final
decree can be made in their absence without affecting them.
26
Any
claim against a party may be severed and proceeded with
separately.
27

The pivotal issue to be determined is whether DBP is an
indispensable party in this case.
Private respondents do not question the legality of the foreclosure
of the mortgaged property and the subsequent sale of the same to
DBP. The subject property was already purchased by petitioner
Nelson from DBP and latter, by such sale, transferred its rights and
obligations to the former. Clearly, petitioners' interest in the
controversy is distinct and separable from the interest of DBP and a
final determination can be had of the action despite the non-
WHEREFORE, there being no reversible error in the decision
appealed from, the petition for review on certiorari is hereby
DENIED. SO ORDERED.

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G.R. No. 156117 May 26, 2005
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
JEREMIAS AND DAVID HERBIETO, respondents.
D E C I S I O N
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari, under Rule 45
of the 1997 Rules of Civil Procedure, seeking the reversal of the
Decision of the Court of Appeals in CA-G.R. CV No. 67625, dated 22
November 2002,
1
which affirmed the Judgment of the Municipal
Trial Court (MTC) of Consolacion, Cebu, dated 21 December 1999,
2

granting the application for land registration of the respondents.
Respondents in the present Petition are the Herbieto brothers,
Jeremias and David, who filed with the MTC, on 23 September 1998,
a single application for registration of two parcels of land, Lots No.
8422 and 8423, located in Cabangahan, Consolacion, Cebu (Subject
Lots). They claimed to be owners in fee simple of the Subject Lots,
which they purchased from their parents, spouses Gregorio Herbieto
and Isabel Owatan, on 25 June 1976.
3
Together with their
application for registration, respondents submitted the following set
of documents:
(a) Advance Survey Plan of Lot No. 8422, in the name of
respondent Jeremias; and Advance Survey Plan of Lot No.
8423, in the name of respondent David;
4

(b) The technical descriptions of the Subject Lots;
5

(c) Certifications by the Department of Environment and
Natural Resources (DENR) dispensing with the need for
Surveyor's Certificates for the Subject Lots;
6

(d) Certifications by the Register of Deeds of Cebu City on
the absence of certificates of title covering the Subject
Lots;
7

(e) Certifications by the Community Environment and
Natural Resources Office (CENRO) of the DENR on its
finding that the Subject Lots are alienable and disposable,
by virtue of Forestry Administrative Order No. 4-1063,
dated 25 June 1963;
8

(f) Certified True Copies of Assessment of Real Property
(ARP) No. 941800301831, in the name of Jeremias,
covering Lot No. 8422, issued in 1994; and ARP No.
941800301833, in the name of David, covering Lot No.
8423, also issued in 1994;
9
and
(g) Deed of Definite Sale executed on 25 June 1976 by
spouses Gregorio Herbieto and Isabel Owatan selling the
Subject Lots and the improvements thereon to their sons
and respondents herein, Jeremias and David, for P1,000.
Lot No. 8422 was sold to Jeremias, while Lot No. 8423 was
sold to David.
10

On 11 December 1998, the petitioner Republic of the Philippines
(Republic) filed an Opposition to the respondents' application for
registration of the Subject Lots arguing that: (1) Respondents failed
to comply with the period of adverse possession of the Subject Lots
required by law; (2) Respondents' muniments of title were not
genuine and did not constitute competent and sufficient evidence of
bona fide acquisition of the Subject Lots; and (3) The Subject Lots
were part of the public domain belonging to the Republic and were
not subject to private appropriation.
11

The MTC set the initial hearing on 03 September 1999 at 8:30 a.m.
12

All owners of the land adjoining the Subject Lots were sent copies of
the Notice of Initial Hearing.
13
A copy of the Notice was also posted
on 27 July 1999 in a conspicuous place on the Subject Lots, as well as
on the bulletin board of the municipal building of Consolacion, Cebu,
where the Subject Lots were located.
14
Finally, the Notice was also
published in the Official Gazette on 02 August 1999
15
and The
Freeman Banat News on 19 December 1999.
16

During the initial hearing on 03 September 1999, the MTC issued an
Order of Special Default,
17
with only petitioner Republic opposing
the application for registration of the Subject Lots. The respondents,
through their counsel, proceeded to offer and mark documentary
evidence to prove jurisdictional facts. The MTC commissioned the
Clerk of Court to receive further evidence from the respondents and
to submit a Report to the MTC after 30 days.
On 21 December 1999, the MTC promulgated its Judgment ordering
the registration and confirmation of the title of respondent Jeremias
over Lot No. 8422 and of respondent David over Lot No. 8423. It
subsequently issued an Order on 02 February 2000 declaring its
Judgment, dated 21 December 1999, final and executory, and
directing the Administrator of the Land Registration Authority (LRA)
to issue a decree of registration for the Subject Lots.
18

Petitioner Republic appealed the MTC Judgment, dated 21
December 1999, to the Court of Appeals.
19
The Court of Appeals, in
its Decision, dated 22 November 2002, affirmed the appealed MTC
Judgment reasoning thus:
In the case at bar, there can be no question that the land
sought to be registered has been classified as within the
alienable and disposable zone since June 25, 1963. Article
1113 in relation to Article 1137 of the Civil Code,
respectively provides that "All things which are within the
commerce of men are susceptible of prescription, unless
otherwise provided. Property of the State or any of its
subdivisions of patrimonial character shall not be the
object of prescription" and that "Ownership and other real
rights over immovables also prescribe through
uninterrupted adverse possession thereof for thirty years,
without need of title or of good faith."
As testified to by the appellees in the case at bench, their
parents already acquired the subject parcels of lands,
subject matter of this application, since 1950 and that they
cultivated the same and planted it with jackfruits,
bamboos, coconuts, and other trees (Judgment dated
December 21, 1999, p. 6). In short, it is undisputed that
herein appellees or their predecessors-in-interest had
occupied and possessed the subject land openly,
continuously, exclusively, and adversely since 1950.
Consequently, even assuming arguendo that appellees'

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possession can be reckoned only from June 25, 1963 or
from the time the subject lots had been classified as within
the alienable and disposable zone, still the argument of
the appellant does not hold water.
As earlier stressed, the subject property, being alienable
since 1963 as shown by CENRO Report dated June 23,
1963, may now be the object of prescription, thus
susceptible of private ownership. By express provision of
Article 1137, appellees are, with much greater right,
entitled to apply for its registration, as provided by Section
14(4) of P.D. 1529 which allows individuals to own land in
any manner provided by law. Again, even considering that
possession of appelless should only be reckoned from
1963, the year when CENRO declared the subject lands
alienable, herein appellees have been possessing the
subject parcels of land in open, continuous, and in the
concept of an owner, for 35 years already when they filed
the instant application for registration of title to the land
in 1998. As such, this court finds no reason to disturb the
finding of the court a quo.
20

The Republic filed the present Petition for the review and reversal of
the Decision of the Court of Appeals, dated 22 November 2002, on
the basis of the following arguments:
First, respondents failed to establish that they and their
predecessors-in-interest had been in open, continuous, and adverse
possession of the Subject Lots in the concept of owners since 12
June 1945 or earlier. According to the petitioner Republic,
possession of the Subject Lots prior to 25 June 1963 cannot be
considered in determining compliance with the periods of
possession required by law. The Subject Lots were classified as
alienable and disposable only on 25 June 1963, per CENRO's
certification. It also alleges that the Court of Appeals, in applying the
30-year acquisitive prescription period, had overlooked the ruling in
Republic v. Doldol,
21
where this Court declared that Commonwealth
Act No. 141, otherwise known as the Public Land Act, as amended
and as it is presently phrased, requires that possession of land of the
public domain must be from 12 June 1945 or earlier, for the same to
be acquired through judicial confirmation of imperfect title.
Second, the application for registration suffers from fatal infirmity as
the subject of the application consisted of two parcels of land
individually and separately owned by two applicants. Petitioner
Republic contends that it is implicit in the provisions of Presidential
Decree No. 1529, otherwise known as the Property Registration
Decree, as amended, that the application for registration of title to
land shall be filed by a single applicant; multiple applicants may file a
single application only in case they are co-owners. While an
application may cover two parcels of land, it is allowed only when
the subject parcels of land belong to the same applicant or
applicants (in case the subject parcels of land are co-owned) and are
situated within the same province. Where the authority of the
courts to proceed is conferred by a statute and when the manner of
obtaining jurisdiction is mandatory, it must be strictly complied with
or the proceedings will be utterly void. Since the respondents failed
to comply with the procedure for land registration under the
Property Registration Decree, the proceedings held before the MTC
is void, as the latter did not acquire jurisdiction over it.
I
Jurisdiction
Addressing first the issue of jurisdiction, this Court finds that the
MTC had no jurisdiction to proceed with and hear the application for
registration filed by the respondents but for reasons different from
those presented by petitioner Republic.
A. The misjoinder of causes of action and parties does not affect the
jurisdiction of the MTC to hear and proceed with respondents'
application for registration.
Respondents filed a single application for registration of the Subject
Lots even though they were not co-owners. Respondents Jeremias
and David were actually seeking the individual and separate
registration of Lots No. 8422 and 8423, respectively.
Petitioner Republic believes that the procedural irregularity
committed by the respondents was fatal to their case, depriving the
MTC of jurisdiction to proceed with and hear their application for
registration of the Subject Lots, based on this Court's
pronouncement in Director of Lands v. Court of Appeals,
22
to wit:
. . . In view of these multiple omissions which constitute
non-compliance with the above-cited sections of the Act,
We rule that said defects have not invested the Court with
the authority or jurisdiction to proceed with the case
because the manner or mode of obtaining jurisdiction as
prescribed by the statute which is mandatory has not been
strictly followed, thereby rendering all proceedings utterly
null and void.
This Court, however, disagrees with petitioner Republic in this
regard. This procedural lapse committed by the respondents should
not affect the jurisdiction of the MTC to proceed with and hear their
application for registration of the Subject Lots.
The Property Registration Decree
23
recognizes and expressly allows
the following situations: (1) the filing of a single application by
several applicants for as long as they are co-owners of the parcel of
land sought to be registered;
24
and (2) the filing of a single
application for registration of several parcels of land provided that
the same are located within the same province.
25
The Property
Registration Decree is silent, however, as to the present situation
wherein two applicants filed a single application for two parcels of
land, but are seeking the separate and individual registration of the
parcels of land in their respective names.
Since the Property Registration Decree failed to provide for such a
situation, then this Court refers to the Rules of Court to determine
the proper course of action. Section 34 of the Property Registration
Decree itself provides that, "[t]he Rules of Court shall, insofar as not
inconsistent with the provisions of this Decree, be applicable to land
registration and cadastral cases by analogy or in a suppletory
character and whenever practicable and convenient."
Considering every application for land registration filed in strict
accordance with the Property Registration Decree as a single cause
of action, then the defect in the joint application for registration
filed by the respondents with the MTC constitutes a misjoinder of
causes of action and parties. Instead of a single or joint application
for registration, respondents Jeremias and David, more

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appropriately, should have filed separate applications for
registration of Lots No. 8422 and 8423, respectively.
Misjoinder of causes of action and parties do not involve a question
of jurisdiction of the court to hear and proceed with the case.
26
They
are not even accepted grounds for dismissal thereof.
27
Instead,
under the Rules of Court, the misjoinder of causes of action and
parties involve an implied admission of the court's jurisdiction. It
acknowledges the power of the court, acting upon the motion of a
party to the case or on its own initiative, to order the severance of
the misjoined cause of action, to be proceeded with separately (in
case of misjoinder of causes of action); and/or the dropping of a
party and the severance of any claim against said misjoined party,
also to be proceeded with separately (in case of misjoinder of
parties).
The misjoinder of causes of action and parties in the present Petition
may have been corrected by the MTC motu propio or on motion of
the petitioner Republic. It is regrettable, however, that the MTC
failed to detect the misjoinder when the application for registration
was still pending before it; and more regrettable that the petitioner
Republic did not call the attention of the MTC to the fact by filing a
motion for severance of the causes of action and parties, raising the
issue of misjoinder only before this Court.
B. Respondents, however, failed to comply with the publication
requirements mandated by the Property Registration Decree, thus,
the MTC was not invested with jurisdiction as a land registration
court.
Although the misjoinder of causes of action and parties in the
present Petition did not affect the jurisdiction of the MTC over the
land registration proceeding, this Court, nonetheless, has discovered
a defect in the publication of the Notice of Initial Hearing, which bars
the MTC from assuming jurisdiction to hear and proceed with
respondents' application for registration.
A land registration case is a proceeding in rem,
28
and jurisdiction in
rem cannot be acquired unless there be constructive seizure of the
land through publication and service of notice.
29

Section 23 of the Property Registration Decree requires that the
public be given Notice of the Initial Hearing of the application for
land registration by means of (1) publication; (2) mailing; and (3)
posting. Publication of the Notice of Initial Hearing shall be made in
the following manner:
1. By publication.
Upon receipt of the order of the court setting the time for
initial hearing, the Commissioner of Land Registration shall
cause a notice of initial hearing to be published once in the
Official Gazette and once in a newspaper of general
circulation in the Philippines: Provided, however, that the
publication in the Official Gazette shall be sufficient to
confer jurisdiction upon the court. Said notice shall be
addressed to all persons appearing to have an interest in
the land involved including the adjoining owners so far as
known, and "to all whom it may concern." Said notice shall
also require all persons concerned to appear in court at a
certain date and time to show cause why the prayer of
said application shall not be granted.
Even as this Court concedes that the aforequoted Section 23(1) of
the Property Registration Decree expressly provides that publication
in the Official Gazette shall be sufficient to confer jurisdiction upon
the land registration court, it still affirms its declaration in Director of
Lands v. Court of Appeals
30
that publication in a newspaper of
general circulation is mandatory for the land registration court to
validly confirm and register the title of the applicant or applicants.
That Section 23 of the Property Registration Decree enumerated and
described in detail the requirements of publication, mailing, and
posting of the Notice of Initial Hearing, then all such requirements,
including publication of the Notice in a newspaper of general
circulation, is essential and imperative, and must be strictly
complied with. In the same case, this Court expounded on the
reason behind the compulsory publication of the Notice of Initial
Hearing in a newspaper of general circulation, thus
It may be asked why publication in a newspaper of general
circulation should be deemed mandatory when the law
already requires notice by publication in the Official
Gazette as well as by mailing and posting, all of which have
already been complied with in the case at hand. The
reason is due process and the reality that the Official
Gazette is not as widely read and circulated as newspaper
and is oftentimes delayed in its circulation, such that the
notices published therein may not reach the interested
parties on time, if at all. Additionally, such parties may not
be owners of neighboring properties, and may in fact not
own any other real estate. In sum, the all encompassing in
rem nature of land registration cases, the consequences of
default orders issued against the whole world and the
objective of disseminating the notice in as wide a manner
as possible demand a mandatory construction of the
requirements for publication, mailing and posting.
31

In the instant Petition, the initial hearing was set by the MTC, and
was in fact held, on 03 September 1999 at 8:30 a.m. While the
Notice thereof was printed in the issue of the Official Gazette, dated
02 August 1999, and officially released on 10 August 1999, it was
published in The Freeman Banat News, a daily newspaper printed in
Cebu City and circulated in the province and cities of Cebu and in the
rest of Visayas and Mindanao, only on 19 December 1999, more
than three months after the initial hearing.
Indubitably, such publication of the Notice, way after the date of the
initial hearing, would already be worthless and ineffective. Whoever
read the Notice as it was published in The Freeman Banat News and
had a claim to the Subject Lots was deprived of due process for it
was already too late for him to appear before the MTC on the day of
the initial hearing to oppose respondents' application for
registration, and to present his claim and evidence in support of
such claim. Worse, as the Notice itself states, should the claimant-
oppositor fail to appear before the MTC on the date of initial
hearing, he would be in default and would forever be barred from
contesting respondents' application for registration and even the
registration decree that may be issued pursuant thereto. In fact, the
MTC did issue an Order of Special Default on 03 September 1999.
The late publication of the Notice of Initial Hearing in the newspaper
of general circulation is tantamount to no publication at all, having
the same ultimate result. Owing to such defect in the publication of
the Notice, the MTC failed to constructively seize the Subject Lots
and to acquire jurisdiction over respondents' application for
registration thereof. Therefore, the MTC Judgment, dated 21

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December 1999, ordering the registration and confirmation of the
title of respondents Jeremias and David over Lots No. 8422 and
8423, respectively; as well as the MTC Order, dated 02 February
2000, declaring its Judgment of 21 December 1999 final and
executory, and directing the LRA Administrator to issue a decree of
registration for the Subject Lots, are both null and void for having
been issued by the MTC without jurisdiction.
II
Period of Possession
Respondents failed to comply with the required period of possession
of the Subject Lots for the judicial confirmation or legalization of
imperfect or incomplete title.
While this Court has already found that the MTC did not have
jurisdiction to hear and proceed with respondents' application for
registration, this Court nevertheless deems it necessary to resolve
the legal issue on the required period of possession for acquiring
title to public land.
Respondents' application filed with the MTC did not state the
statutory basis for their title to the Subject Lots. They only alleged
therein that they obtained title to the Subject Lots by purchase from
their parents, spouses Gregorio Herbieto and Isabel Owatan, on 25
June 1976. Respondent Jeremias, in his testimony, claimed that his
parents had been in possession of the Subject Lots in the concept of
an owner since 1950.
32

Yet, according to the DENR-CENRO Certification, submitted by
respondents themselves, the Subject Lots are "within Alienable and
Disposable, Block I, Project No. 28 per LC Map No. 2545 of
Consolacion, Cebu certified under Forestry Administrative Order No.
4-1063, dated June 25, 1963. Likewise, it is outside Kotkot-Lusaran
Mananga Watershed Forest Reservation per Presidential
Proclamation No. 932 dated June 29, 1992."
33
The Subject Lots are
thus clearly part of the public domain, classified as alienable and
disposable as of 25 June 1963.
As already well-settled in jurisprudence, no public land can be
acquired by private persons without any grant, express or implied,
from the government;
34
and it is indispensable that the person
claiming title to public land should show that his title was acquired
from the State or any other mode of acquisition recognized by law.
35

The Public Land Act, as amended, governs lands of the public
domain, except timber and mineral lands, friar lands, and privately-
owned lands which reverted to the State.
36
It explicitly enumerates
the means by which public lands may be disposed, as follows:
(1) For homestead settlement;
(2) By sale;
(3) By lease;
(4) By confirmation of imperfect or incomplete titles;
(a) By judicial legalization; or
(b) By administrative legalization (free patent).
37

Each mode of disposition is appropriately covered by separate
chapters of the Public Land Act because there are specific
requirements and application procedure for every mode.
38
Since
respondents herein filed their application before the MTC,
39
then it
can be reasonably inferred that they are seeking the judicial
confirmation or legalization of their imperfect or incomplete title
over the Subject Lots.
Judicial confirmation or legalization of imperfect or incomplete title
to land, not exceeding 144 hectares,
40
may be availed of by persons
identified under Section 48 of the Public Land Act, as amended by
Presidential Decree No. 1073, which reads
Section 48. The following-described citizens of the
Philippines, occupying lands of the public domain or
claiming to own any such lands or an interest therein, but
whose titles have not been perfected or completed, may
apply to the Court of First Instance of the province where
the land is located for confirmation of their claims and the
issuance of a certificate of title thereafter, under the Land
Registration Act, to wit:
(a) [Repealed by Presidential Decree No. 1073].
(b) Those who by themselves or through their
predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession
and occupation of agricultural lands of the public
domain, under a bona fide claim of acquisition of
ownership, since June 12, 1945, or earlier,
immediately preceding the filing of the
applications for confirmation of title, except
when prevented by war or force majeure. These
shall be conclusively presumed to have
performed all the conditions essential to a
Government grant and shall be entitled to a
certificate of title under the provisions of this
chapter.
(c) Members of the national cultural minorities
who by themselves or through their
predecessors-in-interest have been in open,
continuous, exclusive and notorious possession
and occupation of lands of the public domain
suitable to agriculture whether disposable or
not, under a bona fide claim of ownership since
June 12, 1945 shall be entitled to the rights
granted in subsection (b) hereof.
Not being members of any national cultural minorities, respondents
may only be entitled to judicial confirmation or legalization of their
imperfect or incomplete title under Section 48(b) of the Public Land
Act, as amended. Section 48(b), as amended, now requires adverse
possession of the land since 12 June 1945 or earlier. In the present
Petition, the Subject Lots became alienable and disposable only on
25 June 1963. Any period of possession prior to the date when the
Subject Lots were classified as alienable and disposable is
inconsequential and should be excluded from the computation of
the period of possession; such possession can never ripen into
ownership and unless the land had been classified as alienable and

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disposable, the rules on confirmation of imperfect title shall not
apply thereto.
41
It is very apparent then that respondents could not
have complied with the period of possession required by Section
48(b) of the Public Land Act, as amended, to acquire imperfect or
incomplete title to the Subject Lots that may be judicially confirmed
or legalized.
The confirmation of respondents' title by the Court of Appeals was
based on the erroneous supposition that respondents were claiming
title to the Subject Lots under the Property Registration Decree.
According to the Decision of the Court of Appeals, dated 22
November 2002, Section 14(4) of the Property Registration Decree
allows individuals to own land in any other manner provided by law.
It then ruled that the respondents, having possessed the Subject
Lots, by themselves and through their predecessors-in-interest,
since 25 June 1963 to 23 September 1998, when they filed their
application, have acquired title to the Subject Lots by extraordinary
prescription under Article 1113, in relation to Article 1137, both of
the Civil Code.
42

The Court of Appeals overlooked the difference between the
Property Registration Decree and the Public Land Act. Under the
Property Registration Decree, there already exists a title which is
confirmed by the court; while under the Public Land Act, the
presumption always is that the land applied for pertains to the State,
and that the occupants and possessors only claim an interest in the
same by virtue of their imperfect title or continuous, open, and
notorious possession.
43
As established by this Court in the preceding
paragraphs, the Subject Lots respondents wish to register are
undoubtedly alienable and disposable lands of the public domain
and respondents may have acquired title thereto only under the
provisions of the Public Land Act.
However, it must be clarified herein that even though respondents
may acquire imperfect or incomplete title to the Subject Lots under
the Public Land Act, their application for judicial confirmation or
legalization thereof must be in accordance with the Property
Registration Decree, for Section 50 of the Public Land Act reads
SEC. 50. Any person or persons, or their legal
representatives or successors in right, claiming any lands
or interest in lands under the provisions of this chapter,
must in every case present an application to the proper
Court of First Instance, praying that the validity of the
alleged title or claim be inquired into and that a certificate
of title be issued to them under the provisions of the Land
Registration Act.
44

Hence, respondents' application for registration of the Subject Lots
must have complied with the substantial requirements under
Section 48(b) of the Public Land Act and the procedural
requirements under the Property Registration Decree.
Moreover, provisions of the Civil Code on prescription of ownership
and other real rights apply in general to all types of land, while the
Public Land Act specifically governs lands of the public domain.
Relative to one another, the Public Land Act may be considered a
special law
45
that must take precedence over the Civil Code, a
general law. It is an established rule of statutory construction that
between a general law and a special law, the special law prevails
Generalia specialibus non derogant.
46

WHEREFORE, based on the foregoing, the instant Petition is
GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No.
67625, dated 22 November 2002, is REVERSED. The Judgment of the
MTC of Consolacion, Cebu in LRC Case No. N-75, dated 21 December
1999, and its Order, dated 02 February 2000 are declared NULL AND
VOID. Respondents' application for registration is DISMISSED.
SO ORDERED.


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G.R. No. L-23136 August 26, 1974
ISMAEL MATHAY, JOSEFINA MATHAY, DIOGRACIAS T. REYES and S.
ADOR DIONISIO, plaintiffs-appellants,
vs.
THE CONSOLIDATED BANK AND TRUST COMPANY, JOSE MARINO
OLONDRIZ, WILFRIDO C. TECSON, SIMON R. PATERNO, FERMIN Z.
CARAM, JR., ANTONIO P. MADRIGAL, JOSE P. MADRIGAL, CLAUDIO
TEEHANKEE, and ALFONSO JUAN OLONDRIZ, defendants-appellees.
CIPRIANO AZADA, MARIA CRISTINA OLONDRIZ PERTIERRA jointly
with her husband ARTURO PERTIERRA, and MARIA DEL PUY
OLONDRIZ DE STEVENS, movants-intervenors-appellants.
Deogracias T. Reyes & Associates for appellants.
Taada, Teehankee & Carreon for appellees.
Paterno Pedrena for appellee Fermin Z. Caram, Jr.

ZALDIVAR, J.:p
In this appeal, appellants-plaintiffs and movants-intervenors seek
the reversal of the order dated March 21, 1964 of the Court of First
Instance of Manila dismissing the complaint together with all other
pending incidents in Civil Case No. 55810.
The complaint in this case, filed on December 24, 1963 as a class
suit, under Section 12, Rule 3, of the Rules of Court, contained six
causes of action. Under the first cause of action, plaintiffs-appellants
alleged that they were, on or before March 28, 1962, stockholders in
the Consolidated Mines, Inc. (hereinafter referred to as CMI), a
corporation duly organized and existing under Philippine laws; that
the stockholders of the CMI, including the plaintiffs-appellants,
passed, at a regular stockholders' meeting, a Resolution providing:
(a) that the Consolidated Bank & Trust Co. (hereinafter referred to
as Bank) be organized with an authorized capital of P20,000,000.00;
(b) that the organization be undertaken by a Board of Organizers
composed of the President and Members of the Board of Directors
of the CMI; (c) that all stockholders of the CMI, who were legally
qualified to become stockholders, would be entitled to subscribe to
the capital stock of the proposed Bank "at par value to the same
extent and in the same amount as said stockholders' respective
share holdings in the CMI," as shown in its stock books on a date to
be fixed by the Board of Directors [which date was subsequently
fixed as January 15, 1963], provided that the right to subscribe
should be exercised within thirty days from the date so fixed, and
"that if such right to subscription be not so exercised then the
stockholders concerned shall be deemed to have thereby waived
and released ipso facto their right to such subscription in favor of
the Interim Board of Organizers of the Defendant Bank or their
assignees;" and (d) that the Board of Directors of the CMI be
authorized to declare a "special dividend" in an amount it would fix,
which the subscribing stockholders might authorize to be paid
directly to the treasurer of the proposed Bank in payment of the
subscriptions; that the President and members of the Board of
Directors of the CMI, who are the individuals-defendants-appellees
in the instant case, constituted themselves as the Interim Board of
Organizers; that said Board sent out, on or about November 20,
1962, to the CMI stockholders, including the plaintiffs-appellants,
circular letters with "Pre-Incorporation Agreement to Subscribe"
forms that provided that the payment of the subscription should be
made in cash from time to time or by the application of the special
dividend declared by the CMI, and that the subscription must be
made within the period from December 4, 1962 to January 15, 1963,
"otherwise such subscription right shall be deemed to have been
thereby ipso facto waived and released in favor of the Board of
Organizers of the Defendant Bank and their assignees"; that the
plaintiffs-appellants accomplished and filed their respective "Pre-
Incorporation Agreement to Subscribe" and paid in full their
subscriptions; that plaintiffs-appellants and the other CMI
subscribing stockholders in whose behalf the action was brought
also subscribed to a very substantial amount of shares; that on June
25, 1963, the Board of Organizers caused the execution of the
Articles or Incorporation of the proposed Bank indicating an original
subscription of 50,000 shares worth P5,000,000 subscribed and paid
only by six of the individuals-defendants-appellees, namely, Antonio
P. Madrigal, Jose P. Madrigal Simon R. Paterno, Fermin Z. Caram, Jr.,
Claudio Teehankee, and Wilfredo C. Tecson, thereby excluding the
plaintiffs-appellants and the other CMI subscribing stockholders who
had already subscribed; that the execution of said Articles of
Incorporation was "in violation of law and in breach of trust and
contractual agreement as a means to gain control of Defendant
Bank by Defendant Individuals and persons or entities chosen by
them and for their personal profit or gain in disregard of the rights
of Plaintiffs and other CMI Subscribing Stockholders;" that the paid-
in capital stock was raised, as required by the Monetary Board, to
P8,000,000.00, and individuals-defendants-appellees caused to be
issued from the unissued shares 30,000 shares amounting to
P3,000,000.00, all of which were again subscribed and paid for
entirely by individuals-defendants-appellees or entities chosen by
them "to the exclusion of Plaintiffs and other CMI subscribing
stockholders" "in violation of law and breach of trust and of the
contractual agreement embodied in the contractual agreement of
March 28, 1962"; that the Articles were filed with the Securities and
Exchange Commission which issued the Certificate of Incorporation
on June 25, 1963; that as of the date of the Complaint, the plaintiffs-
appellants and other CMI subscribing stockholders had been denied,
through the unlawful acts and manipulation of the defendant Bank
and Individuals-defendants-appellees, the right to subscribe at par
value, in proportion to their equities established under their
respective "Pre-Incorporation Agreements to Subscribe" to the
capital stock, i.e., (a) to the original issue of 50,000 shares and/or (b)
to the additional issue of 30,000 shares, and/or (c) in that portion of
said original or additional issue which was unsubscribed; that the
individuals-defendants-appellees and the persons chosen by them
had unlawfully acquired stockholdings in the defendant-appellee
Bank in excess of what they were lawfully entitled and held such
shares "in trust" for the plaintiffs-appellants and the other CMI
stockholders; that it would have been vain and futile to resort to
intra corporate remedies under the facts and circumstances alleged
above. As relief on the first cause of action, plaintiffs-appellants
prayed that the subscriptions and share holdings acquired by the
individuals-defendants- appellees and the persons chosen by them,
to the extent that plaintiffs-appellants and the other CMI
stockholders had been deprived of their right to subscribe, be
annulled and transferred to plaintiffs-appellants and other CMI
subscribing stockholders.
Besides reproducing all the above allegations in the other causes of
action, plaintiffs-appellants further alleged under the second cause
of action that on or about August 28, 1963, defendants-appellees
Antonio P. Madrigal, Jose P. Madrigal: Fermin Z. Caram, Jr., and
Wilfredo C. Tecson "falsely certified to the calling of a special
stockholders' meeting allegedly pursuant to due notice and call of

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Defendant Bank" although plaintiffs-appellants and other CMI
stockholders were not notified thereof, and amended the Articles of
Incorporation increasing the number of Directors from 6 to 7, and
had the illegally created Position of Director filled up by defendant-
appellee Alfonso Juan Olondriz, who was not competent or qualified
to hold such position. In the third cause of action, plaintiffs-
appellants claimed actual damages in an amount equivalent to the
difference between the par value of the shares they were entitled,
but failed, to acquire and the higher market value of the same
shares. In the fourth cause of action, Plaintiffs-appellants claimed
moral damages; in the fifth, exemplary damages; and in the sixth,
attorney's fees.
In his manifestation to the court on January 4, 1964, Francisco
Sevilla, who was one of the original plaintiffs, withdrew. On January
15, 1964 Cipriano Azada, Maria Cristina Olondriz Pertierra, Maria del
Puy Olondriz de Stevens (who later withdrew as intervenors-
appellants) and Carmen Sievert de Amoyo, filed a motion to
intervene, and to join the plaintiffs-appellants on record, to which
motion defendants-appellees, except Fermin Z. Caram, Jr., filed, on
January 17, 1964 their opposition.
On February 7, 1964 defendants-appellees, except Fermin Z. Caram,
Jr., filed a motion to dismiss on the grounds that (a) plaintiffs-
appellants had no legal standing or capacity to institute the alleged
class suit; (b) that the complaint did not state a sufficient and valid
cause of action; and (c) that plaintiffs-appellants' complaint against
the increase of the number of directors did not likewise state a
cause of action. Plaintiffs-appellants filed their opposition thereto on
February 21, 1964.
On March 4, 1964 appellants, plaintiffs and intervenors, filed a
verified petition for a writ of preliminary injunction to enjoin
defendants-appellees from considering or ratifying by resolution, at
the meeting of the stockholders of defendant-appellee Bank to be
held the following day, the unlawful apportionment of the shares of
the defendant-appellee Bank and the illegal amendment to its
Articles of Incorporation increasing the number of Directors, The
Court, after hearing, granted the writ, but subsequently set it aside
upon the appellees' filing a counter bond.
Some subscribers to the capital stock of the Bank like Concepcion
Zuluaga, et al., and Carlos Moran Sison, et al., filed separate
manifestations that they were opposing and disauthorizing the suit
of plaintiffs-appellants.
On March 7, 1964 defendants-appellees, except Fermin Z. Caram,
Jr., filed a supplemental ground for their motion to dismiss, to wit,
that the stockholders, except Fermin Z. Caram, Jr., who abstained,
had unanimously, at their regular annual meeting held on March 5,
1964, ratified and confirmed all the actuations of the organizers-
directors in the incorporation, organization and establishment of the
Bank.
In its order, dated March 21, 1964, the trial court granted the
motion to dismiss, holding, among other things, that the class suit
could not be maintained because of the absence of a showing in the
complaint that the plaintiffs-appellants were sufficiently numerous
and representative, and that the complaint failed to state a cause of
action. From said order, appellants, plaintiffs and intervenors,
interposed this appeal to this Court on questions of law and fact,
contending that the lower court erred as follows:
1. In holding that plaintiffs-appellants could not
maintain the present class suit because of the
absence of a showing in the complaint that they
were sufficiently numerous and representative;
II. In holding that the instant action could not be
maintained as a class suit because plaintiffs-
appellants did not have a common legal interest
in the subject matter of the suit;
III. In dismissing the present class suit on the
ground that it did not meet the requirements of
Rule 3, section 12 of the Rules of Court;
IV. In holding that the complaint was fatally
defective in that it failed to state with
particularity that plaintiffs-appellants had
resorted to, and exhausted, intra-corporate
remedies;
V. In resolving defendants-appellees' motion on
the basis of facts not alleged in the complaint;
VI. In holding that plaintiffs-appellants'
complaint stated no valid cause of action against
defendants-appellees;
VII. In not holding that a trust relationship
existed between the Interim Board of Organizers
of defendant-appellee Bank and the CMI
subscribing stockholders and in not holding that
the waiver was in favor of the Board of Trustees
for the CMI subscribing stockholders;
VIII. In holding that the failure of plaintiffs-
appellants to allege that they had paid or had
offered to pay for the shares allegedly pertaining
to them constituted another ground for
dismissal;
XI. In holding that the allegations under the
second cause of action stated no valid cause of
action due to a fatal omission to allege that
plaintiffs-appellants were stockholders of record
at the time of the holding of the special
stockholders' meeting;
X. In holding that plaintiffs-appellants' complaint
stated no cause of action against defendant-
appellee Bank; and
XI. In considering the resolution of ratification
and confirmation and in holding that the
resolution rendered the issues in this case moot.
The assigned error revolve around two questions namely: (1)
whether the instant action could be maintained as a class suit, and
(2) whether the complaint stated a cause of action. These issues
alone will be discussed.

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1. Appellants contended in the first three assigned errors that the
trial court erred in holding that the present suit could not be
maintained as a class suit, and in support thereof argued that the
propriety of a class suit should be determined by the common
interest in the subject matter of the controversy; that in the instant
case there existed such common interest which consisted not only in
the recovery of the shares of which the appellants were unlawfully
deprived, but also in divesting the individuals-defendants-appellees
and the person or entities chosen by them of control of the appellee
Bank.
1
; that the complaint showed that besides the four plaintiff-
appellants of record, and the four movant-intervenors-appellants
there were in the appellee Bank many other stockholders who,
tough similarly situated as the appellants, did not formally include
themselves as parties on record in view of the representative
character of the suit; that the test, in order to determine the legal
standing of a party to institute a class suit, was not one, of number,
but whether or not the interest of said party was representative of
the persons in whose behalf the class suit was instituted; that
granting arguendo, that the plaintiffs-appellants were not
sufficiently numerous and representative, the court should not have
dismissed the action, for insufficiency of number in a class suit was
not a ground for a motion to dismiss, and the court should have
treated the suit as an action under Rule 3, section 6, of the Rules of
Court which permits a joinder of parties.
Defendants-appellees, on the contrary, stressed that the instant suit
was instituted as a class suit and the plaintiffs-appellants did not sue
in their individual capacities for the protection of their individual
interests; that the plaintiffs appellants of record could not be
considered numerous and representative, as said plaintiffs-
appellants were only four out of 1,500 stockholders, and owned only
8 shares out of the 80,000 shares of stock of the appellee Bank; that
even if to the four plaintiffs-appellants were added the four
movants-intervenors-appellants the situation would be the same as
two of the intervenors, to wit, Ma. Cristina Olondriz Pertierra and
Ma. del Puy Olondriz de Stevens, could not sue as they did not have
their husbands' consent; that it was necessary that in a class suit the
complaint itself should allege facts showing that the plaintiffs were
sufficiently numerous and representative, and this did not obtain in
the instant case, as the complaint did not. even allege how many
other CMI stockholders were "similarly situated"; that the
withdrawal of one plaintiff, Francisco Sevilla, the subsequent
disclaimers of any interest in the suit made in two separate
pleadings by other CMI stockholders and the disauthorization of
their being represented by plaintiffs-appellants by the 986 (out of
1,663) stockholders who attended the annual meeting of bank
stockholders on March 5, 1964, completely negated plaintiffs-
appellants' pretension that they were sufficiently numerous and
representative or that there were many other stockholders similarly
situated whom the plaintiffs-appellants allegedly represented; that
plaintiffs-appellants did not have that common or general interest
required by the Rules of Court in the subject matter of the suit.
2

In their Reply Brief, appellants insisted that non-compliance with
Section 12, Rule 3, not being one enumerated in Rules 16 and 17,
was not a ground for dismissal; that the requirements for a class had
been complied with; that the required common interest existed
even if the interests were several for there was a common question
of law or fact and a common relief was sought; that the common or
general interest could be in the object of the action, in the result of
the proceedings, or in the question involved in the action, as long as
there was a common right based on the same essential facts; that
plaintiffs-appellants adequately represented the aggrieved group of
bank stockholders, inasmuch as appellants' interests were not
antagonistic to those of the latter, and appellants were in the same
position as the group in whose behalf the complaint was filed.
The governing statutory provision for the maintenance of a class suit
is Section 12 of Rule 3 of the Rules of Court, which reads as follows:
Sec. 12. Class suit When the subject matter of
the controversy is one of common or general
interest to many persons, and the parties are so
numerous that it is impracticable to bring them
all before the court, one or more may sue or
defend for the benefit of -ill. But in such case the
court shall make sure that the parties actually
before it are sufficiently numerous and
representative so that all interests concerned
are fully protected. Any party in interest shall
have a right to intervene in protection of his
individual interest.
The necessary elements for the maintenance of a class suit are
accordingly: (1) that the subject matter of the controversy be one of
common or general interest to many persons, and (2) that such
persons be so numerous as to make it impracticable to bring them
all to the court. An action does not become a class suit merely
because it is designated as such in the pleadings. Whether the suit is
or is not a class quit depends upon the attending facts, and the
complaint, or other pleading initiating the class action should allege
the existence of the necessary facts, to wit, the existence of a
subject matter of common interest, and the existence of a class and
the number of persons in the alleged class,
3
in order that the court
might be enabled to determine whether the members of the class
are so numerous as to make it impracticable to bring them all before
the court, to contrast the number appearing on the record with the
number in the class and to determine whether claimants on record
adequately represent the class and the subject matter of general or
common interest.
4

The complaint in the instant case explicitly declared that the
plaintiffs- appellants instituted the "present class suit under Section
12, Rule 3, of the Rules of Court in. behalf of CMI subscribing
stockholders"
5
but did not state the number of said CMI subscribing
stockholders so that the trial court could not infer, much less make
sure as explicitly required by the sufficiently numerous and
representative in order that all statutory provision, that the parties
actually before it were interests concerned might be fully protected,
and that it was impracticable to bring such a large number of parties
before the court.
The statute also requires, as a prerequisite to a class suit, that the
subject-matter of the controversy be of common or general interest
to numerous persons. Although it has been remarked that the
"innocent 'common or general interest' requirement is not very
helpful in determining whether or not the suit is proper",
6
the
decided cases in our jurisdiction have more incisively certified the
matter when there is such common or general interest in the subject
matter of the controversy. By the phrase "subject matter of the
action" is meant "the physical facts, the things real or personal, the
money, lands, chattels, and the like, in relation to which the suit is
prosecuted, and not the delict or wrong committed by the
defendant."
7

This Court has ruled that a class suit did not lie in an action for
recovery of real property where separate portions of the same

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parcel were occupied and claimed individually by different parties to
the exclusion of each other, such that the different parties had
determinable, though undivided interests, in the property in
question.
8
It his likewise held that a class suit would not lie against
319 defendants individually occupying different portions of a big
parcel of land, where each defendant had an interest only in the
particular portion he was occupying, which portion was completely
different from the other portions individually occupied by other
defendants, for the applicable section 118 of the Code of Civil
Procedure relates to a common and general interest in single
specific things and not to distinct ones.
9
In an action for the
recovery of amounts that represented surcharges allegedly collected
by the city from some 30,000 customers of four movie houses, it
was held that a class suit did not lie, as no one plaintiff had any right
to, or any share in the amounts individually claimed by the others, as
each of them was entitled, if at all, only to the return of what he had
personally paid.
10

The interest, subject matter of the class suits in the above cited
cases, is analogous to the interest claimed by appellants in the
instant case. The interest that appellants, plaintiffs and intervenors,
and the CMI stockholders had in the subject matter of this suit
the portion of stocks offering of the Bank left unsubscribed by CMI
stockholders who failed to exercise their right to subscribe on or
before January 15, 1963 was several, not common or general in
the sense required by the statute. Each one of the appellants and
the CMI stockholders had determinable interest; each one had a
right, if any, only to his respective portion of the stocks. No one of
them had any right to, or any interest in, the stock to which another
was entitled. Anent this point, the trial court correctly remarked:
It appears to be the theory of the plaintiffs borne
out by the prayer, that each subscribing CMI
stockholder is entitled to further subscribe to a
certain Proportion depending upon his
stockholding in the CMI, of the P8 million capital
stock of the defendant bank open to
subscription (out of the 20 million authorized
capital stock) as well as the unsubscribed portion
of the P8 million stock offering which were left
unsubscribed by those CMI stockholders who for
one reason or another had failed to exercise
their subscription rights on or before January 15,
1963. Under the plaintiffs' theory therefore,
each subscribing CMI stockholder was entitled to
subscribe to a definite number of shares both in
the original offering of P8 million and in that part
thereof not subscribed on or before the deadline
mentioned, so that one subscribing CMI
stockholder may be entitled to subscribe to one
share, another to 3 shares and a third to 11
shares, and so on, depending upon the amount
and extent of CMI stockholding. But except for
the fact that a question of law the proper
interpretation of the waiver provisions of the
CMI stockholders' resolution of March 28, 1962
is common to all, each CMI subscribing stock
holder has a legal interest in, and a claim to, only
his respective proportion of shares in the
defendant bank, and none with regard to any of
the shares to which another stockholder is
entitled. Thus plaintiff Ismael Mathay has no
legal interest in, or claim to, any share claimed
by any or all of his co-plaintiffs from the
defendant individuals. Hence, no CMI
subscribing stockholder or, for that matter, not
any number of CMI stockholders can maintain a
class suit in behalf of others,...
11

Even if it be assumed, for the sake of argument, that the appellants
and the CMI stockholders suffered wrongs that had been committed
by similar means and even pursuant to a single plan of the Interim
Board of Organizers of the Bank, the wrong suffered by each of them
would constitute a wrong separate from those suffered by the other
stockholders, and those wrongs alone would not create that
common or general interest in the subject matter of the controversy
as would entitle any one of them to bring a class suit on behalf of
the others. Anent this point it has been said that:
Separate wrongs to separate persons, although
committed by similar means and even pursuant
to a single plan, do not alone create a 'common'
or 'general' interest in those who are wronged so
as to entitle them to maintain a representative
action.
12

Appellants, however, insisted, citing American authorities,
13
that a
class suit might be brought even if the interests of plaintiffs-
appellants might be several as long as there was a common question
of law or fact affecting them and a common relief was sought. We
have no conflict with the authorities cited; those were rulings under
the Federal Rules of Civil Procedure, pursuant to Rule 23 of which,
there were three types of class suits, namely: the true, the hybrid,
and the spurious, and these three had only one feature in common,
that is, in each the persons constituting the class must be so
numerous as to make it impracticable to bring them all before the
court. The authorities cited by plaintiffs-appellants refer to the
spurious class action (Rule 23 (a) (3) which involves a right sought to
be enforced, which is several, and there is a common question of
law or fact affecting the several rights and a common relief is
sought.
14
The spurious class action is merely a permissive joinder
device; between the members of the class there is no jural
relationship, and the right or liability of each is distinct, the class
being formed solely by the presence of a common question of law or
fact.
15
This permissive joinder is provided in Section 6 of Rule 3, of
our Rules of Court. Such joinder is not and cannot be regarded as a
class suit, which this action purported and was intended to be as per
averment of the complaint.
It may be granted that the claims of all the appellants involved the
same question of law. But this alone, as said above, did not
constitute the common interest over the subject matter
indispensable in a class suit. The right to purchase or subscribe to
the shares of the proposed Bank, claimed by appellants herein, is
analogous to the right of preemption that stockholders have when
their corporation increases its capital. The right to preemption, it has
been said, is personal to each stockholder,
16
and while a
stockholder may maintain a suit to compel the issuance of his
proportionate share of stock, it has been ruled, nevertheless, that he
may not maintain a representative action on behalf of other
stockholders who are similarly situated.
17
By analogy, the right of
each of the appellants to subscribe to the waived stocks was
personal, and no one of them could maintain on behalf of others
similarly situated a representative suit.
Straining to make it appear that appellants and the CMI subscribing
stockholders had a common or general interest in the subject matter

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of the suit, appellants stressed in their brief that one of the reliefs
sought in the instant action was "to divest defendant individuality
and the persons or entities chosen by them of control of the
defendant bank."
18
This relief allegedly sought by appellants did not,
however, appear either in the text or in the prayer of the complaint.
Appellants, furthermore, insisted that insufficiency of number in a
class suit was not a ground for dismissal of one action. This Court
has, however, said that where it appeared that no sufficient
representative parties had been joined, the dismissal by the trial
court of the action, despite the contention by plaintiffs that it was a
class suit, was correct.
19
Moreover, insofar as the instant case is
concerned, even if it be granted for the sake of argument, that the
suit could not be dismissed on that ground, it could have been
dismissed, nevertheless, on the ground of lack of cause of action
which will be presently discussed. .
2. Appellants supported their assigned error that the court erred in
holding that the complaint stated no valid cause of action, by
claiming that paragraph 15 together with the other allegations of
the complaint to the effect that defendants-appellees had
unlawfully acquired stockholdings in the capital stock of defendant-
appellee Bank in excess of what they were lawfully entitled to, in
violation of law and in breach of trust and the contractual
agreement, constituted a valid and sufficient cause of action;
20
and
that only the allegations in the complaint should have been
considered by the trial court in determining whether the complaint
stated a cause of action or not.
Defendants-appellees, on the contrary, maintained that the
allegations of the complaint should not be the only ones to be
considered in determining whether there is a cause of action; that
even if the ultimate facts alleged in the first cause of action of the
complaint be the only ones considered the complaint would still fail
to state a valid cause of action on the following grounds: first, there
was no allegation regarding appellants' qualification to subscribe to
the capital stock of the appellee Bank, for under the CMI
stockholders' resolution of March 28, 1962, only those qualified
under the law were entitled to subscribe, and under the regulations
of the Monetary Board, only natural-born Filipino citizens could be
stockholders of a banking corporation organized under the laws of
the Philippines, and nowhere did the complaint alleged that
plaintiffs-appellants were natural born Filipino citizens.
21
Second,
appellants' averment in paragraph 8 that they "subscribed," and
their averment in paragraph 15 that they were "denied the right to
subscribe ... to the capital stock of the defendant Bank", were
inconsistent, and hence neutralized each other, thereby leaving in
shambles the first cause of action. Third, there was no allegation
that appellants had not yet received or had not been issued the
corresponding certificates of stock covering the shares they had
subscribed and paid for. Fourth, the allegations failed to show the
existence of the supposed trust; and fifth, the complaint failed to
allege that plaintiffs-appellants had paid or offered to pay for the
shares allegedly pertaining to them.
22

Let us premise the legal principles governing the motion to dismiss
on the ground of lack of cause of action.
Section 1, Rule 16 of the Rules of Court providing in part that: .
Within the time for pleading a motion to dismiss
may be made on any of the following grounds:
....
(g) That the complaint states no cause of action.
..1.
explicitly requires that the sufficiency of the complaint must be
tested exclusively on the basis of the complaint itself and no other
should be considered when the ground for motion to dismiss is that
the complaint states no cause of action. Pursuant thereto this Court
has ruled that:
As a rule the sufficiency of the complaint, when Challenged in a
motion to dismiss, must be determined exclusively on the basis of
the facts alleged therein.
23

It has been likewise held that a motion to dismiss based on lack of
cause of action hypothetically admits the truth of the allegations of
fact made in the complaint.
24
It is to be noted that only the facts
well pleaded in the complaint, and likewise, any inferences fairly
deducible therefrom, are deemed admitted by a motion to dismiss.
Neither allegations of conclusions
25
nor allegations of facts the
falsity of which the court may take judicial notice are deemed
admitted.
26
The question, therefore, submitted to the Court in a
motion to dismiss based on lack of cause of action is not whether
the facts alleged in the complaint are true, for these are
hypothetically admitted, but whether the facts alleged are sufficient
to constitute a cause of action such that the court may render a valid
judgment upon the facts alleged therein.
A cause of action is an act or omission of one party in violation of the
legal right of the other. Its essential elements are, namely: (1) the
existence of a legal right in the plaintiff, (2) a correlative legal duty in
the defendant, and (3) an act or omission of the defendant in
violation of plaintiff's right with consequential injury or damage to
the plaintiff for which he may maintain an action for the recovery of
damages or other appropriate relief.
27
On the other hand, Section 3
of Rule 6 of the Rules of Court provides that the complaint must
state the ultimate facts constituting the plaintiff's cause of action.
Hence, where the complaint states ultimate facts that constitute the
three essential elements of a cause of action, the complaint states a
cause of action;
28
otherwise, the complaint must succumb to a
motion to dismiss on that ground.
The legal principles having been premised, let us now analyze and
discuss appellant's various causes of action.
Appellants' first cause of action, pursuant to what has been
premised above, should have consisted of: (1) the right of appellants
as well as of the other CMI stockholders to subscribe, in proportion
to their equities established under their respective "Pre-
Incorporation Agreements to Subscribe", to that portion of the
capital stock which was unsubscribed because of failure of the CMI
stockholders to exercise their right to subscribe thereto; (2) the legal
duty of the appellant to have said portion of the capital stock to be
subscribed by appellants and other CMI stockholders; and (3) the
violation or breach of said right of appellants and other CMI
stockholders by the appellees.
Did the complaint state the important and substantial facts directly
forming the basis of the primary right claimed by plaintiffs? Before
proceeding to elucidate this question, it should be noted that a bare
allegation that one is entitled to something is an allegation of a
conclusion. Such allegations adds nothing to the pleading, it being
necessary to plead specifically the facts upon which such conclusion

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is founded.
29
The complaint alleged that appellants were
stockholders of the CMI; that as such stockholders, they were
entitled; by virtue of the resolution of March 28, 1962, to subscribe
to the capital stock of the proposed Consolidated Bank and Trust
Co., at par value to the same extent and in the same amount as said
stockholders' respective share holdings in the CMI as shown in the
latter's stock book as of January 15, 1963, the right to subscribe to
be exercised until January 15, 1963, provided said stockholders of
the CMI were qualified under the law to become stockholders of the
proposed Bank;
30
that appellants accomplished and filed their
respective "Pre-Incorporation Agreements to Subscribe" and fully
paid the subscription.
31

These alleged specific facts did not even show that appellants were
entitled to subscribe to the capital stock of the proposed Bank, for
said right depended on a condition precedent, which was, that they
were qualified under the law to become stockholders of the Bank,
and there was no direct averment in the complaint of the facts that
qualified them to become stockholders of the Bank. The allegation
of the fact that they subscribed to the stock did not, by necessary
implication, show that they were possessed of the necessary
qualifications to become stockholders of the proposed Bank.
Assuming arguendo that appellants were qualified to become
stockholders of the Bank, they could subscribe, pursuant to the
explicit terms of the resolution of March 28, 1962, "to the same
extent and in the same amount as said stockholders' respective
stockholdings in the CMI" as of January 15, 1963.
32
This was the
measure of the right they could claim to subscribe to waived stocks.
Appellants did not even aver that the stocks waived to the
subscription of which they claimed the right to subscribe, were
comprised in "the extent and amount" of their respective share
holdings in the CMI. It is not surprising that they did not make such
an averment for they did not even allege the amount of shares of
stock to which they claimed they were entitled to subscribe. The
failure of the complaint to plead specifically the above facts
rendered it impossible for the court to conclude by natural
reasoning that the appellants and other CMI stockholders had a
right to subscribe to the waived shares of stock, and made any
allegation to that effect a conclusion of the pleader, not an ultimate
fact, in accordance with the test suggested by the California
Supreme Court, to wit:
If from the facts in evidence, the result can be
reached by that process of natural reasoning
adopted in the investigation of truth, it becomes
an ultimate fact, to be found as such. If, on the
other hand, resort must be had to the artificial
processes of the law, in order to reach a final
determination, the result is a conclusion of law.
33

Let us now pass to the second and third elements that would have
constituted the first cause of action. Did the complaint allege as
ultimate facts the legal duty of defendants-appellees to have a
portion of the capital stock subscribed to by appellants? Did the
complaint allege as ultimate facts that defendants appellees had
violated appellants' right?
Even if it be assumed arguendo that defendants-appellees had the
duty to have the waived stocks subscribed to by the CMI
stockholders, this duty was not owed to all the CMI stockholders,
but only to such CMI stockholders as were qualified to become
stockholders of the proposed Bank. Inasmuch as it has been shown
that the complaint did not contain ultimate facts to show that
plaintiffs-appellants were qualified to become stockholders of the
Bank, it follows that the complaint did not show that defendants-
appellees were under duty to have plaintiffs-appellants subscribe to
the stocks of the proposed Bank. It inevitably follows also that the
complaint did not contain ultimate facts to show that the right of
the plaintiffs-appellants to subscribe to the shares of the proposed
Bank had been violated by defendants-appellees. How could a non-
existent right be violated?
Let us continue the discussion further. The complaint alleged that by
virtue of the resolution of March 28, 1962, the President and
Members of the Board of Directors of the CMI would be constituted
as a Board of Organizers to undertake and carry out the organization
of the Bank;
34
that the Board of Organizers was constituted and
proceeded with the establishment of the Bank,
35
that the persons
composing the Board of Organizers were the individuals-defendants-
appellees;
36
that the Board of Organizers sent our circular letters
with "Pre-Incorporation Agreement to Subscribe" forms
37
which
specified, among others, "such subscription right shall be deemed
ipso facto waived and released in favor of the Board of Organizers of
the defendant Bank and their assignees";
38
that in the Articles of
Incorporation prepared by the Board of Organizers, the individuals-
defendants-appellees alone appeared to have subscribe to the 50,
shares;
39
and that individuals-defendants-appellees again subscribe
to all the additional 30,000 shares.
40
From these facts, appellants
concluded that they were denied their right to subscribe in
proportion to their equities;
41
that the individuals-defendants-
appellees unlawfully acquired stockholdings far in excess of what
they were lawfully entitled in violation of law and in breach of trust
and of contractual agreement;
42
and that, because of matters
already alleged, the individuals-defendants-appellees "hold their
shares in the defendant bank in trust for plaintiffs."
43

The allegation in the complaint that the individuals-defendants-
appellees held their shares "in trust" for plaintiffs-appellants without
averment of the facts from which the court could conclude the
existence of the alleged trust, was not deemed admitted by the
motion to dismiss for that was a conclusion of law. Express
averments "that a party was the beneficial owner of certain
property; ... that property or money was received or held in trust, or
for the use of another; that particular funds were trust funds; that a
particular transaction created an irrevocable trust; that a person
held Property as constructive trustee; that on the transfer of certain
property a trust resulted" have been considered as mere conclusions
of law.
44
The facts alleged in the complaint did not, by logical
reasoning, necessarily lead to the conclusion that defendants-
appellees were trustees in favor of appellants of the shares of stock
waived by the CMI stockholders who failed to exercise their right to
subscribe. In this connection, it has been likewise said that:
"The general rule is that an allegation of duty in terms
unaccompanied by a statement of the facts showing the existence of
the duty, is a mere conclusion of law, unless there is a relation set
forth from which the law raises the duty."
45

In like manner, the allegation that individuals-defendants-appellees
held said shares in trust was no more than an interpretation by
appellants of the effect of the waiver clause of the Resolution and as
such it was again a mere conclusion of law. It has been said that:

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The following are also conclusions of law: ... an
allegation characterizing an instrument or
purporting to interpret it and state its effects, ...
46

Allegations in petition in the nature of conclusions about the
meaning of contract, inconsistent with stated terms of the contract,
cannot be considered.
47

The allegation that the defendants-appellee acquired stockholdings
far in excess of what they were lawfully entitled, in violation of law
and in breach of trust and of contractual agreement, is also mere
conclusion of law.
Of course, the allegation that there was a violation of trust duty was
plainly a conclusion of law, for "a mere allegation that it was the
duty of a party to do this or that, or that he was guilty of a breach of
duty, is a statement of a conclusion not of fact."
48

An averment ... that an act was 'unlawful' or
'wrongful' is a mere legal conclusion or opinion
of the pleader.
49

Moreover, plaintiffs-appellants did not state in the complaint the
amount of subscription the individual defendant-appellee were
entitled to; hence there was no basis for the court to determine
what amount subscribed to by them was excessive.
From what has been said, it is clear that the ultimate facts stated
under the first cause of action are not sufficient to constitute a
cause of action.
The further allegations in the second cause of action that the calling
of a special meeting was "falsely certified", that the seventh position
of Director was "illegally created" and that defendant Alfonso Juan
Olondriz was "not competent or qualified" to be a director are mere
conclusions of law, the same not being necessarily inferable from
the ultimate facts stated in the first and second causes of action. It
has been held in this connection that:
An averment that ... an act was 'unlawful' or
'wrongful' is a mere legal conclusion or opinion
of the pleader. The same is true of allegations
that an instrument was 'illegally' certified or ...
that an act was arbitrarily done ..."
50

A pleader states a mere conclusion when he
makes any of the following allegations: that a
party was incapacitated to enter into a contract
or convey
property ...
51

The third, fourth, fifth and sixth causes of action depended on the
first cause of action, which, as has been shown, did not state
ultimate facts sufficient to constitute a cause of action. It stands to
reason, therefore, that said causes of action would also be fatally
defective.
It having been shown that the complaint failed to state ultimate
facts to constitute a cause of action, it becomes unnecessary to
discuss the other assignments of errors.
WHEREFORE, the instant appeal is dismissed, and the order dated
March 21, 1964 of the Court of First Instance of Manila dismissing
the complaint in Civil Case No. 55810 is affirmed, with costs in this
instance against appellants. It is so ordered.
Fernando, Barredo, Fernandez and Aquino, JJ, concur.
Antonio, J., took no part.


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G.R. No. 152272 March 5, 2012
JUANA COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C.
BAUTISTA, BRIGIDO DIMACULANGAN, DOLORES P. PRADO,
IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M. MERCADO,
LEOVINO C. DATARIO, AIDA A. ABAYON, NAPOLEON M. DIMAANO,
ROSITA G. ESTIGOY and NELSON A. LOYOLA, Petitioners,
vs.
FIL-ESTATE LAND, INC., FIL ESTATE ECOCENTRUM CORPORATION,
LA PAZ HOUSING AND DEVELOPMENT CORPORATION, WARBIRD
SECURITY AGENCY, ENRIQUE RIVILLA, MICHAEL E. JETHMAL and
MICHAEL ALUNAN, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - x
G. R. No. 152397
FIL-ESTATE LAND, INC., FIL ESTATE ECOCENTRUM CORPORATION,
LA PAZ HOUSING AND DEVELOPMENT CORPORATION, WARBIRD
SECURITY AGENCY, ENRIQUE RIVILLA, MICHAEL E. JETHMAL and
MICHAEL ALUNAN, Petitioners,
vs.
JUANA COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C.
BAUTISTA, BRIGIDO DIMACULANGAN, DOLORES P. PRADO,
IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M. MERCADO,
LEOVINO C. DATARIO, AIDA A. ABAYON, NAPOLEON M. DIMAANO,
ROSITA G. ESTIGOY and NELSON A. LOYOLA, Respondents.
D E C I S I O N
MENDOZA, J.:
Before the Court are two (2) consolidated petitions assailing the July
31, 2001 Decision
1
and February 21, 2002 Resolution
2
of the Court of
Appeals (CA) in CA-G.R. SP No. 60543, which annulled and set aside
the March 3, 1999 Order
3
of the Regional Trial Court, Branch 25,
Bian, Laguna (RTC), granting the application for the issuance of a
writ of preliminary injunction, and upheld the June 16, 2000
Omnibus Order
4
denying the motion to dismiss.
The Facts:
On January 20, 1999, Juana Complex I Homeowners Association, Inc.
(JCHA), together with individual residents of Juana Complex I and
other neighboring subdivisions (collectively referred as JCHA, et. al.),
instituted a complaint
5
for damages, in its own behalf and as a class
suit representing the regular commuters and motorists of Juana
Complex I and neighboring subdivisions who were deprived of the
use of La Paz Road, against Fil-Estate Land, Inc. (Fil-Estate), Fil-estate
Ecocentrum Corporation (FEEC), La Paz Housing & Development
Corporation (La Paz), and Warbird Security Agency and their
respective officers (collectively referred as Fil-Estate, et al.).
The complaint alleged that JCHA, et al. were regular commuters and
motorists who constantly travelled towards the direction of Manila
and Calamba; that they used the entry and exit toll gates of South
Luzon Expressway (SLEX) by passing through right-of-way public road
known as La Paz Road; that they had been using La Paz Road for
more than ten (10) years; that in August 1998, Fil-estate excavated,
broke and deliberately ruined La Paz Road that led to SLEX so JCHA,
et al. would not be able to pass through the said road; that La Paz
Road was restored by the residents to make it passable but Fil-
estate excavated the road again; that JCHA reported the matter to
the Municipal Government and the Office of the Municipal Engineer
but the latter failed to repair the road to make it passable and safe
to motorists and pedestrians; that the act of Fil-estate in excavating
La Paz Road caused damage, prejudice, inconvenience, annoyance,
and loss of precious hours to them, to the commuters and motorists
because traffic was re-routed to narrow streets that caused terrible
traffic congestion and hazard; and that its permanent closure would
not only prejudice their right to free and unhampered use of the
property but would also cause great damage and irreparable injury.
Accordingly, JCHA, et al. also prayed for the immediate issuance of a
Temporary Restraining Order (TRO) or a writ of preliminary
injunction (WPI) to enjoin Fil-Estate, et al. from stopping and
intimidating them in their use of La Paz Road.
On February 10, 1999, a TRO was issued ordering Fil-Estate, et al, for
a period of twenty (20) days, to stop preventing, coercing,
intimidating or harassing the commuters and motorists from using
the La Paz Road.
6

Subsequently, the RTC conducted several hearings to determine the
propriety of the issuance of a WPI.
On February 26, 1999, Fil-Estate, et al. filed a motion to dismiss
7

arguing that the complaint failed to state a cause of action and that
it was improperly filed as a class suit. On March 5, 1999, JCHA, et al.
filed their comment
8
on the motion to dismiss to which respondents
filed a reply.
9

On March 3, 1999, the RTC issued an Order
10
granting the WPI and
required JCHA, et al. to post a bond.
On March 19, 1999, Fil-Estate, et al. filed a motion for
reconsideration
11
arguing, among others, that JCHA, et al. failed to
satisfy the requirements for the issuance of a WPI. On March 23,
1999, JCHA, et al. filed their opposition to the motion.
12

The RTC then issued its June 16, 2000 Omnibus Order, denying both
the motion to dismiss and the motion for reconsideration filed by
Fil-Estate, et al.
Not satisfied, Fil-Estate, et al. filed a petition for certiorari and
prohibition before the CA to annul (1) the Order dated March 3,
1999 and (2) the Omnibus Order dated June 16, 2000. They
contended that the complaint failed to state a cause of action and
that it was improperly filed as a class suit. With regard to the
issuance of the WPI, the defendants averred that JCHA, et al. failed
to show that they had a clear and unmistakable right to the use of La
Paz Road; and further claimed that La Paz Road was a torrens
registered private road and there was neither a voluntary nor legal
easement constituted over it.
13

On July 31, 2001, the CA rendered the decision partially granting the
petition, the dispositive portion of which reads:
WHEREFORE, the petition is hereby partially GRANTED. The Order
dated March 3, 1999 granting the writ of preliminary injunction is
hereby ANNULLED and SET ASIDE but the portion of the Omnibus
Order dated June 16, 2000 denying the motion to dismiss is upheld.

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SO ORDERED.
14

The CA ruled that the complaint sufficiently stated a cause of action
when JCHA, et al. alleged in their complaint that they had been using
La Paz Road for more than ten (10) years and that their right was
violated when Fil-Estate closed and excavated the road. It sustained
the RTC ruling that the complaint was properly filed as a class suit as
it was shown that the case was of common interest and that the
individuals sought to be represented were so numerous that it was
impractical to include all of them as parties. The CA, however,
annulled the WPI for failure of JCHA, et al. to prove their clear and
present right over La Paz Road. The CA ordered the remand of the
case to the RTC for a full-blown trial on the merits.
Hence, these petitions for review.
In G.R. No. 152272, JCHA, et al. come to this Court, raising the
following issues:
(A)
THE HONORABLE COURT OF APPEALS, IN HOLDING THAT A FULL-
BLOWN TRIAL ON THE MERITS IS REQUIRED TO DETERMINE THE
NATURE OF THE LA PAZ ROAD, HAD DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO
CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION.
(B)
THE HONORABLE COURT OF APPEALS, IN HOLDING THAT THE
PETITIONERS FAILED TO SATISFY THE REQUIREMENTS FOR THE
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION, HAD DECIDED
NOT IN ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS
OF THE SUPREME COURT.
15

In G.R. No. 152397, on the other hand, Fil-Estate, et al. anchor their
petition on the following issues:
I.
The Court of Appeals declaration that respondents
Complaint states a cause of action is contrary to existing
law and jurisprudence.
II.
The Court of Appeals pronouncement that respondents
complaint was properly filed as a class suit is contrary to
existing law and jurisprudence.
III.
The Court of Appeals conclusion that full blown trial on
the merits is required to determine the nature of the La
Paz Road is contrary to existing laws and jurisprudence.
16

JCHA, et al. concur with the CA that the complaint sufficiently stated
a cause of action. They, however, disagree with the CAs
pronouncement that a full-blown trial on the merits was necessary.
They claim that during the hearing on the application of the writ of
injunction, they had sufficiently proven that La Paz Road was a
public road and that commuters and motorists of their neighboring
villages had used this road as their means of access to the San
Agustin Church, Colegio De San Agustin and to SLEX in going to
Metro Manila and to Southern Tagalog particularly during the rush
hours when traffic at Carmona Entry/Exit and Susana Heights
Entry/Exit was at its worst.
JCHA, et al. argue that La Paz Road has attained the status and
character of a public road or burdened by an apparent easement of
public right of way. They point out that La Paz Road is the widest
road in the neighborhood used by motorists in going to Halang Road
and in entering the SLEX-Halang toll gate and that there is no other
road as wide as La Paz Road existing in the vicinity. For residents of
San Pedro, Laguna, the shortest, convenient and safe route towards
SLEX Halang is along Rosario Avenue joining La Paz Road.
Finally, JCHA, et al. argue that the CA erred when it voided the WPI
because the public nature of La Paz Road had been sufficiently
proven and, as residents of San Pedro and Bian, Laguna, their right
to use La Paz Road is undeniable.
In their Memorandum,
17
Fil-Estate, et al. explain that La Paz Road is
included in the parcels of land covered by Transfer Certificates of
Title (TCT) Nos. T-120008, T-90321 and T-90607, all registered in the
name of La Paz. The purpose of constructing La Paz Road was to
provide a passageway for La Paz to its intended projects to the
south, one of which was the Juana Complex I. When Juana Complex I
was completed, La Paz donated the open spaces, drainage, canal,
and lighting facilities inside the Juana Complex I to the Municipality
of Bian. The streets within the subdivisions were then converted to
public roads and were opened for use of the general public. The La
Paz Road, not being part of the Juana Complex I, was excluded from
the donation. Subsequently, La Paz became a shareholder of FEEC, a
consortium formed to develop several real properties in Bian,
Laguna, known as Ecocentrum Project. In exchange for shares of
stock, La Paz contributed some of its real properties to the
Municipality of Bian, including the properties constituting La Paz
Road, to form part of the Ecocentrum Project.
Fil-Estate, et al. agree with the CA that the annulment of the WPI
was proper since JCHA, et al. failed to prove that they have a clear
right over La Paz Road. Fil-Estate, et al. assert that JCHA, et al. failed
to prove the existence of a right of way or a right to pass over La Paz
Road and that the closure of the said road constituted an injury to
such right. According to them, La Paz Road is a torrens registered
private road and there is neither a voluntary nor legal easement
constituted over it. They claim that La Paz Road is a private property
registered under the name of La Paz and the beneficial ownership
thereof was transferred to FEEC when La Paz joined the consortium
for the Ecocentrum Project.
Fil-Estate, et al., however, insist that the complaint did not
sufficiently contain the ultimate facts to show a cause of action.
They aver the bare allegation that one is entitled to something is an
allegation of a conclusion which adds nothing to the pleading.
They likewise argue that the complaint was improperly filed as a
class suit for it failed to show that JCHA, et al. and the commuters
and motorists they are representing have a well-defined community
of interest over La Paz Road. They claim that the excavation of La
Paz Road would not necessarily give rise to a common right or cause
of action for JCHA, et al. against them since each of them has a

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separate and distinct purpose and each may be affected differently
than the others.
The Courts Ruling
The issues for the Courts resolution are: (1) whether or not the
complaint states a cause of action; (2) whether the complaint has
been properly filed as a class suit; and (2) whether or not a WPI is
warranted.
Section 2, Rule 2 of the Rules of Court defines a cause of action as an
act or omission by which a party violates the right of another. A
complaint states a cause of action when it contains three (3)
essential elements of a cause of action, namely:
(1) the legal right of the plaintiff,
(2) the correlative obligation of the defendant, and
(3) the act or omission of the defendant in violation of said
legal right.
18

The question of whether the complaint states a cause of action is
determined by its averments regarding the acts committed by the
defendant.
19
Thus, it must contain a concise statement of the
ultimate or essential facts constituting the plaintiffs cause of
action.
20
To be taken into account are only the material allegations
in the complaint; extraneous facts and circumstances or other
matters aliunde are not considered.
21

The test of sufficiency of facts alleged in the complaint as
constituting a cause of action is whether or not admitting the facts
alleged, the court could render a valid verdict in accordance with the
prayer of said complaint.
22
Stated differently, if the allegations in the
complaint furnish sufficient basis by which the complaint can be
maintained, the same should not be dismissed regardless of the
defense that may be asserted by the defendant.
23

In the present case, the Court finds the allegations in the complaint
sufficient to establish a cause of action. First, JCHA, et al.s
averments in the complaint show a demandable right over La Paz
Road. These are: (1) their right to use the road on the basis of their
allegation that they had been using the road for more than 10 years;
and (2) an easement of a right of way has been constituted over the
said roads. There is no other road as wide as La Paz Road existing in
the vicinity and it is the shortest, convenient and safe route towards
SLEX Halang that the commuters and motorists may use. Second,
there is an alleged violation of such right committed by Fil-Estate, et
al. when they excavated the road and prevented the commuters and
motorists from using the same. Third, JCHA, et al. consequently
suffered injury and that a valid judgment could have been rendered
in accordance with the relief sought therein.
With respect to the issue that the case was improperly instituted as
a class suit, the Court finds the opposition without merit.
Section 12, Rule 3 of the Rules of Court defines a class suit, as
follows:
Sec. 12. Class suit. When the subject matter of the controversy is
one of common or general interest to many persons so numerous
that it is impracticable to join all as parties, a number of them which
the court finds to be sufficiently numerous and representative as to
fully protect the interests of all concerned may sue or defend for the
benefit of all. Any party in interest shall have the right to intervene
to protect his individual interest.
The necessary elements for the maintenance of a class suit are: 1)
the subject matter of controversy is one of common or general
interest to many persons; 2) the parties affected are so numerous
that it is impracticable to bring them all to court; and 3) the parties
bringing the class suit are sufficiently numerous or representative of
the class and can fully protect the interests of all concerned.
24

In this case, the suit is clearly one that benefits all commuters and
motorists who use La Paz Road. As succinctly stated by the CA:
The subject matter of the instant case, i.e., the closure and
excavation of the La Paz Road, is initially shown to be of common or
general interest to many persons. The records reveal that numerous
individuals have filed manifestations with the lower court, conveying
their intention to join private respondents in the suit and claiming
that they are similarly situated with private respondents for they
were also prejudiced by the acts of petitioners in closing and
excavating the La Paz Road. Moreover, the individuals sought to be
represented by private respondents in the suit are so numerous that
it is impracticable to join them all as parties and be named
individually as plaintiffs in the complaint. These individuals claim to
be residents of various barangays in Bian, Laguna and other
barangays in San Pedro, Laguna.
Anent the issue on the propriety of the WPI, Section 3, Rule 58 of
the Rules of Court lays down the rules for the issuance thereof.
Thus:
(a) That the applicant is entitled to the relief demanded,
and the whole or part of such relief consists in restraining
the commission or continuance of the acts complained of,
or in the performance of an act or acts, either for a limited
period or perpetually;
(b) That the commission, continuance or non-performance
of the act or acts complained of during the litigation would
probably work injustice to the applicant; or
(c) That a party, court, or agency or a person is doing,
threatening, or attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation
of the rights of the applicant respecting the subject of the
action or proceeding, and tending to render the judgment
ineffectual.
A writ of preliminary injunction is available to prevent a threatened
or continuous irremediable injury to parties before their claims can
be thoroughly studied and adjudicated.
25
The requisites for its
issuance are: (1) the existence of a clear and unmistakable right that
must be protected; and (2) an urgent and paramount necessity for
the writ to prevent serious damage.
26
For the writ to issue, the right
sought to be protected must be a present right, a legal right which
must be shown to be clear and positive.
27
This means that the
persons applying for the writ must show that they have an
ostensible right to the final relief prayed for in their complaint.
28


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In the case at bench, JCHA, et al. failed to establish a prima facie
proof of violation of their right to justify the issuance of a WPI. Their
right to the use of La Paz Road is disputable since they have no clear
legal right therein. As correctly ruled by the CA:
Here, contrary to the ruling of respondent Judge, private
respondents failed to prove as yet that they have a clear and
unmistakable right over the La Paz Road which was sought to be
protected by the injunctive writ. They merely anchor their purported
right over the La Paz Road on the bare allegation that they have
been using the same as public road right-of-way for more than ten
years. A mere allegation does not meet the standard of proof that
would warrant the issuance of the injunctive writ. Failure to
establish the existence of a clear right which should be judicially
protected through the writ of injunction is a sufficient ground for
denying the injunction.
Consequently, the case should be further heard by the RTC so that
the parties can fully prove their respective positions on the
issues.1wphi1
Due process considerations dictate that the assailed injunctive writ
is not a judgment on the merits but merely an order for the grant of
a provisional and ancillary remedy to preserve the status quo until
the merits of the case can be heard. The hearing on the application
for issuance of a writ of preliminary injunction is separate and
distinct from the trial on the merits of the main case.
29
The
evidence submitted during the hearing of the incident is not
conclusive or complete for only a "sampling" is needed to give the
trial court an idea of the justification for the preliminary injunction
pending the decision of the case on the merits.
30
There are vital facts
that have yet to be presented during the trial which may not be
obtained or presented during the hearing on the application for the
injunctive writ.
31
Moreover, the quantum of evidence required for
one is different from that for the other.
32

WHEREFORE, the petitions are DENIED. Accordingly, the July 31,
2001 Decision and February 21, 2002 Resolution of the Court of
Appeals in CA-G.R. SP No. 60543 are AFFIRMED.
SO ORDERED.


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G.R. No. 162109 January 21, 2005
LAPANDAY AGRICULTURAL & DEVELOPMENT CORPORATION (L.S.
VENTURES, INC., ALREADY MERGED WITH LAPANDAY
AGRICULTURAL AND DEVELOPMENT CORP.), petitioner,
vs.
MAXIMO ESTITA, JUANITO ABASOLO, PEDRO ALQUIZA, ISMAEL
ALFAR, MANUEL ALFAR, ERLINDA S. ARIS, PAULO ABLAA, RUFO
ALIPUYO, MARY ANION, ROSALIO ALFAR, AQUILINO ABILIS,
HERSON ALFANTA, GETRODEZ BALANAY, ELENA BATO-BATO,
ALBERTO BOHOLST, PRISCILA CABATUAN, VICTORINO CABATUAN,
RUPERTO CABATUAN, CRISTINO CONANG, PANFILO, CABIGAS,
APOLINARIO CABIGAS, EUSTAQUIO CELEN, ANTONIA
COMENDADOR, POLICARPIO CLARIDO, JOSE CABONITA,
CANDELARIO COSEP, GUILLERMO CASINILLO, SEBASTIAN
CASINILLO, JOSE CAMUS, MARGARITO CLARIDO, JUAN CABAOG,
MARIAS CABAOG, MARIAS CABAOG, TEOFISTA CASAS, ISMAEL
CLARIDO, TOMASA BUDIANG, SOZIMA CASAS, LEONARDO CEJAS,
JOSUE DANDAN, EFREN DEL RIO, LEONARDO DELLO, PABLO
DINALO, BERNARDITO EUSALINA, EGMEDIO EUSALINA, PELAGIO
ESTITA, MAMERTA ENERO, MARCELINA ENERO, REMEGIO ENERO,
MATEO ENERO, PLACIDO ESPINOSA, ANA FRANCO, MELVIN
FRANCO, ELESIO GEONSON, CIRIACO GEONSON, URBANO
GEONSON, CIRIACO GEONSON, MARINA GEONSON, TEOFILO
GEONSON, GAUDIOSO GEONSON, ANACLITO GEONSON, LAREANA
GEONSON, URBANO GEONSON, ANDRICA GIOCA, MARCILA
GEALON, RODRIGO GEALON, PATERNO GUMBA, AGAPITO GUMBA,
FRANCISCO HERSAMIO, ROMEO INONG, ABDON INONG, ANDRES
YBAEZ, ALBINA JIMENEZ, SERGIO JIMENEZ, SIMPLICIO LABRADO,
ENCARNACION LASCUA, IGNACIA LASCUA, MELCHOR LACANG,
MAURITO LOQUIO, GAUDIOSO LASCUA, PRIMO MONTAEZ,
JOSE MONTAEZ, BEINVINIDO MONTAEZ, PABLO MENDOZA,
JUANITA MENDOZA, VICENTE MACION, JR., CIPRIANA MACION,
EDUARDO MONTOYA, CESAR MADRAGA, JUSTO NORO,
ALEXANDER NORO, DOMINGO NORO, FERMIN NORO, QUINTIN
NORO, MAURO NORO, ULPIANO NORO, GERTRODEZ NORO,
ENRIQUE OBENZA, DANILO OBENZA, LEONARDO PEPITO, EULALIO
PANLAAN, EDILITO PAMULAWAN, LEONILA PACIONES, REMEDIOS
PACIONES, REGALADO PACIONES, JAIME RECEBAS, RODRIGO
REBUYAS, AMANCIO RESGONIA, EPETACIO ROLUNA, LEONARDO
ROTAQUIOU, ISIDRA RAMOS, HERMINIGILDO SELGAS, LILIA TAPIC,
ISIDRO TALAOGON, IGMEDIO VILLARIN, EUGENIA BRIGOLE,
FLAVIANO BATOBATO, MANUELA PIALA, CLAUDIA ENERO, GEORGE
COSEP, ANTONIO COSEP, ALFREDO MENDOZA, ALBERTO
MENDOZA, QUINTIN JABELLO, DOLORES JABILLO, ROLUNA
DIONESIO, LOLITA ALFOJA, TOCAO RODOLFO, AVELINO, CABONIA,
GAUDENCIO VILLARAMIA, MARIA PESIAO AND SOFIO ANTIPUESTO,
VICTORIANO CASAS, CELEDONIO CARILLO, CONCHITA CARILLO,
CORNELIO BAYARCAL, AURELIO GALLARDO, FRANCISCA
CARTAGENA, AVELINO CABONITA, BALBINO HERSAMIO, TEOFISTO
ABALAA, NORMA GANTUANCO and PATERNO GUMBA and/or
MEMBERS OF THE DAVAO DEL SUR FARMERS ASSOCIATION
(DASURFA), respondents.
D E C I S I O N
GARCIA, J.:
In this verified petition for review on certiorari, petitioner Lapanday
Agricultural & Development Corporation assails and seeks the
annulment of the following issuances of the Court of Appeals in CA-
G.R. SP No. 71230, to wit:
1. Decision dated September 3, 2003,
1
declaring as valid
an earlier decision dated January 17, 2001 of the
Department of Agrarian Reform Adjudication Board
(DARAB) in DARAB Case No. 8117, which, in turn, affirmed
with modification the resolution dated October 20, 1997
of the DAR Provincial Agrarian Reform Adjudicator of
Digos, Davao del Sur in a land dispute involving the vast
agricultural land of the late Orval Hughes at Malalag,
Davao del Sur; and
2. Resolution dated January 19, 2004,
2
denying
petitioners motion for reconsideration.
We lift from the decision under review and reproduce hereunder the
factual backdrop of the case, thus:
The instant petition involves a vast tract of an agricultural land with
an area of 716 hectares located at Malalag, Davao del Sur. On July
28, 1924, this land was leased by the Government to Orval Hughes
for a period of twenty-five (25) years under Lease Application No.
815 (E-172). The lease actually expired on May 25, 1952, it having
been extended for three (3) years. Orval Hughes died and was
survived by his five (5) heirs who then filed their Sales Application
Nos. V-11538, V-12992, V-13837, V-14586 and V- 15003 with the
Bureau of Lands. Teodulo Tocao, et al., filed a protest against the
sales application.
On August 20, 1957, the Office of the President gave due course to
the applications to cover only 317 hectares at 63 hectares per heir as
per OCT No. P-4712 but awarded 399 hectares to 133 protesters [led
by Teodulo Tocao] at three (3) hectares each.
On September 17, 1981, the Ministry of Natural Resources issued an
Order implementing said decision (Annex "N", Rollo, pp. 160-164).
However, the 133 petitioners listed in the said Order were not in
possession of the land allotted to them. So, they formed the Malalag
Land Petitioners Association, Inc. (The Association) headed by one
Cecilio R. Mangubat Sr.
On the other hand, those in possession of the land sought the
assistance of the Malalag Ventures Plantation Inc., in its
development into a viable banana production project to which the
corporation acceded.
Meanwhile, on November 12, 1987, the Supreme Court in Minister of
Natural Resources vs. Heirs of Orval Hughes, 155 SCRA 566,
sustained the OP decision and it became final and executory.
On December 12, 1991, the association, through its president Mr.
Mangubat, sent a letter to the management of Lapanday Group of
Companies, Inc. manifesting that they were no longer interested in
the government grant under the Order of the Ministry of Natural
Resources and offered to transfer and waive whatever interest they
have over the subject land for a monetary consideration (Annex "O",
Rollo, p. 165).
Mr. Mangubat was the first to relinquish his right for P54,000.00
(Annex "P", Rollo, p. 166). The individual respondents allegedly
followed suit. He facilitated the relinquishment in the Office of the
Commission on the Settlement of Land Problems (COSLAP) (Annex
"Q", Rollo, pp. 167-169).

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It therefore came as a surprise when, on January 17, 1995, the
individual respondents filed [against Lapanday and/or L.S. Ventures,
Inc., the Heirs of Orval Hughes, the DENR/COSLAP and Cecilio
Mangubat, Sr.] the following cases: forcible entry, reinstatement,
nullification of affidavits of quitclaims, relinquishment, waiver and
any other documents on disposition of lands before the Provincial
Agrarian Reform Adjudication Board (PARAD) of Digos, Davao, del
Sur. They alleged that since 1947, they had been the share tenants-
tillers, openly and continuously, of the late Orval Hughes and his
heirs and they remained as such on the 317 hectares land (Annexes
"A" & "B", Rollo, pp. 40-72).
They further averred that on February 11, 1991, petitioner-
corporation, Hughes heirs and Cecilio Mangubat Sr., conspiring
together, misled them to receive P54,000.00 each as rentals on their
respective landholdings and deceived to sign receipts in English
which turned out to be affidavits of quitclaims in favor of the
petitioner (Annex "E", PARAD Decision dated July 9, 1997, p. 3; Rollo,
p. 111).
Petitioner [Lapanday Agricultural & Development Corporation]
opposed said actions for being factually and legally baseless, there
being no entity by the name of Lapanday and L.S. Ventures Inc.
which has agricultural operation in Davao del Sur. The fact is that
said company had already merged with Lapanday Agricultural and
Development Corporation (Annexes "C" & "M", Rollo, pp. 73-79 &
159, respectively).
In a decision dated July 9, 1997,
3
the DAR Provincial Agrarian Reform
Adjudicator of Digos, Davao del Sur, Mardonio L. Edica, rendered
judgment in favor of the Malalag Ventures Plantation, Inc. and
declared the entire 716-hectare property as covered by the
Comprehensive Agrarian Reform Program or CARP. More
specifically, the decision dispositively reads:
WHEREFORE, premises considered, a decision is hereby rendered
declaring that the entire 716 hectares shall be covered by CARP. The
portion planted to bananas by the Malalag Plantation Ventures shall
be governed by Sections 13 and 32 of Republic Act No. 6657 in favor
of Malalag Land Petitioner Association. The Operation Division of the
Provincial Agrarian Reform Office shall implement this decision in
accordance with existing guidelines, rules and regulations.
The heirs of Orval Hughes are hereby ordered to reinstate the
Malalag Land Petitioners Association. Leasehold tenancy shall be
observed collectively, pending recommendation by the PARO
Operations Division, without prejudice to the outcome of the cases
still pending with the administrative agencies and the regular courts.
SO ORDERED.
Upon motion for reconsideration, Provincial Agrarian Reform
Adjudicator Mardonio L. Edica, in a Resolution dated October 20,
1997,
4
modified his aforequoted decision of July 9, 1997 by
specifically directing "Lapanday and/or L.S. Ventures, Inc." to turn
over the area involved for CARP coverage, and ordering the Hughes
heirs to reinstate the members of the Davao del Sur Farmers
Association (DASUFRA) as leasehold tenants of the subject land. We
quote the dispositive portion of the same Resolution:
"WHEREFORE, the decision of 9 July 1997 is hereby modified to
read:
Declaring that the entire 716 hectares shall be covered by CARP. The
portion planted to bananas by the Malalag Plantation Ventures, Inc.
shall be governed by Sections 13 and 32 of Republic Act No. 6657 in
favor of qualified members of the Malalag Land Petitioners
Association (MLPA), and the remaining portion shall be allotted to all
deserving and listed members of the Davao del Sur Farmers
Association (DASUFRA). The LAPANDAY, L.S. Ventures and/or the
Malalag Plantation Ventures, Inc. is hereby mandated to turn over
the area involved for CARP coverage. The Operations division of the
Provincial Agrarian Reform Office of Davao del Sur is likewise
mandated to implement this resolution in accordance with existing
guidelines, rules and regulations.
The heirs of Orval Hughes are hereby ordered to reinstate the
members of the DASUFRA. Leasehold tenancy shall be observed
collectively pending documentation of the area by the PARO
Operations Division regardless of the outcome of the cases still
pending with the administrative agencies and the regular courts.
The local National Police, Armed Forces of the Philippines or any of
the component units are hereby directed to assist the DAR in the
enforcement and/or implementation of this resolution xxx.
This resolution is immediately executory.
SO ORDERED".
From the aforequoted resolution of the Provincial Agrarian Reform
Adjudicator, "Lapanday and/or L.S. Ventures, Inc.", went on appeal
to the Department of Agrarian Reform Adjudication Board (DARAB),
at Quezon City where the appeal was docketed as DARAB Case No.
8117.
In a decision dated January 17, 2001,
5
the DARAB, ruling that the
Provincial Agrarian Reform Adjudicator had no jurisdiction to declare
the entire 716-hectare landholding as covered by the CARP and that
the only issue within his competence is to find out whether
sufficient grounds exist to warrant respondents dispossession from
the 317-hectare portion thereof which was earlier awarded to the
heirs of Orval Hughes, modified the appealed resolution of Provincial
Adjudicator Edica, thus:
WHEREFORE, premises considered, the appealed Resolution of
October 20, 1997, is hereby MODIFIED to read as follows:
1. Ordering respondents heirs of Orval Hughes to vacate
the premises of the 133 (sic, should be 399) hectares which
were long ago awarded to 133 awardees who were
identified in the Order of Natural Resources Minister dated
September 17, 1981, and turn over the peaceful possession
thereof to the said 133 awardees or their heirs;
2. Ordering respondents Lapanday and/or L.S. Ventures
and Hughes heirs to restore petitioners Maximo Estita, et
al., to their respective farmlots within the 317 hectares
owned by the Hughes Heirs; and
3. Declaring the nullity of the quitclaims allegedly executed
by petitioners.

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The matter of placing the 317 hectares under CARP shall be pursued
in the proper forum which is the Office of the Honorable DAR
Secretary.
This decision is immediately executory.
SO ORDERED.
With their motion for reconsideration of the same decision having
been denied by DARAB in its Resolution of March 15, 2002,
"Lapanday and/or L.S. Ventures, Inc.", this time under the name
Lapanday Agricultural & Development Corporation (the herein
petitioner), elevated the case to the Court of Appeals via a petition
for review, thereat docketed as CA-G.R. SP No. 71230.
As stated at the threshold hereof, the Court of Appeals, in a Decision
dated September 3, 2003,
6
denied petitioners recourse thereto for
being merely dilatory and accordingly upheld the validity of the
aforementioned DARAB decision of 17 January 2001 and resolution
of 15 March 2002, as follows:
WHEREFORE, in consonance with the Supreme Courts directive not
to further delay the implementation of the August 20, 1957
Decision, the instant petition is hereby DENIED for being dilatory.
The assailed Decision of the DARAB dated 17 January 2001 and
Resolution dated 15 March 2002 are declared VALID.
Petitioner and its counsel are warned not to further resort to
measures of this nature, otherwise, they shall be dealt with severely
for having abused the processes of the courts.
The individual respondents who received the amount of P54,000.00
are ordered to return the same to the petitioner.
SO ORDERED.
In time, petitioner moved for a reconsideration, which motion was
denied by the same court in the herein equally assailed Resolution
dated January 19, 2004
7
for being merely pro forma.
Hence, this recourse by petitioner Lapanday Agricultural &
Development Corporation on its basic submission that the
Department of Agrarian Reform thru its Provincial Agrarian Reform
Adjudicator, the DARAB and the Court of Appeals all erred (1) in
assuming jurisdiction over an issue covering a public land; and (2) in
rendering judgment against it even as it is not a real party-in-interest
in the case.
The petition is bereft of merit.
Before going any further, however, we shall first address
respondents concern as to what remedy petitioner has resorted to
in coming to this Court: whether by petition for review on certiorari
under Rule 45 of the Rules of Court, wherein only "questions of law"
may be raised, albeit jurisprudence extends this remedy even to
questions of fact in exceptional cases,
8
or by the special civil action
of certiorari under Rule 65, whereunder the main inquiry is whether
there is grave abuse of discretion or lack of jurisdiction.
While the petition raises jurisdictional issue, it is apparent from our
reading thereof that the same is a petition for review on certiorari
under Rule 45. For one, the very recourse itself is captioned as a
"petition for review on certiorari". For another, even as petitioner
came to this Court from a final decision of the Court of Appeals, the
latter is not impleaded as a nominal party-respondent in the petition
thus filed, as in fact the ones impleaded as respondents in the
caption thereof are only the very same original parties to the case
while still in the offices a quo.
We shall then deal with the petition as one filed under Rule 45 and
treat the alleged lack of jurisdiction on the part of the Department
of Agrarian Reform (DAR), the DARAB and the Court of Appeals as
allegation of reversible error.
Petitioner first contends that the subject landholding is still part of
the public domain, hence, still under the jurisdiction of the
Department of Environment and Natural Resources (DENR) and,
therefore, beyond the coverage of the Comprehensive Agrarian
Reform Program (CARP).
There can be no debate at all that under the Public Land Act, the
management and disposition of public lands is under the primary
control of the Director of Lands (now the Director of the Lands
Management Bureau or LMB) subject to review by the DENR
Secretary
9

The hard reality in this case, however, is that the land in question
has ceased to be public, as in fact it is already titled. As found by
both the DARAB and the Court of Appeals, the 317-hectare land
awarded to the Hughes Heirs is covered by Original Certificate of
Title No. P-4712, the existence of which was never refuted by the
petitioner. Specifically, the DARAB decision of January 17, 2001,
10

partly states:
"On August 20, 1957 the Office of the President gave due course to
applications to cover only 317 hectares at 63 hectares each heir as
per OCT No. P-4712 but awarding 399 hectares to 133 awardees at
three (3) hectares each" (Emphasis supplied),
a finding reechoed on page 3 of the CA decision of September 3,
2003.
11

With the above, and bearing in mind that the CARP covers,
regardless of tenurial arrangement and commodity produce, all
public and private agricultural lands,
12
with the DAR vested with
primary jurisdiction to determine and adjudicate, through its
adjudication boards, agrarian reform matters, and exclusive
jurisdiction over all matters involving the implementation of the
agrarian reform program,
13
we rule and so hold, contrary to
petitioners assertion, that the DAR, thru its Provincial Agrarian
Reform Adjudicator at Digos, Davao del Sur correctly took
cognizance of the case in the first instance.
Petitioner next argues that the DARAB decision, as affirmed by the
Court of Appeals, ordering "Lapanday and/or L.S. Ventures Inc. to
restore [respondents] Maximo Estita et al. to their respective farm
lots within the 317 hectares owned by the Hughes Heirs", has no
valid force and effect against petitioner because it is not a real party-
in-interest, pointing out that "Lapanday and/or L.S. Ventures, Inc.,"
are separate and distinct from petitioners corporate personality.
Petitioner asserts that "Lapanday" has no juridical personality, while
the corporate life of "L.S. Ventures Inc." has ceased when said entity
merged with petitioner in 1996. Moreover, petitioner points out

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that it has no business operations in Davao del Sur where the land in
question lies.1awphi1.nt
We are not persuaded.
To begin with, it is basic in the law of procedure that misjoinder of
parties is not a ground for the dismissal of an action, as parties may
be dropped or added by order of the court on motion of any party or
on its own initiative at any stage of the proceedings and on such
terms as are just
14

Then, too, there is the rule that objections to defects in parties
should be made at the earliest opportunity, that is, at the moment
such defect becomes apparent, by a motion to strike the names of
the parties wrongly impleaded. For, objections to misjoinder cannot
be raised for the first time on appeal.
15

Here, aside from unsubstantiated denials that it is not the party
referred to in the complaint for forcible entry, etc., commenced by
the respondents before the office of the Provincial Agrarian Reform
Adjudicator of Digos, Davao del Sur, petitioner did not even file a
motion to strike its name in all the proceedings below. Quite the
contrary, and as correctly found by the Court of Appeals in the
decision under review, petitioner corporation -
"x x x filed an Answer (Annex "D", Rollo, pp.91-96) thereby
submitting to the jurisdiction of the Board. The same answer bears
the name "LAPANDAY AND/OR L.S. VENTURES, INC.", signed by its
representative Caesar E. Barcenas and assisted by its counsel Jose V.
Yap (Ibid, Rollo, p. 96). This alone negates the petitioners stance
that there is no entity by the name of Lapanday and that L.S.
Ventures, Inc. is seperate and distinct from any company (see Annex
"M" Rollo, p. 159 on Merger of Lapanday Agricultural &
Development Corporation and L.S. Ventures, Inc.). And such
admission made by the petitioner in the course of the proceedings in
this case, does not require proof (Sec. 4, Rule 129 of the Revised
Rules on Evidence)."
Petitioners filing of an Answer has thereby cured whatever
jurisdictional defect it now raises. As we have said time and again,
"the active participation of a party in a case pending against him
before a court or a quasi judicial body, is tantamount to a
recognition of that courts or bodys jurisdiction and a willingness to
abide by the resolution of the case and will bar said party from later
on impugning the courts or bodys jurisdiction."
16

But even assuming, in gratia argumenti, that "Lapanday" does not
have a juridical personality, it may nonetheless be sued under such a
name considering that respondents commonly know petitioner by
the name "Lapanday Group of Companies", as shown in their alleged
letter of intent to relinquish their rights over the subject land.
17
This
brings to mind Section 15, Rule 3, of the 1997 Rules of Civil
Procedure, which reads:
"SEC. 15. Entity without juridical personality as defendant. - When
two or more persons not organized as an entity with juridical
personality enter into a transaction, they may be sued under the
name by which they are generally or commonly known" (Emphasis
added).
Aware of the hopelessness of its cause, petitioner invariably posits
that the herein respondents are not real parties-in-interest and are
bereft of any legal personality to file and initiate the complaint for
forcible entry, etc. before the office of the Provincial Agrarian
Reform Adjudicator of Digos, Davao del Sur because they are not
tenant-tillers of the land in dispute. Consequently, so petitioner
argues, respondents are not entitled to be restored thereto.
Petitioners posture cannot hold water.
Both the DAR Provincial Agrarian Reform Adjudicator and the DARAB
affirmed and confirmed the tenancy status of the respondents. We
see no reason why the Court of Appeals should not rely on such a
finding in upholding the respondents right to be restored to their
respective farmlots as leasehold tenants thereof.
For sure, the evidence adduced by the respondents clearly indicate
that they were tenant-tillers of the 317-hectare land owned by the
heirs of Orval Hughes. Indeed, documents
18
showing that the Judicial
Administrator of the Intestate Estate of Orval Hughes had filed cases
in court against the respondents for their failure to deliver the
Estates share in the harvests, are unmistakable proofs that a
tenurial arrangement exists regarding the agricultural produce of
the land.
Besides, the heirs of Orval Hughes as former landlords of the
respondents, never denied the tenancy status of the latter, as in fact
they did not even bother to answer respondents complaint for
forcible entry, etc., before the Office of the Provincial Agrarian
Adjudicator.
In any event, it need not be stressed that the question regarding the
respondents tenancy status is factual in nature, which is not proper
in a petition for review.
19
More so must this be where, as here, the
Provincial Agrarian Reform Adjudicator, the DARAB and the Court of
Appeals were one in upholding the tenancy status of the
respondents.1a\^/phi1.net
Moreover, it is axiomatic that findings of administrative agencies,
which have acquired expertise because their jurisdiction is confined
to specific matters, are accorded not only respect but even finality
by the courts
20
In Corpuz vs. Sps. Grospe ,
21
we categorically held:
"As a rule, if the factual findings of the CA coincide with those of the
DARAB an administrative body which has acquired expertise on the
matter such findings are accorded respect and will not be disturbed
on appeal"
As tenant-tillers of the 317-hectare land owned by the heirs of Orval
Hughes, respondents are undeniably parties-in-interest to this
controversy. As such, they have the legal personality to institute the
action in the office a quo, namely, the office of the Provincial
Agrarian Reform Adjudicator at Digos, Davao del Sur.
But then, there is petitioners contention that respondents interests
over the subject land have already been waived when quitclaims to
that effect were allegedly executed and signed by them.
The submission is equally puerile.
Waivers of rights and/or interests over landholdings awarded by the
government are invalid for being violative of the agrarian reform

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laws. To quote from our decision in Torres vs. Ventura,
22
as
reiterated in Corpuz vs. Sps. Grospe :
23

"x x x As such [the farmer-beneficiaries] gained the rights to possess,
cultivate and enjoy the landholding for himself. Those rights over
that particular property were granted by the government to him and
no other. To insure his continued possession and enjoyment of the
property, he could not, under the law, make any valid form of
transfer except to the government or by hereditary succession, to his
successors"
WHEREFORE, the instant petition is DENIED and the assailed
decision and resolution of the Court of Appeals AFFIRMED in toto.
Costs against petitioner.
SO ORDERED.


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G.R. No. 78295 & 79917 April 10, 1989
ATTORNEY CELSO D. LAVIA, REMEDIOS M. MUYOT, SPOUSES
VIRGILIO D. CEBRERO and SEGUNDINA MAGNO-CEBRERO,
petitioners,
vs.
HONORABLE COURT OF APPEALS and JOSEFINA C. GABRIEL,
respondents.
Arturo A. Alafriz & Associates for petitioners.
Ramon A. Academia for private respondent.

GRIO-AQUINO, J.:
Two petitions were filed in this Court to review: (1) the contempt
resolution dated May 4, 1987, of the Court of Appeals, and (2) its
decision dated September 15, 1987 in a special civil action of
certiorari (CA-G.R. SP No. 11260).
G.R. No. 78295.
Assailed in G.R. No. 78295 is the resolution dated May 4, 1987 of the
Court of Appeals: (a) annulling Judge Vicencio's order cancelling the
notice of lis pendens on the title of the disputed property; (b)
ordering the Register of Deeds of Manila to revive the said notice of
lis pendens; and (c) requiring Judge Vicencio, his branch clerk of
court, Virgilio Caballero, and petitioner, Attorney Celso Lavia, to
show cause, within one week from notice, why they should not be
punished for contempt of court for having disobeyed the temporary
restraining order of the Court of Appeals.
On April 6, 1983, Maria Carmen Gabriel y Paterno, single, 72 years
old, executed a donation mortis causa in favor of her widowed
sister-in-law, Josefina C. Gabriel, 75 years of age, over a 3,081
square-meter parcel of land with improvements in Sampaloc,
Manila, covered by Transfer Certificate of Title No. 155865 in
Carmen's name. The donation was thumbmarked by Carmen before
Notary Public Jose T. Constantino. It was accepted by the donee in
the same instrument (pp. 77-82 & 293, Rollo, G.R. No. 79917).
Four months later, on August 11, 1983, Carmen, who was already
gravely ill with breast cancer, executed a Last Win And Testament in
which she bequeathed the same Sampaloc property to her cousin
and companion, Remedios C. Muyot, and willed a small 240-square-
meter lot in Antipolo, Rizal (TCT No. 278-6) to Josefina. She named a
friend, Concepcion M. De Garcia, as executrix of her will (pp. 288-
291, Rollo, G.R. No. 79917).
On August 15, 1983, Carmen executed a General Power of Attorney
appointing Remedios M. Muyot, as her attomey-in-fact for the
following purposes:
1. To administer, take
charge, and manage for my
sole benefit, all my
properties, whether real or
personal, wheresoever
located;
2. To collect, demand and
recover all debts, notes or
sums of money due me now
or which in the future may
become due or payable to
me, and for this purpose, to
issue such receipts, papers,
or deeds in my name and
stead; to cash or endorse
checks drawn in my favor, to
deposit in, or withdraw from,
any accounts with any banks
wherever I may have savings,
checking, or time deposit
accounts;
3. To execute, sign,
authenticate, and enter into
any and all contracts and
agreements for me and in my
name with any person or
entity; and, if necessary to
settle my personal
obligations, such as for
medical expenses, to
mortgage or to dispose of for
value any or portion of any
of my properties, whether
real or personal; and
4. To bring suit, defend, and
enter into compromises in
my name and stead, in
connection with actions
brought for or against me, of
whatever nature and kind.
(Annex D, p. 61, Rollo, G.R.
No. 79917.)
On November 3, 1983, Josefina registered an adverse claim on the
title of the Sampaloc property based on the donation made by
Carmen in her favor (p. 98, Rollo, G.R. No. 79917).
The next day, November 4, 1983, Remedios Muyot, as Carmen's
attorney- in-fact, hired Atty. Celso D. Lavia, as Carmen's counsel, on
a 30% contingent fee basis (Annex E, p. 62, Rollo, G.R. No. 79917).
On November 19, 1983, Carmen thumbmarked an "AFFIDAVIT OF
DENIAL" repudiating the donation of the Sampaloc property to
Josefina because it was allegedly procured through fraud and
trickery. She alleged that in April 1983, she still could sign her name,
and that she had no intention of donating the property to Josefina
who had not done her any favor and in fact abandoned her during
her illness (pp. 100 and 113, Rollo, G.R. No. 79917).
On the same occasion, November 19, 1983, she thumbmarked a
"REVOCATION OF DONATION" before Notary Public James Beltran
(p. 85, Rollo, G.R. No. 79917).
Two days later, on November 21, 1983, Remedios Muyot, as
Carmen's attorney-in-fact, sold the Sampaloc property to Virgilio D.

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Cebrero for an alleged consideration of P2,664,655 (p. 88, Rollo, G.R.
No. 79917).
On November 29, 1983, Carmen passed away (Annex C, p. 83, Rollo,
G.R. No. 79917).
On December 1, 1983, the "REVOCATION OF DONATION" was
registered on the back of Carmen's TCT No. 155865 (p. 119, Rollo,
G.R. No. 79917).
On December 5, 1983, Josefina filed a complaint in the Regional Trial
Court of Manila against Carmen's estate and the Register of Deeds
of Manila to annul the Deed of Revocation of Donation (Civil Case
No. 83-21629). She alleged that the deed of revocation, made only
ten (10) days before Carmen's death, was false and fictitious. She
asked the court to appoint an administrator ad litem for the estate
of Carmen P. Gabriel (Annex B, p. 55, Rollo, G.R. No. 79917). Upon
filing the complaint, she caused to be recorded a Notice of Lis
Pendens on the title of the property (p. 98, Rollo, G.R. No. 79917).
Without appointing a special administrator for Carmen's estate, the
court caused summons to be served on the estate. The summons
was received by Remedios Muyot (Annex C, p. 60, Rollo, G.R. No.
79917).
On January 24, 1984, the Cebreros registered the sale of the
Sampaloc property to them and obtained TCT No. 158305 in their
names (p. 90, Rollo, G.R. No. 79917).
On February 6, 1984, Josefina's complaint was amended to implead
Muyot and the Cebrero spouses as additional defendants. In
addition to the original causes of action, the amended complaint
sought the nullification of Muyot's General Power of Attorney and
the sale of the Sampaloc property to the Cebrero spouses (Annex G,
p. 68, Rollo, G.R. No. 79917).
Atty. Lavia filed an Answer (later an "Amended Answer with
Compulsory Counter-claim") for the Estate and Muyot (Annexes H
and I, pp. 91 and 105, Rollo, G.R. No. 79917).
Thereupon, Josefina filed a motion to disqualify him on the ground
that his authority as counsel for Carmen was extinguished upon her
death. She also assailed the service of summons to the decedent's
Estate through Muyot and reiterated her motion for the
appointment of a special administrator for the Estate. Atty. Lavia
opposed the motions (Annexes K and L, pp. 125 and 130, Rollo, G.R.
No. 79917).
On September 23, 1986, Judge Vicencio denied Josefina's motion to
disqualify Atty. Lavia. He also denied the motion to appoint a
special administrator for the Estate "since the deceased left a Will
naming an administratrix (executrix) and the latter has accepted the
trust." He sustained his court's jurisdiction over the Estate based on
the service of summons upon Muyot (Annex P, p. 179, Rollo, G.R.
No. 79917).
On January 23, 1987, Cebrero filed a motion to cancel the notice of
lis pendens on the Sampaloc property (Annex B, Rollo, G.R. No.
78295). Before Judge Vicencio could act on it, Josefina filed a
petition for certiorari on February 6, 1987 in the Court of Appeals
(CA-G.R. SP No. 11260) assailing Judge Vicencio's order of
September 23,1986 (Annex P, p. 179, Rollo, G.R. No. 79919) and
praying for a writ of preliminary injunction to stop him from further
proceeding in Civil Case No. 8321629 (Annex V, p. 236, Rollo, G.R.
No. 79917). The Court of Appeals issued a restraining order on
February 10, 1987, ordering the lower court to "desist from
proceeding with Civil Case No. 83-21629 until further orders."
(Annex W, p. 260, Rollo, G.R. No. 79917.)
However, on March 16, 1987, in spite of the restraining order, Judge
Vicencio issued an order cancelling the notice of lis pendens (Annex
N, p. 170, Rollo, G.R. No. 78295) because he believed the Appellate
Court's restraining order of February 10, 1987 expired on March 3,
1987, i.e., after 20 days.
On motions of Josefina (Annex O, p. 153, Rollo, G.R. No. 79917 and
Annex P, p. 178, Rollo, G.R. No. 78295), the Court of Appeals, on
May 4,1987, set aside Judge Vicencio's order and required him, as
well as his branch clerk of court and Attorney Lavia to show cause
why they should not be punished for contempt of court. The Court
of Appeals held that the 20-day limitation on the life of a restraining
order did not apply to it but only to lower court "judges," for Section
5 of BP Blg. 224 provides that:
... the judge to whom the application for
preliminary injunction was made, may issue a
restraining order to be effective only for a period
of twenty days from date of its issuance. Within
the said twenty-day period, the judge must
cause an order to be served on the defendant,
requiring him to show cause, at a specified time
and place, why the injunction should not be
granted ...
While the Appellate Court was aware that Section 8 of the Interim
Rules uses the word "court" instead of "judges," it opined that:
l. ... the Interim Rules was not
meant to effect, modify or
alter BP 224 which took
effect in 1982, subsequent to
the enactment of BP 129,
particularly so since BP 224
specifically governs the
exclusive subject of
restraining orders, whereas
the Interim Rules treats of
the broad Judiciary
Reorganization Act of 1981.
2. BP 224 is a legislative act
laying down a substantive
policy regulating the issuance
and effectivity of restraining
orders issued by 'judges,'
specifically decreeing a
limitation of 20 days to such
orders of 'judges'.
The highest tribunal of the land in National
Dental Supply Co. vs. Bibiano Meer, 90 Phil. 265
... ruled in no uncertain terms that the Supreme
Court in the exercise of its rule-making power

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cannot repeal or alter a substantive piece of
legislation. (p. 49, Rollo, G.R. No. 78295.)
The Court of Appeals further observed that the application of BP Blg.
224 to "judges" only "springs from practical considerations evident
from the Rule itself." (p. 51, Rollo, G.R. No. 78295.) It pointed out
that:
... Rule 58, as amended by BP 224 requires-upon
issuance of a restraining order and within 20
days from said issuance-that 'the judge must
cause an order to be served on the defendant,
requiring him to show cause, at a specified time
and place, why the injunction should not be
granted, and determine within the same period
whether or not the preliminary injunction shall
be granted . . In other words, an actual hearing
on the application for injunction must be
scheduled; the parties must be notified thereof,
and immediately thereafter, the judge must
resolve the application-all within twenty (20)
days from the date of issuance of the restraining
order. The clearly recognized implication being
that after said period-whether the parties have
already received notice or not, whether the
hearing has been conducted or not-the
restraining order if not yet converted into an
injunction by then, automatically self-destructs.
Certainly, while these pressing time and
procedural constraints may reasonably be
brought to bear upon the Regional Trial Courts
whose injunctive writs may be enforced only
within the narrow confines of their respective
regions (Sec. 3[a], Interim Rules and Guidelines),
they cannot sensibly be imposed upon the Court
of Appeals and the Honorable Supreme Court
whose territorial jurisdiction stretches to the
many ends of our broad archipelago. (Emphasis
supplied.) (pp. 51-52, Rollo, G.R. No. 78295.)
On May 26, 1987, Lavia, Muyot, and Cebrero filed in this Court a
petition for certiorari and prohibition (G.R. No. 78295) assailing that
resolution. They prayed that the Court of Appeals be enjoined from
further proceeding in CA-G.R. SP No. 11260.
Without giving due course to the petition, We ordered the
respondents to comment (p. 189, Rollo, G.R. No. 78295).
During the pendency of G.R. No. 78295, and eleven (11) months
after the Court of Appeals issued the assailed order on May 4, 1987,
this Court rendered a divided opinion in another case, "Delbros
Hotel Corporation vs. The Intermediate Appellate Court, et al." (G.R.
No. 72566, April 12,1988), defining the scope of BP Blg. 224. In a ten
to four decision with one abstention, this Court held:
The applicability of the above-quoted provision
(Sec. 5, B.P. Blg. 224) to the then Intermediate
Appellate Court, now the Court of Appeals, can
hardly be doubted. The Interim Rules and
Guidelines were promulgated to implement the
Judiciary Reorganization Act of 1981 (B.P. Blg.
129) which include the Intermediate Appellate
Court among the courts organized thereunder.
This is emphasized in the preamble of the
Interim Rules which states that the same shall
apply to all inferior courts according to the
Constitution. The term 'inferior courts' as used
therein refers to all courts except the Supreme
Court, the Sandiganbayan and the Court of Tax
Appeals. Thus, paragraphs 14 and 15 of the
Interim Rules expressly provide for Procedure in
the Intermediate Appellate Court.
Indeed, if paragraph 8 of the Interim Rules were
not intended to apply to temporary restraining
orders issued by the respondent Court, there
would have been absolutely no reason for the
inclusion of said paragraph in the Interim Rules.
The limited life-span of temporary restraining
orders issued by the regional trial courts and
municipal trial courts is already provided for in
B.P. Blg. 224. It was precisely to include the
Intermediate Appellate Court within the same
limitation as to the effectivity of its temporary
restraining orders that B.P. Blg. 224 was
incorporated in the Interim Rules, with the
significant change of the word 'judge' to 'court,'
so as to make it clear and unequivocal that the
temporary restraining orders contemplated
therein are those issued not only by trial judges
but also by justices of the appellate court.
(Delbros Hotel Corporation vs. Intermediate
Appellate Court, supra.)
This decision sustains Judge Vicencio's, not the Court of Appeals',
interpretation of BP Blg. 224. However, this circumstance does not
excuse his defiance of the Appellate Court's restraining order, for
the heart of the issue in this case, is not whether the Court of
Appeals correctly interpreted BP Blg. 224, but whether petitioners'
disobedience of the Appellate Court's restraining order was
contemptuous. We hold that it was.
Before the promulgation of the Delbros decision on April 12, 1988,
there existed no jurisprudence interpreting "judges" as used in BP
Blg. 224, to include the justices of the Court of Appeals also. Hence,
even if Judge Vicencio thought that Court of Appeals justices were
covered by BP Blg. 224, out of respect for the second highest court
of the land, he should have obeyed its explicit mandate for him to
desist from proceeding with Civil Case No. 83-21629 "until further
orders." His disobedience of that lawful order of the Court was
contemptuous (Sec. 3-b, Rule 71, Rules of Court). His rushing to lift
the notice of lis pendens barely four (4) days before his retirement
from the Bench on March 20,1987, and while his own jurisdiction in
the case was still in issue, puts his motives under a cloud.
If the petitioners wanted the Court of Appeals to hear Josefina's
application for a preliminary writ of injunction within twenty (20)
days after it issued the temporary restraining order, they should
have filed a motion to that effect, or, they should have asked the
Court to limit the duration of its restraining order. Instead, without
notice to the other party or to the Court of Appeals, they persuaded
the trial judge to grant their pending motion to cancel the notice of
lis pendens. The secrecy that shrouded that maneuver is a badge of
their bad faith and constitutes contempt for the Appellate Court that
issued the restraining order.

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G.R. No. 79917.
During the pendency of G.R. No. 78295 in this Court, the Court of
Appeals rendered a decision on September 15, 1987 in CA-G.R. SP
No. 11260, granting Josefina's petition for certiorari, prohibition and
mandamus. The dispositive part of its decision reads:
WHEREFORE, based on all the foregoing
considerations, judgment is hereby rendered: (1)
annulling the assailed order dated 12 January
1987 as well as its related earlier order of
September 23, 1986; (2) declaring that the lower
court did not acquire jurisdiction over the person
of the estate of Maria Carmen P. Gabriel; (3)
ordering respondent Atty. Celso Lavia to refrain
from representing the estate of the deceased
Maria Carmen P. Gabriel in Civil Case No.
8321629; and (4) declaring that all pleadings,
motions and papers filed by Atty. Lavia are
sham and ordered expunged from the records of
said case.
Resolution of the contempt incident against
respondent judge, Atty. Lavia and the branch
clerk of court of respondent judge is hereby held
in abeyance pending the Supreme Court's
resolution of respondent's petition for review.
(pp. 53-54, Rollo, G.R. No. 79917.)
Within the 30-day extension granted by this Court, Attorney Lavia,
Remedios Muyot, and the Cebrero spouses appealed by certiorari to
this Court where their petition was docketed as G.R. No. 79917. The
case was later consolidated with G.R. No. 78295.
The Court of Appeals held that Attorney Lavia may not appear "as
counsel for the estate of Carmen P. Gabriel because his authority as
her counsel was extinguished upon Carmen's death" (Art. 1919, Civil
Code). It also held that "respondent Remedios Muyot was not
capacitated to receive summons for the estate because the general
power of attorney constituting her as agent of the deceased became
inoperative upon the death of the principal." The service of
summons upon her was void (pp. 52-53, Rollo, G.R. No. 79917).
However, the Court held that a special administrator need not be
appointed for the estate in Civil Case No. 83-21629 as the last will
and testament of Maria Carmen P. Gabriel had been allowed
probate on 3 February 1987 in Sp. Proc. No. 8423954 and letters
testamentary had been issued to the duly designated executrix,
Concepcion M. De Garcia (p. 54, Rollo, G.R. No. 79917), to represent
the Estate.
The petitioners allege in their petition for review of the decision that
the Court of Appeals erred:
1. in holding that the trial
court had not acquired
jurisdiction over the estate of
Carmen P. Gabriel; and
2. in holding that Attorney
Celso Lavia's authority as
counsel for Carmen P.
Gabriel was extinguished
upon her death.
The petitioners' argument that service of the summons on Remedios
Muyot was valid and sufficient to vest jurisdiction in the Court over
the Estate of Carmen P. Gabriel, because Muyot was Carmen's
attorney-in-fact, is not correct. The estate of a dead person may only
be summoned through the executor or administrator of his estate
for it is the executor or administrator who may sue or be sued (Sec.
3, Rule 3, Rules of Court) and who may bring or defend actions for
the recovery or protection of the property or rights of the deceased
(Sec. 2, Rule 87, Rules of Court). The general power of attorney
appointing Remedios as Carmen's agent or attorney-in- fact was
extinguished upon Carmen's demise (Art. 1919[3], Civil Code; Ramos
vs. Caoibes 94 Phil. 440; Hermosa vs. Longara 93 Phil. 977).
Thereafter, Remedios was bereft of authority to represent Carmen.
The petitioner's contention that the agency was "constituted in the
common interest of the principal and the agent" and that hence it
was not extinguished by the death of the principal (Art. 1930, Civil
Code) is refuted by the instrument itself which explicitly provided
that the powers conferred on the agent were to be exercised for the
"sole benefit" of the principal, Carmen P. Gabriel (Annex D, p. 61,
Rollo, G.R. No. 79917).
Carmen's death likewise divested Attorney Lavia of authority to
represent her as counsel. A dead client has no personality and
cannot be represented by an attorney (Barrameda vs. Barbara, 90
Phil. 718, 723; Caisip vs. Hon. Cabangon, 109 Phil. 150).
WHEREFORE, finding no reversible error in the appealed decision
and orders of the Court of Appeals in CA-G.R. SP No. 11260, the
petitions for review are dismissed with costs against the petitioners.
SO ORDERED.


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G.R. No. L-45809 December 12, 1986
SOCORRO SEPULVEDA LAWAS, petitioner,
vs.
COURT OF APPEALS, HON. BERNARDO LL. SALAS, [as Judge, CFI,
Cebu, Branch VIII], and PACIFICO PELAEZ, respondents.
Jesus Yray for petitioner.
Teodoro Almase for respondents.

FERIA, J.:
This is an appeal by certiorari under Rule 45 of the Revised Rules of
Court from the decision of the Court of Appeals which dismissed the
petition for certiorari under, Rule 65 of said Rules against
respondent Judge Bernardo L. Salas of the Court of First Instance of
Cebu. The antecedent facts are briefly as follows:
Private respondent Pacifico Pelaez filed a Complaint on December 6,
1972 against petitioner's father, Pedro Sepulveda, for ownership
and partition of certain parcels of land. Defendant Pedro Sepulveda
filed his Answer dated December 31, 1972 resisting the claim and
raising the special defenses of laches, prescription and failure to
ventilate in a previous special proceeding. During the presentation
of evidence for the plaintiff, the defendant died on March 25, 1975.
On May 21, 1975, counsels for the deceased defendant filed a notice
of death wherein were enumerated the thirteen children and
surviving spouse of the deceased.
On May 5, 1975, petitioner filed a petition for letters of
administration and she was appointed judicial administratrix of the
estate of her late father in July, 1976.
At the hearing of the case on November 27, 1975, Attys. Domingo
Antigua and Serafin Branzuela, former counsels for the deceased
defendant, manifested in open court that with the death of their
client, their contract with him was also terminated and none of the
thirteen children nor the surviving spouse had renewed the
contract, but instead they had engaged the services of other lawyers
in the intestate proceedings.
Notwithstanding the manifestation of the former counsels of the
deceased defendant, the respondent trial judge set the case for
hearing on January 13, 1976 and sent the notice of hearing to said
counsels.
On January 13, 1976, the respondent trial judge issued three orders.
The first order substituted the heirs of the deceased defendant,
namely, his thirteen children and surviving spouse, as defendants;
the second order authorized Atty. Teodoro Almase, counsel for the
plaintiff, to present his evidence in the absence of Attys. Antigua and
Branzuela and the third order treated the case submitted for
decision, after the plaintiff had presented his evidence and rested
his case, and directed that said counsels and the fourteen heirs of
the deceased defendant be furnished copies thereof.
On January 28, 1976, the respondent trial judge rendered a decision
against the heirs of the deceased defendant.
On February 19, 1976, ten of the children of the deceased
defendant, who apparently did not know that a decision had already
been rendered, filed an Answer in-substitution of the deceased
defendant through their counsel Atty. Jesus Yray. This was denied
admission by the respondent trial judge for being already moot and
academic because of the earlier decision.
On March 9, 1976, the widow and two other children of the
deceased defendant, through their counsel Atty. Delfin Quijano,
filed a motion for substitution and for reconsideration of the
decision dated January 28, 1976. On April 7, 1976, the respondent
trial judge issued an order setting aside his decision and setting the
case in the calendar for cross-examination of the plaintiff, Pacifico
Pelaez, with a proviso that said order was applicable only to the
three heirs who had filed the motion. On July 14, 1976, the
respondent trial judge lifted the order setting aside his decision,
despite the verbal petition for postponement of the hearing made
by one of the three heirs on the ground of the absence of their
counsel.
On July 9, 1976, petitioner, who had been appointed judicial
administratrix of the estate of the deceased defendant and who was
one of the heirs who had filed an Answer on February 19, 1976, filed
a motion to intervene and/or substitute the deceased defendant. On
August 25, 1976, the respondent trial judge denied the motion for
the reason that the decision had already become final.
Petitioner then filed a special civil action of certiorari with the Court
of Appeals to annul the proceedings in the respondent trial court.
However, the Court of Appeals dismissed the petition for certiorari.
Hence, the present appeal.
The appeal is meritorious.
Section 16 of Rule 3 provides as follows:
Duty of attorney upon death, incapacity, or incompetency
of party. Whenever a party to a pending case dies,
becomes incapacitated or incompetent, it shall be the duty
of his attorney to inform the court promptly of such death,
incapacity or incompetency, and to give the name and
residence of his executor, administrator, guardian or other
legal representative.
The former counsels for the deceased defendant, Pedro Sepulveda,
complied with this rule by filing a notice of death on May 21, 1975.
They also correctly manifested in open court at the hearing of the
case on November 27, 1975, that with the death of their client their
contract with him was also terminated and none of the heirs of the
deceased had renewed the contract, and the heirs had instead
engaged the services of other lawyers in the intestate proceedings.
Both the respondent trial judge and the Court of Appeals erred in
considering the former counsels of the deceased defendant as
counsels for the heirs of the deceased. The statement in the decision
of the Court of Appeals that "the appearance of the lawyers of their
deceased father in court on January 13, 1976 (Annex K) carries the
presumption that they were authorized by the heirs of the deceased
defendant" is erroneous. As this Court held in People vs. Florendo
(77 Phil. 16), "the attorneys for the offended party ceased to be the
attorneys for the deceased upon the death of the latter, the
principal. " Moreover, such a presumption was not warranted in

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view of the manifestation of said lawyers in open court on
November 27, 1975 that they were not representing the heirs of the
deceased defendant.
Consequently, when on the same date, November 27, 1975, the
respondent trial judge issued an order setting the continuation of
the trial of the case on January 13, 1976, with notices sent to Atty.
Almase for the plaintiff and Attys. Antigua and Branzuela for the
deceased defendant, he acted with grave abuse of discretion
amounting to excess of jurisdiction.
It was only at the hearing on January 13, 1976 that the respondent
trial judge issued an order substituting the deceased defendant with
his fourteen heirs. This was followed with an order authorizing
counsel for the plaintiff to present his evidence in the absence of
Attys. Antigua and Branzuela, and lastly, an order treating the case
as submitted for decision.
In the order of the respondent trial judge dated November 10, 1976,
denying petitioner's motion for reconsideration of the order denying
her motion for intervention (Annex 1 of the Comment), mention was
made of the delayed arrival of Attys. Antigua and Branzuela at the
hearing on January 13, 1976 and of their being allowed to cross-
examine the plaintiff himself.
The refusal of said former counsels of the deceased defendant to
cross-examine the plaintiff was justified
... in view of the intervening event of appellant's death and
the interposition of the equally established principle that
the relationship of attorney and client is terminated by the
death of the client, as acknowledged by respondent court
itself as well as respondents. In the absence of a retainer
from the heirs or authorized representatives of his
deceased defendant the attorney would have no further
power or authority to appear or take any further action in
the case, save to inform the court of the client's death and
take the necessary steps to safeguard the decedent's
rights in the case. (Vda. de Haberer vs. Court of Appeals,
May 26, 1981, 104 SCRA 534, 540)
Moreover, as above stated, petitioner had as early as May 5, 1975
filed a petition for letters of administration, and the same was
granted in July, 1975.
Section 17 of Rule 3 provides as follows:
Death of party. After a party dies and the claim is not
thereby extinguished, the court shag order, upon proper
notice, the legal representative of the deceased to appear
and to be substituted for the deceased, within a period of
thirty (30) days, or within such time as may be granted. If
the legal representative fails to appear within said time,
the court may order the opposing party to procure the
appointment of a legal representative of the deceased
within a time to be specified by the court, and the
representative shall immediately appear for and on behalf
of the interest of the deceased. The court charges involved
in procuring such appointment, if defrayed by the
opposing party, may be recovered as costs. The heirs of
the de ceased may be allowed to be substituted for the
deceased, without requiring the appointment of an
executor or administrator and the court may appoint
guardian ad litem for the minor heirs.
As this Court has held:
... Under the Rule, it is the court that is called upon, after
notice of a party's death and the claim is not thereby
extinguished, to order upon proper notice the legal
representative of the deceased to appear within a period
of 30 days or such time as it may grant. Since no
administrator of the estate of the deceased appellant had
yet been appointed as the same was still pending
determination in the Court of First Instance of Quezon
City, the motion of the deceased's counsel for the
suspension of the running of the period within which to
file appellant's brief was well-taken. More, under the Rule,
it should have set a period for the substitution of the
deceased party with her legal representative or heirs,
failing which, the court is called upon to order the
opposing party to procure the appointment of a legal
representative of the deceased at the cost of the
deceased's estate, and such representative shall then
'immediately appear for and on behalf of the interest of
the deceased.
Respondent court gravely erred in not following the Rule
and requiring the appearance of the legal representative
of the deceased and instead dismissing the appeal of the
deceased who yet had to be substituted in the pending
appeal Thus, it has been held that when a party dies in an
action that survives, and no order is issued by the court for
the appearance of the legal representative or of the heirs
of the deceased in substitution of the deceased, and as a
matter of fact no such substitution has ever been effected,
the trial held by the court without such legal
representatives or heirs and the judgment rendered after
such trial are null and void because the court acquired no
jurisdiction over the persons of the legal representatives
or of the heirs upon whom the trial and the judgment
would be binding. (Ordoveza vs. Raymundo, 63 Phil 275
[1936]; Obut vs. Court of Appeals, et al., 70 SCRA 546)
(Vda. de Haberer vs. Court of Appeals, supra, p. 541.
Under the said Rule, priority is given to the legal representative of
the deceased, that is, the executor or administrator of his estate. It
is only in cases of unreasonable delay in the appointment of an
executor or administrator, or in cases where the heirs resort to an
extrajudicial settlement of the estate, that the court may adopt the
alternative of allowing the heirs of the deceased to be substituted
for the deceased.
In the case at bar, in view of the pendency of Special Proceeding No.
37-SF Intestate Estate of Pedro Sepulveda, and the pending
application of petitioner to be appointed judicial administratrix of
the estate, the respondent trial judge should have awaited the
appointment of petitioner and granted her motion to substitute the
deceased defendant.
While the lower courts correctly held that the death of Pedro
Sepulveda did not obliterate his verified Answer to the Complaint
filed by private respondent and that the Answer filed by the ten
heirs and the Answer filed by the Administratrix were both

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unnecessary, the said heirs or the administratrix could, with leave of
court, file an Amended Answer.
In view of the foregoing, the Court rules that the proceedings
conducted by the respondent trial judge after the death of the
deceased defendant are null and void.
WHEREFORE, the decision of the Court of Appeals is reversed; the
petition for certiorari is granted; petitioner is ordered substituted for
the deceased defendant, Pedro Sepulveda; and the proceedings
conducted by the respondent trial judge after the death of the
deceased defendant, including the decision rendered by him on
January 28, 1976, are set aside; with costs against private
respondent.
SO ORDERED.

Rule 3: Parties To Civil Actions

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Rule 3: Parties To Civil Actions

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Outline: Rule 3 - Parties to Civil Actions CIVIL PROCEDURE

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